Chrome Capital Inc.

August 10, 2007 19:02 ET

Chrome Capital Inc. Announces Proposed Qualifying Transaction With Cquay Technologies Corp.

CALGARY, ALBERTA--(Marketwire - Aug. 10, 2007) -


Chrome Capital Inc. (TSX VENTURE:KRM.P) ("Chrome" or the "Corporation"), a Capital Pool Company ("CPC"), announced today that it has executed a binding agreement dated July 31, 2007 (the "Agreement Date") to acquire all of the outstanding shares of Cquay Technologies Corp. ("Cquay" pronounced "Seek Way"), an Alberta corporation. When completed, the transaction will constitute the Corporation's Qualifying Transaction (the "QT" or the "Transaction") pursuant to TSX Venture Exchange (the "Exchange") Policy 2.4 (the "CPC Policy") and the Corporation will be classified as a "Technology or Industrial Issuer". The Transaction is an arm's length transaction and is subject to approval by Cquay shareholders and the usual closing conditions, including approval by the Exchange. Trading of the common shares of Chrome ("Chrome Shares") will remain halted until completion of the Transaction. Wellington West Capital Markets Inc. ("WWCM") has agreed to act as sponsor.

Summary of the Proposed QT

It is anticipated that the Transaction will be by way of a merger with a newly formed Chrome subsidiary (such that Cquay will become a wholly owned subsidiary of Chrome) pursuant to the Business Corporations Act (Alberta) ("ABCA") or some other form of business combination whereby Chrome will acquire all of the outstanding shares issued by Cquay and outstanding convertible securities of Cquay will either be exercised prior to closing of the QT or converted into Chrome securities.

Chrome's outstanding share capital consists of 2,050,000 Chrome Shares, stock options to acquire 205,000 Chrome Shares and warrants to acquire 100,000 Chrome Shares. Chrome has agreed to issue 40,000,000 Chrome Shares to acquire all of the 98,164,151 common shares of Cquay outstanding, as of the Agreement Date (the "Pre-Financing Shares"), thereby establishing a consolidation and exchange ratio of 1 Chrome share for every 2.454 common shares of Cquay ("Cquay Shares") acquired in the Transaction (the "Exchange Ratio"). Chrome will issue additional Chrome Shares to acquire all of the Cquay securities issued pursuant to a Concurrent Financing and Interim Financing (both described below). In addition, Chrome will issue stock options to acquire 2,000,000 Chrome Shares, in exchange for all of the Cquay options granted at the time of the Transaction. The deemed price per share for the Transaction shall be established and announced at the time the pricing for the Concurrent Financing is determined.

The Transaction is subject to approval of 66-2/3% of the votes cast by Cquay shareholders at a special meeting to be called to consider the Transaction. Calvin McElroy, the Executive Chairman and Chief Executive Officer of Cquay, owns or exercises control over 21,590,824 Pre-Financing Shares, representing 22.0% of the Pre-Financing Shares and the directors, officers and advisors of Cquay together with their associates and affiliates own or control an aggregate of 51,214,806 Pre-Financing Shares or 52.2% of the Pre-Financing Shares. The remaining Pre-Financing Shares are held by approximately 33 registered shareholders, none of whom hold more than 5.1% of the Pre-Financing Shares.

In connection with the Transaction, Cquay has agreed with Chrome to undertake to raise a minimum $4.5 million by way of a brokered private placement financing, to be priced in the context of the market. The number of additional Cquay securities to be issued in connection with any financing by Cquay is subject to the issuance price and the total amount raised.

The Transaction will not, as currently contemplated, be subject to approval by the shareholders of Chrome shareholders, but is subject to approval of the Exchange and other usual closing conditions. Further details of the proposed Transaction, Concurrent Financing and Interim Financing will be announced as they become available. It is anticipated that the Transaction will be completed no later than November 30, 2007.

The completion of the Transaction is subject to a number of factors, including but not limited to completion of the Concurrent Financing, the provision of a favourable sponsorship report if required by the Exchange, the overall acceptance of the Exchange (including meeting the Exchange's minimum listing requirements) and the receipt of all other necessary approvals, including approval by Cquay shareholders.

