Avcorp announces private placement

/NOT FOR DISTRIBUTION IN THE UNITED STATES/

Trading Symbol: AVP

VANCOUVER, March 1 /CNW/ - Avcorp Industries Inc. ("Avcorp" or the "Company") (TSX:AVP) today announced that it has completed a private placement of 17,773,211 common shares at $0.055 per share for gross proceeds of approximately $978,000.

Subscribers in the private placement are Panta Holdings B.V. ("Panta"), which has subscribed for 15,995,890 common shares through a wholly-owned subsidiary, and Working Opportunity Fund (EVCC) Ltd. ("WOF"), which has subscribed for 1,777,321 common shares. The common shares issued under the private placement are subject to a restriction on resale for a period of four months and one day from the date of issue, in accordance with applicable Canadian securities laws.

Before completion of the private placement, Panta and WOF held 72,318,286 and 17,964,157 common shares, respectively, representing approximately 40.7% and 10.1% of Avcorp's outstanding shares, respectively. After completion of the private placement, Panta and WOF hold 88,314,176 and 19,741,478 common shares, respectively, representing approximately 45.2% and 10.1% of Avcorp's outstanding shares, respectively.

The proceeds from the private placement will be used for working capital purposes, and to fund tooling and equipment. As stated in its rights offering prospectus filed in August 2009, the Company has revised its operating plans as a result of a forecasted reduction in revenues, primarily as a result of the market deferral of business jet deliveries. The Company forecasted its operating and financing requirements for 2010 would exceed the availability of its operating lines of credit, and that it would continue to seek to obtain additional debt financing to increase the likelihood that it will have liquidity in excess of forecasted requirements. The Company expects that it will continue to seek to raise additional capital in 2010.

This private placement constitutes a "related party transaction" as defined in Multilateral Instrument 61-101 - Protection of Minority Securityholders in Special Transactions ("MI 61-101"), as Panta and WOF are both "related parties" under MI 61-101 by virtue of their significant share ownership positions. However, the transaction is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as neither the fair market value of the common shares issued to Panta and WOF, nor the fair market value of the consideration for the transaction, exceeded 25% of Avcorp's market capitalization, as per section 5.5 and 5.7 of MI 61-101. A material change report in respect of this transaction was not filed at least 21 days in advance of the closing of this transaction. Avcorp believes a shorter period between this disclosure and the closing of these transactions is reasonable, in light of its need to ensure it has sufficient working capital to properly manage and operate its business.. The board of directors of Avcorp unanimously approved the transactions, with Jaap Rosen Jacobson, a director of Avcorp and an insider of Panta, and David Levi, a director of Avcorp and an insider of WOF, abstaining from voting.

About Avcorp

Avcorp designs and builds major airframe structures for some of the world's leading aircraft companies, including Boeing, Bombardier, and Cessna. With more than 50 years of experience, approximately 500 skilled employees and 354,000 square feet of facilities, Avcorp offers integrated composite and metallic aircraft structures to aircraft manufacturers, a distinct advantage in the pursuit of contracts for new aircraft designs, which require lower-cost, light-weight, strong, reliable structures.

    
    MARCUS VAN ROOIJ
    CHIEF EXECUTIVE OFFICER
    

Forward-Looking Statements

Certain statements in this release and other oral and written statements made by the Company from time to time are forward-looking statements, including those that discuss forecasted revenues and financing requirements. These forward-looking statements based on management's projections of customer orders and operating needs, and are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following: (a) the extent to which the Company is able to achieve savings from its restructuring plans; (b) uncertainty in estimating the amount and timing of restructuring charges and related costs; (c) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (d) the occurrence of work stoppages and strikes at key facilities of the Company or the Company's customers or suppliers; (e) government funding and program approvals affecting products being developed or sold under government programs; (f) cost and delivery performance under various program and development contracts; (g) the adequacy of cost estimates for various customer care programs including servicing warranties; (h) the ability to control costs and successful implementation of various cost reduction programs; (i) the timing of certifications of new aircraft products; (j) the occurrence of further downturns in customer markets to which the Company products are sold or supplied or where the Company offers financing; (k) changes in aircraft delivery schedules or cancellation of orders; (l) the Company's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (m) the availability and cost of insurance; (n) the Company's ability to maintain portfolio credit quality; (o) the Company's access to debt financing at competitive rates; and (p) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies.

For further information: Sandi DiPrimo, Investor Relations Contact, [phone]