February 2, 2016 Subject: First Edition 2016 CEO Letter to FLYHT Shareholders Dear Shareholders and Interested Parties; Happy belated New Year from FLYHT! This letter is the initial monthly shareholder update that we will prepare in order to better communicate the activities ongoing within FLYHT. We will still press release material matters as they occur, which is required, but these CEO letters may be used to fill in gaps or provide some background that the press releases do not accomplish. There will not be any particular formats followed in these informational pieces; some letters may be longer than others, some may attempt to clarify questions that I receive through various media from our shareholders and some may explain the context within the industry that FLYHT is operating in. In fact, the idea to provide these letters was prompted by a shareholder! Obviously, we are running a business that requires that we continue to hold competitive information within our company. This initial letter will provide some behind the scenes information about the on-boarding process that I have just completed, and our general plans for 2016, which I believe will be a pivotal year for our company. We had an outstanding meeting with the Board of Directors (BOD) in January. Bill did a fantastic job attracting this BOD and their composition was actually one of several things about FLYHT that attracted me to this job. I discussed with the BOD the processes that we have used as a team to understand where we are strong, where we need improvement and the goals that we have set to achieve that improvement. We reviewed the internal guiding principles that we have adopted and will use as a framework to guide our methods of improvement. We discussed some reorganization that was performed in order to better orient our performance toward customer satisfaction and to improve internal accountability. Finally, we discussed the aggressive financial goals we have set for 2016. All in all, the assessment is that we have transitioned leadership from Bill and Matt to me very rapidly and smoothly. The internal assessments and reorganizations are completed for now and I will focus the majority of my time and energies externally, toward the market, rather than inwardly toward our operations. I have already begun this refocus. Profitability is a major theme within the company now; we understand that the investing public has been patiently waiting for our company to turn the corner and fund our own activities and our energies are very much focused on realizing this important fundamental principle. We do have some debt overhang that we need to manage, and while we have goals to operate better than break even, we are carefully addressing the outstanding debentures. The end of 2015 and beginning of 2016 so far have demonstrated what I discussed in the Q3 conference call, which is solid growth in China and exciting increases in our shipments to our Original Equipment Manufacturer (OEM) partners. Factoid: our OEM shipments to date plus outstanding OEM order quantities now equal the direct sales quantities shipped since the beginnings of the company! So the OEM investment has become, as expected, very important to our ongoing financial performance. It is particularly satisfying for me to have personally played a key role in this revenue source for FLYHT. We anticipate our voice and data services revenue, also known as our recurring revenue, will continue to grow nicely, the major harbinger of our future success. Another element that coaxed me from warm Florida (where I could pretend I was making progress on lowering my handicap) was the number and quality of strategic opportunities that exist for the business. I discussed this backdrop on the 3Q conference call. These are significant opportunities with different OEM providers, along with a steady stream of significant operators. As a longer term objective we want to land tier 1 operators (top 25 in operating revenue or > 80 aircraft) and we continue to work those opportunities where it makes sense, but our team has identified where we can have the most success now given various market factors and we are pursuing that segment with vigor. There are still no add-on technologies available in the market similar to our solution which provides realtime, actionable intelligence from the aircraft and, as I also mentioned on the Q3 call, I feel the time is finally right for broader acceptance of this solution. Significant energies are being poured into these strategic efforts and I am confident the focus and effort of our current engagements will bear fruit. I’d also like to point out the continued improvement and progress in receipt I’d also like to point out the continued improvement and progress in receipt of Supplemental Type Certificates (STC) that allow us to install on customer’s aircraft. In January we received the Re-Issue of the Transport Canada CRJ STC to add the 100/200/440 to the approval for the AFIRS 228. This supports a recent contract signing in China as well as an existing customer performing their first installation. We also received the FAA STC for the Boeing 737. This re-issue adds the 737-300, 737-400 and 737-500 models (the “Classics”) to the approval. The previous issue of the STC covered the 737-700 and 737-800 models. This will allow for the activation of an existing customer with the system currently installed but inactive, as well as support sales for this popular aircraft type. In summary, we continue to see significant improvement in our business revenues and we have outlined a series of 2016 and longer term goals to improve our efficiencies, to improve our customer focus and products as well as our overall company performance. I believe I have developed a good understanding of the company, the culture and the business as it currently exists. We are changing the way we do things in order to be more successful and to respond more quickly with less backtracking. I am focused now on a better understanding of our customers and strategic partners. I am very pleased with the strong acceptance of my focus areas and strategies from our employees and board of directors. I really could not be more satisfied with the transition to date and with the status of the compelling reasons behind my decision to join FLYHT. Thank you for your continued support. Thomas R. Schmutz CEO, FLYHT tschmutz@flyht.com
