Tom Schmutz - Chief Executive Officer Nola Heale - Chief Financial Officer

Thank you for standing by. This is the Chorus Call Conference operator. Welcome to the FLYHT Aerospace Solutions’ Second Quarter 2016 Earnings Conference Call. As a remainder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] Due to the volume of questions expected on today’s call, we ask that you please limit your questions to three to allow others to ask. If there are any outstanding questions at the end of the call, the company will be happy to take them over email at investors@flyht.com that is investors@flyht.com. [Operator Instructions] At this time, I would like to turn the conference over to Tom Schmutz, Chief Executive Officer of FLYHT. Please go ahead.

Thank you, Anastasia. For this call, I will provide a review of our Q2 results operationally and financially from a high level. Nola Heale, our CFO will then provide a more detailed review of the financial results of the second quarter and for the first half of the year. I'll then discuss our 2016 goals and answer some questions that we received via email and any questions that may be called in and then we will close the call. The second quarter was an outstanding revenue quarter for FLYHT. Our total revenue for the quarter was $6.7 million which was nearly 80% larger than our best previous quarter. This revenue result was helped by a $3.3 million intellectual property deal, licensing deal but even without that we brought in $3.5 million from our traditional sources of revenue which would be a close second to fourth quarter last year for best revenue quarter. The intellectual property deal brought in needed cash for our operations and also provides FLYHT to resell the licenses future next generation SATCOM product into our markets. The intellectual property that we shared with sitcom know-how but it did not include any of the real-time aircraft data access which makes flight’s products unique within the industry. We also launched and closed a private placement equity raise which netted close to $5 million. We used $2.5 million of this raise to satisfy in full a mature debenture at the end of June. The balance can be used in December to satisfy that debenture should it not convert. This should satisfy one of the tenants of our Adopt Excellence high level strategy which is to strengthen the balance sheet. Adopt Excellence is our roadmap to becoming a profitable entity and for increasing shareholder value. The OEM license fees which show up in our part sales for the company remain strong and continue to grow year-over-year. We are significantly ahead of last’s year revenue from this source at this time nearly doubling the first half of 2015. We brought in $2.2 million in the first half of this year. The voice and data services component of the revenue is consistent with our performance of first-quarter. We have grown some accounts but we have also lost in others due to operator’s changing out aircraft and in a couple of cases operators have encountered liquidity problems caused by the economic difficulties worldwide. We place significant internal focus on growing this our recurring revenue sources more quickly and I expect to have some exciting news in this revenue area in the near future. The AFIRS sales revenue at midyear is 46% ahead of last year, this is a big improvement and FLYHT continues to look for ways to improve the timeframe it takes to recognize revenues from the source, and also how we convert our sales backlog into shipments which can be recognized. This requires us to work with our customers well after the sales cycle has concluded in order to progress revenues as efficiently as possible. So when we look at our revenues year-to-date, we find that the $9.3 million figure that we brought in quarters one and two of this year is approaching the $10.5 million that we did in all of 2015. Our company has demonstrated record revenue quarters successively for five of the last six quarters. So there is significant optimism within the company resulting from this improved revenue performance and the strong feedback that we are receiving from OEM and solution partners that we have a unique offering for the market. So Nola is going to provide additional financial details. Nola?

