FLYHT Aerospace : Q2 2023 Report

LETTER TO SHAREHOLDERS

Halfway through 2023, FLYHT's future is looking brighter than ever. After persevering through the pandemic and the loss in December last year of FLYHT's former CEO, Bill Tempany, our team remains deeply committed and focused, while the demand for our solutions continues to expand. The entire organization is energized as we are once again a growing company on the cusp of delivering on two of our most promising incremental initiatives - the AFIRS Edge™ and our weather opportunities. This quarter we reached a major milestone - over 5 million cumulative flight hours with our AFIRS hardware onboard our customers' aircraft. It's a simple measure of the longevity our solutions have amassed from over 20 years of supporting the global aviation industry. Yet as impressive as this statistic is, what is even more telling is that FLYHT's long-term customers with the AFIRS 228 onboard continue to renew with us for multi- year commitments, and they are increasingly doing so with expanded fleets and additional software services. Our licensing business remains strong, as we received an additional order from our long-term OEM partner in Q2. This represents the fifth order from this customer over the past three years with an aggregate value of over $11 million USD. Meanwhile, our pipeline

of potential business continues to remain strong at near record levels.

We see a bright future ahead for our existing solutions, including the AFIRS 228, at the same time as we make meaningful progress on our emerging AFIRS Edge and weather opportunities. Recently, we received a Supplemental Type Certificate ("STC") revision from the U.S. Federal Aviation Administration for the TSO version of the AFIRS 228 on the Airbus A319, A320 and A321 aircraft. This STC amendment allows FLYHT to fulfill its commitment to equip a significant customer with our Air Traffic Control ("ATC") compliant satcom solution.

FLYHT continues to make progress toward the commercialization of the AFIRS Edge, our 5G-enabled Wireless Quick Access Recorder ("WQAR"). During the quarter, we received our first order to install the AFIRS Edge on a Boeing 737 Max fleet. With the commercialization of the AFIRS Edge product, we believe the Total Addressable Market ("TAM") to be 25,000 aircraft. FLYHT is extremely well positioned to capture a meaningful share of the TAM in upfront hardware sales and recurring software services and data revenue.

FLYHT's weather solutions are another driver of growth that is heating up as we leverage our FLYHT-WVSS-II water vapor sensor system in conjunction with the AFIRS Edge to address critical environmental imperatives for both the aviation industry and the broader weather community. Real-timeaircraft-based observations, containing relative humidity data from the FLYHT-WVSS-II sensor, provide critical data for weather forecasting models. This presents us with a unique opportunity to support airlines and the world's major national meteorological agencies in their efforts to enhance weather forecasting, improve airline operations, and reduce aviation's impact on the environment. Our conversations with UK Met continue to advance in a positive direction, and we continue to look for ways to further scale the business and accelerate these new and exciting opportunities.

Financially, we delivered strong results in Q2 2023, with revenue increasing 24% year-over-year. All four revenue categories, SaaS, Hardware, Licensing, and Technical Services increased compared to Q2 2022. Our gross margins remain robust at over 59% with a positive EBITDA of $168,045.

I'm extremely excited about the outlook for FLYHT in 2023 and beyond, and I'm proud to be supported by an incredible team at FLYHT. I would like to thank our customers for the opportunity to continue serving them, and to thank our shareholders for their loyal support.

Yours truly,

Kent Jacobs

President and Interim CEO

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Table of Contents
Letter to Shareholders	Forward
Management Discussion & Analysis	5
Non-GAAP Financial Measures	5
Forward-Looking Statements	5
FLYHT Overview	6
Trends and Economic Factors	11
Environmental, Social and Corporate Governance	12
Results of Operations	14
Selected Results	14
Financial Position	15
Comprehensive Loss	17
Other	23
Auditors' Involvement	27
Condensed Consolidated Interim Statements of Financial Position	28
Condensed Consolidated Interim Statements of Comprehensive Loss	29
Condensed Consolidated Interim Statements of Changes in Equity	30
Condensed Consolidated Interim Statements of Cash Flows	31
Notes to the Consolidated Financial Statements	32
Corporate Information	37
A list of financial terms, acronyms and abbreviations can be found at the end of this report

