Fulcrum Capital I Inc.
TSX VENTURE : FUL.P

October 25, 2005 16:00 ET

Fulcrum Capital I Inc. Announces Qualifying Transaction

CALGARY, ALBERTA--(CCNMatthews - Oct. 25, 2005) -

Not for dissemination in the United States of America

Fulcrum Capital I Inc. ("Fulcrum" or the "Corporation") (TSX VENTURE:FUL.P) today announced details concerning its proposed Qualifying Transaction involving a business combination with Macro Industries Inc. ("Macro").

About Macro

Macro is a private company based in Fort St. John, British Columbia that operates a construction business specializing in small diameter pipelines and related facilities. Macro has been in operation for eleven years. It is focused on opportunities in the oil and gas industry in Western and Northern Canada, primarily in pipeline and facility construction and maintenance.

Macro has developed expertise in the following areas: pipeline and maintenance construction, facility construction and maintenance, pipeline systems including pipe maintenance and replacement, station and right of ways. Macro has also developed quality control programs in accordance with applicable Canadian standards.

Macro's strategy has been to expand its services to become more diversified, enabling it to gain a larger percentage of revenues from each phase of a construction, maintenance, or turnaround project. Macro management has also increased its market focus to further expand its services to include all of Alberta, British Columbia, the Northwest Territories, Alaska and Yukon.

Pipeline construction represented the largest portion of Macro's revenues (53%) in fiscal 2004. Facilities construction represented 33% of Macro's revenues in that period. Pipeline construction has historically represented greater than 50% of Macro's sales in certain years, depending on market conditions and customer requirements. Right of ways services represented 9% of Macro's revenues in fiscal 2004. Compressor stations services represented the balance of Macro's revenues in that period. Although Macro did not undertake pipeline system projects in fiscal 2004, in the past it has accumulated extensive experience in this area.

Macro has bid on approximately 150 projects per annum in recent years. Activity to date in the current fiscal year indicates a higher level of activity than the previous year.

Macro's customer base is comprised of many of the largest and most well established oil and gas producers working within its service area. Macro believes it has established a favourable reputation with its customers and obtains repeat business from its customer base as well as referrals.

Macro is a market leader within its primary service areas including Northeastern British Columbia. Fort St. John offers a strategic location as a gateway to the north for the Northwest Territories, Alaska and Yukon. Management of Macro believes Macro's reputation, strategic location and favourable relationships with many large oil and gas producers that are active in the north will enable Macro to participate in development of the infrastructure related to the Mackenzie Valley and Alaska pipeline projects over the next decade.

Macro Corporate History and Structure

Macro was incorporated under the Business Corporations Act (British Columbia) on November 1, 1994. The head office of Macro is located in Fort St. John, British Columbia, and Macro's registered office is located in Vancouver, British Columbia.

Macro has 2,880 shares outstanding (the "Macro Shares"). There are no other Macro Shares issued and outstanding and no stock options, warrants, anti-dilution or other rights to purchase Macro Shares issued or outstanding.

The only shareholders of Macro that own more than 10% of the outstanding Macro Shares are (i) Frank Miles, the President of Macro, who, with his family, owns or controls 63.3% of the Macro Shares; and (ii) Mark Dodge, who, with his family and through Dodge Pipeline Services Ltd., owns or controls 31.7% of the Macro Shares.



The following table sets out certain financial information in respect
of Macro based on management prepared unaudited financial statements for
the years ended March 31, 2005 and 2004:

March 31, 2005 March 31, 2004
------------------------------------------------------------------------

Revenue $47,271,716 $38,784,466

Direct Expenses $31,141,646 $24,640,655

Net Income $ 2,045,341 $ 439,189

Working Capital $ 1,172,576 $ (481,750)

EBITDA(1) $ 9,682,911 $ 9,216,921

Total Assets $33,038,227 $24,556,440

Long Term Debt $ 4,220,652(2) $ 3,998,610(3)

Shareholders Equity $ 4,569,780 $ 2,524,439

Notes:

(1) Earnings before interest, taxes, depreciation and amortization,
adjusted for management fees, bonuses and other income statement
items.
(2) Of this amount, $2,863,904 represents outstanding shareholder loans.
(3) Of this amount, $2,057,532 represents outstanding shareholder loans.


Directors and Officers of Macro

The current directors of Macro are Frank Miles and Mark Dodge. The current officers of Macro are Frank Miles as President and Mark Dodge as Secretary.

Frank Miles, of Fort St. John, British Columbia, is President and General Manager of Macro. Mr. Miles has 24 years of varied experience in the oil and gas industry and specifically in pipeline and facility construction. Under the leadership of Mr. Miles, Macro has experienced continuous growth in its business model since inception in 1994 with gross revenues increasing annually to $47.2 million in the fiscal year ended March 31, 2005. Mr. Miles worked with Westcoast Energy Inc. in various capacities relating to pipeline and facility construction prior to starting at Macro.

