Aqueous Capital Corp.
TSX VENTURE : AQS.P

October 21, 2009 14:04 ET

Aqueous Capital Corp. Provides Details on Proposed Qualifying Transaction

CALGARY, ALBERTA--(Marketwire - Oct. 21, 2009) -

Not for distribution to U.S. Newswire Services or for dissemination in the United States. Any failure to comply with this restriction may constitute a violation of U.S. Securities laws.

Amalgamation Agreement

Stoneset Equities Ltd. ("Stoneset") and Aqueous Capital Corp. ("Aqueous") (TSX VENTURE: AQS.P) are pleased to announce that they have entered into an amalgamation agreement dated October 19, 2009 (the "Amalgamation Agreement") pursuant to which Stoneset and Aqueous will amalgamate (the "Amalgamation") such that each former shareholder of Aqueous shall receive one common share ("Amalco Share") of the amalgamated corporation ("Amalco") for each one common share of Aqueous held, and each former shareholder of Stoneset shall receive 0.38469 of an Amalco Share for each one common share ("Stoneset Share") of Stoneset held. Pursuant to TSX Venture Exchange (the "Exchange") policies, the Amalgamation when completed is expected to qualify as Aqueous' arm's length qualifying transaction as a capital pool company (the "Qualifying Transaction"). The deemed price for the Amalco Shares will be $0.41 per Amalco Share. Aqueous has 3,500,000 common shares outstanding and Stoneset presently has 81,833,906 common shares outstanding. Following the Amalgamation, Amalco will continue to carry on business under the name "Stoneset Equity Development Corp.".

The Amalgamation and related change in management will constitute a change of control of Aqueous and a reverse take-over pursuant to Exchange policies. Pursuant to the Amalgamation, Aqueous will also undergo a change of business from a currently "unclassified" issuer to a "real estate issuer" in accordance with Exchange policies. Amalco will be subject to Exchange policies.

Information about Stoneset Equities Ltd.

Stoneset is a real estate development company focused on commercial, residential and recreational properties that was incorporated under the Business Corporations Act (Alberta) in 2006. Stoneset has five wholly owned subsidiaries: (i) Stoneset Development Corporation, which is the General Partner for Stoneset Vista Del Lago Limited Partnership ("Vista Del Lago LP"); (ii) Stoneset Development (Invermere) Corporation, which will be responsible for project and construction management of Stoneset's Invermere, British Columbia property development; (iii) Stoneset Development (Saskatchewan) Ltd., which will be responsible for projects developed in Saskatchewan; (iv) Stoneset Business Centre Corporation, which will raise capital to acquire properties that can be converted into office business centres; and (v) Stoneset One Mortgage Corporation, which will raise capital on a debenture basis and lend to finance project acquisitions and developments. Stoneset holds approximately 90% of the limited partnership units of Vista Del Lago LP.

Recreational Property

On September 30, 2007, Stoneset purchased a 12.34 acre parcel of land situated on the waterfront of Lake Windermere in the downtown core of Invermere, British Columbia. The property has approved zoning for a ten phase development to include a 144 room hotel and convention centre, 570 condominiums and 45,000 square feet of commercial retail space. The purchase price was twenty-three million dollars ($23,000,000). Stoneset paid a deposit of $4,000,000 in September 2007 and arranged for a $19,000,000 vendor take back mortgage with zero percent interest (0%) with quarterly payments of $3,166,666 (the "VTB"). Marco DeDominicis and David Hall, who are directors and shareholders of Aqueous, have an indirect beneficial interest in the VTB. If a quarterly payment is in default in full or a portion thereof, six percent (6%) interest would be charged on the outstanding balance. The VTB was to be paid out by September 30, 2009 but Stoneset negotiated an extension in March 2009 with the result that the payout of the VTB was extended to March 31, 2010. The terms of the extension included 12% interest payable on a monthly basis on the outstanding balance starting June 1, 2009. As of September 30, 2009, $9,450,000 of the VTB has been paid and a balance of $9,550,000 remains outstanding.

Stoneset estimates that the total cost to develop all ten phases of the project will be approximately $280,000,000 with an estimated market value upon completion of $350,000,000. Current economic conditions have softened recreational property sales throughout North America. It is anticipated, however, that once the economy has recovered, the region in which the property is located will once again become a prime location for investors.

Vista Del Lago LP has sold, by way of offering memorandum, 1544 class A limited partnership units ("LP Units"), of which Stoneset holds 1393 LP Units. The capital raised within the Vista LP is used to secure ownership of the Invermere lands and pay down the VTB. The limited partnership is expected to realize a return on investment in the lands from the development of the ten phases.