Chrome has set a record date of August 2, 2007 for an annual general and special meeting, to be held on October 2, 2007. The special business to be considered and voted on at the meeting, subject to the closing of the Transaction, will include the change of Chrome's name to reflect the Cquay brand, increase of the number of board members, and approval to consolidate the post-Transaction Chrome Shares on a 2:1 basis.

Subject to Exchange approval, Chrome has advanced $50,000 on an unsecured, refundable basis, to Cquay. The loan is to be repaid by December 31, 2007 and will accrue interest at the rate of 10% per annum if not repaid by December 31, 2007.

Proposed Cquay Private Placements

Cquay has engaged WWCM and Orion Securities Inc. as co-lead agents, on behalf of a syndicate which will include Jennings Capital Inc. to complete a minimum $5 million and up to $8 million private placement financing (the "Concurrent Financing") on a best efforts agency basis. Pursuant to the Concurrent Financing, Cquay will offer Subscription Receipts to acquire up to a maximum of 53.3 million additional Cquay Shares. The proceeds from the sale of the Subscription Receipts will be invested and held in escrow until immediately prior to completion of the QT, at which time any unexercised Subscription Receipts will be deemed to be exercised, for no further consideration, on the basis of one Cquay Share per Subscription Receipt. If the proceeds are not released prior to 60 days following the closing of the Concurrent Financing, the proceeds will be used to repurchase all of the outstanding Subscription Receipts at the issuance price together with any interest earned thereon. The proceeds from the Concurrent Financing, if released to Cquay, will be used to: (i) accelerate sales, marketing and business development; (ii) develop and launch additional products; and (iii) increase working capital for general corporate purposes.

In connection with the Concurrent Financing, Cquay has agreed to pay a commission equal to 7% of the proceeds from the sale of the Subscription Receipts and issue non-transferable compensation warrants equal to 8% of the number of Subscription Receipts sold. The agent's compensation warrants will entitle the agents to acquire one Cquay Share at the Subscription Receipt offering price (or an adjusted number of Chrome Shares at the adjusted exercise price) within 18 months of closing of the QT.

Cquay may, but is not obligated to raise up to $500,000 through a non-brokered private placement financing (the "Interim Financing"), with the proceeds to be used by Cquay for working capital and general corporate purposes. The Interim Financing is intended to close prior to closing of the Concurrent Financing and the Transaction. If convertible securities are issued by Cquay pursuant to the Interim Financing, they will automatically convert immediately prior to closing of the Transaction, into additional Cquay Shares. The terms of the Interim Financing have not been finalized, but it is not expected to result in more than 4.5 million additional Cquay Shares being issued.

The actual number of additional Chrome Shares to be issued in exchange for Cquay shares issued pursuant to the Concurrent Financing and Interim Financing will be determined using the same Exchange Ratio as used with the Pre-Financing Shares and the Cquay compensation warrants will be replaced with Chrome compensation warrants (adjusted as to number and exercise price on the same basis) to replace the compensation warrants issued by Cquay to the agents pursuant to the Concurrent Financing.

About Cquay

Cquay ( is a development stage software company, based in Calgary, Alberta. It is a technology leader in the emerging market for location intelligence and local search software and web services. Cquay's flagship product, called Common Ground® is a software platform and database that allows customers to organize, find and analyze information based on location context, and to link this content to web map services like Google, Microsoft and Yahoo. Much of the world's information is associated with places, like stores, buildings, cities, neighbourhoods and natural landmarks - and these places all have a geographic location. Cquay links a massive amount of information about places - and the world of maps, location and GPS. Common Ground uses an innovative and patented index and retrieval method based on a unique Place ID for every real world place, to index, integrate find and analyze any content about places of interest, or geographic areas. Common Ground is an add-on for the Oracle data management platform and the Company is partnered with TeleAtlas, a leading global provider of digital map data and dynamic content. Cquay's business strategies include using the Common Ground platform to establish a leadership position in the emerging market for enterprise location intelligence solutions, and to develop and launch a web-based suite of PlaceSmart Search™, and PlaceSmart Information™ services, with wireless device support, for web developers and Internet users.

Cquay History and Financial Information

Cquay was incorporated under the ABCA on March 28, 2002. Cquay's corporate office is located at 10th Floor, 888 - 3rd Street SW, Calgary, Alberta T2P 5C5 and its registered office is at Suite 3300, 421 - 7th Avenue SW, Calgary, AB, T2P 4K9. Cquay also has an office at 8th Floor, 2425 Matheson Boulevard E., Mississauga, Ontario L4W 5K4.

