6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of May 2016

Commission File Number 001-34798

SMART TECHNOLOGIES INC.

3636 Research Road N.W.

Calgary, Alberta

Canada T2L 1Y1

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  x            Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

THIS REPORT ON FORM 6-K SHALL BE DEEMED FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) AND INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-181530) OF SMART TECHNOLOGIES INC. FILED WITH THE COMMISSION, AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE COMMISSION, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS THE REGISTRANT SUBSEQUENTLY FURNISHES TO OR FILES WITH THE COMMISSION.

DOCUMENTS FURNISHED AS PART OF THIS FORM 6-K

In connection with the announcement of its annual and fourth quarter fiscal 2016 financial results, SMART Technologies Inc. is filing the following documents:

1. Management’s Discussion and Analysis of Financial Condition and Results of Operations; and

2. Annual consolidated financial statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SMART TECHNOLOGIES INC.
By:	/s/ Matt Sudak
Name:	Matt Sudak
Title:	Vice President, Legal & General Counsel, and Corporate Secretary

Date: May 26, 2016

Exhibit Index

99.1	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
99.2	Consolidated Financial Statements for the Years ended March 31, 2016, 2015 and 2014.

2

EX-99.1

Q4 2016	Fourth Quarter Report
	for the fiscal year ended March 31, 2016

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

The following management’s discussion and analysis (“MD&A”) should be read in conjunction with our audited consolidated financial statements and the accompanying notes of SMART Technologies Inc. (the “Company”) for the fiscal year ended March 31, 2016. The consolidated financial statements have been presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Unless the context otherwise requires, any reference to the “Company”, “SMART Technologies”, “SMART^®”, “we”, “our”, “us” or similar terms refers to SMART Technologies Inc. and its subsidiaries. Because our fiscal year ends on March 31, references to a fiscal year refer to the fiscal year ended March 31 of the same calendar year. For example, when we refer to fiscal 2016, we mean our fiscal year ended March 31, 2016. Unless otherwise indicated, all references to “$” and “dollars” in this MD&A mean United States (“U.S.”) dollars. Certain amounts in our MD&A may not add up due to rounding. All percentages however, have been calculated using unrounded amounts. Unless otherwise noted, this MD&A is presented in millions. Capitalized terms used in this MD&A but not defined will have the meanings given to them in our audited consolidated financial statements. Certain reclassifications have been made to prior years’ figures to conform to the current year’s presentation.

is a registered trademark in Canada, the United States and in member countries of the European Union. SMART Board^®, SMART Notebook™, SMART Meeting Pro™, kapp^®, kapp iQ^®, SMART Room System™, SMART Learning Suite™, SMART amp™, smarttech™, the SMART logo and all SMART taglines are marks, common law or registered, of SMART Technologies ULC, a wholly owned subsidiary of SMART Technologies Inc., in the U.S. and/or other countries. All third-party product and company names are for identification purposes only and may be trademarks of their respective owners.

The following table sets forth the year end and year average exchange rates for U.S. dollars expressed in Canadian dollars that are used in the preparation of our audited consolidated financial statements and this MD&A. These rates are based on the closing rates published by the Bank of America.

	Year End Rate		Year Average Rate
Year-ended March 31, 2016		1.2965		1.3113
Year-ended March 31, 2015		1.2677		1.1387
Year-ended March 31, 2014		1.1060		1.0535

Forward-Looking Statements

This MD&A includes forward-looking statements within the meaning of the U.S. federal and applicable Canadian securities laws. These forward-looking statements relate both to us specifically and the technology product industry and business, demographic and other matters generally, and reflect our current views with respect to future events and our financial performance. Statements that include the words “expanding”, “expect”, “continuing”, “intend”, “plan”, “believe”, “project”, “estimate”, “anticipate”, “may”, “will”, “continue”, “further”, “seek” and similar words or statements of a future or forward-looking nature identify forward-looking statements for purposes of the applicable securities laws or otherwise. The forward-looking statements in this MD&A pertain, among other matters, to our business, financial condition, financial performance, cost structure, results of operations, cash flows and plans, including in particular, but without limitation: (i) the decline in interactive display demand, which is beginning to be offset by an early-stage replacement and upgrade cycle; (ii) the transition of education end-users from interactive whiteboards to interactive flat panels; (iii) the low level of penetration of interactive display products in the enterprise market,

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indicating that the market is in the early stages of the product adoption curve; (iv) the potential to expand and monetize our software and service offerings by leveraging our large and loyal user base; and (v) our extensive and growing distribution network.

All forward-looking statements address matters that involve known and unknown risks, uncertainties and assumptions, many of which are beyond our control. Accordingly, there are and will be important factors and assumptions that could cause our actual results and other circumstances and events to differ materially from those indicated in such statements. We believe that these risk factors and assumptions include, but are not limited to, those described under “Risk Factors” in our fiscal 2015 Annual Report on Form 20-F, including without limitation: (i) our sales to the education market are in decline and may continue to decline; (ii) sales of our new products may not be sufficient to offset the decline in our education sales, and if sales of new products are not sufficiently robust, our liquidity may be materially and adversely affected; (iii) our sales and operating results are difficult to predict; (iv) the level and upcoming maturities of our current and future debt could have an adverse effect on our business; and (v) our working capital requirements and cash flows are subject to fluctuation, which could have a material adverse effect on our business, financial condition or results of operations. In addition, we believe that these risk factors and assumptions include without limitation:

• our ability to maintain sales, including sales to the education market that continue to decline;

• sales of our new products and services may not be sufficient to offset the overall decline in sales;

• difficulty in predicting our sales and operating results;

• our ability to raise additional funds, manage cash flow, foreign exchange risk and working capital;

• our substantial debt could adversely affect our financial condition;

• our ability to implement meaningful changes to address the Company’s business and financial challenges;

• our ability to execute and consummate any strategic opportunities that may be identified as a part of our strategic review;

• our ability to successfully manufacture, distribute, market and sell kapp as a new product in the market;

• our ability to manage our market distribution channel, including changes related to establishing new relationships as well as managing our existing relationships with our resellers and distributors;

• our ability to attract, retain and motivate qualified personnel;

• the continued service and availability of a limited number of key personnel;

• the potential for additional costs or liabilities arising from our inventory and purchase commitments within our supply chain, including raw material components;

• competition in our industry, including the potential for our competitors and/or partners to form strategic alliances;

• our ability to increase sales in the enterprise market;

• our ability to successfully execute our strategy to monetize software;

• possible changes in the demand for our products;

• the continuing shift in product mix from interactive whiteboards to interactive flat panels;

• our ability to grow our sales in global markets;

• changes to our business model;

• our ability to enhance current products and develop and introduce new products;

• the potential negative effect of product defects;

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• reduced spending by our customers due to changes in the spending policies or budget priorities for government funding, including the potential shift to other technology products;

• the potential negative effect of disruptions of certain business functions provided by third parties;

• the potential negative effects of system failures or cybersecurity attacks;

• the reliability of component supply and product assembly and logistical services provided by third parties, including their compliance with environmental laws;

• the development of the market for interactive learning and collaboration products;

• our ability to manage risks inherent in foreign operations;

• our ability to manage our systems, procedures and controls;

• the potential of increased costs, including any to future restructuring and related charges;

• our ability to protect our brand;

• our ability to achieve the benefits of strategic partnerships;

• our reliance upon a strategic partnership with Microsoft;

• our ability to successfully obtain patents or registration for other intellectual property rights or protect, maintain and enforce such rights;

• third-party claims of infringement or violation of, or other conflicts with, intellectual property rights by us; and

• our ability to manage, defend and settle litigation.

Although we believe that the assumptions inherent in the forward-looking statements contained in this MD&A are reasonable, undue reliance should not be placed on these statements, which only apply as of the date hereof. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Overview

SMART Technologies Inc. is one of the leading providers of technology solutions that are redefining the way the world works and learns. SMART solutions include large-format interactive displays, collaboration software and services that enable highly-interactive, engaging and productive teaching, learning and work experiences in schools and workplaces around the world. SMART is differentiated by complete, integrated solutions that are easy to use while focused on freeing people from their desks and computer screens to make collaboration and learning digitally more natural and engaging. We introduced the world’s first interactive whiteboard in 1991, and we remain one of the global leaders in the interactive display market with over 3.3 million interactive displays shipped to date. Our award-winning solutions are the result of more than 20 years of technological innovation supported by our core intellectual property. In the education market, we have transformed teaching and learning in classrooms worldwide, reaching millions of students and teachers. In the enterprise market, we have improved the way people work and collaborate worldwide, enabling them to be more productive and reduce costs.

We offer a number of interactive display products, including the SMART Board interactive whiteboards and interactive flat panels, the kapp digital capture boards, and the kapp iQ multi-way whiteboards. By touching the surface of a SMART interactive display, the user can control computer applications, access the Internet and our learning content ecosystem, write in digital ink, and save and distribute work. Our interactive displays serve as the focal point of a broad classroom and meeting-room technology platform and are augmented with a range of modular and integrated interactive technology products and solutions, including hardware, software and content created by both our user community and professional content developers. kapp is a modern replacement for traditional dry-erase boards and flip charts that enables users to capture and digitally share information in high-

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quality formats. kapp iQ is an ultra HD display with a built-in whiteboard that enables multi-way inking between any combination of devices from anywhere in the world. Our collaborative learning solutions for education combine collaboration software with a comprehensive line of interactive displays and other hardware, accessories and services that further enhance learning. Our enterprise solutions facilitate collaborative decision making with industry-leading interactive displays, intuitive software and other high-quality components, including cameras, microphones and speakers.

Revenue and Expenses

We generate revenue from the sale of interactive technology products and solutions, including hardware, software and services. Our distribution and sales channel primarily consists of a variety of third-party distributors and resellers (“customers”), who then sell directly to our consumers in the education and enterprise markets (“end-users”). For our education products, we use resellers in North America and distributors in Europe, Middle East and Africa (“EMEA”), Caribbean, Latin America and Asia Pacific regions. For our enterprise products, we use a distributor model globally. We complement and support our sales channel with sales and support staff who work either directly with prospective end-users or in coordination with our sales channel to promote and provide products and solutions that address the needs of the end-users. Our cost of sales is primarily comprised of the cost of materials and components purchased from our suppliers, cost from contract manufacturers, warranty costs, transportation costs and other supply chain management costs. Our most significant expenses are related to selling, marketing and administration, research and development, and interest on our long-term debt and capital lease.

Foreign Exchange Gains & Losses

We report our financial results in U.S. dollars, allowing us to assess our business performance in comparison to the financial results of other companies in the technology industry. Our Canadian operations and marketing support subsidiaries around the world have the Canadian dollar as their functional currency. Our U.S. subsidiaries have the U.S. dollar as their functional currency. The financial results of these subsidiaries are converted to Canadian dollars for consolidation purposes and then the Canadian consolidated financial results are converted from Canadian dollars to U.S. dollars for reporting purposes.

Our foreign exchange exposure is primarily between the Canadian dollar and the U.S. dollar, the Euro and the British pound sterling. This exposure relates to our U.S. dollar-denominated assets and liabilities, including our external debt, the sale of our products to customers globally and purchases of goods and services in foreign currencies and our Canadian dollar-denominated operating expenses. Gains and losses on our U.S. dollar-denominated debt prior to its maturity or redemption are non-cash in nature.

Market Trends

The dynamic of the education market for interactive displays varies on a geographical basis. In North America and Western Europe, other technology spending priorities and high classroom penetration rates have led to a decline in interactive display demand, which is beginning to be offset by an early-stage replacement and upgrade cycle. Education end-users have begun transitioning from interactive whiteboards to interactive flat panels due to the superior user experience, driven by better touch, higher image quality, durability and usability, and the fact that the total cost of ownership over time is less than that of an interactive whiteboard and projector combination. The enterprise market is in the early stages of the product adoption curve. With low interactive display penetration rates in meeting rooms, and a constant focus on effective collaboration in organizations, we believe there is a large opportunity for our enterprise solutions.

With the increasing utilization of mobile devices and digital content, technology in classrooms is evolving, and this evolution has provided several opportunities for SMART. Educators and administrators face the challenge of uniting various classroom technologies and devices without significant cost and complexity. SMART has an opportunity to provide hardware and software that helps to alleviate these difficulties by unifying

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disparate content and devices. With a large and loyal user base, we believe that we can expand and monetize our software and service offerings, as well as capture replacement and upgrade cycles in interactive display hardware and software when they occur. SMART Learning Suite software bundles SMART Notebook, our industry-leading education software, with SMART amp, our cloud-based software-as-a-service solution, so teachers, students and devices, including interactive displays, PCs, laptops, tablets, or smart phones, can connect to collaborate in real time through in-class assessment, shared digital work spaces, and interactive Web-based learning materials, regardless of location. The hosting of the software in the cloud eliminates costs associated with supporting numerous proprietary operating systems and applications. Since we began monetizing our software offerings in April 2014, SMART’s various education software offerings have been building a recurring revenue stream.

For enterprise market end-users, we offer premium interactive displays and software solutions that facilitate collaborative efforts and can ultimately drive improved business results. Our core solutions for enterprise end-users include kapp iQ, an ultra HD interactive display that is also a whiteboard and allows anyone connected via a web device to contribute on any device, from any location. kapp iQ Pro has all of kapp iQ’s collaboration features, plus even more ways to share ideas through SMART Meeting Pro software which offers best-in-class whiteboarding, inking on any format and collaborative sharing of large amounts of complex data, allowing knowledge workers to mark up and save on any content. The SMART Room System for Microsoft Skype for Business^® is our purpose-built solution that brings Microsoft Skype for Business into the meeting room. We believe the market opportunity for our enterprise solutions is large.

With innovative solutions and technology leadership, a large installed base in education and an extensive and growing distribution network, we believe that we are well-positioned to capitalize on the technology trends in the education and enterprise markets.

Our portfolio of products has expanded over the past year, including development of the 6000 and 4000 series of interactive flat panels, the SMART Learning Suite software for the education market, and new versions of the SMART Board 8000 series interactive flat panel and kapp iQ for the enterprise market.

Reportable Segments

Effective April 1, 2015, we completed a reorganization which merged the existing Education and Enterprise sales and customer service teams into the new Solutions business unit, and established separate sales and customer service teams dedicated to the our new line of products in the kapp business unit. Certain functions that were previously distinct to the individual Education and Enterprise segments were centralized at the corporate level. As a result of only the sales and customer service teams being dedicated to a specific business unit, no discrete financial information is available on a business unit basis. The existing NextWindow segment no longer earns revenue or incurs expenses as it enters the final stage of its wind down. We no longer have individual business units that meet the criteria of an operating segment, and are now organized and managed as a single reportable operating segment. For more information about our revenue by geographic location and by customer, please see “Note 14—Segment disclosure” in our audited consolidated financial statements. In October 2015, as a part of cost reduction initiatives, we merged the kapp sales and customer service teams into the Solutions business unit. This had no impact on our assessment of reportable operating segments.

Highlights

• Revenue decreased by $144 million from $493 million in fiscal 2015 to $348 million in fiscal 2016. Adjusted Revenue, which is defined in the “Non-GAAP measures” section below, decreased by $83 million from $431 million in fiscal 2015 to $349 million in fiscal 2016. Gross margin percentage was 47% in fiscal 2015 compared to 29% in fiscal 2016. Adjusted Gross Margin percentage, which is defined in the “Non-GAAP measures” section below, was 39% in fiscal 2015 compared to 35% in fiscal 2016. Adjusted EBITDA, which is defined in the “Non-GAAP measures” section below, decreased by $26 million from $34 million in fiscal 2015 to $8 million in fiscal 2016.

