Firan Technology Group Corporation — Management Reports 2021

Feb 11, 2021

FIRAN TECHNOLOGY GROUP CORPORATION

For the Year Ended November 30, 2020

Management's Discussion and Analysis of Results of Operations and Financial Condition

February 10, 2021

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

(dollar amounts stated in thousands of Canadian dollars unless otherwise specified)

This Management's Discussion and Analysis ("MD&A") for the year ended November 30, 2020 (fiscal 2020) is as of February 10, 2021 and provides information on the operating activities, performance and financial position of Firan Technology Group Corporation ("FTG" or the "Corporation") and should be read in conjunction with the audited consolidated financial statements of the Corporation for fiscal 2020 and 2019, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in Canadian dollars. Additional information is contained in the Corporation's filings with Canadian securities regulators, including its Annual Information Form dated February 10, 2021, found on SEDAR at www.sedar.com and on the Corporation's website at www.ftgcorp.com.

CORE BUSINESS AND STRATEGY

FTG is a leading global supplier of aerospace and defence electronic products and subsystems, with facilities in Canada, the United States and China. It is a publicly traded corporation on the Toronto Stock Exchange listed under the trading symbol "FTG".

FTG has two operating segments: FTG Circuits and FTG Aerospace.

FTG Circuits is a leading manufacturer of high technology/high reliability printed circuit boards within the Global marketplace. Currently, FTG Circuits has manufacturing operations in Canada (Toronto, Ontario), USA (Chatsworth, California, and Fredericksburg, Virginia), as well as a joint venture and sourcing arrangements with operating facilities in China. In July, 2019, FTG acquired Colonial Circuits, Inc., which has been subsequently renamed FTG Circuits Fredericksburg Inc. ("Colonial" or "Circuits Fredericksburg"). FTG Circuits' customers are technological and market leaders in the aviation, defence and other high technology industries.

FTG Aerospace designs and manufactures illuminated cockpit panels, keyboards, bezels, sub-assemblies and assemblies for original equipment manufacturers ("OEMs") of avionics products as well as for airframe manufacturers. FTG Aerospace has manufacturing operations in Toronto, Ontario, Canada, Chatsworth, California, USA and Tianjin, China, and an engineering office in Fort Worth, Texas, USA. These products are interactive devices that display information and contain buttons and switches that can be used to input signals into an avionics box or aircraft. With these facilities in place in North America and China, FTG has completed some key strategic goals including expanding its presence in the large US aerospace and defense market, penetrating the rapidly growing Asian aerospace market, and becoming a more strategic supplier to many of its customers. FTG has become a truly global company with revenues coming from all geographic regions of the world and our current strategy is to increase the utilization and operational leverage of those facilities and realize the significant margin expansion opportunities as fixed costs are already in place. A key element of FTG's strategy has been its continued focus on Operational Excellence. This has led to improved performance across the Corporation. By weaving Operational Excellence into its day-to-day operations, FTG continues to create a corporate culture where quality products, on time delivery and customer service are the paramount forces driving the Corporation forward.

FTG continues to increase its technical skills in both segments to support the demands from customers for more complex, challenging solutions on new programs and opportunities.

The FTG management team is focused on and committed to running a healthy business, offering stability to its customers, suppliers and employees while delivering long-term value to all of its stakeholders.

FTG continues to strive to balance its sales between commercial aerospace and defence customers. This should help maintain a stable revenue stream as each market goes through its normal cycles.

FTG remains clearly positioned as an aerospace and defence electronics company. FTG is now engaged with most of the top aerospace and defence prime contractors in North America and is making significant progress penetrating markets beyond this continent. FTG's focus on this market is based on a belief that it can provide a unique solution to its customers and attain a sustainable competitive advantage.

Going forward, the Corporation's focus and initiatives will continue to revolve around controlling the Corporation's infrastructure, material and labour costs while increasing the utilization of our facilities realizing significant operational leverage and margin expansion. Simultaneously, management continues to look for accretive business combinations that can add to FTG's strengths and offerings.

BUSINESS HIGHLIGHTS

COVID-19 continues to negatively impact the global economy and, in particular, reduced production rates implemented by the commercial aircraft manufacturers has resulted in economic headwinds for the commercial aerospace supply base, which includes FTG. Although the longer-term strategies remain in place, FTG's short and medium term focus is on maintaining a safe working environment, profitable operations, a lean balance sheet and being a responsive supplier to our customers. Actions taken in 2020 to stabilize the Corporation in this challenging economic environment and position it for the recovery stage include the following:

• In July, 2020, FTG completed a new 2-year committed Credit Facility with our existing financial institution, which includes an operating facility of U.S. $10.0 million and a capex facility of U.S. $10.0 million, as well as sufficient capacity for foreign exchange forward contracts, precious metal forward contracts.
• Reduced costs through lower headcount, which is reduced by 7% compared to the end of 2019, primarily through attrition
• Reduced costs by reducing overtime and a series of one-week plant shutdowns, particularly in our sites focused on commercial aerospace markets.
• Received subsidies of $3,221 from the CEWS program funded by the Government of Canada
• Our U.S. subsidiaries received Paycheck Protection Program (PPP) loans of $3,309 (U.S. $2,369) pursuant to the CARES Act, enacted by the U.S. Government and administered by the Small Business Administration. In December, 2020, we received notification that two of the three PPP loans, valued at $1,352 (U.S. $1,032) had been forgiven in full.
• Continued focus on customer requirements resulting in backlog, as of November 30, 2020 of $37.3 million.

