1997 FORM 10-KSB FINAL DRAFT

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB

(Mark One)
[X] ANNUAL  REPORT UNDER  SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF
1934

For the fiscal year ended                    October 31, 1997
                          ------------------------------------------------------

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934

For the transition period from                  to

Commission File Number                            0-15362

                                COMPUFLIGHT, INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

         Delaware                                             11-2883366
-------------------------------           --------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)


                  125 Mineola Avenue, Roslyn Heights, NY 11577
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (516) 625-0202
--------------------------------------------------------------------------------
                           Issuer's telephone number

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                    Name of each exchange on which registered

None
---------------------------------      -----------------------------------------


Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.001 par value
--------------------------------------------------------------------------------
                                (Title of Class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes No X

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year (1997): $ 2,790,367

     The aggregate market value of the voting stock held by non-affiliates based
upon the average bid and asked prices of such stock as of September 30, 1999 was
$ 122,689

     (ISSUERS  INVOLVED IN  BANKRUPTCY  PROCEEDINGS  DURING THE PAST FIVE YEARS)
Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes No

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
     The  number of shares  outstanding  of the  issuer's  common  stock,  as of
September 30, 1999 was 2,001,980 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      None

<PAGE>



                                COMPUFLIGHT, INC.
                         1997 FORM 10-KSB ANNUAL REPORT


                                TABLE OF CONTENTS



                                   PART I                                   PAGE

Item 1.   Description of Business..............................................5
Item 2.   Description of Property.............................................14
Item 3.   Legal Proceedings...................................................15
Item 4.   Submission of Matters to a Vote of Security Holders.................16


                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters............17
Item 6.   Management's Discussion and Analysis or Plan of Operation...........18
Item 7.   Financial Statements................................................26
Item 8.   Changes In and Disagreements With Accountants on Accounting and
          Financial Disclosure................................................27


                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance  With Section  16(a) of the Exchange Act.................28
Item 10.  Executive Compensation..............................................31
Item 11.  Security Ownership of Certain Beneficial Owners and Management......33
Item 12.  Certain Relationships and Related Transactions......................35


                                     PART IV

Item 13.  Exhibits, List and Reports on Form 8-K

          INDEX TO EXHIBITS...................................................39

          INDEX TO FINANCIAL STATEMENTS (F-1).................................41

          SIGNATURES..........................................................42




<PAGE>


                                GLOSSARY OF TERMS


AFTN  (Aeronautical Fixed Telecommunications Network)
----------------------------------------------------
An international telecommunications network used for the transmission of NOTAMs,
aircraft movement messages, and other relevant data.

ARINC  (Aeronautical Radio, Inc.)
--------------------------------
A vendor of a variety of communications services to the aviation industry.

Airway
------
Air traffic  controlled  airspace  established  in the form of a  corridor,  the
centerline of which is normally defined by radio navigational aids.

CNS-ATM
-------
Communications, Navigation, Surveillance-Air Traffic Management.  The key
elements of the Future Air Navigation System (FANS).

Flight Dispatcher, Dispatcher
-----------------------------
An  airline  employee   responsible  for  pre-flight   planning  and  continuous
communication and monitoring of a flight from start to finish.

Flight Plan
-----------
A  plan  required  by  federal  regulations  to be  filed  by an  aircraft  that
identifies  the  routing,   alternate  routing,  altitude,  enroute  time,  fuel
consumption, and other information.  This data is calculated by factoring, among
other  things,   the  aircraft   manufacturer's   performance   data,   aircraft
specifications, forecasted upper air winds, and estimated payload.

FOMS
----
Navtech's Flight Operations Management System.

FANS (Future Air Navigation System)
----------------------------------
An international  initiative by air traffic control providers and aviation users
to provide  aircraft with the  capability of using any flight path,  altitude or
speed in order to obtain the maximum efficiency. Frequently referred to as "Free
Flight".

GUI
---
Graphical User Interface.

IATA
----
International  Air Transport  Association.  A trade association of the worldwide
scheduled  international  airline  industry  with a membership  of more that 220
airlines.

ICAO
----
International Civil Aeronautical Organization.  The governing body for the civil
aviation authorities in each country.

LINUX
-----
A  sophisticated   computer   operating  system  which  permits   multi-tasking.

<PAGE>

Navigational Data Worldwide
---------------------------
Navigational  flight  information  data  which  provides  name and  location  of
navigational  aids.  The data is updated every 28 days and checked  against data
provider charts every 56 days.



NOTAM (Notice to Airmen)
-----------------------
A notice  containing  information  concerning  the  establishment,  condition or
change in any aeronautical  facility,  service  procedure or hazard,  the timely
knowledge of which is essential to personnel concerned with flight operations.

Oceanic Airspace
----------------
Airspace  over the  oceans  of the  world,  considered  international  airspace.
Responsibility  for  the  provisions  of air  traffic  control  service  in this
airspace is delegated to various  countries,  based  generally  upon  geographic
proximity and the availability of the required resources.

Preferred Routes
----------------
Fixed routes established between busier airports to increase air traffic control
system efficiency and capacity. Also known as Preferred IFR Routes.

SITA (Societe  Internationale  de  Telecommunication  Aeronautique)
------------------------------------------------------------------
A vendor of aviation communication services.


<PAGE>

                                     PART I

Forward Looking Statements

When used herein, the words "believe,"  "anticipate,"  "think," "intend," "may,"
"could,"  "will be,"  "expect,"  "estimate,"  and similar  expressions  identify
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995.  Such  statements  are not  guarantees of future
results and involve  certain risks and  uncertainties  discussed  herein,  which
could   cause   actual   results  to  differ   materially   from  those  in  the
forward-looking statements. Readers are cautioned not to place undue reliance on
the forward-looking  statements which speak only as of the date hereof.  Readers
are also urged to carefully review and consider the various  disclosures made by
Compuflight,  Inc.  which  attempt to advise  interested  parties of the factors
which affect it, including,  without limitation,  the disclosures made under the
caption  "Management's  Discussion  and Analysis or Plan of Operation" in Item 6
hereof.

Item 1.       Description of Business

GENERAL
Compuflight,  Inc.  (the  "Company" or  "Compuflight"),  directly or  indirectly
through its  wholly-owned  Canadian  subsidiaries,  Navtech Systems Support Inc.
("Support")  and  Efficient  Aviation  Systems Inc.  ("EAS"),  is engaged in the
business of developing, marketing, licensing, and supporting computerized flight
operations  management systems to the commercial aviation industry.  The Company
was  originally  incorporated  in the  State  of  New  York  in  1981  and  then
reincorporated in the State of Delaware in 1987.

Navtech  Systems  Support  Inc.  was  incorporated  in 1987 in the  Province  of
Ontario.   Support's   Waterloo,   Ontario  facility  houses  the  research  and
development,  customer support, sales, and financial functions of the Company as
well as an operations  data center (see Item 2 hereof).  Much of Support's early
development  work was undertaken for the installation of flight planning systems
at Wardair and Pan American  Airways  (PanAm).  The Company develops and markets
software  under the names of both  Compuflight  and Navtech  that is designed to
assist commercial passenger and cargo air carriers in the dynamic environment of
their daily flight  operations.  Specifically,  the Company's  software provides
on-line solutions in the areas of flight planning,  route of flight analysis and
optimization, hi-level winds, weather, and NOTAM (Notice to Airmen) information,
communications, runway analysis, and various aspects of performance engineering.
The  Company's  software  is  licensed  for use on UNIX and LINUX open  systems,
client server platforms. The Company utilizes two primary delivery mechanisms to
address its target markets:  Service Bureau Operations and Product Licensing and
Integration.

The Company's  software operates in real time and is designed to enhance airline
operational  capabilities and competitiveness  through flight plan optimization,
reduced  operational and fuel costs,  and provision of faster and more inclusive
operational and management information.  Additionally,  portions of the software
are  licensed  as core  technology  around  which the  Company  and its  Teaming
Agreement Partners construct leading edge enterprise systems.

The Company's success is based upon its highly skilled and experienced technical
and flight  operations  personnel  who develop and maintain the  Company's  core
technology.  The  Company  is  focused  on growing  the  product  licensing  and
integration  business to match or surpass the revenue  generated  by the service
Bureau Operations.

<PAGE>

Compuflight is publicly  traded on the NASD OTC Electronic  Bulletin Board under
the symbol CMFL. The Company's  principal  executive  offices are located at 125
Mineola Avenue, Roslyn Heights, New York (telephone number: (516) 625-0202.

RECENT DEVELOPMENTS

Acquisition of Skyplan Services (UK) Limited
--------------------------------------------
On October 1, 1999,  Support  entered  into an  agreement to purchase all of the
outstanding  shares of Skyplan  Services (UK) Limited  ("Skyplan")  from Skyplan
Services Ltd.  Skyplan,  incorporated  in the United  Kingdom,  provides  flight
planning and overflight permit assistance  through a service bureau located near
Gatwick Airport,  London,  England.  Currently,  there are eight full-time staff
members employed at this location.  Skyplan's customer base is primarily located
throughout Europe, Africa and the Middle East.

The Company will be  accounting  for this  acquisition  by the purchase  method.
Accordingly,  the Company will only include  results of operations of Skyplan in
its books from  October 1, 1999.  Furthermore,  under the purchase  method,  the
Company will  determine the fair market value of the assets in order to properly
allocate the purchase price and separate out the goodwill component, if any.
Goodwill,  if any,  will be amortized  on a straight  line basis over a ten year
period.

In consideration for the shares of Skyplan, Support has agreed to pay to Skyplan
Services  Ltd.  CDN  $180,000  in two  installments.  The first  installment  of
$125,000 was payable upon closing.  The second installment of $55,000 is payable
upon the  successful  transfer  of services  and  systems to Support  during the
transition  period from  October 1, 1999 to October 22,  1999.  No shares of the
Common Stock of the Company were issued.


Acquisition  of Weather  Services  Division of Global  Weather  Dynamics Inc. by
Navtech Applied Research Inc.
--------------------------------------------------------------------------------
On  July  15,  1998,  Navtech  Applied  Research  Inc.  ("NARI"),   a  principal
shareholder of the Company (see Items 11 and 12 hereof) and affiliate company of
Compuflight,  acquired the Weather  Services  Division ("WSD") of Global Weather
Dynamics Inc. ("GWDI").

In connection with the acquisition,  the Company issued 300,000 shares of Common
Stock to NARI at a purchase  price of $135,000  (see Item 12 hereof).  NARI,  in
turn, transferred 250,000 of such shares to GWDI in consideration for the assets
of WSD and issued 50,000 of such shares to Cambridge Information Group, Inc. for
investment banking services.

Following the  acquisition  by NARI of the assets of WSD,  NARI and  Compuflight
entered into a non-exclusive,  non-transferable  licensing  agreement for a term
commencing  August 1, 1998 and  expiring  October  31,  2000  pursuant  to which
Compuflight  was  granted the right to  install,  configure,  modify and use the
software acquired by NARI in Compuflight business. In addition, Compuflight also
entered into a sub-lease for the operations data center in Monterey, California,
formerly that of the GWDI Weather Services  Division.  In addition,  Compuflight
hired the former employees of WSD.

The Weather Services Division of Compuflight  provides weather data software and
services and other related data services  primarily to the  commercial  aviation
community.  The Monterey data center processes data describing or predicting the
state  of the  atmosphere  on a 24  hour,  7 day per  week  basis  from  sources
including  the  U.S.   National   Weather  Service  and  the  Federal   Aviation

<PAGE>

Administration  circuits as well as a number of other  countries' data circuits.
Customers   access    Compuflight's    weather   services   through   land-based
communications    networks   employing   the   latest   distributed   processing
technologies.

INDUSTRY BACKGROUND

Commercial Aviation

The commercial airline industry continued to realize positive results throughout
1997, having increased traffic and sales levels over 1996. The principal impetus
for this  turnaround is the ongoing  restructuring  that airlines were forced to
undertake  in 1993 due to a severe  recession  that  lasted  from  1990 to 1993,
increased competition from non-traditional  carriers seeking to serve a specific
market segment and doing so with a lower operating cost structure, and continued
long-term growth of the North American economies. According to the International
Air  Transportation  Association  ("IATA"),  1996 and 1997 set new profitability
records for the world airline industry, and more specifically the North American
one, with net profit for members  rising to $5.5 billion in 1996, an increase of
$300 million over 1995.

Airline Classification

There are over 1,500 commercial airlines providing service around the globe, and
they are  typically  defined  by  either  the type of  service  offered,  annual
revenues or by the type of aircraft they utilize. Major airlines are categorized
as earning  revenues in excess of  US$1billion  or more  annually  in  scheduled
service and generally  providing  countries with nationwide  service and in some
cases worldwide  service.  There are approximately 40 carriers in this category.
National  carriers are scheduled  airlines with annual  revenues  between US$100
million and US$1billion, and typically serve particular regions of North America
or serve as foreign  country flag carriers.  The national  carriers also provide
long haul and even international  service.  There are approximately 400 airlines
in this category.  Regional  airlines are carriers whose service is limited to a
single region of a country and tend to have annual  revenue of  US$20million  to
US$100  million.  Their  operations tend to either feed passengers to the larger
airline's centers, or operate in under-served markets.

Geographic Trends

Economic forces are expected to continue driving  consolidation to a point where
major  airline  alliances  occur,  such as the One World  Alliance  and the Star
Alliance.  These  alliances will face  competition  from a large number of niche
airlines,  including  the national  carriers  that  differentiate  themselves by
geography or market  segmentation.  Smaller regional carriers seeking to protect
or expand their share of particular  geographical  markets or business  segments
will be forced to compete with these global alliances.

Flight Operations Software Market Outlook

While  there are  significant  savings in fuel and flight time to be achieved by
the major U.S.  carriers within domestic  flight  operations,  the most dramatic
savings  are to be  realized  on  international  routes.  With the shifts in air
traffic management,  particularly the easing of overflight restrictions in China
and the former Soviet republics,  international air carriers can literally chart
new  territory,  saving upwards of two hours per flight.  This  improvement is a
result of integrating the international  development referred to as FANS (Future
Air Navigation System), which provides an air traffic management  infrastructure
that   relies   largely  on  the  use  of  GPS   (Global   Positioning   System)
satellite-based navigation, with the carrier's flight operations system.

<PAGE>

To address the  requirements  of FANS,  airlines are now seeking new  technology
solutions to assist in the  development  of cost  effective  flight  operations,
including flight planning, weather management, crew scheduling, runway analysis,
and chart management.

PRODUCTS AND SERVICES

Navtech's product strategy is to offer an integrated flight management system to
medium size carriers.  In 1998 the Company  integrated  flight planning,  flight
following,  weather and NOTAMs into an Operations  Control System product called
AURORA. The AURORA product is delivered as an installed system at the customer's
operations facility.  In addition to AURORA, the Company offers COMPASS(TM),  an
easy to use flight planning  software  product  designed for start-ups and small
airlines.   To  complement  AURORA  and  COMPASS,   the  Company  also  provides
COMRADE(TM) , a Windows-based  runway  analysis  solution for use in an aircraft
cockpit or in the airlines operations center.

In addition to the Company's  software  products,  the customer is also provided
with a range of data services delivered from the Company's hosted systems,  such
as weather  related data like  high-level  winds,  text weather and NOTAMs.  The
Company  also  provides a  subscription  service for the  provision  of aircraft
performance data to be used in the calculation of take-off and landing settings.

Operations Control Systems - AURORA

In March,  1998,  the Company  released its new core Flight  Operations  Control
System,  AURORA.  The new product provides  real-time  mission critical decision
support to the  dispatcher  or airline  operations  manager in the creation of a
flight  release and the  subsequent  tracking  and  reporting  of the  airline's
performance.

The AURORA system was designed to operate on the powerful, scalable, open source
LINUX operating system.  LINUX provides an alternative to traditional UNIX based
systems at a lesser cost without  losing any of the power,  speed or reliability
that the commercial airline Information Technology division requires.

The Operations  Control System can be implemented as a COTS  (Commercial off the
Shelf)  application  with reduced  installation  time and increased  maintenance
capability.

Through the Company's  Value Added Reseller VAR agreement with IBM, the required
hardware components are configured, tested and fully certified prior to delivery
to the customer.  As part of its project management services,  the Company takes
responsibility   for  all  aspects  of  the  delivery   including   ordering  of
communications  circuits,  installation  of all  hardware,  and  testing  at the
customer's site.

