FLYHT Aerospace Solutions Annual Report 2015

← All annual reports

FY2015 Annual Report · FLYHT Aerospace Solutions

Loading PDF…

FLYHT AEROSPACE SOLUTIONS LTD.
ANNUAL

REPORT 2015

Table of Contents

LETTER TO SHAREHOLDERS

MANAGEMENT DISCUSSION
& ANALYSIS

NON-GAAP FINANCIAL
MEASURES

FORWARD-LOOKING
STATEMENTS

OVERVIEW

TRENDS AND ECONOMIC
FACTORS

CONTRACTS AND
ACHIEVEMENTS
OF FISCAL 2015

RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
2015 AND 2014

SELECTED RESULTS

FINANCIAL POSITION

COMPREHENSIVE INCOME

OTHER

INDEPENDENT AUDITORS’
REPORT

CONSOLIDATED FINANCIAL
STATEMENTS

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

CORPORATE INFORMATION

“THE 2015 FINANCIAL
YEAR WAS A
PERIOD FULL OF
ACCOMPLISHMENT
FOR FLYHT”

Commonly Used
Financial Terms
& Aviation Acronyms

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

ACARS: Aircraft Communications Addressing

ICAO:

and Reporting System

International Civil Aviation
Organization

ADCC: Aircraft Data Communication

ICE:

Iridium Compatible Equipment

Corporation

AFIRSTM: Automated Flight Information
Reporting System

ANAC: National Civil Aviation Agency

of Brazil

BEA:

Bureau d’Enquetes et d’Analyses
(French authority for safety
investigations in civil aviation)

IFRS:

ITU:

International Financial Reporting
Standards

International Telecommunications
Union

MD&A: Management Discussion
and Analysis

NCAA: Nigerian Civil Aviation Authority

CAAC:

Civil Aviation Administration of China

NTSB:

National Transportation Safety Board

COMAC: Commercial Aircraft Corporation

of China

OEM: Original Equipment Manufacturer

QTD:

Quarter-to-date

DGAC: Direccion General de Aeronautica

R&D:

Research and Development

Civil (Mexico’s certification
organization)

EASA:

European Aviation Safety Agency

ECAA: Egyptian Civil Aviation Authority

FAA:

Federal Aviation Administration

FIRST:

Fuel Initiative Reporting
System Tracker

GAMA: General Aviation Manufacturers

Association

GAAP: Generally Accepted Accounting

Principles

IATA:

International Air Transport
Association

SADI:

Strategic Aerospace and
Defence Initiative

SFP:

Statement of Financial Position

STC:

Supplemental Type Certificate

TCCA:

Transport Canada Civil Aviation

YTD:

Year-to-date

Investment
Highlights

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Multiple revenue streams: initial hardware
sale and installation and recurring revenue

Robust recurring revenue gross margins of 75-85%

Five-year customer contracts renew at expiry

Greater than 2.1 million flight hours using AFIRS; and
have shipped and/or installed over 800 units worldwide

Certified on 95% of all aircraft used for commercial
air transport; significant barrier to entry

OEM agreements in place with two global OEMs

Only solution that can provide real-time aircraft
data monitoring and black box streaming

2015 FLYHT
Plan Review &
Achievements

Increase sales force and focus
on major markets

FLYHT recruited David Perez as the VP,

Sales and Marketing and appointed
additional agents.

Capture a major carrier

Succeeded in signing a contract for 146
aircraft with Canadian-based leasing and
airline company Avmax Aviation Services

Inc. (“Avmax”).

In China: continued vigilance in order
to meet mandate for SatCom in 2017;
add an AFIRS repair depot

Saw an escalating increase in AFIRS orders
from China in anticipation of the 2017

deadline.

While we did not open an AFIRS repair
depot in 2015, we plan to partner with
a company to serve as our service centre
commencing in 2016. The Company will
have equipment and spare parts to test or
repair AFIRS units and provide customers
with the re-certification required to install
on their aircraft.

Respond to commercial OEM requests for
alerting and streaming technology

FLYHT responded to several RFPs from
OEMs although at the time of the printing
of this report we have not been advised of

the award of these proposals.

Continue to participate with industry groups
to make changes in regulations for aircraft
alerting and streaming

FLYHT participated in the ICAO meetings
regarding regulations on aircraft tracking at
the beginning of 2015. On March 8, 2016
ICAO released information announcing
that between now and 2021 there will be

new tracking requirements primarily

related to:

• The requirement for aircraft to carry
autonomous distress tracking devices
which can autonomously transmit
location information at least once every
minute in distress circumstances.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

• The requirement for aircraft to be
equipped with a means to have flight
recorder data recovered and made
available in a timely manner.

• Extending the duration of cockpit voice
recordings to 25 hours so that they cover
all phases of flight for all types of
operations.

FLYHT’s technology already complies with
the first point for one-minute tracking
(transmits as frequently as every 20
seconds) and can send the black box data
to the airline in real time so that the FDR
data is available in a timely manner, hence
complies with item two for our customers.
The third point refers to flight voice
recorders, which are not part of our
functionality.

Development: expand application to
mobility platforms, lay groundwork for
high bandwidth solutions, introduce data
on demand

In Q2 2015 FLYHT suspended its work on
mobility platforms and shifted the focus
to develop an improved user interface to
the UpTimeTM platform, updated its Aircraft
Situational Display and continued to build
value-added applications that improve

airlines’ real-time aircraft intelligence.
These applications and the UpTime
expansion are scheduled for completion

in 2016.

2016
FLYHT Plan:

Increase revenues +30% over 2015

Complete development and roll
out of a cloud-based UpTime user
interface

Establish a 24x7 service call center

Close a new OEM opportunity

Deploy our “Adopt Excellence”
strategy: focused efforts to achieve
profitability and to increase
shareholder value

In China: continued vigilance to
meet mandate for SatCom in 2017;
complete an AFIRS repair depot

Revenue Sources

$4,000,000

$3,500,000

$3,000,000

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

Q1
2014

Q2
2014

Q3
2014

Q4
2014

Q1
2015

Q2
2015

Q3
2015

Q4
2015

Flight Hours and Flights

Services

Parts sales

AFIRS sales

Voice & data services

Hours

2,500,000

2,000,000

1,500,000

1,000,000

500,000

2010 2011

2012

2013

2014

2015

Flight Hours

Flights

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Revenue Based on Location

NORTH
AMERICA

55.1%
$5,754,913

CENTRAL
& SOUTH
AMERICA

2.5%
$266,203

EUROPE

5.2%
$542,037

AFRICA
& MIDDLE
EAST

13.7%
$1,432,230

TOTAL 2015 REVENUE: $10,457,125

ASIA

16.9%
$1,766,750

AUSTRALASIA

6.6%
$694,992

2015 Sales & Marketing Update

FLYHT had several achievements on the Sales and Marketing front
throughout 2015. The department went through a transition in July with
the hiring of David Perez, VP Sales and Marketing. FLYHT also signed its
largest contract to date with Avmax for 146 aircraft. Further achievements
were completed in 2015 and established the launch point for 2016.

Organization & Process

IN 2015 FLYHT REFRESHED,
TRANSITIONED AND REBUILT ITS
SALES TEAM.

Part of the refresh occurred in June when the
Company contracted an outside sales agency
to assist with sales and marketing campaigns.
This sales agency provided FLYHT with the
ability to reach several airlines through their
impressive email campaigns. Additionally, FLYHT
re-organized their sales organization after
David joined the team by hiring experienced
industry sales resources to fortify the group
and also moved the Product Management

Marketing

discipline under Sales and Marketing. Due to
the interaction that Sales has with the market it
made sense to feed the intelligence directly from
Sales to the Product Development team.

Through other changes, FLYHT has created a
sales process that provides senior management
with improved visibility to allow for input from
all departments on each deal. The Company
uses financial models to provide clear financial
metrics that can be viewed by all parties on the
profitability of each contract.

Further to the successful internal adjustments,
FLYHT continued to attend a total of eight
industry events in 2015. These global tradeshows
spanned many regions including three in
Asia, one in each of Africa and Europe and the
remainder in the United States. FLYHT focuses

on tradeshows that reach our target market
including mid-tier airlines operating regional
aircraft with limited communication capabilities,
flight tracking or MRO-themed conferences and
those events with a large OEM presence.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Tradeshows

• China Aviation New Technology
Forum – China (April, 2015)

• AFRAA Convention – Kenya (April, 2015)

• Civil Avionics International Forum –
China (April, 2015)

• EFB Conference – Germany (June, 2015)

• Global Connected Aircraft – Washington
(June, 2015)

• Aviation Flight Operations & MRO IT Show –
Thailand (October, 2015)

• AirInsight Cyber Conference –
Washington (October, 2015)

• NBAA Convention – Las Vegas
(November, 2015)

Sales

Key takeaways from each show include
relationships with airlines to pursue sales or
partnership opportunities and increased industry
awareness on FLYHT’s fit within the industry and
on wider trends.

In continuation of the marketing improvements
that commenced in 2015, in 2016 FLYHT will
examine and revamp its sales tools including the
website, branding and messaging. The FLYHT
website was launched in 2011 and needs a refresh
of materials and facelift to appeal to target
customers.

FLYHT HAD A STRONG
SALES YEAR IN 2015.

Our sales team signed six new contracts,
including the Avmax agreement in September
that contributed a new base of close to 170
aircraft to our contracts. This is a significant
increase over our AFIRS count coming into the
year. FLYHT increased the effort to sell data
and services in 2015, and upsold many current
clients to include valued-added features that

also expanded revenue. China continues to be
a primary focus area for FLYHT, with expansion
goals targeting the tier one airline market. Tier
one airlines include the top 25 airlines in the
world based on revene. While we didn’t make
any inroads with the tier one airlines in 2015
we did sign FLYHT’s largest customer to date
in Avmax with 146 aircraft and this is a positive
step to demonstrating our capabilities and
technology to the larger carriers.

Addressing Industry Problems

In order to expand our customer base, FLYHT remains focused on the
problems that are facing the industry and how we can market our
technology to help airlines address those problems.

A COUPLE OF AREAS WE IDENTIFIED IN 2015 ARE BEING ADDRESSED.

• The market is demanding an integrated
suite of solutions that can be delivered
through a single web portal. Today’s
UpTime portal requires an update to
include new functionality. The industry is
also demanding a solution that provides
alerts and notifications when problems
occur. They want to “manage by exception”
to be able to focus on the problem areas
and not get distracted by normal operations.
Actionable intelligence is the method AFIRS
uses to acquire the data from the aircraft,
interpret the data and then alert on the data
if thresholds are exceeded. This integration
of the products and alerting is the primary
focus of our UpTime development that
includes an overhaul and update. This
project is a top priority for FLYHT in 2016.

• FLYHT is proactively providing customers
with a more intuitive and appealing
interaction to the AFIRS system. With all the
data AFIRS provides and processes there is a
need to distribute the information in a way
that can be customized depending on
airlines’ needs. The new user interface that
is planned for full launch later in 2016,
already being tested with a few customers,
is a fresh and intuitive program for airlines
to navigate. The newly improved user
interface is one of the features of AFIRS that
enticed Avmax to invest in our technology.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

• FLYHT now provides a Future Air Navigation
System (“FANS”) certified solution through
the AFIRS 228S. Throughout the past few
years FLYHT worked on obtaining the
Canadian Technical Standard Order (“CAN
TSO”) Design Approval, CAN-TSO-C159b,
and announced successful receipt in January
2016. The TSO receipt represents additional
certification that FLYHT has achieved to
increase its attractiveness to potential
customers and expand its potential market.
FANS allows for and supports improved
data and surveillance of aircraft flying in
remote regions and over the oceans. At the
time of receipt AFIRS is the only product in
the world to receive a TSO based on
compliance to DO-262B for combined
Iridium voice and datalink.

As listed above, the Sales team has observed
the need for AFIRS technology to solve several
problems and these apply to a variety of target
airlines. AFIRS provides a lifeline to close the
communications gap for airlines operating in
remote areas with little to no VHF coverage. With
AFIRS, airlines know where their aircraft are at
all times and can communicate and send text
messages to them through the FLYHTASDTM
system enabled by the Iridium satellite network’s
global coverage. Not only does the system notify
airlines where their assets are, FLYHTHealthTM
detects, reports, and diagnoses to allow
the airline to fix an issue immediately. This
enhancement of the decision making process
leads to fewer delays or flight cancellations, a
reduction in unscheduled maintenance and
improved on-time performance which all impact
airline’s cost cutting programs.

On the horizon

To progress and grow, the Sales and Marketing team are aggressively
promoting AFIRS’ capabilities to the global aviation market.

Specific regions of focus include the airlines in
China and Asia that are improving their aviation
communications technology to respond to
increased growth. We will also reach mid-tier
airlines operating regional aircraft and those
without ACARS that require an Iridium capability.

Our efforts are strongly targeted to position
FLYHT in the marketplace to solve problems and
receive further recognition as an industry leader
for connectivity and real-time aircraft intelligence.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

2015 Major Announcements

CONTRACTS // IN 2015 FLYHT SIGNED A TOTAL SIX CONTRACTS WITH NEW
CUSTOMERS WORLDWIDE. OF THE AIRCRAFT CONTRACTED, TWO WERE FOR
THE AFIRS 220 AND 167 WERE FOR AFIRS 228.

February 10 // FLYHT attended ICAO
meetings in Montreal and participated with
the working group looking into aircraft data
collection, storage and uses.

April 10 // FLYHT signed two new customers
with AFIRS previously installed on their
aircraft who decided to turn on and utilize
the technology’s benefits.

May 8 // FLYHT signed a contract with an
African Airline for AFIRS on a fleet of four
A320 aircraft.

May 12 // FLYHT reported the first quarter
results as the highest quarter on record.

“Revenue for the quarter was the highest
on record at $2.57 million, along with a
very small loss,” remarked FLYHT CEO
Bill Tempany. “We are very pleased
the contracts signed and relationships
developed in the past few years are now
starting to deliver returns.”

June 3 // FLYHT announced the election by
the shareholders of retired Major General
Mark V. Rosenker as a director of the
Company. General Rosenker has many
years of experience in the aviation industry
including a past tenure as chairman of
the National Transportation Safety Board
(“NTSB”). He is currently a consultant to
CBS News and appears on their network to
discuss transportation safety issues.

“I’m honored and energized to have
been appointed to the board of directors
of FLYHT Aerospace Solutions. I have
long believed that innovation, training,
technology and information are keys
to enhanced safety and accident
prevention,” said Mr. Rosenker. “What
FLYHT brings today to the global industry
is a combination of proven products and
services that are cutting edge and raise
the bar of safety for all that implement
them.”

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

June 9 // FLYHT announced the receipt of the
2015 Excellence in Avionics Safety Systems
Award from Avionics Magazine.
The award was presented to FLYHT’s Director
of Operations, Graham Ingham, at the
2015 Global Connected Aircraft Summit in
Chantilly Virginia.

FLYHT’s Automated Flight Information
Reporting System (“AFIRSTM”) and
FLYHTStreamTM application were recognized
as a critical and new safety system that
enable the fastest response time, and
most effectively help in an emergency, to
guarantee safety, or to locate a lost aircraft
in the event of a crash.

“We are honoured to receive this award
for our advancement of safety in the
industry,” remarked Matt Bradley,
President of FLYHT. “The real-time
capability of FLYHTStream lets our
customers know where their aircraft are
at all times, and more importantly, what is

happening when something goes wrong.
It’s a new level of connectivity and it
contributes to the safety of their operation
while also providing valuable real-time
data that saves them money.”

July 15 // FLYHT reported its customer of
seven years, a Middle Eastern Military
Organization has extended its contract
for AFIRS voice and data services on 23
C-130 Hercules Aircraft with the AFIRS 228
installed.

“The contract extension is indicative of our
strong relationship and the importance of
operational control and global air traffic
control compliance for the customer,”
stated Matt Bradley, President of FLYHT.
“The C-130 is an exceptional platform
for AFIRS, and this expanding fleet is
a great showcase for what 21st century
connectivity can do for real-time decision
making.”

July 20 // FLYHT announced that Mr. David
Perez joined FLYHT as Vice President, Sales
and Marketing effective July 20, 2015. Mr.
Perez has over 25-years of accomplishments
in the aviation industry. Most recently
he had served as Director of Travel and
Transportation at Hewlett-Packard (“HP”),
where he leveraged his industry expertise to
secure many strategic aviation agreements.

“I’m excited by the valuable opportunities
FLYHT brings to the aviation industry, as
well as the potential of creating additional
profitable revenue streams that will
enhance the Company’s shareholder
value,” commented Mr. Perez. “FLYHT
is uniquely positioned to provide global
flight tracking and data analysis to the
aviation market.”

August 11 // FLYHT was selected by Alberta
Venture Magazine in a list of the province’s
20 most innovative companies. Alberta
Venture’s annual innovators list is comprised
of companies from a variety of sectors who
are solving problems by thinking outside
of the box in what they describe as “a
compulsion to be better and an inability
to be satisfied with the way things are”.

September 28 // FLYHT and Avmax
announced an agreement for the AFIRSTM
228 for the two airlines Avmax owns, as well

as its current and future leased fleet, for a
total fleet size of 146 aircraft over a seven-
year term.

“Avmax did an extensive review of
products in the market and AFIRS was
selected because it met all of our business
needs. FLYHT’s solution was superior to
the other products we evaluated in the
market,” remarked Al Young, VP of Avmax
Canada and R1 Airlines. “We will be able
to provide world-class solutions, not
only to our own fleet, but also to those
aircraft that are leased to other airlines
and give us higher visibility and data on
our assets. We anticipate high cost savings
on engine repairs as well as the other
advantages of the product for operations,
communications and maintenance
support.”

October 14 // FLYHT received a re-issued
Supplemental Type Certificate (“STC”) for
its Automated Flight Information Reporting
System (“AFIRSTM”) 228 on the Airbus A320
series aircraft from the Federal Aviation
Administration (“FAA”). The STC has been
re-issued to add the AFIRS 228 to this
existing STC.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

October 19 // FLYHT announced changes
to its executive management team. Mr.
Thomas R. Schmutz, MEng, MBA, was
appointed the new chief executive officer
of the Corporation. Mr. Bill Tempany retired
from his role as CEO, but remained on the
board of directors and was appointed the
chairman of the board. In addition, Mr.
Matt Bradley resigned from his position as
president of the Corporation to pursue new
career opportunities.

“I am extremely excited about the
opportunity to lead FLYHT as we head
into the connected aircraft future,” said
Thomas R. Schmutz. “The AFIRS™ UpTime
technology is cutting edge and the value
proposition for airline operators and OEM
manufacturers is being demonstrated
daily.”

“My retirement is the culmination of work
to structure FLYHT for success including
changes to the board, a solid team to
deliver solutions, opportunities to make
FLYHT a global force in aviation and a
new CEO to lead the charge,” stated Bill
Tempany. “It was a pleasure to lead the
FLYHT team with the board’s support to
put our company in a position to change
a global industry.”

November 3 // FLYHT announced its third
quarter results were the second highest on
record with revenue of $2.52M. Also updated
that the July 29 private placement was
withdrawn because market conditions were
not conducive to a U.S.A. based offering.

December 8 // FLYHT applied to the TSX
Venture Exchange to extend the expiry date
of the conversion feature of the Company’s
debentures by one year and amend the
conversion price to $0.25 per share. The
Company also applied to amend the exercise
price of the share purchase warrants to $0.20
from $0.75 and received TSX approval on
December 15, 2015.

December 17 // FLYHT received a
Supplemental Type Certificate (“STC”) for
AFIRS on the Boeing 737 Classic and 737
Next Generation series aircraft from the
National Civil Aviation Agency (“ANAC”)
of Brazil.

December 21 // FLYHT announced the
granting of a non-exclusive license to use
certain of its intellectual property (the “IP”).
The license was granted to a technology
company (the “Licensee”) for an aggregate
license fee of $2.5 million USD, payable in
the first quarter of 2016.

To Our Shareholders

The 2015 financial year was a period full
of accomplishment for FLYHT; we set
“best revenue” records for our financial
performance, we made excellent
progress on our stated goals for the
year, we further enhanced our board of
directors and sales team and we won
awards in the industry and community.

Furthermore, we smoothly transferred executive control
of the Company, reorganized internally and adopted
several new approaches, standards and goals for the
year 2016 and beyond. There is significant optimism
within the Company resulting from our improving
financial performance and strong feedback from
OEM and solution partners that the unique offerings
of FLYHT are now timely and are recognized to solve
important problems within our industry.

The 2015 year ended with a record revenue fourth
quarter (Q4) of $3.8 million, or 46.7% higher than the
previous record quarter, which was the first quarter
(Q1) of the same year. Q1 was itself only $51k ahead of
the third quarter (Q3) of 2015! So, the three highest
revenue quarters in our history were all achieved in
2015. The resulting $10.5M annual revenue for 2015
was also a revenue record, a 51.9% improvement on
2014 and 30.7% ahead of the previous best year in
2013. The additional revenue fell to the bottom line
but an operating loss of $3.2 million was still reported
for 2015. This was $0.4 million less loss than 2014 but,
if we remove the impact of the one-time add back in
2014 of the $1.95 million SNC legal claim provision and
the impact of the costs of retirement and changes in
key management positions in both 2014 and 2015, the
normalized comprehensive loss has decreased 49% or
$2.5 million. Noteworthy financial progress has been
made, but we need to do more in order to internally
fund our operations and produce returns for our loyal
shareholders.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

The Company utilized net $2.9 million cash during the
year because of the losses, but it is also pleasing to
report that the cash balance reported at December
31, 2015 is $5,000 more than that at September 30,
2015. FLYHT progressively self-funded more of its
operations, or consumed less cash, each quarter, from
$1.7 million utilized in Q1, to $0.6 million utilized in Q2
and Q3 to neutral in Q4. Working capital items were
well controlled so did not contribute to a cash burn.
The redeemable and convertible debentures mature
within the coming twelve months and therefore they
are now classified as current liabilities on the statement
of financial position. Management is addressing this
debt and the Company continues to strive to self-fund
operations in 2016.

Our goals for 2015 included expanding the sales team
and capturing a major carrier. We did expand our team
and have put into place standardized sales processes
and materials. We captured our largest customer to
date, Avmax Aviation Services Inc. (“Avmax”), who
operates or leases 146 Bombardier aircraft. We also
continued expansion in China, winning positions at
five airlines, including direct sales and sales through
partners, and began the process of establishing a
depot maintenance facility. This latter goal was not
completed in 2015 but will be accomplished by mid-
2016. We responded to a significant OEM opportunity
for alerting and streaming aircraft data and we remain
hopeful that our outstanding technology will be
selected.

FLYHT also collected awards in 2015.

FLYHT was awarded the 2015 Excellence in Avionics
Safety Systems Innovation Award by Avionics Magazine
for the AFIRSTM and FLYHTStreamTM products. Closer to
home, the Alberta Venture Magazine included FLYHT
in a list of 20 most innovative companies. These awards
demonstrate recognition of the unique solutions that
FLYHT has brought to the industry and are a source of
pride for our team, along with the 2015 achievement of
over two million AFIRS flight hours on our customers’
aircraft, accumulated on more than one million flights.

