Mr. Peter George reports

AVCORP ANNOUNCES 2014 ANNUAL FINANCIAL RESULTS

Avcorp Industries Inc. has released its financial results for the year ended Dec. 31, 2014. Avcorp's recurring contracted revenue base remains strong as customers continue to place orders within existing long-term supply agreements. Deliveries of commercial jet assembly structures rose in 2014 over 2013, while production by Avcorp in supply of defence assembly structures was maintained in 2014 at 2013 levels although certain significant program deliveries were deferred by the customer at year-end into the first quarter 2015. Overall revenues decreased in 2014 relative to 2013 as deliveries of business jet assembly structures were reduced in the last quarter of 2013 and continued at a lower production rate through 2014. Customer orders for business jet assembly structures have been received for 2015, which indicate an increase over 2014. Composite structure repairs and composite floor panel production and deliveries out of Avcorp's Burlington, Ont., subsidiary, Comtek Advanced Structures Ltd., continued its significant growth posting a 25-per-cent revenue increase in 2014 over 2013.

Revenue for the year ended Dec. 31, 2014, was $67,104,000 as compared with $77,364,000 for the year ended Dec. 31, 2013.

During the year ended Dec. 31, 2014, the company recorded a net loss for the current year of $7.95-million on $67,104,000 revenue, as compared with net loss of $1,802,000 for the year ended Dec. 31, 2013, on $77,364,000 revenue. A slowdown in production for certain business jet assembly structures, as well as near-term process improvement initiatives, has caused production costs for certain aircraft structures assemblies to exceed plan by $1,371,000. Losses incurred in 2014 included $5,047,000 expensed for unutilized plant capacity. Also, the current-year loss includes $1,076,000 in severance and retiring allowance costs, as well as $503,000 in recruitment and related compensation benefits incurred to realign the Avcorp organization and reduce overhead costs. Expected cost reductions resulting from restructuring initiatives, commenced in the fourth quarter of 2014, are targeted to reduce operational expense and administrative and general expenses, as well as supply chain costs. The implementation of these improvement initiatives will be completed during the first half of 2015.

The company continues to actively pursue production contracts on aerospace programs throughout North America, Asia and Europe both in the commercial and defence aerospace sectors. The company is expending significant resources with a focused business development strategy to increase revenues through a targeted customer approach and, where beneficial, aligned with the government of Canada defence procurement strategy leveraging industrial and technological benefits.

Cash flows from operating activities during the year ended Dec. 31, 2014, utilized $2,795,000 of cash as compared with providing $24,028,000 of cash during the year ended Dec. 31, 2013. The primary use of cash from operations during the current year is due to operating losses reflecting temporary reduced customer demand. In contrast, collection of an other receivable during the third quarter 2013 provided cash during 2013. As at Dec. 31, 2014, the company had $3,159,000 cash on hand (Dec. 31, 2013: $7,012,000).

The company has a working capital surplus of $7,205,000 as at Dec. 31, 2014, which has decreased from the Dec. 31, 2013, $14,213,000 surplus, as a result of cash utilized in operating activities. The company's accumulated deficit as at Dec. 31, 2014, is $65,673,000 (Dec. 31, 2013: $57,723,000).

CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
  (expressed in thousands of Canadian dollars, except per-share amounts)

                                               For the year ended Dec. 31,
                                                           2014      2013

Revenues                                                $67,104   $77,364
Cost of sales                                            62,199    67,710
Gross profit                                              4,905     9,654
Administrative and general expenses                      12,373    11,682
Office equipment depreciation                               570       591
Other operating (income)                                     --      (604)
Operating (loss)                                         (8,038)   (2,015)
Finance costs -- net                                         64       927
Foreign exchange (gain)                                    (159)   (1,085)
Loss (gain) on disposal of equipment                          3      (108)
Writedown of equipment                                        4        53
(Loss) income before income tax                          (7,950)   (1,802)
Income tax expense                                           --        --
(Loss) income and total comprehensive (loss) income
for the period                                           (7,950)   (1,802)
(Loss) earnings per share
Basic (loss) earnings per common share                    (0.03)    (0.01)
Diluted (loss) earnings per common share                  (0.03)    (0.01)

We seek Safe Harbor.