1998 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, 1998
                          ------------------------------------------------------

[ ] 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): $ 3,849,746

     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.
                         1998 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 - COMRAD(TM)

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(TM),  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(TM) 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 and $169,700 for
the years ending October 31, 1997 and 1998,  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, 1998.



<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, 1998          High           Low
-----------------         ----           ---

First Quarter            $.5625          $.45

Second Quarter            .45             .45

Third Quarter             .50             .45

Fourth Quarter            .50             .375


Fiscal Year Ended
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

<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

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  licenses of software.  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 increased  approximately $1.0 million,  or approximately 38%, from
approximately $2.8 million in 1997 to approximately $3.8 million in 1998.

Geographic Analysis

<TABLE>
    <S>                        <C>              <C>              <C>             <C>
                                    Total Revenue (in $'000)              % of Total Revenue
                               ------------------------------------ -------------------------------
                                                  For the year ended October 31
                               --------------------------------------------------------------------
                                    1998             1997             1998             1997
    -------------------------- ---------------- ---------------- --------------- ------------------

    United States              $      3,092     $      2,052            80%              73%
    Canada                              528              524            14%              19%
    Other jurisdictions                 230              214             6%               8%
                                    -------         --------        --   --         --    --
                               $      3,850     $      2,790           100%             100%
                                    =======          =======           ====             ====

</TABLE>
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  1998,   the  Company   derived
approximately  $3.1  million  from sales in the  United  States as  compared  to
approximately  $2.1 million in fiscal 1997.  This increase is due primarily to a
net increase in fees to existing customers of approximately  $805,000, a loss of
revenue of approximately $180,000 related to lost contracts and bankruptcies (of
which  there  were  four  such  customers)  and the  addition  of new  customers
representing approximately $395,000 in further revenues, mainly from weather and
NOTAMs  customers.  Included in the increase  from  existing  customers  are the
proceeds  of  software  license  sales  to  two  larger  customers   aggregating
approximately $497,000.  Sales in Canada accounted for approximately $528,000 in
fiscal 1998 as compared to approximately  $524,000 in fiscal 1997. This increase
is due primarily to an increase in Canadian customer billings and customer base.
Sales in other jurisdictions  amounted to approximately  $230,000 in fiscal 1998
as compared  to  approximately  $214,000 in fiscal  1997,  which  represents  an
increase of approximately  $16,000,  or  approximately  7%. This increase is due
primarily to the addition of several foreign weather customers.

Service Fees

Revenue  from service  fees was  approximately  $3.3 million in 1998 as compared
with  approximately  $2.7 million in 1997, an increase of approximately  25%, or
approximately $674,000. The increase is primarily attributable to a net increase
in fees to  existing  customers  of  approximately  $855,000.  Specifically  the
increases have resulted from upgrades to existing software and equipment as well
as additions to customer  fleets,  which in turn led to a  requirement  for more
services, and the provision of weather and NOTAMs data. Furthermore, the company
signed  several  new  customers  to its service  bureau  services as well as the
increasing  the revenues  from the provision of weather  services.  As a result,
fees  from new  customers  obtained  during  the year  aggregated  approximately
$107,000.  Offsetting  these  increases  were  decreases  related to the loss of
customers through their bankruptcy or non-renewal of services in the appropriate
amount of $288,000.

Hardware Sales and Software Licenses Sales

Revenue from  hardware,  software,  and license  sales  increased  approximately
$385,000,  or  approximately  308%,  from  approximately  $125,000  in  1997  to
approximately  $510,000 in 1998. The company sold two AURORA systems licenses in
1998 at an average cost of approximately $250,000.  These sales effectively have
few costs  associated with them as the  development  costs have been expensed as
occurred in prior years. 1997 revenue included two sales of the company's COMRAD
product at $40,000 per sale, as well the sale of an AURORA  license at a reduced
price to a Canadian-based simulation software company.


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.

Operating  expenses  were  approximately  $2.8  million  in 1998  compared  with
approximately  $2.4 million in 1997, an increase of approximately  $360,000,  or
approximately  15%.  This increase is primarily  attributable  to an increase in
salaries and benefits of  approximately  $245,000,  an increase in communication
costs of approximately $115,000 to the Monterey facility which opened July 1998.

Furthermore,  the impact of the royalty  agreement  between the company and NARI
resulted in an increase of approximately  $29,000.  This agreement is more fully
discussed  under  Item 12.  The  royalties  commenced  with the  opening  of the
Monterey facility.

These   increases   were  offset  by  decreases  in  computer   lease  costs  of
approximately  $12,000 and decreases in  subcontracting  costs of  approximately
$38,000.  The  subcontracting  costs  relate to the use of an  outside  computer
consultant in 1996 to assist in the  development  of COMRAD.  Lastly,  net other
costs increased approximately 21,000.