Stoneset attained development permits for Phase One, the 144 room hotel and convention centre, Phase Two, 42 Condominiums and 20,720 square feet of commercial/retail space and Phase Three, 57 Condominiums. Stoneset expects to begin tendering work for these three phases along with infrastructure improvements in the fourth quarter of 2009 with the intent to start site work in the second quarter of 2010. During the tendering process, Stoneset intends to initiate the marketing of the condominiums to establish pre-sales for the first three phases of the project. The presales are required to allow for conventional construction financing.

Office/Commercial Property

On February 1, 2007, Stoneset purchased a 7,800 square foot building on 0.8 acres of land in the Highfield industrial/commercial district in the City of Calgary for $1,910,000. Currently, there is a $1,300,000, 10% mortgage on the property due June 30, 2010 with an option to extend for an additional six months.

The building is currently Stoneset's head office. When the property was purchased it was predominately a warehouse and it was converted into offices, boardrooms and a seminar room. Development permit drawings have been prepared and submitted to the City of Calgary for the addition of a second storey to the existing building. The second floor addition would add an additional 12,000 square feet of leasable office space and increase the appraised value for the property from $2,270,000 to $5,700,000. The estimated construction cost for the addition will be $2,000,000. The addition of a second storey to the existing building and subsequent rental of the additional office space would be expected to generate revenues for Stoneset. It is intended that final drawings will be submitted in the first quarter of 2010 to the City of Calgary in order to obtain a building permit. The intent would be to start construction of the addition in the second quarter of 2010. To attain construction financing, Stoneset intends to pre-lease some of the office space that is to be built.

Residential/Commercial Property

On June 1, 2007, Stoneset purchased 1,120 square foot residential building on a double lot in the community of Capitol Hill in the City of Calgary for $529,900. The property was appraised January 19, 2009 and valued at $430,000. The property was sold to a related party on March 1, 2009 for the appraised value with the condition that Stoneset could repurchase the property within 18 months from the related party for appraised value. Capital from the sale of the property to the related party was used by Stoneset to reduce debt owing in relation to Stoneset's Invermere project.

Stoneset's intent with the purchase of the property was to joint venture with an adjacent land owner, a local church, in developing a city block size multi-use residential and commercial development. The church group has indicated its desire to sell its two residential lots to Stoneset, which would allow for a joint venture in redeveloping the current church property along with the three adjoining residential lots to be owned by Stoneset. Stoneset has prepared a master plan in which the project would accommodate a child care facility, 16 senior condominiums, the church and 24 market condominiums. The estimated cost of the project is $17,000,000 with an estimated market value upon completion of $22,000,000 (excluding the Church building portion). The entire project would be designed and built using environmentally sustainable principles in achieving a plus net zero energy development. The project would produce more energy than it would use and exceed conservation standards for water and sewage usage. The master plan was approved by the intended joint venture partner and will be circulated to the City of Calgary in the fourth quarter of 2009. Stoneset anticipates making a formal development permit application on the project in the first quarter of 2010 and would then expect to start development by the third quarter of 2010. Presales of the seniors and market condominiums will take place to allow Stoneset to obtain construction financing.

Terms of the Proposed Qualifying Transaction

The Amalgamation Agreement provides for the Amalgamation, subject to required shareholder approval of each of Aqueous and Stoneset, which would result in Amalco having 35,000,000 shares outstanding (the "Amalco Shares"), of which 31,500,000 Amalco Shares (90%) would be held by former holders of Stoneset common shares and 3,500,000 Amalco Shares (10%) would be held by former holders of Aqueous Shares.

Aqueous also has options outstanding in respect of an aggregate of 297,500 (at exercise prices of $0.20 per share). Subject to regulatory approval, it is expected that the Aqueous options will be converted into options of Amalco on a one-for-one basis, with the same exercise price.

At the closing of the Qualifying Transaction and subject to regulatory approval, Amalco would issue 1,948,000 options to purchase shares under its stock option plan to certain incoming officers, directors and employees at a price of $0.41 per share. No finder's fee is expected to be paid in connection with the Qualifying Transaction.
Upon completion of the Qualifying Transaction, it is expected that Amalco will be a real estate sector issuer pursuant to the policies of the Exchange.