Cquay was founded by Calvin McElroy, Peter Lee and David Warren to acquire the technology assets, patents and trademarks relating to the Common Ground technology, with a view to further development and commercialization. The first commercial version of the Common Ground system was released in 2003 and in that year, Cquay was granted a significant patent by the US Patent & Trademark Office. Since 2003, Cquay has been successful in securing commercial contracts with major Canadian telecommunications companies and a major US public safety agency, in entering into several strategic application or collaborative marketing partnerships and in developing and delivering enterprise applications, using the Common Ground platform. Proceeds from contracts and licenses were used to fund technology commercialization and product development. Version 3 of Common Ground was released in 2006 and in that year, Cquay also was granted a patent by the Canadian Intellectual Property Office.

The present directors of Cquay are Calvin McElroy, Dominique Trempont, Cindy Gordon and Kevin Boeh. The founders are all executive officers of Cquay and will be appointed as executive officers of Chrome following closing of the Transaction.

Cquay's unaudited financial statements for the most recently completed fiscal year ended March 31, 2007 disclose total revenue of $492,023, direct cost of revenue of $32,124 for a gross margin of $459,899, operating expenses of $822,003 that include stock based compensation of $216,002 and research and development expenditures of $258,778, net income of ($370,192), total assets of $632,473, total liabilities of $1,071,961 that include $302,910 in deferred revenue, no long term debt and working capital of ($151,190), excluding deferred revenue that does not affect cash.

Chrome's unaudited financial statements for the most recently completed quarter ended March 31, 2007 disclose total assets of $222,690.00, no revenues and no debt. Chrome's audited financial statements and unaudited interim financial statements can be viewed at

Cquay has engaged KPMG LLP to audit and review its financial statements as required by the CPC Policy. Mark Lawrence, Managing Partner of NorthCrest Partners Inc. (Toronto) is acting as a corporate finance advisor to Cquay.

Proposed Directors and Officers of Chrome following QT

The proposed directors and officers of Chrome to be appointed following closing of the Transaction are subject to acceptance by the Exchange. All of the current officers and directors of Chrome will resign following closing of the Transaction and Calvin McElroy, Rodney Mitton, Alex Blodgett and Robert Tretiak will be appointed to the Board of Directors of the combined Corporation and the following will be appointed officers of the Corporation: Calvin McElroy (Executive Chairman and Chief Executive Officer), David Warren (Chief Technology Officer), Peter Lee (Chief Operating Officer), Peter Kinash (Chief Financial Officer) and Bill Smith (Corporate Secretary) as a non-executive officer.

Calvin L. McElroy, Calgary, Alberta

Proposed Chairman, CEO and Director

Mr. McElroy is currently the Executive Chairman and CEO of Cquay. He has served as a board member and officer of several private technology companies including Cquay, The TPI Group, Panther Services, and Zymeta. Mr. McElroy's career also includes former executive and management mandates at Intergraph Canada (Director and acting President), Oracle (Regional Director), Wang Center for Imaging Technology (General Manager) and Computerland/SHL Systemhouse (now EDS where he was a Branch Manager), all of which were public companies during his tenure. Mr. McElroy holds a diploma in Computer Engineering Technology (1979) from Red River College in Winnipeg, Manitoba.

Peter J. Lee, Toronto, Ontario

Proposed Chief Operating Officer

Mr. Lee is currently a Vice-President of Cquay and its Chief Operating Officer. Prior to Cquay he served in executive roles at Bridg2Market (VP, Product Management & Marketing), Enghouse Systems, where he served as VP, Global Professional Services), and Intergraph (Director Application Services, and Director, Business Development). Mr. Lee is respected for his knowledge and industry experience in mapping, geographic information systems, and location technology. He holds a Bachelor of Mathematics degree in Computer Science (1986) from the University of Waterloo, and attended the Executive Marketing Management Program at the University of Western Ontario - Richard Ivey School of Business (1991).