Flight Planning

Recognizing the fact that a customer's flight operations department may not grow
large enough in size to utilize a fully  integrated  flight  operations  control
system,  the Company  markets a scaled-down  version of its AURORA  product.  In
addition,  the Company also markets to the regional  carriers and to the airline
utilizing less than 5 aircraft operators, the text-based flight planning system,
COMPASS(TM), to fill the need to provide a basic flight plan and to position the
Company to develop a relationship, as the carrier grows.

The  Company's  COMPASS(TM)  flight  planning  software,  which is provided on a
service bureau basis, is designed to improve operational efficiency by providing
easy-to-use  `single  screen'  formats for timely  dispatching  of flights.  The
system responds quickly to changing flight situations so that fuel, flight time,
alternate routing, and payload information can be readily modified.

<PAGE>

Runway Analysis - COMRADTM

The Civil Aviation  Authority for each country  outlines the  regulations  under
which  an  aircraft   operator   must  conduct  its  flying   operations.   Most
jurisdictions  require the operator of a passenger or cargo carrying aircraft to
complete  a  take-off  and  landing  runway  assessment  before  each  flight to
ascertain  the  feasibility  and  limitations  of  operating  the  aircraft on a
particular runway given specific meteorological conditions.

Traditionally,  this function is carried out in two places, the flight operation
dispatch  department  and the aircraft  cockpit.  The source of data required to
complete the runway  analysis  function has been a series of manuals  containing
hundreds of aircraft  performance tables,  which are either generated internally
or by a third party. It is a very cumbersome and time consuming exercise to sort
through  these  tables and gather the  information  necessary  to  complete  the
calculation.

The Company has  responded  by  developing  COMRAD,  a  PC/Windows  based runway
analysis solution which completely automates the calculation of take-off/landing
speeds and maximum payload values. The major benefits of COMRADTM include:

      o  accuracy and consistency of output
      o  timeliness/accessibility of information
      o  ease of use

All of these benefits result in the aircraft being able to transport the maximum
amount of payload, and therefore, generate the maximum yield for the flight.

To accelerate the growth of this market segment,  in 1998 Support entered into a
long-term  software  licensing  agreement with Operational  Performance  Systems
("OPS") of Lake Forest, CA, a provider of aircraft engine calculation  software.
OPS has an extensive  library of aircraft  engine  calculation  software and has
agreed to allow  Support  to  incorporate  these  into its  COMRAD  product on a
royalty basis.

V1 Plus(TM)

V1PLUS is an  aircraft  performance  engineering  subscription  service  that is
offered to airlines that do not maintain  in-house  engineering  departments  or
that wish to augment their existing in-house database.

The V1PLUS Manual  provides the airline  customer with  customized  take-off and
landing data specific to various aircraft/engine combinations, flap settings and
runways  and is  available  24 hours  per  day/7  days per week  from  Support's
Waterloo  operations  center.  Commercial  pilots are required by law to have in
their  possession  a current  runway  analysis  for each flap  setting  of their
aircraft  for each  end of each  runway  for each  airport  from/to  which  they
depart/land.

Weather Systems

With the establishment of the Company's Weather Services  Division,  the Company
began providing weather-related products and services to an established customer
base  complimentary  in nature  to its  existing  products  and  customers.  The
Company's  weather-related products include high level winds and raw data feeds,
text weather systems, and NOTAMs.

The Company,  through  proprietary  access to certain data  circuits of the U.S.
National Weather Service,  has become a primary provider of this data to foreign
governments,  marine service companies and airlines.  Additionally,  the Company
has been able to differentiate  itself by offering redundant sources and methods
of delivery,  thereby assuring customers of the timely delivery of this critical
data.

<PAGE>

Text Weather Solutions

Weather  data is  available  by  querying  one of the  Company's  mainframes  in
Monterey or by  licensing  a  distributed  system  which  receives  its data via
satellite.  Additionally,  the customer can use  templates  and timed  messaging
utilities  to  automate  the   scheduling   and  delivery  of  critical   flight
information.

NOTAMs

NOTAMs (Notice to Airmen) are notices published by each country's Civil Aviation
Authority ("CAA") to provide notice of restricted areas, meteorological changes,
runway conditions and other pertinent  information  required by a pilot for safe
flight.

The  Weather  Services  Division  processes,  decodes  and  translates  the data
transmissions  from 80% of the CAAs around the world.  The NOTAMs  database  can
then be queried by the airline  customer to provide the relevant  NOTAMs for the
origin, destination and alternate airports along the route of flight.

Customer Support Services

The  Company  offers   comprehensive   software  support  and  customer  account
management  throughout the United States,  Canada,  Africa,  and Europe which is
designed to maximize the benefits and utility of the software at the  customer's
location.  These services include training and  installation  support,  software
updates,  including  new systems  functionality  and ongoing  enhancements,  and
telephone  hot-line  support.  Due to the  significant  value of the  customer's
investment in the licensing of the Company's software, the Company believes that
quality support services are a critical component of the customer's satisfaction
level.  The Company's  customer support services are provided from its Waterloo,
Ontario and Monterey, California facilities,  operating 24 hours per day, 7 days
per week.

Custom Programming Services

Design and programming  services are provided to customers that require specific
custom solutions to their flight operations requirements. Fees are based on time
and material usage as determined through customer specifications and quotations.
The  Company  perceives  that  there is an  increased  demand in the  commercial
aviation  market for  systems  integration  services  which  link the  Company's
software  with  third  party  vendors'  applications  such as  crew  scheduling,
maintenance,  flight  following,  and  reservations.  The Company also  provides
consulting  services to assist  customers in  optimizing  the use of the product
functionality within their flight operations process.

MARKETING & SALES

The Company maintained its global marketing  strategy  throughout 1997 and 1998,
either through direct sales or through agency  agreements.  The intended  target
markets were airlines seeking to internalize their flight operations function by
utilizing the Company's  software and those of its existing customers seeking to
upgrade to AURORA.  Additional  emphasis  has been  placed on the  formation  of
markets  for  derivatives  of the core  product  offering  and the  Company  was
successful  in  licensing  its  technology  to Techsult  Eduplus  Inc.  based in
Montreal,  Quebec for the  creation of a simulator to be used in the training of
an airline's dispatchers.

To focus on increasing market share in the Company's defined niches, the Company
continued  to focus  its  primary  marketing  effort  in North  America  and has
achieved an order  back-log of four months for its new  products.  The marketing

<PAGE>

and sales program, as managed by the Vice-President of Sales & Marketing,  seeks
to present  selected  product  and  service  options to  current  and  potential
customers  based on the  Company's  ability to  provide a solution  to fulfill a
defined business need in the flight operations department.

Although the full potential of the North American market has yet to be realized,
the Company believes that future operational  results will depend in part on its
ability to increase sales in the international marketplace, specifically Europe,
South America,  and  Asia/Pacific.  The Company's  marketing  plans,  therefore,
include a strategy to  supplement  its  current  agency  agreements  with direct
marketing  efforts,  although  such a strategy may result in  increased  expense
which could have a short-term adverse effect on the results of operations.

The Company  will be employing  local  in-country  agents to sell the  Company's
products offshore. Additionally,  through the development of a relationship with
The Republic  Group,  an  Arlington,  Virginia  based  international  technology
marketing  company,  which  has an  established  worldwide  network  of  over 50
in-country  agents  around the globe,  the Company has the  opportunity  to gain
direct access to various state-owned airlines.

COMPETITION

The applications  software market for airline  operations  management systems is
intensely  competitive  and subject to rapid change.  The principal  competitive
factors in this market include product functionality and quality,  total cost of
solution, support infrastructure,  relationships, underlying technology, product
architecture, and the financial stability of the vendor.

The Company  competes or may compete  directly or indirectly with i) development
by the major airlines' Information  Technology ("IT") departments,  ii) aviation
software  vendors  that may expand their  product  offerings  by  developing  or
acquiring flight operations  systems,  and iii) independent  companies that have
developed flight operations management solutions for commercial aviation.

A number of major  airlines' have formed  independent  companies or divisions to
develop,  market and install  flight  operations  solutions.  American  Airlines
("AMR") created The Sabre Group Holdings, Inc. in June 1996 to consolidate AMR's
information technology solutions,  including reservations and flight operations,
into a separate  company.  Sabre currently  focuses on providing  outsourcing to
AMR,  Canadian  Airlines,  U.S. Airways and other  customers.  Other examples of
major airline IT spinoffs  include British Airway's  Speedwing  Technologies and
Lufthansa's Informationstechnik & Software GMBH.

In addition to the major  airlines  direct  involvement in the  development  and
marketing  of  systems  and  services,  a  number  of  commercial  carriers  are
utilizing,  as partners,  the large systems  integrators,  such as EDS,  Unisys,
KPMG,  Anderson,  and IBM Global  Transportation  Group. The system  integrators
promote  complete end to end solutions  through  partnering  with companies that
have  expertise in each facet of an airlines'  operation and then  providing the
project management, integration and support services required by the airline.

The large aviation  software  vendors have a variety of  backgrounds.  Jeppesen,
recognized as the industry leader in the provision of aviation charts,  has been
the dominant entrant in the provision of flight operations software and services
to the major  airlines  in North  America.  In Europe and  Africa,  SITA,  which
started out as an aviation telecommunication organization, has branched out into
a number of airline automation services, including flight operations.

<PAGE>

The  independent  competitors  to the Company tend to be relatively  small firms
with  customer  bases of less  than  100 air  carriers  and  have  not  realized
significant  gains in either sales or expanded  product  lines or  consolidation
with competitors.

Many of the Company's competitors have greater financial,  technical, marketing,
and other  resources and a larger  installed  base of customers.  In order to be
successful in the market,  the Company must respond  quickly and  effectively to
changes in customer requirements.

RESEARCH AND DEVELOPMENT

The Company invested significant resources during fiscal 1997 and fiscal 1998 to
develop  new  software  functionality  and to  enhance  its  existing  software.
Research and development expenses were approximately $99,494 and $77,445 for the
years ending October 31, 1997 and 1998, respectively. See Item 6 hereof.

The Company  completed the  commercial  product  release of its Aurora system in
March,  1998  following  beta  testing  at its  launch  customer,  Southern  Air
Transport.

The research and development plans for the Year 2000 are based on a study of the
customer requirements. The key results are as follows:

-    The  requirement  to  introduce  new subject  matter  expertise to lead the
     design and development of new functional requirements.

-    The adoption of a new design modeling framework to aid in rapid prototyping
     and testing of new technologies.

-    A detailed  product  strategy plan and resultant  research and  development
     statement  of work  to  achieve  the  goals  of the  plan.  Some  of  these
     activities will include the integration of runway analysis,  increased text
     weather capabilities, and overflight billing.

-    Other activities are focused on the completion of the Company's integration
     project at its Monterey operation.

<PAGE>

INTELLECTUAL PROPERTY RIGHTS

The Company regards all of its software  products as proprietary.  The Company's
software products are generally  licensed to end-users on a "right to use" basis
pursuant to a perpetual  non-transferable  license that generally  restricts the
use of the software to the  customer's  operations or third  parties  affiliated
with the customer. The Company relies on a combination of copyright,  trademark,
and trade secret laws, as well as  non-disclosure  agreements,  to establish and
maintain its  proprietary  rights.  The Company has not filed for patents due to
the lack of effective patent  protection for software.  In the past, the Company
and Support have licensed certain versions of source code to a limited number of
customers for specific uses.  Also, there can be no assurance that the Company's
competitors will not  independently  develop software that is equivalent to that
of the Company.  Further,  no assurance  can be given that the Company will have
the financial resources to engage in litigation against parties who may infringe
its  intellectual   property  rights.   While  the  Company  realizes  that  its
competitive  position  may be  affected  by its  ability to legally  protect its
software, the Company believes the impact of this protection is less significant
to its  commercial  success than factors such as the level of  experience of the
Company's personnel, name recognition,  and increased investment in research and
development of new products.

EMPLOYEES

As of September 30, 1999,  the Company had a total of 67 employees  including 29
in operations and account management, 21 in research and product development,  4
in sales and marketing, and 13 in management,  finance and administration.  None
of the  Company's  employees  are  represented  by a labor union and the Company
believes  that its employee  relations are good.  The Company  believes that its
success will depend,  to a large degree,  upon its ability to attract and retain
highly skilled technical,  managerial and sales and marketing personnel,  and to
retain  personnel  with  flight  operations  expertise.   Competition  for  such
personnel  is intense,  and there can be no  assurance  that the Company will be
successful  in  attracting  and  retaining  the  personnel  required to develop,
market,   service,   and  support  its  products  and  conduct  its   operations
successfully.

<PAGE>


ITEM 2.       DESCRIPTION OF PROPERTY

The Company maintains offices in the following locations.

Roslyn Heights, New York

Compuflight leases approximately 1090 square feet of office space at 125 Mineola
Avenue,  Roslyn  Heights,  New York.  Concurrent  with the move of the Company's
executive  offices from Port  Washington to Roslyn  Heights on July 1, 1998, the
remaining operational functions in New York were shifted to Monterey, California
and  Waterloo,  Ontario.  The monthly rent  expense as of September  30, 1999 is
approximately  $3,000 per month and the lease terminates on December 31, 1999 at
which time the executive offices will be transferred to the Monterey, California
offices.

Until June, 1998,  Compuflight leased  approximately 2,700 square feet of office
space at 99 Seaview  Boulevard,  Port  Washington,  New York,  for its executive
offices. The monthly rent expense as of June 1, 1998 was $4,499 per month.

Monterey, California

Effective as of July 31, 1998, Compuflight subleased  approximately 5,400 square
feet  of  office  space  at  2400  Garden  Road,  Monterey,  California  for the
establishment  of the  Company's  Weather  Services  Division.  The monthly rent
expense as of September  30, 1999 was $6,150.  The main  tenant's  lease expires
December 31, 2001.

Waterloo, Ontario

Support leases  approximately  9,300 square feet of office space at 175 Columbia
Street West, Waterloo,  Ontario,  which is used for flight operations,  software
development,  customer support, and administration.  This lease became effective
November 1, 1996 and  terminates  October 31, 2006.  The monthly  rent  expense,
inclusive of common area rent, is approximately  CDN $14,100 as of September 30,
1999. The lease calls for additional increases on each anniversary.

Ottawa, Ontario

Support's leased premises in Ottawa,  Ontario function as the corporate  offices
for the Company.  Until September 1, 1998, the space  encompassed  approximately
1,000  square feet at 50 O'Connor  Street,  Ottawa,  Ontario with a monthly rent
expense, inclusive of common area rent, of CDN $1,400 per month.

As of September 1, 1998,  Support's  office was relocated to 275 Slater  Street,
Ottawa,  Ontario.  The sublease for  approximately  1,000 square feet expires on
September  30, 2000,  and the monthly rent expense as of September  30, 1999 was
approximately CDN $1,790.

The  Company's  total rent expenses  were  approximately  $149,000 for the years
ending October 31, 1996 and 1997,  respectively.  The Company  believes that its
facilities are adequate for its current needs and that suitable additional space
will be available as required.


<PAGE>


ITEM 3.       LEGAL PROCEEDINGS


Not applicable.

<PAGE>


ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the quarter
ended October 31, 1997.



<PAGE>


                                     PART II


ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  Market Information

The Company's  common stock is traded on the NASD OTC Electronic  Bulletin under
the symbol "CMFL". The high and low bid prices of the common stock, as furnished
by the National Quotation Bureau, Incorporated, are shown for the fiscal periods
indicated.  Such prices  represent  prices between dealers which, do not include
retail markup, markdown or commission and do not represent actual transactions.



<PAGE>


Fiscal Year Ended             Bid Price
October 31, 1997         High           Low
-----------------        ----           ---

First Quarter            $ 1/2          $ 3/8

Second Quarter            13/32           3/8

Third Quarter              3/8            1/4

Fourth Quarter             2/3            5/16


Fiscal Year Ended
October 31, 1996         High           Low
------------------       ----           ---

First Quarter            $ 5/8          $5/8

Second Quarter             1             1/2

Third Quarter              1/2           1/2

Fourth Quarter             1/2           1/2

<PAGE>



(b)  Approximate Number of Record Holders

Management has been advised by its transfer agent (North American  Transfer Co.)
that the approximate  number of record holders of the Company's  common stock at
September 30, 1999 was 826.

(c)  Payment of Cash Dividends

No cash  dividends have been paid by the Company on its common stock and no cash
dividends are anticipated in the foreseeable future.