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  $35,000 in
1997 to approximately $24,000 in 1998,  representing a decrease of approximately
$11,000,  or approximately 31%. In fiscal 1998, the company turned its attention
to the sale of the AURORA system.  Development personnel are used extensively in
this process both for installation  activities and  customization of the program
for the end user. These activities are usually reimbursed by the customer and do
not fall  explicitly  within  research &  development  activities.  Furthermore,
development  staff also focussed more efforts on the improvement of the existing
systems.   The  Company  has  claimed   scientific   research  and  experimental
development  investment tax credits of approximately  $53,000 for the year ended
October  31, 1998 as  compared  to a claim of  approximately  $61,000 for fiscal
1997.

Selling, General, and Administrative Expenses

Selling,   general,  and  administrative  expenses  decreased  by  approximately
$606,000,  or  approximately  40%,  from  approximately  $1.5 million in 1997 to
approximately  $927,000 in 1998. This decrease can be attributed  primarily to a
decrease in professional and consulting fees of approximately $629,000, of which
approximately  $599,000 relates to the write down in 1997 of the note receivable
from a former  chairman of the Company.  The remaining  decrease  results from a
reduction in professional fees.

Also,  the  termination  of the NARI  management  agreement on July 15, 1998 has
resulted in a decrease of  approximately  $36,000  over the 1997 fiscal year and
travel  expenses have decreased  approximately  $19,000.  The aggregate of these
decreases was offset by increases in bad debt expense of approximately  $30,000,
insurance costs of  approximately  $21,000,  (the majority of which results from
premiums  to insure  the  Company's  receivable),  and a net  increase  in other
selling,  general and administrative  costs of approximately  $27,000.  The 1997
costs also included  one-time charges for  restructuring  costs of approximately
$91,000 and office relocation costs of approximately $68,000.


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  $97,000,  or approximately  93%, from
approximately  $105,000 in 1997 to approximately $202,000 in 1998. This increase
is  primarily  attributable  to the  increased  interest  costs  related  to the
factoring of the Company's receivables, the inclusion of interest from new loans
and the penalties and interest associated with the Company's  delinquent payroll
tax remittances.

NET EARNINGS

The financial statements reflect a net loss of approximately $539,000 for fiscal
1998, as compared to a net loss of  approximately  $1.8 million for fiscal 1997.
The loss in 1997  includes a one-time  adjustment  for the write-off of the note
receivable  from a former  chairman  for  approximately  $599,000  as well as an
allowance  taken against the Company's  investment tax credits of  approximately
$296,000.  The 1998 loss includes a one time provision for bad debt of a related
party for approximately $394,000.

These  reductions  have been offset by the increase in revenue of  approximately
$1.1 million and a decrease in all other costs and expenses,  exclusive of those
noted above, of approximately $334,000.


LIQUIDITY AND CAPITAL RESOURCES

In 1998, the Company financed a significant  part of its operations  through the
proceeds of a loan from a Canadian  financial  institution  as well as continued
negotiations  of  favorable  terms with the Company  suppliers.  The Company has
continued to enter into longer term repayment agreements with its supplies.

As of  October  31,  1998,  the  Company  had a working  capital  deficiency  of
$1,222,816. 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 for the second  quarter of 1999.  This is
more fully disclosed in the Form 10QSB for the period ended April 30, 1999.

Cash flows from  operations  amounted  to a net  inflow of  $166,302  in 1998 as
compared to a net outflow of $221,574 in 1997.  This inflow is primarily  due to
the reduction of the Company's net loss by the removal of non-cash items such as
depreciation and bad debt allowance. In addition, the Company had an increase in
net operating  liabilities.  Cash flows from investing  activities amounted to a
net outflow of  $341,628  as compared to a net outflow of $122,979 in 1997.  The
change is  primarily  attributable  to the loans  made to the  Company's  parent
company  during  the year and the  purchase  of fixed  assets.  Cash  flows from
financing  activities  amounted to a net inflow of $293,495 in 1997, as compared
to a net inflow of $147,020 in 1998.  This inflow is  attributable  primarily to
the receipt of loan  proceeds  and the proceeds  from the sale of shares.  These
receipts were reduced by amounts paid on existing loans

As of October 31,  1998,  the Company had no  significant  capital  commitments.
Reference is made to the  Company's  Form 10-KSB for the year ended  October 31,
1998 and Form 10-QSB for the quarter ended July 31, 1999 for a discussion of the
Company's  October 1, 1999  acquisition of all of the shares of Skyplan Services
(UK)  Limited.  Furthermore,  the  Company  may,  from  time to  time,  consider
additional acquisitions of complementary businesses, products or technologies.

The bank  indebtedness  as of October  31, 1998 net of  restricted  cash held as
security by the bank, was $86,858.


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,  1998,  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 the 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).

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.

