FLYHT Aerospace Solutions Ltd. — Interim / Quarterly Report 2024

Nov 14, 2024

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THIRD QUARTER

FLYHT AEROSPACE SOLUTIONS LTD. FINANCIAL STATEMENTS

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Table of Contents

Auditors’ Involvement ............................................................................................................................................................ 3 Condensed Consolidated Interim Statements of Financial Position ..................................................................................... 4 Condensed Consolidated Interim Statements of Comprehensive Loss ............................................................................... 5 Condensed Consolidated Interim Statements of Changes in Equity .................................................................................... 6 Condensed Consolidated Interim Statements of Cash Flows .............................................................................................. 7 Notes to the Condensed Consolidated Interim Financial Statements .................................................................................. 8 Corporate Information .......................................................................................................................................................... 12

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Auditors’ Involvement

National Instrument 51-102, Part 4, subsection 4.3 (3) (a), requires that if an auditor has not performed a review of the condensed consolidated interim financial statements there must be an accompanying notice indicating that the condensed consolidated interim financial statements have not been reviewed by an auditor.

The auditors of FLYHT Aerospace Solutions Ltd. have not performed a review of the condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and 2023.

FLYHT AEROSPACE SOLUTIONS LTD. Q3 2024 REPORT

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

OSITION
Assets Current assets Cash and cash equivalents Other financial assets Trade and other receivables Contract assets Deposits and prepaid expenses Inventory Tax receivable Total current assets Non-current assets Property and equipment Goodwill Intangible assets Inventory Total non-current assets Total assets Liabilities Current liabilities Trade payables and accrued liabilities Revolving line of credit Customer deposits Contract liabilities Loans and borrowings Lease liability Total current liabilities Non-current liabilities Loans and borrowings Lease liability Provisions Total non-current liabilities Total liabilities Equity Share capital Warrants Contributed surplus Cumulative translation adjustment Deficit Total equity Total liabilities and equity	September 30, 2024 $ 1,289,217 500,000 2,175,408 359,580 224,497 1,801,006 1,570 6,351,278 2,255,888 905,612 1,604,214 1,964,506 6,730,220	December 31, 2023 $
		1,542,203 500,000 2,896,200 282,136 263,798 1,180,757 24,643
		6,689,737
		2,421,957 875,827 1,708,870 1,508,230
		6,514,884
	13,081,498 3,505,481 670,000 1,187,384 167,935 1,131,229 476,473	13,204,621
		3,097,494 - 1,022,829 1,052,969 1,234,335 466,670
	7,138,502 7,693,868 1,663,516 38,974 9,396,358 16,534,860 72,607,412 141,857 12,576,875 247,516 (89,027,022) (3,453,362) 13,081,498	6,874,297
		3,262,199 1,935,515 43,149
		5,240,863
		12,115,160
		72,607,412 - 12,525,970 148,084 (84,192,005)
		1,089,461 13,204,621

See accompanying notes to condensed consolidated interim financial statements, including the going concern note (note 2d).

