FLY.V - Fair?


Flyht Aerospace Solution Ltd. (FLY.V) improves aviation safety, efficiency and profitability by providing airlines, leasing companies, owners, operators and original equipment manufacturers with real-time insights.


Previous coverage was issued on February 2017, September 2017, November 2017, March 2018, May 2018, October 2018, June 2019. and March 2020. Listed below are the releases issued since the last update.


News Releases


Mar. 25 - Strategic Response to COVID-19 Challenge. Industry layoffs and furloughs have been accelerating, accounts payable have been pushed out, and capital equipment orders have been delayed or restructured.


Due to the equity raise in November 2019, which improved the Company’s working capital, and the operational progress made throughout 2019, FLYHT entered 2020 with a relatively robust cash position.


However, the Company anticipates reduced revenues in the near-term as a result of customers rescheduling orders and decreases in air traffic, which will impact the Company’s corresponding SaaS revenues. Despite current headwinds, FLYHT does expect to continue receiving uninterrupted revenues from other sources during this challenging period.


Mar. 30 - To Distribute Complimentary TAMDAR Data During COVID-19 National Emergency. The decline in global airline traffic amid COVID-19 resulted in a decrease of airborne meteorological data collecting by more than 40%. This decrease has had a material impact on the ability of meteorological agencies worldwide to accurately forecast weather.


To help agencies forecast more precisely during this challenging period, FLYHT has opted to temporarily license complimentary TAMDAR weather data to meteorological agencies worldwide for non-commercial use through its commercial partner, Synoptic Data PBC (“Synoptic”).


Through its partnership with Synoptic, FLYHT currently provides TAMDAR weather data and AMDAR (Aircraft Meteorological Data Relay) over AFIRS (Automated Flight Information Reporting System) weather data to the National Mesonet Program (NMP), which is a program of record under the National Weather Service.


Apr. 2 - Provides First Quarter 2020 Update and Schedules Fourth Quarter and Fiscal 2019 Conference Call. Secured an aggregate US $4.6M in sales contracts and purchase orders, assuming the full term of these contracts. Expanded Supplemental Type Certificate (STC) portfolio and reported sales order backlog of approximately $52 million.


Apr. 8 - Reports Fourth Quarter and Year End 2019 Results.


Apr. 14 - 4 Million Hours Logged on FLYHT's UpTime™.


Apr. 29 - Schedules First Quarter Conference Call: Thursday, May 7, 2020 at 7 am MDT (9 am EDT, 6 am PDT).


May 6 - Reports First Quarter 2020 Results


May 12 - Receives Government Loan and Subsidy Money. Received funds under two programs, each designed to support Canadian and American small businesses in keeping their workforces employed during the COVID-19 crisis.


June 8 - Barry Eccleston, former President and CEO of Airbus America, named Executive Chairman of FLYHT Aerospace: Bill Tempany, former FLYHT Aerospace CEO, named Interim CEO and maintains his Director role.


The Company has terminated the contract with Mr. Thomas R. Schmutz as Chief Executive Officer of the Company.


July 16 - To hold virtual 2020 AGM on June 23, 2020 at 9:00 am MT (11:00am ET).


June 25 - Announces Issuance of Incentive Stock Options: 755,300 common shares at 0.59 cents, subject to regulatory approval, to employees, officers and directors under the stock option plan approved at the Annual and Special Meeting held on June 23, 2020. The options will vest 1/3 on each of June 23, 2021, 2022 and 2023 and will expire on June 23, 2024.


June 30 - Receipt of Statement of Claim: Received a statement of claim from Thomas R. Schmutz (former Chief Executive Officer of FLYHT) in the amount of $525,000 CAD in relation to the termination of his employment.


Company believes it has valid defenses to this claim and accordingly has not recorded any related liability at this time.


July 9 - Announces Proposed Warrant Amendment: Amend the exercise price and expiry date of 761,508 previously issued and outstanding warrants (the “Warrants”) such that the Warrants shall expire on December 24, 2020 (subject to acceleration in certain instances) and have an exercise price of $0.60.


The Warrants were originally set to expire on July 24, 2020 with an original exercise price of $1.45. The proposed amendments are being sought by the Company due to the recent market changes affecting the Company.


July 29 - Schedules Second Quarter Conference Call.


Aug. 6 - Reports Second Quarter 2020 Results and Signs Agreement with Investor Relations Firm.

Retained FNK IR LLC. (“FNK”) for investor relations and capital markets communications services.


Sep. 9 - Receives Order from China Express to Factory Install AFIRS on ARJ 21 Aircraft and Announces China Express as a Launch Partner for its Actionable Intelligence Solution. An order for 20 AFIRS units that will be factory installed on the ARJ21 aircraft for China Express Airlines Co. Ltd. China Express will take delivery of the first 20 of an expected commitment for up to 100 of the newest aircraft type available in China over the next 5 years.


Flyht currently has more than 2,800 aircraft equipped with the patented AFIRSTM system, and provides data analytics and reporting to more than 80 aircraft operators around the globe.


Based on the current installation schedule and product deployment plan, Flyht is expected to generate US$2 million in revenue from this contract over the next five years in a combination of hardware and data services.


