Avcorp announces 2021 Second Quarter Financial Results

VANCOUVER, BC, Aug. 12, 2021

2021 Second Quarter Highlights

• The Company has improved the shareholders' deficiency to $30,380,000 as at June 30, 2021 (December 31, 2020: deficiency of $49,140,000). This was the result of the Company entering into a multiparty amended and restated Accommodation Agreement with a customer and Panta Canada B.V on March 12, 2021. This eliminated the unamortized cash advance, provided a mutual release and forgiveness of certain historic and future guarantee fees payable to the customer, and a legal claim.
  
  
• During second quarter 2021, the Company repaid $1,515,000 of bank indebtedness (June 30, 2020: $2,106,000), together with the modification gain recognized in the current quarter, the bank indebtedness was paid down to $71,178,000 as at June 30, 2021 (December 31, 2020: $76,708,000).
  
  
• On June 22, 2021, the Company amended its loan agreement with a Canadian Chartered Bank to extend the maturity date of the existing loan agreement to June 30, 2023, which is supported by a major and material customer of the Company by way of a guarantee and recorded a modification gain of $1,155,000.
  
  
• Second quarter 2021 revenue was $24,385,000 compared to $32,246,000 in 2020. 2021 revenue decreased by $7,861,000, in comparison to 2020. Revenue was affected by lower customer requirements due to the COVID-19 virus.
  
  
• Second quarter 2021 net loss was $1,212,000 compared to net loss of $1,594,000 in 2020. The net loss in the second quarter of 2021 was supported by the Canada Emergency Wage Subsidies, loan forgiveness on Small Business Administration Paycheck Protection Program Loan and gain on modification of bank indebtedness as a result of executing an amendment agreement in the current quarter.
  
  
• Second quarter 2021 cash flows from operating activities were $704,000 compared to an inflow of $3,189,000 in 2020. The second quarter of 2021 cash flows from operating activities were supported by the receipt of Canada Emergency Wage Subsidies of $2,078,000 and the receipt of Canada Emergency Rent Subsidies of $305,000.
  
  
• On June 8, 2021, the Company received approval for forgiveness on the full loan amount of USD $4,123,000 of the first wave Small Business Administration Paycheck Protection Program Loan. The Company has recognized loan forgiveness of $2,195,000 (USD $1,774,000) in the current quarter as the Company has satisfied the requirements of loan forgiveness on both first and second wave of the loan.
  
  
• On June 28, 2021, the Company received an award letter from BLR Aerospace to produce Wingtips with estimated first delivery by end of 2021.

Review of 2021 Second Quarter Results

For the quarter ended June 30, 2021, the Avcorp Group recorded an operating loss of $1,978,000 from $24,385,000 of revenue, as compared to an operating loss of $1,080,000 from $32,246,000 of revenue from the same quarter in the previous year. The second quarter of 2021 operating loss increased in comparison to 2020 by $898,000 mainly due to lower revenue, lower gross profit of $1,320,000 and higher administrative and general expenses of $992,000, partially offset by higher other income of $1,396,000.

During the quarter ended June 30, 2021, cash flows from operating activities generated $704,000 as compared to providing $3,189,000 cash in 2020. The decrease was attributed to lower operational earnings in the current quarter.

As at June 30, 2021, the Company had $4,470,000 cash on hand (December 31, 2020: $7,044,000) and had utilized $72,407,000 of its operating line of credit (December 31, 2020: $76,439,000). The bank indebtedness balance of the modification and related adjustments as a result of executing an amending agreement in 2021 was $1,229,000 as at June 30, 2021 (December 31, 2020 loss of $269,000 from the 2019 amendment). The Company has a working capital deficit of $56,482,000 as at June 30, 2021, compared with $77,780,000 deficit as at December 31, 2020. Working capital is defined as the difference between current assets and current liabilities. The Company's accounts receivable, government grant receivable, contract assets, and inventories net of accounts payable amount to a $41,849,000 surplus as at June 30, 2021 (December 31, 2020: $33,174,000 surplus). The Company's accumulated deficit as at June 30, 2021 is $132,741,000 (December 31, 2020: $148,919,000).

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