PLAN OF OPERATION

The Company's  liquidity at October 31, 1998 was  insufficient to meet operating
requirements. The Company has therefore undertaken the following initiatives and
actions  to reduce  its  working  capital  deficiency  and  alleviate  cash flow
demands:

Management Team Development and Structure

The Company has continued to strengthen  the skill set of its  management  team.
While the  Company has always had  significant  strength in the areas of product
development and technical and  operational  support,  the recruitment  focus has
been on  intermediate  and senior  managers  that could bring  experience in the
areas of people management,  project planning and  implementation,  and business
strategy. The result of these activities has been realized in the development of
a true business  culture that includes  product  planning  strategies,  software
development  programs,  detailed  resource  management,  and more rigid internal
controls and procedures.

Trade Creditors

The Company's objective is to be current with all of its trade creditors.  As an
interim step,  the Company has  renegotiated  payment terms with several  larger
trade creditors  including its key suppliers of communication  services and with
federal tax authorities. The Company is continuing to actively pursue additional
extensions with its creditors.

Renegotiation of Demand Loans

During the past year, the company has been  successful in  renegotiating  two of
its demand loans, resulting in payment terms that reflect reduced interest rates
and fix repayment.

Increase Revenues from Existing Customers

The  Company's  products  and  services  are  used  by more  than  70  customers
worldwide.  By leveraging its solid market reputation,  the Company has focussed
its efforts on  expanding  current  customer  revenues by  providing  additional
products and services, by licensing additional users, and by upgrading customers
to higher level products as their needs arise. The introduction of the Company's
account  management  group has given the  Company  the  ability to more  readily
identify  these  potential  revenue  opportunities,   and  to  be  proactive  in
supplementing  the  efforts of the sales  group.  The  addition  of weather  and
NOTAMs,  and the  related  integration  of  these  systems  into  the  Company's
products,  has provided  another key component in the Company's  plans to become
the premier aviation flight operations systems supplier in the mid-range market.

Expanded Sales and Marketing Efforts

Sales and Marketing  activities  have  increased  significantly  during the past
year, as the Company's  product strategy has been  implemented.  The Company has
added  sales  staff to provide  more  representation  in our  traditional  North
American market,  while also  establishing  Agent  relationships to provide more
focus in other areas of the world  including  Asia and Europe.  This  successful
beginning of this plan has been evident by the Company's  success with the sales
programs of its largest new product offering, the Aurora Flight Planning system.

Business Rationalization

With new management in place,  the Company has  implemented a number of programs
aimed at more  effectively  utilizing  the  business's  assets,  while  shedding
redundant  activities.  Some of these  projects  include  the closure of a small
regional office, the subletting of unutilized office space, and the migration to
more cost-effective production equipment in the Monterey facility. While some of
these  projects may have  resulted in short term cost  increases,  the long term
cost savings are expected to be significant.

Summary

The Company's  management  team is committed to  implementing  and enhancing the
above noted activities. At the same time, a business evaluation process has been
put in place to regularly  review these  activities and to develop and implement
new programs as needed.

The benefits of these  projects  have been  immediate,  however the Company will
require additional  funding to achieve its stated plans and objective.  As such,
various  financing  sources,   including  debt  or  equity  offerings,  will  be
investigated  when  and if  such  financing  is  available  to the  Company.  No
assurances  can be given that any  required  financing  will be  available  with
commercially  reasonable terms or otherwise.  In addition,  no assurances can be
given that the  Company's  activities,  as set forth above,  will be  successful
whether due to lack of required financing or otherwise.

In carrying out its future  growth  strategy,  the Company will also continue to
investigate  possible  business  combinations  aimed at improving  the operating
efficiencies of the Company, and complementary  product lines or market regions,
and ultimately  enhancing  shareholder  value.  These business  combinations may
include  mergers and  acquisitions  of  businesses or  technologies,  as well as
strategic technology and marketing alliances.



<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                66     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,  1998,  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, 1998
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, 1998.


<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,    1998     -0-        -0-     $106,486(1)        -0-         -0-        -0-         -0-
    Chief       1997     -0-        -0-     $118,826(1)        -0-         -0-        -0-         -0-
  Executive     1996     -0-        -0-     $106,359(1)        -0-       200,000      -0-         -0-
   Officer

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

  Russell K.    1998  $143,683      -0-     $ 14,800(2)(3)     -0-         -0-        -0-         -0-
    Thal,       1997  $139,526      -0-     $ 14,800(2)(3)     -0-         -0-        -0-         -0-
   Chairman     1996  $135,863      -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, 1998 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, 1998 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, 1998                    at October 31, 1998
-------------------------------------------------------------------------------------------------------
              Name                    Exercisable/Unexercisable            Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------
        Duncan Macdonald                   -0-/200,000                              -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, 1998.

