Allen-Vanguard provides update on financing plan

OTTAWA, Sept. 1 /CNW Telbec/ - Allen Vanguard Corporation (TSX:VRS) (the
"Corporation" or "Allen Vanguard") today provided an update regarding its
previously announced financing plan.
The financing plan previously announced by the Corporation includes new
investments totalling $12,250,000 and the conversion of existing short-term
liabilities and future obligations into equity totalling approximately
$4 million. The plan can be summarized as follows.

Private Placement

A syndicate of agents (the "Agents") lead by Paradigm Capital Inc. and
including Loewen, Ondaatje, McCutcheon Limited and Versant Partners Inc. has
agreed to act as Agents in connection with a private placement of up to
5,714,286 subscription receipts to be issued at a price of $1.75 per
subscription receipt for gross proceeds to Allen-Vanguard of up to
$10 million.
Each subscription receipt will grant the holder the right to receive, for
no additional consideration, one unit consisting of one common share and one-
half common share purchase warrant. Each whole warrant will entitle its holder
to purchase an additional common share of Allen Vanguard at a price of $2.00
for a period of 18 months from the closing date of the private placement.
In addition, the Agents have been granted an option exercisable up to
24 hours prior to closing to increase the size of the private placement by up
to an additional 1,142,857 subscription receipts.
Allen-Vanguard and the Agents have amended the terms of the compensation
warrants to be issued to the Agents in connection with the private placement.
Under the revised terms, the Agents will be granted compensation warrants
exercisable at $1.95 per common share to acquire such number of common shares
as is equal to 7% of the aggregate number of subscription receipts sold
pursuant to the private placement. The Agents will also be granted
compensation warrants exercisable at a price of $2.00 per common share to
acquire such number of common shares as is equal to 3.5% of the aggregate
number of subscription receipts sold pursuant to the private placement.

Investment by insiders and senior employees

Insiders and senior employees of Allen-Vanguard have agreed to invest up
to $2,250,000 in the Corporation.
The Corporation's Chief Executive Officer, Mr. Roy Peers-Smith, Chief
Operating Officer, Mr. Gerald Harris and Mr. Glyn Buckler, a senior employee
of the Company, have collectively agreed to purchase up to an aggregate of
1,000,000 subscription receipts at a price $1.75 per subscription receipt,
which subscription receipts will have the same rights and conditions as the
subscription receipts issued under the private placement.
Other insiders, including Rob Ryan, Chief Financial Officer of the
Corporation and Elisabeth Preston, General Counsel and Corporate Secretary of
the Corporation, as well as the directors of the Corporation, namely
Robert E. Brown, Alain Lambert, William Hess, David Luxton, Phil O'Dell, of
the Corporation have also agreed to subscribe for subscription receipts or to
exercise existing stock options for gross proceeds to the Corporation of at
least $500,000.
The number of common shares that may be issued to insiders as a result of
their subscription into subscription receipts and assuming the exercise of all
warrants, is 1,813,070 common shares which represent 6.77% of the currently
issued and outstanding common shares.
It is a condition of closing of the private placement that the insiders
and senior employees of the Corporation, collectively, will have subscribed
for subscription receipts or exercised existing stock options for gross
proceeds to the Corporation of at least $2,250,000.

Conversion of existing short-term liabilities and obligations into equity

Messrs. Peers-Smith, Harris and Buckler have agreed to convert existing
notes, accrued interest and bonuses payable valued at approximately
$1.8 million into approximately 1,075,000 subscription receipts at a price of
$1.75 per subscription receipt having the same rights and conditions as the
subscription receipts issued under the private placement.
Messrs Peers-Smith, Harris and Buckler have also agreed to enter into an
agreement with the Corporation with respect to the conversion into equity of a
certain performance consideration of up to pnds stlg 1 million (or
approximately $2.2 million) which is currently payable in cash. Pursuant to
such agreement, Messrs Peers-Smith, Harris and Buckler will agree that the
obligations of the Corporation in respect of any such further consideration
shall be satisfied by the issuance by the Corporation of up to 1,257,143 units
(each to be comprised of one common share and one-half of one common share
purchase warrant exercisable at $2.00 per common share for a period of
18 months) at an issue price per unit equal to $1.75.
The number of common shares that may be issued to Messrs. Peers-Smith,
Harris and Buckler as a result of the conversion of existing notes and payment
of certain performance consideration, and assuming the exercise of all
warrants, is 3,498,215 common shares which represent 13.07% of the currently
issued and outstanding common shares.