Mark Dodge, of Fort St. John, British Columbia, is Secretary of Macro. He has 26 years of experience in the oil and gas industry specifically in pipeline and facility construction and maintenance. Mr. Dodge supervises projects and crews in the field and is responsible for Macro's hot tap specialty services. Mr. Dodge worked for Westcoast Energy Inc. and Westcoast Petroleum from 1979 through to 1996 as a pipeline and valve technician.

Summary of the Proposed Qualifying Transaction

Fulcrum has entered into an arm's length letter agreement dated October 21, 2005 with Macro (the "Agreement") and the Macro shareholders pursuant to which the Corporation and Macro have agreed to complete a business combination (the "Business Combination"). The Business Combination is expected to constitute a Qualifying Transaction of the Corporation as defined in Policy 2.4 of the TSX Venture Exchange Inc. ("TSX Venture") Corporate Finance Manual.

The Business Combination will be completed after completion of a brokered private placement financing (the "Private Placement") to be conducted, in one or more closings, through a private corporation ("AcquisitionCo") to be incorporated for the purpose of acquiring Macro. The Private Placement is expected to yield gross proceeds of $15,000,000 through the issue of up to 8,571,500 common shares ("AcquisitionCo Shares") at a price of $1.75 per share. After completion of the Private Placement, AcquisitionCo will have up to 8,571,501 AcquisitionCo Shares outstanding.

It is anticipated that the Business Combination will be effected by the amalgamation of AcquisitionCo and Fulcrum (the "Amalgamation"). Immediately prior to the Amalgamation, AcquisitionCo will acquire all outstanding Macro Shares for a price of $34,800,000, including the assumption of an estimated $9,000,000 of debt. The estimated purchase price will be $25,800,000 after debt. The purchase price will be subject to two post-closing adjustments, the first for working capital and the second for meeting EBITDA projections (the "Post-Closing Adjustments").

The purchase price will be payable in cash as to $12,000,000 (which will be paid out of the proceeds of the Private Placement) and, based on the estimated purchase price, the balance of $13,800,000 by the issue of 7,885,714 AcquisitionCo Shares at a deemed price of $1.75 per share. As a result of the Post-Closing Adjustments, the number of shares received by the Macro shareholders may be increased above or reduced below 7,885,714.

After completion of the purchase of Macro and based on the estimated purchase price, there will be 16,457,215 AcquisitionCo Shares outstanding, comprised of 8,571,500 AcquisitionCo Shares held by subscribers to the private placement and 7,885,714 AcquisitionCo Shares held by the former Macro shareholders.

Immediately after the acquisition of all Macro Shares by AcquisitionCo, Fulcrum and AcquisitionCo will amalgamate to continue as Amalco with each one (post-Consolidation) Fulcrum Share being exchanged for one share of Amalco ("Amalco Share") and each one AcquisitionCo Share being exchanged for one Amalco Share, each of which will have identical terms to the shares they were exchanged for and each of which will be exchanged at a deemed price of $1.75 per share. Outstanding Fulcrum options will be replaced with options of Amalco with identical terms. Immediately after completion of the Amalgamation, it is anticipated there will be 17,820,466 Amalco Shares outstanding, of which up to 8,571,500 will be held by subscribers to the Private Placement, 7,885,714 by former Macro shareholders and 1,363,250 (after giving effect to the Consolidation, defined below) by former Fulcrum shareholders.

On completion of the Business Combination, Amalco will be a public company listed on the TSX Venture holding all issued and outstanding securities of Macro, which will remain a private company. The parties intend that the outstanding Amalco Shares (other than certain convertible Amalco Shares issued in order to effect the Post-Closing Adjustments) will be listed on the TSX Venture and that Amalco will operate as a Tier 1 Industrial Issuer (as defined in the policies of the TSX Venture).

In connection with the Business Combination, Fulcrum intends to seek shareholder approval to consolidate the outstanding common shares of the Corporation (the "Fulcrum Shares") on a one for five basis (the "Consolidation"), such that the deemed price of the Fulcrum Shares to be exchanged for Amalco Shares can be set at $1.75 per Fulcrum Share.

Macro and Fulcrum have agreed that the repayment of all shareholder loans and management bonuses currently payable by Macro (the "Loans"), which Loans currently represent a liability of Macro of not more than $5,000,000, will be deferred for one year after the closing of the Business Combination.

Macro and Fulcrum have agreed that in connection with the Business Combination, a board of seven directors of Amalco will be nominated and will include Frank Miles, William McFetridge, Brian Trypka, Mike Nielson, Vincent Krynski, Dean Prodan and one additional director to be agreed to by the parties prior to the closing of the Business Combination. Fulcrum will issue a press release containing details of such director immediately upon his or her appointment. After the closing of the Business Combination, the management of Amalco will consist of Frank Miles, as President and Chief Operating Officer, and Brian Trypka, as Chief Executive Officer.

William McFetridge, of Vancouver, British Columbia, is a senior partner with Bull, Housser & Tupper LLP in Vancouver where he practices commercial and business law. He acts for a wide range of businesses based in British Columbia, including Macro.