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• In the third quarter of fiscal 2016, we updated our financial outlook and subsequently implemented cost reduction initiatives primarily relating to kapp sales and marketing activities and related R&D spend. As a result, we are no longer organized with a separate kapp sales and customer service team. We incurred employee termination costs of $4 million related to the fiscal 2016 October restructuring plan in the third quarter of fiscal 2016.

• As a result of slower than anticipated kapp sales, during the third quarter of fiscal 2016, we assessed and revised our future demand assumptions for finished goods and raw materials. Based on these revised demand assumptions, we recorded a primarily non-cash, pre-tax charge against inventory and purchase commitments of $21 million in the third quarter of fiscal 2016 (“kapp Inventory Charge”). We also re-classified $5 million of inventory as non-current as it is not reasonably expected to be realized in cash during the next 12 months. The kapp Inventory Charge is excluded from the calculation of Adjusted Net Income and Adjusted EBITDA.

• In May 2016, we completed a 1-for-10 share consolidation of our issued and outstanding Common Shares. All share and per share amounts have been retroactively adjusted to reflect the share consolidation for all periods presented.

• On May 26, 2016, we announced that we entered into an arrangement agreement under which Foxconn Technology Group has agreed to acquire all of the outstanding Common Shares of the Company for a cash payment of US$4.50 per Common Share. The arrangement agreement is subject to customary conditions for a transaction of this nature, which include court and regulatory approvals and the approval of 66 ²/₃% of the votes cast by SMART shareholders, and is expected to close during the second quarter of fiscal 2017.

Results of Operations

Revenue

	2016		Change			2015		Change			2014
Revenue	$	348.5		(29.3	)%	$	492.9		(16.3	)%	$	589.2
Adjusted Revenue(1)	$	348.5		(19.2	)%	$	431.3		(22.3	)%	$	555.3
Revenue by geographic location
North America	$	223.6		(23.8	)%	$	293.4		(11.0	)%	$	329.6
Europe, Middle East and Africa (EMEA)		105.8		(30.6	)%		152.6		(8.7	)%		167.1
Rest of World		19.0		(59.5	)%		47.0		(49.2	)%		92.5
	$	348.5		(29.3	)%	$	492.9		(16.3	)%	$	589.2
Adjusted Revenue(1) by geographic location
North America	$	223.6		(13.2	)%	$	257.6		(17.1	)%	$	310.6
Europe, Middle East and Africa (EMEA)		105.8		(20.2	)%		132.7		(15.8	)%		157.5
Rest of World		19.0		(53.7	)%		41.1		(52.9	)%		87.2
	$	348.5		(19.2	)%	$	431.3		(22.3	)%	$	555.3

(1) This is a non-GAAP measure. See “Non-GAAP measures” section for additional information.

Revenue decreased by $144 million in fiscal 2016 compared to fiscal 2015. When we introduced SMART Notebook Advantage in the third quarter of fiscal 2014, we reduced the support period, and effectively, the revenue deferral period, for previously sold software to end at March 31, 2015. The accelerated revenue recognition due to this change in accounting estimate resulted in a revenue increase of $62 million in fiscal 2015. Adjusted Revenue decreased by $83 million in fiscal 2016 compared to fiscal 2015, primarily due to lower revenue from interactive whiteboards, interactive projectors and attachment products, partly offset by increases in revenue from interactive flat panels.

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Revenue decreased by $96 million in fiscal 2015 compared to fiscal 2014. The accelerated revenue recognition due to the change in accounting estimate discussed above, positively impacted revenue by $62 million in fiscal 2015 and $34 million in fiscal 2014. Adjusted Revenue decreased by $124 million in fiscal 2015 compared to fiscal 2014, primarily due to lower revenue from the sale of interactive whiteboards, interactive projectors and attachment products and a year-over-year decline in the sales of optical touch components, partly offset by increases in revenue from interactive flat panels and software.

Adjusted Revenue for each of the past three years in North America, EMEA and Rest of World was negatively impacted by declines in our education and enterprise solutions sales. This decline in Rest of World was partially offset by higher sales of our optical touch components in fiscal 2014.

In fiscal 2016, revenue was negatively impacted by foreign exchange movements of approximately $11 million compared to the prior year, primarily as a result of the strengthening of the U.S. dollar against the Canadian dollar, the Euro and the GBP. In fiscal 2015, revenue was negatively impacted by foreign exchange movements of approximately $8 million compared to the prior year, primarily as a result of the strengthening of the U.S. dollar against the Canadian dollar and the Euro.

Gross Margin

	2016			Change			2015			Change			2014
Gross margin	$	101.3			(56.3	)%	$	231.9			(6.9	)%	$	249.1
Gross margin percentage		29.1	%		(17.9	)pt		47.0	%		4.7	pt		42.3	%
Adjusted Gross Margin(1)	$	121.9			(28.4	)%	$	170.3			(20.9	)%	$	215.2
Adjusted Gross Margin percentage(1)		35.0	%		(4.5	)pt		39.5	%		0.7	pt		38.8	%

(1) These are non-GAAP measures. See “Non-GAAP measures” section for additional information

Gross margin decreased by $131 million in fiscal 2016 compared to fiscal 2015 and decreased by $17 million in fiscal 2015 compared to fiscal 2014. In the third quarter of fiscal 2016, the $21 million kapp Inventory Charge was recorded against cost of sales. The change in deferred revenue due to the change in accounting estimate as discussed previously, positively impacted gross margin by $62 million in fiscal 2015 and $34 million in fiscal 2014.

Adjusted Gross Margin decreased by $48 million in fiscal 2016 compared to fiscal 2015 and decreased by $45 million in fiscal 2015 compared to fiscal 2014. The decreases were due to lower Adjusted Revenue as discussed previously. For fiscal 2016, the decrease in period-over-period Adjusted Gross Margin percentage was due to a continuing shift in product mix from interactive whiteboards to interactive flat panels which carry a lower gross margin percentage. For fiscal 2015, the year-over-year Adjusted Gross Margin percentage remained flat.

Gross margin was negatively impacted by foreign exchange movements of approximately $8 million in fiscal 2016 compared to fiscal 2015 and approximately $6 million in fiscal 2015 compared to fiscal 2014, primarily as a result of the strengthening of the U.S. dollar against the Canadian dollar, the Euro and the GBP which negatively impacted our revenue and positively impacted our cost of sales.

Operating Expenses

Selling, Marketing and Administration Expense

	2016			Change			2015			Change			2014
Selling, marketing and administration	$	78.1			(24.8	)%	$	103.9			(11.1	)%	$	116.9
As a percent of revenue		22.4	%		1.3	pt		21.1	%		1.3	pt		19.8	%
As a percent of Adjusted Revenue(1)		22.4	%		(1.7	)pt		24.1	%		3.1	pt		21.0	%

(1) This is a non-GAAP measure. See “Non-GAAP measures” section for additional information.

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Our selling and marketing expenses consist primarily of costs relating to our sales and marketing activities, including salaries and related expenses, customer support, advertising, trade shows, various cooperative marketing programs and other promotional activities. Our administration expenses primarily consist of costs relating to people services, information systems, legal and finance functions, professional fees, insurance, stock-based compensation and other corporate expenses.

As the majority of our selling, marketing and administration expenses were incurred in Canadian dollars, these expenses were positively impacted by changes in foreign exchange rates of approximately $10 million in fiscal 2016 and approximately $6 million in fiscal 2015 compared to the respective prior years, primarily as a result of the strengthening of the U.S. dollar relative to the Canadian dollar. Removing the foreign exchange impact, selling, marketing and administration expenses decreased by approximately $16 million in fiscal 2016 and $7 million in fiscal 2015 compared to the respective prior years, primarily due to the impact of restructuring activities.

Research and Development Expense

	2016			Change			2015			Change			2014
Research and development	$	36.0			(16.9	)%	$	43.3			8.1	%	$	40.1
As a percent of revenue		10.3	%		1.5	pt		8.8	%		2.0	pt		6.8	%
As a percent of Adjusted Revenue(1)		10.3	%		0.3	pt		10.0	%		2.8	pt		7.2	%

(1) This is a non-GAAP measure. See “Non-GAAP measures” section for additional information.

Our research and development expenses consist primarily of salaries and related expenses for software and hardware engineering and technical personnel as well as materials and consumables used in product development. We incur most of our research and development expenses in Canada and the United States.

Research and development expenses were positively impacted by foreign exchange movements of approximately $4 million in fiscal 2016 and $3 million in fiscal 2015 compared to respective prior periods, primarily as a result of the strengthening of the U.S. dollar relative to the Canadian dollar. Removing the foreign exchange impact, research and development expenses decreased in fiscal 2016 compared to fiscal 2015. The increase in fiscal 2015 compared to fiscal 2014 was due to increased investment in the development of new products and technologies.

Depreciation and Amortization

	2016		Change			2015		Change			2014
Depreciation and amortization of property and equipment	$	8.1		(28.3	)%	$	11.3		(31.1	)%	$	16.4
Amortization of intangible assets	$	0.1		(14.1	)%	$	0.1		(99.7	)%	$	22.4

The decrease in depreciation and amortization of property and equipment in fiscal 2016 and fiscal 2015 compared to respective prior years was due to decreases in the net book value of these assets as a result of declining capital expenditures.

In fiscal 2014, the decline in the optical touch sensor market for desktop displays resulted in our decision to wind down the NextWindow operations. As a result, we accelerated the amortization of our intangible assets.

Restructuring Costs

	2016		Change			2015		Change			2014
Restructuring costs	$	5.1		(16.8	)%	$	6.1		3.7	%	$	5.9

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In fiscal 2016, we incurred $4 million in employee termination costs related to the fiscal 2016 restructuring plan. We also incurred $1 million in additional restructuring costs related to the cancellation of an office lease.

In fiscal 2015, we incurred $6 million in employee termination and other restructuring costs related to the fiscal 2015 March restructuring and fiscal 2015 restructuring plans.

Gain on Sale of Long-Lived Assets

	2016		Change			2015			Change			2014
Gain on sale of long-lived asset	$	—		(100.0	)%	$	(0.1	)		(98.0	)%	$	(4.2	)

In fiscal 2014, we recorded a gain on the sale of long-lived assets of $4 million, primarily related to the sale of several internally generated intangible assets to a third party.

Non-Operating Expenses (Income)

	2016			Change			2015			Change			2014
Interest expense	$	18.3			(8.5	)%	$	20.0			(6.9	)%	$	21.4
Foreign exchange loss	$	1.2			(88.8	)%	$	11.1			12.1	%	$	9.9
Other income	$	(0.7	)		(6.6	)%	$	(0.7	)		(6.2	)%	$	(0.8	)
	$	18.8			(37.9	)%	$	30.4			(0.8	)%	$	30.6

Interest Expense

In fiscal 2016 and fiscal 2015, our interest expense primarily related to our long-term debt and capital lease. The decrease in interest expense in fiscal 2015 compared to fiscal 2014 was due to deferred financing fees expensed in the prior-year period partially offset by higher interest expense on the Term loan in fiscal 2015.

Foreign Exchange loss

For fiscal 2016 and fiscal 2015, the change in foreign exchange loss was primarily related to the conversion of our U.S. dollar-denominated debt into our functional currency of Canadian dollars, partially offset by the repayment of our derivative contracts. During fiscal 2016, the U.S dollar strengthened by 2.3% against the Canadian dollar, compared to 14.6% during fiscal 2015.

Income Tax Expense

	2016			Change			2015			Change			2014
Income tax expense	$	16.0			24.8	%	$	12.9			*		$	0.5
Effective tax rate		(35.7	)%		*			34.8	%		32.3	pt		2.5	%

* Not Meaningful

The increase in income tax expense in fiscal 2016 compared to fiscal 2015 was due primarily to an increased valuation allowance resulting from the derecognition of previously recognized tax assets. For more information about changes in our valuation allowance, please see “Note 11—Income taxes” in our audited consolidated financial statements. The tax expense also includes investment tax credits of $0.5 million, $3 million and $5 million in fiscal 2016, 2015 and 2014, respectively.

Our tax provision is weighted towards Canadian income tax rates as substantially all our taxable income is Canadian-based. In calculating the tax provision, we adjusted income before income taxes by the unrealized foreign exchange loss from the revaluation of the U.S. dollar-denominated debt. This is treated as a capital item for income tax purposes.

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Non-GAAP measures

As used in this MD&A, “GAAP” means generally accepted accounting principles in the United States that are in effect from time to time. This MD&A discloses certain financial measures, such as Adjusted Revenue, Adjusted Gross Margin, Adjusted Gross Margin percentage, Adjusted Net (Loss) Income, Adjusted Net (Loss) Income per share and Adjusted EBITDA.

Adjusted Revenue, Adjusted Gross Margin, Adjusted Gross Margin percentage, Adjusted Net (Loss) Income, Adjusted Net (Loss) Income per share and Adjusted EBITDA are non-GAAP measures and should not be considered as alternatives to revenue, gross margin, gross margin percentage, net (loss) income or any other measure of financial performance calculated and presented in accordance with GAAP. Adjusted Revenue, Adjusted Gross Margin, Adjusted Gross Margin percentage, Adjusted Net (Loss) Income, Adjusted Net (Loss) Income per share, and Adjusted EBITDA have inherent limitations, and the reader should therefore not place undue reliance on them.

In the second quarter of fiscal 2016, we changed our definition of Adjusted Revenue from revenue adjusted for the change in deferred revenue balances during the period, to revenue adjusted for the accelerated deferred revenue recognized as a result of the change in accounting estimate as discussed below. All Adjusted Revenue amounts with respect to prior periods presented herein have been restated to reflect this change.

In the third quarter of fiscal 2016, we recognized the kapp Inventory Charge of $21 million and elected to remove this expense from our non-GAAP financial measures, including Adjusted Gross Margin, Adjusted Gross Margin percentage, Adjusted Net (Loss) Income, Adjusted Net (Loss) Income per share, and Adjusted EBITDA. We removed the kapp Inventory Charge as we believe it is unusual and material, and enables us and our shareholders to better assess our operating performance in prior and future periods by improving the comparability of the financial information presented.

We calculate Adjusted Gross Margin by subtracting cost of sales, excluding the kapp Inventory Charge, from Adjusted Revenue.

Adjusted Gross Margin percentage is calculated by dividing Adjusted Gross Margin by Adjusted Revenue.

We define Adjusted Net (Loss) Income as net (loss) income before stock-based compensation (recovery) expense, restructuring costs, foreign exchange gains or losses, accelerated deferred revenue recognized, amortization of intangible assets, gains or losses related to the liquidation of foreign subsidiaries, gains or losses related to the sale of long-lived assets and the kapp Inventory Charge, all net of tax.

We calculate Adjusted Net (Loss) Income per share by dividing Adjusted Net (Loss) Income by the average number of basic and diluted shares outstanding during the period.

We define Adjusted EBITDA as Adjusted Net (Loss) Income before interest expense, income taxes, depreciation and other income.

Due to the change in accounting estimate as a result of the reduction in the support period for previously sold products, as discussed in Note 1 in the audited consolidated financial statements, and the kapp Inventory Charge, as discussed in Note 4 in the audited consolidated financial statements, we chose to use the non-GAAP measures of Adjusted Revenue and Adjusted Gross Margin. Although the significant impact related to the change in accounting estimate for previously sold products ended in the fourth quarter of fiscal 2015, we will continue adjusting for this change for comparative purposes. We use Adjusted Revenue and Adjusted Gross Margin as key measures to provide additional insights into the operational performance of the Company and to help clarify trends affecting the Company’s business.