The following table provides the operating results for the fourth quarter of fiscal		years	2020	and 2019:
		Three months ended
(in thousands of Canadian dollars, except per share amounts)		November 30,	November 30,2019
		2020
Sales	$	26,711	$	27,075
Cost of sales
Cost of sales		18,227		20,224
Depreciation of plant and equipment		1,035		981
Depreciation of right-of-use assets		386		-
Total cost of sales		19,648		21,205
Gross margin		7,063		5,870
Expenses
Selling, general and administrative		2,972		3,004
Research and development costs		1,318		1,339
Recovery of investment tax credits, net		(165)		(260)
Depreciation of plant and equipment		59		40
Depreciation of right-of-use assets		15		-
Amortization of intangible assets		91		301
Interest expense on bank debt, net		52		54
Accretion on lease liabilities		139		-
Stock based compensation		18		27
Foreign exchange loss		446		253
Total expenses		4,945		4,758
Earnings before income taxes		2,118		1,112
Current income tax expense		807		1,181
Deferred income tax expense		33		(677)
Total income tax expense		840		504
Net earnings	$	1,278	$	608
Attributable to:
Non-controlling interest	$	(30)	$	33
Equity holders of FTG	$	1,308	$	575

RESULTS OF OPERATIONS FOR THE FOURTH QUARTER OF 2020

FTG 2020 Management's Discussion and Analysis 3

(thousands of dollars except per share amounts)	2020	2019
Number of Common and preferred shares, in aggregate (in thousands)	24,491	24,491
Net earnings per share –basic	$0.06	$0.03
Net earnings per share –diluted	$0.06	$0.03
Total assets	86,676	73,377
Net cash position1	12,637	2,231
Free cash flow2	4,050	2,477

Supplementary Information for the fourth quarter of fiscal years 2020 and 2019:

1**.** Net cash is defined as cash and cash equivalents less bank debt

2 Free cash flow ("FCF") is a non-IFRS financial measure, which the Corporation defines as net cash flow from operating and investing activities excluding acquisitions, less lease liability payments.

Sales

Sales for the fourth quarter of fiscal 2020 were $26,711, a decrease of $364 or 1.3% from the fourth quarter of fiscal 2019. The significant variances in fourth quarter sales in 2020 as compared to 2019 were as follows:

• All FTG sites were negatively impacted by COVID-19, particularly as the reduction in production rates for commercial aircraft resulted in reduced demand for FTG's products. The impact is most heavily concentrated in Circuits Toronto, Aerospace Toronto and both China sites.
• Offsetting the reduced commercial aerospace revenue, Q4 2020 shipments into the Simulator market were approximately $7.2 million as compared to $1.1 million in the prior year. In FY 2020, most of the Simulator shipments were for military applications.

Gross margin

Gross margin for Q4 2020 was $7,063 or 26.4%, compared to $5,870 or 21.7% in the fourth quarter of fiscal 2019. The increased gross margin rate is the result of cost containment in the form of reduced headcount and overtime costs, and wage subsidies of $1,410.

Net Earnings

The net earnings for the fourth quarter of fiscal 2020 were $1,278 which included net earnings of $1,308 attributable to equity holders of FTG, offset by net loss of $30 relating to the non-controlling interest. The net earnings for the fourth quarter of fiscal 2020 attributable to equity holders of FTG translated into basic and diluted earnings per share of $0.06.

The net earnings for the fourth quarter of fiscal 2019 were $608 which included net earnings of $575 attributable to equity holders of FTG and net earnings of $33 relating to the non-controlling interest. The net earnings for the fourth quarter of fiscal 2019 attributable to equity holders of FTG translated into basic and diluted earnings per share of $0.03.

The increase in net earnings in Q4 2020 over the prior year is the result of the increased gross margin, partially offset by increased foreign exchange losses.

Cash Flow

Free Cash Flow

Free Cash Flow ("FCF") for the quarter ended November 30, 2020 was $4,050 (equal to net cash from operating and investing activities of $4,535 less acquisitions of $nil less lease liability payments of $485) represented an increase of $1,573 over Q4 2019. The increase in quarterly cash flow in 2020 was driven primarily by an increase in net earnings, increased realization of investment tax credits, lower investment in capital expenditures partially offset by changes in operating working capital. Reduction in working capital for Q4 2020 was driven by strong shipments in the Aerospace segment, which reduced inventories.

The Corporation recorded a net gain of $308 on disposal of plant and equipment during fiscal 2020 which resulted from casualty insurance proceeds for replacement of certain plant and equipment impacted by a fire in the third quarter of fiscal 2020 at the Circuits Fredericksburg site. Remediation has been completed and the facility is fully operational, with certain related capital expenditures to follow in the first half of 2021.

Financing Activities

Cash used by financing activities during the fourth quarter of fiscal 2020 amounted to $1,144 which included $504 for repayments of bank debt and $155 for payment on conversion of preferred shares – refer to note 13.2 to the consolidated financial statements. Cash used by financing activities during the fourth quarter of fiscal 2019 amounted to $505 for repayments of bank debt.

(thousands of dollars except per share amounts) 2020 2019 Sales $ 102,435 $ 112,653 Gross margin 26,419 30,264 Net earnings to equity holders of FTG 1,390 6,058 Number of Common and preferred shares, in aggregate (in thousands) 24,491 24,491 Net earnings per share – basic $0.06 $0.27 Net earnings per share –diluted $0.06 $0.25 Total assets 86,676 73,377 Net cash position1 12,637 2,231 Free cash flow2 11,067 8,880

RESULTS OF OPERATIONS FOR THE 2020 FISCAL YEAR

1 Net cash is defined as cash and cash equivalents less bank debt

2 Free cash flow is a non-IFRS financial measure, which the Corporation defines as net cash from operating and investing activities excluding acquisitions, less lease liability payments.

Sales

For FTG, overall sales decreased by $10,218 or 9.1% in 2020 as compared to the prior year, and include the following variances:

• All FTG sites were negatively impacted by COVID-19, commencing with a complete shutdown of operations at the two China sites for the month of February 2020. This cascaded into North America, where we experienced parts shortages from suppliers and higher than normal employee abscences. Although the impact on FTG's operational efficiency at the site level was significant, the far greater impact on FTG's business was the reduction in production rates for commercial aircraft imposed by Boeing and Airbus on the commercial aerospace supply chain. The COVID-19 impact on the FTG's 2020 revenue is most heavily concentrated in Circuits Toronto, Aerospace Toronto and both China sites.
• The Simulator market is an important product line for FTG and revenues in FY 2020 were $1.0 million greater than FY 2019. In FY 2020, most of the Simulator shipments were for military applications.
• The acquisition of the FTG Circuits Fredericksburg business, which closed July 15, 2019, contributed approximately $8.7 million to 2020 sales as compared to approximately $3.6 million to fiscal 2019 sales for an increase of $5.1 million.

