Mr. Lorne MacFarlane reports

AQUARIUS ANNOUNCES PROPOSED ACQUISITION AND APPLICATION FOR REINSTATEMENT OF LISTING ON THE TSX VENTURE EXCHANGE

Aquarius Coatings Inc. has entered into a letter of intent pursuant to which it proposes to acquire all of the issued and outstanding shares of Surgical Lasers Inc., and consequently it has submitted an application for reinstatement of the listing of its shares on the TSX Venture Exchange.

Aquarius will be convening an annual and special general meeting of its shareholders to consider, in addition to regular annual general meeting business, which will present the audited financial statements for the years ended March 31, 2014, 2015 and 2016, the appointment of an auditor, the election of directors, the consolidation of its existing common shares on a one new for 20 old shares, a debt settlement agreement with an insider, a reorganization of its share capital, the approval of a new bylaw No. 1, the approval of the adoption of an incentive stock option plan, a change in financial year-end and the proposed acquisition of Surgical Lasers. All of the foregoing proposed matters will be subject to obtaining all relevant shareholder and regulatory consents and approvals, including, but not limited to, acceptance from the TSX Venture Exchange in accordance with its policies.

The following sections of this press release describe the basic details of the proposed acquisition of Surgical Lasers and the other resolutions referred to above. All these matters will be described in full in a management information circular to be sent to shareholders in connection with the forthcoming annual and special meeting.

Proposed acquisition -- description of Surgical Lasers (SLI)

SLI, a private company, was formed pursuant to the laws of the Province of Ontario on Aug. 4, 2015, by the amalgamation of Surgical Laser Inc. (old SLI) and 2459663 Ontario Ltd. (Numco). Prior to that, old SLI had been incorporated on Oct. 14, 2014, to continue business operations of a business previously operated by TASC LP and its predecessors, while Numco had been incorporated on March 26, 2015, to acquire the assets, business and undertaking of the business operations previously carried on by TASC LP.

Numco acquired the assets, business and undertaking of the business operations previously carried on by TASC LP in an arm's-length transaction pursuant to an agreement dated April 6, 2015, which was completed on that date, for a consideration of $850,000, paid in cash. The financing for that acquisition was provided by Forest Lane Holdings Ltd.

SLI owns a 100-per-cent interest in Surgical Lasers Inc. (SLInc), a Delaware corporation. SLInc was formed on April 23, 2015, for the express purpose of acting as holder of inventory and for administrative purposes in the United States of America.

Description of SLI business overview and development of the business

The business of SLI is the development, sale, distribution, marketing and exploitation of laser-driven technologies for use in surgical environments, principally in the field of urology. In particular, SLI has entered into two exclusive distribution agreements, covering effectively all countries in the North America and South America, pursuant to which it has exclusive rights over a multidiode laser system and related fibre optic delivery devices used principally for minimally invasive treatment of benign prostatic hyperplasia (BPH).

Benign prostatic hyperplasia is the most common benign tumour in men from age 50 and older. Life expectancy increases the incidence of BPH, which has become the major consultation in the urologist practice. It causes various symptoms such as occlusion of the lower urinary tract, pain and others.

Until recently, the main treatment for BPH was the transurethral resection of the prostate (known by the acronym TURP). This surgical procedure, the most common in urology, has been associated with postoperative complications, which have driven the search for other minimally invasive alternatives offering similar results, fewer side effects and a faster recovery for the patient as BPH laser vaporization with a high-power urology laser (HPUL). To maximize the potential of the operational opportunity for the HPUL technology in its marketplace, SLI has entered into independent distributor agreements with a number of organizations directly engaged in the urology field in North America, and is developing additional relationships with such organizations in both North and South America.

Since the introduction of the HPUL technology to the North American marketplace is still in its early stages, SLI is considered to be in the development stage while it establishes itself and its products in the marketplace. The HPUL technology is embodied in the basic laser-generating machine and the fibre optic delivery system. SLI has been granted exclusive distribution rights for North America and South America to the multidiode laser-generating machine and to the fibre optic delivery system technology by its developer/manufacturer. Additionally, SLI has the right and option to acquire the total rights to and ownership of the specific technology used in the design and manufacture of the fibre optic delivery system.