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We use Adjusted Net (Loss) Income to assess the performance of the business after removing the after-tax impact of stock-based compensation (recovery) expense, restructuring costs, foreign exchange gains and losses, accelerated deferred revenue recognized, amortization of intangible assets, gains or losses related to the liquidation of foreign subsidiaries, gains or losses related to the sale of long-lived assets and the kapp Inventory Charge. We also use Adjusted EBITDA as a key measure to assess the core operating performance of our business after removing the after-tax effects of both our leveraged capital structure and the volatility associated with the foreign currency exchange rates on our U.S. dollar-denominated debt. We use both of these measures to assess business performance when we evaluate our results in comparison to budgets, forecasts, prior-year financial results and other companies in our industry. Many of these companies use similar non-GAAP measures to supplement their GAAP disclosures, but such measures may not be directly comparable to ours. In addition to its use by management in the assessment of business performance, Adjusted EBITDA is used by our Board of Directors in assessing management’s performance and is a key metric in the determination of payments made under our incentive compensation plans. We believe Adjusted Net (Loss) Income and Adjusted EBITDA may be useful to investors in evaluating our operating performance because securities analysts use metrics similar to Adjusted Net (Loss) Income and Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies.

We compensate for the inherent limitations associated with using Adjusted Revenue, Adjusted Gross Margin, Adjusted Gross Margin percentage, Adjusted Net (Loss) Income, Adjusted Net (Loss) Income per share and Adjusted EBITDA through disclosure of such limitations, presentation of our financial statements in accordance with GAAP, and reconciliation of Adjusted Revenue, Adjusted Gross Margin, Adjusted Gross Margin percentage, Adjusted Net (Loss) Income per share, Adjusted Net (Loss) Income, and Adjusted EBITDA to the most directly comparable GAAP measures: revenue, gross margin, gross margin percentage, net (loss) earnings per share and net (loss) income.

The following table shows the reconciliation of revenue to Adjusted Revenue and gross margin to Adjusted Gross Margin.

	2016		2015			2014
Adjusted Revenue
Revenue	$	348.5	$	492.9		$	589.2
Deferred revenue recognized—accelerated amortization		—		(61.6	)		(33.8	)
Adjusted Revenue	$	348.5	$	431.3		$	555.3
Adjusted Gross Margin
Gross margin	$	101.3	$	231.9		$	249.1
Deferred revenue recognized—accelerated amortization		—		(61.6	)		(33.8	)
kapp Inventory Charge		20.6		—			—
Adjusted Gross Margin	$	121.9	$	170.3		$	215.2

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The following table shows the reconciliations of net (loss) income to Adjusted Net (Loss) Income and Adjusted EBITDA and basic and diluted (loss) earnings per share to Adjusted Net (Loss) Income per share.

	2016			2015			2014
Net (loss) income		(60.9	)		24.1			20.5
Adjustments to net (loss) income
Amortization of intangible assets		0.1			0.1			22.4
Foreign exchange loss		1.2			11.1			9.9
Accelerated deferred revenue recognized		—			(61.6	)		(33.8	)
Stock-based compensation (recovery) expense		(3.8	)		5.9			3.6
Restructuring costs		5.1			6.1			5.9
Gain on liquidation of foreign subsidiary(1)		—			(0.4	)		—
Gain on sale of long-lived assets		—			(0.1	)		(4.2	)
kapp Inventory Charge		20.6			—			—
		23.1			(38.9	)		3.7
Tax impact on adjustments(2)		(0.4	)		(15.0	)		(0.7	)
Adjustments to net (loss) income, net of tax		23.5			(23.9	)		4.4
Adjusted Net (Loss) Income		(37.4	)		0.2			24.9
Additional adjustments to Adjusted Net (Loss) Income
Income tax expense (recovery)(3)		15.6			(2.1	)		(0.1	)
Depreciation in cost of sales		4.1			5.4			9.5
Depreciation of property and equipment		8.1			11.3			16.4
Interest expense		18.3			20.0			21.4
Other income(1)		(0.7	)		(0.3	)		(0.8	)
Adjusted EBITDA		8.0			34.4			71.4
As a percent of revenue(4)		2.3	%		8.0	%		12.9	%
Adjusted Net (Loss) Income per share
(Loss) earnings per share—basic(5)	$	(4.99	)	$	1.98		$	1.70
Adjustments to net (loss) income, net of tax, per share		1.93			(1.97	)		0.36
Adjusted Net (Loss) Income per share—basic(5)	$	(3.06	)	$	0.01		$	2.06
(Loss) earnings per share—diluted(5)	$	(4.99	)	$	1.91		$	1.62
Adjustments to net (loss) income, net of tax, per share		1.93			(1.90	)		0.35
Adjusted Net (Loss) Income per share—diluted(5)	$	(3.06	)	$	0.01		$	1.97

(1) Included in Other income in the consolidated statements of operations.

(2) Reflects the tax impact on the adjustments to net (loss) income. A key driver of our foreign exchange gain is the conversion of our U.S. dollar-denominated debt that was originally incurred at an average rate of 1.03 into our functional currency of Canadian dollars. When the unrealized foreign exchange amount on the U.S. dollar-denominated debt is in a net gain position as measured against the original exchange rate, the gain is tax-effected at current rates. When the unrealized foreign exchange amount on the U.S. dollar- denominated debt is in a net loss position as measured against the original exchange rate and the loss cannot be carried back to a previous year, a valuation allowance is taken against it and as a result no net tax effect is recorded.

(3) Income tax expense of $16 million (2015—$13 million; 2014—$1 million) per consolidated statement of operations, net of tax impact on adjustments to Adjusted Net (Loss) Income of $0.4 million for the year ended March 31, 2016 (2015—$15 million; 2014—$0.7 million).

(4) Adjusted EBITDA as a percent of revenue is calculated by dividing Adjusted EBITDA by Adjusted Revenue.

(5) All share and per share amounts have been retroactively adjusted to reflect the share consolidation for all periods presented.

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Selected Quarterly Financial Data

The following tables set forth the Company’s unaudited quarterly financial information and non-GAAP measures for each of the eight most recent quarters, including the quarter ended March 31, 2016. The information in the table below has been derived from our unaudited interim consolidated financial statements. Our quarterly operating results have varied substantially in the past and may vary substantially in the future. Accordingly, the information below is not necessarily indicative of future results.

	2016												2015
	Fourth Quarter			Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter		Second Quarter		First Quarter
Revenue	$	68.4		$	77.7		$	103.6		$	98.7		$	99.6		$	126.6	$	129.2	$	137.5
Gross margin		23.7			3.9			37.5			36.3			49.4			57.1		62.5		62.9
Net (loss) income		(0.2	)		(49.5	)		(9.0	)		(2.2	)		(9.6	)		9.3		12.3		12.1
Earnings (loss) per share(1)
Basic	$	(0.02	)	$	(4.05	)	$	(0.74	)	$	(0.18	)	$	(0.79	)	$	0.77	$	1.01	$	1.00
Diluted	$	(0.02	)	$	(4.05	)	$	(0.74	)	$	(0.18	)	$	(0.79	)	$	0.74	$	0.97	$	0.95
Non-GAAP measures:
Adjusted Revenue	$	68.4		$	77.7		$	103.6		$	98.7		$	85.8		$	111.3	$	113.1	$	121.2
Adjusted Gross Margin		23.7			24.4			37.5			36.3			35.5			41.8		46.4		46.6
Adjusted EBITDA		(2.9	)		1.7			6.8			2.5			1.8			10.9		12.9		8.7
Adjusted Net (Loss) Income		(10.0	)		(23.1	)		(1.3	)		(2.9	)		(5.2	)		2.2		4.8		(1.5	)
Adjusted Net (Loss) Income per share(1)
Basic	$	(0.82	)	$	(1.89	)	$	(0.11	)	$	(0.24	)	$	(0.43	)	$	0.18	$	0.39	$	(0.13	)
Diluted	$	(0.82	)	$	(1.89	)	$	(0.11	)	$	(0.24	)	$	(0.43	)	$	0.17	$	0.38	$	(0.13	)

(1) All share and per share amounts have been retroactively adjusted to reflect the share consolidation for all periods presented

Liquidity and Capital Resources

Given that we have experienced a significant decline in revenue as well as the market value of our stock, our financial position has deteriorated. For fiscal 2016, we reported a net loss of $61 million and used $31 million of cash in operating activities, as a result of slower than anticipated SMART kapp sales and significant declines in our education sales during the period.

As of March 31, 2016, we held cash and cash equivalents of $20 million, primarily in U.S dollars and Canadian dollars, in addition to the liquidity that is available through our asset-based loan (the “ABL”). Our primary source of cash flow is generated from sales of our hardware and software products. We have implemented cost reduction initiatives during the year as well as other initiatives focusing on increasing sales in order to improve earnings and liquidity. We believe that ongoing operations and associated cash flow, in addition to our cash resources and ABL, will provide sufficient liquidity to support our business operations for at least the next 12 months. However, if our sales continue to decline, and the sales of our new products, particularly interactive flat panels, software products and kapp, continue to be unable to sufficiently offset the decline in revenue from our interactive whiteboard products, our liquidity may continue to be materially and adversely affected. Additionally, if we are unable to restructure or refinance the Term loan and/or the ABL or generate additional liquidity through other actions, our ability to make the scheduled payments on the ABL and the Term loan in the second quarter of fiscal 2018 and the fourth quarter of fiscal 2018, respectively, would be adversely impacted. We are also pursuing various strategic opportunities. If these strategic opportunities cannot be realized and management is unsuccessful in achieving increased sales or cost reductions, management’s assessment related to our ability to continue as a going concern would need to be updated.

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See “—Forward-Looking Statements” and the “Risk Factors” section of our fiscal 2015 Annual Report on Form 20-F, including but not limited to, the risk factors titled:

• Our sales to the education market are in decline and may continue to decline;

• Sales of our new products may not be sufficient to offset the decline in our education sales, and if sales of new products are not sufficiently robust, our liquidity may be materially and adversely affected;

• Our sales and operating results are difficult to predict;

• The level and upcoming maturities of our current and future debt could have an adverse effect on our business;

• Our working capital requirements and cash flows are subject to fluctuation, which could have a material adverse effect on our business, financial condition or results of operations.

As of March 31, 2016, our outstanding debt balance was as follows:

	Issue Date		Maturity Date		Interest Rate		Amount Outstanding
Term loan, net of unamortized debt discount of $2.8 million		July 31, 2013		Jan 31, 2018		LIBOR + 9.25%	$	97.9 million
Asset-based loan credit facility		July 31, 2013		July 31, 2017		LIBOR + 2.50%	$	10.0 million

All debt and credit facilities are denominated in U.S. dollars. Our debt and credit facilities contain standard borrowing conditions, and could be recalled by the lenders if certain conditions are not met.

We hold a four-and-a-half year, $125 million senior secured term loan (the “Term loan”) maturing on January 31, 2018 and a four-year, $50 million ABL maturing on July 31, 2017. The Term loan bears interest at LIBOR plus 9.25% with a LIBOR floor of 1.25% and will be repaid, on a quarterly basis, at 7.5% per annum during the first two-and-a-half years and 10% per annum in the last two years. The ABL bears interest at LIBOR plus 2.5% and $10 million was drawn as of March 31, 2016. The availability of the ABL is limited by certain accounts receivable balances calculated on a monthly basis and the outstanding standby letter of credit totaling $1 million as at March 31, 2016 (March 31, 2015—$1 million). We had $20 million of availability from the ABL facility as at March 31, 2016.

The following table shows a summary of our cash flows (used in) provided by operating activities, investing activities and financing activities.

	2016			2015			2014
Net cash (used in) provided by operating activities	$	(31.0	)	$	17.7		$	29.6
Net cash (used in) provided by investing activities	$	(2.8	)	$	(6.6	)	$	69.1
Net cash used in financing activities	$	(1.2	)	$	(10.3	)	$	(180.6	)

Net Cash (Used in) Provided by Operating Activities

The increase in net cash used in operating activities was primarily due to an operating loss in fiscal 2016 compared to operating income in fiscal 2015.

Net cash provided by operating activities decreased in fiscal 2015 compared to fiscal 2014. The decrease was primarily due to a decrease in period-over-period revenue as discussed previously, partially offset by a net decrease in working capital.

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Net Cash (Used in) Provided by Investing Activities

The decrease in net cash used in investing activities was due to lower capital expenditures in fiscal 2016 compared to fiscal 2015.

Net cash used in investing activities decreased in fiscal 2015 compared to fiscal 2014. The decrease was primarily due to lower capital expenditures in fiscal 2015 and proceeds received from the sale of our global headquarters building in fiscal 2014.

Net Cash Used in Financing Activities

In fiscal 2016, we drew $10 million on our ABL and repaid $11 million of our Term loan and capital lease obligation. In fiscal 2015, we repaid $10 million of our Term loan and capital lease obligation.

In fiscal 2014 we closed our credit facility refinancing, entered into a $125 million senior secured Term loan and repaid the balance of a previous long-term facility.

Contractual Obligations, Commitments, Guarantees and Contingencies

Contractual Obligations and Commitments

We have certain fixed contractual obligations and commitments that include future estimated payments for general operating purposes. Changes in our business needs, contractual cancellation provisions, fluctuating foreign exchange and interest rates, and other factors may result in actual payments differing from estimates. The following table summarizes our outstanding contractual obligations in millions of dollars as of March 31, 2016.

Fiscal year ended March 31,	2017		2018		2019		2020		2021		2022		2023 and thereafter		Total
Operating leases	$	1.7	$	1.8	$	1.5	$	1.4	$	—	$	—	$	—	$	6.4
Capital lease		4.6		4.6		5.0		5.0		5.0		5.0		61.6		90.8
Long-term debt		12.5		98.3		—		—		—		—		—		110.8
Interest obligations on long-term debt		10.5		7.6		—		—		—		—		—		18.1
Purchase commitments		27.9		2.7		—		—		—		—		—		30.6
Total	$	57.3	$	115.1	$	6.4	$	6.4	$	5.0	$	5.0	$	61.6	$	256.8

The operating lease commitments relate primarily to office and warehouse space and represent the minimum commitments under these agreements.

The capital lease commitment relates to our headquarters building and represents our minimum capital lease payments (including amounts representing interest) and management fees under the lease agreement.

Long-term debt commitments represent the minimum principal repayments required under the Term loan and the ABL.

Our purchase commitments are for finished goods from contract manufacturers, certain information systems management services and licensing costs.

Commitments have been calculated using foreign exchange rates and interest rates in effect at March 31, 2016. Fluctuations in these rates may result in actual payments differing from those in the above table.

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Guarantees and Contingencies

Legal Proceedings

We are involved in various claims and litigation from time to time arising in the normal course of business. While the outcome of these matters is uncertain, there can be no assurance that such matters will be resolved in our favor and we are not able to make any determination with respect to the amount of any damages that might be awarded against us in connection with such matters, we do not believe that the outcome of such claims and litigation, or the amounts which we may be required to pay by reason thereof, would have a material adverse impact on our financial position, results of operations or liquidity.

Indemnities and Guarantees

In the normal course of business we enter into guarantees that provide indemnification and guarantees to counterparties to secure sales agreements and purchase commitments. Should we be required to act under such agreements, it is expected that no material loss would result.

Off-Balance Sheet Arrangements

As of March 31, 2016, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Disclosure Controls and Procedures and Internal Controls

Disclosure Controls and Procedures

As of March 31, 2016, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and the Interim VP, Finance and Chief Financial Officer, of the effectiveness of the design and operations of the Company’s disclosure controls and procedures as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, the President and Chief Executive Officer and the Interim VP, Finance and Chief Financial Officer have concluded that, as of such date, the Company’s disclosure controls and procedures were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission (the “SEC”).