(thousands of dollars)	2020	2019
Circuits	$65,824	$71,442
Aerospace	36,611	41,211
Net sales	$ 102,435	$ 112,653

The following table compares net sales by reportable segment for fiscal 2020 and 2019.

Net sales in the Circuits segment in fiscal 2020 decreased by $5.6 million or 7.9%, as a result of lower demand for commercial aircraft components of $10.7 million, partially offset by the positive impact of the Circuits Fredericksburg acquisition of $5.1 million. Net sales to the top five customers represented 60.1% of the FTG Circuits net segment sales in fiscal 2020 (68.1% in 2019).

Net sales in the FTG Aerospace segment in fiscal 2020 decreased by $4.6 million or 11.2%, which is the result of COVID-19 related impacts of $2.7 million and reduced sales in the Simulator market of $1.9 million. The Aerospace segment has a higher mix of military end-use products and thus was less impacted by lower demand from the commercial aerospace market. Net sales to the top five customers represented 57.3% of the FTG Aerospace net segment sales for fiscal 2020 (51.6% in 2019).

The Corporation's consolidated net sales by location of its customers are as follows:

(thousands of dollars)	2020	%	2019	%
Canada	$ 7,116	6.9	$ 9,346	8.3
United States	79,266	77.4	83,102	73.8
Asia	12,238	12.0	15,266	13.6
Europe	2,866	2.8	3,721	3.3
Other	949	0.9	1,218	1.0
Total	$ 102,435	100.0	$ 112,653	100.0

The percentage of sales derived in the United States increased in FY 2020 for two reasons: (i) The Circuits Fredericksburg location is located in the U.S. and virtually all of its customers are located in the U.S., and (ii) substantially all of the Corporation's shipments to military customers are in the U.S. and

deliveries to these customers were stable in FY20, whereas commercial aerospace products are delivered to global markets.

The Corporation's top five customers represent 51.5% of net sales for fiscal 2020 as compared to 53.9% in last year. The Corporation's two largest customers accounted for 20.8% (22.5% in 2019) and 9.3% (9.6% in 2019) of net sales for fiscal 2020.

Gross Margin

Gross margin on a consolidated basis decreased by $3,845 or 12.7% for fiscal 2020 to $26,419 or 25.8% of net sales compared to $30,264 or 26.9% of net sales for last year. The decrease in gross margin dollars is primarily the result of reduced operating leverage on lower sales volumes, partially offset by strong cost controls and the CEWS program.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for fiscal 2020 were $13,286 or 13.0% of net sales as compared to $13,732 or 12.2% of net sales for last year. The decrease of $446 during fiscal 2020 is the result of lower performance compensation expense and travel costs, which was partially offset by the full year impact of the added headcount at Circuits Fredericksburg site acquired in July 2019.

Research and Development Costs

Research and development ("R&D") costs include the cost of direct labour, materials and an allocation of overhead specifically incurred in activities regarding technical uncertainties in production processes, product development and upgrading. Generally, these costs represent specific activities regarding the technical uncertainty of production processes and exotic materials.

R&D costs for fiscal 2020 were $5,284 or 5.2% of net sales as compared to $4,846 or 4.3% of net sales for last year. This represents an increase of $438 or 9.0% in fiscal 2020 compared to last year. R&D costs were higher in fiscal 2020 as compared to the last year, in which both U.S and Canadian operations focused on process and product improvements as well as testing of new techniques, technology and special materials.

Recovery of Investment Tax Credits

The Corporation records the tax benefit of investment tax credits ("ITCs") when there is reasonable assurance that such credits will be realized. During the year ended November 30, 2020, the Corporation recorded $735 in ITCs (2019 – $669), which were earned from qualifying research and development expenditures.

The Corporation has, as at November 30, 2020, $1,359 (November 30, 2019 – $3,035) of investment tax credits available to be applied against future income taxes otherwise payable in Canada.

Depreciation of Plant and Equipment

Depreciation of plant and equipment for fiscal 2020 was $4,367, an increase of $603 or 16.0% as compared to depreciation of $3,764 for last year. The increase in depreciation during fiscal 2020 includes $417 related to the Circuits Fredericksburg operation that was acquired in July 2019 and the remaining increase of $186 for fiscal 2020 as compared to last year was mainly due to the timing of capital expenditures being put into service.

Depreciation of Right-of-use Assets

Depreciation of right-of-use assets for fiscal 2020 was $1,615, as compared to $nil for last year. Effective December 1, 2019, the Corporation adopted IFRS 16, Leases. Subsequent to the adoption, operating costs decreased due to the removal of rent expense for leases, depreciation expense increased due to depreciation of right-of-use assets, and finance costs increased due to accretion of the lease liability.

Amortization of Intangible Assets

Amortization of intangible assets for fiscal 2020 was $581, a decrease of $547 or 48.5% as compared to amortization of $1,128 for last year. The decrease in amortization was mainly due to the effect of the impairment of intangibles assets recognized in the first quarter of fiscal 2020 (per discussion below) offset by additional amortization of $81 in fiscal 2020 as compared to last year related to the acquisition of the Circuits Fredericksburg business that was acquired in July 2019.

In the first quarter of fiscal 2020, the Corporation determined that the carrying value of intangible assets recognized following the acquisition of the Teledyne PCT business in July, 2016, exceeded its recoverable amount as of February 28, 2020 by an amount of $1,145. The recoverable amount was determined through a value in use analysis of the present value of the future cash flows to be derived from the relevant cash-generating unit.

Interest Expense

In fiscal 2020, net interest costs were $211, a decrease of $79 or 27.2% as compared to $290 for last year. The decrease in interest expense in fiscal 2020 was mainly due to the decrease in bank debt as compared to last year.

Accretion on Lease Liabilities

Accretion on lease liabilities for fiscal 2020 was $556 as compared to $nil for last year. As a result of the adoption of IFRS 16 effective December 1, 2019, operating costs decreased due to the removal of rent expense for leases, depreciation expense increased due to depreciation of right-of-use assets, and finance costs increased due to accretion of the lease liability.

