FOX-TEK provides further update on non-binding letter of intent

TSX Venture Exchange symbol: FOX

TORONTO, May 19 /CNW/ - Fiber Optic Systems Technology, Inc. ("FOX- TEK"), (TSX-V: FOX), a developer and manufacturer of patented non-intrusive sensing systems, today announced further details on the non-binding letter of intent, ("LOI") with Allen Lone who is the sole shareholder of Marcon International Inc., ("Marcon").

Marcon has recently completed the audit of their consolidated financial statements for the year ended December 31, 2009. Marcon reports in US dollars but the following amounts have been converted to Canadian dollars. Consolidated group sales were $3,614,017, gross profit was $523,673 and net income was $238,925. Net assets of the consolidated group was $561,575. On a pro-forma consolidated basis, FOX-TEK would have reported total revenues of $4,617,016 had the proposed LOI with Marcon been in effect for the 2009 calendar year.

On May 13th, 2010, Marcon International Inc. changed its name to Knoxbridge Inc., ("Knoxbridge") a private Ontario company and entered into an asset purchase agreement. Under the asset purchase agreement Knoxbridge sold all of its assets, including but not limited to, all contracts and goodwill, pertaining to its procurement business to a newly incorporated Ontario company named Marcon International Inc. ("New Marcon"). New Marcon will continue the business of Knoxbridge and all disclosure pertaining to New Marcon, including financial, will be that of Knoxbridge. Knoxbridge will be the sole shareholder of New Marcon with Allen Lone being the sole shareholder of Knoxbridge. Allen Lone transferred all of the shares in the capital of Marcon International (USA), Inc. and Marcon International (UK) Ltd to New Marcon for nominal consideration. Marcon International (USA), Inc. and Marcon International (UK) Ltd were previously held directly by their sole shareholder, Allen Lone.

Fraser Mackenzie, subject to completion of satisfactory due diligence, has agreed to act as sponsor to FOX-TEK in connection with the transaction. FOX-TEK has now signed a sponsorship agreement with Fraser Mackenzie whereby Fraser Mackenzie will review the proposed application for an all share deal with Marcon International Inc. that will result in a reverse-takeover of FOX-TEK. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

The proposed Board of Directors of the resulting issuer will be comprised of the following members:

    
     Mr. Allen Lone

      - Former President and CEO of Marcon International Inc.
      - Former President & CEO and Promoter of Ketchum Capital Corporation a
        capital pool company listed on the TSX Venture Exchange
      - Former Director of Ammonite Energy LTD (AMO-TSXV)
      - Mr. Lone has a MBA from Lindenwood University, St. Louis, Missouri
        and a B.Sc. in Business Administration and General Studies from South
        East Missouri State University

    Mr. Steve Ewaskiw

      - Co-founder and former President and CEO of Ammonite Energy Ltd.
      - Former president and CEO of Wave Energy Ltd. (2003-2006)
      - Former VP Exploration at Rival Energy Ltd. (2002-2003)
      - Co-founder and President of Innovative Energy Ltd. (2000-2002) before
        it was acquired by Denison Energy Inc.
      - Co-founded various start-ups including Storm Energy Inc., Winfield
        Energy and Joss Energy
      - Former employee at Amoco, ARCO and Amerada Hess

    Mr. Tony Boogmans

      - Former VP Operations and Director at Ammonite Energy following the
        merger with Clearwater Energy Inc.
      - Former President of Clearwater Energy Inc. (2005-2008)
      - Former employee at Gulf Oil Canada, AOSTRA, Canadian Western Natural
        Gas Company Ltd. and North Western Utilities Limited.
      - Co-founder of Innovative Energy Ltd. and former Manager, Oil & Gas
        Operations at Denison Energy Inc.
      - Former Consulant and then VP Engineering at Silverwing Energy Inc.

    Mr. Jay Vieira

      - Partner with Fogler & Rubinoff LLP in Toronto
    

FOX-TEK will be seeking to raise approximately $2.0M through an equity financing (the "Financing") to close prior to or contemporaneously with the closing of the RTO. The Financing will be comprised of the issuance of units of FOX-TEK. The unit consists of one share and one warrant. The shares of FOX-TEK will be priced in accordance with current market conditions at the time of the offering. The warrants will likely be priced at $0.15 and will entitle the holder to acquire one common share of FOX-TEK at any time within thirty six (36) months from the closing date of the offering. FOX-TEK anticipates using a broker for this financing and agents involved in the Financing will receive customary fees, including cash and/or securities. Proceeds from this Financing will be used to repay $365,000 of the outstanding convertible debentures and for general corporate purposes.

Completion of the transaction is subject to a number of conditions, including Exchange acceptance and Shareholder approval. 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 Filing Statement to be prepared in connection with the transaction, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of FOX-TEK should be considered highly speculative.

About FOX-TEK:

Fiber Optic Systems Technology, Inc. "FOX-TEK" develops non-intrusive asset health monitoring sensor systems for the oil and gas market to help operators track the thinning of pipelines and refinery vessels due to corrosion/erosion, strain due to bending/buckling, and process pressure and temperature. FOX-TEK's FT fiber optic sensor and PinPoint systems allow cost-effective, 24/7 remote monitoring capabilities to improve scheduled maintenance operations, avoid unnecessary shutdowns, and prevent accidents and leaks.

FOX-TEK has offices in Toronto, ON and Alberta; FOX-TEK is traded on the TSX Venture Exchange under the symbol "FOX". For more information, visit www.fox-tek.com.

This press release contains forward-looking statements based on assumptions, uncertainties and management's best estimates of future events. Actual results may differ materially from those currently anticipated. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements are detailed from time to time in FOX-TEK's periodic reports filed with the Ontario Securities Commission and other regulatory authorities. FOX-TEK has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Completion of the transaction is subject to a number of conditions, including Exchange acceptance and disinterested Shareholder approval. 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 to be prepared in connection with the transaction, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of FOX-TEK should be considered highly speculative.

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

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For further information: FOX-TEK: Sean Carr, President & CFO, Fiber Optic Systems Technology, Inc., [phone], [email protected]