Interim Financing Arrangements

Prior to the closing of the Qualifying Transaction, Stoneset may complete a private placement of Stoneset Shares at a price of $0.35 per share provided that the maximum number of issued and outstanding Stoneset Shares as of the date of closing of the amalgamation does not exceed 82,000,000, which would result in aggregate gross proceeds of up to $3,500,000.
A minimum aggregate of 10,000,000 Stoneset Shares held by private companies controlled by the founders of Stoneset, including Messrs. Argento and Jarman will be returned to treasury in order to facilitate the private placement and to comply with certain Exchange policies regarding founder's shares.

The following table sets forth certain unaudited financial information for Stoneset as at and for the year ended December 31, 2008.

 Year Ended
December 31, 2008
Total Assets$27,141,543
Total Liabilities$12,794,999
Total Revenue$41,308
Net Income (Loss)($2,205,811)

To the knowledge of the directors and officers of Stoneset, no person or company beneficially owns, directly or indirectly, or exercises control or direction, over more than 10% of the common shares of Stoneset.

Proposed Directors and Management Team of Amalco

Immediately after the completion of the Qualifying Transaction, the new board of directors of Amalco will consist of Tony Argento, Peter Jarman, Ron Bichel, Russell Kalmacoff, Jorg Ostrowski, Marco DeDominicis and David Hall. Tony Argento, the current Chairman and Chief Executive Officer of Stoneset, and Peter Jarman, the current President of Stoneset, will serve in the same roles for Amalco following the Amalgamation. In addition to Messrs. Argento and Jarman, Stephen Yuen is expected to be appointed as Chief Financial Officer of Amalco. The following is a brief description of the background of the expected directors and officers of Amalco following the Amalgamation.

Tony Argento – Calgary, Alberta – Chief Executive Officer and a Director

Mr. Argento has a Bachelor of Arts Degree in Urban Planning from the University of Calgary, a Bachelor of Environmental Design Studies degree and a Masters of Architecture degree from the Technical University of Nova Scotia. As a graduate architect, Tony Argento has worked on numerous environmental projects including the design and construction of a unique and sustainable home located in Scenic Acres in Calgary Alberta. The home is a display of environmental components that rely on solar energy rather than on non-renewable resources. The project has won several design awards and has been showcased in numerous publications.

Mr. Argento was employed with Walton Development (Asia) Inc. ("Walton"), a multi-national corporation with large syndicated land development projects. Mr. Argento was the President of the Walton's "Planning and Development Operations" and was responsible for supervising and directing the company's staff planners and designers. Mr. Argento evaluated potential properties, established guidelines in maximizing land appreciation, prepared detailed "Concept" and "Outline Plans" for government approval and established project management teams for the development of real estate properties on an international scale. Mr. Argento was also involved in marketing of Walton's real estate projects to investors. The sales value of the development projects that Mr. Argento was involved with were in excess of $30,000,000.

After leaving Walton, Mr. Argento headed up his own land development and construction firm. Through AC Caliber Development Inc. & Bronco Contracting Ltd. Mr. Argento was a registered member with Alberta New Home Warranty and Calgary Home Builders Association. Mr. Argento completed the design, project management and construction of a 32 unit condominium complex in Calgary in the district of Beddington. The value of the projects that Mr. Argento's companies undertook was in excess of $17,500,000.

Mr. Argento joined CPI Crown Properties International Corporation, a Tier One publicly traded real estate company on the Exchange, in 2003 in the capacity of Chief Operating Officer. Mr. Argento assisted CPI in setting up their investment syndication program on their real estate holdings and CPI had successfully sold out all of their investment syndications prior to Mr. Argento's departure.

In December of 2006, Mr. Argento co-founded Stoneset. Stoneset was established to provide development services from land and project acquisition through to project management and construction. Mr. Argento took on the role of Chief Executive Officer and Chairman of the Board with Stoneset. Based on Mr. Argento's experience with investment syndication, Stoneset has been set up to allow investors to invest in the various projects that Stoneset intends to develop. This allows investors to participate in projects and realize a developers return while Stoneset's team with Mr. Argento's leadership will take the projects from inception through to completion.

Mr. Argento has been associated with the construction industry in Calgary for the past twenty-eight years. Mr. Argento has extensive experience in real estate syndication, product research and development, building design, product detailing, construction management, project scheduling, and subdivision planning and project management at various levels of government approval.