Foreign Exchange Loss

The foreign exchange loss for fiscal 2020 was $1,042 compared to a foreign exchange loss of $785 for last year. The foreign exchange loss for fiscal 2020 was mainly as a result of a net loss of $1,122 (2019 – $759) on the re-valuation of the US dollar assets and liabilities on the respective consolidated statements of financial position, offset by net realized gain of $80 (2019 - loss of $26) on foreign exchange contracts). These foreign exchange fluctuations are due to the variance in U.S. dollar balances held by the Corporation, the changes in average and month-end Canadian dollar versus U.S. dollar exchange rates and the foreign exchange hedging contracts that the Corporation has in place. The year-end Canadian dollar as compared to US dollar exchange rate decreased by approximately 0.0324 or 2.4% from 1.3289 as at November 30, 2019 to 1.2965 as at November 30, 2020, as compared to a decrease of approximately 0.0012 or 0.1% from 1.3301 as at November 30, 2018 to 1.3289 as at November 30, 2019.

In fiscal 2020, a net realized loss of $1,082 was recognized in sales with respect to foreign exchange forward contracts designed as cash flow hedges; this compares to a net realized loss of $387 recognized in sales with respect to foreign exchange forward contracts designed as cash flow hedges in fiscal 2019. The table below includes the effect of the net realized loss on foreign exchange forward contracts on net sales.

(thousands of dollars)	2020	2019
Sales before adjustment for net realized loss on f/x		$
forward contracts designed as cash flow hedges	$ 103,517	113,040
Adjustment for net realized loss on hedged f/x forward
contracts designed as cash flow hedges	(1,082)	(387)
Net sales	102,435	112,653
Costs of sales	70,307	78,788
Depreciation of plant and equipment	4,146	3,601
Depreciation of right-of-use assets	1,563	-
Total cost of sales	76,016	82,389
Gross margin	26,419	30,264
Gross margin %	25.8%	26.9%
Gross margin before f/x loss	$ 27,501	$ 30,651
Gross margin % before f/x loss	26.6%	27.1%

Income Tax Expense

During the year ended November 30, 2020, current income tax of $3,715 (2019 – $4,296) was recognised in the consolidated statement of earnings which includes current income tax expense of $3,625 (2019 – $4,191) related to income tax on earnings in the Canadian entity, and expense of $28 (2019 – $32) related to taxes for the U.S. subsidiaries, and withholding taxes of $62 (2019 –$73) related to source deductions on remittances from the Chinese subsidiary to the Corporation.

During the year ended November 30, 2020, net deferred income tax (recovery) of ($331) was recognised in the consolidated statement of earnings which included deferred income tax (recovery) of ($479) related to movement in deferred income tax assets and investment tax credits receivable, offset by deferred income tax expense of $148 related to the tax effect of recovery of investment tax credit. During the year ended November 30, 2019, net deferred income tax (recovery) of ($550) was recognised in the consolidated statement of earnings which included deferred income tax (recovery) of ($729) related to movement in deferred income tax assets and investment tax credits receivable, offset by deferred income tax expense of $179 related to the tax effect of recovery of investment tax credit.

The Corporation's tax expense is calculated by using the rates applicable in each of the tax jurisdictions that the Corporation operates in. The effective tax rate on Canadian earnings for the year ended November 30, 2020 was 25% (2019 – 25%) which was based on projected annualized Manufacturing and Processing rates.

Net Earnings

The net earnings for fiscal 2020 were $1,262 which included net earnings of $1,390 attributable to equity holders of FTG, offset by net loss of $128 relating to non-controlling interests. The net earnings for fiscal 2020 attributable to equity holders of FTG translated into basic earnings per share of $0.06 and diluted earnings per share of $0.06.

The net earnings for fiscal 2019 were $5,982 which included net earnings of $6,058 attributable to equity holders of FTG, offset by net loss of $76 relating to non-controlling interests. The net earnings for fiscal 2019 attributable to equity holders of FTG translated into basic earnings per share of $0.27 and diluted earnings per share of $0.25.

OVERVIEW OF HISTORICAL QUARTERLY RESULTS

	Q1-19	Q2-19	Q3-19	Q4-19	Q1-20	Q2-20	Q3-20	Q4-20
Circuit
Segment Sales	$15,207	$19,265	$18,336	$18,634	$16,457	$19,599	$15,690	$14,078
Aerospace Segment Sales	10,183	12,970	9,617	8,441	8,081	7,223	8,674	12,633
Total Net Sales	25,390	32,235	27,953	27,075	24,538	26,822	24,364	26,711
Earnings (Loss) before
income taxes	1,980	3,798	2,838	1,112	(2,160)	3,300	1,388	2,118
Net Earnings (Loss)
Attributable toEquity
holders of FTG	1,218	2,482	1,783	575	(2,597)	2,034	645	1,308
Earnings (Loss) per share:
Basic1	$0.05	$0.11	$0.08	$0.03	($0.11)	$0.08	$0.03	$0.06
Earnings (Loss) per share:
Diluted	$0.05	$0.10	$0.07	$0.03	($0.11)	$0.08	$0.03	$0.06
Quarterly average CDN$
U.S.$ exchange rates	$1.3322	$1.3401	$1.3214	$1.3223	$1.3169	$1.3996	$1.3449	$1.3176

(thousands of dollars except per share amounts and exchange rates)

1 Basic earnings (loss) per share for Q2-20 has been restated to $0.08 for rounding purposes. It was previously reported as $0.09.

The Corporation was profitable during all prior eight quarters of fiscal 2020 and 2019 except first quarter of fiscal 2020.

The Corporation is exposed to foreign exchange fluctuations as the vast majority of sales are earned in U.S. dollars, while a significant amount of operating expenses are incurred in Canadian dollars. The Corporation regularly enters into foreign exchange forward contracts to sell excess U.S. dollars generated from its Canadian operations.

LIQUIDITY AND CAPITAL RESOURCES

As at November 30, 2020, the Corporation's primary sources of liquidity totalled $56,116 ($51,154 as at November 30, 2019), made up of cash, accounts receivable, contract assets, taxes recoverable and inventory, excluding the unused portion of the Corporation's credit facilities of up to $22,500 (U.S. $17.4 million). Working capital at November 30, 2020 was $39,121 as compared to $28,603 at November 30, 2019.

Accounts receivable days outstanding were 62 as at November 30, 2020 compared to 70 as of November 30, 2019; inventory turns were 3.8 as at November 30, 2020 as compared to 3.7 as of November 30, 2019, and accounts payable days outstanding were 74 as at November 30, 2020 as compared to 81 as of November 30, 2019.