As we advance in 2016, we are making significant
investment in the redevelopment and roll out of an
updated, cloud based implementation of the UptimeTM
ground based user software. We have collected
important lessons learned in the legacy, server based
applications that we currently provide as a seminal
service provider in the connected aircraft space. This
UpTime suite of products includes FLYHTVoiceTM,
FLYHTLogTM, FLYHTASDTM, FLYHTMailTM, FLYHTHealthTM,
FLYHTFuelTM and, of course, FLYHTStreamTM along
with some other product components. UpTime
features will include an integrated user interface to
this suite using the latest cloud-based application
implementation in order to enhance service availability
and intuitive usability, while providing some dramatic
enhancements.

We have created new goals for 2016 including the
launch of a 24x7 call center to enhance customer
service. Internally, we’ve implemented the “Adopt
Excellence” program which establishes our goals and
objectives to improve internal efficiencies which in
turn will further enhance financial performance of the
Company. Furthermore, we have set very aggressive
sales goals and budgets to control expenditures to
continue our efforts toward profitability and growth.

FLYHT continues to monitor industry discussions on
aircraft tracking and other safety related industry
initiatives, but the delays and industry stonewalling
in these efforts indicate that there will not be any
type of regulatory action in the next year or more.
Most recently, the International Civil Aviation
Organization (ICAO) adopted new provisions to include
a requirement for aircraft to carry an autonomous
tracking device which can transmit location information
at least once every minute in distress circumstances
by the year 2021. This new provision is separate from
ICAO’s proposal to require a standard of reporting
aircraft position at least every 15 minutes when in
oceanic or remote airspace. This later requirement,
originally targeted for 2016 as a result of the MH370
disaster, has been pushed back to 2018. FLYHT stands
ready with our solution set to address these or any
other similar regulatory response, but we are focused
on demonstrating how our existing, fielded, proven
solutions save customers money while dramatically
enhancing the safety and situational awareness of
their fleet today.

We remain very positive about our significant ability
to improve the operational efficiencies of airlines
and are as engaged as ever at FLYHT. Our monthly
CEO investor letters are designed to help provide as
much background information as we can to help you
understand how we run the business. Thank you for
your support of our Company and we look forward to
a very exciting and opportunity filled 2016!

Thomas R. Schmutz

Chief Executive Officer

Management Discussion
& Analysis

This management discussion and analysis (“MD&A”) is as of April 5, 2016
and should be read in conjunction with the audited annual consolidated
financial statements of FLYHT Aerospace Solutions Ltd. (“FLYHT” or the
“Company”) as at and for the years ended December 31, 2015 and 2014
and the accompanying notes. Additional information with respect to FLYHT
can be found on SEDAR at www.sedar.com. The Company has prepared its
December 31, 2015 consolidated financial statements and the notes thereto
in accordance with International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board (“IASB”). The
Company’s accounting policies are provided in note 3 to the consolidated
financial statements.

Non-GAAP Financial Measures

The Company reports its financial results in accordance with International
Financial Reporting Standards (“IFRS”) or Generally Accepted Accounting
Principles (“GAAP”). It also occasionally uses certain non-GAAP financial
measures, such as working capital, modified working capital, and loss before
research, development and certification engineering expenses (“R&D”).
FLYHT defines working capital as current assets less current liabilities. The
Company defines modified working capital as current assets less current
liabilities not including customer deposits or the current portion of unearned
revenue. A clearer picture of short-term net cash requirements can be
drawn by excluding these two items because those customer deposits
and unearned revenue are nonrefundable. Loss before R&D is defined as
the net loss before the direct costs associated with R&D. These non-GAAP
financial measures are always clearly indicated. The Company believes
that these non-GAAP financial measures provide investors and analysts
with useful information so they can better understand the financial results
and perform a better analysis of the Company’s growth and profitability
potential. Since non-GAAP financial measures do not have a standardized
definition, they may differ from the non-GAAP financial measures used by
other companies. The Company strongly encourages investors to review its
financial statements and other publicly filed reports in their entirety and not
rely on a single non-GAAP measure.

Forward-Looking Statements

This discussion
includes certain statements that may be deemed
“forward-looking statements” that are subject to risks and uncertainty.
All statements, other than statements of historical facts included in this
discussion, including, without limitation, those regarding the Company’s

financial position, business strategy, projected costs, future plans, projected
revenues, objectives of management for future operations, the Company’s
ability to meet any repayment obligations, the use of non-GAAP financial
measures, trends in the airline industry, the global financial outlook,
expanding markets, R&D of next generation products and any government
assistance in financing such developments, foreign exchange rate outlooks,
new revenue streams and sales projections, cost increases as related to
marketing, R&D, administration expenses, and litigation matters, may be
or include forward-looking statements. Although the Company believes
the expectations expressed in such forward-looking statements are based
on a number of reasonable assumptions regarding the Canadian, U.S.A.,
and global economic environments, local and foreign government policies/
regulations and actions, and assumptions made based upon discussions to
date with the Company’s customers and advisers, such statements are not
guarantees of future performance and actual results or developments may
differ materially from those in the forward-looking statements.

Factors that could cause actual results to differ materially from those in the
forward-looking statements include but are not limited to production rates,
timing for product deliveries and installations, Canadian, U.S.A., and foreign
government activities, volatility of the aviation market for FLYHT’s products
and services, factors that result in significant and prolonged disruption of air
travel worldwide, U.S.A. military activity, market prices, foreign exchange
rates, continued availability of capital and financing, and general economic,
market, or business conditions in the aviation industry, worldwide political
stability or any effect those may have on the Company’s customer base.
Investors are cautioned that any such statements are not guarantees of
future performance, and that actual results or developments may differ
materially from those projected in the forward-looking statements.

Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, there can be no assurance that
such expectations will prove to have been correct. The Company cannot
assure investors that actual results will be consistent with any forward-
looking statements; accordingly, readers should not place undue reliance
on forwardlooking statements. The forward-looking statements contained
herein are current only as of the date of this document. The Company
disclaims any intentions or obligation to update or revise any forward-looking
statements or comments as a result of any new information, future event or
otherwise, unless such disclosure is required by law.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

FLYHT Overview

FLYHTStreamTM

FLYHT is a leading provider of real-time aircraft intelligence and cockpit
communications for the aerospace industry. More than 50 customers,
including airlines, leasing companies and original equipment manufacturers,
have installed our systems in order to increase safety, improve operational
efficiencies and enhance profitability. FLYHT’s tools deliver data and voice
communication between the aircraft and operations groups on the ground,
on demand. The Company’s products are available for commercial, business
and military aircraft. FLYHT’s proprietary technology, the Automated Flight
Information Reporting System (AFIRSTM), operates on multiple aircraft types
and provides functions such as safety services voice and text messaging,
data collection and transmission, and on-demand streaming of flight data
recorder (black box), engine and airframe data. AFIRS has flown over 2.1
million aggregate flight hours and 1.4 million flights on customers’ aircraft.
FLYHT holds supplemental type certificates (STC) which allow for the
installation of AFIRS on 95% of transport category aircraft.

FLYHT’s products and services are marketed globally by a team of employees
and agents based in Canada, the United States, China, and the United
Kingdom.

AFIRSTM and UpTimeTM

AFIRS is a device installed on aircraft that monitors hundreds of essential
functions from the aircraft and the black box. AFIRS sends this information
through the Iridium satellite network to FLYHT’s UpTimeTM ground-based
server, which routes the data to customer-specified end points and
provides an interface for real-time aircraft interaction. In addition to its data
monitoring functions, AFIRS provides voice and text messaging capabilities
that give pilots the ability to communicate with ground support. Value-
added applications such as FLYHTStreamTM, FLYHTLogTM, FLYHTASDTM,
FLYHTMailTM, FLYHTHealthTM and FLYHTFuelTM are unique to FLYHT. FLYHT’s
global satellite coverage is enabled by the Iridium satellite network, providing
service to our customers when they need it anywhere on the planet.

FLYHT first marketed its technology with the AFIRS 220 in 2004. The unit
received regulatory certification for installation in a large number of widely
used commercial aircraft brands and models (see systems approvals
section). The AFIRS 228, released in 2009, incorporates improvements over
the AFIRS 220 in processing capacity, data transmission characteristics and
programmability. The AFIRS 228 features cater to the evolving needs of
airlines by providing a customized and flexible product. In early 2016, FLYHT
announced the Canadian Technical Standard Order (“CAN-TSO”) Design
Approval, CAN-TSO-C159b for the AFIRS 228S. The certification, granted by
Transport Canada, represents an additional level of airworthiness standards
met by AFIRS to provide safety services messages and data.

FLYHTStream is a revolutionary, industry-leading technology that performs
real-time triggered alerting and black-box data streaming in the event
of an abnormal situation on an aircraft. FLYHTStream can be activated
automatically by a set of pre-determined factors, by the pilots or on the
ground by airline operations. It uses AFIRS’ onboard logic and processing
capabilities in combination with UpTime’s ground-based servers to interpret
and route alerts and messages from the aircraft in trouble to key groups on
the ground, such as the airline, operation centers and regulators. Animation
software converts the raw FDR data into visual data that can be viewed
from any computer, providing ground personnel a view of the controls and
awareness of what’s happening onboard the aircraft.

FLYHTFuelTM

A powerful program that focuses attention on areas of greatest savings
potential to provide information necessary to make decisions about the
operation. Most airlines currently rely on a system of manually generated
and analyzed reports to make fuel savings decisions within the operation.
This is time-consuming and relies on the user to calculate areas of potential
by cross-referencing a great number of queries. FLYHTFuel is both a report-
generation tool and a dynamic, interactive application that generates
alerts and provides the user with the ability to quickly identify trends. The
dashboard compares how pilots are operating the aircraft to how they
could be flying in order to maximize efficiency and fuel savings. The unique
application highlights exceptions to best practices, provides quick drill downs
to spot the root cause of issues, and identifies trends. Where compliance
has not been met, associated costs, in a dollar amount, are shown. The
tool is de-identified to meet pilot union requirements, but can be filtered to
display performance by pilot if desired. It is an intuitive tool that enables
fuel managers to act on information instead of compiling and analyzing data.

FLYHTASDTM

FLYHTASD is an aircraft situational display that shows the aircraft position
reports from AFIRS via the Iridium satellite network. A unique application
that integrates real-time flight following, routine aircraft notifications,
aircraft health exceedance alerts and the ability to send text messages
immediately to the aircraft. The program supports a number of aviation-
specific tools including charts and weather information. It also provides
the aircraft operator with the ability to start FLYHTStream, black box data
streaming, on their airborne aircraft at any time.

FLYHTHealthTM

System Approvals

Consists of automated engine and airframe trend monitoring and real-time
exceedances and diagnostics. Automated trend reports with configurable
reporting intervals notify the airline when a maintenance event has occurred.
Leveraging the global coverage of the Iridium satellite network, FLYHTHealth
allows the airline to request data directly from the engine once a problem
has been detected. The airline can then use FLYHT’s real-time systems
diagnostics capabilities to interrogate systems information and identify
the source of the problem and prepare the arrival station for repair, long
before the aircraft lands at its destination. By automating and enhancing the
real-time and long-term monitoring of airplane data, FLYHTHealth enables
proactive management of maintenance and reduces downtime and the
financial impact of unscheduled maintenance.

FLYHTLogTM

Allows operators to monitor the status of their aircraft and have detailed Out,
Off, On and In (“OOOI”) time information. It allows airlines to automatically
route aircraft system and operational data to various partner systems.
Additionally, FLYHTLog increases situational awareness and accurate flight
times, saving money on flight crew pay and maintenance operations.

FLYHTMailTM

Two-way text messaging to the flight deck is established through the multi-
control display unit (“MCDU”) or an iPad application. Text messaging is
highly useful to manage diversions due to weather, mechanical occurrences
or other unforeseen situations.

FLYHTVoiceTM

The onboard satellite phone, using the Iridium satellite constellation with
global coverage, is a rapid and reliable private communication channel for the
flight deck. When operating remote or oceanic flights, it allows dispatch to
pass on updated information to the crew with no delay. The voice capability
is particularly valuable during emergency situations or irregular operations.

Underfloor Stowage Unit

The Underfloor Stowage Unit offers the flight crew additional stowage
space in the cockpit. With this addition, manuals are always within reach of
the seated crew and are kept safe, dry and clean inside the stowage unit. In
addition, safety equipment and other items required by the flight crew can
be accessed any time throughout the flight without leaving the cockpit. The
stowage unit is certified to be installed in Bombardier CRJ series, Challenger
and DHC-8s and can also be installed in other aircraft types.

The DragonTM

As part of an evaluation of its products and services and in order to focus
attention where it is needed most, FLYHT is discontinuing the sale of the
DragonTM. This decision will not impact FLYHT’s current Dragon customers.

A STC is an airworthiness certification required to modify an aircraft from
its original design and is issued by an aviation regulator. FLYHT’s AFIRS
equipment is an addition to an aircraft and therefore an STC is required prior
to installation. FLYHT has received or applied for AFIRS product approvals
from TCCA, the FAA, EASA, ANAC, ECAA, DGAC and the CAAC for various
aircraft models, depending on customer requirements.

FLYHT’s expertise in airworthiness certification enabled it, in October 2008,
to join a select group of Canadian companies who are approved by TCCA as a
Design Approval Organization (“DAO”). Very few organizations achieve DAO
status because of the time and expertise required to meet TCCA standards.
FLYHT’s DAO status, along with the delegations it has received, allows the
Company to obtain and revise its own STCs with minimal TCCA oversight.
This speeds up the process by lessening wait times, and reduces cost and
reliance on contractors.

In addition to its DAO status, the Company has an engineer on staff with
delegated authority, allowing him to approve electrical design aspects of
an airworthiness certification. If an issue is encountered during the STC
process, the delegated staff member has the authority to approve necessary
changes and continue the process without the involvement of an external
party.

The process to receive a STC takes time to complete but always starts
with an application for the STC through any one of TCCA, FAA or EASA.
Generally, FLYHT starts the process with TCCA by opening an application
with the regulator, after which an STC data package is created. The data
package consists of the engineering documents that outline how the AFIRS
equipment will be installed on the aircraft. Once the data package is prepared
and first stage approvals granted by the regulator, ground and flight tests
take place. To fulfill the flight test requirement, FLYHT must have access to
the appropriate type and model of aircraft. This is done in cooperation with
an existing or potential customer. Once these tests are completed, FLYHT
submits an activation data package to TCCA that enables the AFIRS unit to
be integrated with the aircraft systems. If TCCA approves the submission,
an STC is issued. To obtain an STC from another regulator, FLYHT prepares
an application, which is sent through TCCA to the regulator such as FAA,
EASA, ANAC, ECAA, DGAC or CAAC along with the STC package previously
approved by TCCA. The regulator reviews the package and issues the STC.

The time required for the approval process through TCCA varies depending
on the aircraft and workloads. A general rule of thumb is approximately three
months, with a minimum of another three months if an STC is required from
another regulator.

The Company, over the next several years, will file the necessary documents
to obtain approval for the AFIRS 228 in parallel to the majority of current 220
STCs, depending on market requirements.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

TCCA

FAA

EASA

CAAC

ANAC

220
A

228
A

220
A

228
A

220
A

228
A

220
A

228
A

220

228

Airbus A319, A320, A321

Airbus A330

ATR42-300, -500

ATR72-100, -200

ATR-42-500

ATR42-500 "600 Version" *STC Twenty One

ATR72-212A "600 Version" *STC Twenty One

Boeing B737 -200

Boeing B737 -300, -400, -500

Boeing B737 -600

Boeing B737 -700, -800

Boeing B737 -900

Boeing 747-200

Boeing 757 -200

Boeing 767 -200, -300

Boeing B777

Bombardier DHC 8 -100, -200, -300
*Avmax
Bombardier DHC 8 -400

Bombardier CRJ 100, 200, 440

Bombardier CRJ -700, 900

McDonnell Douglas DC-10 (KC-10 military)

McDonnell Douglas MD-82

McDonnell Douglas MD-83

Fokker 100

Hawker Beechcraft -750, 800XP, 850XP, 900XP

Viking Air DHC -7 (LSTC)

Embraer EMB 190

Embraer Legacy 600 and EMB – 135/145

FLYHT has also received an approved AFIRS 228 STC for the Bombardier CRJ- 700, 900 from the DGDC in Mexico. AFIRS 220 or 228 model

A = Approved, P = Pending (We have received a Provisions STC and are in the final stages before receiving a full STC), I = In Progress.
* = Occasionally FLYHT may partner with a third party to gain STC approval.

Balance January 1
Interest accretion
Repayment
Balance December 31
Less current portion
Non-current portion

FLYHT announced additional certification in January 2016, with the receipt
of the Canadian Technical Standard Order (“CAN-TSO”) Design Approval,
CAN-TSO-C159b for the AFIRS 228S. The certification, granted by Transport
Canada, represents an additional level of airworthiness standards met by
AFIRS. A Technical Standard Order is a minimum performance standard
issued by an airworthiness authority for specified materials, parts,
processes, and appliances used on civil aircraft. Issuance of the CAN-TSO by
TCCA through international agreements, represents recognition of the AFIRS
228S in the world’s major airworthiness jurisdictions, thus simplifying the
STC and installation process.

Balance January 1
Repayment
Balance December 31

2015
$

2014
$
818,828
149,001
(68,229)
899,600
78,462
821,138

899,600
163,369
This TSO certification confirms that AFIRS 228S meets all product
(78,462)
requirements,
including DO-262B Minimum Operational Performance
984,507
Standards for Avionics Supporting Next Generation Satellite Systems
90,234
(NGSS), for an Iridium SATCOM supporting Future Air Navigation System
894,273
(“FANS”) -1/A capability. FANS allows for and supports improved data
and surveillance of aircraft flying in remote regions and over the oceans.
Additionally, the certification enables voice and data services for Air Traffic
Control (“ATC”), Aeronautical Operational Control (“AOC”) and Air-to-Air
Communication (“AAC”) using Iridium’s global satellite network. The system
also provides ACARS over Iridium messaging capability.

2014
$
1,967,507
(68,229)

1,899,278
(78,462)

2015
$

1,899,278

1,820,816

Trends and Economic Factors

FLYHT examines the results of growth and measurements made by leading
aviation groups in order to determine the health of the industry. AFIRS is a
technology that can be installed on commercial, business or military aircraft.

Passenger traffic (measured in Revenue Passenger Kilometers or “RPK”)
saw a 6.5% increase in 2015 compared to the previous year and was the
strongest result in five years1. All regions saw demand growth in 2015 and
load factors that measure the capacity of flights were at a record annual
high of 80.3%, an increase of 0.6% over 2014. Demand in international
markets at 6.5% was slightly higher than domestic travel at 6.3%. Global
freight traffic (measured in Freight Tonne Kilometers or “FTK”) increased by
2.2% in 2015, which was lower than the 4.5% growth in 20142. RPK and
FTK measure passenger and freight contributions to airline revenue. These
are significant measures to determine the health of the industry because
the larger the increase, the more people are flying and freight shipping,
suggesting growth in the industry.

Large commercial aircraft manufacturers marked record numbers for
deliveries and new orders in 2015. Airbus achieved a new record for aircraft
deliveries of 635 aircraft for 85 customers, an increase from 629 aircraft in
2014. 2015 deliveries continued the upward trend for the 13th consecutive
year3. Boeing also reached new heights, delivering 762 aircraft in 2015, 39
more than the previous year.4 Embraer set a five-year record and delivered
a total of 101 commercial and 120 executive jets (82 light and 38 large),
in 20155. Bombardier delivered less aircraft than in 2014, a total of 275
business and commercial jets compared to 290 aircraft in the previous year.
The company also announced that it would undergo some transformation in
its programs and a restructuring in 2016 resulting in a loss of jobs6.

Results for the general aviation industry were not as strong in the year due
to the fluctuating world economy. The General Aviation Manufacturers
Association (“GAMA”) reported that numbers in worldwide general aviation
airplane shipments fell in 2015 5% from 2,454 in 2014 to 2,331 shipments
in 20157.

FLYHT continues to be an industry leader in providing airlines with increased
operational control and aircraft situational awareness. The Company’s efforts
in the year have been on the early stage redevelopment and implementation
of a cloud-based UpTime user software. This development will occur in
2016 and marks an improvement on our current technology; taking into
consideration customer feedback and optimization. The FLYHTHealth
program is significant in its ability to detect and notify the airline of any
problems while the aircraft is in flight and prepare for repair before the aircraft
lands, thereby reducing the financial impact of unscheduled maintenance.
Since 2009, FLYHT has had the technology to stream black box data in real-
time. As a result of industry events and accidents during 2014, FLYHT has
participated in working groups and demonstrated the AFIRS technology
with FLYHTStream capabilities on industry panels. Multiple working groups
included sessions with the Malaysian Government, ICAO, IATA, the NTSB
and ITU. FLYHT will continue to participate in industry working groups to
advance engineering and technical requirements and prepare for future
development of the AFIRS product line to meet industry needs.

The weakening of the Canadian dollar relative to the U.S. dollar throughout
2015 had a positive impact on the Company’s revenue and income compared

to 2014. As a result of these currency movements, the Company’s revenues,
which are substantially all denominated in U.S. dollars, were higher than
they would have been had the foreign exchange rates not changed. It is
the standard of the aviation industry to conduct business in U.S. dollars.
While the majority of the Company’s operating and overhead costs are
denominated in Canadian dollars, a significant portion of the cost of sales,
marketing and distribution costs are U.S. dollar denominated, and therefore
a natural hedge exists against fluctuations of the Canadian dollar.

Contracts and Achievements of Fiscal 2015

Contracts

FLYHT Aerospace Solutions Ltd. signed a total of six contracts on 169 aircraft
with customers worldwide. Two were for the AFIRS 220 and 167 for the
AFIRS 228, as described below;

In April, FLYHT signed contracts with new customers that had AFIRS 220
units previously installed on their aircraft. One was with an African operator
on a Bombardier DHC-8; the other is with a Caribbean carrier on a Boeing
767-300.

In May, FLYHT signed a contract with an African Airline for the AFIRS 228 on
a fleet of four A320 aircraft.

In September, FLYHT signed a contract with Avmax Aviation Services Inc. to
install the AFIRS 228 on the two airlines Avmax owns, as well as its current
and future leased fleet, for a total fleet size of 146 aircraft over a seven year
term.

Throughout the year FLYHT signed contracts with five airlines in China,
including direct sales and sales through partners, for a total of 18 aircraft.