Peter Jarman – Calgary, Alberta – President and a Director

Mr. Jarman holds a Bachelor of Science Degree in Biochemistry from the University of Victoria, British Columbia. His background in academic research has assisted him in property investigation, analysis and acquisition in the Alberta market. Mr. Jarman currently serves as the President of Trimax Inc., the company he started in August 2001. Under Mr. Jarman's direct supervision, Trimax initially raised in excess of $4,000,000 to explore opportunities in international fund markets. Since 2002, Mr. Jarman has focused Trimax offerings on property acquisition in Alberta. In addition, Mr. Jarman has also worked extensively with investment advisors to develop programs and seminars to facilitate the sale of Trimax investment products.
Mr. Jarman has served as the president of Avant Garde Marketing Group Ltd. since 2003, which has focused on exempt market securities available through offering memoranda for the western Canadian market. The company has achieved sales volumes of over $5,000,000 per year, with a client base of over 1,400 clients.

In December 2006, Mr. Jarman assisted in the initial set-up of Stoneset and he has directed capital raising and financial product distribution since that time. Mr. Jarman has assisted in the development of Stoneset in the areas of financial product design, legal review liaison, investor relations and product distribution. He has experience in agent management, marketing, securities compliance and business development.

Stephen Yuen – Vice-President, Finance and Chief Financial Officer

Mr. Yuen has over 20 years of accounting and financial management experience in real estate, the oil and gas, manufacturing and merchant banking businesses. He has a Bachelors Degree in Business from McMaster University and is a member of the Association of Certified General Accountants of Alberta and Canada. He has been with Stoneset since May 2009. Mr. Yuen is responsible for treasury, controllership and systems functions of Stoneset.

Jorg Ostrowski – Calgary, Alberta – Director

Mr. Ostrowski is best described as a visionary who has been instrumental in a number of initiatives in environmental architecture worldwide. He was the mastermind behind the development and construction of the Alberta Sustainable Home, which was developed in partnership with Helen Ostrowski and Stoneset CEO, Tony Argento, in 1991. Mr. Ostrowski has two professional degrees in architecture: a B. Arch. (University of Toronto), and a M. Arch. A.S. (Environmental Design Program, Massachusetts Institute of Technology (MIT)). At MIT, Mr. Ostrowski won a Canada Mortgage and Housing Corporation fellowship. Mr. Ostrowski has published several articles in the Canadian Architect and the AIA Journal, and was invited to speak at Harvard, the Pratt Institute and the University of Manitoba. Mr. Ostrowski brings a real-world perspective to ecological planning and will assist Stoneset in developing environmental solutions to development, ensuring that Stoneset's projects use appropriate technology to limit environmental impact.

Ron A. Bichel – Calgary, Alberta – Director

Mr. Bichel is the founder of Ron A. Bichel Professional Corporation, an accounting firm that provides a wide range of corporate and personal accounting, taxation consulting and accounting technology to a diverse client base. Mr. Bichel has been in practice since 1990. Prior to establishing his own practice, he was employed with Canada Custom and Revenue Agency from 1978 to 1990. During his years of employment with the government, he completed a wide variety of audits. A significant amount of time was spent on audits of oil and gas corporations and assisting in the administration of the Federal Oil and Gas Flow-Through Share Program. Mr. Bichel spent several years contracted by Alberta Tax and Revenue Administration assisting in the administration and auditing of the Alberta Royalty Tax Credit Program. Mr. Bichel is on the board and has been an elected officer of various non profit organizations.

Russell Kalmacoff – Calgary, Alberta – Director

Mr. Kalmacoff brings with him extensive experience in mortgage products, corporate finance and public corporation governance. He is the President of Rockmount Trust Corporation, and serves as a director with Trafina Energy Ltd. (a public corporation traded on the Exchange) and the International Avenue Arts and Cultural Centre. Mr. Kalmacoff was recently appointed to the Alberta Government's Task Force on Technology Commercialization. Mr. Kalmacoff is the co-author of Introduction to the Canadian Mortgage Market, a text used in the Canadian Securities Course of the Investment Dealers Association for twenty years (1977-97), and has in-depth experience of Canadian mortgage products.

Marco DeDominicis – Calgary, Alberta – Director

Mr. DeDominicis is currently the President and a director of Plumb-Line Holdings Inc., the administrator of Plumb-Line Income Trust ("Plumb-Line"), a private income trust. A number of businesses operate as part of Plumb-Line including Con-Forte Contracting Group Inc., Four Star Gravel Contractors Ltd., F&D Management Services Inc., Asty Concrete & Construction Ltd. and Plumb-Line Masonry Group Inc. Mr. DeDominicis is also a current director of RMS Systems Inc. (TSXV: RMS). Mr. DeDominicis has many years of experience in the construction and real estate industries. Mr. DeDominicis holds a BA from Carleton University in Ottawa, Ontario.