All of the Corporation's credit facilities with its primary lender are secured by a first charge on all of the Corporation's assets. The Corporation was in compliance with all of its financial loan covenants as at November 30, 2020.

Management believes the Corporation has sufficient liquidity and capital resources to meet its obligations for the foreseeable future.

	PAYMENTS DUE IN $000'S
CONTRACTUALOBLIGATIONS	Total	FirstYear	SecondYear	ThirdYear	FourthYear	BeyondFourthYear
Bank debt(committed facility)	3,318	959	2,359	-	-	-
Bank debt(PPP Loans)	3,072	2,048	1,024	-	-	-
Accounts payable and accruedliabilities, and provisions	14,789	14,789	-	-	-	-
Contract liabilities	388	388	-	-	-	-
Lease liabilities	15,769	1,826	1,664	1,334	1,315	9,630
Income tax payable	155	155	-	-	-	-
Operating Leases	605	329	159	74	43	-

The following table outlines the contractual obligations of the Corporation as at November 30, 2020.

The Corporation does not have any off consolidated statements of financial position arrangements that have or reasonably are likely to have a material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result, the Corporation is not exposed materially to any financing, liquidity, market or credit risk that could arise if it had engaged in these arrangements.

DERIVATIVE FINANCIAL INSTRUMENTS

The Corporation follows hedge accounting on its derivative financial instruments and as a result, has designated certain derivative financial instruments as cash flow hedges. The fair value of the Corporation's foreign exchange forward contracts, gold forward contracts, interest rate swap is based on the current market values of similar contracts with similar remaining durations as if the contract had been entered into on November 30, 2020. The forward current value (fair value) of these financial instruments as at November 30, 2020 had an net unrealized gain of $1,569 (an unrealized gain on foreign exchange forward contracts of $1,680, and an unrealized gain on gold forward contracts of $19, offset by an unrealized loss on interest rate swaps of $130), and included in other comprehensive income (loss), net of $392 in tax, and relates to derivatives designated as cash flow hedges. The forward current value (fair value) of these financial instruments as at November 30, 2019 had an net unrealized loss of $2,234 (an unrealized loss on foreign exchange forward contracts of $2,127, and an unrealized loss on gold forward contracts of $30, and an unrealized loss on interest rate swaps of $77), and included in other comprehensive income (loss), net of $558 in tax, and relates to derivatives designated as cash flow hedges.

In December 2015, the Corporation entered into an interest rate swap to hedge the U.S. dollar interest payments of the term loan (5.0 year U.S. $4,000 term loan, amortized over 5 years, repayable in equal monthly principal payments of approximately U.S. $67 plus interest at LIBOR rate plus 200 basis points) over the five year term at a fixed rate of 1.44% plus applicable margin of 200 basis points for an aggregate fixed interest rate of 3.44%. The interest rate swap has been designated as a cash flow hedge. The interest rate swap has been discharged in November 2020 as the term loan matured in November 2020 and was fully repaid. The forward current value (fair value) of the interest rate swap as at November 30, 2019 had an unrealized gain of $1 which was included in other comprehensive income (loss) and prepaid expenses and other.

In July 2016, the Corporation entered into an interest rate swap to hedge the U.S. dollar interest payments of the term loan (7.0 year U.S. $2,600 term loan, amortized over 7 years, repayable in equal monthly principal payments of approximately U.S. $31 plus interest at LIBOR rate plus 215 basis points) over the seven year term at a fixed rate of 1.20% plus applicable margin of 215 basis points for an aggregate fixed interest rate of 3.35%. The interest rate swap has been designated as a cash flow hedge and the forward current value (fair value) of the interest rate swap as at November 30, 2020 had an unrealized loss of $21 which is included in other comprehensive income (loss) and accounts payable and accrued liabilities. The interest rate swap has been designated as a cash flow hedge and the forward current value (fair value) of the interest rate swap as at November 30, 2019 had an unrealized gain of $10 which was included in other comprehensive income (loss) and prepaid expenses and other.

In February 2018, the Corporation entered into an interest rate swap to hedge the U.S. dollar interest payments of the term loan (7.0 year U.S. $1,500 term loan, amortized over 7 years, repayable in equal monthly principal payments of approximately U.S. $18 plus interest at LIBOR rate plus 215 basis points) over the seven year term at a fixed rate of 2.81% plus applicable margin of 215 basis points for an aggregate fixed interest rate of 4.96%. The interest rate swap has been designated as a cash flow hedge and the forward current value (fair value) of the interest rate swap as at November 30, 2020 had an unrealized loss of $60 (November 30, 2019 – unrealized loss of $48 which is included in other comprehensive income (loss) and accounts payable and accrued liabilities.

In April 2018, the Corporation entered into an interest rate swap to hedge the U.S. dollar interest payments of the term loan (7.0 year U.S. $1,000 term loan, amortized over 7 years, repayable in equal monthly principal payments of approximately U.S. $12 plus interest at LIBOR rate plus 215 basis points) over the seven year term at a fixed rate of 2.93% plus applicable margin of 215 basis points for an aggregate fixed interest rate of 5.08%. The interest rate swap has been designated as a cash flow hedge and the forward current value (fair value) of the interest rate swap as at November 30, 2020 had an unrealized loss of $49 (November 30, 2019 – unrealized loss of $40 which is included in other comprehensive income (loss) and accounts payable and accrued liabilities.

CAPITAL EXPENDITURES (PLANT AND EQUIPMENT)

In 2020, the Corporation invested $3,219 in net capital expenditures which consisted of additions to deburring line and etchboard line, purchase of sprint machines, multiline machine, spectrometer, planarizer and various upgrades to machinery and equipment and leasehold improvements at its existing facilities. The Corporation also invested in an automated, highly secure system to ensure that critical Information Technology data and software is backed up and retrievable.

In 2019, the Corporation invested $5,512 in net capital expenditures which included $2,443 of machinery and equipment acquired as a result of the Colonial business acquisition and the remaining $3,069 which mainly included soldermask inkjet system machine, replace section of roof at its Circuits Toronto facility, laser machine, photometer, spectrometer system, new network switches and servers, ETQ-quality management system suite software, various upgrades to machinery and equipment and leasehold improvements at its existing facilities.