TSX exemption

As the aggregate number of common shares to be issued in connection with
the transactions described in the Corporation news releases dated August 18
and 22, 2005 will exceed the maximum number of securities that can be issued
without shareholder approval under the rules of the Toronto Stock Exchange
(the "TSX"), Allen Vanguard will be relying on an exemption from the
shareholder approval requirements provided for under Section 604 (e) of the
TSX Company Manual on the basis of its financial situation, as described in
the Corporation's financial statements and Management Discussion and Analysis
for the quarter ended June 30, 2005 dated August 11, 2005.
In accordance with Section 604 (e), Allen-Vanguard set up a special
committee of independent directors who are free from any interest in the
proposed transactions and are unrelated to any of the parties involved in
these transactions. Upon the recommendation of the special committee, and in
accordance with the rules under Section 604 (e), the Board of Directors of
Allen Vanguard has determined that Allen Vanguard is in serious financial
difficulty, that the proposed transactions are designed to improve its
financial situation and are reasonable in the circumstances, and has
authorized Allen Vanguard to make the application to the TSX to be exempted
from the requirements of obtaining shareholders approval for the proposed
transactions.
Allen Vanguard currently has outstanding 26,765,652 common shares. The
number of common shares that may be issued as a result of the Corporation
financing plan, assuming that the private placement is fully subscribed for
(including the Agents' warrants), the conversion of existing notes, accrued
interest and bonuses payable into subscription receipts, the conversion of
certain performance consideration into units, the exercise of options and
purchase of subscription receipts by insiders and senior employees, is
approximately 14,686,572 common shares which will represent a dilution to
current shareholders of approximately 64.6%. Once all transactions are
completed, the insiders and senior employees exercising options and
subscribing to subscription receipts will own 21.14% of the outstanding common
shares of the Corporation. Currently, these Insiders own 16.5% of the
outstanding common shares. These transactions will not result in a change of
control of the Corporation. After these proposed transactions no Insider will
hold more than 10% of the issued and outstanding common shares of the
Corporation.

About Allen-Vanguard

Allen-Vanguard Corporation and its subsidiaries worldwide operate under
the brand "Allen-Vanguard". The Corporation develops and markets technologies,
tools and training for defeating and minimizing the effects of hazardous
devices and materials, whether Chemical, Biological, Radiological, Nuclear or
Explosive (CBRNE). The Corporation's equipment is in service with leading
security and military forces in more than 120 countries. This includes a
complete range of remote intervention robots for hazardous applications,
vehicle barrier systems, suspect package containers and Electronic Counter-
Measures (ECM) equipment for jamming remote detonation of terrorist devices.
The Corporation is a world leader in the development, manufacturer and sale of
specialty security equipment for Explosive Ordnance Disposal (EOD), and is the
sole, worldwide licensee and/or developer of patented technologies such as the
Universal Containment System and CASCAD Foam for blast mitigation,
decontamination of bio chemical warfare agents, and personal protective gear.
Head office operations are located in Ottawa, Ontario, Canada, with
manufacturing operations in Ottawa and Stoney Creek, Ontario; Tewkesbury,
U.K.; and Cork, Ireland, and sales offices in Canada, the U.S., the U.K. and
Asia. The Corporation's shares are listed on The Toronto Stock Exchange (TSX:
VRS). The web site is www.allen-vanguard.com .

This press release may contain forward-looking statements relating to,
among other things, the Corporation's expectations concerning future product
demand and growth opportunities and customer acceptance of Corporation's
products. These forward-looking statements are neither promises nor
guarantees, but involve risks and uncertainties that may cause actual results
to differ materially from those in the forward-looking statements. The
Corporation disclaims any obligation to publicly update or revise any such
statements. The Toronto Stock Exchange has neither approved nor disapproved
the contents of this press release.

To find out more about Allen-Vanguard Corporation (TSX: VRS), visit our
website at www.allen-vanguard.com .
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