     (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, 1998                     F-3

        Consolidated Statements of Operations for the Years Ended
        October 31, 1998 and 1997                                            F-4

        Consolidated Statement of Shareholders' Deficit for the
          Years Ended October 31, 1998 and 1997                              F-5

        Consolidated Statements of Cash Flows for the Years Ended
          October 31, 1998 and 1997                                          F-6

        Notes to Consolidated Financial Statements                    F-7 - F-26



                                      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,  1998  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, 1998, 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,  1998,  the Company has a  deficiency  in working
capital and shareholders  equity of $1,222,816 and $762,603,  respectively,  and
has  incurred a net loss of $538,773 for the year ended  October 31, 1998.  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
October 15, 1999

                                      F-2
<PAGE>
<TABLE>

                       Compuflight, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEET

                                October 31, 1998

                                     ASSETS

<S>                                                                                                             <C>
 CURRENT ASSETS
     Accounts receivable, net of allowance for doubtful accounts
       of $301,512                                                                                              $   478,013
     Prepaid expenses and other                                                                                      20,509
                                                                                                                -----------
         Total current assets                                                                                       498,522
 INVESTMENT TAX CREDITS RECEIVABLE, NET OF ALLOWANCE                                                                438,689
 FIXED ASSETS, NET                                                                                                  309,626
 DUE FROM RELATED PARTY                                                                                             259,763

 RESTRICTED CASH                                                                                                     50,000

 OTHER ASSETS                                                                                                        21,054
                                                                                                                 $1,577,654
                                 LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES
     Cash overdraft                                                                                                $ 62,328
     Bank revolving demand loans                                                                                     74,530
     Accounts payable                                                                                               536,505
     Accrued and other liabilities                                                                                  775,929
     Due to related parties - current portion                                                                       139,207
     Current portion of long-term debt                                                                              118,748
     Current portion of deferred lease inducements                                                                   14,091
                                                                                                                 ----------
                                                                                                                  1,721,338
 DUE TO RELATED PARTIES                                                                                             115,440
 LONG-TERM DEBT                                                                                                     172,700
 DEFERRED LEASE INDUCEMENTS                                                                                          98,633
 MINORITY INTERESTS                                                                                                 232,146
 COMMITMENTS AND CONTINGENCIES
 SHAREHOLDERS' DEFICIENCY
     Common stock, par value $.001 per share; authorized
       2,500,000 shares; issued and outstanding,
       2,001,980 shares                                                                                               2,002
     Additional paid-in capital                                                                                   1,680,445
     Accumulated other comprehensive income                                                                          57,450
     Accumulated deficit                                                                                         (2,502,500)
                                                                                                                 ----------
                                                                                                                   (762,603)
                                                                                                                 $1,577,654
The accompanying notes are an integral part of this statement.
</TABLE>
                                      F-3
<PAGE>


                       Compuflight, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended October 31,


<TABLE>
<S>                                                                                 <C>                       <C>
                                                                                      1998                      1997
                                                                                    -------------             --------

Revenue
    Service fees                                                                       $3,339,818                $2,665,337
    Hardware, software and license sales                                                  509,928                   125,030
                                                                                       ----------                ----------

                                                                                        3,849,746                 2,790,367
                                                                                        ---------                 ---------

Costs and expenses
    Operating                                                                           2,758,518                 2,398,086
    Research and development, net                                                          24,413                    35,334
    Selling, general and administrative                                                   926,761                 1,532,665
    Allowance for reduction in scientific research and
      experimental development credits                                                                              296,029
    Restructuring costs                                                                                              90,948
    Office relocation costs                                                                                          67,678
    Depreciation and amortization                                                         133,833                   162,448
                                                                                       ----------                ----------

                                                                                        3,843,525                 4,583,188
                                                                                        ---------                 ---------

         Operating income (loss)                                                            6,221                (1,792,821)

Other income (expense)
    Interest income                                                                        52,501                    54,590
    Interest expense - related parties                                                    (46,126)                  (35,680)
    Interest expense - other                                                             (155,121)                  (68,834)
    Realized foreign exchange loss                                                         (1,795)                   (7,690)
    Provision for bad debt - related party                                               (394,453)
    Other                                                                                                            30,783
                                                                                   --------------               -----------

         NET LOSS                                                                       $(538,773)              $(1,819,652)
                                                                                         ========                ==========

Net loss per share - basic and diluted                                                     $(0.30)                   $(1.07)
                                                                                            =====                     =====

Weighted average number of common shares outstanding                                    1,801,980                 1,701,980
                                                                                        =========                 =========






The accompanying notes are an integral part of these statements.
</TABLE>
                                      F-4

<PAGE>


                       Compuflight, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT

                      Years ended October 31, 1998 and 1997


<TABLE>
<S>                            <C>                 <C>         <C>        <C>           <C>             <C>          <C>
                                                                 Notes     Accumulated
                                                   Additional  Receivable    other
                                  Common stock      paid -in     Former   comprehensive  Accumulated                 Comprehensive
                               -------------------
                                Shares    Amount    capital    Chairmen      income       deficit        Total          income
                               ---------  -------- ---------   ----------  ----------    -----------    --------      ------------