CASH FLOW

Free Cash Flow

In fiscal 2020, FTG generated $11.1 million in free cash flow, which was an improvement of $2.2 million or 25% over 2019. Offsetting the lower net earnings, the primary positive variances included: (i) the level of working capital employed in the business, (ii) realization of investment tax credits to offset income taxes otherwise payable, and (iii) net gains on valuation of derivative financial instruments. The reduction in working capital, primarily lower levels of accounts receivable and inventories, is the result of lower business volumes and improved operational efficiency.

Financing Activities

Cash used by financing activities in fiscal 2020 resulted in a cash outflow of $1,167 which included $2,056 towards repayments of bank debt to FTG's principal financial institution, $1,845 towards lease liability payments, $420 for repurchase of common shares on exercise of PSU's, and $155 for conversion of preferred shares, offset by $3,309 of proceeds from bank debt (PPP Loans).

Cash used by financing activities in fiscal 2019 resulted in a cash outflow of $2,031 towards repayments of bank debt.

RELATED PARTY TRANSACTIONS

There were no related party transactions during the years ended November 30, 2020 and 2019, except as disclosed in Note 13.2 to the consolidated financial statements as at November 30, 2020.

FINANCIAL RISK MANAGEMENT

Disclosures regarding the nature and extent of the Corporation's exposure to risks arising from financial instruments, including credit risk, liquidity risk, foreign currency risk and interest rate risk and how the Corporation manages those risks can be found under the heading "Financial Instruments" in Note 17 of the consolidated financial statements as at November 30, 2020 and are designed to meet the requirements of the set out by the IASB in IFRS 7 Financial Instruments: Disclosures.

OUTSTANDING SHARES

The authorized capital of the Corporation consists of an unlimited number of common shares ("Common Shares") and an unlimited number of preference shares issuable in series, of which authorized is a series of convertible preference shares, Series 1 (the "Preferred Shares"). The Preferred Shares are convertible into Common Shares on a one-for-one basis. Each Common Share and Preferred Share carries the right to one vote.The outstanding common shares at the year ended November 30, 2020 were 24,491,201 (22,676,201 as at November 30, 2019).

In October 2020, 1,775,000 Preferred Shares, were converted into Common Shares on a one-for-one basis upon exercise of the convertible option by the preferred shareholder. Holder of Series 1 Preferred Shares was entitled to a preference over holders of Common Shares in respect of any distribution of assets in connection with the liquidation, dissolution or winding up of the Corporation and was entitled to receive an amount equal to $2.50 per Series 1 Preferred Share before any amount is paid or any assets of the Corporation are distributed to the holders of Common Shares. In connection with this transaction, the Board of Directors of the Corporation approved a payment of $155 to the holder of the Preferred Shares, who is a related party, for conversion of Preferred Shares. As a result of the conversion, the Corporation has nil voting convertible Series 1 Preferred Shares outstanding as at November 30, 2020 (November 30, 2019 – 1,775,000).

During the year ended November 30, 2020, the Corporation granted 100,000 PSUs (2019 – 22,500), of which 100% vest based on the achievement of a non-market performance condition. PSUs vest at the end of their respective terms, generally three years, to the extent that the applicable performance conditions have been met. The fair value of the non-market performance based PSUs is determined by the market value of the Corporation's Common Shares at the time of grant and may be adjusted in subsequent years to reflect the estimated level of achievement related to the applicable performance condition. The Corporation expects to settle these awards with Common Shares issued from the treasury or by purchasing from the open market.

As at November 30, 2020, nil of the 108,750 outstanding PSU's had vested. As at November 30, 2019, 184,444 of the 206,944 outstanding PSU's had vested, which were exercised and settled during the year ended November 30, 2020. The PSU settlement resulted in a transfer of $760 from contributed surplus to share capital representing the stock compensation expense that was recognized in contributed surplus over the three years from 2017 to 2019 related to these PSUs, which was offset by cash outflow of $420 related to the common share repurchase and issuance on settlement of these PSU's.

ACQUISITION OF COLONIAL CIRCUITS INC.

On July 15, 2019, the Corporation acquired all of the outstanding shares of Colonial Circuits Inc. ("Colonial"), for a consideration of US $2,927 or $3,817, net of cash acquired. The acquisition price was paid in cash. This transaction has significant strategic benefit to the Corporation as it is expected to complement FTG's existing facilities, add capacity to the Corporation's circuit segment, allow for rebalancing of production amongst facilities and increase FTG's market share through new technological offerings and new customers.

The Colonial acquisition was accounted for by the Corporation as a business combination under IFRS 3. Under this method, the identifiable assets acquired and liabilities assumed are measured at their acquisition date fair values.

Included in the consolidated statement of earnings are revenues of approximately $3,600 and earnings before income taxes of approximately $400 related to the Colonial acquisition for the period from July 15, 2019 to November 30, 2019.

The transaction costs associated with the acquisition totaling $153 were expensed during the year ended November 30, 2019 and is included in selling, general and administrative expenses.

Acquired identifiable intangible assets include customer relationships, non-compete agreement, technology, access to markets, certifications and new products in circuits, which are being amortized over a period of 5 years.

The following table sets out the allocation of the purchase price to assets acquired and liabilities assumed, based on management's estimates of fair value:

	Colonial
Total purchase price:
Cash paid for acquisition	$4,281
Total purchase price to allocate	$4,281
Fair value of assets acquired and liabilities assumed:
Cash	$464
Accounts receivable	862
Inventories	704
Prepaid expenses	29
Plant and equipment	2,443
Intangible assets	626
Accounts payable and accrued liabilities	(581)
Deferred income tax liability, net	(266)
Net assets acquired	$4,281

RISK FACTORS

FTG operates in a dynamic and rapidly changing environment and industry, which exposes the Corporation to numerous risk factors. Additional information about the Corporation, including risks and uncertainties about FTG's business, is provided in the Corporation's Annual Information Form dated February 10, 2021 which is available on SEDAR at www.sedar.com.