1 http://www.iata.org/pressroom/pr/Pages/2016-02-04-01.aspx

2 http://www.iata.org/pressroom/pr/Pages/2016-02-03-01.aspx

3 http://www.airbus.com/newsevents/news-events-single/detail/airbus-
exceeds-targets-in-2015-delivers-the-most-aircraft-ever/

4 http://boeing.mediaroom.com/2016-01-07-Boeing-Achieves-Record-
Commercial-Airplanes-Deliveries-in-2015

5 http://www.embraer.com/Documents/noticias/003-Embraer%20Deliveries%20
4Q15-Ins-VPF-I-16.pdf

6 http://www.bombardier.com/en/media/newsList/details.binc-20160217-
bombardier-announces-financial-results-for-the-fou.bombardiercom.html

7 http://www.gama.aero/media-center/press-releases/content/gama-unveils-
2015-year-end-shipment-and-billing-numbers-%E2%80%9Cstate-i
and
http://www.gama.aero/media-center/industry-facts-and-statistics/

shipments-billings

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Achievements

• In the first quarter FLYHT reported the highest revenue yet
achieved in a quarter, $2,569,908, and a loss for the period close to break
even.

• In June, FLYHT announced the election of retired Major General Mark V.
Rosenker to the Board of Directors.

• In June, FLYHT was recognized with the 2015 Excellence in Avionics
Safety Systems Innovation Award by Avionics Magazine.

• In July, FLYHT welcomed Mr. David Perez as Vice President, Sales and
Marketing. Mr. Perez has over 25 years of experience in the aviation

industry.

• In August, FLYHT was selected by the Alberta Venture Magazine in a list
of 20 most innovative companies.

• In the third quarter FLYHT reported the second highest revenue
achieved in a quarter, $2,519,347; second only to the first quarter of 2015
by $50,561.

• In October, subsequent to the end of the third quarter, FLYHT announced
appointment of Mr. Thomas R. Schmutz as new CEO of the Company. In
a career of more than 30 years, he gained extensive experience in senior
leadership roles in the aerospace and telecommunications industries.

• In December, FLYHT announced the granting of a non-exclusive license to
use certain of its intellectual property (the “IP”) to a technology company
for an aggregate license fee of $2.5 million USD, payable in the first

quarter of 2016.

• In the fourth quarter FLYHT reported a new quarterly revenue record,
$3,769,267, being the third record revenue quarter in the 2015 financial
year. The results show a 51.9% improvement on 2014 revenue and 30.7%

ahead of the previous highest revenue year in 2013.

Results of Operations –
Years Ended December 31, 2015 and 2014
Results of Operations – Years Ended December 31, 2015 and 2014

Selected Results
Selected Results

2015

Assets
Non-current financial liabilities
Revenue
Cost of sales
Distribution expenses
Administration expenses
Research, development and
certification engineering expenses
Loss (income) from operating
activities
Loss
Loss (income) before R&D
Loss per share (basic & fully diluted)
2014

Financial Position

Liquidity and Capital Resource

Q4
$
5,478,867
390,110
3,769,267
1,340,513
1,084,443
1,573,796

Q3
$
6,140,675
3,267,030
2,519,347
672,341
1,142,086
607,755

Q2
$
6,344,752
3,053,577
1,598,603
562,535
987,330
943,931

Q1
$
7,752,509
5,407,303
2,569,908
637,901
763,774
551,471

Total
$
5,478,867
390,110
10,457,125
3,213,290
3,977,633
3,676,953

689,195

638,104

737,968

737,285

2,802,552

918,680

540,939

1,633,161

120,523

3,213,303

1,203,998
514,803
0.01

Q4
$
8,275,546
5,506,179
2,218,681
849,221
990,650
780,039

683,224
45,120
0.00

Q3
$
8,968,372
2,728,769
1,808,794
655,927
806,051
985,756

1,943,924
1,205,956
0.01

Q2
$
10,281,225
2,433,044
1,505,767
604,860
816,240
1,119,379

60,414
(676,871)
0.00

Q1
$
9,734,630
2,262,812
1,348,786
440,043
780,050
663,344

3,891,560
1,089,008
0.02

Total
$
8,275,546
5,506,179
6,882,028
2,550,051
3,392,991
3,548,518

772,725

848,119

(1,277,790)

434,695

777,749

1,173,954

1,487,059

(243,078)

969,346

3,387,281

1,305,712
532,986
0.01

1,653,147
805,028
0.01

46,925
1,324,716
0.00

1,273,101
838,406
0.01

4,278,885
3,501,136
0.03

The Company’s cash at December 31, 2015 decreased to $1,301,955 from $3,910,962 at December 31, 2014 due mainly to cash

used in operating activities in the first half of the year. FLYHT utilized net $2,894,478 million cash during the year (excluding the

unrealized foreign exchange differences) to fund the losses. The Company progressively self-funded more of its operations, or

consumed less cash, each quarter, from $1,666,232 utilized in Q1, to $622,400 utilized in Q2, $621,716 utilized in Q3 and $15,870

cash generated in Q4, as reported on the statements of cash flow. Working capital items were well controlled so did not contribute

to a cash burn. The Company has an available and undrawn operating line of $250,000 at Canadian chartered bank prime plus

1.5%, secured by assignment of cash collateral and a general security agreement.

The convertible and the redeemable debentures mature during 2016 and have been classified as current liabilities a t December

31, 2015. The Company thus had negative working capital of $5,413,927 compared to positive $3,009,025 as of December 31,

2014, a decrease of $8,422,952 comprising $2,609,007 cash decrease, $5,267,636 increase in current portion of loans and

borrowings reclassified from non-current liabilities and a net decrease in other working capital of $546,309. Neither customer

deposits, nor the current portion of unearned revenue are refundable, and if those two items are excluded in the working capital

calculation, the resulting modified working capital at December 31, 2015 would be negative $3,306,055 compared to positive

$5,283,775 at December 31, 2014.

The Company funded 2015 operations primarily through cash received from sales and available cash on hand. Management is

addressing the debenture debt and the Company will continue to strive to self-fund operations in the coming year. The Company

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Financial Position

Liquidity and Capital Resource

The Company’s cash at December 31, 2015 decreased to $1,301,955 from $3,910,962 at December 31, 2014 due mainly to cash used in operating activities in the first
half of the year. FLYHT utilized net $2,894,478 million cash during the year (excluding the unrealized foreign exchange differences) to fund the losses. The Company
progressively self-funded more of its operations, or consumed less cash, each quarter, from $1,666,232 utilized in Q1, to $622,400 utilized in Q2, $621,716 utilized in Q3
and $15,870 cash generated in Q4, as reported on the statements of cash flow. Working capital items were well controlled so did not contribute to a cash burn. The
Company has an available and undrawn operating line of $250,000 at Canadian chartered bank prime plus 1.5%, secured by assignment of cash collateral and a general
security agreement.

The convertible and the redeemable debentures mature during 2016 and have been classified as current liabilities at December 31, 2015. The Company thus had negative
working capital of $5,413,927 compared to positive $3,009,025 as of December 31, 2014, a decrease of $8,422,952 comprising $2,609,007 cash decrease, $5,267,636
increase in current portion of loans and borrowings reclassified from non-current liabilities and a net decrease in other working capital of $546,309. Neither customer
deposits, nor the current portion of unearned revenue are refundable, and if those two items are excluded in the working capital calculation, the resulting modified
working capital at December 31, 2015 would be negative $3,306,055 compared to positive $5,283,775 at December 31, 2014.

The Company funded 2015 operations primarily through cash received from sales and available cash on hand. Management is addressing the debenture debt and the
believes that where funding is required to meet cash flow requirements in 2016, it will be raised through sale of (or licensed rights
Company will continue to strive to self-fund operations in the coming year. The Company believes that where funding is required to meet cash flow requirements in 2016,
to use) assets, or issue of debt or equity instruments.
it will be raised through sale of (or licensed rights to use) assets, or issue of debt or equity instruments.

Cash and cash equivalents
Restricted cash
Trade and other receivables
Deposits and prepaid expenses
Inventory
Trade payables and accrued liabilities
Unearned revenue
Loans and borrowings
Finance lease obligations
Current tax liabilities
Working capital

Unearned revenue
Customer deposits
Modified working capital

2015
$
1,301,955
250,000
898,166
137,861
1,716,313
(2,757,707)
(1,087,197)
(5,840,418)
(27,922)
(4,978)
(5,413,927)

1,087,197
1,020,675
(3,306,055)

2014
$
3,910,962
250,000
959,786
183,750
1,917,249
(2,129,622)
(1,484,345)
(572,782)
(25,973)
-
3,009,025

1,484,345
790,405
5,283,775

Variance
$
(2,609,007)
-
(61,620)
(45,889)
(200,936)
(628,085)
397,148
(5,267,636)
(1,949)
(4,978)
(8,422,952)

(397,148)
230,270
(8,589,830)

In 2015 warrant and option exercises together with convertible debenture conversions resulted in the Company issuing a total of
In 2015 warrant and option exercises together with convertible debenture conversions resulted in the Company issuing a total of 1,297,500 shares for total proceeds of
1,297,500 shares for total proceeds of $236,000, including:
$236,000, including:

a) 542,500 warrants were exercised at $0.20 per share for proceeds of $108,500
a) 542,500 warrants were exercised at $0.20 per share for proceeds of $108,500
b) 100,000 options were exercised at $0.25 per share for proceeds of $25,000
c) 500,000 options were exercised at $0.205 per share for proceeds of $102,500
b) 100,000 options were exercised at $0.25 per share for proceeds of $25,000
d) 155,000 convertible debentures converted at $0.40 per share

c) 500,000 options were exercised at $0.205 per share for proceeds of $102,500

As at April 5, 2016, FLYHT’s issued and outstanding share capital was 173,477,635.

d) 155,000 convertible debentures converted at $0.40 per share

The achievement of positive earnings before interest and amortization is necessary before the Company can improve liquidity. The
Company has continued to expand its cash flow potential through its continued marketing drive to clients around the world.
Management believes that the Company’s installation momentum, conversion of installations to recurring revenue, new revenue
streams, and ongoing sales will be sufficient to meet standard liquidity requirements going forward. 2015 revenue was a 51.9%
increase over 2014 which contributed to a reduced operating loss of $3,213,303; being $130,337 less loss than 2014

To continue as a going concern, the Company will need to attain profitability and/or obtain additional financing to fund ongo ing
operations. If:

 general economic conditions in the industry or the financial condition of a major customer deteriorates, or



sufficient funds are not available to extinguish the debentures coming due in June 2016, or
sufficient funds are not available, or debenture holders do not convert their debenture units to equity, when the
debentures mature in December 2016;

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

then the Company may have to scale back operations to create positive cash flow from existing revenue and/or raise the
necessary financing in the capital markets. It is the Company’s intention to continue to fund operations by adding revenue an d its
resulting cash flow as well as continue to manage outgoing cash flows. If the need arises due to market opportunities, the
Company may meet those needs via the capital markets. These material uncertainties may cast significant doubt upon the
Company’s ability to continue as a going concern.

Financial Instruments

its risk.

to interest rate changes.

The Company is exposed to fluctuations in the exchange rates between the Canadian dollar and other currencies with respect to

assets, sales, expenses and purchases. The Company monitors fluctuations and may take action if deemed necessary to mitigate

The Company is exposed to changes in interest rates as a result of the operating loan bearing interest based on the Company’s

lenders’ prime rate. All outstanding debentures have a fixed rate of interest and therefore do not expose the Company’s cash flow

There is a credit risk associated with accounts receivable where the customer fails to pay invoices. The Company extends cred it to

credit-worthy or well-established customers. In the case of AFIRS sales the invoiced amount is frequently payable before the

product is shipped to the customer. The Company assesses the financial risk of a customer and based on that analysis may

require that a deposit payment be made before services are provided. In the case of monthly recurring revenue the Company has

the ability to disable the AFIRS unit transmissions where the customer has not fulfilled its financial obligations.

10-

As at April 5, 2016, FLYHT’s issued and outstanding share capital was 173,477,635.

The achievement of positive earnings before interest and amortization is necessary before the Company can improve liquidity. The Company has continued to expand its
cash flow potential through its continued marketing drive to clients around the world. Management believes that the Company’s installation momentum, conversion of
installations to recurring revenue, new revenue streams, and ongoing sales will be sufficient to meet standard liquidity requirements going forward. 2015 revenue was a
51.9% increase over 2014 which contributed to a reduced operating loss of $3,213,303; being $130,337 less loss than 2014.

To continue as a going concern, the Company will need to attain profitability and/or obtain additional financing to fund ongoing operations. If:

• general economic conditions in the industry or the financial condition of a major customer deteriorates, or

• sufficient funds are not available to extinguish the debentures coming due in June 2016, or

• sufficient funds are not available, or debenture holders do not convert their debenture units to equity, when the debentures mature in December 2016;

then the Company may have to scale back operations to create positive cash flow from existing revenue and/or raise the necessary financing in the capital markets.
It is the Company’s intention to continue to fund operations by adding revenue and its resulting cash flow as well as continue to manage outgoing cash flows. If the
need arises due to market opportunities, the Company may meet those needs via the capital markets. These material uncertainties may cast significant doubt upon the
Company’s ability to continue as a going concern.

Financial Instruments

The Company is exposed to fluctuations in the exchange rates between the Canadian dollar and other currencies with respect to assets, sales, expenses and purchases.
The Company monitors fluctuations and may take action if deemed necessary to mitigate its risk.

The Company is exposed to changes in interest rates as a result of the operating loan bearing interest based on the Company’s lenders’ prime rate. All outstanding
debentures have a fixed rate of interest and therefore do not expose the Company’s cash flow to interest rate changes.

There is a credit risk associated with accounts receivable where the customer fails to pay invoices. The Company extends credit to credit-worthy or well-established
customers. In the case of AFIRS sales the invoiced amount is frequently payable before the product is shipped to the customer. The Company assesses the financial risk of
a customer and based on that analysis may require that a deposit payment be made before services are provided. In the case of monthly recurring revenue the Company
has the ability to disable the AFIRS unit transmissions where the customer has not fulfilled its financial obligations.

Contractual Obligations
Contractual Obligations
The following table details the contractual maturities of financial liabilities, including estimated interest payments.
The following table details the contractual maturities of financial liabilities, including estimated interest payments.

December 31, 2015

Accounts payable

Compensation and
statutory deductions

< 2 months
$
1,034,319

2-12 months
$
2,692

1-2 years
$
-

2-5 years
$
-

> 5 years
$
-

Total
$
1,037,011

84,525

270,134

108,000

570,659

Finance lease liabilities

4,970

24,849

15,794

Accrued liabilities

39,215

61,650

Loans and borrowings

5,840,418

Total

1,163,029

6,199,743

9,715

103,768

237,277

18,782

45,613

129,362

414,386

1,212,427

7,570,999

541,168

1,212,427

9,353,644

Under SADI, the Company has, at December 31, 2015, an outstanding repayable balance of $1,820,816, compared to $1,899,278 at December 31, 2014. The amount
Under SADI, the Company has, at December 31, 2015, an outstanding repayable balance of $1,820,816, compared to $1,899,278
is repayable over 15 years on a stepped basis commencing April 30, 2014. The initial payment on April 30, 2014 was 3.5% of the total contribution received and the
at December 31, 2014. The amount is repayable over 15 years on a stepped basis commencing April 30, 2014. The initial payment
payment increases yearly by 15% until April 30, 2028 when the final payment will be 24.5% of the total contribution received. The repayment in 2015 was $78,462
on April 30, 2014 was 3.5% of the total contribution received and the payment increases yearly by 15% until April 30, 2028 wh en
(2014: $68,229).
the final payment will be 24.5% of the total contribution received. The repayment in 2015 was $78,462 (2014: $68,229). A
summary of the SADI loan carrying value as at December 31, 2015 and 2014 and changes during these years is presented below.

Balance January 1
Interest accretion
Repayment
Balance December 31
Less current portion
Non-current portion

2015
$
899,600
163,369
(78,462)
984,507
90,234
894,273

2014
$
818,828
149,001
(68,229)
899,600
78,462
821,138

A summary of the SADI outstanding payable balance as at December 31, 2015 and 2014 and changes during these years is
presented below.

Balance January 1

Repayment

Balance December 31

2015

1,899,278

(78,462)

1,820,816

2014

1,967,507

(68,229)

1,899,278

The debenture issued December 23, 2010 had an original face value of $3,159,000 and was set to mature on December 23, 2014.

On December 22, 2014 approval was received to extend the maturity date of the debentures then remaining outstanding from four

to six years, now maturing on December 23, 2016. The debenture continues to bear interest at a rate of 8% per annum, accrued

and paid annually in arrears. The debentures were convertible into common shares at a conversion rate of $0.40 per share at any

time up to December 23, 2015; on December 15, 2015 the conversion rate was amended to be $0.25 per share at any time up to

December 23, 2016 and the warrant exercise price was amended to $0.20. The debentures carry a face value after conversions of

$3,039,000 at April 5, 2016.

FLYHT did not enter into any new loan or lease agreements in 2015. Minimum lease payments are as follows.

Year

2016

2017

Total

29,818

15,795

45,613

Customer Deposits

FLYHT’s revenue recognition for AFIRS sales and Parts sales occurs in a series of steps. The process begins with the receipt of

customer deposits, followed by shipment, installation and finally customer usage of the AFIRS Solution.

11-

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

TCCA

FAA

EASA

CAAC

ANAC

220

228

220

228

220

FAA

EASA

CAAC

TCCA

220

228

220

228

220

228

220

228

220

228

ANAC

220

228

Airbus A319, A320, A321

Airbus A330

Airbus A319, A320, A321

ATR42-300, -500

Airbus A330

ATR72-100, -200

ATR42-300, -500

ATR-42-500

ATR72-100, -200

ATR-42-500

ATR42-500 "600 Version" *STC Twenty One

ATR72-212A "600 Version" *STC Twenty One

ATR42-500 "600 Version" *STC Twenty One

Boeing B737 -200

ATR72-212A "600 Version" *STC Twenty One

Boeing B737 -300, -400, -500

Boeing B737 -200

Boeing B737 -600

Boeing B737 -300, -400, -500

Boeing B737 -700, -800

Boeing B737 -600

Boeing B737 -900

Boeing B737 -700, -800

Boeing 747-200

Boeing B737 -900

Boeing 757 -200

Boeing 747-200

Boeing 767 -200, -300

Boeing B777

Boeing 767 -200, -300

Contractual Obligations

The following table details the contractual maturities of financial liabilities, including estimated interest payments.

Boeing 757 -200

December 31, 2015

< 2 months

2-12 months

Accounts payable

1,034,319

2,692

Finance lease liabilities

4,970

Compensation and

statutory deductions

Accrued liabilities

Loans and borrowings

Total

84,525

270,134

39,215

24,849

61,650

5,840,418

1,163,029

6,199,743

Bombardier DHC 8 -100, -200, -300

> 5 years

1-2 years

Boeing B777

*Avmax

2-5 years

Bombardier DHC 8 -400

Bombardier DHC 8 -100, -200, -300

*Avmax

Bombardier CRJ 100, 200, 440

108,000

Bombardier DHC 8 -400

Bombardier CRJ -700, 900

108,000

Bombardier CRJ 100, 200, 440

15,794

McDonnell Douglas DC-10 (KC-10 military)

Bombardier CRJ -700, 900

McDonnell Douglas MD-82

18,782

9,715

McDonnell Douglas DC-10 (KC-10 military)

Total

1,037,011

570,659

45,613

129,362

103,768

McDonnell Douglas MD-83

414,386

McDonnell Douglas MD-82

237,277

Fokker 100

541,168

McDonnell Douglas MD-83

1,212,427

7,570,999

1,212,427

9,353,644

Hawker Beechcraft -750, 800XP, 850XP, 900XP

A
A
A

A
I

Under SADI, the Company has, at December 31, 2015, an outstanding repayable balance of $1,820,816, compared to $1,899,278
at December 31, 2014. The amount is repayable over 15 years on a stepped basis commencing April 30, 2014. The initial payment
on April 30, 2014 was 3.5% of the total contribution received and the payment increases yearly by 15% until April 30, 2028 when
the final payment will be 24.5% of the total contribution received. The repayment in 2015 was $78,462 (2014: $68,229). A
A summary of the SADI loan carrying value as at December 31, 2015 and 2014 and changes during these years is presented below.
summary of the SADI loan carrying value as at December 31, 2015 and 2014 and changes during these years is presented below.

Fokker 100
Viking Air DHC -7 (LSTC)
Hawker Beechcraft -750, 800XP, 850XP, 900XP
Embraer EMB 190
Viking Air DHC -7 (LSTC)
Embraer Legacy 600 and EMB – 135/145
Embraer EMB 190

Embraer Legacy 600 and EMB – 135/145

Balance January 1
Balance January 1
Interest accretion
Interest accretion
Repayment
Repayment
Balance January 1
Balance December 31
Balance December 31
Interest accretion
Less current portion
Less current portion
Repayment
Non-current portion
Non-current portion
Balance December 31
Less current portion
Non-current portion

Balance January 1
Repayment
Balance December 31
Balance January 1
Balance January 1
Repayment
Repayment
Balance December 31
Balance December 31

2015
2015
$
$
899,600
899,600
2015
163,369
163,369
$
(78,462)
(78,462)
899,600
984,507
163,369
984,507
90,234
90,234
(78,462)
894,273
894,273
984,507
90,234
894,273

2015
$
1,899,278
2015
2015
(78,462)
$
$
1,899,278
1,820,816
1,899,278
(78,462)
(78,462)

2014
2014
$
$
818,828
818,828
2014
149,001
149,001
$
(68,229)
(68,229)
818,828
899,600
149,001
899,600
78,462
78,462
(68,229)
821,138
821,138
899,600
78,462
821,138
2014
$
1,967,507
2014
2014
(68,229)
$
$
1,967,507
1,899,278
1,967,507
(68,229)
(68,229)

1,820,816
1,820,816

1,899,278

A summary of the SADI outstanding payable balance as at December 31, 2015 and 2014 and changes during these years is
A summary of the SADI outstanding payable balance as at December 31, 2015 and 2014 and changes during these years is presented below.
presented below.

The debenture issued December 23, 2010 had an original face value of $3,159,000 and was set to mature on December 23, 2014.
The debenture issued December 23, 2010 had an original face value of $3,159,000 and was set to mature on December 23, 2014. On December 22, 2014 approval was
On December 22, 2014 approval was received to extend the maturity date of the debentures then remaining outstanding from four
received to extend the maturity date of the debentures then remaining outstanding from four to six years, now maturing on December 23, 2016. The debenture continues
to six years, now maturing on December 23, 2016. The debenture continues to bear interest at a rate of 8% per annum, accrued
to bear interest at a rate of 8% per annum, accrued and paid annually in arrears. The debentures were convertible into common shares at a conversion rate of $0.40 per
and paid annually in arrears. The debentures were convertible into common shares at a conversion rate of $0.40 per share at any
share at any time up to December 23, 2015; on December 15, 2015 the conversion rate was amended to be $0.25 per share at any time up to December 23, 2016 and the
time up to December 23, 2015; on December 15, 2015 the conversion rate was amended to be $0.25 per share at any time up to
warrant exercise price was amended to $0.20. The debentures carry a face value after conversions of $3,039,000 at April 5, 2016.
December 23, 2016 and the warrant exercise price was amended to $0.20. The debentures carry a face value after conversions of
$3,039,000 at April 5, 2016.