On behalf of the board

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Director – Doug Marlin

Director – Paul Takalo

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Revenue (note 7) Cost of sales Gross profit Distribution expenses Administration expenses Research, development and certification engineering expenses Income (loss) from operating activities Finance income Finance costs Net finance costs Loss before income tax Income tax expense Loss for the period Foreign currency translation adjustment Comprehensive loss for the period Loss per share Basic and diluted loss per share (note 6)	For the three months ended September 30 2024 2023 $ $ 4,398,225 5,099,019 1,897,844 2,108,313 2,500,381 2,990,706 1,740,638 1,543,074 1,455,190 897,031 1,236,801 1,146,019 (1,932,248) (595,418) (15,108) (47,637) 314,085 174,727 298,977 127,090 (2,231,225) (722,508) (13,279) (6,147) (2,244,504) (728,655) 66,871 27,874	For the three months ended September 30 2024 2023 $ $ 4,398,225 5,099,019 1,897,844 2,108,313 2,500,381 2,990,706 1,740,638 1,543,074 1,455,190 897,031 1,236,801 1,146,019 (1,932,248) (595,418) (15,108) (47,637) 314,085 174,727 298,977 127,090 (2,231,225) (722,508) (13,279) (6,147) (2,244,504) (728,655) 66,871 27,874	For the nine months ended September 30 2024 2023 $ $ 13,500,818 15,899,792 5,263,936 6,580,706 8,236,882 9,319,086 4,971,743 4,889,824 3,480,458 3,019,982 4,021,325 3,508,887 (4,236,644) (2,099,607) (200,183) (67,899) 774,113 498,929 573,930 431,030 (4,810,574) (2,530,637) (24,443) (23,939) (4,835,017) (2,554,576) 99,432 (19,701)	For the nine months ended September 30 2024 2023 $ $ 13,500,818 15,899,792 5,263,936 6,580,706 8,236,882 9,319,086 4,971,743 4,889,824 3,480,458 3,019,982 4,021,325 3,508,887 (4,236,644) (2,099,607) (200,183) (67,899) 774,113 498,929 573,930 431,030 (4,810,574) (2,530,637) (24,443) (23,939) (4,835,017) (2,554,576) 99,432 (19,701)
				15,899,792 6,580,706
				9,319,086 4,889,824 3,019,982 3,508,887
				(2,099,607) (67,899) 498,929
				431,030
				(2,530,637) (23,939)
				(2,554,576)
				(19,701)
	(2,177,633)	(700,781)	(4,735,585)	(2,574,277)
	(0.05)	(0.02)	(0.12)	(0.07)

FLYHT AEROSPACE SOLUTIONS LTD. Q3 2024 REPORT

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

For the nine months ended September 30, 2024 and 2023

Balance at January 1, 2024 Loss for the period Total comprehensive loss Contributions by and distributions to owners Share-based payment transactions Warrants issued Warrant issuance costs Total contributions by and distributions to owners Balance at September 30, 2024	Share Capital $ Warrants $ Contributed Surplus $ Cumulative Translation Adjustment Deficit $ Total Equity (Deficit) $
	72,607,412 - 12,525,970 148,084 (84,192,005) 1,089,461
	- - - 99,432 (4,835,017) (4,735,585)
	- - - 99,432 (4,835,017) (4,735,585)
	- - 50,905 - - 50,905 - 148,251 - - - 148,251 - (6,394) - - - (6,394)
	- 141,857 50,905 - - 192,762
	72,607,412 141,857 12,576,875 247,516 (89,027,022) (3,453,362)

Balance at January 1, 2023 Loss for the period Total comprehensive loss Contributions by and distributions to owners Share-based payment transactions Share options exercised Total contributions by and distributions to owners Balance at September 30, 2023	72,427,102 - 12,462,645 147,829 (80,142,634) 4,894,942
	- - - (19,701) (2,554,576) (2,574,277)
	- - - (19,701) (2,554,576) (2,574,277)
	- - 110,023 - - 110,023 180,310 - (81,513) - - 98,797
	180,310 - 28,510 - - 208,820
	72,607,412 - 12,491,155 128,128 (82,697,210) 2,529,485

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

Cash flows from (used in) operating activities Loss for the period Depreciation, amortization and impairment of non-financial assets Loss on disposal of PPE Debenture accretion and interest Lease liability accretion Gain on loan modification Government loan accretion Equity-settled share-based payment expenses Change in inventories Change in trade and other receivables Change in contract assets Change in prepayments Change in trade and other payables Change in customer deposits Change in contract liabilities Change in provisions Unrealized foreign exchange loss (gain) Interest expense Interest paid Interest income Interest received Income tax expense Income tax paid Net cash from (used in) operating activities Cash flows used in investing activities Acquisitions of property and equipment Proceeds from sale of PPE Net cash used in investing activities Cash flows from (used in) financing activities Proceeds from exercise of share options Revolving credit facility Net proceeds from debenture (note 5) Payment of lease liabilities Repayment of borrowings Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning Effect of exchange rate fluctuations on cash held Cash and cash equivalents, ending	For the nine months ended September 30 2024 2023 $ $	For the nine months ended September 30 2024 2023 $ $
	(4,835,017) 507,536 942 234,129 73,922 (169,755) 322,924 50,905 (1,076,525) 781,624 (79,230) 39,300 420,264 164,555 (885,034) (3,905) 21,316 34,490 (143,987) (30,428) 32,214 24,443 (1,641) (4,516,958) (172,859) 300 (172,559) - 670,000 4,534,362 (282,595) (410,884) 4,510,883 (178,634) 1,542,203 (74,352) 1,289,217	(2,554,576) 492,873 - - 84,476 - 352,348 110,023 670,215 1,489,360 (146,643) (14,012) (6,194) 493,167 (834,935) (298) (34,921) (6,742) (84,476) (29,760) 30,587 23,939 (24,704)
		9,727
		(14,260) -
		(14,260)
		98,797 - - (249,552) (580,548)
		(731,303)
		(735,836) 2,647,650 28,145 1,939,959