Prior to entering the field of law, Mr. McFetridge practised as a Chartered Accountant in Winnipeg and Vancouver. Mr. McFetridge has remained active within the accounting profession. Mr. McFetridge is a member of the Accounting Standards Oversight Council of the Canadian Institute of Chartered Accountants, the committee which oversees the development of generally accepted accounting standards in Canada. Previously, he has been a member of numerous committees of the British Columbia Institute of Chartered Accountants.

He was an Adjunct Professor at the Faculty of Law at University of British Columbia for thirteen years.

Brian Trypka, of Calgary, Alberta, was recently the Partner-in-Charge of the corporate recovery and restructuring practice for KPMG LLP for Calgary, Saskatchewan and Manitoba. Mr. Trypka was also a Director and Senior Vice-President of KPMG Inc. Mr. Trypka joined KPMG in Winnipeg and was elected to the partnership in 1981. He was employed in the Toronto, Halifax and Edmonton offices prior to moving to Calgary in 1984. From 1984 to 1997, Mr. Trypka was in charge of KPMG LLP's Calgary Financial Advisory Service practice which included the corporate recovery, corporate finance, forensic and valuation practice. Mr. Trypka has conducted viability assessments, provided restructuring, corporate finance and turnaround advice and related services across Canada, Europe, and Africa involving many public and private companies on behalf of various stakeholders including shareholders, financial institutions and governments. Mr. Trypka is currently an independent consultant.

Mike Nielsen, of Salmon Arm, British Columbia, has 16 years of experience in the natural gas industry consulting as construction manager and capital project coordinator primarily to Westcoast Energy Inc. and Duke Energy Gas Transmission. The projects involved construction of pipelines, process plants and compressor stations varying in value up to $300 million. Mr. Nielsen was treasurer and exploration manager for a public listed junior venture company in the 1980's. Mr. Nielsen is currently an independent consultant.

Vincent Krynski, of Calgary, Alberta, is the President and a Director of Fulcrum. Mr. Krynski has a diverse background in the creation, management and divestment of several small and mid-sized, high-growth manufacturing and technology businesses in Western Canada. In 1980, Mr. Krynski founded HTI Canada Ltd., an oilfield production equipment supply company and worked as the President and Chief Operating Officer. HTI was sold in 1994 to Kvaerner Process Systems Inc. In 1989, Mr. Krynski co-founded Dyad Holdings Ltd., and worked as the President and Chief Operating Officer to diversify growth opportunities for his corporate interests including his ownership of HTI and Dyad Data Services. In 1999, Dyad Data was sold to Ausdoc Group Limited, an international data management and transport company based in Australia.

In 1990, Mr. Krynski co-founded Ceramic Protection Corporation ("CPC"), an advanced ceramics company that launched an initial public offering on the ASE in 1996. CPC manufactures ceramics ballistic protection products for personnel and vehicular protection products. Mr. Krynski has worked with CPC as past interim CEO and VP Corporate Development, and is currently a Director. In 1999, Mr. Krynski co-founded Foundry Ventures Management Inc. and was actively involved in the management of Foundry Ventures LP I, an investment partnership investing in early stage technology and advanced manufacturing companies until March 2005.

Dean Prodan, of Calgary, Alberta, is a Director of Fulcrum. Mr. Prodan is President of UTA Asset Management Corp., an asset management company specializing in the Canadian energy sector. He has been a Director of NQL Drilling Tools Inc. since June 2004. Previously, Mr. Prodan was President and Director of Dominion Equity Resource Fund Corp. from January 1998 to March 2004 and President and Director of Crescent Capital Corp. from May 1997 to August 2004. From September 1993 to February 1997, he was a founding shareholder and managing director of FirstEnergy Capital Corp.

Fulcrum announces that it has reserved a price of $1.75 per share (on a post-Consolidation basis) for the grant of stock options to directors, officers, employees and consultants of Amalco, as determined by the Board of Directors of Amalco immediately following the completion of the Business Combination to acquire up to 10% of the issued and outstanding Amalco Shares, less existing options of Fulcrum and Macro, upon the completion of the Business Combination subject to Fulcrum shareholder approval and the approval of TSX Venture.

The Business Combination will be an arm's length transaction as the directors and officers of the Corporation currently have no interest in Macro.

The Corporation has applied to TSX Venture for a waiver from the requirement to retain a sponsor for the Business Combination.

The Fulcrum Shares were halted for trading on the TSX Venture in connection with the announcement of the Business Combination. The Fulcrum Shares will remain halted until the Corporation has completed certain filings with the TSX Venture.

All references to "$" in this press release are to Canadian dollars.

Completion of the Business Combination is subject to a number of conditions, including but not limited to, TSX Venture acceptance and Fulcrum shareholder approval. The Business Combination cannot close until the required shareholder approval is obtained. There can be no assurance that the Business Combination will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular of the Corporation to be prepared in connection with the Business Combination, any information released or received with respect to the Business Combination may not be accurate or complete and should not be relied upon. Trading in the securities of the Corporation should be considered highly speculative.

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

Contact Information

  • Fulcrum Capital I Inc.
    Vincent Krynski
    President
    (403) 571-2412
    or
    Macro Industries Inc.
    Frank Miles
    President
    (250) 785-0033