FLYHT did not enter into any new loan or lease agreements in 2015. Minimum lease payments are as follows.
FLYHT did not enter into any new loan or lease agreements in 2015. Minimum lease payments are as follows.

Year

2016
2017
Total

Total
$
29,818
15,795
45,613

Customer Deposits
Customer Deposits

FLYHT’s revenue recognition for AFIRS sales and Parts sales occurs in a series of steps. The process begins with the receipt of customer deposits, followed by shipment,
FLYHT’s revenue recognition for AFIRS sales and Parts sales occurs in a series of steps. The process begins with the receipt of
installation and finally customer usage of the AFIRS Solution.
customer deposits, followed by shipment, installation and finally customer usage of the AFIRS Solution.

Customers are frequently required to pay for AFIRS units and installation kits prior to the planned shipment date. This prepayment
Customers are frequently required to pay for AFIRS units and installation kits prior to the planned shipment date. This prepayment is recorded as a customer deposit,
is recorded as a customer deposit, which is recognized as an accrued liability upon receipt. When the AFIRS unit and installation
which is recognized as an accrued liability upon receipt. When the AFIRS unit and installation kit are shipped, the customer deposit is reclassified to unearned revenue,
kit are shipped, the customer deposit is reclassified to unearned revenue, where it will remain until the AFIRS Solution has been
FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015
11-
where it will remain until the AFIRS Solution has been installed and is fully functional, at which point the unearned revenue is recognized as AFIRS sales revenue.
installed and is fully functional, at which point the unearned revenue is recognized as AFIRS sales revenue.

When customers order spare parts or Underfloor Stowage Units and a prepayment is required, it is also recorded as a customer deposit. The Parts sales revenue is
When customers order spare parts or Underfloor Stowage Units and a prepayment is required, it is also recorded as a customer
deposit. The Parts sales revenue is recognized when the ordered part or unit is shipped.
recognized when the ordered part or unit is shipped.

Customer deposits are amounts received for AFIRS sales and parts that have not yet been shipped to the customer, and services that have not yet been completed. These
Customer deposits are amounts received for AFIRS sales and parts that have not yet been shipped to the customer, and services
that have not yet been completed. These deposits are nonrefundable, and are included on the Statement of Financial Position
deposits are nonrefundable, and are included on the Statement of Financial Position (“SFP”) in trade payables and accrued liabilities.
(“SFP”) in trade payables and accrued liabilities.
The chart below outlines the movement in the Company’s customer deposits throughout the periods ended December 31, 2015 and 2014. Payment was received for 11
The chart below outlines the movement in the Company’s customer deposits throughout the periods ended December 31, 2015
installation kits in the fourth quarter of 2015 compared to 9 received in the fourth quarter of 2014, bringing 2015 year-to-date (“YTD”) total payments for installation kits
and 2014. Payment was received for 11 installation kits in the fourth quarter of 2015 compared to 9 received in the fourth quarter of
to 36, compared to a total of 57 in 2014.
2014, bringing 2015 year-to-date (“YTD”) total payments for installation kits to 36, compared to a total of 57 in 2014.

Opening balance
Payments received
Moved to unearned revenue

Q4 2015
$
524,325
1,229,085
(732,735)

Q4 2014
$
1,070,854
744,042
(1,024,491)

Variance
$
(546,529)
485,043
291,756

YTD 2015
$
790,405
2,828,055
(2,597,785)

YTD 2014
$
551,227
2,967,089
(2,727,911)

Variance
$
239,178
(139,034)
130,126

Balance, December 31

1,020,675

790,405

230,270

1,020,675

790,405

230,270

Unearned Revenue

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

The chart below outlines the movement in the Company’s unearned revenue throughout the periods ended December 31, 2015
and 2014. Revenue was recognized for 28 installation kits in 2015’s fourth quarter compared to 12 in the fourth quarter of 2014.
YTD, revenue has been recognized for 58 installation kits in 2015, as compared to 44 in 2014. In 2015, 65.9% of the unearned
revenue balance at December 31, 2014 was recognized as earned revenue (2014: 57.1%).

Voice and data services prepaid

19,033

15,960

3,073

19,033

92,084

(73,051)

Q4 2015

Q4 2014

Variance

YTD 2015

YTD 2014

Variance

1,922,504

1,272,206

650,298

1,675,746

1,103,834

571,912

732,735

1,024,491

(291,756)

2,597,785

2,727,911

(130,126)

(1,524,940)

(614,411)

(910,529)

(3,131,261)

(2,146,871)

(984,390)

(3,991)

(22,500)

18,509

(15,962)

(101,212)

85,250

1,145,341

1,675,746

(530,405)

1,145,341

1,675,746

(530,405)

Opening balance

AFIRS sales shipped, not

accepted

AFIRS sales revenue

recognized

Voice and data services

revenue recognized

Balance, December 31

Comprehensive Income

Revenue

In the categories listed in the revenue sources chart, Voice and data services is the recurring revenue from customers’ usage of

data they receive from AFIRS and use of functions such as the satellite phone. Usage fees are recognized as the service is

provided based on actual customer usage each month. AFIRS sales includes the income from AFIRS hardware sales and related

parts required to install the unit along with Dragon hardware sales. Upon shipment, these amounts are deferred as unearned

revenue and corresponding expenses are recorded as work in progress. When the system is fully functional and the customer has

accepted the system, the deferred amount is recognized as AFIRS sales revenue and the work in progress as cost of sales. Parts

sales include the sale of spare AFIRS units, spare installation parts, modems with related manufacturing license fee, and

Underfloor Stowage Units. Services revenue includes technical services, repairs and expertise the Company offers including the

installation of operations control centres.

Revenue sources

Q4 2015

Q4 2014

Variance

YTD 2015

YTD 2014

Variance

Voice and data services

1,067,894

915,602

152,292

3,986,813

3,657,300

329,513

AFIRS sales

1,574,559

619,776

954,783

3,372,421

2,054,251

1,318,170

12-

Customers are frequently required to pay for AFIRS units and installation kits prior to the planned shipment date. This prepayment

is recorded as a customer deposit, which is recognized as an accrued liability upon receipt. When the AFIRS unit and installation

kit are shipped, the customer deposit is reclassified to unearned revenue, where it will remain until the AFIRS Solution has been

installed and is fully functional, at which point the unearned revenue is recognized as AFIRS sales revenue.

When customers order spare parts or Underfloor Stowage Units and a prepayment is required, it is also recorded as a customer

deposit. The Parts sales revenue is recognized when the ordered part or unit is shipped.

Customer deposits are amounts received for AFIRS sales and parts that have not yet been shipped to the customer, and services

that have not yet been completed. These deposits are nonrefundable, and are included on the Statement of Financial Position

(“SFP”) in trade payables and accrued liabilities.

The chart below outlines the movement in the Company’s customer deposits throughout the periods ended December 31, 2015

and 2014. Payment was received for 11 installation kits in the fourth quarter of 2015 compared to 9 received in the fourth quarter of

2014, bringing 2015 year-to-date (“YTD”) total payments for installation kits to 36, compared to a total of 57 in 2014.

Opening balance

Payments received

Moved to unearned revenue
Moved to unearned revenue
Balance, December 31
Balance, December 31

Q4 2015

524,325

1,229,085

(732,735)
(732,735)
1,020,675
1,020,675

Q4 2014

1,070,854

744,042

(1,024,491)
(1,024,491)
790,405
790,405

Variance

YTD 2015

YTD 2014

Variance

(546,529)

485,043

291,756
291,756
230,270
230,270

790,405

2,828,055

(2,597,785)
(2,597,785)
1,020,675
1,020,675

551,227

2,967,089

(2,727,911)
(2,727,911)
790,405
790,405

239,178

(139,034)

130,126
130,126
230,270
230,270

Unearned Revenue
Unearned Revenue
Unearned Revenue
The chart below outlines the movement in the Company’s unearned revenue throughout the periods ended December 31, 2015
The chart below outlines the movement in the Company’s unearned revenue throughout the periods ended December 31, 2015
and 2014. Revenue was recognized for 28 installation kits in 2015’s fourth quarter compared to 12 in the fourth quarter of 2014.
The chart below outlines the movement in the Company’s unearned revenue throughout the periods ended December 31, 2015 and 2014. Revenue was recognized for 28
and 2014. Revenue was recognized for 28 installation kits in 2015’s fourth quarter compared to 12 in the fourth quarter of 2014.
YTD, revenue has been recognized for 58 installation kits in 2015, as compared to 44 in 2014. In 2015, 65.9% of the unearned
installation kits in 2015’s fourth quarter compared to 12 in the fourth quarter of 2014. YTD, revenue has been recognized for 58 installation kits in 2015, as compared to
YTD, revenue has been recognized for 58 installation kits in 2015, as compared to 44 in 2014. In 2015, 65.9% of the unearned
revenue balance at December 31, 2014 was recognized as earned revenue (2014: 57.1%).
revenue balance at December 31, 2014 was recognized as earned revenue (2014: 57.1%).
44 in 2014. In 2015, 65.9% of the unearned revenue balance at December 31, 2014 was recognized as earned revenue (2014: 57.1%).

Q4 2015
Q4 2015
$
$
1,922,504
1,922,504
732,735
732,735
19,033
19,033
(1,524,940)
(1,524,940)

Q4 2014
Q4 2014
$
$
1,272,206
1,272,206
1,024,491
1,024,491
15,960
15,960
(614,411)
(614,411)

Variance
Variance
$
$
650,298
650,298
(291,756)
(291,756)
3,073
3,073
(910,529)
(910,529)

YTD 2015
YTD 2015
$
$
1,675,746
1,675,746
2,597,785
2,597,785
19,033
19,033
(3,131,261)
(3,131,261)

YTD 2014
YTD 2014
$
$
1,103,834
1,103,834
2,727,911
2,727,911
92,084
92,084
(2,146,871)
(2,146,871)

(3,991)
(3,991)

(22,500)
(22,500)

18,509
18,509

(15,962)
(15,962)

(101,212)
(101,212)

1,145,341
1,145,341

1,675,746
1,675,746

(530,405)
(530,405)

1,145,341
1,145,341

1,675,746
1,675,746

Variance
Variance
$
$
571,912
571,912
(130,126)
(130,126)
(73,051)
(73,051)
(984,390)
(984,390)

85,250
85,250

(530,405)
(530,405)

Opening balance
Opening balance
AFIRS sales shipped, not
AFIRS sales shipped, not
accepted
accepted
Voice and data services prepaid
Voice and data services prepaid
AFIRS sales revenue
AFIRS sales revenue
recognized
recognized
Voice and data services
Voice and data services
revenue recognized
revenue recognized
Balance, December 31
Balance, December 31

Comprehensive Income
Comprehensive Income
Comprehensive Income

Revenue
Revenue
Revenue
In the categories listed in the revenue sources chart, Voice and data services is the recurring revenue from customers’ usage of data they receive from AFIRS and
In the categories listed in the revenue sources chart, Voice and data services is the recurring revenue from customers’ usage of
In the categories listed in the revenue sources chart, Voice and data services is the recurring revenue from customers’ usage of
use of functions such as the satellite phone. Usage fees are recognized as the service is provided based on actual customer usage each month. AFIRS sales includes
data they receive from AFIRS and use of functions such as the satellite phone. Usage fees are recognized as the service is
data they receive from AFIRS and use of functions such as the satellite phone. Usage fees are recognized as the service is
the income from AFIRS hardware sales and related parts required to install the. Upon shipment, these amounts are deferred as unearned revenue and corresponding
provided based on actual customer usage each month. AFIRS sales includes the income from AFIRS hardware sales and related
provided based on actual customer usage each month. AFIRS sales includes the income from AFIRS hardware sales and related
parts required to install the unit along with Dragon hardware sales. Upon shipment, these amounts are deferred as unearned
expenses are recorded as work in progress. When the system is fully functional and the customer has accepted the system, the deferred amount is recognized as
parts required to install the unit along with Dragon hardware sales. Upon shipment, these amounts are deferred as unearned
revenue and corresponding expenses are recorded as work in progress. When the system is fully functional and the customer has
revenue and corresponding expenses are recorded as work in progress. When the system is fully functional and the customer has
AFIRS sales revenue and the work in progress as cost of sales. Parts sales include the sale of spare AFIRS units, spare installation parts, modems with related
accepted the system, the deferred amount is recognized as AFIRS sales revenue and the work in progress as cost of sales. Parts
accepted the system, the deferred amount is recognized as AFIRS sales revenue and the work in progress as cost of sales. Parts
manufacturing license fee, and Underfloor Stowage Units. Services revenue includes technical services, repairs and expertise the Company offers including the
sales include the sale of spare AFIRS units, spare installation parts, modems with related manufacturing license fee, and
sales include the sale of spare AFIRS units, spare installation parts, modems with related manufacturing license fee, and
installation of operations control centres.
Underfloor Stowage Units. Services revenue includes technical services, repairs and expertise the Company offers including the
Underfloor Stowage Units. Services revenue includes technical services, repairs and expertise the Company offers including the
installation of operations control centres.
installation of operations control centres.
Revenue sources
Revenue sources
Revenue sources

Voice and data services
Voice and data services
AFIRS sales
AFIRS sales
Parts sales

Services

Total

Q4 2015
Q4 2015
$
$
1,067,894
1,067,894
1,574,559
1,574,559
1,123,803

Q4 2014
Q4 2014
$
$
915,602
915,602
619,776
619,776
455,297

Variance
Variance
$
$
152,292
152,292
954,783
954,783
668,506

YTD 2015
YTD 2015
$
$
3,986,813
3,986,813
3,372,421
3,372,421
2,932,100

YTD 2014
YTD 2014
$
$
3,657,300
3,657,300
2,054,251
2,054,251
718,567

3,011

228,006

(224,995)

165,791

451,910

Variance
Variance
$
$
329,513
329,513
1,318,170
1,318,170
2,213,533
12-
12-
(286,119)

3,769,267

2,218,681

1,550,586

10,457,125

6,882,028

3,575,097

Overall, total revenue increased 51.9% from $6,882,028 in 2014 to $10,457,125 in 2015. Voice and data services increased by
Overall, total revenue increased 51.9% from $6,882,028 in 2014 to $10,457,125 in 2015. Voice and data services increased by 9.0%, Parts sales increased by 308.0%,
9.0%, Parts sales increased by 308.0%, AFIRS sales increased by 64.2%, while Services revenue decreased by 63.3%. Revenue
AFIRS sales increased by 64.2%, while Services revenue decreased by 63.3%. Revenue in the first, third and fourth quarters were the three highest quarters in FLYHT
in the first, third and fourth quarters were the three highest quarters in FLYHT history.
history.
Voice and data services increased compared to last year, due to a higher number of aircraft producing recurring revenue together
Voice and data services increased compared to last year, due to a higher number of aircraft producing recurring revenue together with the higher value of the USD.
with the higher value of the USD. Recurring revenue accounted for 28.3% of revenue in Q4 2015 (Q4 2014: 41.3%), and 38.1%
YTD 2015 (YTD 2014: 53.1%). Recurring revenue from FLYHT’s existing client base is expected to continue to expand throughout
Recurring revenue accounted for 28.3% of revenue in Q4 2015 (Q4 2014: 41.3%), and 38.1% YTD 2015 (YTD 2014: 53.1%). Recurring revenue from FLYHT’s existing client
2016 and future years.
base is expected to continue to expand throughout 2016 and future years.
AFIRS sales increased in 2015 as compared to 2014 due to an increased number of installation kits meeting the requirements for
AFIRS sales increased in 2015 as compared to 2014 due to an increased number of installation kits meeting the requirements for revenue recognition. YTD, revenue has
revenue recognition. YTD, revenue has been recognized on 58 installation kits, compared to 44 in 2014. Revenue was recognized
been recognized on 58 installation kits, compared to 44 in 2014. Revenue was recognized on 28 installation kits in Q4 2015 compared to 12 in Q4 2014.
on 28 installation kits in Q4 2015 compared to 12 in Q4 2014.

Parts sales increased both in the quarter and YTD in 2015 from 2014 as the result of large orders of modems with related license
Parts sales increased both in the quarter and YTD in 2015 from 2014 as the result of large orders of modems with related license fees throughout 2015.
fees throughout 2015.

Services revenue decreased in the quarter and YTD in 2015 compared to 2014 due to a lower number of technical services provided to customers throughout 2015. In
Services revenue decreased in the quarter and YTD in 2015 compared to 2014 due to a lower number of technical services
provided to customers throughout 2015. In 2014 higher revenue was earned on engineering documentation required for our
2014 higher revenue was earned on engineering documentation required for our Chinese customers, which was not required in 2015.
Chinese customers, which was not required in 2015.

Revenue sources for the last eight quarters were:

Q4 2015

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Voice and data services
AFIRS sales
Parts sales
Services

1,067,894 1,100,238
613,229
1,574,559
682,476
1,123,803
123,404
3,011

855,121
434,102
285,459
23,921

963,560
750,531
840,362
15,455

915,602
619,776
455,297
228,006

927,117
609,085
148,198
124,394

893,464
447,632
111,720
52,951

921,116
34
377,758
3,353
46,559

Total

3,769,267 2,519,347 1,598,603 2,569,908 2,218,681 1,808,794 1,505,767

1,348,786

Geographical sources of revenue

The following revenue split is based on the geographical location of customers.

North America

South/Central America

Africa/Middle East

Europe

Australasia

Asia

Total

North America

South/Central America

Africa/Middle East

Europe

Australasia

Asia

Total

YTD 2015

YTD 2014

Q4 2015

1,979,070

38,640

586,570

251,382

215,805

697,800

3,769,267

Q4 2015

52.5

1.0

15.6

6.7

5.7

18.5

100.0

Q4 2014

1,215,724

67,265

369,309

54,078

143,922

368,383

2,218,681

Q4 2014

54.9

3.0

16.6

2.4

6.5

16.6

100.0

5,754,913

266,203

1,432,230

542,037

694,992

1,766,750

10,457,125

YTD 2015

55.1

2.5

13.7

5.2

6.6

16.9

100.0

3,321,408

304,449

1,194,644

317,112

658,366

1,086,049

6,882,028

YTD 2014

48.2

4.4

17.4

4.6

9.6

15.8

100.0

Gross Profit and Cost of Sales

FLYHT’s cost of sales includes the direct costs associated with specific revenue types, including the AFIRS unit, installation kits,

training and installation support, as well as associated shipping expenses and travel expenses for the Company’s engineering

personnel while performing on-site installation support. Installations on aircraft are performed by third parties at the customer’s

13-

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Parts sales

Services

Total

1,123,803

455,297

668,506

2,932,100

718,567

2,213,533

3,011

228,006

(224,995)

165,791

451,910

(286,119)

3,769,267

2,218,681

1,550,586

10,457,125

6,882,028

3,575,097

Overall, total revenue increased 51.9% from $6,882,028 in 2014 to $10,457,125 in 2015. Voice and data services increased by

9.0%, Parts sales increased by 308.0%, AFIRS sales increased by 64.2%, while Services revenue decreased by 63.3%. Revenue

in the first, third and fourth quarters were the three highest quarters in FLYHT history.

Voice and data services increased compared to last year, due to a higher number of aircraft producing recurring revenue together

with the higher value of the USD. Recurring revenue accounted for 28.3% of revenue in Q4 2015 (Q4 2014: 41.3%), and 38.1%

YTD 2015 (YTD 2014: 53.1%). Recurring revenue from FLYHT’s existing client base is expected to continue to expand throughout

2016 and future years.

AFIRS sales increased in 2015 as compared to 2014 due to an increased number of installation kits meeting the requirements for

revenue recognition. YTD, revenue has been recognized on 58 installation kits, compared to 44 in 2014. Revenue was recognized

on 28 installation kits in Q4 2015 compared to 12 in Q4 2014.

Parts sales increased both in the quarter and YTD in 2015 from 2014 as the result of large orders of modems with related license

fees throughout 2015.

Services revenue decreased in the quarter and YTD in 2015 compared to 2014 due to a lower number of technical services
provided to customers throughout 2015. In 2014 higher revenue was earned on engineering documentation required for our
Chinese customers, which was not required in 2015.

Revenue sources for the last eight quarters were:
Revenue sources for the last eight quarters were:

Q4 2015

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Voice and data services
Voice and data services
AFIRS sales
AFIRS sales
Parts sales
Parts sales
Services
Services
Total
Total

1,067,894 1,100,238
613,229
1,574,559
682,476
1,123,803
123,404
3,011

1,067,894 1,100,238
963,560
613,229
1,574,559
750,531
1,123,803
682,476
840,362
123,404
3,011
15,455
3,769,267 2,519,347 1,598,603 2,569,908

893,464
447,632
111,720
52,951
3,769,267 2,519,347 1,598,603 2,569,908 2,218,681 1,808,794 1,505,767

921,116
377,758
3,353
46,559
2,218,681 1,808,794 1,505,767 1,348,786

927,117
609,085
148,198
124,394

915,602
619,776
455,297
228,006

855,121
434,102
285,459
23,921

963,560
750,531
840,362
15,455

893,464
447,632
111,720
52,951

927,117
609,085
148,198
124,394

915,602
619,776
455,297
228,006

855,121
434,102
285,459
23,921

921,116
377,758
3,353
46,559
1,348,786

Geographical sources of revenue
Geographical sources of revenue

Q4 2015

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Q1 2014

73.3
The following revenue split is based on the geographical location of customers.
The following revenue split is based on the geographical location of customers.
26.7

Gross Margin %
Cost of Sales %

64.4
35.6

75.2
24.8

61.7
38.3

64.8
35.2

63.7
36.3

59.8
40.2

67.4
32.6

Distribution Expenses (Recovery)

Consist of overhead expenses associated with the sale and delivery of products and services to customers, and marketing.