<PAGE>


ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

The following  table sets forth the  percentage of total revenue  represented by
certain items in the  Company's  consolidated  statements of operations  for the
years indicated:

                                                  Percentage of Total Revenue
                                                      Year ended October 31,
                                                        1997           1996
                                                --------------------------------

Revenue
   Service fees                                          96%             86%
   Hardware sales and software licenses
   sales                                                  4              14
                                                 ---------------  --------------
     Total revenue                                       100             100
                                                 ---------------  --------------

Costs and expenses
   Operating                                              86              57
   Research and development, net                           1               3
   Selling, general and administrative                    55              32
   Allowance for reduction in SR&ED credits               11               -
   Restructuring costs                                     3
   Office relocation costs                                 2
   Depreciation and amortization                           6               4
                                                 ---------------  --------------
     Total operating expenses                            164              96
                                                 --------------  --------------

Income (Loss) from operations                            (64)              4
Other (expense) income                                    (1)              -
                                                 ---------------  --------------

Net (loss) earnings                                      (65)%             4%
                                                 ===============  ==============


REVENUE

The Company's  revenue is derived from two major  sources:  (i) service fees for
the provision of flight planning services, runway analysis services, and ongoing
customer support and (ii) sales of hardware and software license sales.  Revenue
from license fees is recognized at the later of delivery of the software  master
copy or, if applicable,  fulfillment of all other significant  obligations under
terms of a license agreement. For those agreements where there is uncertainty as
to ultimate  collection,  revenue is  recognized  as cash is  received.  Systems
consulting and implementation fees and hardware  commissions are recognized upon
rendering of services.  Custom software development,  communication charges, and
aviation  database  income and service bureau and support revenue are recognized
ratably over applicable contractual periods or as services are performed.

Total revenue  decreased  approximately  $784,000,  or  approximately  22%, from
approximately $3.6 million in 1996 to approximately $2.8 million in 1997.

<PAGE>

Geographic Analysis

                Total Revenue (in $'000)              % of Total Revenue
            ------------------------------------ -------------------------------
                          For the year ended October 31,
            --------------------------------------------------------------------
                         1997             1996             1997            1996
--------------------------------------------------------------------------------

United State        $      2,052     $      2,970            73%             83%
Canada                       524              369            19%             10%
Other jurisdictions          214              236             8%              7%
                         -------         --------           ----            ----
                    $      2,790     $      3,575           100%            100%
                         =======          =======           ====            ====

The Company's  products and services are used by airline  carriers  primarily in
the United States and Canada, although its customers are also located in Europe,
Mexico,  Africa,  and South America (see Recent  Developments  - Acquisition  of
Skyplan   Services  (UK)  Limited).   In  fiscal  1997,   the  Company   derived
approximately  $2.1  million  from sales in the  United  States as  compared  to
approximately $3.0 million in fiscal 1996. This decrease is due primarily to the
inclusion  in fiscal  1996 of a  one-time  settlement  from  Harris  Corporation
("Harris") related to a software development contract in a prior year, for which
the Company had not  previously  included any income as the ultimate  settlement
was not  measurable.  Sales in Canada  accounted for  approximately  $524,000 in
fiscal 1997 as compared to approximately  $369,000 in fiscal 1996. This increase
is due primarily to an increase in Canadian customer billings and customer base.
Sales in other jurisdictions  amounted to approximately  $214,000 in fiscal 1997
as compared  to  approximately  $236,000  in fiscal  1996,  which  represents  a
decrease of approximately  $22,000,  or  approximately  9%. This decrease is due
primarily to the loss of one customer.

Service Fees

Revenue from service fees was  approximately  $2.7 million in 1997 compared with
approximately $3.1 million in 1996, a decrease of 13% or approximately $413,000.
The decrease is primarily  attributable  to the termination of a contract with a
large  airline  customer in June 1996,  resulting in a decline of  approximately
$77,000.  Subsequent  to July 1997, a new  software  development  agreement  was
signed with the aforementioned airline. Furthermore,  revenue for the year ended
October 31, 1996 included approximately $106,000 from a teaming arrangement with
a U.S.  systems  integrator  which was  completed in 1996.  Also,  approximately
$136,000  was  lost  due to the  bankruptcies  of three  airline  customers  and
approximately $368,000 of the decline was attributable to the loss of two larger
service bureau  customers.  Increases were realized from revenue from a contract
with the United States Postal Service totaling approximately $61,000, as well as
from a net increase in billings of approximately  $213,000 from existing and new
customers.

Hardware Sales and SoftwareLicenses/Sales

Revenue from hardware sales and software  license sales decreased  approximately
$371,000,  or  approximately  75%,  from  approximately   $497,000  in  1996  to
approximately  $125,000 in 1997. This decrease is primarily  attributable to the
inclusion of the Harris  settlement  of $450,000 in fiscal 1996 and is offset by
licenses  of both the  Company's  COMRAD  and AURORA  product  of  approximately
$79,000.

COSTS AND EXPENSES

Operating Expenses

Operating  expenses  consist mainly of personnel and other  expenses  related to
providing product support, service bureau operation and custom development. Also
included in operating  expenses are the communication  costs associated with the
provision of in-house flight planning services and customer support.

<PAGE>

Operating  expenses  were  approximately  $2.4  million  in 1997  compared  with
approximately  $2.0 million in 1996, an increase of approximately  $374,000,  or
approximately  19%.  This increase is primarily  attributable  to an increase in
salaries and  benefits of  approximately  $370,000  from the addition of several
senior  staff in sales,  as well as  additional  operations  and support  staff.
Furthermore, a decrease in computer maintenance and lease costs of approximately
$31,000,  a decrease in  communications  charges of  approximately  $25,000,  an
increase in rent costs of approximately $50,000 and an increase in subcontractor
charges of  approximately  $16,000  added to the overall  increase in  operating
expenses. There was a decline in other operating expenses of $6,000.

Research and Development Expenses

The Company's  research and  development  activities  are  undertaken in Canada.
Support qualifies for certain Scientific  Research and Experimental  Development
(SR&ED)  investment  tax credits  under the Income Tax Act  (Canada) on eligible
research and development expenditures. Refundable tax credits have been recorded
at a rate of 35% and  non-refundable  tax  credits,  which can be used to offset
Canadian federal income taxes otherwise payable,  will be recognized at 20% when
such taxes become payable. These refundable tax credits are netted against gross
research and development expenses for financial statement purposes.

Net research and development  expenses decreased from approximately  $122,000 in
1996 to approximately $35,000 in 1997,  representing a decrease of approximately
$87,000,  or approximately  71%. The Company's research and development team had
completed  the  majority of its work on the new AURORA  program  during the last
quarter of fiscal 1996 and the first quarter of fiscal 1997.  Accordingly,  this
resulted in a decline in research and  development  expenses  during  1997.  The
Company has claimed scientific research and experimental  development investment
tax  credits of  approximately  $64,000  for the year ended  October 31, 1997 as
compared to a claim of approximately $290,000 for the same period in 1996.

The Company  recorded an allowance for the assessed  reduction of its Investment
Tax Credits.  These  reductions are as a result of the technical audit performed
by  Revenue  Canada and the  Company  has filed a Notice of  Objection  to these
assessments. No assurance can be given as to the Company's ultimate success with
respect to the Notice of Objection.

Selling, General, and Administrative Expenses

Selling,   general,  and  administrative  expenses  increased  by  approximately
$375,000,  or  approximately  32%,  from  approximately  $1.2 million in 1996 to
approximately $1.5 million in 1997. This increase can be attributed primarily to
increases in bad debt expense of approximately $38,000 and in consulting fees of
approximately $539,000. The increase in consulting fees is directly attributable
to the  write  down of the note  receivable  due from a former  Chairman  of the
Company.  The note was being  reduced on a monthly basis by payments due under a
consulting  agreement  between the former Chairman and the Company.  Based on an
evaluation  by the  Company  that it no  longer  derives  any  benefit  from the
consulting  agreement,  it has offset the required future  contractual  payments
against the note in its  entirety.  The note had  previously  been included as a
component of equity.

The Company recorded  declines in several expense items,  which served to offset
the  increases   noted  above.   Specifically,   professional   fees   decreased
approximately  $48,000,  travel  decreased  approximately  $52,000,  shareholder
relations costs decreased  approximately $29,000 and net other selling,  general
and administrative  expenses decreased  approximately $73,000. Both professional
fees and  shareholder  relations  costs in 1996 reflected the  additional  costs
incurred to remedy the Company's delinquent filings.


<PAGE>



Restructuring Costs

The  Company has  segregated  costs  related to its  restructuring  plan,  which
commenced in February 1997. The plan was initiated to consolidate  the Company's
operations in the Port Washington and Waterloo  offices,  including the transfer
of the aircraft performance engineering software development effort. As a result
of these  activities,  both staff levels and related  operating  costs have been
reduced at the New York facility.

Office Relocation Costs

The Company has segregated office relocation expenses related to the move of its
operations  and  administrative  center to premises in Waterloo,  Canada.  These
costs  include,  among  other  items,  the cost of contract  management  for the
construction phase and the successful  transfer of the Company's  communications
and computer system.

OTHER INCOME (EXPENSE)

Other income (expense) consists of interest income and expense, realized foreign
exchange gains and losses and certain other items as more fully discussed below.

Interest expense increased  approximately  $18,000,  or 20%, from  approximately
$87,000 in 1996 to approximately  $105,000 in 1997 due to continued deferrals on
debt  payments  and from  penalties  related to late  remittances  with  Revenue
Canada.

NET EARNINGS

The financial  statements reflect a net loss of $1.9 million for fiscal 1997, as
compared to net earnings of $149,666 for fiscal 1996.  This represents a decline
of $2.0 million.

LIQUIDITY AND CAPITAL RESOURCES

In  1997,  the  Company  financed  a  significant  part  of  its  operations  by
negotiating   a  fixed   term   bank   loan  for  the   purchase   of   specific
operation-critical  fixed assets as well as a revolving  line of credit with the
same bank.  In addition,  the  Company's  lease at its new facility in Waterloo,
Ontario  provided  for the  landlord  to install  leasehold  improvements  at no
additional cost.

As of  October  31,  1997,  the  Company  had a working  capital  deficiency  of
$1,039,201. The financial position of the Company has improved subsequent to the
year ended October 31, 1997,  primarily as a result of the partial collection of
the  Company's  investment  tax  credits in the  fourth  quarter of 1998 and the
second  quarter of 1999.  In  addition,  the  Company  has issued  three  AURORA
licenses  since the year ended  October  31,  1997.  These  items are more fully
disclosed in the Form 10-QSB for the particular quarter.

Cash flows from  operations  amounted  to a net  outflow of  $221,574 in 1997 as
compared to a net inflow of $104,361 in 1996.  This outflow is primarily  due to
the  impact of the net loss for the year,  which in turn was offset by the write
off of the note  receivable  from the Company's  former  Chairman.  Lastly,  the
Company continued to defer payables whenever possible. Cash flows from investing
activities amounted to a net outflow of approximately  $123,000 as compared to a
net  outflow  of  approximately   $10,000  in  1996.  The  change  is  primarily
attributable  to the  purchase of fixed  assets,  less the  proceeds  from lease

<PAGE>

inducements  received  by the  Company.  Cash  flows from  financing  activities
amounted to a net outflow of  approximately  $155,000 in 1996,  as compared to a
net  inflow of  approximately  $293,000  in 1997.  This  inflow is  attributable
primarily to the receipt of proceeds  from a fixed term bank loan by Support for
the purchase of specific  fixed assets,  as well as proceeds from bank revolving
demand  loans.  As a result  of these  activities  and the  resulting  effect of
foreign  currency  transactions,  the  Company  recorded  a net cash  outflow of
$37,362 in 1997 as compared to a net cash outflow of $60,550 in 1996.

As of October 31,  1997,  the Company had no  significant  capital  commitments.
Reference is made to Item 1 hereof for a discussion of the Company's  October 1,
1999  acquisition  of all of the shares of Skyplan  Services (UK)  Limited.  The
Company  may,  from  time  to  time,   consider   additional   acquisitions   of
complementary businesses, products or technologies.

The Company's bank  indebtedness,  after  offsetting the restricted cash held as
security against the loans, as of October 31, 1997, was $113,611.


<PAGE>


COMMITMENTS AND CONTINGENCIES

Support Class B Special Shareholders Redemption

In 1987 and 1989,  Support  issued a total of 3,600  Class B special  shares for
$358,200  Canadian.  These  shares are  non-voting,  entitled to  non-cumulative
dividends of $8 Canadian per share and are  redeemable  at the option of Support
for an  aggregate  amount of  $540,000  Canadian.  As at October  31,  1997,  no
dividends had been paid or declared on these shares.

Employment and Consulting Agreements

Reference is made to Note I-2 to the Company's consolidated financial statements
included herein as Item 7 for a discussion of certain  employment and consulting
agreements   entered  into  by  the  Company  or  Support  and  certain  minimum
compensation obligations thereunder.

Effective August 25, 1999, the Company entered into a retirement  agreement with
its  current  Chairman,  Russell K.  Thal.  This  agreement  replaces a previous
employment agreement, as amended, and calls for the payment, among other things,
of $600,000 in 96  semimonthly  payments  commencing  shortly  after Mr.  Thal's
retirement on October 31, 1999.  Mr. Thal will  continue on as Chairman  without
additional  compensation  (other than  standard  fees,  if any,  paid to outside
directors). See Item 12 hereof.

PLAN OF OPERATION

The  Company's  Plan of  Operation  is discussed in its Form 10-KSB for the year
ended October 31, 1998 and Form 10-QSB for the period ended July 31, 1999, which
are being filed concurrently with this Form 10-KSB.

YEAR 2000 COMPLIANCE

In 1998, the Company  implemented a Year 2000 Project  Management  Plan in which
the Company  adopted a phased-in  approach in preparing its internal  operations
for the Year 2000 date change. These phases are identified as follows: Awareness
and Strategy Phase - the process of defining project  objectives and methodology
while setting key milestones; Inventory Assessment and Business Impact Phase the
process  of  taking  inventory  of all core  business  processes  and  assessing
business and customer  risks  associated  with non  compliance;  Renovation  and
Conversion Phase - the process of systematically  diagnosing and replacing known
systems identified to have Year 2000 date issues; Validation Phase - the process
of testing replaced systems and ensuring compliance and the Implementation Phase
- the process of executing and monitoring action plans and contingency planning.

The Company's operations were segregated into six core systems areas as follows:
Commercial  Software  Systems,  Financial  Systems,  Facilities and  Operations,
Information Systems, Data Exchange and Communications  Interchange.  Within each
business  process,  categorizations  of high,  medium  and low  priorities  were
assigned to each  inventoried  item covering all facets of operations  including
hardware and software systems through to power generators and security systems.

The Company has been addressing the non IT areas of the business. Specific areas
identified as having high priority to the continued  day-to-day operation of the
Company include  electrical  power and other  utilities.  It was determined that
should  such  vendors  suffer a  business  interruption  from the Year 2000 date
change, that could also cause the Company to suffer a business interruption. The
Company  has asked  these  vendors to  certify  the year 2000  readiness  of the
products and/or services they supply,  as well as their own internal  compliance
programs.  The majority of the vendors have furnished such certification.  Those
remaining  vendors with a product or service  determined  not to be compliant or
too cost  excessive  for  replacement  were isolated and  alternative  solutions
implemented.

<PAGE>

As part of the Year 2000 Project  Management Plan the Company has also addressed
third-party  telecommunications  vendors. The Company's business is dependent on
the ability to transmit data via telecommunication service providers,  including
AT&T, SITA, ARINC and MCI Worldcom.  Some or all of these service  providers may
rely  on  other  communication  service  providers  who  may  have  insufficient
resources  to address  Year 2000  compliance.  A failure  within any part of the
telecommunications  network  could  disrupt  the  Company's  ability  to provide
services to its customers and depending on the severity of the interruption,  it
could have a material  adverse  effect on the Company's  business and results of
operations.  The Company has asked the four  above-named  vendors to certify the
Year 2000  readiness of the products  and/or  services  they supply,  as well as
their own internal compliance programs,  and has received certification from all
of them.  The Company does not  anticipate  the Year 2000 problems that could be
encountered to be materially different from those of its competitors.

The Company has substantially  completed Year 2000 readiness  preparations as of
the end of September  1999.  The  remaining  work to be  completed  includes the
testing of Data Exchange and Communications  Interchange systems which have been
scheduled  for  completion by October 31, 1999.  Extensive  testing has and will
continue  throughout 1999. The status of the Company's  readiness  efforts is as
follows   across  the  six  core   business   processes:   Commercial   Software
Systems-remediation  complete  with ongoing  assessment  and testing;  Financial
Systems-complete;     Facilities    and     Operations-complete;     Information
Systems-substantially  complete, with minor testing scheduled to be completed by
November 15; Data  Exchange-substantially  complete,  with minor systems testing
scheduled     to    be     completed     by    October    31;     Communications
Interchange-substantially  complete,  with  minor  re-testing  scheduled  to  be
completed by November 15.