Balance at November 1, 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                                 599,456
Repayments from NARI - net                                        84,727                                  84,727
Foreign translation adjustment                                             (22,089)                      (22,089)         $(22,089)
Net Loss                                                                                 (1,819,652)   (1,819,652)      (1,819,652)
                               ---------  -------- ---------   ----------  ---------     -----------   -----------     -----------
Comprehensive loss                                                                                                     $(1,841,741)
                                                                                                                       ===========
Balance at October 31, 1997    1,701,980  1,702     1,545,745  (278,325)      43,070     (1,963,727)     (651,535)

Issuance of shares to NARI       300,000    300       134,700                                             135,000
Reclassification - NARI note                                    278,325                                   278,325
receivable
Foreign translation adjustment                                                14,380                       14,380           14,380
Net loss                                                                                   (538,773)     (538,773)        (538,773)
                               ---------  -------- ---------   ----------  ---------     -----------   -----------       ----------

Comprehensive loss                                                                                                     $  (524,393)
                                                                                                                        ===========
Balance at October 31, 1998    2,001,980 $2,002    $1,680,445  $             $57,450      $(2,502,500)   $(762,603)
                               =========  =====     =========                 ======       ==========     ========


The accompanying notes are an integral part of this statement.
</TABLE>

                                      F-5
<PAGE>


                       Compuflight, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended October 31,
<TABLE>
<S>                                                                                    <C>                      <C>
                                                                                          1998                      1997
                                                                                       ----------                -------
Cash flows from operating activities
   Net loss                                                                             $(538,773)              $(1,819,652)
   Adjustments to reconcile net earnings to net cash provided by (used in)
   operating activities
       Depreciation and amortization                                                      133,833                   162,448
       Provision for uncollectible accounts                                               147,064                   106,731
       Allowance for reduction in investment tax credits                                                            296,029
       Write off of note receivable - former chairmen                                     394,453                   599,456
       Other                                                                              (14,841)
       (Increase) decrease in operating assets
         Accounts receivable                                                             (398,404)                  237,336
         Scientific research and experimental development credits
                                                                                            7,262                   (61,827)
         License fees receivable                                                                                    104,502
         Prepaid expenses and other                                                        (4,720)                    9,164
       Increase (decrease) in operating liabilities
         Accounts payable and accrued liabilities                                         440,428                   144,239
                                                                                         ---------                 --------
         Net cash provided by (used in) operating activities                              166,302                  (221,574)
                                                                                         ---------                ----------

Cash flows from investing activities
   Purchase of fixed assets                                                               (62,477)                 (330,225)
   Proceeds from lease inducements                                                                                  141,023
   Advances to parent company, net                                                       (279,151)
   Payments from NARI                                                                                                66,223
                                                                                         --------                  --------
         Net cash used in investing activities                                           (341,628)                 (122,979)
                                                                                         --------                  --------

Cash flows from financing activities
   Cash overdraft                                                                                                    81,995
   Proceeds from bank revolving demand loans                                                                         81,616
   Restricted cash                                                                                                  (50,000)
   Proceeds from issuance of common shares                                                    300
   Proceeds (repayments)  on bank loan, net                                               (41,961)                  158,752
   Proceeds from loan                                                                     180,087                    13,948
   Proceeds from note                                                                      26,905                    47,215
   Payment of notes                                                                       (18,311)                  (40,031)
                                                                                          -------                 ---------
         Net cash provided by financing activities                                        147,020                   293,495
                                                                                          -------                  --------

Effect of foreign translations on cash                                                     28,306                    13,696
                                                                                          -------                  --------

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

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

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, 1998 and 1997



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  Inc.  ("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, 1998,
     the Company has a deficiency in working capital and shareholders' equity of
     $1,222,816 and $762,603,  respectively,  and has a net loss of $538,773 for
     the year ended October 31, 1998.  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 three specific
     areas to  address  both the  strategic  direction  required  and the  daily
     operational  issues to position the Company for  profitability.  First, the
     Company has  continued  to increase its  marketing  endeavors to obtain new
     customers  and will be  introducing a number of  complementary  products to
     address  marketplace  demands.  Secondly,  the Company believes it has been
     building  an  effective  management  structure.  Thirdly,  the  Company has
     continued its pursuit of financing.

     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.


                                      F-7
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



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   and
         comprehensive income.

     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.

     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.


                                      F-8
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE C (continued)

     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, 1998 consist of 3,600 shares of Class
         B,  nonvoting  shares of  Support.  Such  shares,  issued for  $358,200
         Canadian   ($232,146  U.S.  at  October  31,  1998),  are  entitled  to
         noncumulative  dividends  of $8 per  share  and are  redeemable  at the
         option of the Company for $540,000  Canadian  ($349,968 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.

     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.

                                      F-9
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE C (continued)

     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 Per Share

         In fiscal 1998,  the Company  adopted the  provisions  of SFAS No. 128,
         "Earnings Per Share." SFAS No. 128 replaces the  calculation of primary
         and fully  diluted  earnings per share with basic and diluted  earnings
         per share.  Unlike primary earnings per share, basic earnings per share
         excludes any  dilutive  effects of options,  warrants  and  convertible
         securities. Diluted earning per share is very similar to the previously
         reported  fully  diluted  earnings  per share.  Potential  common stock
         equivalents  from  outstanding  stock options are excluded in computing
         net loss per share for fiscal 1998 and 1997 as their  effects  would be
         antidilutive.