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow for timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13(a)-15(f) and 15(d)-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

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• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisitions, use or dispositions of the Company’s assets that could have a material effect on the Company’s financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on this assessment, management believes that, as of March 31, 2016, the Company’s internal control over financial reporting was effective.

No attestation on our internal control over financial reporting by our registered public accounting firm is required pursuant to rules of the SEC that permit us to provide only management’s report.

Changes in Internal Control Over Financial Reporting

During fiscal 2016, no changes were made to the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Quantitative and Qualitative Disclosures about Market and Other Financial Risks

In the normal course of our business, we engage in operating and financing activities that generate risks in the following primary areas.

Foreign Currency Risk

Foreign currency risk is the risk that fluctuations in foreign exchange rates could impact our earnings. We are exposed to foreign exchange risk primarily between the Canadian dollar and the U.S. dollar, the Euro and British pound sterling. This exposure relates to our U.S. dollar-denominated debt, the sale of our products to customers globally and purchases of goods and services in foreign currencies. A large portion of our revenue and purchases of materials and components are denominated in U.S. dollars. However, a substantial portion of our revenue is denominated in other foreign currencies, primarily the Canadian dollar, Euro and British pound sterling. If the value of any of these currencies depreciates relative to the U.S. dollar, our foreign currency revenue will decrease when translated to U.S. dollars for financial reporting purposes. In addition, a portion of our cost of goods sold, operating costs and capital expenditures are incurred in other currencies, primarily the Canadian dollar and the Euro. If the value of either of these currencies appreciates relative to the U.S. dollar, our expenses will increase when translated to U.S. dollars for financial reporting purposes.

We continually monitor foreign exchange rates and periodically enter into forward contracts and other derivative contracts to convert a portion of our forecasted foreign currency denominated cash flows into Canadian dollars for the purpose of paying our Canadian dollar-denominated operating costs. We target to cover between 25% and 75% of our expected Canadian dollar cash needs for the next 12 months through the use of forward contracts and other derivatives with the actual percentage determined by management based on the changing exchange rate environment. We may also enter into forward contracts and other derivative contracts to

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manage our cash flows in other currencies. We do not use derivative financial instruments for speculative purposes. We have also entered into and continue to look for opportunities within our supply chain to match our cost structures to our foreign currency revenues.

These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. Our current practice is to use foreign currency derivatives without hedge accounting designation. The maturity of these instruments generally occurs within 12 months. Gains or losses resulting from the fair valuing of these instruments are reported in foreign exchange loss on the consolidated statements of operations.

For fiscal 2016, our net income would have decreased with a 10% depreciation in the average value of the Canadian dollar compared to the U.S. dollar by approximately $7 million, primarily as a result of our U.S. dollar-denominated debt, our U.S dollar-denominated revenue and our Canadian dollar-denominated operating expenses. Our net income would have increased with a 10% depreciation in the average value of the Euro compared to the U.S. dollar by approximately $3 million primarily as a result of revenue denominated in Euros.

Interest Rate Risk

Interest rate risk is the risk that the value of a financial instrument will be affected by changes in market interest rates. Our long-term debt and revolving credit facilities bear interest based on floating market rates. Changes in these market rates result in fluctuations in the cash flows required to service this debt. In the past, we partially mitigated this risk by periodically entering into interest rate swap agreements to fix the interest rate on certain long-term variable-rate debt, and we may continue to do so in the future. Our current practice is to use interest rate derivatives without hedge accounting designation. In fiscal 2016, we did not enter into any interest rate derivatives. Changes in the fair value of these interest rate derivatives are included in interest expense in the consolidated statements of operations.

Credit Risk

Credit risk is the risk that the counterparty to a financial instrument fails to meet its contractual obligations, resulting in a financial loss to us.

We sell to a diverse customer base over a global geographic area. We evaluate collectability of specific customer receivables based on a variety of factors including currency risk, geopolitical risk, payment history, customer stability and other economic factors. Collectability of receivables is reviewed on an ongoing basis by management and the allowance for doubtful receivables is adjusted as required. Account balances are charged against the allowance for doubtful receivables when we determine that it is probable that the receivable will not be recovered. We believe that the geographic diversity of the customer base, combined with our established credit approval practices and ongoing monitoring of customer balances, mitigates this counterparty risk.

We may also be exposed to certain losses in the event that counterparties to the derivative financial instruments are unable to meet the terms of the contracts. Our credit exposure is limited to those counterparties holding derivative contracts with positive fair values at the reporting date. We manage this counterparty credit risk by entering into contracts with large established counterparties.

Liquidity Risk

Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due. We continually monitor our actual and projected cash flows and believe that our internally generated cash flows, combined with our revolving credit facilities, will provide us with sufficient funding to meet all working capital and financing needs for at least the next 12 months. See “—Liquidity and Capital Resources”.

Critical Accounting Policies and Estimates

We believe our critical accounting policies are those related to revenue recognition, inventory valuation and purchase commitments, product warranty costs, income taxes, and legal and other contingencies. We consider

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these policies critical because they are important to the portrayal of our financial condition and operating results, and they require us to make judgments and estimates about inherently uncertain matters. Note 1, “Basis of presentation and significant accounting policies”, to our audited consolidated financial statements describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base estimates on historical experience and assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.

Revenue Recognition

Revenue consists primarily of the sale of integrated hardware and software products. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is reasonably assured. Product is considered delivered to the customer once title and risk of loss have been transferred. In the case of integrated hardware and software products, we recognize revenue in accordance with general revenue recognition accounting guidance. This includes the sale of (i) hardware products (e.g. SMART’s interactive displays and related attachment products); (ii) software bundled with hardware that is essential to the functionality of the hardware; and (iii) post-contract end-user support which includes technical support for the life of the product and when-and-if-available upgrades. We recognize revenue in accordance with industry specific software accounting guidance for the following types of sales transactions: (i) stand-alone sales of software products and post-contract end-user support; and (ii) sales of software bundled with hardware not essential to the functionality of the hardware. Amounts invoiced and cash received in advance of meeting these revenue recognition criteria are recognized as deferred revenue.

For multiple-element arrangements that include tangible products containing software essential to the tangible product’s functionality and undelivered software elements relating to the tangible product’s essential software, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, accounting principles establish a hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of fair value, or VSOE; (ii) third-party evidence of selling price, or TPE; and (iii) estimate of the selling price, or ESP.

For SMART’s interactive displays and SMART Notebook and SMART Meeting Pro software which is essential to its operation, prior to September 24, 2013, we may have from time to time provided future unspecified software upgrades and features free of charge to end-users. We have identified three deliverables generally contained in arrangements involving the sale of interactive displays. The first deliverable is the hardware. The second deliverable is the software license essential to the functionality of the hardware device delivered at the time of sale. The third deliverable is post-contract end-user support, which includes the end-user of the interactive display receiving, on a when-and-if available basis, future unspecified software upgrades and features relating to the product’s essential software and end-user support for both the hardware and software. Because we have neither VSOE nor TPE for the three deliverables, the allocation of revenue has been based on ESP. Amounts allocated to the delivered hardware and the related essential software are recognized at the time of sale provided all the conditions for revenue recognition have been met. Amounts allocated to the technical support services and unspecified software upgrades are deferred and recognized on a straight-line basis over the estimated term of provision.

Our process for determining the ESP for deliverables without VSOE or TPE involves management’s judgment. Our process considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable. This view is primarily based on the fact that we are not obligated to provide upgrades at a particular time or at all, and do not specify to end-users which upgrades or features will be

Page 19

delivered in the future. Key factors considered in developing the ESP for SMART Notebook and SMART Meeting Pro software include our historical pricing practices, the nature of the upgrades (i.e. unspecified and when-and-if available), and the relative ESP of the upgrades as compared to the total selling price of the product. If the facts and circumstances underlying the factors considered change or should future facts and circumstances lead us to consider additional factors, our ESP for software upgrades, updates and end-user support related to future interactive display sales could change in future periods.

We record reductions to revenue for estimated obligations related to customer incentive programs, including sales programs and volume-based incentives. For customer incentive programs, the estimated cost of these programs is recognized at the date the product is sold. Additionally, certain customer incentive programs are based on periodic sales targets and require management to estimate the expected sales levels based on market conditions. Our estimates are based on experience and the specific terms and conditions of particular incentive programs. If a customer misses its sales target significantly in relation to our estimate we would be required to record a change to the estimate, which would favorably impact our revenue and results of operations.

Change in accounting estimate

Prior to September 24, 2013, amounts allocated to technical support services and unspecified software upgrades in multi-element arrangements were deferred and recognized on a straight-line basis over the estimated life of the related hardware of seven years. As a result of our introduction of Notebook Advantage, an annual maintenance and upgrade program which became mandatory in April 2014, we ceased our past practice of providing technical support services and upgrades over the life of a product. At the time of the announcement in September 2013, we reassessed the estimated period that support services and unspecified software upgrades were expected to be provided for sales occurring prior to that date. We concluded that the support period for these sales would end on March 31, 2015 and therefore decreased the period over which deferred revenue for technical support services and unspecified software upgrades is amortized. We determined that this adjustment was a change in accounting estimate and accounted for the change prospectively commencing September 24, 2013. No further changes in estimate were made after September 2013. Therefore, there is no continuing impact on operating income and net income subsequent to March 31, 2015. For fiscal year 2015, the effect of this change on operating income and net income was an increase of $38 million and $28 million (2014—$20 million and $15 million) respectively and the impact on earnings per share was $2.33 and $2.24 (2014—$1.26 and $1.20) on a basic and diluted basis, respectively.

Inventory Valuation and Inventory Purchase Commitments

Components and finished goods for our products must be ordered to build inventory in advance of product shipments. We record inventory valuation adjustments for inventories of components and products which have become obsolete or are in excess of anticipated demand or net realizable value. We perform detailed reviews of inventory that consider multiple factors including demand forecasts, product life cycle status, product development plans, current sales levels and component cost trends. If the future demand or market conditions for our products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of inventory, we may be required to record additional inventory valuation adjustments, which would negatively affect our results of operations in the period when the inventory valuation adjustments are recorded.

Consistent with industry practice, we acquire components and finished goods through a combination of purchase orders, supplier contracts and open orders based on projected demand information. These commitments typically cover our requirements for periods ranging from 30 to 150 days. If there were an abrupt and substantial decline in demand for one or more of our products, or an unanticipated change in technological requirements for any of our products, we may be required to record additional provisions for cancellation fees as well as purchase commitments that would negatively affect the results of operations in the period when these costs are identified and recorded.

Page 20

kapp Inventory Charge

In the third quarter of fiscal 2016, we recorded a primarily non-cash, pre-tax charge against inventory and purchase commitments of $21 million. Significant judgment was required in calculating the kapp Inventory Charge, which involved forecasting future demand and the associated pricing at which we can realize the carrying value of our inventory. Further, our expectations with respect to our inventory and asset risk (including our ability to sell our existing inventory of kapp boards and manage our purchase obligations with our manufacturing suppliers) and the potential for additional charges related to inventory are forward-looking statements that are subject to the inherent risk of forecasting our financial results and performance for future periods, particularly over longer periods.

Warranty Costs

We provide for the estimated cost of hardware warranties at the time the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost-per-claim and knowledge of specific product failures that are outside of our typical experience. Standard warranty periods on interactive displays extend up to five years and on other hardware products up to three years. Each quarter, we evaluate our estimates to assess the adequacy of our recorded warranty liabilities considering the size of the installed base of products subject to warranty protection and adjust the amounts if necessary. In instances where specific product issues are determined outside of the normal warranty estimates, additional provisions are recorded to address the specific item. If actual product failure rates or repair costs differ significantly from our estimates, revisions to the estimated warranty liability would be required and could affect our results of operations.

Income Taxes

We record tax expenses for the anticipated tax effect of the reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

We only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. During fiscal 2016 we did not identify any uncertain tax positions.

We use the flow-through method to account for investment tax credits earned on eligible scientific research and experimental development expenditures. We apply judgment in determining which expenditures are eligible to be claimed. Under this method, investment tax credits are recognized as a reduction to income tax expense.

We enter into transactions and arrangements in the ordinary course of business in which the tax treatment is not entirely certain. In particular, certain countries in which we operate could seek to tax a greater share of income than has been provided for. The final outcome of any audits by taxation authorities may differ from estimates and assumptions used in determining our consolidated tax provision and accruals for interest and penalties associated with the resolution of these audits. These may have a material effect on the consolidated income tax expense and the net income for the period in which such determinations are made.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective

Page 21

negative evidence evaluated was the impact of the fiscal 2016 financial performance together with the uncertainty surrounding the timing of a return to generating taxable income in Canada. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of March 31, 2016, a valuation allowance of $27 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth

Legal and Other Contingencies

We are subject to a number of legal proceedings and claims arising out of the conduct of our business. See a discussion of our litigation matters under “—Contractual Obligations, Commitments, Guarantees and Contingencies—Guarantees and Contingencies”. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. However, the outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. Should we fail to prevail in any of these legal matters or should several legal matters be resolved against us in the same reporting period, the financial results of a particular reporting period could be materially adversely affected.

Recent Accounting Guidance Adopted

In July 2015, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard update on the topic of inventory. The amendments in this update changed the guidance on the subsequent measurement of inventory from the lower of cost or market to the lower of cost and net realizable value for entities using the first-in, first-out or the average cost method. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We early adopted this standard in the third quarter of fiscal 2016 and applied the new guidance prospectively, as permitted. The early adoption did not impact our results of operations, financial condition or disclosures.

In November 2015, the FASB issued a new accounting standard update to change the balance sheet classification of deferred taxes. The amendments in this update eliminate the requirement for companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classified balance sheet. Instead, companies will be required to classify all deferred tax liabilities and assets as non-current. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We early adopted this standard in the third quarter of fiscal 2016 and applied the new guidance retrospectively, as permitted. Previously reported current deferred income taxes and non-current deferred income taxes, classified under current assets and non-current assets, respectively, have been revised to reflect the retrospective application as follows as at March 31, 2015:

	March 31, 2015
Current deferred income taxes, as reported	$	8,052
Reclassification of deferred income taxes		(8,052	)
Current deferred income taxes, as reclassified	$	—
	March 31, 2015
Non-current deferred income taxes, as reported	$	8,304
Reclassification of deferred income taxes		8,052
Non-current deferred income taxes, as reclassified	$	16,356

Page 22

Recent Accounting Guidance Not Yet Adopted

In May 2014, the FASB issued a comprehensive new revenue recognition standard, as well as subsequent updates, which will supersede existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The five-step model includes (1) identifying the contract, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations and (5) recognizing revenue when each performance obligation has been satisfied. The standard also requires expanded disclosures surrounding revenue recognition. The standard is effective for fiscal periods beginning after December 15, 2017 and allows for either full retrospective or modified retrospective adoption. Early adoption is not permitted prior to fiscal periods beginning after December 15, 2016. The new standard will be effective for us beginning April 1, 2018. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

In April 2015, the FASB issued a new accounting standard update to simplify the presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued clarification that debt issuance costs related to line-of-credit arrangements could be presented as an asset and amortized, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early adoption is permitted. This new guidance will be effective for us beginning April 1, 2016. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued a new accounting standard on leases which will supersede existing leases guidance. The standard requires companies to include the majority of their lease obligations in their balance sheet, including a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. The standard also requires expanded disclosures surrounding lease transactions. The standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and allows for modified retrospective adoption. Early adoption is permitted. The new standard will be effective for us beginning April 1, 2019. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

In March 2016, the FASB issued a new accounting standard update to simplify the accounting for share-based payments. The amendments in this update simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. The guidance is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. This new guidance will be effective for us beginning April 1, 2017. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

Page 23

EX-99.2

SMART Technologies Inc.

