- Special committee of the Board appointed to consider strategic alternatives to maximize shareholder value - Paradigm Capital Inc. retained as advisors - Unaudited financial highlights announced for fiscal year ended September 30, 2005 - Request being made to extend filing of audited financial statements, AIF and MD&A to no later than January 31, 2006 - David Luxton, Company founder and formerly Vice Chair, appointed to Chair and interim Chief Executive Officer OTTAWA, Dec. 23 /CNW Telbec/ - Allen-Vanguard Corporation (the "Company" or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada today announced various measures to enhance shareholder value. It also announced selected unaudited financial highlights for the fourth quarter and fiscal year ended September 30, 2005. The Company intends to request a filing extension to January 31, 2006 from the Ontario Securities Commission in respect of its audited financial statements, annual information form and Management's Discussion and Analysis for the fiscal year ended September 30, 2005. The request for such an extension beyond the statutory filing date of December 29, 2005 is being made in order to satisfactorily complete a complicated first full year audit for its U.K. and Irish subsidiaries. Selected Unaudited Financial Highlights and Business Update Subject to any year-end audit adjustments, the Company is pre-announcing selected unaudited financial highlights for its fiscal year ended September 30, 2005. Revenues are expected to be approximately $51.4 million for the year, compared to $20.3 million in the previous year. The unaudited expected net loss for the year of approximately $29.3 million compared to a break-even level of net earnings in the previous year. The Company noted that the net loss for fiscal 2005 is expected to include several non-recurring items: an impairment to goodwill of approximately $20.5 million, integration costs of $1.0 million, amortization of orders on hand of $2.4 million, and a charge of approximately $1.0 million for a change in accounting policy with respect to the translation of foreign subsidiaries. Earnings before interest, taxes, depreciation and amortization, foreign exchange and goodwill impairment is expected to be a loss of approximately $3.3 million, compared to earnings of $0.5 million in fiscal 2004. The Company's year-end balance sheet remained strong as a result of the Company's recent equity financing completed in September 2005 and the conversion of long-term debt into equity at the time of such financing. With all figures subject to year-end audit adjustment, total assets were approximately $58 million, working capital was approximately $18 million, and shareholders' equity was approximately $38 million. The Company performed a goodwill impairment test as of September 30, 2005, whereby the carrying amount of goodwill was compared to the discounted expected future cash flows. The Company concluded that an impairment had occurred in the carrying value of goodwill associated with the overall acquired product portfolio. The most significant factor affecting the Company's valuation of goodwill was the shortfall in operating results in fiscal 2005 compared to the results expected when the impairment test was last performed at the end of fiscal 2004. Consequently, Allen-Vanguard is expecting to reduce the carrying value of goodwill to $22.5 million through a charge to earnings of $20.5 million in the fourth quarter of 2005. Iraqi Receivable Also, the Company announced the satisfactory resolution of matters relating to the outstanding Iraqi receivable. Included in accounts receivable at year end was a $4.3 million receivable in respect of a contract to supply Iraqi security forces with a turnkey package of bomb team vehicles configured with Allen-Vanguard's bomb disposal equipment and ECM systems (the "Iraqi Contract"). Subsequent to the end of the fiscal year the Company entered into an amending agreement with the other party (the "Prime") to the Iraq Contract whereby the Company accepted certain Improvised Explosive Device Disposal equipment from the Prime with an estimated net realizable value of $4.3 million in full settlement of the outstanding balance of $4.3 million owed to the Company by the Prime. This amending agreement was entered into on December 20, 2005. The Company retained all partial payments previously advanced by the Prime, and the Company's obligation to supply additional components and installation services was terminated. The Company agreed to sell on a best efforts basis certain additional equipment (the "Consignment Equipment") owned by the Prime with an estimated net realizable value of US$2 million, and agreed to advance payment of US$0.1 million to the Prime upon the effective date of the amending agreement, and a further US$0.1 on January 7, 2006. Any proceeds in excess of US$2 million realized from the sale of the Consignment Equipment shall be retained by the Company. Appointment of Special Committee and Management and Board Changes Given the disappointing results for fiscal 2005 and continuing weak performance in the first quarter of 2006, the Company has taken a number of steps to increase shareholder value. Allen-Vanguard has convened a special committee (the "Special Committee") of the board of directors to consider all options to maximize shareholder value. The Special Committee consists of Alain Lambert, William Hess Q.C., and Philip O'Dell. In addition, the Special Committee has retained Paradigm Capital Inc. to assist the Company in this process. In addition, several changes to the management and Board of Directors were approved by the Board: David Luxton, a Company founder and formerly Vice Chair, will become Chair. William Hess, Q.C. will take on the new role of Lead Director. The current Board of Directors consists of the following five directors. David Luxton: Chair William Hess, Q.C.: Lead Director, Chair of Corporate Governance and Compensation Committee, member of Audit Committee, member of Special Committee Alain Lambert: Interim Chair of Audit Committee, Chair of Special Committee Roy Peers-Smith Philip O'Dell: member of Audit Committee, member of Special Committee, member of Corporate Governance and Compensation Committee Roy Peers-Smith will focus primarily on developing and exploiting global sales opportunities, and building the Company's international sales, particularly its ECM products. The Company noted that it received two significant orders for its advanced digital ECM systems after the year end. A European government placed an order valued at $1.9 million, following a rigorous competitive evaluation of available systems. A follow-on order valued at $2.25 million was placed by an Asian military force. These orders are expected to be fulfilled in the first half of 2006. In addition the Company saw increasing demand for its large defender robotic platform in the quarter with sales to Asia, Eastern Europe and Western Europe. Among the buyers was an early adopter of the Company's Defender integrated CBRN sensor platform. David Luxton will become interim Chief Executive Officer. In this role, he will lead the Company through its organizational restructuring, and the need to rework its business and financial model to ensure that short-term profitability is restored. This process will take place in parallel with the work of the Special Committee. Robert Brown, Chair of the Company since its inception, has resigned due to his other professional and personal commitments. About Allen-Vanguard Allen-Vanguard Corporation and its subsidiaries worldwide operate under the brand "Allen-Vanguard". The Company 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 Company'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. The Company 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 Company'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 Company's expectations concerning future product demand and growth opportunities and customer acceptance of Company'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 Company 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 (TSX: VRS), visit our website at www.allen-vanguard.com %SEDAR: 00018026E