    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.


                                      F-10
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE C (continued)

    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  $218,975 and $57,800  during the years ended October
         31,  1998 and 1997,  respectively.  Non-cash  investing  and  financing
         activities consisted of the issuance of 300,000 shares of the Company's
         common  stock in exchange  for a  promissory  note of  $134,700  during
         fiscal 1998.

    12.  Comprehensive Income

         In  fiscal  1998,  the  Company   adopted  SFAS  No.  130,   "Reporting
         Comprehensive  Income."  SFAS No.  130  establishes  new  rules for the
         reporting  and  display of  comprehensive  income  and its  components;
         however,  the  adoption of SFAS No. 130 had no impact on the  Company's
         net loss or  stockholders'  deficit.  SFAS No. 130 requires  cumulative
         translation   adjustments,   which  prior  to  adoption  were  reported
         separately  in  stockholders'  deficit,  to be included in  accumulated
         other comprehensive income (loss). Prior year financial statements have
         been  reclassified to conform to the  requirements of SFAS No. 130. The
         cumulative  foreign  currency  translation  adjustment  was $57,450 and
         $43,070 as of October 31, 1998 and 1997, respectively.



                                      F-11
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE C (continued)

    13.  Accounting Pronouncements Not Yet Adopted

         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-12

<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE D - INVESTMENT TAX CREDITS RECEIVABLE

     The  Company  has  filed  claims  for  Canadian   investment   tax  credits
     aggregating  $912,297  for fiscal  years ended  October  31,  1992  through
     October 31, 1998.  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  $53,000 and
     $64,000, 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  $319,000  of  such  credits,  which  have  been  applied  to
     outstanding payroll taxes and other government liabilities (see Note J).

                                      F-13


<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE E - FIXED ASSETS

     Fixed assets consist of the following:

                                             Useful
                                              life                    1998
                                             ------                   ----
      Computer software                      5-10 years          $  422,292
      Computer equipment                     5-10 years             370,750
      Furniture and fixtures                 5-20 years              40,129
      Leasehold improvements                 5-10 years             130,091
      Office equipment                          5 years             100,271
                                                                  ---------
                                                                  1,063,533

      Less accumulated depreciation and amortization               (753,907)

                                                                 $  309,626
                                                                  =========

     Amortization expense for capitalized software totaled approximately $52,100
     and  $65,500  in 1998  and  1997,  respectively.  Accumulated  amortization
     approximated $424,000 at October 31, 1998.


NOTE F - TRANSACTIONS WITH RELATED PARTIES

     Notes Receivable - Parent Company

     Navtech Applied Research Inc. ("NARI"),  the parent company of the Company,
     is the  continuing  Canadian  corporation  resulting from the merger of Ray
     English and Associates Inc. ("RE&A") and NARI (the "Merger"). NARI is owned
     by an executive  vice-president  and director of the Company.  Prior to the
     Merger,  RE&A had been 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.


                                      F-14

<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE F (continued)

     The  balance  owing from NARI as at October  31,  1998 is  composed  of the
     following amounts:

               Promissory Note # 1                     $ 532,203
               Promissory Note # 2                       109,763
               Intercompany advances receivable          206,676
                                                        --------
                                                         848,642
               Less: Allowance                          (588,879)
                                                       $ 259,763
                                                        ========

     Promissory Note # 1 ("Note # 1")
     --------------------------------

     In 1993,  Support charged its then parent  company,  RE&A, a management and
     marketing fee in connection  with the management of certain  software owned
     by EAS,  formerly a  subsidiary  of RE&A.  Effective  July 15,  1995,  RE&A
     executed and delivered to Support a promissory note in the principal amount
     of $750,000 Canadian to evidence certain  obligations to Support as of such
     date. Note # 1 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 RE&A and
     Support,  RE&A would provide  software  marketing  services to the Company.
     Support  shall have the right to offset  $3,500  Canadian per month ($2,625
     U.S. at October 31, 1996) against  compensation  otherwise  payable to RE&A
     thereunder as a payment of amounts due under the RE&A Note.  The consulting
     and marketing  agreement also provides for finder's fees and commissions of
     2% and 10%, respectively, for the introduction of potential clients and for
     the  licensing of software.  The Company has the right to apply 10% to 25%,
     as  defined,   of  the  finder's  fees  and  commissions   against  amounts
     outstanding  on Note # 1.  Effective  with the Merger,  this  agreement was
     cancelled.

     Promissory Note # 2 (Note # 2)
     ------------------------------

     In July 1998, NARI purchased 300,000 shares of the Company in consideration
     for $300 cash and a promissory  note in the  principal  amount of $134,700.
     Note # 2 is payable in forty eight  monthly  installments  of principal and
     interest  of $4,375 and  provides  for an  interest  rate of 10% per annum.
     Additional payments of principal are permitted based on amounts due to NARI
     under a royalty agreement as discussed below.