Consolidated Financial Statements

Years ended March 31, 2016, 2015 and 2014

INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of SMART Technologies Inc.

We have audited the accompanying consolidated financial statements of SMART Technologies Inc., which comprise the consolidated balance sheets as at March 31, 2016 and March 31, 2015, the consolidated statements of operations, comprehensive (loss) income, shareholders’ (deficit) equity and cash flows for each of the years in the three-year period ended March 31, 2016, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with US generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Other Matter

As discussed in Note 1 to the financial statements, the company has changed its method of presenting deferred taxes in the balance sheet as at March 31, 2016, due to the adoption of Accounting Standards Update 2015-17, Income Taxes. The comparative period has been revised to reflect the retrospective application.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of SMART Technologies Inc. as at March 31, 2016 and March 31, 2015, and its consolidated results of operations and its consolidated cash flows for each of the years in the three-year period ended March 31, 2016 in accordance with US generally accepted accounting principles.

/s/ KPMG LLP

Chartered Professional Accountants

May 26, 2016

Calgary, Canada

Page 2

SMART Technologies Inc.

Consolidated Statements of Operations

(thousands of U.S. dollars, except per share amounts)

For the years ended March 31,
	2016			2015			2014
Revenue (note 1 (j))	$	348,480		$	492,919		$	589,174
Cost of sales		247,169			261,057			340,107
Gross margin		101,311			231,862			249,067
Operating expenses
Selling, marketing and administration		78,127			103,858			116,880
Research and development		35,982			43,309			40,068
Depreciation and amortization of property and equipment (note 5)		8,078			11,266			16,357
Amortization of intangible assets		61			71			22,367
Restructuring costs (note 2)		5,080			6,108			5,891
Gain on sale of long-lived assets		—			(84	)		(4,151	)
		127,328			164,528			197,412
Operating (loss) income		(26,017	)		67,334			51,655
Non-operating expenses (income)
Interest expense		18,270			19,958			21,446
Foreign exchange loss		1,244			11,107			9,904
Other income		(665	)		(712	)		(759	)
		18,849			30,353			30,591
(Loss) income before income taxes		(44,866	)		36,981			21,064
Income tax expense (recovery) (note 11)
Current		3,503			(1,945	)		5,097
Deferred		12,534			14,798			(4,577	)
		16,037			12,853			520
Net (loss) income	$	(60,903	)	$	24,128		$	20,544
(Loss) earnings per share (note 12)
Basic	$	(4.99	)	$	1.98		$	1.70
Diluted	$	(4.99	)	$	1.91		$	1.62

See accompanying notes to consolidated financial statements

Page 3

SMART Technologies Inc.

Consolidated Statements of Comprehensive (Loss) Income

(thousands of U.S. dollars)

For the years ended March 31,
	2016			2015			2014
Net (loss) income	$	(60,903	)	$	24,128		$	20,544
Other comprehensive income
Unrealized (losses) gains on translation of consolidated financial statements to U.S. dollar reporting currency		(2,854	)		(1,216	)		3,280
Unrealized gains on translation of foreign subsidiaries to Canadian dollar functional currency, net of income taxes of $92 ($281 and $394 for the years ended March 31, 2015 and March 31, 2014, respectively)		813			5,774			3,993
Reclassification of cumulative currency translation adjustments relating to liquidated subsidiary to Other income, net of income taxes of $0 for the year ended March 31, 2015		—			(422	)		—
		(2,041	)		4,136			7,273
Total comprehensive (loss) income	$	(62,944	)	$	28,264		$	27,817

See accompanying notes to consolidated financial statements

Page 4

SMART Technologies Inc.

Consolidated Balance Sheets

(thousands of U.S. dollars, except number of shares)

	March 31, 2016			March 31, 2015
ASSETS
Current assets
Cash and cash equivalents	$	19,960		$	54,465
Trade receivables, net of allowance for receivables of $4,205 and $4,392 (note 3)		46,572			61,584
Income taxes recoverable		5,349			7,432
Inventory (note 4)		42,651			51,638
Other current assets		6,661			6,466
		121,193			181,585
Inventory (note 4)		5,242			—
Property and equipment (note 5)		44,094			54,745
Deferred income taxes (note 11)		3,150			16,356
Deferred financing fees (note 8(b))		1,515			2,462
Other long-term assets		528			603
	$	175,722		$	255,751
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities
Accounts payable	$	8,929		$	18,678
Accrued and other current liabilities (note 6)		36,575			44,340
Deferred revenue		16,458			13,134
Current portion of capital lease obligation (note 5)		1,152			1,103
Current portion of long-term debt (note 8)		12,500			10,156
		75,614			87,411
Long-term debt (note 8)		95,434			96,342
Capital lease obligation (note 5)		51,470			53,818
Deferred revenue		13,608			11,787
Deferred income taxes (note 11)		247			—
Other long-term liabilities		635			938
		237,008			250,296
Commitments and contingencies (note 13)
Shareholders’ (deficit) equity
Share capital (note 9)
Common Shares—no par value; unlimited shares authorized; issued 12,242,992 and 12,219,091		696,506			696,151
Treasury Shares (Common Shares)—41,050		(840	)		(840	)
Accumulated other comprehensive income		631			2,672
Additional paid-in capital (notes 9 and 10)		44,478			48,630
Accumulated deficit		(802,061	)		(741,158	)
		(61,286	)		5,455
	$	175,722		$	255,751

See accompanying notes to consolidated financial statements

Page 5

SMART Technologies Inc.

Consolidated Statements of Shareholders’ (Deficit) Equity

(thousands of U.S. dollars)

For the years ended March 31,
	2016			2015			2014
Share capital amount (note 9)
Balance at beginning of year	$	695,311		$	694,041		$	692,270
Participant Equity Loan Plan (note 9)		43			234			603
Shares issued under stock plans (note 9)		312			1,036			1,168
Balance at end of year		695,666			695,311			694,041
Accumulated other comprehensive income (loss)
Balance at beginning of year		2,672			(1,464	)		(8,737	)
Other comprehensive (loss) income		(2,041	)		4,136			7,273
Balance at end of year		631			2,672			(1,464	)
Additional paid-in capital
Balance at beginning of year		48,630			43,738			41,281
Stock-based compensation (recovery) expense (note 10)		(3,840	)		5,910			3,603
Shares issued under stock plans (note 9)		(312	)		(1,018	)		(1,146	)
Balance at end of year		44,478			48,630			43,738
Accumulated deficit
Balance at beginning of year		(741,158	)		(765,286	)		(785,830	)
Net (loss) income		(60,903	)		24,128			20,544
Balance at end of year		(802,061	)		(741,158	)		(765,286	)
Total shareholders’ (deficit) equity	$	(61,286	)	$	5,455		$	(28,971	)

See accompanying notes to consolidated financial statements

Page 6

SMART Technologies Inc.

Consolidated Statements of Cash Flows

(thousands of U.S. dollars)

For the years ended March 31,
	2016			2015			2014
Cash (used in) provided by
Operations
Net (loss) income	$	(60,903	)	$	24,128		$	20,544
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Depreciation and amortization of property and equipment (note 5)		12,185			16,619			25,875
Amortization of intangible assets		61			160			22,463
Amortization of deferred financing fees (note 8(b))		884			1,023			3,471
Amortization of long-term debt discount		1,592			1,338			374
Non-cash (recovery) expense in other liabilities		(63	)		98			(3,870	)
Stock-based compensation (recovery) expense		(3,840	)		5,910			3,603
Unrealized (gain) loss on foreign exchange		(1,011	)		12,478			10,627
Deferred income tax expense (recovery)		12,534			14,798			(4,577	)
Gain on liquidation of foreign subsidiary		—			(422	)		—
Gain on sale of long-lived assets		—			(84	)		(4,151	)
Changes in operating assets and liabilities:
Trade receivables		14,233			19,829			(26,356	)
Inventory		(413	)		19,288			(18,634	)
Other current assets		(227	)		2,197			1,053
Income taxes recoverable		1,231			(5,864	)		21,746
Accounts payable, accrued and other current liabilities		(12,970	)		(40,231	)		7,378
Deferred revenue		5,745			(53,574	)		(29,530	)
Other long-term assets		—			—			(465	)
Cash (used in) provided by operating activities		(30,962	)		17,691			29,551
Investing
Capital expenditures		(2,751	)		(6,691	)		(11,383	)
Proceeds from sale of long-lived assets		—			116			4,221
Proceeds from sale-leaseback, net (note 5)		—			—			76,216
Cash (used in) provided by investing activities		(2,751	)		(6,575	)		69,054
Financing
Proceeds from long-term debt		10,000			5,000			127,950
Repayment of long-term debt		(10,156	)		(14,375	)		(302,912	)
Financing fees paid		—			(12	)		(4,824	)
Repayment of capital lease obligation		(1,068	)		(1,152	)		(1,361	)
Participant equity loan plan, net		41			224			559
Other		—			19			22
Cash used in financing activities		(1,183	)		(10,296	)		(180,566	)
Effect of exchange rate changes on cash and cash equivalents		391			(4,501	)		(1,276	)
Net decrease in cash and cash equivalents		(34,505	)		(3,681	)		(83,237	)
Cash and cash equivalents, beginning of year		54,465			58,146			141,383
Cash and cash equivalents, end of year	$	19,960		$	54,465		$	58,146
Cash and cash equivalents are comprised as follows
Cash	$	11,331		$	26,592		$	31,434
Cash equivalents		8,629			27,873			26,712
	$	19,960		$	54,465		$	58,146
Supplemental cash flow disclosures:
Interest paid	$	13,947		$	15,110		$	15,043
Income taxes paid	$	2,050		$	8,542		$	3,093
Changes in non-cash capital expenditures in accounts payable and accrued and other current liabilities	$	191		$	1,559		$	(676	)
Non-cash acquisition of asset under capital lease	$	—		$	—		$	70,936

See accompanying notes to consolidated financial statements

Page 7

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

Nature of business

SMART Technologies Inc. (the “Company”), formerly SMART Technologies (Holdings) Inc., was incorporated on June 11, 2007 under the Business Corporations Act (Alberta). On August 28, 2007 the shareholders of a related company which was then named SMART Technologies Inc. (“STI”), transferred 100% of the issued shares of STI to the Company. Prior to August 28, 2007 the principal operating company was STI. On August 28, 2007, SMART Technologies ULC was formed with the amalgamation of STI and a numbered company. On February 26, 2010 the Company changed its name to SMART Technologies Inc.

Through its wholly owned subsidiary, SMART Technologies ULC, and its subsidiaries, the Company designs, develops and sells interactive technology products and integrated solutions. The Company generates revenue from the sale of interactive technology products and integrated solutions, including hardware, software and services.

In May 2016, the Company completed a 1-for-10 share consolidation of its issued and outstanding Common Shares. All stock-related disclosures have been retroactively adjusted to reflect the share consolidation for all years presented.

1. Basis of presentation and significant accounting policies

The consolidated financial statements of the Company have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”), applied on a basis consistent for all periods. The significant accounting policies used in these GAAP consolidated financial statements are as follows.

(a) Principles of consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated on consolidation.

(b) Use of estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of provisions for litigation claims, deferred revenue, allowance for doubtful receivables, inventory valuation, warranty provisions, sales incentive provisions, stock-based compensation, deferred income taxes, and investment tax credits. Actual results could differ from these estimates.

(c) Foreign currency translation and re-measurement

The Company’s Canadian operations and its foreign subsidiaries outside the United States (“U.S.”), which solely provide sales and marketing support, have the Canadian dollar (“CDN”) as their functional currency. For these entities, monetary assets and liabilities denominated in foreign currencies are translated using exchange rates in effect at the balance sheet date and non-monetary assets and liabilities denominated in foreign currencies

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

are translated at historic rates. Gains and losses on re-measurement are recorded in the Company’s consolidated statements of operations as part of foreign exchange loss. The Company’s U.S. subsidiaries have the U.S. dollar as their functional currency. The financial statements of these subsidiaries are translated into Canadian dollars using the method of translation whereby assets and liabilities are translated using exchange rates in effect at the balance sheet date and revenues and expenses are translated using average rates for the reporting period. Exchange gains or losses from the translation of these foreign subsidiaries’ financial results are credited or charged to foreign currency translation included in other comprehensive (loss) income and accumulated other comprehensive income as part of shareholders’ (deficit) equity.

The Company uses the U.S. dollar as its reporting currency. The Canadian dollar consolidated financial statements are translated into the U.S. dollar reporting currency using the current rate method of translation. Exchange gains or losses are included as part of other comprehensive (loss) income and accumulated other comprehensive (loss) income as part of shareholders’ (deficit) equity.

(d) Cash and cash equivalents

Cash and cash equivalents consist of cash-on-hand and short-term investments with an original maturity of three months or less and are carried on the consolidated balance sheet at cost which approximates fair value.

(e) Trade receivables

Trade receivables reflect invoiced and accrued revenue and are presented net of an allowance for doubtful receivables.

The Company evaluates collectability of specific customer receivables based on a variety of factors on a periodic basis. The Company considers currency risk, geopolitical risk, payment history, customer stability, the age of the trade receivable balances and other factors that may affect the customers’ ability to pay. Collectability of receivables is reviewed on an ongoing basis by management and receivables accounts are adjusted as required. Receivables balances are charged against the allowance when the Company determines that it is probable that the receivable will not be recovered.

(f) Inventory

Raw materials and finished goods inventory is stated at the lower of cost, computed using the first-in, first-out method, or net realizable value. Cost includes the cost of the material plus the applicable share of overhead. If the cost of the inventory exceeds its net realizable value, provisions are made for the difference between the cost and the net realizable value.

(g) Property and equipment

Property and equipment is recorded at cost and depreciated over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives are generally as follows: asset under capital lease, 20 years; information systems, hardware and software, two to four years; assembly equipment, furniture, fixtures and other, two to four years; and leasehold improvements, two to four years. The Company capitalizes certain internal and external costs incurred to acquire or develop internal use software. Capitalized software costs are

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

amortized over its useful life, which ranges from two to four years. Depreciation expense related to equipment used in assembly operations held at the Company’s contract manufacturers is included in cost of sales.

The Company reviews property and equipment for impairment. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amounts to future undiscounted cash flows the asset is expected to generate. If property and equipment is considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value.

(h) Deferred financing fees

Deferred financing fees represent the direct costs of entering into the Company’s long-term debt and credit facilities. For non-revolving credit facilities, costs are amortized as interest expense using the effective interest method. For revolving credit facilities, costs are amortized as interest expense using the straight-line method. The deferred financing fees are amortized over the term of the debt or credit facilities.

(i) Leases

Lease agreements are evaluated to determine whether they are capital or operating leases. When substantially all of the risks and benefits of property ownership have been transferred to the Company, the lease is recognized as a capital lease.

For capital leases, an asset is recorded at the lower of its fair value or the net present value of the future minimum lease payments, with a corresponding obligation. Assets under capital lease are amortized on a straight-line basis over the lease term, and included in depreciation and amortization of property and equipment in the consolidated statements of operations. Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease agreement.

Gains associated with the fiscal 2014 sale-leaseback transaction were deferred. The deferred gain is presented as a reduction of the asset under capital lease. This gain is amortized on a straight-line basis over the lease term as a reduction to amortization expense.

(j) Revenue recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services are rendered, the sales price is fixed or determinable and collection is reasonably assured. Revenue consists primarily of consideration from the bundled sale of hardware, software that is essential to the functionality of the hardware and technical support.