Peter Kinash, Calgary, Alberta

Proposed Chief Financial Officer

Mr. Kinash is currently a financial advisor to Cquay, and will transition into the role of Chief Financial Officer upon closing of the Transaction. In addition, he provides and will continue to provide financial advisory services to several other public and private technology companies including KnowledgeWhere and Replicon,. Mr Kinash is a member of the Boards of Directors of Computer Modelling Group and Chartwell Technology. Mr. Kinash previously served as the CFO of three TSX listed issuers, including Wi-LAN, and led KPMG's Calgary technology practice. Mr. Kinash is a Chartered Accountant, and holds a BComm degree from the University of Saskatchewan (1977).

David J. N. Warren, Calgary, Alberta

Proposed Chief Technology Officer

Mr. Warren is currently a Vice-President of Cquay and its Chief Technology Officer. Mr. Warren is a respected scientist and technologist recognized for his work on Cquay's patents, and for leading and participating in global standards initiatives within the location technology industry. Prior to Cquay, Mr. Warren worked as a senior technology architect and database designer at The TPI Group, Intergraph, Encor and Texaco. He holds a BSc in Applied Physics (1976) and a MSc in Civil Engineering (1983), both from the University of Wales.

William H. Smith, Q.C., Calgary, Alberta

Proposed Corporate Secretary

Mr. Smith is a partner with McCarthy Tetrault LLP. He advises Cquay on securities and corporate matters, and acts as Cquay's Corporate Secretary. Mr. Smith has served as advisor, counsel, director and/or corporate secretary for numerous private and public companies, including of: Pan-Ocean Energy Corporation Limited, Oilexco Incorporated, PFB Corporation and AxianetMedia Corporation. He was previously the acting CEO of the Alberta Securities Commission and for ten years, the Chair of its Securities Advisory Committee. Mr. Smith holds a BA (1973) and LLB (1976), both from the University of Alberta and was called to the Alberta bar in 1977.

Rodney D. Mitton, Calgary, Alberta

Proposed Director

Mr. Mitton is currently the Chief Financial Officer and a director of Zaio Corporation. Mr. Mitton organized the merger of Zaio, with three separate public issuers (CPCs), to create the current public company. Prior to Zaio, Mr. Mitton was an officer or director of several public issuers, including Kelman Technologies, Zi Corporation (NASDAQ and TSX), Red Oak Resources Inc. (TSX) and predecessor companies to Phoenix Technology Services Inc. (TSX) called Starlink Communications Corporation (TSX) and Nevis Energy Services Ltd. (TSX).

Alex Blodgett, Vancouver, B.C.

Proposed Director

Mr. Blodgett is currently the VP, Corporate Development for Call Genie Inc. Mr. Blodgett was a founder and former President of Call Genie and led its financing strategy through a CPC qualifying transaction and several subsequent rounds of financing. Mr. Blodgett has an extensive background in corporate finance and has worked with companies in Canada, USA, Europe and Asia. Prior to Call Genie, Mr. Blodgett was a partner in investment banking with Gordon Capital (Toronto), ran Gordon Capital's real estate research and consulting division, and Bankers Trust Company in the USA.

Robert W. Tretiak, Calgary, Alberta

Proposed Director

Mr. Tretiak is currently the General Manager with NGrain, a private technology company. Previously, Mr. Tretiak was the founder, President, CEO and a director of Applied Terravision Systems and led the company through several years of rapid growth. Applied Terravision Systems was acquired in 2002 by Cognicase, a public issuer, and subsequently by CGI. Mr. Tretiak previously served an advisor and board member to several private and public companies, and is currently a director of Automated Benefits.

Completion of the Transaction is subject to a number of conditions, including but not limited to, due diligence and Exchange acceptance. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in a 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 Chrome, a capital pool company should be considered highly speculative.

Wellington West Capital Inc., subject to completion of satisfactory due diligence, has agreed to act as 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.

Certain information set forth in this press release contains forward-looking statements. All statements other than historical facts contained herein are forward-looking statements, including without limitation, statements regarding the business of Cquay, which may become the business of Chrome. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Cquay and Chrome's control, including the impact of general economic conditions, industry conditions, governmental regulations, volatility of prices, currency fluctuations, competition from other industry participants, stock market volatility and ability to access sufficient capital from internal and external sources Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and as such, undue reliance should not be placed on forward-looking statements. Actual results, performance or achievement could differ materially from those expressed in or implied by, these forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits will be derived therefrom. Cquay and Chrome disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of Chrome or Cquay's securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to any U.S. Person unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

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

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