Since SLI has only recently been formed, and its predecessors had a comparatively short-term history in the development stage, there is no historical business history going back before 2015 and the stub period of 2-1/2 months in 2014.

Terms of the proposed acquisition

The following are the basic terms for the proposed acquisition of SLI by Aquarius. See also below in relation to the proposed restructuring of Aquarius in connection with the overall acquisition plan.

Purchaser:  Aquarius

Vendor:  Gordon Willox, being the sole shareholder holding all of the issued shares of SLI

Assets purchased:  All of the issued and outstanding shares of SLI

Consideration

The consideration payable by Aquarius is valued at $6,131,605, to be satisfied by the issuance of 4,598,704 (postconsolidation) fully paid and non-assessable common shares from the treasury of Aquarius, and 1,532,605 Series A non-voting, convertible, redeemable special shares from the treasury of Aquarius. See below under Series A special shares for the specific terms and provisions of the Series A special shares.

Performance consideration

The acquisition agreement will contain a provision for the issuance to the vendor shareholder of up to 1,532,605 Series A special shares, as referred to above, which will be convertible on a one-for-one basis upon and subject to meeting of specific milestones over the period of five years following closing, and subject to redemption and cancellation in the event that such milestones are not achieved.

General terms and conditions

The general terms and conditions of the acquisition agreement will contain all the usual representations and warranties as would normally be expected in a commercial transaction of this nature, providing for due diligence and protection for the parties to ensure delivery of the reasonable expectations of the parties.

Escrow

The vendor shareholder will enter into such escrow agreements as may be required by relevant regulatory provisions and policies, including any applicable stock exchange policies.

Consents/approvals

Closing of the acquisition agreement will be subject to meeting certain express conditions, including, but not limited to, obtaining all relevant regulatory consents and approvals and an affirmative vote of a majority of disinterested shareholders of Aquarius.

Financing condition

Closing of the transaction will be subject to a condition that Aquarius will, prior to closing, have raised not less than $1.5-million in new capital, pursuant to an exempt offering of units to accredited investors. This new financing is to be used for development of the SLI business and general corporate purposes. The units to be issued will be priced at $1 each and will comprise one fully paid and non-assessable common share from the treasury of Aquarius (on a consolidated basis, see below) and one-half of a share purchase warrant. Each whole share purchase warrant will entitle the holder to purchase one fully paid non-assessable common share (on a consolidated basis, see below) from the treasury of Aquarius at the price of $1.50, during a period of two years following the date of issuance of the original unit.

Series A special shares/milestone achievements/conversion or redemption

A portion of the consideration payable by Aquarius for the SLI shares, valued at $1,532,605, is to be satisfied by the issuance of 1,532,605 Series A special shares. These Series A special shares are performance shares, which are convertible into common shares on a one-for-one basis in the event that specific milestones are reached, and are redeemable by the corporation at 0.01 cent each in the event that the specific milestones are not met. The milestones specified are directly linked to earnings before interest, taxes, depreciation and amortization financial performance over a five-year period.

                                           MILESTONES 

                        Year 1         Year 2         Year 3         Year 4          Year 5

EBITDA                $284,365     $3,440,632     $7,128,544    $11,291,880     $15,300,840
Convert or             
redeem                      20%            20%            20%            20%             20% 

The terms for the conversion or redemption of the Series a special shares will provide that the EBITDA milestones must be achieved by the end of each financial year, as certified by the corporation's independent auditor, so that if a milestone is achieved, then 306,521 Series A special shares will be converted, for no further consideration, into common shares. In the event that a milestone in any year is not reached in that specific year, then the Series A special shares that would have been released on achievement of the milestone for that year will be held for a further period of one year, so that if, at the end of the next financial year, the milestone for that year and the immediately preceding year has been reached on a cumulative basis, then both instalments of Series A special shares would be convertible into common shares, but if the total EBITDA for both years, on a cumulative basis, has not been achieved, then the instalment relating to the former financial year will be redeemed by the company, and the instalment relating to the latter year may be carried forward to the next financial year, provided that no amount may be carried forward beyond the end of the fifth financial year.