Revenue from the bundled sale of hardware, software and technical support is recognized in accordance with general revenue recognition accounting guidance and revenue from separate sales of software products and technical support is recognized in accordance with industry specific software revenue recognition accounting guidance. Amounts invoiced and cash received in advance of meeting these revenue recognition criteria are recognized as deferred revenue.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

The Company offers certain incentives to customers based on purchase levels. These incentives are recorded as a reduction of related revenues when this revenue is recognized. The Company has agreements with certain distributors which allow for stock rotation rights and price protection. The Company recognizes an allowance for stock rotation rights and price protection based on historical experience. The provision is recorded as a reduction to revenue in the period during which the related revenue is recognized. Revenue is recorded net of taxes collected from customers that are remitted to government authorities with the collected taxes recorded as current liabilities until remitted to the relevant government authority.

Revenue recognition for arrangements with multiple deliverables

The Company’s interactive displays consist of hardware products and software essential to the functionality of the hardware product that is delivered at the time of sale, and technical support, which includes future unspecified software upgrades and features relating to the product’s essential software to be received, on a when-and-if-available basis. For multi-element arrangements that include tangible products containing software essential to the product’s functionality and undelivered elements relating to the tangible product and its essential software, the Company allocates revenue to the multiple deliverables based on their relative selling prices. To determine the relative selling price the following hierarchy is used.

(i) vendor-specific objective evidence of fair value (“VSOE”);

(ii) third-party evidence (“TPE”); and

(iii) estimate of the selling price (“ESP”).

VSOE is established as the price charged for a deliverable when the same deliverable is sold separately by the Company. TPE of selling price is established by evaluating largely similar and interchangeable competitor products or services in stand-alone sales. The ESP is established considering internal factors such as internal costs, margin objectives, pricing practices and controls, customer and market conditions such as competitor pricing strategies for similar products, and industry data.

The Company assesses incentives and discounts provided to customers in determining the relative selling prices of the deliverables in its arrangements to determine the most appropriate method of allocating such incentives and discounts to such deliverables. In general, the Company has concluded that allocating such incentives and discounts ratably to the deliverables based on the proportion of arrangement consideration allocated to each is appropriate based upon the way the Company sells its product.

The Company is unable to determine VSOE for its deliverables as they are not sold in significant volumes on a separate, stand-alone basis. The Company’s go-to-market strategy is the same or similar to that of its peers for these deliverables, in that product offerings are made in multiple deliverable bundles, such that the TPE of selling price of stand-alone deliverables cannot be obtained. Consequently, the Company is unable to establish selling price using VSOE or TPE and therefore uses ESP in its allocation of revenue.

Amounts allocated to the delivered hardware and the related essential software are recognized at the time of sale provided all the conditions for revenue recognition have been met. Amounts allocated to the technical support services and unspecified software upgrades are deferred and recognized using the straight-line method over the estimated term of provision.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

Change in accounting estimate

Prior to September 24, 2013, amounts allocated to technical support services and unspecified software upgrades in multi-element arrangements were deferred and recognized on a straight-line basis over the estimated life of the related hardware of seven years. As a result of the Company’s introduction of Notebook Advantage, an annual maintenance and upgrade program which became mandatory in April 2014, the Company ceased its past practice of providing technical support services and upgrades over the life of a product. At the time of the announcement in September 2013, the Company reassessed the estimated period that support services and unspecified software upgrades were expected to be provided for sales occurring prior to that date. The Company concluded that the support period for these sales would end on March 31, 2015 and therefore decreased the period over which deferred revenue for technical support services and unspecified software upgrades is amortized. The Company determined that this adjustment was a change in accounting estimate and accounted for the change prospectively commencing September 24, 2013. No further changes in estimate were made after September 2013. Therefore, there is no continuing impact on operating income and net income subsequent to March 31, 2015. For fiscal year 2015, the effect of this change on operating income and net income was an increase of $37,839 and $28,379 (2014—$20,303 and $15,227) respectively and the impact on earnings per share was $2.33 and $2.24 (2014—$1.26 and $1.20) on a basic and diluted basis, respectively.

Revenue recognition for software

The Company also sells software, technical support and unspecified software upgrade rights separately from hardware. For software arrangements involving multiple elements, revenue is allocated to each element based on the relative fair value only if VSOE evidence of fair values, which is based on prices charged when the element is sold separately, is available. The Company does not have VSOE for the undelivered elements in its software sales and, accordingly, the entire arrangement consideration is deferred and amortized over one year, the estimated period that such items are delivered or that services are provided.

(k) Financial instruments

Derivative financial instruments are used by the Company to manage its exposure to interest and foreign exchange rate fluctuations. To manage interest rate exposure, the Company enters into interest rate swap contracts and to manage foreign exchange exposure, the Company enters into forward and foreign exchange collar contracts. The Company does not use derivative financial instruments for speculative purposes.

All derivative financial instruments are recognized at fair value on the consolidated balance sheet. Fair value is calculated based on quoted market prices.

Derivative contracts that do not qualify as hedges, or where hedge accounting is not applied, are recorded at fair value in the consolidated balance sheet unless exempted from derivative treatment as meeting normal purchase and sale criteria. Any changes in the fair value of these derivative contracts are recorded in net income when those changes occur. The Company does not apply hedge accounting to any of its financial instruments.

(l) Income taxes

The Company uses the liability method of accounting for income taxes. Under the liability method, current income taxes are recognized for the estimated income taxes payable for the current year and deferred income

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

taxes are recognized for temporary differences between the tax and accounting bases of assets and liabilities and the benefit of losses and other deductions carried forward for tax purposes that are likely to be realized. A valuation allowance is recorded against net deferred income tax assets if it is more likely than not that the asset will not be realized. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are scheduled to be recovered or settled. The effect on the deferred income tax assets and liabilities from a change in tax rates is recognized in net income in the period that the change is enacted.

The Company’s practice is to recognize interest related to income taxes in interest expense and penalties related to income taxes in selling, marketing and administration expense in the consolidated statement of operations.

(m) Investment tax credits

The Company uses the flow-through method to account for investment tax credits (“ITCs”), earned on eligible Scientific Research and Experimental Development (“SR&ED”) expenditures. Under this method, the ITCs are recognized as a reduction (increase) to income tax expense (recovery).

ITCs are subject to technical and financial review by Canadian tax authorities on a project-by-project basis and therefore amounts received may vary significantly from the amounts recorded. Any such differences are recorded as an adjustment to the recognized amount in the year the SR&ED review is completed and the results are made known to the Company.

(n) Research and product development costs

Research costs are expensed as incurred. Development costs for products and licensed software to be sold, leased or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Costs incurred subsequent to achievement of technological feasibility are usually not significant, and therefore all product development costs are expensed as incurred.

(o) Earnings per share

Per share amounts are based on the weighted-average number of Common Shares outstanding during the period. Diluted earnings per share are calculated using the treasury stock method.

(p) Warranty provision

The Company provides for the estimated costs of product warranties at the time revenue is recognized and records the expense in cost of sales. Interactive displays and other hardware products are generally covered by a time-limited warranty for varying periods of time. The Company’s warranty obligation is affected by product failure rates, warranty periods, freight, material usage and other related repair or replacement costs. The Company assesses the adequacy of its warranty liability and adjusts the amount as necessary based on actual experience and changes in future estimated costs. The accrued warranty obligation is included in accrued and other current liabilities.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

(q) Stock-based compensation

Stock-based compensation expense for stock options is estimated at the grant date based on each option’s fair value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. The Company generally recognizes stock-based compensation expense ratably using the graded method over the requisite service period with an offset to additional paid-in capital. The BSM model requires various judgmental assumptions including volatility and expected option life. In addition, judgment is also applied in estimating the amount of stock-based awards that are expected to be forfeited, and if actual results differ significantly from these estimates, stock-based compensation expense and the Company’s results of operations would be impacted. Any consideration paid by employees on exercise of stock options plus any recorded stock-based compensation within additional paid-in capital related to that stock option is credited to share capital.

The Company classifies Restricted share units (“RSUs”), Performance share units (“PSUs”) and Deferred share units (“DSUs”) as equity instruments as the Company has the ability and intent to settle the awards in Common Shares. The compensation expense is calculated based on the fair value of each instrument as determined by the closing value of the Company’s Common Shares on the grant date. The Company recognizes compensation expense ratably over the vesting period of the RSUs and PSUs. For DSUs, compensation expense is recorded at the date of grant.

(r) Participant equity loan plan

The Company has a Participant Equity Loan Plan (the “Plan”), under which the Company loaned funds to certain employees for the purpose of allowing these employees the opportunity to purchase Common Shares of the Company at fair value. Common Shares issued under the Plan are subject to voting and transferability restrictions that lapse based on certain events.

Shares purchased under the Plan are reported as share capital at their fair value on the date of issue. The outstanding related employee loans and any accrued interest are reported as a deduction from share capital. When there is an amendment in the terms of the Plan, the difference between the fair value at the date of the amendment and the fair value at the original date of purchase is recognized as stock-based compensation ratably on a graded basis over the period that restrictions on the shares lapse.

(s) Restructuring costs

Employee termination benefits associated with an exit or disposal activity are accrued when the liability is both probable and reasonably estimable provided that the Company has a history of providing similar severance benefits that meet the criteria of an on-going benefit arrangement. If no such history exists, the costs are expensed when the termination benefits are paid. Contract termination costs are recognized and measured at fair value when the Company ceases using the rights under the contract. Other associated costs are recognized and measured at fair value when they are incurred.

(t) Legal and other contingencies

The Company is subject to a number of legal proceedings and claims arising out of the conduct of the Company’s business. A liability is recorded when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

whether an exposure can be reasonably estimated. However, the outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. Should the Company fail to prevail in any of these legal matters or should several legal matters be resolved against the Company in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.

(u) Reclassification

Certain reclassifications have been made to prior periods’ figures to conform to the current period’s presentation.

(v) Recent accounting guidance adopted

In July 2015, the FASB issued a new accounting standard update on the topic of inventory. The amendments in this update changed the guidance on the subsequent measurement of inventory from the lower of cost or market to the lower of cost and net realizable value for entities using the first-in, first-out or the average cost method. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company early adopted this standard in the third quarter of fiscal 2016 and applied the new guidance prospectively, as permitted. The early adoption did not impact the Company’s results of operations, financial condition or disclosures.

In November 2015, the FASB issued a new accounting standard update to change the balance sheet classification of deferred taxes. The amendments in this update eliminate the requirement for companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classified balance sheet. Instead, companies will be required to classify all deferred tax liabilities and assets as non-current. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company early adopted this standard in the third quarter of fiscal 2016 and applied the new guidance retrospectively, as permitted. Previously reported current deferred income taxes and non-current deferred income taxes, classified under current assets and non-current assets, respectively, have been revised to reflect the retrospective application as follows as at March 31, 2015:

	March 31, 2015
Current deferred income taxes, as reported	$	8,052
Reclassification of deferred income taxes		(8,052	)
Current deferred income taxes, as reclassified	$	—

	March 31, 2015
Non-current deferred income taxes, as reported	$	8,304
Reclassification of deferred income taxes		8,052
Non-current deferred income taxes, as reclassified	$	16,356

(w) Recent accounting guidance not yet adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard, as well as subsequent updates, which will supersede existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

when considering contract terms and relevant facts and circumstances. The five-step model includes (1) identifying the contract, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations and (5) recognizing revenue when each performance obligation has been satisfied. The standard also requires expanded disclosures surrounding revenue recognition. The standard is effective for fiscal periods beginning after December 15, 2017 and allows for either full retrospective or modified retrospective adoption. Early adoption is not permitted prior to fiscal periods beginning after December 15, 2016. The new standard will be effective for the Company beginning April 1, 2018. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

In April 2015, the FASB issued a new accounting standard update to simplify the presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued clarification that debt issuance costs related to line-of-credit arrangements could be presented as an asset and amortized, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early adoption is permitted. This new guidance will be effective for the Company beginning April 1, 2016. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued a new accounting standard on leases which will supersede existing leases guidance. The standard requires companies to include the majority of their lease obligations in their balance sheet, including a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. The standard also requires expanded disclosures surrounding lease transactions. The standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and allows for modified retrospective adoption. Early adoption is permitted. The new standard will be effective for the Company beginning April 1, 2019. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

In March 2016, the FASB issued a new accounting standard update to simplify the accounting for share-based payments. The amendments in this update simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. This new guidance will be effective for the Company beginning April 1, 2017. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

2. Restructuring costs

(a) Fiscal 2016 October restructuring

In the third quarter of fiscal 2016, the Company updated its financial outlook and subsequently implemented cost reduction initiatives primarily relating to kapp sales and marketing activities and related R&D spend. The restructuring plan was substantially completed as at December 31, 2015.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

Changes in the accrued restructuring obligation associated with the fiscal 2016 October restructuring activities were as follows:

	Year ended March 31, 2016
	Employee Termination Costs
Restructuring costs incurred	$	3,870
Restructuring costs paid		(3,809	)
Adjustments		(24	)
Currency translation adjustment		(20	)
Balance at end of year	$	17

At March 31, 2016, the accrued fiscal 2016 October restructuring obligation of $17 was included in accrued and other current liabilities.

(b) Fiscal 2015 March restructuring

At the end of fiscal 2015, the Company completed a reorganization which merged the existing Education and Enterprise segments, effective April 1, 2015. Certain functions that were previously distinct to the Education and Enterprise segments were centralized at the corporate level. The restructuring plan included outsourcing of the Company’s information technology function. The restructuring plan was substantially completed as at September 30, 2015.

Changes in the accrued restructuring obligation associated with the fiscal 2015 March restructuring activities were as follows:

	Year ended March 31, 2016
	Employee Termination Costs			Other Restructuring Costs			Total
Balance at beginning of year	$	4,066		$	31		$	4,097
Restructuring costs paid		(4,111	)		(31	)		(4,142	)
Adjustments		373			—			373
Currency translation adjustment		(68	)		—			(68	)
Balance at end of year	$	260		$	—		$	260

	Year ended March 31, 2015
	Employee Termination Costs			Other Restructuring Costs			Total
Restructuring costs incurred	$	4,127		$	240		$	4,367
Restructuring costs paid		(38	)		(207	)		(245	)
Currency translation adjustment		(23	)		(2	)		(25	)
Balance at end of year	$	4,066		$	31		$	4,097

At March 31, 2016, the accrued fiscal 2015 March restructuring obligation of $260 was included in accrued and other current liabilities.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

(c) Other restructuring activities

Other restructuring activities undertaken from fiscal 2012 to 2015 included the closure of the Ottawa business location, the exit of the optical touch sensor business for desktop displays and restructuring of NextWindow, increased focus on target markets, streamlined corporate support functions and cost reductions, the transfer of interactive display assembly operations to contract manufacturers and a change in business focus for specific regions including movement to a leaner organizational structure with additional reliance placed on key channel partners.