Sep. 14 - Attends: Lake Street Best Ideas Growth Conference.


Sep. 16 - Works to Speed Aviation Industry Recovery with New Actionable Intelligence Suite of Applications: Delivering phase one of the Actionable Intelligence suites (SaaS) with IBM Watson Knowledge Catalog and IBM Cloud Pak for Data.


The new solution, Actionable Intelligence, uses real time data capabilities to create profit-driving actions rather than simply recording history and showing where money was lost. The solution assists airlines with analyzing and optimizing flight planning operations to improve efficiency, cost, and the goal of on time operations for its customers


Oct. 6 - Present at Virtual Investor Conferences on October 8.


Oct. 14 - Confirms No Un-Released Material News: not aware of any material change.


Summary


Appointments

Significant organizational changes were made. Mr. Eccleston agreed to serve as Executive Chairman, Bill Tempany became "interim CEO" and Thomas Schmutz had his contract terminated. Mr. Eccleston joined FLY.V's Board of Director in 2014. At that time Bill Tempany was CEO of FLY.V.


Subsequently, FLY.V informed the market that Mr. Schmutz filed a statement of claim for $0.52M. FLY.V stated:

Company believes it has valid defenses to this claim and accordingly has not recorded any related liability at this time.


Milestones

FLYTH announced that it was distributing complimentary TAMDAR to meteorological agencies worldwide via Synoptic. This effort was to assist in weather monitoring that ensue from COVID-19.


TAMDAR is currently installed on approximately 70 aircraft for the purposes of collecting weather data. FLYHT supplies this weather data to Synoptic Data DBC as part of their participation in the National Mesonet program.


Also in the last period, the Company logged its 4M Hours logged on Flyth's UPTIME.


The UpTime platform, originally a fixed server, is now implemented in the Amazon Web Services cloud and uses the real-time reports from AFIRS to create Software as a Service products that airlines use to reduce their costs, streamline their operations and proactively enhance the safety of their operations.


Shortly after the termination of Mr. Schmutz, FLY.V launched: Actionable Intelligence.


Flyht’s solutions leverage our technology partnership with IBM to provide a comprehensive and point-in-time analysis of key assets and data points which can be used in real-time to pivot, fine-tune, and adjust your operations automatically, continuously, and dynamically―saving you money, reducing risk, and improving operational efficiency and profitability.


Last month, FLY.V disclosed receiving an order from China Express to install 20 AFIRS on ARJ21 Aircraft. China Express committed for up to 100 unit. The contract value is $2M which is expected to be received over the next 5 years.


Additional revenues are expected as the Actionable Intelligence is rolled out, which will be announced in due course.


Two weeks after the China Express release, FLY.V announced that it had developed and delivered phase one of its new actionable intelligence suite (SaaS) applications with IBM Watson Knowledge Catalog and IBM Cloud Pak for Data.


Charles Duncan, President of Swoop stated that “the power of the Watson tools along with real time data from our aircraft integrated with our existing ground based applications give Swoop the opportunity to be the industry leader in Actionable Intelligence. We are confident that our partnership with Flyht and IBM will have long lasting positive effects on our profits and how we operate our business.


Earnings

By now, everyone is aware of the impact of Covid-19 on air travel. For FLY.V, Q2 2020 earnings were a turning point. Revenue and other income were down by 52% with a decline in net income from $1.55M to a net loss of $0.27M YOY.


The decline in the backlog from Q1 2020 to Q2 2020 was also very significant; From $52M to $33M (40%).



Year to date, Revenue and other income is down from $11.6M to $8.3M (32%). Note that other income subsidies are now ended and will likely have an impact. Also because of the pandemic, Tamdar revenue are expected to be affected.


Stock Options and Warrants

In July, FLY.V issued 0.75M options at $0.59 cents. Also in July, 0.76M warrants were amended from $1.45 to $0.60 cents with a new expiry date of December 2020.


In short

Covid-19 has affected FLY.V's top and bottom line. Revenue were down in Q2 2020 by 52% YOY. The extent to which this downward trend resume should be revealed in Q3 2020. Specifically, backlog will also be important to watch.


Actionable Intelligence has already experienced some early success with both Swoop and China Express reporting interest. However, its still early days. Actionable Intelligence has five phase and phase one has just been recently completed. No implementation timeline have been provided which makes measuring success is rather challenging.


Recent price action of FLY.V has been interesting. It comes after the reductions of warrant to $0.60 cents (July 9) and after the Actionable Intelligence update (Sept 16). The recent rise in the stock price was initiated on October 5 the day prior to the Virtual Investor Conference. The price rose for six consecutive days from $0.50 cents to $0.84 cents.


Once FLY.V issued a "no material change" release, the price corrected to $0.55 cents and closed at $0.63 cents Friday. A look at the short transaction revealed that on the TSX.V activities (FLY.V) were low but OTC (FLYF) were not.





Indeed, it appears that there was a significant amount of short transactions on the OTC which may have influence the price action. Whether these are linked to the warrant remained unknown but the timing is noted.


The upcoming Q3 2020 earnings should provide clarity on whether the current valuation for FLY is fair.


DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.

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