North America
South/Central America
Africa/Middle East
Europe
Australasia
Major Category
Asia
Total
Salaries and benefits
Share based compensation
Contract labour
Office
North America
Travel
South/Central America
Equipment and maintenance
Africa/Middle East
Depreciation
Europe
Australasia
Marketing
Asia
Other
Total
Total

Q4 2015
$
1,979,070
38,640
586,570
251,382
215,805
Q4 2014
697,800
$
3,769,267
364,083
10,470
Q4 2015
97,574
%
66,654
52.5
84,291
1.0
5,764
15.6
6.7
1,733
5.7
12,306
18.5
347,775
100.0
990,650

Q4 2014
$
1,215,724
67,265
369,309
54,078
143,922
368,383
2,218,681

Variance
$
234,842
(11,862)
107,020
45,505
59,919
(10,816)
7,652
9,308
(347,775)

YTD 2015
$
1,983,579
91,658
829,298
328,855
472,078
40,216
29,840
100,169
101,940

Q4 2014
%
54.9
3.0
16.6
2.4
6.5
16.6
100.0

93,793

3,977,633

YTD 2015
$
5,754,913
266,203
1,432,230
542,037
694,992
YTD 2014
1,766,750
$
10,457,125
1,652,340
84,971
YTD 2015
354,320
%
275,427
55.1
449,215
2.5
22,180
13.7
5.2
26,910
6.6
55,610
16.9
472,018
100.0
3,392,991

YTD 2014
$
3,321,408
304,449
1,194,644
317,112
658,366
1,086,049
6,882,028

Variance
$
331,239
6,687
474,978
53,428
22,863
18,036
2,930
44,559
(370,078)

YTD 2014
%
48.2
4.4
17.4
4.6
9.6
15.8
100.0

584,642

Q4 2015
$
598,925
(1,392)
204,594
112,159
144,210
(5,052)
9,385
21,614
-

1,084,443

Gross Profit and Cost of Sales
Gross Profit and Cost of Sales

Q4 2015

Q3 2015

Q4 2014

Q2 2014

Q3 2015

Q2 2015

Q1 2015

Q3 2014

Variance
$

64.4
35.6

Gross margin for the last eight quarters was:

927,117
609,085
148,198
124,394

893,464
447,632
111,720
52,951

Administration Expenses
FLYHT’s cost of sales includes the direct costs associated with specific revenue types, including the AFIRS unit, installation kits, training and installation support, as well
FLYHT’s cost of sales includes the direct costs associated with specific revenue types, including the AFIRS unit, installation kits,
as associated shipping expenses and travel expenses for the Company’s engineering personnel while performing on-site installation support. Installations on aircraft are
training and installation support, as well as associated shipping expenses and travel expenses for the Company’s engineering
Consist of expenses associated with the general operations of the Company that are not directly associated with delivery of services or
Q1 2014
performed by third parties at the customer’s expense. Cost of sales as a percentage of revenue in the fourth quarter of 2015 was 35.6% compared to 38.3% in 2014’s
personnel while performing on-site installation support. Installations on aircraft are performed by third parties at the customer’s
sales.
1,067,894 1,100,238
Voice and data services
fourth quarter. A review of the annual results shows the cost of sales as a percentage of revenue also decreased from 37.1% in 2014 to 30.7% in 2015. The decrease was
1,574,559
613,229
AFIRS sales
due to a difference in the mix of revenue sources, as Voice and data services, Parts sales, and Services have higher margins than AFIRS sales. Gross margin will fluctuate
13-
682,476
1,123,803
Parts sales
quarter over quarter depending on customer needs and revenue mix.
Major Category
Q4 2015
123,404
3,011
Services
$
Total
Salaries and benefits
1,058,602
Share based compensation
37,099
Contract labour
52,024
Office
61,836
Gross Margin %
Legal fees
91,212
Cost of Sales %
Audit and accounting
24,000
148,810
Investor relations
Brokerage, stock exchange,
and transfer agent fees
Travel
Equipment and maintenance
Depreciation
Major Category
Other

855,121
434,102
FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015
285,459
Q4 2014
23,921
$
352,434
2,022
Q2 2015
60,860
62,895
42,787
31,500
85,807

921,116
915,602
377,758
619,776
3,353
455,297
YTD 2015
YTD 2014
46,559
228,006
$
$
2,218,681 1,808,794 1,505,767 1,348,786
1,972,362
1,468,711
417,278
276,008
245,678
153,594
257,614
276,983
61.7
160,360
151,566
38.3
141,438
85,840
372,423
399,619

963,560
750,531
840,362
Variance
15,455
$
3,769,267 2,519,347 1,598,603 2,569,908
706,168
35,077
Q1 2015
(8,836)
(1,059)
48,425
(7,500)
63,003

54,140
Consist of overhead expenses associated with the sale and delivery of products and services to customers, and marketing.
46,270
760
Q4 2014
30,458
$
780,039
364,083
10,470
97,574
66,654
84,291
5,764
1,733

Total
Salaries and benefits
Share based compensation
Contract labour
Office
Travel
Equipment and maintenance
Depreciation

6,683
(34,317)
1,544
Variance
(8,926)
$
793,757
234,842
(11,862)
107,020
45,505
59,919
(10,816)
7,652

60,823
11,953
2,304
Q4 2015
21,532
$
1,573,796
598,925
(1,392)
204,594
112,159
144,210
(5,052)
9,385

215,660
98,438
15,217
YTD 2014
71,060
$
3,548,518
1,652,340
84,971
354,320
275,427
449,215
22,180
26,910

211,307
64,138
10,098
YTD 2015
26,469
$
3,676,953
1,983,579
91,658
829,298
328,855
472,078
40,216
29,840

Variance
$
128,435
331,239
6,687
474,978
53,428
22,863
18,036
2,930

503,651
(141,270)
(92,084)
(19,369)
8,794
(55,598)
27,196

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Distribution Expenses (Recovery)

(4,353)
(34,300)
(5,119)
(44,591)

75.2
24.8

73.3
26.7

67.4
32.6

64.8
35.2

59.8
40.2

63.7
36.3

(14,522)

(6,505)

Q3 2014

Q1 2014

Q4 2014

Q2 2014

74,066

10,106

59,544

3,601

Marketing

Other

Total

21,614

12,306

9,308

100,169

55,610

44,559

347,775

(347,775)

101,940

472,018

(370,078)

1,084,443

990,650

93,793

3,977,633

3,392,991

584,642

Administration Expenses

sales.

Consist of expenses associated with the general operations of the Company that are not directly associated with delivery of services or

Major Category

Q4 2015

Q4 2014

Variance

YTD 2015

YTD 2014

Variance

1,058,602

352,434

706,168

1,972,362

1,468,711

503,651

Salaries and benefits

Share based compensation

Contract labour

Office

Legal fees

Audit and accounting

Investor relations

Brokerage, stock exchange,

and transfer agent fees

Equipment and maintenance

Depreciation

Travel

Other

Total

37,099

52,024

61,836

91,212

24,000

148,810

3,601

60,823

11,953

2,304

21,532

2,022

60,860

62,895

42,787

31,500

85,807

10,106

54,140

46,270

760

30,458

35,077

(8,836)

(1,059)

48,425

(7,500)

63,003

(6,505)

6,683

(34,317)

1,544

(8,926)

276,008

153,594

257,614

160,360

85,840

399,619

59,544

64,138

10,098

26,469

417,278

245,678

276,983

151,566

141,438

372,423

(141,270)

(92,084)

(19,369)

8,794

(55,598)

27,196

74,066

(14,522)

98,438

15,217

71,060

(34,300)

(5,119)

(44,591)

211,307

215,660

(4,353)

1,573,796

780,039

793,757

3,676,953

3,548,518

128,435

Q4 2015

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Voice and data services

1,067,894 1,100,238

855,121

963,560

915,602

927,117

893,464

921,116

AFIRS sales

Parts sales

Services

Total

1,574,559

613,229

434,102

750,531

619,776

609,085

447,632

377,758

1,123,803

682,476

285,459

840,362

455,297

148,198

111,720

3,353

3,011

123,404

23,921

15,455

228,006

124,394

52,951

46,559

3,769,267 2,519,347 1,598,603 2,569,908

2,218,681 1,808,794 1,505,767 1,348,786

Q4 2015

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Gross Margin %
Cost of Sales %

64.4
35.6

73.3
26.7

64.8
35.2

75.2
24.8

61.7
38.3

63.7
36.3

59.8
40.2

67.4
32.6

Q4 2015

Q3 2015

Q2 2015

Q1 2015

Q4 2014

Q3 2014

Q2 2014

Q1 2014

915,602
Distribution Expenses (Recovery)
Distribution Expenses (Recovery)
619,776
Consist of overhead expenses associated with the sale and delivery of products and services to customers, and marketing.
455,297
228,006

893,464
447,632
111,720
Consist of overhead expenses associated with the sale and delivery of products and services to customers, and marketing.
52,951

963,560
750,531
840,362
15,455
3,769,267 2,519,347 1,598,603 2,569,908

Voice and data services
AFIRS sales
Parts sales
Services
Total
Major Category

1,067,894 1,100,238
613,229
1,574,559
682,476
1,123,803
123,404
3,011

855,121
434,102
285,459
23,921

Q3 2014

927,117
609,085
148,198
124,394

921,116
377,758
3,353
46,559
2,218,681 1,808,794 1,505,767 1,348,786
YTD 2015
YTD 2014
$
$
1,983,579
1,652,340
Q4 2014
91,658
84,971
61.7
829,298
354,320
38.3
275,427
328,855
449,215
472,078
22,180
40,216
26,910
29,840
55,610
100,169
472,018
101,940

Variance
$
331,239
6,687
474,978
53,428
22,863
18,036
2,930
44,559
(370,078)

67.4
32.6

59.8
40.2

63.7
36.3

Q1 2014

Q2 2014

Salaries and benefits
Share based compensation
Gross Margin %
Contract labour
Cost of Sales %
Office
Travel
Equipment and maintenance
Depreciation
Marketing
Other

Q4 2015

Q3 2015

Q2 2015

64.4
35.6

73.3
26.7

64.8
35.2

Q4 2015
$
598,925
(1,392)
204,594
112,159
144,210
(5,052)
9,385
21,614
-

Q4 2014
$
364,083
10,470
97,574
66,654
84,291
5,764
1,733
12,306
347,775

Q1 2015

75.2
24.8

Variance
$
234,842
(11,862)
107,020
45,505
59,919
(10,816)
7,652
9,308
(347,775)

Distribution Expenses (Recovery)

Consist of overhead expenses associated with the sale and delivery of products and services to customers, and marketing.

Consist of expenses associated with the general operations of the Company that are not directly associated with delivery of services or
sales.

Contract labour increased compared with the same periods last year, consequent on an increase in resources focused on customer deliverables, increased sales
representation throughout the later portion of 2014 into 2015, together with recruitment fees paid to seek additional sales staff.

Marketing expense has increased YTD mainly due to the creation in Q1 2015 of a video communicating the FLYHTStream product together with a presence at an
industry tradeshow in China in Q2 2015.

Office expenses increased in 2015 from 2014 mainly as the result of an increased rent allocation combined with increased participation in an industry group.

Travel expenses increased in 2015 versus 2014 largely as the result of increased travel associated with sales and customer satisfaction activities, particularly in the
fourth quarter of 2015. Travel expenses vary significantly depending on the location of customer contracts and regions served.

Total
Major Category

Other expenses decreases in both the quarter and YTD are due to a large bad debt reserve taken in Q4 2014 that was not repeated in 2015.
Administration Expenses

990,650
Q4 2014
$
364,083
10,470
97,574
66,654
84,291
5,764
1,733
Q4 2014
12,306
$
347,775
352,434
990,650
2,022
60,860
62,895
42,787
31,500
85,807

3,977,633
YTD 2015
$
1,983,579
91,658
829,298
328,855
472,078
40,216
29,840
YTD 2015
100,169
$
101,940
1,972,362
3,977,633
276,008
153,594
257,614
160,360
85,840
399,619

1,084,443
Q4 2015
$
598,925
(1,392)
204,594
112,159
144,210
(5,052)
9,385
Q4 2015
21,614
$
-
1,058,602
1,084,443
37,099
52,024
61,836
91,212
24,000
148,810

93,793
Variance
$
234,842
(11,862)
107,020
45,505
59,919
(10,816)
7,652
Variance
9,308
$
(347,775)
706,168
93,793
35,077
(8,836)
(1,059)
48,425
(7,500)
63,003

3,392,991
YTD 2014
$
Salaries and benefits
1,652,340
Distribution expenses increased compared to 2014 due mainly to higher people costs offset by the decrease required in FLYHT’s bad debt reserve.
Share based compensation
84,971
Administration Expenses
Salaries and benefits increased in 2015 as compared to 2014 mainly due to an increase in sales and customer satisfaction staff.
Contract labour
354,320
Office
275,427
Travel
449,215
Equipment and maintenance
22,180
Depreciation
26,910
Marketing
Major Category
YTD 2014
55,610
$
Other
472,018
Equipment expenses increased YTD due to the 2015 purchase of equipment used to demonstrate FLYHT’s services to prospective customers.
Salaries and benefits
1,468,711
Total
3,392,991
Share based compensation
417,278
Contract labour
245,678
Office
276,983
Legal fees
151,566
Audit and accounting
141,438
372,423
Investor relations
Brokerage, stock exchange,
and transfer agent fees
Travel
Equipment and maintenance
Major Category
Depreciation
Salaries and benefits
Other
Share based compensation
Total
Contract labour
Office
Legal fees
Audit and accounting
Investor relations
Brokerage, stock exchange,
and transfer agent fees
Travel
Equipment and maintenance
Depreciation
Other

60,823
11,953
Q4 2015
$
2,304
1,058,602
21,532
37,099
1,573,796
52,024
61,836
91,212
24,000
148,810

54,140
46,270
Q4 2014
$
760
352,434
30,458
2,022
780,039
60,860
62,895
42,787
31,500
85,807

215,660
98,438
YTD 2014
$
15,217
1,468,711
71,060
417,278
3,548,518
245,678
276,983
151,566
141,438
372,423

211,307
64,138
YTD 2015
$
10,098
1,972,362
26,469
276,008
3,676,953
153,594
257,614
160,360
85,840
399,619

6,683
(34,317)
Variance
$
1,544
706,168
(8,926)
35,077
793,757
(8,836)
(1,059)
48,425
(7,500)
63,003

6,683
(34,317)
1,544
(8,926)

215,660
98,438
15,217
71,060

211,307
64,138
10,098
26,469

54,140
46,270
760
30,458

60,823
11,953
2,304
21,532

(6,505)

10,106

74,066

10,106

59,544

3,601

584,642
Variance
$
331,239
6,687
474,978
53,428
22,863
18,036
2,930
Variance
44,559
$
(370,078)
503,651
584,642
(141,270)
(92,084)
(19,369)
8,794
(55,598)
27,196

Variance
$

(4,353)
(34,300)
(5,119)
503,651
(44,591)
(141,270)
128,435
(92,084)
(19,369)
8,794
(55,598)
27,196

(14,522)

(4,353)
(34,300)
(5,119)
(44,591)

Consist of expenses associated with the general operations of the Company that are not directly associated with delivery of services or
Administration Expenses
sales.
Consist of expenses associated with the general operations of the Company that are not directly associated with delivery of services or sales.

(14,522)

(6,505)

74,066

59,544

3,601

Total

1,573,796

780,039

793,757

3,676,953

3,548,518

128,435

Administration expenses were higher in 2015 due mainly to people costs for staff retirement and change in key management positions, partially offset by cost savings
in several other expense categories.

Salaries and benefits were higher in 2015 compared with 2014, mainly as the result of separation payments for our retiring CEO together with variable compensation
as a result of the change in key management positions in Q4 2015 which exceeded the cost of separation included in Q4 2014 for our retiring CFO.

Share based compensation differences in the quarter and YTD were the result of timing and volume differences in share options awarded throughout 2014 and into
2015.

Contract labour decreased compared to 2014 as a result of recruitment fees paid in 2014, along with expenses resulting from increased involvement throughout 2014
in industry groups following the disappearance of Malaysian Airlines flight MH370, which did not recur in 2015.

Office expenses decreased throughout 2015 compared to 2014 mainly as the result of decreased rent with the move to the new office space in Q1 2014 and a change
in rent allocation, together with decreased communication costs.

Legal fees increased in the quarter due to employee related services, including international employment law, and treasury matters.

Audit and accounting decreases are mainly due to service adjustments.

Investor relations expense increased due to treasury matters and including costs of the OTCQX listing for the full year in 2015 (listing obtained in June 2014).

Brokerage, stock exchange, and transfer agent fees decreases are the result of a larger number of warrant and option exercises throughout 2014 as compared
to 2015.

Equipment and maintenance decreases were the result of one-time purchases of equipment required for the new office premises in 2014.

Other decreases were related to the office move in 2014.

Research, Development and Certification Engineering Expenses (Recovery)
Research, Development and Certification Engineering Expenses (Recovery)

Major Category

Salaries and benefits
Share based compensation
Contract labour
Office
Travel
Equipment and maintenance
Components
SRED credit
Depreciation
Other
SNC litigation settlement
Total

Q4 2015
$

474,014
(1,635)
161,206
30,212
6,902
20,364
(9,541)
-
3,310
4,363
-
689,195

Q4 2014
$
427,690
-
172,201
87,376
11,226
39,409
35,708
(324)
(561)
-
-
772,725

Variance
$
46,324

YTD 2014
YTD 2015
$
$
1,874,482
1,964,388
86,341
(1,635) 75,011
538,874
595,821
288,686
197,618
37,882
52,143
56,555
65,038
52,308
27,877
(241,677)
(216,708)
23,195
16,936
12,060
24,428
- (1,950,957)
777,749
2,802,552

(10,995)
(57,164)
(4,324)
(19,045)
(45,249)
324
3,871
4,363
-
(83,530)

Variance
$

89,906
(11,330)
56,947
(91,068)
14,261
8,483
(24,431)
24,969
(6,259)
12,368
1,950,957
2,024,803

Research and Development expense, before the favorable impact in 2014 of the recovery of a provision on settlement of the SNC
Research and Development expense, before the favorable impact in 2014 of the recovery of a provision on settlement of the SNC litigation, was higher in 2015 due mainly
litigation, was higher in 2015 due mainly to higher people costs, legal and patent fees, and components required for research and
to higher people costs, legal and patent fees, and components required for research and development activities.
development activities.

Salaries and benefits expended in this category increased from 2014 to 2015, partially due to the time committed to increasing
revenue sources for ground based server applications, and enhancements made to FLYHTStream in Q1 2015. People costs will
fluctuate with customer and industry demands for new products and enhancements of existing products, as well as differences in
allocations between Distribution cost centres and R&D.

Contract labour has increased YTD mainly due to certification engineering on a time-sensitive STC in Q1 2015 together with
increased software development needs in Q2 2015.

Office expenses decreased as a result of decreased legal fees, as resources similar to those required in 2014 to finalize the
settlement with Sierra Nevada Corporation (“SNC”) were not required in 2015. Legal fees required to establish and defend patents
also decreased from 2014 to 2015.

Travel expenses increased due to increased hardware testing and test flights. Cost of travel varies significantly depending on the
location of customers and regions served.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Equipment and maintenance expense decreases in Q4 2015 offset increases earlier in 2015 due to timing on additional software
and associated licensing fees required for research and development activities.

Components requirements were lower in 2015 than in 2014 as a lower number of expensed parts were required for use in

development and testing activities.

SRED credit YTD variance is due to a decrease in the expenses that qualify for the refundable tax credit under the Canada

Revenue Agency Scientific Research and Experimental Development (“SRED”) in 2015 compared to 2014. Annual claims will

fluctuate based on differences in R&D activities and associated costs.

Other expenses increased due to differences in employee relocation costs between 2014 and 2015.

SNC litigation settlement recovery shown in 2014 was the result of the settlement in Q2 2014 of the dispute with SNC and the

release of the related liability accrual.

16-

Salaries and benefits expended in this category increased from 2014 to 2015, partially due to the time committed to increasing revenue sources for ground based
server applications, and enhancements made to FLYHTStream in Q1 2015. People costs will fluctuate with customer and industry demands for new products and
enhancements of existing products, as well as differences in allocations between Distribution cost centres and R&D.

Contract labour has increased YTD mainly due to certification engineering on a time-sensitive STC in Q1 2015 together with increased software development needs
in Q2 2015.

Office expenses decreased as a result of decreased legal fees, as resources similar to those required in 2014 to finalize the settlement with Sierra Nevada Corporation
(“SNC”) were not required in 2015. Legal fees required to establish and defend patents also decreased from 2014 to 2015.

Travel expenses increased due to increased hardware testing and test flights. Cost of travel varies significantly depending on the location of customers and regions
served.

Equipment and maintenance expense decreases in Q4 2015 offset increases earlier in 2015 due to timing on additional software and associated licensing fees
required for research and development activities.

Components requirements were lower in 2015 than in 2014 as a lower number of expensed parts were required for use in development and testing activities.

SRED credit YTD variance is due to a decrease in the expenses that qualify for the refundable tax credit under the Canada Revenue Agency Scientific Research and
Experimental Development (“SRED”) in 2015 compared to 2014. Annual claims will fluctuate based on differences in R&D activities and associated costs.

Other expenses increased due to differences in employee relocation costs between 2014 and 2015.

SNC litigation settlement recovery shown in 2014 was the result of the settlement in Q2 2014 of the dispute with SNC and the release of the related liability accrual.

Net Finance Costs
Net Finance Costs

Major Category

Interest (income)

Q4 2015
$
-

Q4 2014
$
-

Variance
$
-

YTD 2015
$
(2,128)

YTD 2014
$
(2,000)

Variance
$
(128)

Net foreign exchange (gain) loss

25,721

(137,326)

163,047

(237,247)

(154,265)

(82,982)

Bank service charges

6,352

5,353

999

22,699

21,995

704

Interest expense

821

1,088

(267)

3,917

3,885

Government grant accretion

42,628

38,928

3,700

163,368

149,001

14,367

Debenture interest and accretion

204,272

199,937

4,335

711,993

784,404

(72,411)

Debenture cost amortization

2,691

23,777

(21,086)

10,677

88,530

(77,853)

Net finance costs

282,485

131,757

150,728

673,279

891,550

(218,271)

Net foreign exchange gain will vary between periods due to fluctuations in the value of the Canadian dollar in relation to the U.S.
Net foreign exchange gain will vary between periods due to fluctuations in the value of the Canadian dollar in relation to the U.S. dollar. A weakening of the Canadian
dollar. A weakening of the Canadian dollar has given rise to increased foreign exchange gains on U.S. dollar denominated sale s
dollar has given rise to increased foreign exchange gains on U.S. dollar denominated sales and purchases, in combination with fluctuations in U.S. denominated assets
and purchases, in combination with fluctuations in U.S. denominated assets and liabilities.
and liabilities.
Government grant accretion is the recognition of the effective interest component of the SADI grant.
Government grant accretion is the recognition of the effective interest component of the SADI grant.
Debenture interest and accretion decreases are due to the conversion of a portion of the debentures issued in December 2010.
Debenture interest and accretion decreases are due to the conversion of a portion of the debentures issued in December 2010.
Debenture cost amortization decreases occurred as the costs associated with issuing the convertible debenture in 2010 had
Debenture cost amortization decreases occurred as the costs associated with issuing the convertible debenture in 2010 had been fully amortized when the debenture
been fully amortized when the debenture was extended in December 2015.
was extended in December 2015.
Net Loss

Major Category

Net loss
Net loss without
R&D

Q4 2015
$
1,203,998

Q4 2014
$
1,305,712

Variance
$
(101,714)

YTD 2015
$
3,891,560

YTD 2014
$
4,278,885

Variance
$
(387,325)

514,803

532,986

(18,183)

1,089,008

3,501,136

(2,412,128)

The loss for 2015 was $387,325 less than the loss in 2014. If the favorable impact of the onetime recovery of the $1,950,957
provision on settlement of the SNC litigation is excluded from 2014 results, the improvement in 2015 would be $2,338,282 or
37.5%.