Changes in the accrued restructuring obligation associated with the other restructuring activities were as follows:

	Year ended March 31, 2016
	Employee Termination Costs			Facilities Costs			Total
Balance at beginning of year	$	1,053		$	217		$	1,270
Restructuring costs paid		(379	)		(1,094	)		(1,473	)
Adjustments		(98	)		959			861
Currency translation adjustment		47			(82	)		(35	)
Balance at end of year	$	623		$	—		$	623

	Year ended March 31, 2015
	Employee Termination Costs			Facilities Costs			Other Restructuring Costs			Total
Balance at beginning of year	$	5,191		$	4,129		$	—		$	9,320
Restructuring costs incurred		2,194			—			781			2,975
Accretion expense		—			8			—			8
Restructuring costs paid		(5,165	)		(4,048	)		(339	)		(9,552	)
Adjustments		(869	)		24			(397	)		(1,242	)
Currency translation adjustment		(307	)		104			(36	)		(239	)
Balance at end of year	$	1,044		$	217		$	9		$	1,270

	Year ended March 31, 2014
	Employee Termination Costs			Facilities Costs			Other Restructuring Costs			Total
Balance at beginning of year	$	5,890		$	7,518		$	84		$	13,492
Restructuring costs incurred		6,374			235			681			7,290
Accretion expense		—			218			—			218
Restructuring costs paid		(5,005	)		(3,949	)		(530	)		(9,484	)
Adjustments		(1,986	)		585			(216	)		(1,617	)
Currency translation adjustment		(82	)		(478	)		(19	)		(579	)
Balance at end of year	$	5,191		$	4,129		$	—		$	9,320

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

At March 31, 2016, the Company has incurred total restructuring costs to date of $42,607 since the commencement of the other restructuring activities discussed above, comprised of employee termination benefits of $27,444, facilities costs of $12,651, and other restructuring costs of $2,512.

At March 31, 2016, $623 (March 31, 2015 – $1,113) of the accrued other restructuring obligation was included in accrued and other current liabilities and nil (March 31, 2015 – $157) was included in other long-term liabilities.

3. Trade receivables

The activity in the allowance for doubtful receivables was as follows:

	Year ended March 31,
	2016			2015			2014
Balance at beginning of year	$	4,392		$	3,182		$	3,500
Charge to bad debts expense		768			2,288			516
Write-off of receivables		(862	)		(439	)		(542	)
Currency translation adjustment		(93	)		(639	)		(292	)
Balance at end of year	$	4,205		$	4,392		$	3,182

4. Inventory

The components of inventory were as follows:

	March 31, 2016			March 31, 2015
Finished goods	$	47,139		$	51,113
Raw materials		754			525
Non-current inventory		(5,242	)		—
Current inventory	$	42,651		$	51,638

As a result of slower than anticipated SMART kapp sales, during the third quarter of fiscal 2016, the Company assessed and revised its future demand assumptions for finished goods and raw materials. Based on these revised demand assumptions, the Company recorded an inventory adjustment of $20,555 in the third quarter of fiscal 2016 within cost of sales, of which $13,226 related to finished goods and raw materials and $7,329 related to purchase commitments. The Company also classified the portion of inventory that is not reasonably expected to be realized in cash during the next 12 months as non-current.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

5. Property and equipment

The components of property and equipment were as follows:

	March 31, 2016		March 31, 2015
Cost
Asset under capital lease, net of deferred gain	$	45,604	$	46,030
Information systems, hardware and software		50,953		56,054
Assembly equipment, furniture, fixtures and other		21,398		28,780
Assets under development		418		1,082
	$	118,373	$	131,946
Accumulated depreciation and amortization
Asset under capital lease, net of deferred gain	$	8,094	$	5,424
Information systems, hardware and software		47,268		48,741
Assembly equipment, furniture, fixtures and other		18,917		23,036
	$	74,279	$	77,201
Net book value
Asset under capital lease, net of deferred gain	$	37,510	$	40,606
Information systems, hardware and software		3,685		7,313
Assembly equipment, furniture, fixtures and other		2,481		5,744
Assets under development		418		1,082
	$	44,094	$	54,745

Depreciation and amortization expense was $12,185, $16,619 and $25,875 in fiscal years 2016, 2015 and 2014 respectively. The amount of depreciation expense included in cost of sales amounted to $4,107, $5,353 and $9,518 for fiscal years 2016, 2015 and 2014 respectively.

Sale-leaseback transaction

In fiscal 2014, the Company sold its global headquarters building for proceeds of $76,216, net of transaction fees, with gains on sale of CDN$15,000. Pursuant to the agreement, the Company entered into a 20-year lease agreement on the building with an effective date of May 7, 2013. Based on the terms of the agreement, the Company has classified and is accounting for the lease as a capital lease. The lease provides an option for four additional five-year periods. The initial base rent is CDN$5,945 per year, payable monthly, with an 8% escalation every five years. The effective interest rate on the capital lease obligation outstanding was 6.6%. Under the lease, the Company is responsible for the management fees and cost of utilities, insurance, taxes and maintenance expenses.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

Future minimum annual payments under capital lease at March 31, 2016 are as follows:

Fiscal year ending March 31,
	Annual minimum lease payments
2017	$	4,585
2018		4,585
2019		4,922
2020		4,952
2021		4,952
2022 and thereafter		65,940
Total minimum lease payments	$	89,936
Less: imputed interest on capital lease		37,314
Present value of minimum lease payments	$	52,622

6. Accrued and other current liabilities

The components of accrued and other current liabilities were as follows:

	March 31, 2016		March 31, 2015
Product warranty (note 7)	$	12,787	$	11,448
Accrued compensation and employee benefits		3,873		8,418
Accrued restructuring liabilities (note 2)		900		5,210
Accrued purchase commitments		4,178		485
Other current liabilities		14,837		18,779
	$	36,575	$	44,340

Other current liabilities, as noted in the table above, include, among other things, freight liabilities, in-transit inventory liabilities and marketing program liabilities, none of which are greater than 5% of the current liabilities balance.

7. Product warranty

Changes in the accrued warranty obligation were as follows:

	Year ended March 31,
	2016			2015			2014
Balance at beginning of year	$	11,448		$	17,775		$	19,794
Actual warranty costs incurred		(7,301	)		(12,552	)		(10,995	)
Warranty expense		8,811			8,274			10,502
Currency translation adjustment		(171	)		(2,049	)		(1,526	)
Balance at end of year	$	12,787		$	11,448		$	17,775

Page 21

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

8. Long-term debt and credit facilities

The components of long-term debt were as follows:

	March 31, 2016			March 31, 2015
Term loan	$	100,781		$	110,938
Unamortized debt discount		(2,847	)		(4,440	)
Current portion of long-term debt		(12,500	)		(10,156	)
Asset-based loan		10,000			—
	$	95,434		$	96,342

Long-term debt repayments for each of the next five years are as follows:

	Fiscal year ending March 31,
	2017		2018		2019		2020		2021		Total
Long-term debt principal	$	12,500	$	98,281	$	—	$	—	$	—	$	110,781
Future interest obligations on long-term debt	$	10,525	$	7,640	$	—	$	—	$	—	$	18,165

All debt and credit facilities are U.S. dollar facilities. The Company’s debt and credit facilities contain standard borrowing conditions, and could be recalled by the lenders if certain conditions are not met.

(a) Term loan and asset-based loan

In July 2013, the Company closed its credit facility refinancing. The Company entered into a four-and-a-half year, $125,000 senior secured term loan (the “Term loan”) maturing on January 31, 2018 and a four-year, $50,000 asset-based loan (the “ABL”) maturing on July 31, 2017. The Term loan and the ABL are secured by substantially all assets of the Company. At March 31, 2016, $10,000 was drawn from the ABL facility (March 31, 2015—undrawn).

The Term loan requires mandatory repayments, on a quarterly basis, of 7.5% per annum during the first two-and-a-half years and 10.0% per annum in the last two years. In addition, the Term loan is subject to an annual excess cash flow sweep, as defined under the credit agreement. The Company is required to repay amounts under the facility ranging between zero and 50% of annual excess cash flows, contingent upon the Company’s leverage ratio at the time.

The availability of the ABL is limited by certain accounts receivable balances calculated on a monthly basis and the outstanding standby letter of credit totaling $1,000 at March 31, 2016 (March 31, 2015—$1,000). The Company had $20,454 of availability from the ABL facility at March 31, 2016.

Borrowings under the Term loan and ABL bear interest at floating rates, based on LIBOR or the base rate of the administrative agent. The Company has discretion with respect to the basis upon which interest rates are set. The interest rate on borrowings under the Term loan is LIBOR plus 9.25% with a LIBOR floor of 1.25% and the ABL is LIBOR plus 2.5% at March 31, 2016.

Page 22

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

The Company recognized a discount of $7,050 which has been presented as a reduction of the Term loan. The discount is recognized over the term of the loan using the effective interest method, based on an imputed interest rate of 12.4%.

(b) Deferred financing fees

In July 2013, the Company expensed $2,023 of unamortized deferred financing fees as a result of the repayment of the credit facility refinancing and the subsequent full repayment of a previous long-term facility. These fees are included in interest expense.

In July 2013, the Company incurred fees of $4,541 relating to the Term loan and the ABL. The Company recorded amortization of deferred financing fees of $884, $1,023 and $3,471 for fiscal years 2016, 2015 and 2014, respectively.

9. Share capital

In April 2014, the Company announced the conversion of 7,946,420 Class B Shares into single vote Class A Subordinate Voting Shares effective April 17, 2014. The Company no longer has any issued and outstanding Class B Shares that carry multiple voting privileges and no further Class B Shares are permitted to be issued by the Company. The Class A Subordinate Voting Shares have been re-designated as Common Shares.

In May 2016, the Company completed a 1-for-10 share consolidation of its issued and outstanding Common Shares. All stock-related disclosures have been retroactively adjusted to reflect the share consolidation for all years presented.

The Company’s authorized share capital consists of an unlimited number of Common Shares and an unlimited number of Preferred Shares issuable in series.

Each holder of Common Shares is entitled to receive notice of and attend all meetings of the Company’s shareholders. Each Common Share entitles its holder to one vote, voting together as a single class, except as otherwise set forth in the Company’s articles of amalgamation or prescribed by applicable laws.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

The share capital activity was as follows:

	Amount			Number of Shares
Common Shares
Balance at March 31, 2013	$	454,703			4,152,117
Participant Equity Loan Plan		603			—
Shares issued under stock plans		1,168			65,110
Balance at March 31, 2014	$	456,474			4,217,227
April 2014 share conversion		238,407			7,946,420
Participant Equity Loan Plan		234			—
Shares issued under stock plans		1,036			55,444
Balance at March 31, 2015	$	696,151			12,219,091
Participant Equity Loan Plan		43			—
Shares issued under stock plans		312			23,901
Balance at March 31, 2016	$	696,506			12,242,992
Common Shares—Treasury Shares
Balance at March 31, 2014	$	(840	)		(41,050	)
Balance at March 31, 2015	$	(840	)		(41,050	)
Balance at March 31, 2016	$	(840	)		(41,050	)
Class B Shares
Balance at March 31, 2014	$	238,407			7,946,420
April 2014 share conversion		(238,407	)		(7,946,420	)
Balance at March 31, 2015	$	—			—
Balance at March 31, 2016	$	—			—
Total share capital	$	695,666			12,201,942

10. Stock-based compensation

The Amended and Restated Equity Incentive Plan provides for the grant of options, restricted share units and deferred share units to the directors, officers, employees and consultants of the Company and its subsidiaries. The Company has reserved for issuance Common Shares representing up to 12% of the total outstanding Common Shares. At March 31, 2016, there were 502,792 stock-based awards available for future grant.

In May 2016, the Company completed a 1-for-10 share consolidation of its issued and outstanding Common Shares. All stock-related disclosures have been retroactively adjusted to reflect the share consolidation for all years presented.

(a) Stock options

Stock options may be settled in cash or shares of the Company at the option of the Company. Stock options vest either over 3 to 4 years or cliff-vest after 3 years, and have a 5 year term.

Page 24

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

The weighted-average fair value of the stock options granted was calculated using the BSM option-pricing model with the following assumptions:

	Year ended March 31,
	2016			2015			2014
Risk-free interest rate		1.22	%		1.19	%		0.70	%
Expected volatility		66.68	%		64.85	%		61.51	%
Expected life in years		3.8			4.0			3.5
Expected dividend yield		0.00	%		0.00	%		0.00	%
Weighted average fair value of options granted	$	4.90			10.10		$	9.40

The expected risk-free interest rate is based on the yield of a U.S. government zero coupon Treasury bill issued at the date of grant with a remaining life approximately equal to the expected life of the option. The expected volatility used in the stock option valuation is the Company’s historical volatility over the options’ expected life from the date of grant. The expected life is based on the Company’s estimated expected exercise pattern of the options. The expected dividend yield reflects the Company’s current intention to not pay cash dividends in the foreseeable future.

During fiscal years 2016, 2015 and 2014, the following activity occurred under the Company’s stock option plan:

	Number of options			Weighted- average exercise price		Weighted-average remaining contractual life in years		Aggregate intrinsic value
Balance at March 31, 2013		308,820		$	68.61		3.42	$	37
Granted		112,898			21.25		—
Exercised/Released		(1,338	)		16.16		—
Forfeited		(74,246	)		88.40		—
Balance at March 31, 2014		346,134		$	49.08		2.77	$	5,901
Granted		225,278			20.43		—
Exercised/Released		(1,162	)		16.20		—
Forfeited		(73,364	)		45.38		—
Balance at March 31, 2015		496,886		$	36.71		2.03	$	—
Granted		313,621			9.94		—
Forfeited		(243,517	)		24.52		—
Expired		(36,400	)		166.42		—
Balance at March 31, 2016		530,590		$	17.58		1.90	$	16
Vested or expected to vest as of March 31, 2016		444,374		$	18.67		1.79	$	11
Exercisable at March 31, 2016		135,712		$	28.33		1.05	$	—

As at March 31, 2016, the total compensation cost not yet recognized related to unvested stock options was $1,098. This amount is expected to be recognized over the next 32 months on a weighted-average basis. Cash received from stock options exercised for fiscal 2016 was nil (2015—$19; 2014—$22). The total intrinsic value of stock options exercised in fiscal 2016 was nil (2015—$6; 2014—$17).

Page 25

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

(b) Deferred share units

Deferred share units (“DSUs”) are issued to independent directors of the Company and vest immediately. DSUs are settled upon retirement or death, and may be settled in cash or shares of the Company at the option of the Company.

During fiscal years 2016, 2015 and 2014, the following activity occurred under the Company’s deferred share plan:

	Year ended March 31,
	2016		2015		2014
Balance at beginning of year		14,798		10,375		6,000
Granted		7,200		4,423		6,375
Exercised/Released		—		—		(2,000	)
Forfeited		—		—		—
Balance at end of year		21,998		14,798		10,375

(c) Restricted share units

Restricted share units (“RSUs”) are issued to employees of the Company and may be settled in cash or shares of the Company at the option of the Company. Time-based RSUs either vest over 3 to 4 years or cliff-vest after 3 years. Performance-based RSUs vest after three years and the number of units released is dependent upon meeting certain performance conditions.

During fiscal years 2016, 2015 and 2014, the following activity occurred under the Company’s restricted share plan:

	Number of time- based RSUs			Weighted- average fair value		Number of performance- based RSUs			Weighted- average fair value
Balance at March 31, 2013		183,184		$	15.87		8,763		$	43.70
Granted		35,000			18.21		475,000			14.98
Exercised/Released		(61,773	)		17.33		—			—
Forfeited		(42,126	)		13.51		(73,750	)		15.87
Balance at March 31, 2014		114,285		$	16.67		410,013		$	15.44
Granted		59,531			21.89		—			—
Exercised/Released		(54,282	)		18.59		—			—
Forfeited		(18,245	)		15.27		(69,813	)		18.36
Balance at March 31, 2015		101,289		$	18.96		340,200		$	14.84
Granted		132,980			10.69		27,700			11.80
Exercised/Released		(23,901	)		13.03		—			—
Forfeited		(56,788	)		14.60		(107,700	)		13.96
Balance at March 31, 2016		153,580		$	14.33		260,200		$	14.88

As at March 31, 2016, estimated total compensation expense not yet recognized related to all unvested RSUs was $1,122 which is expected to be recognized over the next 32 months.