In March 2020, the World Health Organization characterized the novel coronavirus ("COVID-19") as a global pandemic and extraordinary actions have been taken by international, federal, state and provincial governmental authorities to contain and combat the spread of COVID-19 in regions throughout the world. The COVID-19 outbreak and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, have adversely affected workforces, organizations, consumers, economies, and financial markets globally, leading to an economic downturn and increased market volatility. The extent of the impact of COVID-19 on the Corporation's operational and financial performance will depend on certain developments, including the duration of the outbreak, impact on the Corporation's customers and its sales cycles, impact on critical suppliers, and impact on the Corporation's employees.

The economic downturn and uncertainty caused by the COVID-19 outbreak and measures undertaken to contain its spread continue to negatively affect all of the Corporation's operations to some extent and, in particular, and has caused volatility in demand for the Corporation's products and services targeted to the commercial aerospace market. The Corporation continues to evaluate the current and potential impact of the COVID-19 outbreak on its business, results of operations and interim condensed consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the end of the reporting year. It also requires management to exercise judgement in applying the Corporation's accounting policies. However, uncertainty about these assumptions and estimates could result in

outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future years. Estimates and judgements are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

The Corporation based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Corporation.

The areas involving a higher degree of judgement or complexity, and or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below:

Expected credit losses

Accounts receivable are stated after evaluation as to their collectability and an appropriate provision for expected credit losses to be incurred is made, where considered necessary.

Allowance for inventory obsolescence

Management is required to make an assessment of the net realizable value of inventory at each reporting period. Management incorporates estimates and judgements that take into account current market prices, current economic trends and past experience in the measurement of net realizable value.

Taxes and deferred taxes

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Corporation reviews the adequacy of these provisions at the end of the reporting period. These balances are subject to audit by taxation authorities and as a result, maybe adjusted at some future date. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

Income taxes are determined based on estimates of the Corporation's current income taxes and estimates of deferred income taxes resulting from temporary differences. Deferred tax assets are assessed to determine the likelihood that they will be realized from future taxable income before they expire.

Useful lives of plant and equipment

The Corporation estimates the useful lives of plant and equipment based on the period over which the assets are expected to be available for use. In addition, the estimation of the useful lives of plant and equipment are based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the plant and equipment would increase the recorded expenses and decrease the noncurrent assets. An increase in the estimated useful lives of the plant and equipment would decrease the recorded expenses and increase the non-current assets.

Impairment and valuation of non-financial assets

Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. If there is no binding sale agreement or active market for an asset, fair value less costs to sell is based on the best information available to reflect the amount that an entity could obtain, at the end of the reporting period, from the disposal of the asset in an arm's length transaction between knowledgeable, willing parties, after deducting the costs of disposal. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Corporation is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

As part of acquisitions (if any), the Corporation may acquire product designs, process know-how and customer contracts. An intangible asset is recorded in the consolidated statements of financial position with respect to these assets. This asset is valued at fair value based on the present value of expected future cash flows. As actual valuation may vary from these estimates, they are reviewed on a quarterly basis with changes recognized through net earnings as required.

Warranties

The Corporation typically provides warranties for general repairs of defects that existed at the time of sale, as required by law. These assurance-type warranties are not separate performance obligations and are accounted for under IAS 37.

Business combinations

In a business combination, the acquisition method of accounting is used, whereby the purchase consideration is allocated to the fair value of identifiable assets acquired and liabilities assumed at the date of acquisition. Preliminary fair values allocated at a reporting date are finalized as soon as the relevant information is available, within a period not to exceed twelve months from the acquisition date with retroactive restatement of the impact of adjustments to those preliminary fair values effective as at the acquisition date. Acquisition-related costs are expensed as incurred and included in selling, general and administrative expenses.

Purchase consideration may also include amounts payable if future events occur or conditions are met. Any such contingent consideration is measured at fair value and included in the purchase consideration at the acquisition date. Subsequent changes to the estimated fair value of contingent consideration are recorded through the consolidated statements of earnings. Where the cost of the acquisition exceeds the fair values of the identifiable net assets acquired, the difference is recorded as goodwill. A gain is recorded through the consolidated statements of earnings if the cost of the acquisition is less than the fair values of the identifiable net assets acquired.

ADOPTION OF NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS

The Corporation has adopted IFRS 16 Leases ("IFRS 16") Effective December 1, 2019. The Corporation adopted IFRS 16 under the modified retrospective approach and did not restate the comparatives for 2019. At transition, the Corporation applied the practical expedient available to the Corporation as lessee that allows the continuation of the lease assessments under IAS 17 and IFRIC 4 for existing contracts. Therefore, the definition of a lease under IFRS 16 was applied only to contracts existing as at December 1, 2019 and not expiring before November 30, 2020. Refer to Note 3 and Note 4 of the consolidated financial statements as at November 30, 2020 for additional details.

ETHICAL BUSINESS CONDUCT

The Corporation has a written code of conduct for Directors, Officers and employees (the "Policy of Business Conduct") and a "Whistle Blowing Policy", which are each available on www.sedar.com. The Board monitors compliance with the Policy of Business Conduct through an annual review and sign off procedure from all of its Directors, Officers and employees.

OUTLOOK

The world economy and the outlook for the commercial Aerospace industry is very uncertain at this time. By far the largest negative impact is the COVID-19 pandemic. This has resulted in a significant decline in air travel, and has hurt the overall world economy. Looking forward, widespread vaccines could help reduce the number of cases of Covid-19 and reduce restrictions on air travel. Offsetting this could be the spread of new variants of the virus that are more easily transmissible that might or might not be controlled by existing vaccines.

On a global scale, the airline industry is dramatically weakened with huge drops in passenger travel. Both the demand for and the capacity to finance new aircraft in the short term is reduced.

Specifically at FTG, the COVID-19 pandemic has caused production disruptions at all sites at various points in time. We have had some plants shut down for periods of time due to government restrictions, we have had restricted operations, we have had suppliers with restricted operations and we have had a number of employees absent due to testing positive for the virus or having close contact with others that tested positive. We have made efforts within all our facilities to protect our employees through physical distancing, wearing masks, enhanced cleaning and other actions to minimize their exposure to the virus.

Beyond the above, we are seeing very mixed signals in the various markets we serve.