Proposed restructuring of Aquarius

At the forthcoming special general meeting of the shareholders of Aquarius, and in addition to considering the proposed acquisition of SLI, shareholders will be asked to consider and, if thought fit, pass resolutions to effect the following changes:

Debt settlement agreement

Subject to obtaining all relevant regulatory and other consents and approvals, and acceptance by the TSX Venture Exchange, it is proposed to ratify a debt settlement agreement with Forest Lane Holdings, a shareholder, to settle $3.8-million of debt by the issuance of 76 million preconsolidation or 3.8 million postconsolidation common shares.

Share consolidation

Subject to obtaining all relevant regulatory and other consents and approvals, and acceptance by the TSX Venture Exchange, it is proposed to pass a resolution to consolidate the 107,948,144 existing issued common shares into new common shares on the basis of one new common share for 20 old common shares.

Reorganization of share capital

Subject to obtaining all relevant regulatory and other consents and approvals, and acceptance by the TSX Venture Exchange, it is proposed to pass a resolution to restructure the existing authorized share capital into: (i) an unlimited number of common shares without par value, and (ii) an unlimited number of special shares, issuable in series, with the designations, rights privileges and restrictions as fixed by the board of directors. At the same time, the directors will designate a series of special shares as Series A special shares, with the rights, privileges and restrictions described above in this press release.

New bylaw No. 1

Subject to obtaining all relevant regulatory and other consents and approvals, and acceptance by the TSX Venture Exchange, shareholders will be asked to pass a resolution to ratify the adoption of a new bylaw No. 1, being a general bylaw.

Adoption of an incentive stock option plan

Aquarius does not currently have an incentive stock option plan. Subject to obtaining all relevant regulatory and other consents and approvals, and acceptance by the TSX Venture Exchange, it is proposed to pass a resolution to approve the adoption of a fixed-number incentive stock option plan.

Change of name

In conjunction with the proposed acquisition of SLI, and subject to obtaining all relevant regulatory and other consents and approvals, and acceptance by the TSX Venture Exchange, and to align the name of the corporation with its new principal business, it is proposed to pass a resolution to change the name of the corporation to Surgical Technologies Inc. or such other name as may be acceptable to the director of consumer and business services, Province of Ontario.

Application for reinstatement of listing on the TSX Venture Exchange

As stated in a November, 2015, news release, the compliance and disclosure department of the TSX-V commenced a review to assess the corporation's compliance with exchange requirements in connection with the corporation's disposition of its coatings business.

The exchange determined that the corporation had failed to comply with exchange Policy 5.3 by failing to obtain exchange approval for the disposition. Further, the company failed to comply with exchange Policy 3.3 by failing to make timely disclosure of the Aug. 1, 2014, disposition agreement, and the company's Aug. 29, 2014, management's discussion and analysis report and September, 2014, news release failed to disclose the full terms of the Aug. 1, 2014, disposition agreement. As a result of these contraventions, the officers and directors have been placed on notice to comply with exchange requirements in the future, are required to obtain advice from legal counsel for all material transactions, and two directors have completed a corporate governance course acceptable to the exchange.

As a consequence of the disposition of the assets of the coatings assets, it was determined that the corporation did not meet Tier 2 continued listing requirements for continued listing on the TSX Venture Exchange, and accordingly its listing was transferred to the NEX board. The NEX trading platform is a separate board of the TSX Venture Exchange. Since the corporation's shares have been suspended from listing for an extended period of time, and in accordance with exchange Policy 2.9, the corporation has commenced an application for relisting of its shares as a Tier 2 issuer on the TSX Venture Exchange, and accordingly the corporation must receive approval for reinstatement from the exchange, which will conduct a review to ensure that the corporation, with its new business proposal, will meet initial listing requirements to justify reinstatement of the listing. The corporation can give no assurance that its application for reinstatement of its listing will be successful.