FLYHT AEROSPACE SOLUTIONS LTD. Q3 2024 REPORT

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2024 and 2023

1. Reporting entity

FLYHT Aerospace Solutions Ltd. (the “ Company ” or “ FLYHT ”) was founded in 1998 under the name AeroMechanical Services Ltd. FLYHT is a public company incorporated under the Canada Business Corporations Act and is domiciled in Canada. The Company has been listed on the TSX Venture Exchange since March 2003, first as TSX.V: AMA and as TSX.V: FLY since 2012 and has been listed on the OTCQX marketplace since June 2014 as OTCQX: FLYLF. FLYHT is based in Calgary, Canada with offices in Denver CO, USA and Frankfurt, Germany. FLYHT Aerospace Solutions Ltd is an AS9100 Quality registered company. For more information visit www.flyht.com.

FLYHT provides airlines with Actionable Intelligence to transform operational insight into immediate, quantifiable action, and delivers industry leading solutions to improve aviation safety, efficiency, and profitability. This unique capability is driven by a suite of patented aircraft certified hardware products, AFIRS™. Solutions include an aircraft satcom/interface device that enables cockpit voice communications, transmission of aircraft data both while inflight via satellite and post-flight via 5G, real-time aircraft state and fleet status analysis, and preventative maintenance solutions. FLYHT’s hardware products can also be interfaced with FLYHT’s proprietary relative humidity sensors to deliver airborne weather and humidity data in real-time.

2. Basis of preparation

(a) Basis of accounting

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, under International Financial Reporting Standards (“IFRS”) Accounting Standards as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated interim financial statements were approved by the Board of Directors on November 13, 2024.

(b) Basis of measurement

The condensed consolidated interim financial statements have been prepared on a historical cost basis. Certain immaterial amounts have been adjusted in the prior period to align with current period presentation.

(c) Functional and presentation currency

These condensed consolidated interim financial statements are presented in Canadian dollars, which is the Company’s functional currency. The functional currency of the Company’s United States subsidiary is U.S. dollars, and of the Company’s German subsidiary is the euro.

(d) Going concern

The condensed consolidated interim financial statements have been prepared on the basis that the Company will continue to realize its assets and meet its obligations in the ordinary course of business. The Company closed a $5 million unsecured debenture arrangement in June 2024. The Company incurred a loss in Q3 2024 of $2.2 million, compared to an incurred loss in Q3 2023 of $729 thousand; and as at September 30, 2024 has a deficit of $89 million. As of Q3 2024, the Company used $4.5 million cash in operations, compared to $9.7 thousand cash from operations up to Q3 2023. At September 30, 2024, the Company had negative working capital of $787 thousand compared to negative $185 thousand as of December 31, 2023. The Company ended Q3 2024 with balances of $1.3 million in cash and cash equivalents, $0.5 million in Guaranteed Investment Certificates (“GIC”), and a draw of $0.67 million on the credit facility.

For the Company to continue as a going concern, it will need to consistently achieve profitability and positive operating cash flows. The Company continues efforts to expand its earnings and cash flow potential; however, until achieving consistent positive earnings and cash flows, the Company will be required to continue to fund operations through revenue and its resulting cash flow, as well as managing outgoing cash flows and raising necessary financing in the capital markets through debt and/or equity. The Company may be required to scale back operations to maximize positive cash from existing revenue. The company has entered into an agreement to be acquired (Note 9).