Foreign Exchange

All international and a majority of domestic sales of the Company’s products and services are denominated in U.S. dollars.
Accordingly, the Company is susceptible to foreign exchange fluctuations. In 2015, 98.4% of the Company’s gross sales were

made in U.S. dollars, compared to 95.5% in 2014. The Company expects this to continue as the aviation industry conducts the

majority of its transactions in U.S. dollars, thus limiting the opportunity for sales in Canadian dollars or other major currencies. The

Company also contracts in U.S. dollars for certain services and products related to cost of sales, which creates a natural hedge.

Recent Accounting Pronouncements

Other

application:

The following new accounting pronouncements have been issued but are not effective and may have an impact on the Company.

All of the following new or revised standards permit early adoption with transitional arrangements depending upon the date of initial

IFRS 9 – Financial Instruments replaces the current multiple classification and measurement models for financial assets and

liabilities with a single model that has only two classification categories: amortized cost and fair value (January 1, 2018).

IFRS 15 – Revenue from Contracts with Customers replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13

Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from

Customers, and SIC 31 Revenue – Barter Transactions Involving Advertising Services. The standard contains a single model

that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model

features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized.

17-

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Net Finance Costs

Major Category

Interest (income)

Q4 2015

Q4 2014

Variance

YTD 2015

YTD 2014

Variance

(2,128)

(2,000)

(128)

Net foreign exchange (gain) loss

25,721

(137,326)

163,047

(237,247)

(154,265)

(82,982)

Bank service charges

6,352

5,353

999

22,699

21,995

704

Interest expense

821

1,088

(267)

3,917

3,885

Government grant accretion

42,628

38,928

3,700

163,368

149,001

14,367

Debenture interest and accretion

204,272

199,937

4,335

711,993

784,404

(72,411)

Debenture cost amortization

2,691

23,777

(21,086)

10,677

88,530

(77,853)

Net finance costs

282,485

131,757

150,728

673,279

891,550

(218,271)

Net foreign exchange gain will vary between periods due to fluctuations in the value of the Canadian dollar in relation to the U.S.

dollar. A weakening of the Canadian dollar has given rise to increased foreign exchange gains on U.S. dollar denominated sales

and purchases, in combination with fluctuations in U.S. denominated assets and liabilities.

Government grant accretion is the recognition of the effective interest component of the SADI grant.

Debenture interest and accretion decreases are due to the conversion of a portion of the debentures issued in December 2010.

Debenture cost amortization decreases occurred as the costs associated with issuing the convertible debenture in 2010 had
been fully amortized when the debenture was extended in December 2015.

Net Loss
Net Loss

Major Category

Net loss

Q4 2015
$
1,203,998

Q4 2014
$
1,305,712

Variance
$
(101,714)

YTD 2015
$
3,891,560

YTD 2014
$
4,278,885

Variance
$
(387,325)

Net loss without R&D

514,803

532,986

(18,183)

1,089,008

3,501,136

(2,412,128)

The loss for 2015 was $387,325 less than the loss in 2014. If the favorable impact of the onetime recovery of the $1,950,957
The loss for 2015 was $387,325 less than the loss in 2014. If the favorable impact of the onetime recovery of the $1,950,957 provision on settlement of the SNC litigation
provision on settlement of the SNC litigation is excluded from 2014 results, the improvement in 2015 would be $2,338,282 or
is excluded from 2014 results, the improvement in 2015 would be $2,338,282 or 37.5%.
37.5%.

Foreign Exchange
Foreign Exchange
All international and a majority of domestic sales of the Company’s products and services are denominated in U.S. dollars. Accordingly, the Company is susceptible to
All international and a majority of domestic sales of the Company’s products and services are denominated in U.S. dollars.
foreign exchange fluctuations. In 2015, 98.4% of the Company’s gross sales were made in U.S. dollars, compared to 95.5% in 2014. The Company expects this to continue
Accordingly, the Company is susceptible to foreign exchange fluctuations. In 2015, 98.4% of the Company’s gross sales were
as the aviation industry conducts the majority of its transactions in U.S. dollars, thus limiting the opportunity for sales in Canadian dollars or other major currencies. The
made in U.S. dollars, compared to 95.5% in 2014. The Company expects this to continue as the aviation industry conducts the
Company also contracts in U.S. dollars for certain services and products related to cost of sales, which creates a natural hedge.
majority of its transactions in U.S. dollars, thus limiting the opportunity for sales in Canadian dollars or other major currencies. The
Company also contracts in U.S. dollars for certain services and products related to cost of sales, which creates a natural hedge.
Other

Other
Recent Accounting Pronouncements

The following new accounting pronouncements have been issued but are not effective and may have an impact on the Company. All of the following new or revised
Recent Accounting Pronouncements
standards permit early adoption with transitional arrangements depending upon the date of initial application:

The following new accounting pronouncements have been issued but are not effective and may have an impact on the Company.
All of the following new or revised standards permit early adoption with transitional arrangements depending upon the date of initial
application:

IFRS 9 – Financial Instruments replaces the current multiple classification and measurement models for financial assets and liabilities with a single model
that has only two classification categories: amortized cost and fair value. (January 1, 2018).

IFRS 15 – Revenue from Contracts with Customers replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC
IFRS 9 – Financial Instruments replaces the current multiple classification and measurement models for financial assets and
15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers, and SIC 31 Revenue – Barter Transactions Involving
liabilities with a single model that has only two classification categories: amortized cost and fair value (January 1, 2018).
Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point
in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized.
IFRS 15 – Revenue from Contracts with Customers replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13
Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from
New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard
Customers, and SIC 31 Revenue – Barter Transactions Involving Advertising Services. The standard contains a single model
applies to contracts with customers. It does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of other IFRSs
that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model
(January 1, 2017).
features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized.
New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue
IFRS 16 – Leases replaces IAS 17, leases. Under the new standard, more leases may come on-balance sheet for lessees, with the exception of leases with a term
FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015
not greater than 12 months and leases considered to be of small value (January 1, 2019).

17-

The Company has not completed its evaluation of the effect of adopting these standards on its consolidated annual financial statements.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Risks and Uncertainties

FLYHT operates in the aviation industry and part of the business involves risks and uncertainties. The Company takes steps to manage these risks, though it is important
to identify risks that could have a material effect on business or results of operations. Such risks are listed below; the areas defined are not inclusive.

Installations at c-checks

The Company’s products, AFIRS 220 and 228, can take approximately 200 person-hours or more to install on an aircraft, depending on the aircraft type and crew. As the
box needs a longer period to be installed, the installation is usually scheduled when the aircraft is undergoing its routine c-check or scheduled maintenance. The timing
of c-checks depends on how many segments the aircraft has flown and is based on the manufacturer’s guidelines; it can take as long as two or three years before an
aircraft is out of service for an extended period. Waiting for a c-check for AFIRS installation is a risk to the Company because it results in a delay in initial revenue from
the sale of the box and the Company does not receive recurring revenue connected with the monthly service offerings until the device is installed and running.

The Company takes steps to mitigate this risk by encouraging customers to install AFIRS at their aircraft’s earliest availability and works with them to provide the box at
the right time for installation, preferably while the aircraft is down for normal service. The goal is to reduce aircraft downtime and save the customer as much money as
possible. Another risk mitigation tool used by the Company is to offer special discounts to airlines that pay for all units up front. This discount decreases FLYHT’s gross
margin slightly, but allows the Company to bring in cash immediately after signing an agreement. As well, the terms of the Company’s standard agreement states that
payment is due a minimum of 90 days prior to the shipment of kits.

Foreign currency fluctuations

The Company does a majority of its business in U.S. dollars so there is a risk of currency fluctuation. The major portion of the operating and overhead costs are denominated
in Canadian dollars, though certain payroll costs and a significant portion of costs of goods sold, marketing and distribution costs are U.S. dollar denominated, and
therefore create a natural hedge against fluctuations of the Canadian dollar.

General economic and financial market conditions

In an industry, such as the aviation industry, finances are tied to global trends and patterns. As an airline’s spending is tied to their income, they may be unwilling or unable
to spend money, particularly on a value-added product such as AFIRS.

In order to address this risk, the sales team has developed a number of strategies. One is a global sales presence. FLYHT has established sales agents on every continent.
While some economies of the world may be in a slump or downturn, there is a place for FLYHT in growing markets. FLYHT also demonstrates to potential customers the
impressive return on investment model, how quickly potential customers can improve operational efficiency, and ultimately how much AFIRS will save them in operating
cost.

Dependence on key personnel and consultants

FLYHT’s ability to maintain its competency in the industry is dependent on maintaining a specialty skilled workforce. The Company’s DAO status, delegated by TCCA,
enables a smooth implementation of STCs, required to install AFIRS on aircraft. Key staff with TCCA delegation status enable the Company to complete STCs in a timely
and cost efficient manner. The Company has worked over the past few years to distribute the specified knowledge among a number of key individuals. This reduces risk
and ensures the Company can still function effectively were it to lose specialized staff.

Dependence on new products

Over the past few years, the Company has been in the R&D stage of its next generation product, AFIRS 228. FLYHT is confident the product fills a gap in the industry, as
evidenced by sales of the AFIRS 228 throughout 2013, 2014 and 2015. Through 2014 and 2015 FLYHT was working to increase certification of the 228 from an ‘E’ to a ‘D’
level certification at the request of customers; the certification was received during Q4 2015 and is expected to increase the market for the Company’s product. FLYHT
released the Dragon in the Fall of 2013, expanding into the sector within the industry that required a portable satellite communications device to meet general aviation
operators’ need for increased connectivity. Late in 2015 the Dragon was identified as falling outside of FLYHT’s core competency and the Company may look to divest the
product line during 2016. The Company’s success will ultimately depend on the success of its products, and future enhancements made to same.

Need to consider inserting FLYHTStream/fuel/etc type items

Availability of key supplies

FLYHT produces and builds all AFIRS 220 units in-house, while AFIRS 228 units are built by a contract manufacturer. The Company relies on partners, suppliers and
special parts to complete unit builds. Certain parts can be delayed in shipping or availability, which can cause a delay in building the AFIRS 220 or in receiving AFIRS 228
completed units. FLYHT aims to avoid the risk of not having the necessary supplies by managing inventories and storing extra key parts. The contract manufacturer is a
global supplier with the ability to meet FLYHT’s requirements. Additionally, the Company maintains close communication with its partners and suppliers to ensure all key
components for the AFIRS units will be available into the future.

Proprietary protection

Patent rights are extremely important to the continuation of the Company because the AFIRS technology is the Company’s primary revenue source. The Company relies
on contract, copyright and trademark laws and has received patents from the United States, Chinese, Turkish and European patent offices. These patents are generally
respected in other international jurisdictions as well. The risks involved with proprietary protection lie in other companies infringing on FLYHT patents or claiming
patent infringement by FLYHT, though the Company has defended patent claims in court and been successful. FLYHT conducted due diligence on its technology and the
conditions of its patent before applying and maintains that it holds unique characteristics from other technologies in the marketplace and does not infringe on the rights
of any third parties.

Transactions with Related Parties

a) Throughout 2014, the Company engaged in transactions with a company owned by a former director to supply consulting services in promoting the Company’s
product as a preferred solution for enhanced aircraft tracking and triggered data transmission. No similar services were contracted during 2015.

b) In the third and fourth quarters of 2015, the Company entered into an agreement with a company with ownership related to an officer of FLYHT. The company
supplied consulting services in recruitment and supplied a contract resource to develop tools used to enhance the Company’s ground based software.

Included in contract labour for the periods ended December 31:

For the three months
2014
$
- 5,621

2015
$

30,114
30,114

-
5,621

2015
$
-
41,114
41,114

For the year
2014
$
74,418
-
74,418

(a)
(b)
Total

Included in accounts payable and accrued liabilities as at December 31:

(a)
(b)
Total

2015
$
-
30,114
30,114

2014
$

-
-

All of the transactions with the related parties were at exchange amounts that approximated fair value. All other transactions with related parties were normal business
transactions related to employee and director positions within the Company. These transactions included expense reimbursements for business travel and expenses paid
by the related party, and were measured at exchange amounts paid to a third party as substantiated with a third party receipt.

Contingency

Subsequent to year end FLYHT received a claim from a partner totaling $0.8 million USD for past and potential future warranty claims relating to reliability of some active
AFIRS units. The claim asserts a design defect has led to the reliability issues. The resolution of the claim is pending review. The result of the claim is currently unknown
and will be resolved with the partner.

Subsequent event

On December 21, 2015 the Company granted a non-exclusive license to use certain of its intellectual property to a technology company for an aggregate license fee of
$2.5 million USD, payable in the first quarter of 2016. Payment for this license has been delayed until the second quarter of 2016.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Independent Auditors’ Report

To the Shareholders of FLYHT Aerospace Solutions Ltd.

We have audited the accompanying consolidated financial statements of FLYHT Aerospace Solutions Ltd., which comprise the consolidated statements of financial
position as at December 31, 2015 and December 31, 2014, the consolidated statements of comprehensive income (loss), changes in equity (deficiency) and cash flows
for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting
Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian
generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of FLYHT Aerospace Solutions Ltd. as at
December 31, 2015 and December 31, 2014, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with
International Financial Reporting Standards.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 2 in the consolidated financial statements, which indicates that FLYHT Aerospace Solutions Ltd. has a net
loss and negative cash flows from operating activities for the year ended December 31, 2015 and is dependent upon obtaining profitable operations and/or additional
financing to fund its ongoing operations. These conditions, along with other matters as set forth in Note 2 in the consolidated financial statements, indicate the existence
of a material uncertainty that may cast significant doubt about FLYHT Aerospace Solutions Ltd.’s ability to continue as a going concern.

Chartered Professional Accountants

April 5, 2016

Calgary, Canada

Consolidated Statement of Financial Position

December 31, 2015
$

December 31, 2014
$

Assets
Current assets
Cash and cash equivalents (note 6)
Restricted cash (note 13)

Trade and other receivables (note 7)

Deposits and prepaid expenses

Inventory (note 8)

Total current assets

Non-current assets

Property and equipment (note 9)
Intangible assets (note 10)
Inventory (note 8)

Total non-current assets

Total assets

Liabilities
Current liabilities

Trade payables and accrued liabilities (note 11)

Unearned revenue (note 12)

Loans and borrowings (note 13)
Finance lease obligations
Current tax liabilities (note 25)

Total current liabilities

Non-current liabilities
Unearned revenue (note 12)

Loans and borrowings (note 13)
Finance lease obligations
Provisions (note 15)

Total non-current liabilities

Total liabilities

Equity (deficiency)
Share capital (note 16)
Convertible debenture – equity feature (note 13)
Warrants (note 16)
Contributed surplus
Deficit

Total (deficiency)

Total liabilities and deficit

1,301,955
250,000
898,166
137,861
1,716,313

4,304,295

202,775
34,992
936,805

1,174,572

5,478,867

2,757,707
1,087,197
5,840,418
27,922
4,978

9,718,222

58,144
374,555
15,555
263,596

711,850

10,430,072

53,895,046
222,531
-
8,439,136
(67,507,918)

(4,951,205)

5,478,867

3,910,962
250,000
959,786
183,750
1,917,249

7,221,747

217,186
34,992
801,621

1,053,799

8,275,546

2,129,622
1,484,345
572,782
25,973
-

4,212,722

191,401
5,462,701
43,478
235,019

5,932,599

10,145,321

53,496,969
220,700
163,771
7,865,143
(63,616,358)

(1,869,775)

8,275,546

See accompanying notes to consolidated financial statements. Going concern (note 2d). Contingencies (note 28)

On behalf of the board

Director – Bill Tempany

Director – Paul Takalo

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Consolidated Statement of Comprehensive Income (Loss)

For the year ended December 31

Revenue (note 18)

Cost of sales

Gross profit

Distribution expenses (note 21)

Administration expenses (note 22)

Research, development and certification engineering expenses (note 23)

Results from operating activities

Finance (income) (note 24)

Finance costs (note 24)

Net finance costs

Loss before income tax

Income tax expense (note 25)

Loss for the period

Total comprehensive loss for the period

Loss per share

Basic and diluted loss per share (note 17)

See accompanying notes to consolidated financial statements.

2015
$

10,457,125

3,213,290

7,243,835

3,977,633

3,676,953

2,802,552

(3,213,303)

(239,375)

912,654

(673,279)

(3,886,582)

4,978

(3,891,560)

(0.02)

2014
$

6,882,028

2,550,051

4,331,977

3,392,991

3,548,518

777,749

(3,387,281)

(156,265)

1,047,815

(891,550)

(4,278,831)

(4,278,885)

(0.03)

Consolidated Statement of Changes in Equity (Deficiency)
For the years ended December 31, 2015 and 2014

Share
Capital
$

Convertible
Debenture
$

Warrants
$

Contributed
Surplus
$

Deficit
$

Total Equity
(Deficit)
$

Balance at December 31, 2014

Loss for the period

53,496,969
-

220,700
-

163,771
-

7,865,143
-

(63,616,358)
(3,891,560)

(1,869,775)
(3,891,560)

Total comprehensive loss
for the period

Contributions by and
distributions to owners

Issue of common shares
Issue of warrants

Share-based payment transactions
Share options exercised
Warrants exercised
Warrants expired

Total contributions by and
distributions to owners

(3,891,560)

62,000
-
-
183,920
152,157
-

1,831
-
-
-
-
-

-
154,001
-
-
(43,657)
(274,115)

(86,378)
-
442,676
(56,420)
-
274,115

398,077

1,831

(163,771)

573,993

-
-
-
-
-
-

(22,547)
154,001
442,676
127,500
108,500
-

810,130

Balance at December 31, 2015

53,895,046

222,531

8,439,136

(67,507,918)

(4,951,205)

Balance at December 31, 2013

Loss for the period

48,318,003
-

231,318
-

1,057,652
-

7,458,093
-

(59,337,473)
(4,278,885)

(2,272,407)
(4,278,885)

Total comprehensive loss
for the period

Contributions by and
distributions to owners

Issue of common shares

Share-based payment transactions
Share options exercised
Warrants exercised
Warrants expired

Total contributions by and
distributions to owners

(4,278,885)

58,000
-
1,008,573
4,112,393
-

(10,618)
-
-
-
-

-
-
-
(854,003)
(39,878)

93,531
588,589
(314,948)
-
39,878

5,178,966

(10,618)

(893,881)

407,050

-
-
-
-
-

140,913
588,589
693,625
3,258,390
-

4,681,517

Balance at December 31, 2014

53,496,969

220,700

163,771

7,865,143

(63,616,358)

(1,869,775)

See accompanying notes to consolidated financial statements.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Consolidated Statement of Cash Flows

For the year ended December 31

Cash flows used in operating activities

Loss for the period

Depreciation – property plant and equipment
Convertible debenture accretion
Payment of debenture interest

Amortization of debenture issue costs
Government grant accretion

Equity-settled share-based payment transactions

Change in inventories
Change in trade and other receivables
Change in prepayments
Change in trade and other payables
Change in provisions
Change in unearned revenue
Unrealized foreign exchange

Interest expense
Interest paid
Income tax expense
Income tax paid

Net cash used in operating activities

Cash used in investing activities
Acquisitions of property and equipment

Interest income
Interest received

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue and exercise of share options and warrants

Repayment of borrowings

Payment of finance lease liabilities

Net cash from financing activities

Net (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning

Effect of exchange rate fluctuations on cash held

Cash and cash equivalents, ending

See accompanying notes to consolidated financial statements.

2015
$

(3,891,560)
56,873
711,993
(496,633)
10,677
163,368
442,676
65,752
17,969
45,889
605,257
28,577
(530,405)
(218,991)
3,917
(3,917)
4,978
-

(2,983,580)

(42,462)
(2,128)
2,128

(42,462)

236,000
(78,462)
(25,974)

131,564

(2,894,478)

3,910,962

285,471

1,301,955

2014
$

(4,278,885)
65,322
784,404
(502,487)
88,530
149,001
588,589
(874,377)
(195,614)
(38,195)
(1,486,537)
86,591
571,912
(212,393)
3,885
(3,885)
54
(950)

(5,255,035)

(10,236)
(2,000)
2,000

(10,236)

3,952,015
(80,592)
(24,300)

3,847,123

(1,418,148)

5,184,803

144,307

3,910,962

Notes to the Consolidated Financial Statements

1. Reporting entity

FLYHT Aerospace Solutions Ltd. (the “Company” or “FLYHT”) was founded in 1998 under the name AeroMechanical Services Ltd. FLYHT is a public company
incorporated under the Canada Business Corporations Act, and is domiciled in Canada. The Company has been listed on the TSX Venture Exchange since March
2003, first as TSX.V: AMA and as TSX.V: FLY since 2012 and has been listed on the OTCQX marketplace since June 2014 as OTCQX: FLYLF. The Company’s head
office is located at 300E, 1144 – 29th Avenue NE, Calgary, Alberta T2E 7P1.

The consolidated financial statements of the Company as at and for the years ended December 31, 2015 and 2014 consist of the Company and its subsidiaries.

FLYHT is a designer and developer of products and software for, and a service provider to, the global aerospace industry. The Company supports aviation
customers in different sectors including commercial, business, leasing and military operators. FLYHT’s headquarters are located in Calgary, Canada with sales
representation in the United States, China, and the United Kingdom.

2. Basis of preparation

(a) Statement of compliance

These consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). These consolidated
financial statements were approved by the Board of Directors on April 5, 2016.

(b) Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for financial instruments at fair value through profit or loss, which
are measured at fair value in the statement of financial position (“SFP”).

These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency.

(d) Going concern

These consolidated financial statements have been prepared on the basis that the Company will continue to realize its assets and meet its obligations in
the ordinary course of business. As at December 31, 2015, the Company had negative working capital of $5,413,927, a deficit of $67,507,918, a net loss of
$3,891,560 and negative cash flow used in operating activities of $2,983,580 for the year.

The Company has incurred significant operating losses and negative cash flows from operations over the past years. The achievement of positive earnings
before interest and amortization is necessary before the Company can improve liquidity. The Company has continued to expand its cash flow potential through
its continued marketing drive to clients around the world. Management believes that the Company’s installation momentum, conversion of installations to
recurring revenue, new revenue streams, and ongoing sales will be sufficient to meet standard liquidity requirements going forward.

To continue as a going concern, the Company will need to attain profitability and/or obtain additional financing to fund ongoing operations. If:

• general economic conditions in the industry or the financial condition of a major customer deteriorates, or

• sufficient funds are not available to extinguish the debentures coming due in June 2016, or

• sufficient funds are not available, or debenture holders do not convert their debenture units to equity, when the debentures mature in December 2016;

then the Company may have to scale back operations to create positive cash flow from existing revenue and/or raise the necessary financing in the capital
markets. It is the Company’s intention to continue to fund operations by adding revenue and its resulting cash flow as well as continue to manage outgoing
cash flows. If the need arises due to market opportunities, the Company may meet those needs via the capital markets. These material uncertainties may cast
significant doubt upon the Company’s ability to continue as a going concern.