                                      F-15
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE F (continued)

     Effective  July 15,  1999,  NARI and the  Company  entered  into a  royalty
     agreement  (the  "Royalty  Agreement")  that  provides  the Company  with a
     non-exclusive license to use the weather and NOTAMs software owned by NARI.
     The royalty is  calculated as 10% of a Gross Revenue Base as defined in the
     Royalty  Agreement.  NARI is  applying  the excess of the  monthly  royalty
     amount over its  required  payments on Note # 2 as  additional  payments of
     principal.

     Intercompany Advances Receivable

     NARI has used the common stock  purchased  and the majority of the advances
     made during 1998 to purchase  the weather and NOTAMs  software  licensed to
     the  Company.  As a result of the above  fiscal  1998  transactions  by and
     amongst  NARI and the Company,  management  has revised its estimate of the
     ultimate  amount  presently  collectible  from  NARI  and  provided  for an
     additional  allowance of  approximately  $394,000.  Such  estimate is based
     principally on the estimated net worth of NARI,  and the historical  cost o
     the software assets owned by NARI.

     The Company has made additional  advances to its parent company which carry
     no repayment terms.


     Due to Related Parties

     Due to related parties at October 31, 1998 consists of the following:

          Demand loans - related party (i)                  $  18,518
          Loans payable - related parties (ii)                 64,682
          Other note payable - related parties (iii)          171,447
                                                              -------
                                                             $254,647

          (i)  The demand  loans bear  interest  at 9.18% per annum,  compounded
               monthly.  The amount is due to a company controlled by an officer
               of the Company



                                      F-16
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE F (continued)

          (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.  The loan 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)Other notes  payable - related  parties bear  interest  form 5% -
               18% and  require  monthly  payments  of  interest  and  principal
               through May 2005.


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, 1998:

Small  business  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                                              $102,918

Term loan,  interest at 9.18%,  payable in monthly  payments
of principal and interest of $7,351 through September 30, 2000          166,473

Equipment note, payable in monthly  payments of principal
and interest of $598 through August 2003                                 22,057
                                                                         ------
                                                                        291,448
      Less current portion                                             (118,748)
                                                                        -------
      Long-term portion                                                $172,700
                                                                        =======

                                      F-17
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE G (continued)

      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.

      As of October  31,  1998,  a wholly  owned  subsidiary  of the Company had
      factored certain trade receivables,  with full recourse to the subsidiary,
      resulting in net advances of approximately $145,000.

      Maturities of long-term debt as of October 31, 1998 are as follows:

                      ==============================================
                               October 31,
                      ---------------------------- -----------------
                                 1999                     $ 118,728
                      ---------------------------- -----------------
                                 2000                       126,787
                      ---------------------------- -----------------
                                 2001                        35,007
                      ---------------------------- -----------------
                                 2002                         5,462
                      ---------------------------- -----------------
                                 2003                         5,464
                                                          ----------
                      ---------------------------- -----------------
                                                           $ 291,488
                      ==============================================

NOTE H - INCOME TAXES

     The Company's  fiscal 1998 and 1997 effective  income tax rate differs from
     the statutory U.S. Federal income tax rate as a result of the following:

                                                  1998                  1997
                                                --------              --------

      Statutory U.S. Federal tax rate             (34.0)%               (34.0)%
      Increase in valuation allowance              34.0                  34.0
                                                   -----                 -----
                                                   -    %                -    %
                                                =========              ========

                                      F-18
<PAGE>

     The  temporary  differences  which  give rise to  deferred  tax  assets and
     liabilities at October 31, 1998 are summarized as follows:

      Deferred tax assets
          Net operating loss carryforwards                            $ 327,000
          Deferred salaries and other compensation                      341,000
          Allowance for doubtful accounts                               415,000
          Fixed assets                                                   24,000
                                                                      ---------

               Total deferred tax assets                              1,107,000

      Deferred tax liabilities
          License fees receivable                                       (31,000)
          Scientific research and experimental development
             credits, net                                              (201,000)

               Total deferred tax liabilities                          (232,000)

               Net deferred tax assets                                $ 875,000
                                                                       ========

      Valuation allowance                                             $(875,000)


     During  fiscal  1998,  the  Company  increased  its  allowance  by $317,000
     principally due to an increase in the Company's deferred tax assets.