Good morning, everyone. FLYHT second quarter results to June 30, 2016 are strong. The revenue on parts sales was the highest on record, AFIRS sales revenue was second only to the fourth quarter of 2015 and the voice and data revenue is a little behind the last three quarters. The four categories combined had a revenue of $3.5 million or only $230,000 behind the fourth quarter of 2015 which was itself a very strong quarter FLYHT’s record. FLYHT is experiencing a very positive trend of improving revenue. There will be cyclical changes quarter-by-quarter. But the overall trend is unquestionably improving. In the second quarter we also earned income from sale of the [indiscernible] and these combined for an incredible $6.7 million of income a very strong quarter for the company. The net expenses in the quarter were in line with those of the second quarter of 2015, year-do-date expenses of 15% more than the prior year. The difference is largely people cost. One noteworthy decrease included in the second quarter expenses is a bad debt recovery. We had a former customer come back to us for services when they had raised their cash price stringency situation and they contracted to pay their arrears. The bottom line for the second quarter is a profit of $2.6 million FLYHT’s best quarter and the first positive earnings per share on both a basic and a diluted EPS basis. The balance sheet line items have remained reasonably consistent quarter-on-quarter with two significant exceptions, the cash has increased significantly, this is the improving revenue, the IP license sold and the private placement that was closed for $5.086 million. It is worth nothing that the private placement saw significant EBITDA to take up those shares. The first of the two debentures matured and was redeemed including the 10% premium under the contract for $2.3 million or $2.5 million including the interest payment on June 30, so we now only have the SIMBA (ph) convertible debenture remaining in current liabilities. Performance has definitely improved, you will note that in the second quarter the cash generated by operations improved significantly over all prior quarters, $3.3 million when compared to the second quarter of 2015 and even a nice $1.4 million improvement over the cash that flowed in in the first quarter of this year. We are continuing to see the ramp-up in revenue in Asia. Sales in this region were higher than this quarter apologizes. Sales in this region were higher in this quarter than in the first quarter and year-to-date at $941,000 revenue is 48% up on the equivalent period in 2015 and sales in the Africa-Middle East region are also continuing at a very good rate. We certainly hope to see the returns in these regions continuing where they are now. Sales in both the regions are still direct sales by FLYHT to customers and an element of sales through some of our partners. Customer deposits are at approximately the same value as they were in the prior year and 16% increase on the first quarter. Payments received from customers have increased significantly and AFIRS sales revenue recognized has increased at the same time as mentioned earlier yet it is pleasing to note that unearned revenue is higher than it was at this time in the prior year and at yearend. In fact, we’ve returned to levels approximately equivalent to December 2014. Shareholders will recall the unearned revenue balance did decrease through 2015. This unearned revenue balance of course informs the AFIRS revenue that will be recognized in future periods. These items are very encouraging indication of how the business is generally improving on AFIRS revenue and installations. Payments were received for 17 installation kits compared to 12 in the second quarter of 2015 and year-to-date 32 kits compared to 15 in 2015. In fact payments received on the 32 kits in the six months compared to the 36 in all of 2015. And revenue was recognized for 27 kits compared to only 7 in the second quarter of 2015 and also on the year 36 installations kits have been recognized compared to 22 in the first half of 2015 or 58 in all of 2015. In the unearned revenue, you see that our AFIRS shipped are turning into revenue more smoothly than they have in the past. There can be less of a delay between shipment and installation or revenue recognition now. The value of AFIRS unit shipped not accepted or in other words a waiting revenue recognition is well up on the prior year about 215% in the quarter or 205% in the six months. The working capital at quarter end was $1.7 million compared to the negative $5.4 million we had at December 31, a $7.1 million improvement and Modified Working Capital has increased $7.4 million from yearend. They are of course significantly stronger due to the improved operating income which included the sale of the IP, the private placement we closed and the fact we have repaid they first debenture. So current liabilities have now decreased. Only the $3.1 million debenture convertible or repayable in December now appears in current liabilities. The financial position of the company is progressively improving. With that brief summary, I would like to hand the microphone back to Tom.