There is no assurance that the Company will be successful in attaining and sustaining profitable operations and cash flow or raising additional capital to meet
its working capital requirements. If the Company is unable to satisfy its working capital requirements from these sources, the Company’s ability to continue as
a going concern and to achieve its intended business objectives will be adversely affected. These consolidated financial statements do not reflect adjustments
that would otherwise be necessary if the going concern assumption was not valid, such as revaluation to liquidation values and reclassification of statement
of financial position items.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

2. Basis of preparation (Continued)

(e) Critical Accounting Estimates

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in Canada. The preparation of these
consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues,
and expenses. These estimates are based on management’s historical experiences and various other assumptions that are believed by management to be
reasonable under the circumstances. Such assumptions are evaluated on an ongoing basis and form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

The following are the Company’s critical accounting policies, significant estimates, and assumptions used in preparing our financial statements:

1. The Company maintains an allowance for doubtful accounts for estimated losses that may occur if customers are unable to pay trade balances owing to

the Company. This allowance is determined based on a review of specific customers, historical experience, and economic circumstances.

2. The Company evaluates its deferred tax assets at each reporting date and recognizes deferred tax assets to the extent that it is probable that future

taxable profits will be available against which they can be utilized. At December 31, 2015, no deferred tax assets were recognized.

3. The Company records amounts for warranty based on historical warranty data. A provision is recognized upon shipment of the underlying products.

4. Consideration received for installation kits is deferred as unearned revenue and corresponding expenses are recorded as work in progress until the system
is fully functional and customer acceptance has been obtained, at which time the full deferred amount is recognized in revenue along with the work in
progress as cost of sales. Revenue from Voice and data services is recognized at the end of each month and is based on actual usage during that month.

5. Revenue from the sale of Dragons, Underfloor Stowage Units and other parts is recognized when the unit is shipped, title is transferred, and collection
is reasonably assured. Certain customers have prepaid for products or services not yet delivered. These amounts are included in trade payables and
accrued liabilities on the Statement of Financial Position, and are recorded as revenue in the period in which such products or services are delivered.

6. Technical services are provided based upon orders and contracts with customers that include fixed or determinable prices that are based upon daily, hourly

or contracted rates. Revenue is recognized as services are rendered and when collectability is reasonably assured.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated annual financial statements including by
FLYHT’s subsidiaries.

(a) Basis of consolidation

(i) Business combinations

For acquisitions of businesses, the Company measures goodwill as the fair value of the consideration transferred including the recognized amount of any non-
controlling interest in the acquiree, less the net recognized amount (fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the
acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Company incurs in connection with a business combination
will be expensed as incurred.

(ii) Subsidiaries

Subsidiaries are entities controlled by FLYHT. The financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the
policies adopted by the Company.

These consolidated financial statements consolidate the accounts of FLYHT and its wholly owned subsidiaries, FLYHT Inc., AeroMechanical Services USA Inc.,
FLYHT Corp., FLYHT India Corp and TFM Inc. The latter four subsidiaries are inactive.

(iii) Transactions eliminated on consolidation

Intra-group balances, transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated
financial statements.

3. Significant accounting policies (Continued)

(b) Financial instruments

(i) Non-derivative financial assets

The Company initially recognizes loans, receivables and deposits on the date they are originated. All other financial assets (including assets designated at fair
value through profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the rights to receive the
contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.
Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal
right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially
at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses.

Loans and receivables comprise trade and other receivables, and cash and cash equivalents.

(ii) Non-derivative financial liabilities

The Company initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including
liabilities designated at fair value through profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual
provisions of the instrument.

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

The Company has the following non-derivative financial liabilities: debentures, trade payables and accrued liabilities, loans and borrowings, and finance lease
obligations.

These financial liabilities are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial
liabilities are measured at amortized cost using the effective interest rate method.

(iii) Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and share options are recognized as a deduction
from equity, net of any tax effects.

Warrants are classified as equity. Incremental costs directly attributable to the issue of warrants are recognized as a deduction from equity, net of any tax
effects.

The fair value of warrants is estimated using the Black-Scholes option pricing model.

(iv) Compound financial instruments

Compound financial instruments issued by the Company comprise convertible secured subordinate debentures that can be converted to common shares at the
option of the holder, and the number of shares to be issued does not vary with changes in their fair value.

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion
option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value
of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying
amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method.
The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest relating to the financial liability is recognized in profit or loss. On conversion, the financial liability is reclassified to equity and no gain or loss is recognized.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

3. Significant accounting policies (Continued)

Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes expenditures incurred in acquiring the inventories,
production or conversion costs, and other costs incurred in bringing them to their existing location and condition. The amount of inventory that is expected to be
recovered more than 12 months after the reporting date is presented as a non-current asset.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Any writedown
to net realizable value is recognized as an expense. Reversals of previous writedowns are recognized in profit or loss in the period when the reversal occurs.

AFIRS raw material inventories include general parts, which are held pending installation and sales to customers. The weighted average cost method is used.

AFIRS finished goods consists of AFIRS units that have been assembled or purchased and are held pending sale to customers. The weighted average cost
method is used to determine the carrying cost of purchased AFIRS units. The carrying cost of AFIRS units assembled by the Company includes AFIRS raw
material component costs plus a standard labour allocation. The weighted average cost method is used for components, while the labour component allocated
to each unit is valued using a standard cost.

Installations-in-progress includes product costs, and other direct project costs. When the system is fully functional, the installations-in-progress balance is
recognized as cost of sales to correspond with the full unearned revenue amount then recognized as revenue.

The production of Underfloor Stowage Units and Dragons is outsourced and the weighted average cost method is used.

(d) Property and equipment

(i) Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset including those that are directly attributable to bringing the asset to the
location and working condition for its intended use.

Software that is integral to the functionality of the related equipment is recognized as property and equipment, otherwise it is considered an intangible asset.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of
property and equipment. Net gains (losses) are recognized in profit or loss.

(ii) Subsequent costs

The cost of replacing a part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic
benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized.
The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.

(iii) Depreciation

Depreciation is calculated using the depreciable amount, which is the cost of an asset less its residual value. Depreciation is recognized in profit or loss at rates
calculated to write-off assets over their estimated useful lives since this most closely reflects the expected pattern of consumption of the future economic
benefits embodied in the assets.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership
by the end of the lease term.

The depreciation rates are as follows:

Computers

Software

Equipment

Leasehold improvements

30% declining balance

12 months straight line

20% declining balance

Term of lease (7 years)

Estimates of depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Any changes in these
estimates are accounted for prospectively.

3. Significant accounting policies (Continued)

(e) Research and development (“R&D”)

(i) Recognition and measurement

Expenditure on research activities is expensed as incurred.

R&D costs consist primarily of consulting expenses and parts related to the design, testing, and manufacture of Automated Flight Information Reporting System
(“AFIRSTM”) and the design and testing of all software systems and products (including UpTime, FLYHTASD, FLYHTMail, FLYHTStream and FLYHTFuel). Other
R&D costs include testing, patent application and certification.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is
capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalized includes
the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying
assets. Other development expenditure is recognized in profit or loss as incurred.

Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other
expenditures are recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated based on the asset’s cost less its residual value.

Estimates of amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Any changes in these
estimates are accounted for prospectively.

(f) Leased assets

Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased
asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the
asset is accounted for according to the accounting policy applicable to that asset. Other leases are operating leases and the Company does not recognize the
leased assets in its statement of financial position. Initial direct costs for operating leases are expensed immediately.

As a lessee, FLYHT has several finance leases for computer hardware and leasehold improvements.

As a lessee, FLYHT has an operating lease for its premises.

(g) Intangible assets

Intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment
losses.

Acquired intangible assets with indefinite useful lives are stated at cost and are not amortized.

The license with Bombardier that allows FLYHT access to technical documents has an indefinite life and is not amortized. The Company presently has dealings
with Bombardier and sees no end to that relationship.

An intangible asset is derecognized on disposal or when no future economic benefits are expected from its use or disposal.

(h) Government assistance

(i) Government grants

Government grants related to qualifying research expenditures are recognized in profit or loss to match the costs that they are intended to compensate when
there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant.

(ii) Government loans

Low-interest or interest-free government loans are measured initially at their fair value and interest is imputed on the loan in subsequent periods. The benefit
of the below-market interest rate is measured as the difference between the fair value of the loan on initial recognition and the amount received. This benefit
is accounted for according to the type of grant.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

3. Significant accounting policies (Continued)

(i) Lease payments

(i) Operating lease payments

Payments made under operating leases are recognized in profit or loss on an accrual basis over the term of the lease. Initial direct costs for operating leases
are immediately expensed.

(ii) Finance lease payments

Minimum lease payments made under finance leases are apportioned between finance costs and a reduction of the outstanding liability. The finance cost is
allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(j) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is
recognized as finance cost.

(i) Warranties

The Company warrants that the AFIRS products shall be free of defects during the term of each agreement. Also, FLYHT warrants that it will deliver all data
services required by the customer accurately and on-time. A provision for warranties is recognized when the underlying products or services are sold. The
provision is based on historical warranty data.

(k) Impairment

(i) Financial assets (including receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is
impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss
event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms
that the Company would not consider otherwise, or indications that a debtor will enter bankruptcy.

The Company assesses impairment of each customer’s receivable balance by analyzing historical trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely
to be greater or less than suggested by historical trends.

An impairment loss regarding a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value
of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance
account against receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes
the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

(ii) Non-financial assets

The carrying amounts of the Company’s non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For intangible assets that have indefinite useful lives,
the recoverable amount is estimated at year end. The Company’s non-financial assets that are subject to impairment include: property and equipment and
intangible assets.

The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. Fair value less costs to sell is assessed on an asset by asset basis at the point in time when a sale may be probable.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”, or “CGU”). The
Company’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable
amount is determined for the CGU to which the corporate asset belongs.

3. Significant accounting policies (Continued)

(ii) Non-financial assets (Continued)

An impairment loss is recognized in profit or loss if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses
are allocated to reduce the carrying amounts of the assets in the CGU on a pro rata basis.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no
impairment loss been recognized.

(l) Revenue

(i) AFIRS sales

AFIRS fees from service agreements are deferred as revenue and corresponding expenses are recorded as an asset (installations in progress). Once the system
(including the AFIRS unit and installation kit) is fully functional and accepted by the customer, the full deferred amount is recognized in revenue along with
the installations in progress as cost of sales. Revenue from the sale of Dragons is recognized when the unit is shipped, title is transferred, and collection is
reasonably assured.

(ii) Voice and data services

Revenue from Voice and data services is recognized at the end of each month and is based on actual usage during that month.

(iii) Parts sales

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable. Revenue is recognized when persuasive evidence
exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of
the consideration is probable, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.

Revenue from the sale of Underfloor Stowage Units is recognized when the unit is shipped, title is transferred, and collection is reasonably assured.

(iv) Services

Technical services are provided based on orders and contracts with customers that include fixed or determinable prices that are based on daily, hourly, or
contracted rates. Revenue is recognized in proportion to the stage of completion of the transaction at the reporting date.

(v) Other income

License fees and royalties paid for the use of FLYHT’s assets (i.e., trademarks, patents, and software) are recognized on an accrual basis.

(m) Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

The Company follows accrual accounting for wages, salaries, commissions and variable compensation payments. The commission policy outlines how
commissions are calculated and when payment is made to employees.

(ii) Share-based payment transactions

The grant date fair value of share-based payment awards granted to employees is recognized as an expense, with a corresponding increase in equity, over the
period that the employees unconditionally become entitled to the awards.

Share-based payment transactions are equity-settled. Share options granted to directors and employees are measured using the fair value of the equity
instruments granted at the grant date, which is determined using the Black-Scholes option pricing model.

If options are promised to an employee before the grant date, the Company recognizes the expense at the service commencement date based on fair value.
Once the grant date is established, the earlier estimate is revised so that the expense is recognized based on the actual grant date fair value.

FLYHT estimates the expected forfeiture rate at the option grant date and updates the estimate over time as new information becomes available. Forfeitures
may occur if the employee’s relationship with the Company is terminated prior to expiry.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

3. Significant accounting policies (Continued)

(n) Share-based payment transactions to non-employees

(i) Stock options granted to consultants

The Company grants stock options to consultants. These share-based payment transactions are equity-settled. Transactions with non-employees are measured
based on the fair value of the goods or services received, at the receipt date. Fair value is measured at the date the Company obtains the goods or the
counterparty renders service.

FLYHT estimates the expected forfeiture rate at the option grant date and updates the estimate over time as new information becomes available. Forfeitures
may occur if consultants do not fulfill their obligations before the options vest, or if the consultant’s relationship with the Company is terminated prior to expiry.

(ii) Agent warrants

When the Company issues common shares, warrants, and debentures through brokered private placements, agent warrants are issued to the agents as
consideration for their services.

Warrants are classified as equity. Incremental costs directly attributable to the issue of warrants are recognized as a deduction from equity, net of any tax
effects.

The fair value of warrants is estimated using the Black-Scholes option pricing model.

(o) Finance income and finance costs

Finance income comprises interest income which is recognized as it accrues in profit or loss, using the effective interest method. The Company earns income
on its cash and cash equivalents (bank deposits) and its restricted cash (Guaranteed Investment Certificates).

Finance costs comprise interest expense and accretion on borrowings, and unwinding of the discount on provisions and are recognized in profit or loss using
the effective interest method.

Foreign currency gains and losses are reported on a net basis, as either finance income or finance costs.

(p) Foreign currency

(i) Foreign currency transactions

Foreign currency transactions are translated to Canadian dollars at the exchange rate in effect on the transaction date. Foreign currency denominated monetary
assets and liabilities at each reporting date are retranslated to the functional currency at the exchange rate in effect on that date. The foreign currency gain or
loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and
payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate in effect on the date of the
transaction.

Foreign currency differences arising on retranslation are recognized in profit or loss.

(ii) Foreign operations

The assets and liabilities of foreign operations are translated to Canadian dollars at exchange rates in effect at the reporting date. The income and expenses of
foreign operations are translated to Canadian dollars at exchange rates in effect on the transaction dates.

Foreign currency differences are recognized in other comprehensive income in the cumulative translation account.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned
nor likely to occur in the foreseeable future and which, in substance, is considered to form part of the net investment in the foreign operation, are recognized in
other comprehensive income in the cumulative amount of foreign currency translation differences.

3. Significant accounting policies (Continued)

(q) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a
business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities
in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in
subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to
settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable
profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.

When a taxable temporary difference arises from the initial recognition of the equity component separately from the liability component of a compound
financial instrument, the resulting deferred tax liability is charged directly to the carrying amount of the equity component.

(r) Earnings per share

The Company presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable
to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined each
period by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding, for the effects of
all dilutive potential common shares, which comprise debentures, convertible debentures, share options, and warrants.

4. New standards and interpretations not yet adopted

The following new accounting pronouncements have been issued but are not effective and may have an impact on the Company. All of the following new or
revised standards permit early adoption with transitional arrangements depending upon the date of initial application:

IFRS 15 – Revenue from Contracts with Customers replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes,
IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers, and SIC 31 Revenue – Barter Transactions Involving
Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point
in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is
recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new
standard applies to contracts with customers. It does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of
other IFRSs (January 1, 2017).

IFRS 16 – Leases replaces IAS 17, Leases. Under the new standard, more leases may come on-balance sheet for lessees, with the exception of leases with
a term not greater than 12 months and leases considered to be of small value (January 1, 2019).

The Company has not completed its evaluation of the effect of adopting these standards on its consolidated annual financial statements.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

5. Determination of fair values

A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.
Fair values have been determined for measurement and/or disclosure purposes based on the following methods.

(a) Share based payment transactions: measured using the Black-Scholes option pricing model;

(b) Loans and borrowings: for measurement purposes, fair value is calculated based on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the inception of the loan. In respect of the liability component of convertible debenture, the market rate of
interest is determined by reference to similar liabilities that do not have a conversion feature. In respect of the convertible debentures and the
debentures, as there has been no material change in the Company’s market rate subsequent to the issuance dates, carrying value approximates fair
value; and

(c) Trade and other receivables, trade payables and accrued liabilities: carrying value approximates fair value, due to the short-term nature of the

instruments.

6. Cash and cash equivalents

Cash and cash equivalents consist of cash balances and bank deposits with an original maturity of three months or less.

7. Trade and other receivables

Trade receivables

Non-trade receivables and accrued receivables

Total

December 31, 2015

December 31, 2014

874,112

24,054

898,166

944,835

14,951

959,786

Non-trade receivables consist of earned interest income receivable, input tax credits, and government grants receivable. The Company’s exposure to credit and
currency risks is disclosed in note 26.

8. Inventory

AFIRS raw materials

AFIRS finished goods

Installations in progress

Balance

Less current portion

Non-current portion

December 31, 2015

December 31, 2014

946,082

1,047,415

659,621

2,653,118

(1,716,313)

936,805

951,269

752,333

1,015,268

2,718,870

(1,917,249)

801,621

In 2015, AFIRS raw materials and changes in AFIRS finished goods units and installations in progress recognized as cost of sales amounted to $2,289,676 (2014:
$1,521,962). Included in this amount was a write down of inventories amounting to $66,196 in 2015 (2014: $203,618) resulting from a review of slow moving
inventory parts. All inventories are pledged as security for the bank loan and debentures.

9. Property and equipment

2015

Cost

Balance at January 1

Additions

Balance at December 31

Accumulated Depreciation

Balance at January 1

Depreciation for the year

Balance at December 31

Carrying Amounts

At January 1

At December 31

2014

Cost

Balance at January 1

Additions

Disposals

Balance at December 31

Accumulated Depreciation

Balance at January 1

Depreciation for the year

Disposals

Balance at December 31

Carrying Amounts

At January 1

At December 31

Computers
and Software
$

491,800

19,111

510,911

385,118

35,261

420,379

106,682

90,532

Computers
and Software
$

898,919

73,523

(480,642)

491,800

803,805

36,088

(454,775)

385,118

95,114

106,682

Equipment

242,019

23,351

265,370

169,570

15,309

184,879

72,449

80,491

Equipment

230,297

36,722

(25,000)

242,019

172,021

18,984

(21,435)

169,570

58,276

72,449

Leasehold
improvements
$

44,121

6,066

6,303

12,369

38,055

31,752

Leasehold
improvements
$

166,972

10,000

(132,851)

44,121

128,667

10,250

(132,851)

6,066

38,305

38,055

Total

777,940

42,462

820,402

560,754

56,873

617,627

217,186

202,775

Total

1,296,188

120,245

(638,493)

777,940

1,104,493

65,322

(609,061)

560,754

191,695

217,186

The Company leases equipment under several finance lease agreements. Certain leases provide FLYHT with the option to purchase the equipment at the end
of the lease term. At December 31, 2015, the net carrying amount of leased property and equipment was $52,704 (2014: $89,612).

As of December 31, 2015, all property and equipment is pledged as security for the bank loan and debentures (note 13).

FLYHT did not enter into any new lease agreements in 2015.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

10. Intangible assets

The intangible asset balance of $34,992 at December 31, 2015 (December 31, 2014: $34,992) is the value of the license with Bombardier that allows FLYHT
access to technical documents. It has an indefinite life, is not amortized, and is tested for impairment annually. The Company presently has dealings with
Bombardier and forsees no end to that relationship.

All intangible assets are pledged as security for the bank loan and debentures.

11. Trade payables and accrued liabilities

Trade payables

Non-refundable customer deposits

Compensation and statutory deductions

Accrued liabilities

Total

December 31, 2015

December 31, 2014

1,037,011

1,020,675

570,659

129,362

2,757,707

650,712

790,405

516,881

171,624

2,129,622

Compensation and statutory deductions include accrued vacation pay, variable compensation, and statutory payroll deductions.

12. Unearned revenue

Unearned revenue classified as current consists of sales type agreements revenue that will be recognized when the AFIRS Solution is fully functional and
expected to be recognized as income in the next year.

All amounts recorded in unearned revenue are non-refundable.

December 31, 2015

December 31, 2014

Balance January 1

AFIRS sales: shipped

AFIRS sales: revenue recognized

Voice and data services: prepaid

Voice and data services: revenue recognized

Balance December 31

Less current portion

Non-current portion

1,675,746

2,597,785

(3,131,261)

19,033

(15,962)

1,145,341

1,087,197

58,144

1,103,834

2,727,911

(2,146,871)

92,084

(101,212)

1,675,746

1,484,345

191,401

13. Loans and borrowings

Bank loan

The Company currently has no bank debt and has available to it an operating demand loan up to a maximum of $250,000 (2014: $250,000). The operating
loan bears interest at Canadian chartered bank prime plus 1.5%. The operating demand loan is secured by an assignment of cash collateral in the amount
of $250,000 and a general security agreement including a first ranking security interest in all personal property. The amount of the cash collateral has been
disclosed as restricted cash. As at December 31, 2015 and 2014, the facility had not been drawn.

Government loans

The Technology Partnerships Canada (“TPC”) loan was non-interest bearing and unsecured. The loan was repayable annually, based on 15% of the initial
contribution when the Company achieved more than 10% growth in gross revenues above the previous year’s gross revenue and the gross revenue for the year
is greater than the base amount. The base amount is defined as the Company’s gross revenue in fiscal 2004, which was at $556,127. The obligation under TPC
was fulfilled in 2015.

Under SADI, the Company has, at December 31, 2015, an outstanding repayable balance of $1,820,816, compared to $1,967,507 at December 31, 2014. The
amount is repayable over 15 years on a stepped basis commencing April 30, 2014. The initial payment on April 30, 2014 was 3.5% of the total contribution
received and the payment increases yearly by 15% until April 30, 2028 when the final payment is 24.5% of the total contribution received. A summary of the
SADI loan carrying value as at December 31, 2015 and 2014 and changes during these years is presented below.

Balance January 1

Interest accretion

Repayment

Balance December 31

Less current portion

Non-current portion

2015

899,600

163,369

(78,462)

984,507

90,234

894,273

A summary of the SADI outstanding payable balance as at December 31, 2015 and 2014 and changes during these years is presented below.

Balance January 1

Repayment

Balance December 31

Convertible debentures

2015

1,899,278

(78,462)

1,820,816

2014

818,828

149,001

(68,229)

899,600

78,462

821,138

2014

1,967,507

(68,229)

1,899,278

The debenture issued December 23, 2010 originally had a face value of $3,159,000 and was set to mature on December 23, 2014. The fair value of the conversion
feature was determined at the time of issue as the difference between the principal value of the debentures and the discounted cash flows assuming an 18%
rate. The conversion feature was classified as equity and had an original value of $231,318 based on an exercise price of $0.40. The associated debenture
warrants had an exercise price of $0.75, were exercisable by December 23, 2014, and had an original carrying value of $163,771.