Risks of Year 2000 Non Compliance

The Company has designed and tested the most current  versions of its Commercial
Software and confirmed them to be Year 2000 compliant.  However, there can be no
assurances that the Company's  current  customer  systems,  internal systems and
third  party  systems do not  contain  undetected  Year 2000  defects.  The most
reasonably  likely worst case  scenario is that such a defect would  include the
partial  failure  of a  system  that is of  mission-critical  importance  to the
Company.  Such a scenario could expose the Company to litigation that could have
a material adverse impact on the Company.

Costs of Year 2000 Project

The Company  expects to incur  hardware,  software and labour costs,  as well as
other related expense,  in its Year 2000 Project.  The Company's total estimated
cost of the project is approximately  $300,000, of which approximately  $240,000
was  incurred as of September  30, 1999.  Costs of the Year 2000 Project will be
expensed as incurred and will be paid from operating cash flows.

Contingency Planning

From the  onset of the  original  Project  Management  Plan,  and to the  extent
practical,  contingency  plans have been developed to address failures caused by
the Year 2000 date change. Contingency planning will address a variety of issues
including access to alternative third party vendors for any services,  software,
and hardware  systems.  The Company has already begun  addressing  potential and
expected  effects of the Year 2000 date change,  such as planning for  increased
customer  support in December  1999 and early  January  2000,  with  significant
resources   scheduled  for  the  cross-over   period.  The  plans  also  include
calculating flight plans and processes  manually .The contingency  planning will
continue to be refined until the transition has been completed.

<PAGE>

The aviation  industry may be adversely  affected by risks  associated with Year
2000.  The  Company's  business and results of  operations  could be  materially
adversely  affected if internal  or  third-party  data,  software  and  hardware
products are not Year 2000  compliant in time.  There can be no assurances  that
the Company will not experience serious  unanticipated  negative consequences by
undetected  Year 2000 defects in its  internal  systems,  including  third party
provided data, software or hardware products.

Although the Company is not aware of any claims  against the Company  related to
Year  2000  compliance,  the  Company  may  be  subjected  to  litigation.  Such
litigation,  depending on the outcome,  could have a material  adverse effect on
the Company.



<PAGE>


ITEM 7.       FINANCIAL STATEMENTS

The financial statements,  under Item 13 hereof, begin on Page F-1 following the
main body of this document.



<PAGE>


ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
       DISCLOSURE

Not applicable.




<PAGE>


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table sets forth the positions and offices presently held with the
Company and Support by each present Director and executive  officer,  as well as
by each significant  employee of the Company and Support,  and his or her age as
of September 30, 1999:

         Executive Officers and Directors

============================= --------- ========================================

                                 Age       Positions and Offices Presently Held
             Name                                with the Company and Support
============================= --------- ========================================

Russell K. Thal                   65     Chairman of the Board, Executive Vice
                                         President and Director
============================= --------- ========================================

Duncan Macdonald                  40     Chief Executive Officer
============================= --------- ========================================

Derek Dawson                      30     Chief Operating Officer
============================= --------- ========================================

Dorothy A. English                56     Executive Vice President &  Director of
                                         the Company, Managing Director of
                                         Support

============================= --------- ========================================

Denis L. Metherell                65     Secretary and Director
============================= --------- ========================================

Rainer Vietze                     33     Chief Financial Officer
============================= --------- ========================================

Kenneth M. Snyder                 51     Director
============================= --------- ========================================

Significant Employees
============================= --------- ========================================

                                          Positions and Offices Presently Held
                                               with the Company and Support
     Name                        Age
============================= --------- ========================================

William Bowra                    38       Vice President - Sales and Marketing
============================= --------- ========================================

Robert Sosnowski                 34     Vice President, Chief Technology Officer
============================= --------- ========================================


<PAGE>


     Russell K. Thal,  a founder of the  Company,  has served as Chairman of the
Board of the Company since October 1994, Executive Vice President of the Company
since March 1996 and a Director of the Company since its formation in 1981.  Mr.
Thal also  served as the  Company's  President  from  1981 to July  1995,  Chief
Executive  Officer  from  July  1995 to March  1996 and  Treasurer  from 1981 to
December  1993. In addition to managing the Company's  operations,  Mr. Thal has
been responsible for its marketing efforts.  Prior to founding the Company,  Mr.
Thal served as Director - Stations for New York Air from  December  1980 to June
1981.  From 1978 to December  1980, he was Director of  Operations  for Seaboard
World Airlines,  and Senior  Director-Military and Charter Operations for Flying
Tigers,  where he was responsible for day-to-day control of operations,  charter
and military operations, and fuel purchasing (see Item 12 hereof).

     Duncan Macdonald has served as Chief Executive Officer of the Company since
March 1996 and served as Chief  Financial  Officer of the Company from July 1995
to January 1999 (see Item 12 hereof). From July 1994 to July 1995, Mr. Macdonald
provided  management  consulting  services  to  the  Company  and  Support  in a
non-officer  capacity.  Since  January  1992,  Mr.  Macdonald has also served as
managing partner of Kintyre & Company,  Inc., a management consulting firm based
in Ottawa, Ontario.

     Derek Dawson has served as the Vice President - Operations  since September
1997 and was appointed  Chief  Operating  Officer in January 1999.  From 1995 to
1997,  Mr.  Dawson  served as  Manager  for  Corporate  Development  for a large
industrial  contracting firm. From 1991 to 1995, Mr. Dawson was an air navigator
with the Canadian Air Force involved in strategic and tactical  airlifts as well
as training duties.

     Dorothy A.  English has served as Executive  Vice  President of the Company
since July 1995 and a Director of the Company since February 1994. Mrs.  English
also served as the Company's Chief Operating  Officer from December 1993 to July
1994 and Chief Executive Officer from July 1994 to July 1995. She co-founded the
Company's wholly-owned subsidiary, Navtech Systems Support Inc. ("Support"), and
has served as its  Managing  Director  since March  1996,  its  Treasurer  since
February  1992 and a Director  since  1987.  Mrs.  English  also  served as Vice
President and Secretary of Support from 1987 to February  1992,  President  from
February  1992 to October 1993 as well as from  October 1995 to March 1996,  and
Chief Operating Officer from February 1992 to October 1993.

     Denis L.  Metherell  has served as Secretary of the Company  since  October
1994 and a Director of the Company since July 1994. Mr. Metherell also served as
Treasurer of the Company from  November  1994 to March 1996 and Chief  Financial
Officer from November 1994 to July 1995. He served as Vice  President of Support
from June 1993 to July 1995 and also serves as Vice  President and a Director of
AVCON  Associates  Inc., which leases computers to Support (see Item 12 hereof).
From 1976 to 1992, Mr. Metherell  served as a technical  consultant to Northwest
Airlines.

     Rainer Vietze,  MTax, C.A.,  C.P.A.  joined the Company in November 1995 as
the Director of Finance.  He was appointed as Chief Financial Officer in January
1999.  Prior to joining the Company,  Mr.  Vietze  worked as a manager for Grant
Thornton Chartered Accountants for the period from 1990 to 1995.

     Kenneth M. Snyder has served as a Director of the  Company  since  February
1994.  Since  October  1995,  he has also served as a management  consultant  to
entities in the aviation  industry and,  since such date,  has provided  certain
consulting,  advisory and corporate finance services to the Company.  Mr. Snyder
served as Vice  President  and  Treasurer  of the Company  from  October 1993 to
November 1994 and Chief Operating  Officer from November 1994 to July 1995. From
October 1993 to October 1995, he served as President and Chief Operating Officer
of Support.  Prior thereto and from 1984, Mr. Snyder served as Vice President of
American AirLease Corporation, a company engaged in the leasing and financing of
aircraft.

<PAGE>

     William  Bowra has  served as Vice  President  of Sales and  Marketing  for
Support since March 1996.  Furthermore,  he served as Vice President of Business
Development  and Chief  Operating  Officer of the Company  from  October 1996 to
January 1999.  From 1993 to 1996, Mr. Bowra served as the Regional Sales Manager
for AT&T Canada, a Canadian  telecommunications  service provider.  From 1988 to
1993, Mr. Bowra served as a Corporate Account Manager for AT&T/NCR.

     Robert Sosnowski has served as Vice President and Chief Technology  Officer
since  January  1999.  Prior to that he  served  as the  Director  of  Technical
Architecture  for Support since September 1995. Prior thereto and from 1989, Mr.
Sosnowski served as a software engineer for Support.

     Each  Director   will  hold  office  until  the  next  Annual   Meeting  of
Stockholders  or until his or her  successor  is  elected  and  qualified.  Each
executive  officer will hold office until the next regular  meeting of the Board
of Directors  following the next Annual Meeting of  Stockholders or until his or
her successor is elected or appointed and qualified.

     To the Company's knowledge,  based solely on a review of copies of Forms 3,
4 and 5  furnished  to the Company  and  written  representations  that no other
reports  were  required,  during the fiscal  year ended  October 31,  1997,  all
Section  16(a)  filing  requirements   applicable  to  the  Company's  officers,
Directors and 10% stockholders were complied with.

<PAGE>

ITEM 10.      EXECUTIVE COMPENSATION

     (a)  Summary Compensation Table

                  The following table sets forth certain information  concerning
the compensation of all executive officers of the Company as of October 31, 1997
who had a total  salary and bonus for such year in excess of $100,000 as well as
Duncan  Macdonald,  the Chief Executive Officer of the Company during the fiscal
year ended October 31, 1997.


<TABLE>
<S>              <C>    <C>        <C>      <C>           <C>            <C>        <C>       <C>

                            Annual Compensation                 Long-Term Compensation
----------------------------------------------------------------------------------------------------------
                                                                   Awards           Payouts
==========================================================================================================

                                                                          Common
   Name and                                                Restricted     Stock
  Principal                                 Other Annual      Stock     Underlying    LTIP     All Other
   Position     Year    Salary     Bonus    Compensation     Award(s)    Options    Payouts   Compensation
--------------- ----- ----------- --------- -------------- ------------ ----------- --------- =============
    Duncan
  Macdonald,    1997     -0-        -0-     $118,826(1)        -0-         -0-        -0-         -0-
    Chief       1996     -0-        -0-     $106,359(1)        -0-         -0-        -0-         -0-
  Executive     1995     -0-        -0-     $ 95,316(1)        -0-       200,000      -0-         -0-
   Officer

--------------- ----- ----------- --------- -------------- ------------ ----------- --------- =============

  Russell K.    1997  $139,526      -0-     $ 14,800(2)(3)     -0-         -0-        -0-         -0-
    Thal,       1996  $135,863      -0-     $ 14,800(2)(3)     -0-         -0-        -0-         -0-
   Chairman     1995  $128,808      -0-     $ 14,800(2)(3)     -0-         -0-        -0-         -0-

=============== ===== =========== ========= ============== ============ =========== ========= =============
</TABLE>
(1)  Represents amounts paid as an independent advisor to the Company.  See
     Item 12 hereof.
(2)  Includes $12,000 paid by the Company as an automobile allowance.

(3)  Includes  $2,800 paid by the Company as an allowance  for the purchase
     of disability insurance.


     (b) Option Grants Table

                  The following table sets forth certain information with regard
to the grants of stock options  during the fiscal year ended October 31, 1997 to
the persons named in Item 10(a) hereof:

<TABLE>
<S>                  <C>                     <C>                          <C>            <C>
==========================================================================================================
                     Shares of                Percent of
                     Common Stock            Total Options
                     Underlying               Granted to                  Exercise
                     Options                 Employees in                  Price/          Expiration
         Name        Granted                  Fiscal Year                  Share              Date
----------------------------------------------------------------------------------------------------------
  Duncan Macdonald     -0-                        -0-                       N/A               N/A
----------------------------------------------------------------------------------------------------------
  Russell K. Thal      -0-                        -0-                       N/A               N/A
==========================================================================================================
</TABLE>


<PAGE>
<TABLE>

     (c)  Fiscal Year-End Option Value Table

     The following table sets forth certain information  concerning the value as
of October 31, 1997 of  unexercised  options  held by the persons  named in Item
10(a) hereof:

<S>                                   <C>                                 <C>
=======================================================================================================
                                        Number of Unexercised                Value of Unexercised
                                             Options at                      In-the-Money Options
                                          October 31, 1997                    at October 31, 1997
-------------------------------------------------------------------------------------------------------
              Name                    Exercisable/Unexercisable            Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------
        Duncan Macdonald                 200,000/-0-                              -0-/-0-
-------------------------------------------------------------------------------------------------------
        Russell K. Thal                   75,938/-0-                              -0-/-0-
============================= ================================== ======================================
</TABLE>


No options  were  exercised by any of the named  persons  during the fiscal year
ended October 31, 1997.

     (d)  Compensation of Directors

         The By-Laws of the Company  provide that Directors  shall be reimbursed
for  travel  expenses  incurred  in  attending  any  meeting of the Board or any
committee  thereof and each Director,  except salaried  officers of the Company,
shall  be paid a fee  for  attending  each  meeting  of the  Board  or any  such
committee  as may be fixed by the Board from time to time.  No  Directors'  fees
have been paid to date.  The By-Laws of the Company also provide,  to the extent
permitted by law, for certain indemnification of its Directors.

     (e) Employment  Contracts,  Termination of Employment and Change-in-Control
         Arrangements

     See Item 12 hereof for a  discussion  of a certain  Key  Advisor  Agreement
between Support and Mr. Macdonald.

         Mr.  Thal  was  employed  by  the  Company  pursuant  to an  employment
agreement, as amended, (the "Employment  Agreement"),  which expired on July 31,
1999  (the  "Expiration  Date")  and  provided  for a minimum  annual  salary of
$125,000  effective  December 1, 1993,  with  annual  cost of living  increases.
Effective August 25, 1999, the Company entered into a retirement  agreement (the
"Retirement  Agreement")  with Mr. Thal. The Retirement  Agreement  replaces the
Employment Agreement and calls for, among other things, the continued employment
of Mr. Thal at the then existing salary rate until Mr. Thal's retirement date of
October 31, 1999. In addition,  the Company has committed  itself to the payment
of $600,000 in 96 semimonthly  payments  commencing after Mr. Thal's retirement.
Mr. Thal will  continue as Chairman  without  compensation  (other than standard
fees, if any, paid to outside directors) upon his retirement.

Pursuant to the Retirement  Agreement,  the Company also agreed to reimburse Mr.
Thal for  expenses  incurred in the amount of $60,594  (payable  over the period
August 1999 to May 2000) and obtain a declining balance life insurance policy on
Mr. Thal  commencing  with  coverage of $600,000  and  declining  at the rate of
$150,000 per year.  Any proceeds  received will be used by the Company to prepay
to Mr. Thal's estate any remaining  portion of the $600,000 due. All amounts due
by the Company are  evidenced  by  promissory  notes that  contain  acceleration
provisions in the event of, among other things, a default in payment.

<PAGE>



ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The total number of shares of Common Stock  outstanding as of September
30,  1999 was  2,001,980.  The  common  Stock is the  only  class of  securities
outstanding.  Each share is entitled to one vote. The following table sets forth
certain   information   regarding   the  Company's   outstanding   Common  Stock
beneficially  owned as of September  30, 1999 by (i) each person who is known by
the Company to own  beneficially or exercise voting or dispositive  control over
more than 5% of the Company's Common Stock,  (ii) each present  Director,  (iii)
each person named in the Summary  Compensation  Table above, and (iv) all of the
Company's present executive officers and Directors as a group:

<TABLE>
<S>                                 <C>                                          <C>
==========================================================================================================

                                                                                    Approximate
  Name and Address of Beneficial    Number of Shares Beneficially Owned             Percentage of
              Owner                                                             Outstanding Shares
----------------------------------------------------------------------------------------------------------
Dorothy A. English                    1,007,766(1)(2)                                    50.3%
175 Columbia Street West
Waterloo, Ontario,
Canada
----------------------------------------------------------------------------------------------------------
Navtech Applied Research Inc.
175 Columbia Street West                802,766(2)(3)                                    40.1%
Waterloo, Ontario,
Canada
----------------------------------------------------------------------------------------------------------
Kenneth M. Snyder                       350,000(4)                                       14.9%
207 Pittman Place
Carson City, Nevada
----------------------------------------------------------------------------------------------------------
Innovation Ontario                      125,000                                           6.2%
 Corporation
56 Wellesley Street West
Toronto, Ontario, Canada
----------------------------------------------------------------------------------------------------------
Russell K. Thal                          93,813(5)                                      4.5%
125 Mineola Avenue
Roslyn Heights, NY
----------------------------------------------------------------------------------------------------------
Denis L. Metherell                        6,000                                          *
175 Columbia Street West
Waterloo, Ontario,
Canada
----------------------------------------------------------------------------------------------------------
Duncan Macdonald                        -   (6)                                          *
275 Slater Street, Suite 2002
Ottawa, Ontario,
Canada
----------------------------------------------------------------------------------------------------------
All executive officers and            1,457,579(1)(4)(5)                               60.0%
Directors as a group (7 persons)
==========================================================================================================
*Less than 1%

</TABLE>

(1)  Represents  802,766 shares  beneficially  owned by Navtech Applied Research
     Inc.  ("NARI")  (see  footnote (3) below) and 205,000  shares  beneficially
     owned by Ms. English.
(2)  Such persons may be deemed parents of the Company.
(3)  Represents  shares  beneficially  owned by NARI, of which,  the Company has
     been advised, Ms. English is the Chairman, Chief Executive Officer and sole
     stockholder.  Furthermore,  the Company has been  advised that these shares
     have been pledged to Raymond  English as collateral for certain amounts due
     to Mr. English under an agreement  between Mr.  English and NARI.  NARI has
     maintained voting control over these shares (see Item 12 hereof).
(4)  Represents  shares  issuable  upon  exercise of options that are  currently
     exercisable.
(5)  Includes 75,938 shares issuable pursuant to currently  exercisable  options
     and 312  shares  owned by Mr.  Thal's  wife.  This  shall  not be deemed an
     admission that Mr. Thal is the beneficial  owner of the shares owned by his
     wife.
(6)  Mr. Macdonald has voluntarily  agreed not to exercise his 200,000 currently
     exercisable  options until such time as the authorized share capital of the
     Company has been sufficiently increased.