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There is no assurance that the Company will be successful in attaining and sustaining profitable operations and positive cash flow and/or raising additional capital to meet its liquidity requirements. If the Company is unable to satisfy its working capital requirements from these sources, the Company’s ability to continue as a going concern and to achieve its intended business objectives will be adversely affected. As a result of these factors, there is a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern. The condensed consolidated interim financial statements do not reflect adjustments that would otherwise be necessary if the going concern assumption was not valid, such as revaluation to liquidation values and reclassification of statement of financial position items.

3. Material accounting policies

The accounting policies set out in note 3 of the Company’s December 31, 2023 consolidated financial statements have been applied consistently to all periods presented in these unaudited condensed consolidated interim financial statements, unless otherwise indicated. These accounting policies have also been applied consistently by the Company’s subsidiaries.

IAS1

Effective January 1, 2024 the Company adopted the amendments to IAS 1 Presentation of Financial Statements , which requires that liabilities be classified as non-current if the company has a right to defer settlement for at least 12 months following the reporting date, and also requires new disclosures for liabilities subject to covenants.

There has not been a resulting impact on the Company’s financial statements. The amendments have been applied retrospectively. Liabilities where the Company has a right to defer settlement for at least 12 months following the reporting date have been classified as non-current. Additional disclosures are not required as no contractual covenants are in place.

4. Measurement of fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair value, for both financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

Fair values have been determined for measurement and/or disclosure purposes based on the following methods, all of which are determined using a number of observable inputs other than quoted prices in active markets (Level 2).

• (a) Cash and cash equivalents, trade and other receivables, trade payables and accrued liabilities: carrying value approximates fair value, due to the short-term nature of the instruments.

• (b) Loans and borrowings: for measurement purposes, fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period.

FLYHT AEROSPACE SOLUTIONS LTD. Q3 2024 REPORT

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5. Loans and borrowings

On June 10, 2024 the Company executed an unsecured debenture in the principal amount of $5,000,000 with Pinnacle Island II, an unrelated third-party lender. Proceeds were discounted by 5% (with such discount fee for the benefit of the Lender). On the closing date of the Debenture, as additional consideration for the loan, the Company issued 2,000,000 common share purchase warrants, with each Warrant exercisable for a period of three years into one common share, for the exercise price of $0.4839. The Debenture carries a term of three years, with an annual interest of 12% payable on a quarterly basis. Interest is accreted, and issue costs amortized, based on a calculated effective interest rate of 17.04%.

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----- Start of picture text -----

Q3 2024 YTD 2024
$ $
Proceeds on issuance - 4,750,000
Transaction costs allocated - (215,638)
Amount classified as equity (net of transaction costs) - (141,857)
Opening balance 4,436,599 4,392,505
Amortization of issuance costs 12,036 16,045
Accrued interest 177,999 218,084
Interest payments (34,426) (34,426)
Balance September 30, 2024 4,592,208 4,592,208
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6. Earnings per share

The calculation of basic and diluted earnings per share for the three months ended September 30, 2024 was based on a weighted average number of common shares outstanding of 38,997,650 (basic and diluted) (September 30, 2023: 38,968,888 (basic and diluted).

The calculation of basic and diluted earnings per share for the nine months ended September 30, 2024 was based on a weighted average number of common shares outstanding of 38,997,650 (basic and diluted) (September 30, 2023: 38,872,643 (basic and diluted).

Calculations of diluted earnings per share did not include outstanding stock options because they would be anti-dilutive. For the same reason, 2024 calculations also did not include warrants.

7. Disaggregation of revenue and non-current assets

The Company has one operating segment. The following revenue is based on the geographical location of customers. All non-current assets reside in Canada, except for:

• Property and equipment valued at $5,860 (Denver CO, USA) and $5,242 (Frankfurt, Germany)

• Leased premises valued at $96,244 (Frankfurt, Germany)

United States & Mexico Asia China Middle East Canada Australia Africa Europe South/Central America Total		For the three months ended September 30 2024 2023 $ $	For the three months ended September 30 2024 2023 $ $	For the nine months ended September 30 2024 2023 $ $	For the nine months ended September 30 2024 2023 $ $
		900,829 59,958 839,360 95,308 241,976 155,639 145,865 1,939,579 19,711 4,398,225	1,908,288 419,829 229,807 167,892 265,717 124,993 143,853 1,816,004 22,636 5,099,019	2,617,029 860,185 1,750,306 547,823 1,019,703 522,715 449,364 5,668,355 65,338 13,500,818	4,810,639 1,240,993 964,872 504,963 2,863,717 526,869 409,104 4,522,246 56,389 15,899,792

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The following shows revenue per major product and service categories.

