FLYHT Aerospace : 2022 Q2 Report

SECOND QUARTER 2022

FLYHT AEROSPACE SOLUTIONS LTD.

Table of Contents
Letter to Shareholders.............................................................................................................................................................	4
Management Discussion & Analysis.......................................................................................................................................	5
Non-GAAP Financial Measures..........................................................................................................................................	5
Forward-Looking Statements..............................................................................................................................................	5
FLYHT Overview.................................................................................................................................................................	6
System Approvals ...............................................................................................................................................................	9
Trends and Economic Factors..........................................................................................................................................	11
Environmental, Social and Corporate Governance ..........................................................................................................	12
Results of Operations .......................................................................................................................................................	13
Selected Results .........................................................................................................................................	13
Financial Position ........................................................................................................................................	14
Comprehensive Loss ..................................................................................................................................	17
Other ...........................................................................................................................................................	21
Auditors Involvement ............................................................................................................................................................	26
Condensed Consolidated Interim Statements of Financial Position (Unaudited) .................................................................	27
Condensed Consolidated Interim Statements of Comprehensive Income (Loss) (Unaudited) .........................................	28
Condensed Consolidated Interim Statements of Changes in Equity (Unaudited) ................................................................	29
Condensed Consolidated Interim Statements of Cash Flows (Unaudited) ..........................................................................	30
Notes to the Condensed Consolidated Interim Financial Statements ..................................................................................	36

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COMMONLY USED FINANCIAL TERMS AND AVIATION ACRONYMS

ABOs:	Aircraft Based Observations
ACARS:	Aircraft Communications Addressing and Reporting System
ACMS:	Aircraft Condition and Monitoring System
ADS-C	Automatic Dependent Surveillance - Contract
AID	Aircraft Interface Device
AFIRSTM:	Automated Flight Information Reporting System
AHM:	Aircraft Health Monitoring
AMDAR:	Aircraft Meteorological Data Relay
ANAC:	National Civil Aviation Agency of Brazil
APU:	Auxiliary Power Unit
BDC:	Business Development Bank of Canada
CAAC:	Civil Aviation Administration of China
CARES:	The Coronavirus Aid, Relief, and Economic Security Act
CERS:	Canada Emergency Rent Subsidy
CEWS:	Canada Emergency Wage Subsidy
CPDLC	Controller Pilot Data Link Communications
DAO:	Design Approval Organization
DGAC:	Direccion General de Aeronautica Civil (Mexico's certification organization)
EASA:	European Aviation Safety Agency
EBITDA:	Earnings before interest, taxes, depreciation and amortization
ECAA:	Egyptian Civil Aviation Authority
EFB:	Electronic Flight Bag
ERTC:	Employee Retention Tax Credit
FAA:	Federal Aviation Administration
FANS	Future Air Navigation System
FDR:	Flight Data Recorder
FlightLinkTM: An Iridium Satellite Data Unit
GAAP:	Generally Accepted Accounting Principles
GAMECO:	Guangzhou Aircraft Maintenance Engineering Company Limited
HASCAP:	Highly Affected Sectors Credit Availability Program
IATA:	International Air Transport Association
ICAO:	International Civil Aviation Organization
IFRS:	International Financial Reporting Standards
MD&A:	Management Discussion and Analysis
MRO	Maintenance, Repair, and Overhaul

OEM: Original Equipment Manufacturer

PAC: Panasonic Avionics Corporation

1. Paycheck Protection Program
   PWS: Panasonic Weather Solutions
   QAR: Quick Access Recorder
   QTD: Quarter-to-date
   R&D: Research and Development
   RPK: Revenue Passenger Kilometers
   SaaS: Software as a Service
   SADI: Strategic Aerospace and Defence Initiative
   SAAU: State Aviation Authority of Ukraine
   STC: Supplemental Type Certificate
   TAMDARTM: Tropospheric Airborne Meteorological Data Reporting
   TCCA: Transport Canada Civil Aviation
   WINN: Western Innovation Initiative
   WVSS: Water Vapour Sensing System
   YTD: Year-to-date

3-	FLYHT AEROSPACE SOLUTIONS LTD. Q2 2022 REPORT

LETTER TO SHAREHOLDERS

We are pleased to present our Q2 2022 results, which show that our business is returning to some sort of normal. Revenue was strong at $4.9 million, and likely would have been even stronger without hardware shipment delays resulting from short-term supply chain issues at quarter end. Shipments of modems and associated licenses in the first week of Q3 which were originally scheduled for Q2 amounted to another $900k in licensing revenue and likely would have pushed revenue closer to record territory. This does though mean that we have a great start on Q3 revenues.

This is also the first quarter that includes full CrossConsense financial results. We are seeing the integration of the teams, products and customers going smoothly with strong synergies being uncovered. We are engaged in trials with existing customers and we are looking for more opportunities in the fall of 2022 as our customers struggle their way out of this pandemic induced chaos that is air travel.

The AFIRS Edge has become FLYHT's biggest opportunity in 20 years. We have received the first manufactured AFIRS Edge units from our supplier and they are currently undergoing the final testing and certification steps. Development on the A320 and B737 Supplemental Type Certificates (STC's) is well underway. The most exciting and rewarding time in the two years since my return was in late June when the team of hardware, software, ground software, product owners and sales staff spent three days huddled in the office with a manufactured Edge 1.0, an MBS setup, iPad, PC and power supply. The team trained staff on the functions of the end-to-end products for WQAR and Remote Avionics Data loading from source, to Edge, to ground and certified for use. We then packaged up the units and delivered them to Japan and Indonesia for demonstrations to 15 airlines. It is a strong testament to our team that in two short years, we have built hardware, software, infrastructure and partnerships with third parties that we feel will solve the problems faced by the demise of 2G and 3G networks with robust multi-function 3G, 4G and 5G compatible solutions for an estimated 15,000 aircraft around the world. We are hopeful that developments this coming quarter will give investors confidence that the two years of COVID disruption have allowed our team the ability to create a fantastic and timely solution that the industry will readily adapt.