<PAGE>


ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATED PARTIES

1.       Navtech Applied Research Inc.

General

Ray English and  Associates  Inc.  ("RE&A") was a  corporation  incorporated  in
Ontario,  Canada. Until July 15, 1995, RE&A was controlled by Raymond English, a
former  Chairman of the Company.  As of that date,  pursuant to a share transfer
agreement, the ownership of RE&A was transferred to Mr. English's former spouse,
Dorothy A.  English.  Dorothy A.  English is an  Executive  Vice  President  and
Director  of the  Company.  As of July 2,  1998,  RE&A was merged  with  Navtech
Applied Research Inc. ("NARI") and continued operations under the latter name.

NARI was  incorporated in Ontario,  Canada,  on December 31, 1997 and during all
material  times has been wholly owned by Dorothy A.  English,  who serves as its
Chairman and Chief Executive Officer.

References  to RE&A below will  pertain  strictly  to the  Company as it existed
prior to the merger with NARI.

Share Ownership

NARI owns 802,766  shares of the Common  Stock of the Company.  On or about July
15, 1995, RE&A had transferred all of its Common Stock of the Company to Dorothy
A. English, as voting trustee pursuant to a voting trust agreement between them.
When control of RE&A was  transferred  to Dorothy A. English,  and RE&A and NARI
had been merged,  the voting  trust was  terminated  and the share  certificates
returned to NARI. At that time, the shares were placed in escrow as security for
amounts  owed by NARI to Mr.  English  and  payable  under  the  share  transfer
agreement.

RE&A/Support Transactions
In 1993, Support charged RE&A, its then parent company, a management, consulting
and marketing fee in connection with the management of certain software owned by
EAS, formerly a subsidiary of RE&A. Support also advanced funds to RE&A in order
to assist RE&A in meeting its continuing  obligations.  Effective July 15, 1995,
RE&A executed and delivered to Support a promissory note in the principal amount
of CDN $750,000 (the "RE&A Note") to evidence certain  obligations to Support as
of such date. The RE&A Note is payable on July 15, 2005 (or sooner, as described
below) and provides for interest at the rate of 5% per annum  payable  annually.
Effective with the merger,  NARI, by operation of law,  assumed the  obligations
represented by the RE&A Note.

Further,  pursuant to a  consulting  and  marketing  agreement  between RE&A and
Support,  RE&A agreed to provide  software  marketing  services to the  Company.
Support  had the right to offset  CDN  $3,500  per  month  against  compensation
otherwise  payable to RE&A  thereunder  as payment of amounts due under the RE&A
Note.  Effective  July 15,  1998,  this  agreement  was  terminated  by NARI and
Support.



<PAGE>



2.       Global Weather Dynamics, Inc.

On or about  February  18, 1998,  NARI  entered  into an  agreement  with Global
Weather  Dynamics,  Inc.  ("GWDI") to  purchase  all of the assets of the GWDI's
Weather Services Division ("WSD") for a consideration  consisting of $250,000 in
cash,  the delivery of 250,000 shares of the Common Stock of the Company to GWDI
and the  delivery  of 50,000  shares of the  Common  Stock of the  Company to an
unrelated  third  party  involved  in  brokering  the deal.  The  agreement  was
consummated on July 15, 1998.

The primary assets  acquired  included the weather and NOTAMs  software that had
been  developed  by GWDI.  Also,  pursuant to the  agreement,  NARI  obtained an
assignment of the WSD contracts.

Following the  acquisition by NARI of WSD, NARI and  Compuflight  entered into a
non-exclusive,   non-transferable   software  license  agreement  (the  "license
agreement")  for a term  commencing  August 1, 1998 and  expiring  initially  on
October 31, 1999.  Pursuant to which  Compuflight  has been granted the right to
install,   configure,   modify  and  use  the  software   acquired  by  NARI  in
Compuflight's   business.   Pursuant   to  the  license   agreement,   the  term
automatically  renews for  additional one year periods unless either party gives
at least 60 days prior  written  notice of it's  desire  not to renew.  Since no
notice was given at least 60 days prior to October 31, 1999, the current term of
the  license  agreement  has been  extended to October 31,  2000.  In  addition,
pursuant to the license  agreement  Compuflight is obligated to pay royalties in
an  amount  equal  to 10% of  certain  revenues  derived  from  the sale of data
processed using the licensed software.  Concurrently,  with the execution of the
license  agreement,  NARI also signed to Compuflight  the rights it had obtained
from GWDI with respect to the WSD customer contracts.

In  order  to  effect  NARI's  acquisition  of  WSD  certain  transactions  were
undertaken  between the Company and NARI to provide the  necessary  financing as
follows:

i.   NARI purchased  300,000 shares of the Common Stock of the Company in return
     for cash consideration of $300 and the delivery of a promissory note in the
     amount of  $134,700,  payable in 36  monthly  installments  and  bearing an
     interest  rate of 10% per annum.  The note provides that payments are to be
     made by offsetting royalties due under the Licensing Agreement.

ii.  Compuflight borrowed $210,000 from a Canadian financial institution,  which
     loan is repayable over a 28 month term bearing  interest at a rate of 9.18%
     per month.  Dorothy A. English was  required to  personally  guarantee  the
     payment of this loan.

iii. The proceeds  from the loan were  transferred  to Support  which,  in turn,
     loaned  $150,000 to NARI. This loan bears interest  commencing  November 1,
     1998 at a rate of 10% per annum and  repayable  in 36 monthly  installments
     commencing November 1, 1999.

iv.  Subsequent to October 31, 1998, the Company advanced an additional $100,000
     to NARI.

The weather and NOTAMs software acquired by NARI and licensed to the Company was
of critical  importance to the Company in order for it to maintain a competative
advantage in the delivery of its  products to the  marketplace.  The Company had
determined that the internal development of this solftware wold require at least
10  man-years  to  complete  at a cost  estimated  to be in excess of  $700,000.
Furthermore, the Company was paying a third party weather supplier approximately
$4,000  per month for  information  it had  determined  was below the  standards
required by the Company's customers.

<PAGE>

3.       Russell K. Thal
Reference is made to Item 10(O) hereof.

4.       AVCON Associates Inc. ("AVCON")

AVCON,  an entity of which Denis L.  Metherell,  Secretary and a Director of the
Company,  is a Vice President and a Director,  leased certain computer equipment
to Support.  Effective January 31, 1996, the leases were terminated.  On October
1, 1996, the Company entered into two new lease  agreements for certain computer
equipment.  These  agreements  were  replaced on June 1, 1999 with amended lease
agreements.  Under the  present  agreements,  the  Company is  required  to make
varying  payments  until  November  2004.  The Company  believes  that the lease
payments,  which commenced July 1999 at $1,952 Canadian per month, are no higher
than would be payable to a nonaffiliated third party.

On October 31, 1996,  the Company  executed and  delivered to AVCON a promissory
note in the principal  amount of $53,000 Canadian (the "AVCON Note") to evidence
amounts due under the terminated  lease agreement noted above and outstanding as
of such date. On June 1, 1999, the Company  amended the note (the "Amended AVCON
Note") to include additional arrears that had accumulated on the two leases. The
Amended AVCON Note is in the principle amount of $90,000 Canadian and is payable
on May 1, 2005 or sooner and provides for payments as follow:

(i)  interest of $1,350 Canadian only from July 1999 to September 2000;

(ii) interest and  principal of $2,400 Canadian from October 2000 to April 2005;
     and,

(iii)a residual payment of principal and interest of $1,263 during May 2005.


5.       Duncan Macdonald

Effective  as of June 1,  1996,  Support  entered  into a two year  Key  Advisor
Agreement (the "Macdonald Key Advisor Agreement") with Duncan Macdonald pursuant
to which Mr. Macdonald has been retained to serve as Chief Executive  Officer of
the Company.  Pursuant to the  Macdonald  Key Advisor  Agreement,  as amended in
January 1997,  Mr.  Macdonald is entitled to receive a base weekly fee of $3,000
Canadian.  In addition, a bonus of $5,000 Canadian per fiscal quarter is payable
during the term of the  agreement.  Mr.  Macdonald has agreed to expend at least
75% of his working time in the fulfillment of his duties under the Macdonald Key
Advisor Agreement. Mr. Macdonald has waived his entitlement to the bonus amounts
related  to each of the fiscal  quarters  of 1997.  The  Macdonald  Key  Advisor
Agreement expired in 1998 and has not been replaced.  Mr. Macdonald continues to
serve as Chief Executive Officer. Effective January 1, 1999, the base weekly fee
has been  paid to a company  controlled  by Mr.  Macdonald,  again  without  the
benefit of an agreement.




<PAGE>


ITEM 13.      EXHIBITS, LIST AND REPORTS ON FORM 8-K

     (a) Exhibits

          3(A) Certificate of  Incorporation  and amendments  thereto  including
               Certificate of Ownership and Merger (1)

          3(B) By-Laws (2)

          10(A)Employment  Agreement  dated as of December  1, 1993  between the
               Company and Russell K. Thal (3)  Amendment #1 thereto dated March
               14, 1996 (1), and amendment thereto dated January 8, 1997 (4)

          10(B) Incentive Stock Option Plan (2)

          10(C) Non-Qualified Stock Option Plan (5)

          10(D)Consulting  Agreement  dated  as  of  November  1,  1993  between
               Compuflight,  Inc. and Bert E. Brodsky,  together with  amendment
               thereto dated December 2, 1993 (6)

          10(E)Promissory  Note dated as of November 1, 1993  payable by Bert E.
               Brodsky to the order of Compuflight, Inc. in the principal amount
               of $804,000 (6)

          10(F)Lease dated  October 8, 1996 between  Ferdi  Investments  Company
               Limited  and  Navtech   Systems  Support  Inc.  with  respect  to
               Waterloo, Ontario premises (4)

          10(G) 1995 Key Employees and Advisors Stock Option Plan as amended (1)

          10(H)Consulting  and Marketing  Agreement  dated as of January 1, 1995
               between   Navtech  Systems  Support  Inc.  and  Ray  English  and
               Associates Inc. (1)

          10(I)Promissory  Note dated as of July 15, 1995 payable by Ray English
               and  Associates  Inc. to Navtech  Systems  Support,  Inc., in the
               principal amount of $750,000 (1)

          10(J)Amendment  to the  Promissory  Note  payable by Ray  English  and
               Associates  Inc. in the principal  amount of $750,000 dated as of
               June 12, 1996 (7)

          10(K)Key  Advisor  Agreement  dated  as of  October  1,  1995  between
               Compuflight, Inc. and Kenneth M. Snyder (1)

          10(L)Amended and Restated  Stock Option  Agreement  dated as of August
               9, 1995 between Compuflight, Inc. and Kenneth M. Snyder (1)

          10(M)Stock  Option  Agreement  dated  as of  August  9,  1995  between
               Compuflight, Inc. and Duncan Macdonald (1)

          10(N)Key Advisor  Agreement  dated as of June 1, 1996 between  Navtech
               Systems Support Inc. and Duncan Macdonald (7)

          10(O)Retirement  Agreement dated as of August 5, 1998, between Russell
               K. Thal and Compuflight, Inc.

          10(P)Promissory   Note   dated  as  of  August  5,  1999   payable  by
               Compuflight,  Inc.,  to the  order  of  Russell  K.  Thal  in the
               principal amount of $600,000.

          10(Q)Promissory   Note   dated  as  of  August  5,  1999   payable  by
               Compuflight,  Inc.,  to the  order  of  Russell  K.  Thal  in the
               principal amount of $60,594.

          10(R)Sale  Purchase  Agreement  dated as of  October  1, 1999  between
               Navtech Systems  Support,  Inc., and Skyplan Services Limited for
               the shares of Skyplan Services (UK) Limited.

          10(S)Forbearance and Continued  Service  Agreement dated as of October
               1, 1999  between  Navtech  Systems  Support and Skyplan  Services
               Limited.

          10(T)Software  License  Agreement  dated as of August 1, 1998  between
               Navtech Applied Research, Inc. and Compuflight, Inc.

          10(U)Promissory  Note  dated as of July 15,  1998  payable  by Navtech
               Applied Research, Inc., to the order of Compuflight, Inc., in the
               principal amount of $134, 700.

          10(V)Promissory  Note  dated as of July 15,  1998  payable  by Navtech
               Applied Research, Inc., to the order of Compuflight, Inc., in the
               principal amount of $150,000.

          21   Subsidiaries(3)

          27   Financial Data Schedules

(1) The Company  hereby  incorporates  the  footnoted  Exhibit by  reference  in
accordance with Rule 12b-32,  as such Exhibit was originally filed as an Exhibit
to the Company's  Annual Report on Form 10-KSB for the fiscal year ended October
31, 1994.

(2) The Company  hereby  incorporates  the  footnoted  Exhibit by  reference  in
accordance with Rule 12b-32,  as such Exhibit was originally filed as an Exhibit
to the  Company's  Registration  Statement  on  Form  S-18 as  Registration  No.
2-93714-NY.

(3) The Company  hereby  incorporates  the  footnoted  Exhibit by  reference  in
accordance with Rule 12b-32,  as such Exhibit was originally filed as an Exhibit
to the Company's  Annual Report on Form 10-KSB for the fiscal year ended October
31, 1993.

(4) The Company  hereby  incorporates  the  footnoted  Exhibit by  reference  in
accordance with Rule 12b-32,  as such Exhibit was originally filed as an Exhibit
to the Company's  Annual Report on Form 10-KSB for the fiscal year ended October
31, 1996.

         b)  Reports on Form 8-K

(5) The Company  hereby  incorporates  the  footnoted  Exhibit by  reference  in
accordance with Rule 12b-32,  as such Exhibit was originally filed as an Exhibit
to the Company's  Annual Report on Form 10-KSB for the fiscal year ended October
31, 1992.

(6) The Company  hereby  incorporates  the  footnoted  Exhibit by  reference  in
accordance with Rule 12b-32,  as such Exhibit was originally filed as an Exhibit
to the Company's Current Report on Form 8-K for an event dated December 1, 1993.

(7) The Company  hereby  incorporates  the  footnoted  Exhibit by  reference  in
accordance with Rule 12b-32,  as such Exhibit was originally filed as an Exhibit
to the Company's  Annual Report on Form 10-KSB for the fiscal year ended October
31, 1995.

         The  Company  did not file any  Current  Reports on Form 8-K during the
quarter ended October 31, 1996.


<PAGE>




                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page

Report of Independent Certified Public Accountants                           F-2

Financial Statements

     Consolidated Balance Sheet as of October 31, 1997                       F-3

     Consolidated  Statements of Operations for the Years
     Ended October 31, 1997 and 1996                                         F-4

     Consolidated Statement of Shareholders' Deficit for the Years
     Ended October 31, 1997 and 1996                                         F-5

     Consolidated  Statements of Cash Flows for the Years
     Ended October 31, 1997 and 1996                                         F-6

     Notes to Consolidated Financial Statements                       F-7 - F-27

                                      F-1


<PAGE>

                        REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
     Compuflight, Inc.