                                      F-19
<PAGE>



                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997

NOTE H (continued)


     The Company,  for United  States  purposes,  has available to offset future
     taxable income net operating loss carryforwards  approximating  $797,000 at
     October 31, 1998, which expire through 2018. For Canadian tax purposes, the
     Company has fully utilized its available net operating loss  carryforwards.
     The Company has available scientific research and experimental  development
     credits of $674,000  Canadian  ($437,000  U.S.)  expiring  through 2000 and
     2005, 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  9nonqualified  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, 1998 and 1997



NOTE I (continued)

     Summary information with respect to the stock option plans follows:

<TABLE>
      <S>                                           <C>                   <C>                <C>              <C>
                                                                                              Weighted
                                                      Range of             Outstanding         Average          Outstanding
                                                      Exercise               options          Exercise            Options
                                                       Prices              granted              Price         Exercisable


      Balance at November 1, 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
                                                                          ==========                             =======

      Balance at October 31, 1998                    0.625 -  1.88           626,376              0.684          626,376
                                                                          ==========                             =======


     During  fiscal 1998,  no options were  granted or  terminated.  On July 15,
     1998, an option holder  agreed to not exercise  200,000  options until such
     time as the Company's authorized capital has been increased.

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

</TABLE>

<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                 21                $.625
                         $1.00 to $1.88                             76,376                 56                $1.11


     There  were no  options  issued by the  Company  in  fiscal  1998 and 1997,
     therefore there is no pro forma effect presented.



</TABLE>
                                      F-21
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



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.

                                      F-22
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE J (continued)

     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 2004.

          Future  minimum  annual  rental  payments  pursuant  to these  leasing
          agreements as of October 31, 1998 are summarized as follows:

                                                       Related
                    Office                              Party
                    Space           Equipment         Equipment         Total

          1999    $  79,276           $49,682          $11,282         $140,240
          2000       61,571            46,173           11,321          119,065
          2001       57,444            31,996           10,110           99,550
          2002       57,444             7,903           10,110           75,457
          2003       57,444             1,685           10,110           69,239
                   --------         ---------          -------         --------
                   $313,179          $137,439          $52,933         $503,551
                    =======           =======           ======          =======

     Rental  costs  for  fiscal  1998  and  1997  were  $205,668  and  $199,207,
     respectively.  Rental cost incurred in 1998 and 1997 in connection with the
     equipment   lease  with  the   related   party  was  $4,310  and   $21,049,
     respectively.

     3.  Employment Contracts

         The Company has entered into  employment  agreement  with its chairman.
         Effective August 1999, the Company entered into a retirement  agreement
         with the chairman, which effectively superseded the employment contract
         as of that date.  Both these  agreements  provide for  minimum  monthly
         compensation.  The Company's obligations under the retirement agreement
         expires November 2003.


                                      F-23
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE J (continued)

         Approximate  aggregate  minimum  compensation   obligations  under  the
         agreements  with  the  Company's  chairman  at  October  31,  1998  are
         summarized as follows:

                                 Year                          Amount

                                 1999                      $   156,457
                                 2000                          150,000
                                 2001                          150,000
                                 2002                          150,000
                                 2003                          150,000
                                                             ----------
                                                           $   756,457

          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  October  1998.  The Company has  provided for
          approximately  $300,000  relating  to the  net  present  value  of the
          services  provided  by the  chairman  during  fiscal  1998  and  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 $600,000 and declining at a rate
          of $150,000  per year.  The proceeds of which 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.

     4.  Nonremittance of Payroll Taxes

          At October 31, 1998, the unremitted balance  aggregated  approximately
          $164,000  (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.

                                      F-24

<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



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  1998,   one  customer   accounted  for  10%  of  the  Company's
     consolidated revenues,  and, in 1997, one customer accounted for 11% of the
     Company's consolidated revenues.


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, 1998 and 1997 is as follows:

                                      F-25

<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE N (continued)

                                                  1998               1997
                                               ----------          ---------

      Net sales
          United States                        $3,092,291        $ 2,052,518
          Canada                                  527,706            523,556
          Other                                   229,749            214,293
                                              -----------         -----------

              Total net sales                 $ 3,849,746        $  2,790,367
                                               ----------          ----------

      Operating (loss) profit
          United States                       $   (20,660)       $ (1,165,939)
          Canada                                   26,881            (626,882)
                                               ----------         -----------

               Total operating income (loss)       $6,221        $ (1,792,821)
                                               ==========          ==========

      Identifiable assets
          United States                       $ 1,274,007         $ 1,040,648
          Canada                                1,350,778             995,610
          Eliminations                         (1,047,131)           (851,131)
                                               -----------         ----------

               Total identifiable assets      $ 1,577,654         $ 1,185,127
                                                =========           =========

NOTE O - SUBSEQUENT EVENTS

      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.  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
      straight line over a ten year basis.

                                      F-27
<PAGE>


                       Compuflight, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                            October 31, 1998 and 1997



NOTE O (continued)

      In consideration  for the shares of Skyplan,  Support has agreed to pay to
      Skyplan Services Ltd.  Canadian  $180,000 in two  installments.  The first
      installment of $125,000 was payable upon closing.  The second  installment
      of $55,000 is payable on October 22,  1999.  No shares of the common stock
      of the Company were issued.

     The  information  required  to  provide  supplemental  pro  forma  data  is
     currently not available


                                      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