SaaS Hardware Licensing Technical Services Total	For the three months ended September 30 2024 2023 $ $ 2,167,003 2,787,664 1,061,822 1,001,817 22,889 494,573 1,146,511 814,965 4,398,225 5,099,019	For the nine months 2024 $ 7,638,386 2,353,110 102,979 3,406,343 13,500,818	ended September 30 2023 $
			7,891,437 3,945,523 1,936,574 2,126,258 15,899,792

SaaS is the recurring revenue from the Company’s products that allow customers to utilize and analyze data they receive from units, use of functions such as the satellite phone and the sale of weather data collected by units. These fees are recognized as the service is provided each month.

Hardware includes the income from hardware sales and related parts required to install the unit, spare units, spare installation parts, and Underfloor Stowage Units.

Licensing includes sales of modems with a related manufacturing license fee.

Technical Services includes services offered by the Company, including repairs and other expertise. The Company has not disclosed the transaction price allocated to remaining performance obligations for SaaS and Technical Services, as revenue for these performance obligations is recognized using the practical expedient to recognize revenue at the amount to which the Company has a right to invoice.

The undelivered amount of revenue related to contracted yet undelivered hardware for which a purchase order has been received was $3,823,162 CAD as of September 30, 2024.

8. Related parties

Since 2020, a company related to an officer of FLYHT has provided marketing services to the Company. All of the transactions with the related party are considered in the normal course of business and have been measured at their exchange amount.

Amounts included in: Contract labour Accounts payable	For the three months ended September 30 For the nine months ended September 30 2024 $ 2023 $ 2024 $ 2023 $
	30,000 22,500 67,500 72,500 10,000 22,500 10,000 22,500

9. Subsequent event

FLYHT announced that it has entered into a definitive arrangement agreement to be acquired by Firan Technology Group Corporation (“FTG”). The transaction is valued at approximately $13.2 million CAD, with consideration including a combination of cash and common shares of FTG.

Under the Arrangement, FLYHT shareholders may elect to receive, for each common share of FLYHT held (a “Common Share”) (i) CAD$0.1103 in cash and 0.0333 FTG Shares, (ii) CAD$0.3379 in cash or (iii) 0.0495 FTG Shares, in each case subject to pro-ration (collectively, the “Consideration”). The Consideration will be subject to maximum aggregate cash consideration of CAD$4.3 million and 1,300,000 FTG Shares.

The Transaction is subject to receipt of FLYHT shareholder and court approvals, any required regulatory approvals and consents, and customary closing conditions and is expected to close in the fourth quarter of 2024.

FLYHT AEROSPACE SOLUTIONS LTD. Q3 2024 REPORT

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CORPORATE INFORMATION

Registrar and Transfer Agent

Odyssey Trust Company 1.587.885.0960 https://odysseytrust.com/

Share Listing

Shares are traded on the TSX Venture Exchange (TSX.V: FLY) and the OTCQX Marketplace (OTCQX: FLYLF)

Investor Relations

investors@flyht.com 1.403.250.9956 www.flyht.com

FNK IR LLC flyht@fnkir.com 1.646.809.2183

Directors

Mary McMillan Brent Rosenthal Doug Marlin Lorne Sugarman Nancy Young Paul Takalo Peter Large

Executive Chairman Mountain Hawk Capital Partners, LLC President, Marlin Ventures Ltd. Director Director Director Director

Officers

Mary McMillan Alana Forbes Darrel Deane Gurjot Bhullar Scott Chambers

Interim Chief Executive Officer and Executive Chairman Chief Financial Officer Chief Revenue Officer Chief Operating Officer Vice President Sales and Marketing

Auditor

KPMG LLP

Calgary, Alberta

Legal Counsel Chris Croteau

Head Office

Tingle Merrett LLP, Calgary, Alberta #500, 1212 - 31 Avenue NE Calgary, Alberta T2E 7S8

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