Thank you, Nola. We are focused on accomplishing the goals we set out to do in 2016. We are increasing our revenues and will continue to shepard that very important indicator. We are very focused on closing a new OEM opportunity and we continue to see interest in the market for our solution. We are evaluating some different approaches for the 24/7 service call center and we continue negotiations in China for a depot repair center. The slide [ph] or effort continues to take longer than we had hoped but we are seeing some progress now. Our midyear goal of completion will be moved to yearend, however. We don’t have a lot of warranty and repair requirements in China yet but we do want to be prepared. As I mentioned previously, we are making significant investment in the redevelopment and rollout of an updated cloud based implementation of our UpTime ground based user software. This UpTime suite of products will include an integrated user interface and will enhance service availability and intuitive usability while providing some dramatic enhancements. We have a phased rollout plan to rollout the elements of this new server system to our customers this year and beyond and we will feature a formal launch in a future period. We have also continued progress on our supplemental type certificate generation. During this quarter, we received certifications for the ATR 42 and 72 Bombardier Dash Eight Series 100, 200, 300 aircraft and the Boeing 767-200 and 300 series. We have a detailed matrix on our website of these important authorizations to install and these SECs form an important part of our value proposition for FLYHT. Now, I will answer some questions that have some in from email that haven’t otherwise been addressed in Nola or my discussion. The first was have you brought in a PR team? And so yes, we are working with an undisclosed PR team from the United States. We did this in order to better craft our message and to engage news outlets and to improve FLYHT’s recognition among the public and within our industry. Next question is do you foresee that insurance companies will eventually make the AFIRS compulsory in order to ensure airline company coverage? What is the marketing strategy with them and do you see pressure in that regards coming from organization such as the International Civil Aviation Organization? So I answered a question that was similar to this at our AGM earlier this year, we have been advised by several customers that they have received a break on their insurance using AFIRS and we have been looking for ways to leverage this into current and future sales opportunities. The problem that we encounter is that everybody has little bit of a different arrangement with insurance companies and there is no one size that fits all approach that we have been able to isolate. So we continue to research this and we have not found what we would say would be the golden bullet I guess. I do not expect ICAO to weigh in on this particular item I would be surprised if they would. The next question is couple of similar questions, when do you think you will be able to close a major airliner and how many RFPs do you have for OEMs, listed companies and Tier 1 airlines? So we are pursuing opportunities with all of these elements. But there is really nothing that I can share at this time. Next question is what other software or applications are being developed or are possible on the tutorial [ph] box, it would be a bit advantageous to maximize the number of apps the box has. I agree with that. Our focus right now is to firm up the feature sets that make up the product family that we have recently defined and so these product families are the FLYHTVoice, the FLYHTLog, FLYHTAircraft situation display, FLYHTMail, FLYHTHealth, FLYHTFuel and FLYHTStream. So that’s the new set of products that we are focused on selling, we are spending a great deal of time making sure that those are complete and that those are discreet and so that’s really where the bulk of our efforts are engaged with right now. The next question is when will we see the launch of the product from the IP license agreement? Of course that’s, we have that opportunity to sell out. We expect that it would be launched sometime in the 2018 timeframe. There is a lot of variables that go into that, and so we will just have to stayed tuned and see how that shakes up. The next question is what percentage of customers have been transferred to cloud technology? When will all the customers be on the cloud? And so I think we mentioned earlier that we have two customers that have been moved to the cloud implementation. We are migrating a third soon. And we have some internal goals for this – we are completing the migration but we have not externally published those goals. So I can’t discuss those at this time. The next question was can you comment on the recent Farnborough, Airbus buyout of the new FLYHT operation subsidiary in NAVBLUE. Does this compete with the AFIRS solution? And so we don’t see that venture as competition and in fact we believe that there is synergies with what we do and what our system can provide. For applications like that, that we think are the real time information that we can provide with improve the effectiveness of a system like that, so we don’t see it as competitive. One final question that we received was a discussion about our ambitions in military and government sectors given my background? And so right now at FLYHT we are really focusing on the commercial market, we are opportunistically approaching military operations. We do have partners here in Nevada that has traditionally worked within the military sector in the United States, so that’s kind of the summary of that. So Anastasia, you would like at this time we can turn the call over to callers.

Okay, well great. I would just like to say that we remain very excited about the opportunities that we are working on now. We brought in significant cash this past quarter. We have released some of our debt overhang and we are excited about the progress that we are making at FLYHT. We have a good team that’s very engaged right now. We are refining what we do and how we do it in order to become a money making company. I would like to thank you for your support of FLYHT and we look forward to a very exciting and opportunity filled second half of 2016. So thank you very much.

This concludes today’s conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.