We have audited the accompanying consolidated balance sheet of Compuflight, Inc.
and  Subsidiaries  (the  "Company")  as of  October  31,  1997  and the  related
consolidated statements of operations,  shareholders' deficit and cash flows for
each  of  the  two  years  then  ended.  These  financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Compuflight,  Inc. and  Subsidiaries  as of October 31, 1997, and the results of
its  consolidated  operations  and its cash flows for each of the two years then
ended, in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As shown in the  financial
statements,  as of October 31,  1997,  the Company has a  deficiency  in working
capital and shareholders  equity of $1,039,201 and $651,535,  respectively,  and
has incurred a net loss of $1,818,652 for the year ended October 31, 1997.  This
factor,  among  others,  as  described in Note B to the  consolidated  financial
statements,  raises substantial doubt about the Company's ability to continue as
a going  concern.  Management's  plans  in  regard  to  these  matters  are also
described in Note B. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.



GRANT THORNTON LLP

Melville, New York
August 5, 1999

                                      F-2
<PAGE>

                       Compuflight, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEET
                                October 31, 1997

                                     ASSETS

CURRENT ASSETS
     Accounts receivable, net of allowance for doubtful accounts
       of $178,997                                                   $   250,476
     Prepaid expenses and other                                           18,206
                                                                     -----------
         Total current assets                                            268,682

INVESTMENT TAX CREDITS RECEIVABLE, NET OF ALLOWANCE                      490,850
FIXED ASSETS, NET                                                        403,475
RESTRICTED CASH                                                           50,000

OTHER ASSETS                                                              22,120
                                                                     -----------
                                                                      $1,235,127
                                                                     ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
     Cash overdraft                                                   $   81,996
     Bank revolving demand loans                                          81,615
     Accounts payable                                                    473,429
     Accrued and other liabilities                                       442,178
     Due to related parties - current portion                            169,608
     Current portion of long-term debt                                    43,627
     Current portion of deferred lease inducements                        15,430
                                                                      ----------
                                                                       1,307,883

DUE TO RELATED PARTIES                                                    76,672
LONG-TERM DEBT                                                           112,702
DEFERRED LEASE INDUCEMENTS                                               123,440
OTHER LIABILITIES                                                         11,751
MINORITY INTERESTS                                                       254,214
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY
     Common stock, par value $.001 per share; authorized
       2,500,000 shares; issued and outstanding,
       1,701,980 shares                                                    1,702
     Additional paid-in capital                                        1,545,745
     Notes receivable - former chairmen                                (278,325)
     Cumulative foreign exchange adjustment                               43,070
     Accumulated deficit                                             (1,963,727)
                                                                      ----------
                                                                       (651,535)
                                                                      $1,235,127
                                                                      ==========
The accompanying notes are an integral part of this statement.

                                      F-3
<PAGE>


<TABLE>
                       Compuflight, Inc. and Subsidiaries

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended October 31,
<S>                                                                <C>            <C>

                                                                          1997           1996
                                                                   -----------    -----------

Revenue
    Service fees ...............................................   $ 2,665,337    $ 3,078,084
    Hardware, software and license sales .......................       125,030        496,505
                                                                   -----------    -----------

                                                                     2,790,367      3,574,589
                                                                   -----------    -----------

Costs and expenses
    Operating ..................................................     2,398,086      2,023,678
    Research and development, net ..............................        35,334        122,177
    Selling, general and administrative ........................     1,532,665      1,157,488
    Allowance for reduction in scientific research and
      experimental development credits .........................       296,029
    Restructuring costs ........................................        90,948
    Office relocation costs ....................................        67,678
    Depreciation and amortization ..............................       162,448        133,072
                                                                   -----------    -----------

                                                                     4,583,188      3,436,415
                                                                   -----------    -----------

         Operating (loss) income ...............................    (1,792,821)       138,174

Other income (expense)
    Interest income ............................................        54,590         59,825
    Interest expense - related parties .........................       (35,680)       (40,351)
    Interest expense - other ...................................       (68,834)       (46,587)
    Realized foreign exchange loss .............................        (7,690)          (645)
    Waiver of deferred salaries ................................         5,499
    Other ......................................................        30,783         33,751
                                                                   -----------    -----------

         NET (LOSS) INCOME .....................................   $(1,819,652)   $   149,666
                                                                   ===========    ===========

Net (loss) income per share ....................................   $     (1.07)   $      0.09
                                                                   ===========    ===========

Weighted average number of common shares outstanding ...........     1,701,980      1,691,563
                                                                   ===========    ===========

</TABLE>

The accompanying notes are an integral part of these statements

                                      F-4

<PAGE>
<TABLE>

                       Compuflight, Inc. and Subsidiaries

                CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT

                                                 Years ended October 31, 1997 and 1996
<S>                                 <C>                  <C>         <C>              <C>          <C>              <C>
                                                                        Notes         Cumulative
                                                         Additional   Receivable -      foreign
                                      Common stock        paid -in      former        translation   Accumulated
                                     Shares    Amount     capital      chairmen       adjustment      deficit           Total
                                    --------   ------    ----------   -----------     ----------   ------------     -----------

Balance at November 1, 1995         1,576,980  $1,577    $1,444,308   $(1,050,533)    $ 54,034     $   (293,741)    $   155,645

Issuance of common stock              125,000     125       101,437                                                     101,562
Amortization of notes receivable -
   former chairman                                                         71,266                                        71,266
Repayments from RE&A - net                                                 16,759                                        16,759
Foreign translation adjustment                                                          11,125                           11,125
Net income                                                                                              149,666         149,666
                                    ---------  ------    ----------   -----------     ----------    -----------     -----------


Balance at October 31, 1996         1,701,980   1,702     1,545,745      (962,508)      65,159         (144,075)        506,023

Write off of notes receivable -
   former chairman                                                                                                      599,456
Repayments from RE&A - net                                                                                               84,727
Foreign translation adjustment                                                         (22,089)                         (22,089)
Net loss                                                                                            (1,819,652)      (1,819,652)
                                    ---------  ------    ----------   -----------     ----------    ------------     ----------


Balance at October 31, 1997         1,701,980  $1,702    $1,545,745   $  (278,325)    $ 43,070     $(1,963,727)     $   (651,535)
                                    =========   =====     =========    ==========       ======      ==========       ===========

The accompanying notes are an integral part of this statement.


                                      F-5
</TABLE>

<PAGE>

                       Compuflight, Inc. and Subsidiaries

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended October 31,
<TABLE>

<S>                                                                                <C>            <C>
                                                                                          1997           1996
                                                                                   -----------    -----------
Cash flows from operating activities
   Net (loss) income ...........................................................   $(1,819,652)   $   149,666
   Adjustments to reconcile net earnings to net cash
   provided by operating activities
       Depreciation and amortization ...........................................       162,448        133,072
       Provision for uncollectible accounts ....................................       106,731         68,685
       Allowance for reduction in investment tax credits .......................       296,029
       Write off of note receivable - former chairman ..........................       599,456
       Consulting fees, net ....................................................        71,266
       (Increase) decrease in operating assets

         Accounts receivable ...................................................       237,336       (266,390)
         Scientific research and experimental
         development credits
                                                                                       (61,827)      (290,559)
         License fees receivable ...............................................       104,502        235,110
         Prepaid expenses and other ............................................         9,164          3,247
       Increase (decrease) in operating liabilities
         Accounts payable and accrued liabilities ..............................       144,239            264
                                                                                   -----------    -----------
         Net cash (used in) provided by operating activities ...................      (221,574)       104,361
                                                                                   -----------    -----------

Cash flows from investing activities
   Purchase of fixed assets ....................................................      (330,225)       (27,247)
   Proceeds from lease inducements .............................................       141,023
   Payments from RE&A ..........................................................        66,223         16,759
                                                                                   -----------    -----------
         Net cash used in investing activities .................................      (122,979)       (10,488)
                                                                                   -----------    -----------

Cash flows from financing activities
   Cash overdraft ..............................................................        81,995
   Proceeds from bank revolving demand loans ...................................        81,616
   Restricted cash .............................................................       (50,000)
   Payment of notes - former affiliate .........................................      (197,337)
   Proceeds from bank loan .....................................................       158,752
   Proceeds from loan ..........................................................        13,948
   Proceeds from note ..........................................................        47,215         44,753
   Payment of notes ............................................................       (40,031)        (2,943)
                                                                                   -----------    -----------
         Net cash provided by (used in) financing activities ...................       293,495       (155,527)
                                                                                   -----------    -----------

Effect of foreign translations on cash .........................................        13,696          1,104
                                                                                   -----------    -----------

         NET DECREASE IN CASH AND CASH EQUIVALENTS
                                                                                       (37,362)       (60,550)

Cash and cash equivalents at beginning of year .................................        37,362         97,912
                                                                                   -----------    -----------
Cash and cash equivalents at end of year .......................................   $              $    37,362
                                                                                   ===========    ===========

The accompanying notes are an integral part of these statements.

</TABLE>

                                      F-6

<PAGE>

                       Compuflight, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           October 31, 1997 and 1996


NOTE A - DESCRIPTION OF BUSINESS AND ORGANIZATION

     Compuflight,  Inc.  (the  "Company"),  directly or  indirectly  through its
     wholly owned subsidiaries,  Navtech Systems Support Inc.  ("Support"),  and
     Efficient  Aviation  Systems  ("EAS"),   is  engaged  in  the  business  of
     developing,   marketing,   licensing  and  supporting  computerized  flight
     planning and  aircraft  performance  engineering  services for the aviation
     industry.


NOTE B - LIQUIDITY AND CAPITAL RESOURCES

     The consolidated  financial statements have been prepared assuming that the
     Company will continue as a going concern.  However, as of October 31, 1997,
     the Company has a deficiency in working capital and shareholders' equity of
     $1,039,201 and $651,535, respectively, and has a net loss of $1,819,652 for
     the year ended October 31, 1997.  This raises  substantial  doubt about the
     Company's  ability  to  continue  as  a  going  concern.  The  consolidated
     financial  statements do not include any adjustments that may result should
     the Company be unable to continue in existence.

          The  Company  and its senior  management  group  have  focused on four
          specific  areas  to  address  both   strategic   direction  and  daily
          operational  issues in an effort to  position  the  Company for future
          profitability as outlined below.

          The Company has increased its marketing  endeavors with respect to its
          two major software products,  AURORA and COMRAD. This increase is also
          tied to a  strategic  redirection  by senior  management  to focus the
          Company on the sale of systems versus the provision of flight planning
          on a service  bureau  basis.  These  efforts have  resulted in several
          larger system sales in fiscal 1997. In addition, the Company continues
          to develop complementary products to address marketplace demands.

          The  Company  has  added  to its  senior  management  team in order to
          provide support for the  development,  customer support and operations
          areas of the business. As a result,  management believes, an efficient
          management  structure has been created with a clear  division  between
          strategic and operational policy development.

          The Company  devoted time to the  realization  of its  investment  tax
          credits  receivable  under  the  Canadian   Scientific   Research  and
          Experimental Development incentive program.

          The Company has continued its pursuit of financing.

                                      F-7

<PAGE>

                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           October 31, 1997 and 1996


NOTE B (continued)

         The  Company's  operation is  dependent  upon its ability to obtain new
         customers,  to  maintain  profitable  levels of service and to maintain
         existing financial  arrangements or obtain new financing.  There can be
         no  assurance  that  sufficient  cash  flows will be  generated  by the
         Company  to  avoid  the  further  depletion  of  its  working  capital.
         Additionally,  there can be no assurance that additional debt or equity
         financing will be available,  if and when needed, or that if available,
         such  financing  could be completed on  commercially  favorable  terms.
         Furthermore, no assurances can be given the above plans will enable the
         Company to continue in existence.


NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          A summary of significant  accounting policies  consistently applied in
          the preparation of the consolidated financial statements follows:

          1.   Principles of Consolidation

               The  consolidated  financial  statements  include the accounts of
               Compuflight and its 100%-owned subsidiaries, Support and EAS. All
               material   intercompany   balances  and  transactions  have  been
               eliminated  in  consolidation.  In accordance  with  Statement of
               Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency
               Translations,"  assets and liabilities of foreign  operations are
               translated  at  current  rates  of  exchange,  while  results  of
               operations  are  translated  at  average  rates in effect for the
               period.  Unrealized  translation  gains or losses  are shown as a
               separate component of shareholders' deficit.

          2.   Fixed Assets

               Fixed assets are recorded at cost.  Depreciation and amortization
               is provided using the straight-line and declining balance methods
               over the estimated useful lives of the related assets.

          3.   Goodwill

               Goodwill is  recorded  at cost and is included as a component  of
               other  assets.  Amortization  is  computed  on the  straight-line
               method over ten years.

                                      F-8
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE C (continued)

          4.   Software Development Costs

               The Company capitalizes expenditures incurred for the development
               of  existing  software  which has already  reached  technological
               feasibility  and  expenses  all  other  costs.   Amortization  is
               computed by the  straight-line  method over the estimated  useful
               life of the software.

          5.   Minority Interests

               Effective November 24, 1995, the Company issued 125,000 shares of
               its common stock in exchange for 500,000 shares of Support, which
               represented  the  common  shares  of  Support  held  by  the  one
               remaining  common  shareholder  of  Support,  Innovation  Ontario
               Corporation,  a provincial  government agency, and,  accordingly,
               the Company  now owns 100% of the  outstanding  common  shares of
               Support.  The excess of the fair  market  value of the  Company's
               common  stock on the  date of the  exchange  ($101,563)  over the
               Company's  minority  interest  ($78,411)  has  been  recorded  as
               goodwill   (included  in  other   assets)  in  the   accompanying
               consolidated balance sheet.

               Minority interests at October 31, 1997 consist of 3,600 shares of
               Class B,  nonvoting  shares of Support.  Such shares,  issued for
               $358,200  Canadian  ($254,214  U.S.  at October  31,  1997),  are
               entitled  to  noncumulative  dividends  of $8 per  share  and are
               redeemable  at the option of the  Company for  $540,000  Canadian
               ($383,238 U.S.). To date, no dividends have been declared or paid
               with respect to such shares.

          6.   Use of Estimates

               In preparing  financial  statements in conformity  with generally
               accepted  accounting  principles,  management is required to make
               estimates  and  assumptions  that affect the reported  amounts of
               assets and  liabilities  and the disclosure of contingent  assets
               and  liabilities  at the  date of the  financial  statements  and
               revenues and expenses during the reporting period. Actual results
               could differ from those estimates.

                                      F-9
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE C (continued)

          7.   Income Taxes

               Deferred income taxes are recognized for the tax  consequences of
               temporary  differences by employing  enacted  statutory tax rates
               applicable to future years to  differences  between the financial
               statement  carrying  amounts and the tax bases of existing assets
               and liabilities.  The effect on deferred taxes of a change in tax
               rates is  recognized  in income in the period that  includes  the
               enactment  date. A valuation  allowance has been  established  to
               offset the deferred tax assets as it is more likely than not that
               such deferred tax assets will not be realized.

          8.   Stock-based Compensation

               During fiscal 1997, the Company adopted SFAS No. 123, "Accounting
               for Stock-Based  Compensation." As permitted under this standard,
               the  Company  elected  to  continue  to account  for  stock-based
               compensation  using the  intrinsic  value  method  prescribed  in
               Accounting Principles Board Opinion No. 25, "Accounting for Stock
               Issued to Employees," and related  interpretations.  Accordingly,
               compensation expense for stock options is measured as the excess,
               if any, of the fair value of the  Company's  stock at the date of
               grant over the amount an employee  must pay to acquire the stock.
               Pro forma  disclosures  of net income and income per common share
               for fiscal 1996, as if the fair value-based  method prescribed by
               SFAS No. 123 had been applied in measuring  compensation expense,
               are presented in Note I.

          9.   Net (Loss) Income Per Share

               Net  (loss)  income  per share of common  stock is based upon the
               weighted average number of shares  outstanding  during each year.
               Common stock equivalents  consist of additional shares that would
               be  outstanding  assuming  the  exercise of dilutive  outstanding
               stock   options.   Potential   common  stock   equivalents   from
               outstanding  stock options are excluded in computing net loss per
               share for fiscal 1997 as their effects would be antidilutive.  No
               common  stock  equivalents  were  included  in the net income per
               common share  calculation  during fiscal 1996 as their  inclusion
               would not be materially dilutive.