Page 26

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

(d) Stock-based compensation expense

A summary of the stock-based compensation expense included in the Consolidated Statements of Operations for fiscal years 2016, 2015 and 2014 is as follows:

	Year ended March 31,
	2016			2015		2014
Selling, marketing and administration	$	(3,821	)	$	5,016	$	3,243
Research and development		(19	)		894		360
Total stock-based compensation (recovery) expense	$	(3,840	)	$	5,910	$	3,603

In fiscal 2016, the Company recorded a stock-based compensation recovery of $3,840, which included a recovery of $5,716 with respect to performance-based RSUs as it was determined to be improbable that the performance conditions will be satisfied.

11. Income taxes

Income tax expense differs from the amount that would be computed by applying the combined Canadian federal and provincial statutory income tax rates to income before income taxes.

The reasons for these differences are as follows:

	Year ended March 31,
	2016			2015			2014
(Loss) income before income taxes
Domestic	$	(51,981	)	$	17,435		$	30,594
Foreign		7,115			19,546			(9,530	)
	$	(44,866	)	$	36,981		$	21,064
Combined tax rate		26.50	%		25.00	%		25.00	%
Expected income tax (recovery) expense	$	(11,889	)	$	9,245		$	5,266
Adjustments
Non-deductible, non-taxable items		(1,502	)		3,684			1,768
Tax rate variance		(853	)		1,646			1,000
Change in valuation allowance		27,483			1,446			(2,807	)
Investment tax credits		2,398			(2,618	)		(5,176	)
Other		400			(550	)		469
Income tax expense	$	16,037		$	12,853		$	520

Page 27

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

The components of the deferred income tax assets and liabilities were as follows:

	March 31, 2016		March 31, 2015
Deferred income tax assets
Inventory	$	—	$	146
Non-capital losses		12,099		1,953
Foreign non-capital losses		5,529		5,691
Property, plant and equipment		2,061		1,399
Allowance for bad debts		433		135
Deferred revenue		10,780		6,765
Capital lease obligation		1,324		818
Accrued restructuring		67		269
Warranty		3,453		4,933
Deferred financing fees		524		256
Long-term debt		2,585		2,090
Intangible assets		123		88
Other		412		503
Total deferred income tax assets		39,390		25,046
Deferred income tax liabilities
Inventory		26		—
Investment tax credits		939		651
Total deferred income tax liabilities		965		651
Net deferred income tax assets before valuation allowance		38,425		24,395
Valuation allowance		35,522		8,039
Net deferred income tax assets after valuation allowance	$	2,903	$	16,356
Deferred income tax asset	$	3,150	$	16,356
Deferred income tax liability		247		—
	$	2,903	$	16,356

The Company had consolidated non-capital losses for income tax purposes of $64,523 at March 31, 2016 (Canada—$44,794, New Zealand—$19,598, Other—$131) (March 31, 2015—$28,182 (Canada—$7,873, New Zealand—$20,168, Other—$141)) which will expire at various times through 2036.

The Company had consolidated investment tax credit carryforwards for income tax purposes of $2,570 (March 31, 2015—$2,605) that will expire at various times through 2036.

The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will be realized. In evaluating the need for a valuation allowance, the Company assessed the impact of the fiscal 2016 financial performance together with the uncertainty surrounding the timing of a return in generating taxable income in Canada. As a result, the Company recorded a $27,483 valuation allowance during fiscal 2016 against its Canadian and international deferred tax

Page 28

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

assets to the extent that they are not expected to be realized through the reversal of taxable temporary differences and loss carrybacks. This accounting treatment has no effect on the Company’s actual ability to utilize the deferred tax assets to reduce future cash tax payments. The Company will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance will be adjusted accordingly.

The Company and its Canadian subsidiaries file federal and provincial income tax returns in Canada, its U.S. subsidiaries file federal and state income tax returns in the U.S. and its other foreign subsidiaries file income tax returns in their respective foreign jurisdictions. The Company and its subsidiaries are generally no longer subject to income tax examinations by tax authorities for years before March 31, 2008. Tax authorities in various jurisdictions are conducting examinations of local tax returns for various taxation years ending after March 31, 2008. Notwithstanding management’s belief in the merit of the Company’s tax filing position, it is possible that the final outcome of any audits by taxation authorities may differ from estimates and assumptions used in determining the Company’s consolidated tax provision and accruals, which could result in a material effect on the consolidated income tax provision and the net income (loss) for the period in which such determinations are made.

Notwithstanding management’s belief in the merit of the Company’s tax filing positions, it is reasonably possible that the Company’s unrecognized tax benefits, if any, could significantly increase or decrease within the next twelve months, although this change is not likely to have a material impact on the Company’s effective tax rate. Future changes in management’s assessment of the sustainability of tax filing positions may impact the Company’s income tax liability.

12. (Loss) earnings per share amounts

Basic (loss) earnings per share is computed based on the weighted average number of shares of Common Shares outstanding during the year. Diluted (loss) earnings per share is computed based on the weighted average number of shares of Common Shares plus the effect of dilutive potential Common Shares outstanding during the year using the treasury stock method. Dilutive potential Common Shares include outstanding stock options, deferred share units and restricted share units.

The components of basic and diluted (loss) earnings per share were as follows:

	Year ended March 31,
	2016			2015		2014
Net (loss) income available to common shareholders	$	(60,903	)	$	24,128	$	20,544
Weighted-average number of shares outstanding		12,197,167			12,158,169		12,099,703
Effect of dilutive securities		—			493,643		582,314
Weighted-average diluted shares		12,197,167			12,651,812		12,682,017
Basic (loss) earnings per share	$	(4.99	)	$	1.98	$	1.70
Diluted (loss) earnings per share	$	(4.99	)	$	1.91	$	1.62

No dilutive securities were included in the diluted earnings per share calculation for fiscal 2016 due to a net loss reported. Anti-dilutive securities excluded from the calculations of diluted earnings per share were 17,305 and 11,792 for fiscal years 2015 and 2014, respectively.

Page 29

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

13. Commitments and contingencies

(a) Commitments

	Fiscal year ending March 31,
	2017		2018		2019		2020		2021 and thereafter		Total
Operating leases	$	1,730	$	1,794	$	1,487	$	1,426	$	—	$	6,437

The operating lease commitments relate primarily to office space and represent the minimum commitments under these agreements. The lease terms range from 3 to 12 years. The Company incurred rental expense of $1,966, $2,132 and $2,436 for fiscal years 2016, 2015 and 2014, respectively.

Commitments have been calculated using foreign exchange rate in effect at March 31, 2016. Fluctuations in these rates may result in actual payments differing from those reported in the above table.

(b) Indemnities and Guarantees

In the normal course of business, the Company enters into guarantees that provide indemnification and guarantees to counterparties to secure sales agreements and purchase commitments. It is not anticipated that the Company would suffer a material loss in the event that it is required to honor these guarantees.

14. Segment disclosure

Effective April 1, 2015, the Company completed a reorganization which merged the existing Education and Enterprise sales and customer service teams into the new Solutions business unit, and established separate sales and customer service teams dedicated to the Company’s new line of products in the kapp business unit. Certain functions that were previously distinct to the individual Education and Enterprise segments were centralized at the corporate level. As a result of only the sales and customer service teams being dedicated to a specific business unit, no discrete financial information is available on a business unit basis. The existing NextWindow segment no longer earns revenue or incurs expenses as it enters the final stage of its wind down. Therefore, the Company no longer has individual business units that meet the criteria of an operating segment, and is now organized and managed as a single reportable operating segment.

Revenue information relating to the geographic locations in which the Company sells products was as follows:

	Year ended March 31,
	2016		2015		2014
Revenue
United States	$	194,596	$	255,544	$	266,610
Canada		29,041		37,852		62,979
Europe, Middle East and Africa		105,846		152,569		167,099
Rest of World		18,997		46,954		92,486
	$	348,480	$	492,919	$	589,174

Page 30

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

For fiscal 2016 and fiscal 2015, one distributor accounted for 20% and 16% of total revenue, respectively. For fiscal 2014, no single distributor or reseller accounted for more than 10% of revenues.

15. Financial instruments

The Company’s financial instruments consist of foreign exchange and interest rate derivative instruments and other financial instruments including cash and cash equivalents, trade receivables, accounts payable, accrued and other current liabilities and long-term debt.

The Company uses derivatives to partially offset its exposure to foreign exchange risk and interest rate risk. The Company enters into derivative transactions with high credit quality counterparties and, by policy, seeks to limit the amount of credit exposure to any one counterparty based on an analysis of the counterparty’s relative credit standing. The Company does not use derivative financial instruments for trading or speculative purposes.

(a) Foreign exchange rate risk

Foreign exchange rate risk is the risk that fluctuations in foreign exchange rates could impact the Company. The Company operates globally and is exposed to significant foreign exchange risk, primarily between the Canadian dollar and the U.S. dollar (“USD”), the Euro (“EUR”), and British pound sterling (“GBP”). This exposure relates to our U.S. dollar-denominated debt, the sale of our products to customers globally and purchases of goods and services in foreign currencies. The Company seeks to manage its foreign exchange risk by monitoring foreign exchange rates, forecasting its net foreign currency cash flows and periodically entering into forward contracts and other derivative contracts to convert a portion of its forecasted foreign currency denominated cash flows into Canadian dollars for the purpose of paying Canadian dollar-denominated operating costs. The Company may also enter into forward contracts and other derivative contracts to manage its cash flows in other currencies.

These programs reduce but do not entirely eliminate the impact of currency exchange movements. The Company does not apply hedge accounting to its currency derivatives. The maturity of these instruments generally occurs within 12 months. Gains or losses resulting from the fair valuing of these instruments are reported in foreign exchange loss in the consolidated statements of operations.

(b) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will be affected by changes in market interest rates. The Company’s financing includes long-term debt and revolving credit facilities that bear interest based on floating market rates. Changes in these rates result in fluctuations in the required cash flows to service this debt. The Company partially mitigates this risk by periodically entering into interest rate swap agreements to fix the interest rate on certain long-term variable-rate debt. The Company does not apply hedge accounting to its interest rate derivatives.

(c) Credit risk

Credit risk is the risk that the counterparty to a financial instrument fails to meet its contractual obligations, resulting in a financial loss to the Company.

Page 31

SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

The Company sells hardware and software to a diverse customer base over a global geographic area. The Company evaluates collectability of specific customer receivables based on a variety of factors. The geographic diversity of the customer base, combined with the Company’s established credit approval practices and ongoing monitoring of customer balances, partially mitigates this credit risk.

Fair value measurements

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-tier value hierarchy, which prioritizes the inputs in the valuation methodologies in measuring fair value:

Level 1—Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.

Level 2—Observable inputs other than quoted market prices included in level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active or inputs that are observable or can be corroborated by observable market data.

Level 3—Significant unobservable inputs which are supported by little or no market activity and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis:

March 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	8,629	$	—	$	—	$	8,629
Derivative instruments		—		726		—		726
Total assets	$	8,629	$	726	$	—	$	9,355
Liabilities
Derivative instruments	$	—	$	125	$	—	$	125
Total liabilities	$	—	$	125	$	—	$	125

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

March 31, 2015
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	27,873	$	—	$	—	$	27,873
Derivative instruments		—		639		—		639
Total assets	$	27,873	$	639	$	—	$	28,512
Liabilities
Derivative instruments	$	—	$	927	$	—	$	927
Total liabilities	$	—	$	927	$	—	$	927

(a) Fair value of derivative contracts

March 31, 2016
	Asset (liability) fair value			Contract term	Rates	Notional amounts of quantity	Buy/Sell
Foreign exchange forward derivative contracts	$	(48	)	Apr 2016 to Jun 2016	1.2492 – 1.2946	USD 4,000	Sell
		293		Apr 2016 to Oct 2016	1.3762 – 1.5920	EUR 9,000	Sell
		356		Apr 2016 to Sep 2016	2.0201 – 2.0201	GBP 3,000	Sell
	$	601
March 31, 2015
	Asset (liability) fair value			Contract term	Rates	Notional amounts of quantity	Buy/Sell
Foreign exchange forward derivative contracts	$	(607	)	Apr 2015 to Nov 2015	1.1294 – 1.2152	USD 7,000	Sell
		639		Apr 2015 to Dec 2015	1.4010 – 1.4938	EUR 20,000	Sell
		(320	)	Apr 2015 to Nov 2015	1.7906 – 1.8354	GBP 5,500	Sell
	$	(288	)

The Company enters into foreign exchange forward derivative contracts to economically hedge its risks in the movement of foreign currencies against the Company’s functional currency of the Canadian dollar. At March 31, 2016, the fair value of foreign exchange derivative contracts includes $726 in other current assets (March 31, 2015—$639) and $125 in accrued and other current liabilities (March 31, 2015—$927). Changes in the fair value of these contracts are included in foreign exchange loss. The Company recorded a loss of $1,688, a gain of $1,295 and a loss of $5,784 on these contracts for fiscal years 2016, 2015 and 2014, respectively.

The Company enters into interest rate derivative contracts to hedge its risks in the changes of market interest rates against the Company’s financial instruments. The Company did not enter into any interest rate derivative contracts in fiscal 2016. The Company recorded gains of $242 and $720 for fiscal 2015 and fiscal 2014, respectively.

The estimated fair values of foreign exchange and interest rate derivative contracts are derived using complex financial models with inputs such as benchmark yields, time to maturity, reported trades, broker/dealer quotes, issuer spreads and discount rates.

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SMART Technologies Inc.

Notes to Consolidated Financial Statements

(thousands of U.S. dollars, except per share amounts, and except as otherwise indicated)

For the years ended March 31, 2016, 2015 and 2014

Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts the Company could expect to realize in a liquidation or unwinding of an existing contract.

(b) Long-term debt

The estimated fair value of the Company’s Term loan has been determined based on current market conditions by discounting future cash flows under current financing arrangements at borrowing rates believed to be available to the Company for debt with similar terms and remaining maturities.

The fair value of the Term loan was measured utilizing Level 3 inputs. The Level 3 fair value measurements utilize a discounted cash flow model. This model utilizes observable inputs such as contractual repayment terms and benchmark forward yield curves and other inputs such as a discount rate that is intended to represent our credit risk for secured or unsecured obligations. The Company estimates its credit risk based on the corporate credit rating and the credit rating on its variable-rate long-term debt and utilizes benchmark yield curves that are widely used in the financial industry.

The carrying value and fair value of the Company’s Term loan are as follows:

	March 31, 2016				March 31, 2015
	Carrying amount		Fair value		Carrying amount		Fair value
Variable-rate long-term debt, excluding debt discount	$	100,781	$	99,671	$	110,938	$	111,424

(c) Other financial assets and liabilities

The fair values of cash and cash equivalents, trade receivables, accounts payable and accrued and other current liabilities approximate their carrying amounts due to the short-term maturity of these instruments. A portion of these items are denominated in currencies other than the Canadian dollar functional currency of the Company including the U.S. dollar, Euro and British pound sterling and are translated at the exchange rate in effect at the balance sheet date.

16. Subsequent events

In May 2016, the Company completed a 1-for-10 share consolidation of its issued and outstanding Common Shares. All stock-related disclosures have been retroactively adjusted to reflect the share consolidation for all years presented.

On May 26, 2016, the Company announced that it entered into an arrangement agreement under which Foxconn Technology Group has agreed to acquire all of the outstanding Common Shares of the Company for a cash payment of US$4.50 per Common Share. The arrangement agreement is subject to customary conditions for a transaction of this nature, which include court and regulatory approvals and the approval of 66 ²/₃% of the votes cast by SMART shareholders, and is expected to close during the second quarter of fiscal 2017.

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