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File: AQC - Press Release -July 22, 2016.pdf
AQUARIUS COATINGS INC.
NEWS RELEASE
AQUARIUS ANNOUNCES PROPOSED ACQUISITION AND APPLICATION FOR
REINSTATEMENT OF LISTING ON THE TSX VENTURE EXCHANGE
July 22, 2016 - Halifax, NS Aquarius Coatings Inc. (the "Corporation" or "Aquarius") (NEX Board AQC.H)
announces that it 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, appointment of Auditors and the election of directors, resolutions to consolidate its
existing common shares on a 1 new for 20 old shares, a Debt Settlement Agreement with an Insider, a reorganization
of its share capital, approval of a new Bylaw No 1, approval of the adoption of an Incentive Stock Option Plan, a
change in financial year end and the proposed acquisition of Surgical Lasers Inc. All of the foregoing proposed matter
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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
Inc. and the other resolutions referred to above. All these matters will be described in full in a Management Informat
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Circular to be sent to shareholders in connection with the forthcoming Annual and Special Meeting.
Proposed Acquisition - Desription of of Surgical Lasers Inc. ("SLI")
SLI, a private company, was formed pursuant to the laws of the Province of Ontario on August 4, 2015, by the
amalgamation of Surgical Laser Inc. ("OldSLI"), and 2459663 Ontario Ltd. ("Numco"). Prior to that, OldSLI
had been incorporated on October 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, in order 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 funding for that acquisition was provided by Forest
--->Lane
Holdings Limited.
SLI owns a 100% interest in Surgical Lasers Incorporated ("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 i
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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 en
--->tered
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 multi-diode laser system and related fibre-optic de
--->livery
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 other.
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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"). In order 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. Th
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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 multi-diode 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 comparatively short-term history in the
development stage, there is no historical business history going back before 2015 and the stub-period of 2 one-ha
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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: AQC.
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 AQC is valued at $6,131,605, to be satisfied by the issuance of
4,598,704 (post consolidation) fully paid and non-assessable common shares from the
Treasury of AQC, and 1,532,605 Series A non-voting, convertible, redeemable special shares
("Series A Special Shares") from the Treasury of AQC. 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 AQC
Financing Condition: Closing of the transaction will be subject to a condition that AQC will, prior to closing,
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have raised not less than $1,500,000 in new capital, pursuant to an exempt offering of Uni
--->ts
to accredited investors; this new funding is to be used for development of the SLI business
and general corporate purposes. The Units to be issued will be priced at $1.00 each and wil
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comprise One fully paid and non-assessable common share from the Treasury of AQC (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 AQC at the price of $1.50,
during a period of two (2) years following the date is issuance of the original Unit.
Series A Special Shares Milestone Achievements Conversion or Redemption
A portion of the consideration payable by AQC for the SLI Shares, valued at $1,532,605, is
--->to
be satisfied by issuance of 1,532,605 Series A Special Shares. These Series A Special Share
--->s
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
$0.0001 each in the event that the specific milestones are not met. The milestones specifie
--->d
are directly linked to EBITDA financial performance over a five year period, as follows:
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 20% 20% 20% 20% 20%
Redeem
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 Auditors, so that if a Milestone is achieved, then 306,521 Se
--->ries
A Special Shares will be converted, for no further consideration, into common shares. In th
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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 achieve
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then the instalment relating to the former financial year will be redeemed by the Company a
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the instalment relating to the latter year may be carried forward to the next financial yea
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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 th
--->e
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 Limited,
a shareholder, to settle $3,800,000 of debt by issuance of 76,000,000 (pre-consolidation; 3,800,000 post
consolidation) 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 (1) new common shares for twenty (20) old common
shares.
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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 in
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(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 Direct
--->ors.
At the same time, the Directors will designate a series of special shares as Series A Special Shares, with th
--->e
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 adoption of a new Bylaw No. 1,
being a General Bylaw.
Adoption of an Incentive Stock Option Plan
Aquarius does not presently 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 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 oth
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consents and approvals, and acceptance by the TSX Venture Exchange, and in order 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 & Business Services, Province of Ontario.
Application for reinstatement of Listing on the TSX-V
As stated in its Nov 27, 2015 news release, the Compliance & 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 August 1, 2014 disposition agreement and the Company's August 29, 2014 MD&A
report and September 8, 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 n
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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 re-listing 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 in order to ensure that the Corporation, with its new business proposal, will
meet Initial Listing Requirements in order to justify reinstatement of the listing. The Corporation can give no assura
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that its application for reinstatement of its listing will be successful.
About the Corporation
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Aquarius is a corporation existing under the laws of the Province of Ontario and is a reporting issuer, in good stand
--->ing,
in the Provinces of British Columbia, Alberta, Ontario and Nova Scotia.
Further information regarding Aquarius can be found in its public record available at www.sedar.com.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For additional information contact:
Lorne MacFarlane, CFO (902)-496-7594 lornemac@eastlink.ca
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