Vancouver, BC, July 12, 2006--VANCOUVER: Avcorp Industries Inc. (AVP on the Toronto Stock Exchange) (the Company) announces the closing of a private placement of $12,000,000 of 9.25% 5-year convertible preferred shares (Preferred Shares), for which the Company has obtained written consent of a majority of its shareholders to the terms of the placement prior to closing, as required by the Toronto Stock Exchange (TSX).
Each of the 1,200,000 Preferred Shares is issued at a price of $10.00 per share, and is convertible at any time, without the payment of additional consideration, at the option of the holder, on the following basis:
Year 1: into 6.45 Common Shares, at a Conversion Price of $1.55 per Common Share (the "Conversion Price");
Year 2: into 5.71 Common Shares at a Conversion Price of $1.75;
Year 3: into 5.00 Common Shares at a Conversion Price of $2.00;
Year 4: into 4.26 Common Shares at a Conversion Price of $2.35; and
Thereafter: into 3.64 Common Shares at a Conversion Price of $2.75.
The net proceeds of the offering will be used to fully retire the Company’s $7 million convertible secured subordinated debentures and provide additional working capital for the Company’s growing business.
A total of 35% of the Preferred Shares have been purchased by insiders of the Company. As part of this financing, $7 million of existing convertible secured subordinated debentures (60% of which are held by insiders) have been repaid. Under TSX policies, the Company is required to obtain disinterested shareholder approval if the total number of common shares issuable on conversion of the Preferred Shares to insiders (assuming all of the Preferred Shares are placed and then converted into common shares) exceeds 10% of the current number of common shares outstanding. One of the insiders has agreed to not convert the number of Preferred Shares that would result in the issuance of common shares in excess of 10% of the number outstanding at closing until such time as disinterested shareholder approval is obtained.
About Avcorp
Avcorp Industries Inc. designs and builds major airframe structures for some of the world’s most respected aircraft companies, including Boeing, Bombardier and Cessna. With 50 years of experience, more than 600 skilled employees and a 300,000 square foot facility near Vancouver, Canada, the company’s depth and breadth of capabilities are unique in the aerospace industry for a company of its size. Avcorp is a Canadian public company traded on the Toronto Stock Exchange.
More information is available at www.avcorp.com.
MICHAEL SCHOLZ
CHAIRMAN
Contact: Sheryl Brecknell, Investor Relations, 604-587-4921