The easing of travel and work restrictions is clearly benefiting our business. It's also allowing us to get back in front of customers and investors. The first events we attended in March were exciting as we announced the Edge and MBS partnership. The June trip to the far East was very rewarding and provided validation that we have built a solution the industry needs. We are working with staff to get our operations back in the office while following protocols to make sure we are actively avoiding the COVID situation.

We continue to aggressively market our story through both virtual and in-person investor conferences which we will continue until the change and opportunity is recognized by all.

We believe we are on track to have a very solid year in 2022.

Yours Truly,

William T. Tempany

Interim Chief Executive Officer

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MANAGEMENT DISCUSSION & ANALYSIS

This management discussion and analysis ("MD&A") is as of August 10, 2022 and should be read in conjunction with the audited annual consolidated financial statements of FLYHT Aerospace Solutions Ltd. ("FLYHT" or the "Company") as at and for the years ended December 31, 2021 and 2020 and the accompanying notes. Additional information with respect to FLYHT can be found on SEDAR at www.sedar.com. The Company has prepared its June 30, 2022 condensed consolidated interim financial statements and the notes thereto in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").

Non-GAAP Financial Measures

The Company reports its financial results in accordance with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). It also occasionally uses certain non-GAAP financial measures, such as working capital, and earnings before interest, income tax, depreciation and amortization (EBITDA). FLYHT defines working capital as current assets less current liabilities. EBITDA is defined as income for the period, before net finance costs, income tax, depreciation and amortization of assets. These non-GAAP financial measures are always clearly indicated. Working capital can be used to assess a company's liquidity, operational efficiency, and short-term financial health. EBITDA can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. The Company believes that these non-GAAP financial measures provide investors and analysts with useful information so they can better understand the financial results and perform a better analysis of the Company's performance and profitability. Since non-GAAP financial measures do not have a standardized definition, they may differ from the non-GAAP financial measures used by other companies. The Company strongly encourages investors to review its financial statements and other publicly filed reports in their entirety and not rely on a single non-GAAP measure.

Forward-Looking Statements

This discussion and the letter to the shareholders accompanying this discussion includes certain statements that may be deemed "forward-looking statements" or "forward-looking information" that are subject to risks and uncertainty. All statements, other than statements of historical facts included in this discussion, including, without limitation, those regarding the Company's financial position, business strategy, projected costs, future plans, projected revenues, objectives of management for future operations, the Company's ability to meet any repayment obligations, the use of non-GAAP financial measures, trends in the airline industry, the global financial outlook, expanding markets, R&D of next generation products and any government assistance in financing such developments, foreign exchange rate outlooks, new revenue streams and sales projections, cost increases as related to marketing, R&D, administration expenses, litigation matters, and sales order backlog may be or include forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on a number of reasonable assumptions regarding the Canadian, United States (U.S.), and global economic environments, local and foreign government policies/regulations and actions, and assumptions made based upon discussions to date with the Company's customers and advisers, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

Forward-looking information is based on the opinions and estimates of management at the date the statements are made and are founded on the basis of expectations, assumptions and hypotheses made by the Company, including, but not limited to, the following: projected costs, future plans, projected revenues, objectives of management for future operations, trends in the airline industry, the global financial outlook, including, but not limited to, the effects of the COVID-19 virus being experienced worldwide, expanding markets, foreign exchange rate outlooks, sales projections, cost increases and/or decreases as related to marketing, R&D, administration expenses. The forward-looking information included in this discussion and the letter to the shareholders accompanying this discussion has been prepared using assumptions (all of which are supportable and reflect the Company's planned courses of action for the next 12 months) as to the most probable set of economic conditions. Such assumptions are consistent with the purpose of the information but are not necessarily the most probable in management's judgement. Factors that could cause actual results to differ materially from those in the forward- looking statements include but are not limited to production rates, timing for product deliveries and installations, Canadian, U.S., German and foreign government activities, volatility of the aviation market for FLYHT's products and services, factors that result in significant and prolonged disruption of air travel worldwide, global military activity, market prices, availability of satellite communication, foreign exchange rates, continued availability of capital and financing, and general economic, market, or business conditions in the aviation industry, including, but not limited to, the effects of the COVID-19 virus being experienced worldwide, worldwide political stability or any effect those may have on the Company's customer base. Investors are cautioned that any such statements are not guarantees of future performance, and that actual results or developments may differ materially from those projected in the forward-looking statements.

Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. The Company cannot assure investors that actual results will be consistent with any forward-looking statements; accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements contained herein are current only as of the date of this document. The Company disclaims any intentions or obligation to update or revise any forward-looking statements or comments as a result of any new information, future event or otherwise, unless such disclosure is required by law. The forward-looking information has been provided to the readers to assist in assessing the impact of the information disclosed herein on the Company and such forward-looking information may not be appropriate for other purposes. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.

5-	FLYHT AEROSPACE SOLUTIONS LTD. Q2 2022 REPORT