On December 22, 2014 approval was received to extend the maturity date of the debenture from four to six years. The debentures were convertible into
common shares at a conversion rate of $0.40 per share at any time up to December 23, 2015. The associated debenture warrants were also extended to
December 23, 2015.

On December 15, 2015 approval was received to lower the warrant exercise price to $0.20, extend the conversion feature to December 23, 2016, and lower the
conversion price to $0.25.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

13. Loans and borrowings (Continued)

Convertible debentures (Continued)

The debenture has a face value of $3,039,000 as at December 31, 2015 (December 31, 2014: $3,101,000). The conversion feature has a carrying value of
$222,531 as at December 31, 2015 (December 31, 2014: $220,700). The debenture warrants have a carrying value of nil as at December 31, 2015 (December
31, 2014: $163,771), as they expired on December 23, 2015.

The debentures are secured against all personal property of the Company, with the exception of the Company’s intellectual property, and are subordinated
in right of payment to all existing and future bank and/or governmental indebtedness of the Company. If the debentures are converted to shares, a portion of
the value of the conversion feature recognized in shareholders’ equity will be classified to share capital along with the conversion price paid. The debenture
continues to bear interest at a rate of 8% per annum, accrued and paid annually in arrears commencing December 31, 2011.

Redeemable debentures

In two tranches on April 18 and May 28, 2013, the Company issued an aggregate $2,110,000 of debentures in a debt offering. The debentures mature on June
30, 2016 and bear interest at a rate of 12% per annum on the contributed amounts, which shall be accrued and paid annually in arrears commencing December 1,
2013. Purchasers of debentures received a capital discount premium of 10% on the financing, meaning that for every $1.00 debenture acquired, FLYHT shall owe,
on the maturity date, principal equal to $1.10 to the debenture holder. The purchasers of the debentures were also issued one common share of the Corporation
for every $1.00 principal amount of debentures acquired pursuant to the offering. A total of 2,110,000 common shares were issued under these tranches. All
of the securities issued thereunder were subject to a 4-month hold period. The debentures are not listed on any stock exchange and are not convertible into
common shares. The debentures are secured against all personal property of FLYHT, including FLYHT’s intellectual property and are subordinated in right of
payment to all existing and future secured bank and/or governmental indebtedness of FLYHT and any existing security already registered against FLYHT’s
assets. The fair value of the debenture was determined at the time of issue as the difference between the principal value of the debentures and the discounted
cash flows assuming an 18% rate.

TPC

SADI

Debenture payable

Convertible debenture payable

Balance December

Less current portion

Non-current portion

14. Operating leases

Operating lease rentals are payable as follows:

2015

984,507

2,269,545

2,960,921

6,214,973

(5,840,418)

374,555

2014

899,601

2,128,842

3,007,040

6,035,483

(572,782)

5,462,701

Premises $

410,750

433,419

437,952

2016

2017

2018

2019

2020

2021

72,992

Total

2,231,017

15. Provisions

Product warranty - non-current provision

Balance January 1

Provision made during the period

Provision used during the period

Balance December 31

2015
$

235,019

72,735

(44,158)

263,596

2014
$

148,428

157,942

(71,351)

235,019

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data.

16. Capital and other components of equity

Share capital

Authorized:

Unlimited numbers of common shares, and classes A, B and C preferred shares, issuable in series, having no par value.

The preferred shares may be issued in one or more series. The directors are authorized to fix the number of shares in each series and to determine the
designation, rights, privileges, restrictions and conditions attached to the shares in each series.

Issued and outstanding:

Common shares:

Balance January 1, 2014

Exercise of employee options

Exercise of warrants

Debenture conversions

Balance December 31, 2014

Exercise of employee options

Exercise of warrants

Debenture conversions

Balance December 31, 2015

Number of
Shares

158,817,268

2,774,500

10,443,367

145,000

172,180,135

600,000

542,500

155,000

173,477,635

Value
$

48,318,003

1,008,573

4,112,393

58,000

53,496,969

183,920

152,157

62,000

53,895,046

In 2015 warrant and option exercises together with convertible debenture conversions resulted in the Company issuing a total of 1,297,500 shares for total
proceeds of $236,000, including:

e) 542,500 warrants were exercised at $0.20 per share for proceeds of $108,500

f) 100,000 options were exercised at $0.25 per share for proceeds of $25,000

g) 500,000 options were exercised at $0.205 per share for proceeds of $102,500

h) 155,000 convertible debentures were converted at $0.40 per share

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

16. Capital and other components of equity (Continued)

Stock option plan

The Company grants stock options to its directors, officers, employees and consultants.

In the second quarter of 2015 the Company granted 2,803,050 stock options to employees, officers and directors under the stock option plan. The stock options
will expire December 31, 2018, and have an exercise price of $0.25 per share.

In the third quarter of 2015 the Company granted a total of 475,000 stock options to one officer and two employees under the stock option plan. The stock
options will expire December 31, 2018 and have an exercise price of $0.165 per share.

In the fourth quarter of 2015 the Company granted a total of 500,000 options exercisable at a price of $0.205 per share to an officer of the Company under
the stock option plan. 100,000 of the stock options expired on December 31, 2015 with 100,000 additional stock options expiring on December 31 of each
subsequent year (the last 100,000 stock options expiring on December 31, 2019).

The Company has a policy of reserving up to 10% of the outstanding common shares for issuance to eligible participants. As at December 31, 2015, there were
17,347,764 (2014: 17,218,014) common shares reserved for this purpose.

All outstanding options vested immediately at the grant date and were granted at an exercise price not less than fair market value of the stock on the date of
issuance. No options remained unvested as at December 31, 2015 and 2014.

A summary of the Company’s outstanding and exercisable stock options as at December 31, 2015 and 2014 and changes during these years is presented below.

2015

Number of
options

7,802,250
3,778,050
(600,000)
(2,244,000)
8,736,300
8,736,300

Weighted average
exercise price
$
0.34
0.23
0.23
0.27
0.32
0.32

2014

Number of options

7,472,500
3,230,750
(2,774,500)
(126,500)
7,802,250
7,802,250

Weighted average
exercise price
$
0.27
0.41
0.25
0.30
0.34
0.34

Outstanding, January 1
Options granted
Options exercised
Options expired
Outstanding, December 31
Exercisable, December 31

Weighted average life remaining for the options outstanding and exercisable is 2.0 years. The exercise prices for options outstanding at December 31, 2015
were as follows:

Exercise price:

$0.165
$0.250
$0.250
$0.400
$0.420
$0.450
$0.530
Total

All options

Exercisable options

Number

475,000
1,807,500
2,716,050
2,337,750
50,000
1,200,000
150,000
8,736,300

Weighted average remaining
contractual life (years)
3.0
1.0
3.0
2.0
2.0
1.0
2.0
2.0

Number

475,000
1,807,500
2,716,050
2,337,750
50,000
1,200,000
150,000
8,736,300

Weighted average remaining
contractual life (years)
3.0
1.0
3.0
2.0
2.0
1.0
2.0
2.0

16. Capital and other components of equity (Continued)

The weighted average fair value of the options granted during the year that were valued using the Black-Scholes option pricing model was $0.12 (2014: $0.20).
The fair value of the options granted and valued using the Black-Scholes option pricing model were valued with the following weighted average assumptions:

Risk-free interest rate
Expected life (years)
Volatility in the price of the Company’s common shares
Dividend yield rate

Warrants

Outstanding January 1, 2014

Warrants exercised

Warrants expired

Outstanding December 31, 2014

Warrants extended

Warrants exercised

Warrants expired

Outstanding December 31, 2015

17. Earnings per share

Basic earnings per share

Number

14,711,867

(10,443,367)

(319,750)

3,948,750

(542,500)

(3,406,250)

2015
0.75%
3.37
76%
0.00%

Weighted average

exercise price

0.23

0.31

0.30

0.75

0.20

2014
1.48%
3.69
74%
0.00%

Value

1,057,652

(854,003)

(39,878)

163,771

154,001

(43,657)

(274,115)

The calculation of basic and diluted earnings per share for the year ended December 31, 2015 was based on a weighted average number of common shares
outstanding of 172,423,488 (2014: 166,441,119). The calculation of diluted earnings per share did not include stock options of 8,736,300 (2014: 7,802,250), nil
warrants (2014: 3,948,750) and convertible debentures of 7,597,500 (2014: 7,390,000) because they would be anti-dilutive.

18. Revenue

Voice and data services

AFIRS sales

Parts sales

Services

Total

2015

3,986,813

3,372,421

2,932,100

165,791

10,457,125

2014

3,657,300

2,054,251

718,567

451,910

6,882,028

Voice and data services include fees for communications usage. AFIRS sales includes revenue from AFIRS and Dragon hardware sales along with the parts
required to install the unit. Parts sales includes spare AFIRS units, spare installation kit parts, L-3 AR revenue and Underfloor Stowage Units. Services include
technical, repair and installation support services.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

19. Operating segments

The Company has one operating segment.

Geographical Information

The following revenue is based on the geographical location of customers.

North America

South / Central America

Africa / Middle East

Europe

Australasia

Asia

Total

2015
$

5,754,913

266,203

1,432,230

542,037

694,992

1,766,750

10,457,125

2014
$

3,321,408

304,449

1,194,644

317,112

658,366

1,086,049

6,882,028

All non-current assets (property and equipment and intangible assets) reside in Canada.

Major customers

Revenues from the three largest customers represent approximately 42.9% of the Company’s total revenues for the year ended December 31, 2015 (2014: 30.9%).

21. Distribution expenses

Salaries and benefits

Stock based compensation

Contract labour

Office

Travel

Equipment & maintenance

Depreciation

Marketing

Other

Total

2015
$

1,983,579

91,658

829,298

328,855

472,078

40,216

29,840

100,169

101,940

3,977,633

2014
$

1,652,340

84,971

354,320

275,427

449,215

22,180

26,910

55,610

472,018

3,392,991

22. Administration expenses

Salaries and benefits
Stock based compensation
Contract labour
Office
Legal fees
Audit and accounting
Investor relations
Brokerage, stock exchange, and transfer agent fees
Travel
Equipment and maintenance
Depreciation
Other
Total

23. Research and development expenses

To date, all development costs have been expensed as incurred.

Salaries and benefits
Stock based compensation
Contract labour
Office
Travel
Equipment and maintenance
Components
SRED tax credit
Depreciation
Other
SNC litigation settlement

Total

2015
$
1,972,362
276,008
153,594
257,614
160,360
85,840
399,619
59,544
211,307
64,138
10,098
26,469
3,676,953

2015
$
1,964,388
75,011
595,821
197,618
52,143
65,038
27,877
(216,708)
16,936
24,428
-

2,802,552

2014
$
,468,711
417,278
245,678
276,983
151,566
141,438
372,423
74,066
215,660
98,438
15,217
71,060
3,548,518

2014
$
1,874,482
86,341
538,874
288,686
37,882
56,555
52,308
(241,677)
23,195
12,060
(1,950,957)

777,749

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

24. Finance income and finance costs

Interest income on bank deposits

Net foreign exchange gain

Finance income

Bank service charges

Interest expense

Government grant interest expense

Debenture interest expense and accretion

Debenture issuance cost amortization

Finance costs

25. Income tax expense

Current Tax Expense

Current income tax expense

Deferred income tax expense

Deferred Tax Expense

Unrecognized deferred tax assets

2015
$

4,978

2014
$

Deferred tax assets have not been recognized in respect to the following items:

Capital assets

Intangibles

Inventory

Non-capital loss carry-forwards

Share issue costs

Scientific research and experimental development expenditures

2015
$

2,128

237,247

239,375

22,699

3,917

163,368

711,993

10,677

912,654

2015

145,562

77,332

2,162

12,071,922

20,598

7,535,586

19,853,162

2014
$

2,000

154,265

156,265

21,995

3,885

149,001

784,404

88,530

1,047,815

2014

180,622

107,370

2,342

10,643,137

52,432

6,735,345

17,721,248

The Company has non-capital losses for income tax purposes of approximately $40,996,307 which are available to be applied against future year’s taxable
income. The benefit of these non-capital losses has not been recognized in the consolidated financial statements because it is not probable that future taxable
profit will be available against which FLYHT can use the benefits. These losses will expire as follows:

Amount
$
2,461,959
3,390,309
5,596,948
6,997,140
2,791,748
6,596,636
4,351,802
2,313,255
1,464,723
1,890,509
3,141,308
40,996,307

25. Income tax expense (Continued)

Year

2015
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Total

Reconciliation of effective tax rate

Loss for the period

Total income tax expense

Loss excluding income tax

Tax Rate

Expected income tax recovery

True up from prior year

Change in rate and other

Non-deductible expenses

Stock based compensation

Change in unrecognized temporary differences

26. Financial risk management

2015
$

(3,896,538)

4,978

(3,891,560)

26.0%

(1,011,806)

(1,241,807)

11,582

115,096

2,131,913

4,978

2014
$

(4,278,885)

(4,278,831)

25.0%

(1,069,708)

(636,299)

200,624

147,147

1,358,290

The Company’s operating activities expose it to a variety of financial risks, including credit, liquidity and market risks associated with the Company’s financial
assets and liabilities. FLYHT has established procedures and policies to minimize its exposure to these risks, and continually monitors its exposure to all
significant risks to assess the impact on its operating activities. The following details the Company’s exposure to credit, liquidity, currency, and other market
risks.

Credit risk

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Management considers the demographics of
the Company’s customer base, including the default risk of the industry and country in which customers operate. Approximately 28.5% (2014: 13.1%) of the
Company’s 2015 revenue is attributable to transactions with a single customer; however, geographically there is no concentration of credit risk.

Each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered.
Customers that fail to meet the Company’s benchmark creditworthiness may transact with FLYHT only on a prepayment basis. The AFIRS Solution is subject
to a retention of title clause, so that in the event of non-payment the Company will have a secured claim. To further minimize credit exposure, the sale of most
AFIRS Solutions requires payment in advance of any product shipment. At each reporting date, the Company establishes an allowance for impairment that
represents its estimate of incurred losses.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

26. Financial risk management (Continued)

The aging of receivables at the reporting date was:

December 31, 2015

Accounts receivable

Impairment

Net receivable

December 31, 2014

Accounts receivable

Impairment

Net receivable

0-30 days
$

865,067

0-30 days
$

646,795

(37,747)

609,048

31-60 days
$

39,128

31-60 days
$

326,522

(37,728)

288,794

61-90 days
$

(5,953)

61-90 days
$

107,106

(37,731)

69,375

91+ days
$

537,393

(537,469)

(76)

91+ days
$

271,218

(278,649)

(7,431)

Total
$

1,435,635

(537,469)

898,166

Total
$

1,351,641

(391,855)

959,786

The Company believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on historic payment behavior.

The movement in the allowance for impairment in respect of trade and other receivables for the years ended December 31, 2015 and 2014 was:

Balance, January 1

Provision

Amounts written off

Impairments recovered

Balance, December 31

Liquidity risk

2015
$

391,855

165,164

(19,550)

537,469

2014
$

198,007

409,478

(203,651)

(11,979)

391,855

The Company’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, without incurring
unacceptable losses or risking damage to the Company’s reputation. The Company manages its liquidity risks by having cash available, by maintaining a
conservative capital structure, by prudently managing its credit risks, and by maintaining its relationship with the capital markets to meet any near-term liquidity
requirements.

The following table details the contractual maturities of financial liabilities, including estimated interest payments.

December 31, 2015

Accounts payable

Compensation and statutory deductions

Finance lease liabilities

Accrued liabilities

Loans and borrowings

Total

< 2 months
$

1,034,319

84,525

4,970

39,215

1,163,029

2-12 months
$

1-2 years
$

2,692

270,134

24,849

61,650

5,840,418

6,199,743

108,000

15,794

9,715

103,768

237,277

2-5 years
$

108,000

18,782

414,386

541,168

> 5 years
$

1,212,427

Total
$

1,037,011

570,659

45,613

129,362

7,570,999

9,353,644

26. Financial risk management (Continued)

December 31, 2014

Accounts payable

Compensation and statutory deductions

Finance lease liabilities

Accrued liabilities

Loans and borrowings

Total

Currency risk

< 2 months
$

2-12 months
$

1-2 years
$

2-5 years
$

> 5 years
$

638,598

406,298

4,970

43,641

1,093,507

12,114

110,584

24,849

115,030

585,146

847,723

29,818

5,819,600

5,849,418

15,794

12,953

360,335

389,082

1,370,267

Total
$

650,712

516,882

75,431

171,624

8,135,348

9,549,997

A significant portion of the Company’s revenues and a portion of its expenses are denominated in U.S. dollars. Management estimates that a 1% weakening
of the Canadian dollar relative to the U.S. dollar would increase net earnings by approximately $102,932 (2014: $65,743) and a strengthening of the Canadian
dollar would decrease net earnings by approximately $102,932 (2014: $65,743).

The Company mitigates its currency exposures by the international nature of the business where a portion of its cost of goods sold are in currencies that
naturally hedge a portion of U.S. dollar revenue. The Company has not engaged in activities to manage its cash flow foreign currency exposure through the use
of financial instruments.

The Company has exposure to foreign exchange risk for working capital items denominated in U.S. dollars. At December 31, 2015, working capital denominated
in U.S. dollars was approximately positive $90,053 (2014: positive $3,109,586). As a result a 1% weakening of the Canadian dollar would increase net earnings
by approximately $901 (2014: $31,096) and a strengthening of the Canadian dollar would decrease net earnings by approximately $901 (2014: $31,096).

The Company mitigates its working capital exposure by managing its U.S. dollar denominated working capital items to limit the requirement to convert either
to or from U.S. dollars to fulfill working capital payment requirements.

Although there are limited expenses under contracts denominated in EUR and GBP, fluctuations in these currencies would result in insignificant foreign
exchange variances. In respect of other monetary assets and liabilities denominated in foreign currencies, the Company ensures that its net exposure is kept to
an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

Interest rate risk

Borrowings issued at variable rates result in exposure to interest rate risk, which would affect future cash flows if interest rates were to rise. Fluctuations in
the prime interest rate could result in exposure for the Company with regards to the bank credit facility, which bears interest at Canadian chartered bank prime
plus 1.5%. The Company’s exposure to interest rate risk as at December 31, 2015 and 2014 was minimal as the credit facility had not been drawn.

Market risk

Market risk is the risk that changes in market conditions, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or
the value of its financial instruments. The Company’s objective in managing market risk is to manage and control exposure, while optimizing return.

Fair values versus carrying amounts

The fair values of financial assets and liabilities approximate carrying values.

Capital management

FLYHT’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern. In order to maintain or adjust the capital
structure, the Company may issue new debt, sell assets to reduce debt, or issue new shares. There were no changes in the Company’s approach to capital
management during the year.

27. Related parties

(a) Throughout 2014, the Company engaged in transactions with a company owned by a former director to supply consulting services in promoting the
Company’s product as a preferred solution for enhanced aircraft tracking and triggered data transmission. No similar services were contracted during
2015.

(b) In the third and fourth quarters of 2015, the Company entered into an agreement with a company with ownership that is related to an officer of FLYHT.
The company supplied consulting services in recruitment and supplied a contract resource to develop tools used to enhance the Company’s ground based
software.

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

Included in contract labour:

Included in accounts payable and accrued liabilities:

For the three months ended
December 31

For the year ended
December 31

2015
$

30,114

2014
$

5,621

2015
$

41,114

2014
$

74,418

(a)

(b)

Total

December 31

2015
$

30,114

2014
$

All of the transactions with the related parties were at exchange amounts that approximated fair value. All other transactions with related parties were normal
business transactions related to employee and director positions within the Company. These transactions included expense reimbursements for business travel
and expenses paid by the related party, and were measured at exchange amounts paid to a third party as substantiated with a third party receipt.

Transactions with key management personnel

Key management personnel includes all persons with direct or indirect authority and responsibility for planning, directing and controlling the activities of the
Company, and includes directors and the FLYHT executive team.

In addition to salary and variable compensation, the Company also provides non-cash benefits to key management personnel. Certain executive officers are
entitled to a mutual term of notice of six months.

Compensation for this group comprised:

Salary
Director fees
Variable compensation
Retiring allowance
Share-based payments
Short-term employee benefits

Total

Directors of the Company control 2.6% (2014: 4.1%) of the voting shares of the Company.

2015
$
1,299,019
167,494
368,870
324,000
305,855
123,858

2,589,096

2014
$
1,138,733
125,928
221,471
275,000
208,418
131,425

2,100,975

Subsidiaries

FLYHT Inc.
AeroMechanical Services USA Inc.
FLYHT Corp.
FLYHT India Corp.
TFM Inc.

28. Contingency

Country of Incorporation

Ownership interest

United States
United States
Canada
Canada
Canada

100%
100%
100%
100%
100%

29. Subsequent event

Corporate Information

REGISTRAR AND
TRANSFER AGENT

Computershare Trust Company
of Canada
Telephone: 1-403-267-6800
Online: Investor Centre –
contact us section
www.computershare.com

SHARE LISTING

Shares are traded on the TSX Venture
Exchange and the OTCQX Marketplace

Ticker Symbols: TSX: FLY
and OTCQX: FLYLF

DIRECTORS

Bill Tempany
Doug Marlin
Mike Brown
Paul Takalo
Jacques Kavafian
Jack Olcott
Barry Eccleston
John Belcher
Mark Rosenker

OFFICERS

Chairman, FLYHT Aerospace Solutions Ltd.
President, Marlin Ventures Ltd.
Partner, Geselbracht Brown
Director
Director
President, General Aviation Company
President, Airbus Americas, Inc.
Former Chairman and Chief Executive Officer, ARINC Inc.
United States Air Force (retired)

Thomas R. Schmutz
Nola M. Heale
Derek Graham
Jeff Brunner

Chief Executive Officer
Chief Financial Officer
Chief Technical Officer
Vice President, China Operations

INVESTOR RELATIONS

AUDITOR

Email: investors@flyht.com
Telephone: 1-403-250-9956
Toll free: 1-866-250-9956
www.flyht.com

The Howard Group Inc.
Dave Burwell
Email: dave@howardgroupinc.com
Telephone: 1-403-410-7907
www.howardgroupinc.com

KPMG LLP

Calgary, Alberta

LEGAL COUNSEL

Chris Croteau

Tingle Merrett LLP, Calgary, Alberta

HEAD OFFICE

300E, 1144 - 29 Avenue NE
Calgary, Alberta T2E 7P1

FLYHT AEROSPACE SOLUTIONS LTD. ANNUAL REPORT 2015

FLYHT
AEROSPACE
SOLUTIONS
LTD.

FLYHT AEROSPACE
SOLUTIONS LTD.

300 E, 1144 – 29 Ave NE
Calgary, AB, T2E 7P1
Canada

Phone: 1.866.250.9956
Fax: 1.403.291.9717