                                      F-10
<PAGE>

                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE C (continued)

          10.  Revenue Recognition

               Revenue from license fees is  recognized at the later of delivery
               of software  master copy or, if  applicable,  fulfillment  of all
               other significant  obligations under terms of license agreements.
               The Company has no significant  expenditures  relating  either to
               warranties or  post-contract  customer  support  bundled with the
               initial  sale of the license  and,  therefore,  no  provision  is
               included  in the  consolidated  financial  statements.  For those
               agreements where there is uncertainty as to ultimate  collection,
               revenue  is  recognized   only  as  cash  is  received.   Systems
               consulting and implementation  fees and hardware  commissions are
               recognized  upon  rendering  of  services.   Custom  programming,
               communication and database income, and service bureau and support
               revenue  are  recognized  ratably  over  applicable   contractual
               periods or as services are performed.  Amounts billed but not yet
               earned and payments received prior to the earnings of the revenue
               are recorded as deferred revenue.

          11.  Cash Flows

               For  purposes  of the  statements  of  cash  flows,  the  Company
               considers all highly liquid debt  instruments  purchased  with an
               original maturity of three months or less to be cash equivalents.
               The Company paid  interest of  approximately  $57,800 and $47,600
               during the years ended October 31, 1997 and 1996, respectively.

          12.  Accounting Pronouncements Not Yet Adopted

               In February 1997,  SFAS No. 128,  "Earnings Per Share" was issued
               and is effective  for financial  statements  for both interim and
               annual periods ending after December 15, 1997.  Early adoption of
               the new standard is not  permitted.  The new standard  eliminates
               primary  and  fully  diluted  earnings  per  share  and  requires
               presentation  of basic and diluted  earnings  per share  together
               with  disclosure of how the per share amounts were computed.  The
               adoption of this new  standard is not expected to have a material
               impact on the  disclosure  of earnings per share in the Company's
               financial statements.


                                      F-11
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE C (continued)

               In June 1997, SFAS No. 130, "Reporting  Comprehensive Income" was
               issued.  SFAS No. 130  establishes  standards  for  reporting and
               display of  comprehensive  income and its  components  (revenues,
               expenses,  gains  and  losses)  in a full set of  general-purpose
               financial  statements.  SFAS No. 130 requires that all items that
               are  required to be  recognized  under  accounting  standards  as
               components  of  comprehensive  income be  reported in a financial
               statement  that is displayed  with the same  prominence  as other
               financial  statements.  SFAS No. 130 requires  that a company (a)
               classify items of other comprehensive income by their nature in a
               financial  statement and (b) display the  accumulated  balance of
               other comprehensive  income separately from retained earnings and
               additional  paid-in  capital in the equity section of the balance
               sheet. SFAS No. 130 is effective for fiscal years beginning after
               December 15, 1997.  Reclassification of financial  statements for
               earlier periods  provided for  comparative  purposes is required.
               The  adoption of SFAS No. 130 is not  expected to have a material
               affect on the Company's consolidated financial statements.

               In June 1997,  SFAS No. 131,  "Disclosures  about  Segments of an
               Enterprise  and Related  Information,"  was issued.  SFAS No. 131
               establishes  standards for the way that public  companies  report
               selected information about operating segments in annual financial
               statements  and requires  that those  companies  report  selected
               information about segments in interim financial reports issued to
               shareholders.   It  also   establishes   standards   for  related
               disclosures  about  products and services,  geographic  areas and
               major  customers.  SFAS No. 131,  which  supersedes  SFAS No. 14,
               "Financial Reporting for Segments of a Business  Enterprise," but
               retains  the  requirement  to  report   information  about  major
               customers,  requires that a public company  report  financial and
               descriptive  information about its reportable operating segments.
               Operating  segments are  components of an enterprise  about which
               separate  financial  information  is available  that is evaluated
               regularly by the chief  operating  decision maker in deciding how
               to allocate  resources and in assessing  performance.  Generally,
               financial  information  is  required  to be reported on the basis
               that it is used internally for evaluating segment performance and
               deciding  how to allocate  resources  to  segments.  SFAS No. 131
               requires that a public company report a measure of segment profit
               or loss,  certain specific revenue and expense items, and segment
               assets.  However, SFAS No. 131 does not require that reporting of
               information that is not prepared for internal use if reporting it
               would be impracticable.  SFAS No. 131 also requires that a public
               company  report  descriptive  information  about the way that the
               operating  segments  were  determined,  the products and services
               provided  by the  operating  segments,  differences  between  the
               measurements used in reporting segment information and those used
               in the enterprise's  general-purpose  financial  statements,  and
               changes in the  measurement  of segment  amounts  from  period to
               period.  SFAS No. 131 is effective for financial  statements  for
               periods  beginning  after December 15, 1997. The adoption of SFAS
               No.  131  is  not  expected  to  have a  material  affect  on the
               Company's segment disclosure.

                                      F-12
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE C (continued)

               In October 1997, the  Accounting  Standards  Executive  Committee
               ("AcSEC")   of  the  American   Institute  of  Certified   Public
               Accountants issued Statement of Position ("SOP") 97-2,  "Software
               Revenue  Recognition".  SOP 97-2 provides  guidance on the timing
               and  amount  of  revenue  recognition  when  licensing,  selling,
               leasing or otherwise marketing computer software and is effective
               for transactions entered into during fiscal years beginning after
               December 15, 1997. On March 18, 1998,  the  Financial  Accounting
               Standards  Board issued a new SOP that  provides for the one-year
               deferral  of certain  provisions  of SOP 97-2  pertaining  to its
               requirements for what constitutes vendor specific evidence of the
               fair value of multiple elements included in an arrangement. It is
               AcSEC's  intention  to  immediately  begin a project to  consider
               whether  guidance  is needed on any  restrictions  that should be
               placed on what  constitutes  evidence  of fair value and,  if so,
               what the guidance  should be. Because of the  uncertainties  with
               respect to the outcome of any such project,  the Company believes
               that the  impact of the  deferred  provisions  of SOP 97-2 on its
               financial  position or results of operations  upon  expiration of
               the  one-year  deferral  period  is not  currently  determinable.
               However,  the Company  believes that those provisions of SOP 97-2
               that  have  not  been  deferred,  and  therefore  are  applicable
               commencing  January  1,  1998,  will not  materially  affect  its
               consolidated financial position or results of operations.

               In February  1998,  AcSEC  issued SOP 98-1,  "Accounting  for the
               Costs of Computer  Software  Developed  or Obtained  for Internal
               Use" which is effective for years  beginning  after  December 15,
               1998. SOP 98-1  establishes  the accounting for costs of software
               products  developed or purchased for internal use, including when
               such costs should be capitalized. The Company does not expect SOP
               98-1 to have a significant  impact on the Company's  consolidated
               financial condition or results of operations.

          13.  Reclassifications

               For  comparative  purposes,  certain prior year amounts have been
               reclassified to conform to the current year presentation.

                                      F-13
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE D - INVESTMENT TAX CREDITS RECEIVABLE

     The  Company  has  filed  claims  for  Canadian   investment   tax  credits
     aggregating  $946,053  for fiscal  years ended  October  31,  1992  through
     October 31, 1997.  These scientific  research and experimental  development
     investment tax credits are available to certain  entities located in Canada
     for  qualified  scientific  research  expenditures.  The rate of credit for
     qualified  research and development  expenditures  varies  according to the
     status of the company  and, in certain  instances,  the  company's  taxable
     income for the prior year. Credits  aggregating  approximately  $64,000 and
     $290,000, in 1998 and 1997, respectively, have been recorded as a reduction
     in research and development expense.

     In September 1998, Revenue Canada, the Canadian taxing authority, issued an
     assessment to the Company with respect to its claims for fiscal years ended
     October  31,  1992  through  October  31,  1995 and an  assessment  for the
     Company's  claim  related to fiscal  1996  followed  in January  1999.  The
     assessments  resulted from the  completion of both financial and scientific
     audits.

     All  of  the  Company's  claims  were  subjected,  by  Revenue  Canada,  to
     reductions  based on Revenue  Canada's  disallowance  of  certain  expenses
     related to projects deemed non-qualifying. In addition, Revenue Canada also
     denied the  Company's  claims for the  enhanced  refundable  credit for the
     fiscal years ended  October 31, 1994 through  October 31, 1996 on the basis
     that  the  Company  did  not  qualify  as  a  Canadian-controlled   private
     corporation ("CCPC").

     The Company  challenged these assessments  through the filing of Notices of
     Objection for each of the claim years.  Accordingly,  after a review of the
     file by Revenue  Canada  Appeals,  CCPC status was conferred on the Company
     and the local appeals officer was ordered to reassess.

     The  Company  continues  to object  to the  reductions  resulting  from the
     scientific  audits. At this time, the Company cannot  reasonably  determine
     the  likelihood of success in appealing the  reductions  resulting from the
     scientific audits and has therefore recorded an allowance in fiscal 1997 of
     $296,029  against its  scientific  research  and  experimental  development
     investment  tax  credits  receivable.   Due  to  continued  delays  in  the
     processing of such appeals at Revenue Canada, it is estimated that a result
     may take  over one  year to  obtain.  To date,  the  Company  has  received
     approximately  $285,000  of  such  credits,  which  have  been  applied  to
     outstanding payroll taxes (see Note J).


                                      F-14

<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE E - FIXED ASSETS

     Fixed assets consist of the following:
                                                        Useful
                                                        life             1997
                                                        ------           ----
      Computer software                                5-10 years    $  411,328
      Computer equipment                               5-10 years       374,175
      Furniture and fixtures                           5-20 years        46,507
      Leasehold improvements                           5-10 years       142,298
      Office equipment                                    5 years        78,086
                                                                      ---------
                                                                      1,052,394
      Less accumulated depreciation and amortization                   (648,919)

                                                                     $  403,475
                                                                      =========

     Amortization expense for capitalized software totaled approximately $65,500
     and  $75,000  in 1997  and  1996,  respectively.  Accumulated  amortization
     approximated $362,000 at October 31, 1997.


NOTE F - TRANSACTIONS WITH RELATED PARTIES

     Notes Receivable - Former Chairmen

     1.   The  Company's  former  Chairman's  (through  December  1, 1993) total
          indebtedness (the "Note") to the Company of $804,000 as of November 1,
          1993 is payable in equal monthly  installments  over a ten-year period
          together  with  interest  at 4-1/2% per annum.  Further,  the  Company
          entered into a ten-year consulting agreement,  as of November 1, 1993,
          with the former Chairman providing for fees payable substantially upon
          the same terms of the indebtedness repayment. As of the fourth quarter
          of fiscal  1997,  the  Company  has  written-off  the note  receivable
          against  future   payments  due  to  the  former  Chairman  under  the
          consulting  agreement  as the Company no longer  expects to derive any
          substantive services from the former Chairman.

          Accordingly,  the Company has  recorded a charge  against  earnings of
          $599,456.

                                      F-15
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996


NOTE F (continued)

     2.   In 1993, Support charged its parent company,  Navtech Applied Research
          Inc.  ("NARI"),  the successor  company to Ray English and  Associates
          Inc.  ("REA"),  a management and marketing fee in connection  with the
          management of certain software owned by EAS,  formerly a subsidiary of
          NARI.  Support also advanced  funds to NARI in order to assist NARI in
          meeting its  obligations.  NARI was owned by a former  chairman of the
          Company  (for the period  from  December 1, 1993  through  October 31,
          1994) who resigned from that  position on October 31, 1994.  Effective
          July 15, 1995,  NARI  executed  and  delivered to Support a promissory
          note in the principal amount of $750,000 Canadian (the "NARI Note") to
          evidence certain obligations to Support as of such date. The NARI Note
          is  payable  on July 15,  2005 (or  sooner,  as  described  below) and
          provides for interest at the rate of 5% per annum payable annually.

          Further, pursuant to a consulting and marketing agreement between NARI
          and Support,  NARI was to provide software  marketing  services to the
          Company.  Support had the right to offset  $3,500  Canadian  per month
          ($2,484  U.S.  at October 31,  1997)  against  compensation  otherwise
          payable to NARI  thereunder as a payment of amounts due under the NARI
          Note.  The  consulting  and  marketing  agreement  also  provided  for
          finder's fees and  commissions  of 2% and 10%,  respectively,  for the
          introduction  of potential  clients and for the licensing of software.
          Further, the Company had the right to apply 10% to 25%, as defined, of
          the finder's fees and commissions  against amounts  outstanding on the
          NARI Note.

          Concurrent  with the signing of the NARI Note,  NARI also  transferred
          all of its common  stock of the Company  (802,766  shares) to a Voting
          Trust ("Trust") under the sole  administration  of Dorothy A. English.
          Mrs. English is an Executive Vice President of the Company.  Effective
          with the  succession  of REA by NARI during  1998,  Dorothy A. English
          became the sole  shareholder of NARI and at such time the voting trust
          was revoked  and the common  stock of the Company was placed in escrow
          as collateral for amounts payable by NARI to the former chairman under
          a share transfer agreement.  Further,  the above consulting  agreement
          between NARI and Support was terminated.

          The Company has provided  for an allowance of $300,000  Canadian as of
          October 31,  1997  ($212,910  U.S. as of October 31,  1997) to reflect
          management's estimate of the amount ultimately  collectible from NARI.
          Such estimate is based principally on the estimated net worth of NARI,
          which, in turn, is  substantially  based upon the estimated fair value
          of the common shares of the Company beneficially owned by NARI.

                                      F-16

<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE F (continued)

     Since the amount due from NARI is in all likelihood  recoverable  only from
     amounts  payable by the Company to NARI or from the  proceeds  derived from
     NARI's sale of the Company's common stock, the amount due from NARI, net of
     allowance,  has been  classified as a separate  component of  shareholders'
     equity.

     Due to Related Parties

     Due to related parties at October 31, 1997 consists of the following:

               Support shareholder demand loans (i)               $  35,485
               Accrued interest (i)                                  57,847
               Loans payable - related parties (ii)                  68,118
               Note payable - related party (iii)                    84,830
                                                                   --------
                                                                  $ 246,280


               (i)  Support  shareholder  demand loans bear  interest at 15% per
                    annum.  Interest  in the amount of $56,654 is in arrears and
                    is included in accrued interest.

               (ii) Loan payable - related party consists of a chattel  mortgage
                    on specific  computer  equipment in the  original  amount of
                    $120,000 Canadian due to a company owned by the brother of a
                    shareholder of the Company. This note was originally due May
                    10,  1997  and  bears  interest  at 15%  per  annum  payable
                    monthly.  Under an  agreement  dated  August  1,  1998,  the
                    balance of $95,982  Canadian  remaining  at that time,  plus
                    accrued  interest  through July 31, 1998, was payable in six
                    monthly payments of $5,000 Canadian each and then continuing
                    monthly  payments  of  $10,000  Canadian  until the loan and
                    interest have been paid off.

               (iii)Notes payable - related  parties  includes a note payable to
                    a company  related to a director  of the  Company and a note
                    payable to a director of the Company. Interest in the amount
                    of $1,193 on the latter  note is in arrears  and is included
                    in accrued  interest.  The payments on the note payable to a
                    company  related to a director of the Company are not fixed.
                    Amounts due on the note payable to a director of the Company
                    are due at various scheduled dated through March 2000.


                                      F-17
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE G - BANK REVOLVING DEMAND LOANS AND LONG TERM DEBT

     The Company has a revolving  bank demand loan facility  which  provides for
     borrowings of up to $115,000  Canadian  which are payable on demand.  These
     demand loans bear interest at the bank's prime rate plus 1.25%.

     Long-term debt is as follows as of October 31, 1997:

      Smallbusiness  bank loan  payable,  interest at the bank's  prime
      rate plus 1.75%,  payable in monthly principal payments of $5,123
      Canadian plus interest  based on a 48 month amortization period
                                                                       $156,329

      Less current portion                                              (43,627)
      Long-term portion                                                $112,702


      Substantially  all of the Company's  assets are pledged as collateral  for
      revolving  demand  loans and long term debt.  In addition,  the  revolving
      demand  loans are  hypothecated  by a U.S.  term  deposit in the amount of
      $50,000 (U.S.) which is presented as "restricted cash" in the accompanying
      balance sheet.