In commercial Air Transport, the pandemic has hurt demand. Airbus has reduced production by 30-40% in 2020. They are now speculating of production increases in late 2021 but not back to pre-pandemic levels. Boeing has also been hurt by the pandemic but also by their challenges with the B737 aircraft. Although the B737 is now approved for flight in the US, Canada and Europe, there are over 400 aircraft already built that need to be delivered before significant production will resume. And at the airline level, domestic travel is recovering faster than international travel and this is driving an expected ramp up of single aisle aircraft demand ahead of long-haul, twin aisle aircraft.

The business jet market also saw reduced demand due to the pandemic. But business jet activity has recovered rapidly and is now near pre-pandemic levels. In Canada, Bombardier has divested programs until it is now a business jet manufacturer only. FTG continues to maintain a solid relationship with Bombardier.

The helicopter market was less impacted by the pandemic. Production rates are being impacted by the overall economic conditions and key industries such resource extraction and public safety that are heavy users of helicopters.

The defense market is not expected to be significantly impacted by the COVID-19 pandemic. In fact, defense spending is one tool governments can use to stimulate the global economy.

There are many other economic factors, outside the aerospace and defense market, that can also impact the outlook for FTG. The relative strength, or weakness, of the Canadian dollar is one such factor as about 50-60% of FTG's operations are located in Canada but FTG competes primarily in U.S. dollars. Strengthening of the Canadian dollar would hurt FTG's competitiveness whereas a weakening of the Canadian dollar would enhance FTG's competitiveness.

CONTROLS AND PROCEDURES

The Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO") are responsible for establishing and maintaining disclosure controls and procedures and internal controls over financial reporting for the Corporation. The control framework used in the design of disclosure controls and procedures and internal control over financial reporting is the internal control integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 1992. In May 2013, COSO released an updated version of the 1992 internal control integrated framework. The Company is in the process adopting the new framework.

Disclosure controls and procedures

An evaluation of the design of and operating effectiveness of the Corporation's disclosure controls and procedures was conducted as of November 30, 2019 under the supervision of the CEO and CFO as required by CSA National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings. The evaluation included documentation, review, enquiries and other procedures considered appropriate in the circumstances. Based on that evaluation, the CEO and the CFO have concluded that the Corporation's disclosure controls and procedures are effective to provide reasonable assurance that information relating to the Corporation and its consolidated subsidiaries that is required to be disclosed in reports filed under provincial and territorial securities legislation is recorded, processed, summarized and reported to senior management, including the CEO and the CFO, so that appropriate decisions can be made by them regarding required disclosure within the time periods specified in the provincial and territorial securities legislation.

Internal control over financial reporting

CSA National Instrument 52-109 requires the CEO and CFO to certify that they are responsible for establishing and maintaining internal control over financial reporting for the Corporation, that those internal controls have been designed and are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS.

Management, including the CEO and CFO, does not expect that the Corporation's disclosure controls or internal controls over financial reporting will prevent or detect all errors and all fraud or will be effective under all potential future conditions. A control system is subject to inherent limitations and, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met.

The CEO and CFO have, using the framework and criteria established by COSO, evaluated the design and operating effectiveness of the Corporation's internal controls over financial reporting and concluded that, as of November 30, 2020, internal controls over financial reporting were effective to provide reasonable assurance that information related to consolidated results and decisions to be made based on those results were appropriate.

During the fourth quarter ended November 30, 2020, there have been no changes in the Corporation's internal controls over financial reporting, other than the limitation of scope of design as noted above, that may have materially affected, or are reasonably likely to materially affect, the Corporation's internal controls over financial reporting.

Caution Regarding Forward-Looking Statements

Certain statements in this MD&A other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect the current expectations of FTG. These statements include without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of FTG, as well as the outlook for North American and international economies, for the current fiscal year and subsequent periods. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "plans", "believes", "estimates", "seeks", "considers", "intends", "targets", "projects", "forecasts" or negative versions thereof and other similar expressions, or future or conditional verbs such as "may", "will", "should", "would" and "could". Forward-looking statements are provided for the purpose of conveying information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes.

Forward-looking information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking statements, including FTG's perception of historical trends, current conditions and expected future developments as well as other factors FTG believes are appropriate in the circumstances.

By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of material factors, many of which are beyond FTG's control, affect the operations, performance and results of FTG and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: impact or unanticipated impact of general economic, political and market factors in North America and internationally; intense business competition and uncertain demand for products; technological change; customer concentration; foreign currency exchange rates; dependence on key personnel; ability to retain and develop sufficient labour and management resources; ability to complete strategic transactions, integrate acquisitions and implement other growth strategies; litigation and product liability proceedings; increased demand from competitors with lower production costs; reliance on suppliers; credit risk of customers; compliance with environmental laws; possibility of damage to manufacturing facilities as a result of unforeseeable events, such as natural disasters or fires; fluctuations in operating results; possibility of intellectual property infringement claims; demand for the products of FTG's customers; ability to obtain continued debt and equity financing on acceptable terms; ability of a significant shareholder to influence matters requiring shareholder approval; historic volatility in the market price of the Corporation's common shares and risk of price decreases; production warranty and casualty claim losses; conducting business in foreign

jurisdictions; income and other taxes; and government regulation and legislation and FTG's ability to successfully anticipate and manage the foregoing risks.

The reader is cautioned that the foregoing list of factors is not exhaustive of the factors that may affect any of FTG's forward-looking statements. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements.

Other than as specifically required by law, FTG undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results otherwise.

The MD&A presents certain non-IFRS financial measures to assist readers in understanding the Corporation's performance. Non-IFRS financial measures are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP"). Throughout this discussion, reference is made to gross margin which represents net sales less cost of sales and expenses. Not included in the calculation of gross margin are selling, administrative and general expenses, research and development costs and recoveries, foreign exchange, gains or losses on the sale of assets, interest and income taxes. Gross margin is not generally accepted earnings measures and should not be considered as an alternative to net earnings or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating these measures, the Corporation's gross margin may not be directly comparable with similarly titled measures used by other companies. Management believes the gross margin measure is important to many of the Corporation's shareholders, creditors and other stakeholders. The risks, uncertainties and other factors that could influence actual results are described in this MD&A based on information available as of February 10, 2021 and the Corporation's Annual Information Form (including documents incorporated by reference) dated February 10, 2021 which is available on SEDAR at www.sedar.com.