David Hall – Calgary, Alberta – Director

Mr. Hall is the former President, Chief Operating Officer and director of Marble Energy Ltd., a private oil and gas company. Mr. Hall serves and has served as a director of many private and public companies. Mr. Hall is a current director of RMS Systems Inc. (TSXV: RMS). From May 2005 to September 2008 Mr. Hall was a director of C-Data Communications Inc. (now RMS Systems Inc.). From November 2005 to September 2008, Mr. Hall was a director of Tiger-Cat Energy Ltd. (now RMS Systems Inc.). From July 2005 to May 2006, Mr. Hall was a director of Norquay Capital Ltd. (now Xtreme Coil Drilling Corp. (TSX: XDC)). From September 2002 to April 2005, Mr. Hall was President and a director of Argo Energy Ltd. (TSX: AAE, now part of Daylight Resources Trust (TSX: DAY.UN). Mr. Hall is a professional engineer.

Interest of Directors and Executive Officers

Following the Amalgamation, the directors and executive officers of Amalco, as a group, will own, directly or indirectly, or exercise control or direction over, approximately 1,944,184 Amalco Shares and are expected to have options to purchase an additional 1,948,000 Amalco Shares. As a group the directors and executive officers will hold approximately 5.5% of the issued and outstanding Amalco Shares on a non-diluted basis and 10.5% of the issued and outstanding Amalco Shares on a fully-diluted basis.

Requirements to Completion of the Amalgamation

Completion of the proposed Amalgamation is subject to a number of conditions, including but not limited to, Exchange acceptance and shareholder approval. The proposed Amalgamation cannot close until the required shareholder approval is obtained (being the approval of shareholders of both Aqueous and Stoneset holding in excess of 662/3% of the outstanding common shares). There can be no assurance that the proposed Amalgamation will be completed as proposed or at all. In addition, sponsorship of the Amalgamation may be required in accordance with Exchange policies, but has not yet been obtained.

Trading of the common shares of Aqueous was halted in connection with the initial announcement of the proposed transaction on October 2, 2009. As Aqueous' deadline for completing a qualifying transaction was October 2, 2009, the shares will not begin trading until the Amalgamation is completed. If the Amalgamation is not completed within 90 days Aqueous may be required to transfer to the Exchange's NEX Board.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the Amalgamation, any information released or received with respect to the proposed Amalgamation may not be accurate or complete and should not be relied upon. Trading in the securities of Aqueous, a capital pool company should be considered highly speculative at this time based on the information contained herein.

Information about Aqueous

Aqueous was incorporated pursuant to the provisions of the Business Corporations Act (Alberta) on November 20, 2006. Since incorporation, the business of Aqueous has been to identify and evaluate assets or businesses with a view to completing a qualifying transaction as a capital pool company pursuant to Exchange policies. The directors of Aqueous are Marco DeDominicis, Trevor Haynes and David Hall, all of which are residents of Calgary, Alberta. Marco DeDominicis is also the President and Chief Executive Office of Aqueous. Marco DeDominicis, Trevor Haynes and DSH Partnership (a Partnership in which David Hall is a partner) each own, directly or indirectly, or exercise control or direction over, approximately 16.2% of the outstanding Aqueous common shares.

Cautionary Statements

This news release contains "forward-looking statements" within the meaning of applicable securities laws relating to the proposal to complete the Amalgamation, including statements regarding the terms and conditions of the proposed transaction, structure of the transaction, expected future values of Stoneset's development projects, expected timing and costs of completion of Stoneset's development projects, the pro forma capitalization and the proposed board of directors and executive officers of Amalco following completion of the Amalgamation. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the transaction, that the ultimate terms of the transaction will differ from those that currently are contemplated, decreasing property values, inability to obtain necessary funding, inability to obtain necessary permits and approvals, execution and capital cost risks relating to the Stoneset's development and construction projects and that the transaction will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this news release are made as of the date of this release. Neither Aqueous nor Stoneset undertakes any obligation to update such forward-looking statements except as required by applicable securities laws.

The TSX Venture Exchange, Inc. has in no way passed upon the merits of the proposed Amalgamation and has neither approved nor disapproved of the contents of this press release.

Contact Information

  • Aqueous Capital Corp.
    Marco DeDominicis
    President and Chief Executive Officer
    (403) 569-4876
    or
    Aqueous Capital Corp.
    1415 - 28th Street N.E.
    Calgary, Alberta T2A 2P6
    or
    Stoneset Equities Ltd.
    Peter Jarman
    President
    (403) 237-8822
    or
    Stoneset Equities Ltd.
    3915-8 Street S.E.
    Calgary, Alberta T2G 3A5