                                      F-18
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE H - INCOME TAXES

     The Company's  fiscal 1997 and 1996 effective  income tax rate differs from
     the statutory U.S. Federal income tax rate as a result of the following:

                                                   1997                    1996
                                                 ---------               -------

      Statutory U.S. Federal tax rate             (34.0)%                 34.0%
      Increase in valuation allowance              34.0
      Utilization of NOL carryforward                                    (34.0)
                                                 ---------               -------

                                                   -    %                 -    %
                                                =========              =========

     The  temporary  differences  which  give rise to  deferred  tax  assets and
     liabilities at October 31, 1997 are summarized as follows:

     Deferred tax assets
          Net operating loss carryforwards                            $ 425,000
          Deferred salaries and other compensatio                       313,000
          Allowance for doubtful accounts                               177,000
          Fixed assets                                                   24,000
                                                                       ---------

               Total deferred tax assets                                939,000
                                                                       ---------
    Deferred tax liabilities
          License fees receivable                                       (31,000)
          Scientific research and experimental development
             credits, net                                              (203,000)

               Total deferred tax liabilities                          (234,000)
                                                                       ---------
              Net deferred tax assets                                 $ 705,000
                                                                        ========
    Valuation allowance                                               $(705,000)


     During  fiscal  1997,  the  Company  increased  its  allowance  by $558,000
     principally  due to the  recognition of additional  U.S. net operating loss
     carryforwards.


                                      F-19
<PAGE>



                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE H (continued)


     The Company,  for United  States  purposes,  has available to offset future
     taxable income net operating loss carryforwards  approximating  $478,000 at
     October 31, 1997, which expire through 2017. For Canadian tax purposes, the
     Company has available  net  operating  loss  carryforwards  and  scientific
     research  and  experimental   development   credits  of  $693,000  Canadian
     ($500,000 U.S.) and $61,000 Canadian ($44,000 U.S.), respectively, expiring
     through  2001  and  2006,  respectively.  The  Company  has  established  a
     valuation  allowance  with respect to its net  deferred  tax assets,  as it
     cannot presently assess the utilization of such deferred tax assets as more
     likely than not.


NOTE I - STOCK OPTIONS

     The Company has adopted an incentive  stock option plan which,  as amended,
     reserved  125,000  unissued  shares of common stock for the plan.  The plan
     requires  that all options be granted at exercise  prices not less than the
     fair market value of the stock on the date of grant. In September 1987, the
     Company  adopted a  nonqualified  stock option plan which  reserved  62,500
     unissued  shares of common stock for the plan.  The  Company's  subsidiary,
     Support,  has outstanding  options to purchase 300,000 shares of its common
     stock at exercise prices ranging from $.20 to $.50 Canadian per share.

     Further,  in 1995,  the Company  adopted the 1995 Key Advisor  Stock Option
     Plan (the "1995  Advisor  Plan"),  which  provides  for the granting to key
     employees and advisors of the Company of nonqualified stock options for the
     purchase  of a  maximum,  as  amended  in 1996,  of  700,000  shares of the
     Company's  common  stock.  Under the terms of the 1995  Advisor  Plan,  the
     options,  which expire no later than ten years after grant, are exercisable
     at a price determined by the Board of Directors,  and become exercisable in
     accordance with terms established at the time of the grant.


                                      F-20
<PAGE>



                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996




NOTE I (continued)

  Summary information with respect to the stock option plans follows:

<TABLE>
  <S>                             <C>             <C>             <C>              <C>
                                  Range of        Outstanding       Weighted       Outstanding
                                  exercise          options          average         options
                                   prices           granted       exercise price   exercisable
                                  --------        -----------     --------------   -----------

  Balance at November 1, 1995   $0.625 - $3.24     1,228,377          0.658          427,877

  Terminated                     0.625              (600,000)         0.625
  Granted                        0.625                25,000          0.625
  Became exercisable             0.625 - 3.24                                        225,250
                                                   ---------                         -------

  Balance at October 31, 1996   0.625 - 3.24         653,377          0.687          653,127

  Expired                       0.625 - 3.24         (27,001)         0.77           (26,751)
                                                   ----------                        --------

  Balance at October 31, 1997   0.625 - 1.88         626,376          0.684          626,376
                                                   ==========                        ========

</TABLE>

The following table summarizes  information concerning currently outstanding and
exercisable nonqualified stock options:

<TABLE>
   <S>                       <C>                  <C>                 <C>
                                                  Weighted-average
                             Number outstanding       remaining       Weighted-average
                                   and            contractual life       exercise
                                exercisable            (months)             price
  Range of exercise prices
            $0.00 to $0.99        550,000                 33                $.625
            $1.00 to $1.88         76,376                 68                $1.11


The  weighted-average  option fair value on the grant date was $0.17 for options
issued during the year ended October 31, 1996.

                                      F-21
</TABLE>
<PAGE>



                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE I (continued)

     The  Company  has adopted  the  disclosure  provisions  of SFAS No. 123, it
     applies APB Opinion No. 25 and related  interpretations  in accounting  for
     the plans and does not recognize  compensation  expense for such plans.  If
     the Company had elected to recognize  compensation  expense  based upon the
     fair value at the grant dates for awards under these plans  consistent with
     the  methodology  prescribed  by SFAS No. 123, the  Company's  reported net
     income  and  income  per share  would be  reduced  to the pro forma  amount
     indicated below for the fiscal year ended October 31, 1996:

                                                               1996
                                                               ----
      Net income                                             $149,666
           As reported                                        145,416
           Pro forma
      Income per common share
           As reported                                         $0.09
           Pro forma                                           $0.09

     There were no options issued by the Company in fiscal 1997, therefore there
     is no pro forma effect presented.

     These pro forma  amounts may not be  representative  of future  disclosures
     because they do not take into effect pro forma compensation expense related
     to grants  made before  fiscal  1996.  The fair value of these  options was
     estimated at the date of grant using the Black-Scholes option-pricing model
     with the following  weighted-average  assumptions for the fiscal year ended
     October 31, 1996:  expected  volatility of 30%;  risk-free interest rate of
     5.50%; and expected term of 3 years.

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating  the  fair  value  of  traded  options  which  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models  require  the use of highly  subjective  assumptions  including  the
     expected  stock price  volatility.  Because the  Company's  employee  stock
     options have characteristics  significantly  different from those of traded
     options,  and because changes in the subjective  assumptions can materially
     affect the fair value estimate in management's opinion, the existing models
     do not  necessarily  provide a reliable single measure of the fair value of
     its employee stock options.



                                      F-22
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE J - COMMITMENTS AND CONTINGENCIES

     1.  Failure to File Timely Reports

         By letter dated March 2, 1998, the  Securities and Exchange  Commission
         (the  "Commission")  advised the Company that it had failed to file its
         Annual  Report on Form  10-KSB for the fiscal  year ended  October  31,
         1997. In such letter, the Company was advised by the Commission that it
         reserved the right to bring an enforcement  action, as appropriate,  at
         any time.

         This  failure to file on a timely  basis  could  expose the  Company to
         enforcement  actions by the Securities and Exchange  Commission,  which
         could include civil penalties against the Company for violations of the
         reporting  requirements of Section 13(a) of the Securities Exchange Act
         of 1934, as amended (the  "Exchange  Act"),  and the rules  thereunder.
         Pursuant  to the  Exchange  Act,  the  amount of the  penalty  shall be
         determined  by the  court  in  light of the  facts  and  circumstances;
         however, for each violation,  the amount of the penalty, with regard to
         a company,  cannot exceed the greater of $50,000 or the gross amount of
         pecuniary  gain  to the  Company  as a  result  of any  violation.  The
         Exchange Act provides for  substantially  greater maximum  penalties in
         the  event the  violation  involved  fraud,  deceit,  manipulation,  or
         deliberate  or reckless  disregard of a regulatory  requirement  and/or
         such violation directly or indirectly resulted in substantial losses or
         created a significant risk of substantial losses to other persons.

         The Company  has also  failed to file its Annual  Report on Form 10-KSB
         for the fiscal year ended  October 31,  1998 and  Quarterly  Reports on
         Form 10-QSB for the fiscal  quarters ended January 31, 1998,  April 30,
         1998,  July 31,  1998,  January 31,  1999,  April 30, 1999 and July 31,
         1999.

         The  Company  intends to file its Annual  Report on Form 10-KSB for the
         fiscal year ended  October 31, 1997;  its Annual  Report on Form 10-KSB
         for the fiscal year ended October 31, 1998;  and its Quarterly  Reports
         on Form 10-QSB for the fiscal  quarters  ended January 31, 1998,  April
         30, 1998, July 31, 1998,  January 31, 1999, April 30, 1999 and July 31,
         1999 all on or before  October 20,  1999.  No  assurances  can be given
         that,  notwithstanding  the  Company's  filing  of  the  aforementioned
         documents on or before the date set forth above,  the  Commission  will
         not seek to recover civil  penalties from the Company.  Any such action
         taken by the  Commission  could have a material  adverse  effect on the
         Company's financial position,  liquidity and results of operations.  As
         the Company cannot presently predict, with any certainty,  the ultimate
         outcome  of this  matter,  no  amounts  have been  provided  for in the
         accompanying consolidated financial statements.

     2.  Operating Lease Commitments

         The Company leases equipment and office space pursuant to various lease
         agreements  which expire through fiscal 2006. The annual rent of office
         space  consists of minimum  rent,  real estate taxes,  maintenance  and
         other expenses. The Company also leases certain computer equipment from
         a company  controlled  by the spouse of an Officer and  Director of the
         Company pursuant to an agreement which expires in fiscal 2000.


                                      F-23
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE J (continued)

     Future minimum annual rental payments pursuant to these leasing  agreements
     as of October 31, 1997 are summarized as follows:

                                                  Related
                Office                             party
                space           Equipment         equipment          Total
              ---------          ---------         --------         ---------
     1998     $  98,611          $30,084          $14,478           $143,173
     1999        58,660            26,467           26,827           111,954
     2000        56,283            22,625           29,665           108,573
     2001        62,904             9,429                             72,333
     2002        62,904             7,886                             70,790
              ---------          --------         ---------          --------

              $ 339,362           $96,491          $70,970           $506,823
              =========          ========         =========          ========

     Rental  costs  for  fiscal  1997  and  1996  were  $199,207  and  $162,468,
     respectively.  Rental cost incurred in 1997 and 1996 in connection with the
     equipment   lease  with  the  related   party  was  $21,049  and   $11,448,
     respectively.

     3.   Employment and Consulting Contracts

          The Company has entered into employment and consulting agreements with
          its chairman,  chief executive officer, former chairmen and a director
          of the Company,  which provide for minimum monthly  compensation.  The
          Company's  obligations  under such agreements  expire at various times
          during the period from September 1997 through March 31, 2004. Further,
          the Company has entered into a retirement  agreement with its chairman
          dated August 5, 1999,  which  provides for,  among other  things,  the
          payment of 96 consecutive  semi-monthly  payments of $6,250 commencing
          November 25, 1999 for services  rendered for the period from  November
          1996 through  March 1997.  The Company has provided for  approximately
          $150,000 relating to the net present value of the services provided by
          the  chairman  during  fiscal 1997.  Concurrent  with the term of this
          retirement  agreement,  the Company has also agreed to  reimburse  the
          chairman for expenses  incurred in the amount of $60,594 (payable over
          the period August 1999 to May 2000) and to obtain a declining  balance
          life  insurance  policy on the chairman  commencing  with  coverage at
          $630,000 and  declining  at a rate of $150,000 per year.  The proceeds
          would be payable in full settlement of any remaining obligation at the
          time of the former  chairman's  demise.  All amounts due by promissory
          notes  contain  acceleration  provisions  in the event of, among other
          things, default in payment.

                                      F-24

<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE J (continued)

     Approximate aggregate minimum compensation obligations under all agreements
     at October 31, 1997 are summarized as follows:

              Year                                          Amount
              ----                                          ------
              1998                                       $   323,000
              1999                                           205,000
              2000                                           188,000
              2001                                           131,000
              2002                                           120,000
              Thereafter                                     170,000
                                                           ----------
                                                          $1,137,000
                                                           =========

     4.   Nonremittance of Payroll Taxes

          During and as of the year ended October 31, 1997,  the Company has not
          timely remitted to the respective tax collecting jurisdictions payroll
          taxes  withheld from  employees'  earnings.  At October 31, 1997,  the
          unremitted   balance   aggregated   approximately   $269,000  Canadian
          ($191,000 U.S. and included in accrued and other liabilities) which is
          subject to additional penalty and interest charges until paid.

     5.   Legal Proceedings

          The  Company  is  subject to  various  legal  proceedings,  claims and
          liabilities which arise in the ordinary course of its business. In the
          opinion of  management,  the  amount of any  ultimate  liability  with
          respect to these  actions will not have a material  adverse  effect on
          the  Company's  consolidated  results  of  operations,  cash  flow  or
          financial position.


NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS AND
                 BUSINESS CONCENTRATIONS

     The carrying  amounts of cash,  accounts  receivable,  and  investment  tax
     credits  receivable  are estimated to  approximate  their fair values.  The
     Company  believes  that the carrying  amount of its bank  revolving  demand
     loans  and  long-term  debt  approximates  the fair  value as the  variable
     interest  rate  approximates  the current  prevailing  interest  rate.  The
     Company  believes that it is not  practicable to estimate the fair value of
     its other liabilities due to its current financial condition.

     In fiscal 1997,  two  customers  each  accounted  for 11% of the  Company's
     consolidated revenues, and, in 1996, three customers accounted for 13%, 11%
     and 10%, respectively, of the Company's consolidated revenues.

                                      F-25
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE L - OFFICE RELOCATION COSTS AND RESTRUCTURING CHARGES

     During  fiscal  1997,  the  Company  moved its  Canadian  facility to a new
     facility in Waterloo,  Ontario.  Costs  associated with this relocation are
     recorded in the accompanying Statements of Operations as "office relocation
     costs" and aggregated $67,678 during fiscal 1997.

     In addition,  as a result of the  Company's  consolidation  of its New York
     facility into the new Waterloo,  Ontario facility, which was also completed
     in fiscal 1997, the Company has recorded  $90,948 of pre-tax  restructuring
     charges.  The restructuring  charges include costs incurred for moving from
     the New York facility to the recently  acquired  Canadian  facility.  As of
     October 31, 1997,  all expenses have been incurred  pertaining to the above
     mentioned charges.


NOTE M - FOURTH QUARTER ADJUSTMENTS

     During the fourth  quarter of fiscal  1997,  the  Company  wrote off a note
     receivable from its former Chairman against earnings aggregating  $599,456,
     established  an allowance of $296,029  against its  investment  tax credits
     receivable   and  increased   the   allowance  for  doubtful   accounts  by
     approximately $106,297.


NOTE N - INDUSTRY SEGMENT INFORMATION AND GEOGRAPHIC AREA OPERATIONS

     The Company operates in one business segment, providing computerized flight
     planning  services  and  software  to  commercial  airlines  and  corporate
     aircraft users in the aviation industry.

     A summary of the Company's  operations  by  geographic  area for the fiscal
     years ended October 31, 1997 and 1996 is as follows:


                                      F-26
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1997 and 1996



NOTE N (continued)
<TABLE>
<S>                                      <C>            <C>
                                                1997           1996
                                         -----------    -----------

Net sales
    United States ....................   $ 2,052,518    $ 2,970,308
    Canada ...........................       523,556        368,743
    Other ............................       214,293        235,538
                                         -----------    -----------

        Total net sales ..............   $ 2,790,367    $ 3,574,589
                                         -----------    ===========

Operating (loss) profit
    United States ....................   $(1,165,939)       556,944
    Canada ...........................      (626,882)      (418,770)
                                         -----------    -----------

         Total operating (loss) income   $(1,792,821)   $   138,174
                                         ===========    ===========

Identifiable assets
    United States ....................   $ 1,040,648    $ 1,570,299
    Canada ...........................       995,610      1,095,580
    Eliminations .....................      (851,131)      (850,981)
                                         -----------    -----------

         Total identifiable assets ...   $ 1,185,127    $ 1,814,898
                                         ===========    ===========

</TABLE>


                                      F-28


<PAGE>

                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  the  registrant  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: October 20, 1999                                        COMPUFLIGHT, INC.


                                                        By: /s/ Russell K. Thal
                                                            --------------------
                                                            Russell K. Thal,
                                                            Chairman of the
                                                            Board of Directors


         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.

         Signatures               Capacity                              Date
         ----------               --------                              ----

/s/ Russell K. Thal           Chairman of the Board of          October 20, 1999
----------------------        Directors, Executive Vice-
Russell K. Thal               President and Director


/s/ Duncan Macdonald          Chief Executive Officer           October 20, 1999
---------------------------   (Principal Executive Officer)
Duncan Macdonald

/s/ Dorothy A. English        Executive Vice President          October 20, 1999
---------------------------   and Director
Dorothy A. English

/s/ Denis L. Metherell        Secretary and Director            October 20, 1999
---------------------------
Denis L. Metherell

/s/ Kenneth M. Snyder         Director                          October 20, 1999
---------------------------
Kenneth M. Snyder

/s/ Rainer Vietze             Chief Financial Officer           October 20, 1999
---------------------------
Rainer Vietze