3-	FLYHT AEROSPACE SOLUTIONS LTD. Q2 2023 REPORT

Management Discussion & Analysis

This management discussion and analysis ("MD&A") is as of August 16, 2023 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, 2022 and 2021 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, 2023 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, non-current financial liabilities and earnings before interest, income tax, depreciation and amortization (EBITDA). FLYHT defines working capital as current assets less current liabilities. Non-current financial liabilities include the non-current portion of loans and borrowings and lease 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. Non-current financial liabilities can be used to assess the solvency and leverage of a company. 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 pandemic, 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 within 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 pandemic, 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.

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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.

FLYHT Overview

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 and software solutions. These include AFIRS™, an aircraft satcom/interface device, which enables cockpit voice communications, real-time aircraft state analysis, and the transmission of aircraft data while inflight. The AFIRS Edge (Edge) is a 5G Wireless Quick Access Recorder (WQAR), Aircraft Interface Device (AID), and Aircraft Condition and Monitoring System (ACMS). The Edge can be interfaced with FLYHT's TAMDAR probe and/or the FLYHT-WVSS-II relative humidity sensor to deliver airborne weather and humidity data in real-time. FLYHT complements the AFIRS airborne systems with enterprise applications that help airlines improve operational efficiency and situational awareness including UpTime, FleetWatch, FuelSense and ClearPort services.

CrossConsense, FLYHT's wholly owned subsidiary, offers highly skilled services to the commercial aviation industry and provides preventative maintenance solutions. These include Aircraft Fleet View, a native application that gives a real-time view of airline fleet status; AviationDW, a managed data warehouse for enhanced business intelligence; and ACSIS, a visualization and predictive maintenance alerting tool (see Business Combination section, page 21).

FLYHT is headquartered in Calgary, Canada, and is an AS9100 Quality registered company. CrossConsense, located in Frankfurt, Germany, is an ISO9001 certified operation. For more information visit www.flyht.com.

1. Actionable Intelligence Solutions

Actionable Intelligence solutions maximize customers' operational efficiency and safety with reliable, easy to use, flexible, and cost- effective solutions. This industry differentiator provides not only economic value but also opportunities for customers and FLYHT to meet their sustainability goals. FLYHT aims to leave no data stranded and no related opportunity to take corrective or opportunistic action left unrealized.

Cloud-based enterprise servers complement AFIRS data with external airline, airport and other industry data sources. These external sources have many components aiding in aircraft operations, maintenance, and ground operations as well as flight planning and scheduling. The combination of this wide set of data sources allows for the creation of a data lake to which machine learning can be applied, allowing FLYHT to provide customers with Actionable Intelligence solutions.

FLYHT continues to add to the suite of Actionable Intelligence solutions. The service offering provides FLYHT with a recurring, SaaS (Software as a Service) revenue stream that is incremental to its existing revenue sources. While every Actionable Intelligence solution will thrive with real-time inputs from an AFIRS unit, the broader approach to incorporate third-party inputs allows FLYHT's solutions to be leveraged in any airline environment.

WQAR

As 2G/3G/LTE cellular networks around the world are decommissioned, FLYHT's AFIRS Edge provides a seamless transition to WQAR (Wireless Quick Access Recorder) file transmission over existing 3G/4G and new 5G networks. 5G networks allow for a significant increase in data volumes transmitted from an aircraft, enabling additional Actionable Intelligence solutions to be implemented. As these become available FLYHT can provide immediate access for airlines to maximize benefits of the new networks, setting up airlines for long term success. QAR data forms one of the foundations for the Actionable Intelligence solutions that FLYHT provides.

Opportunities to enhance airline operational control and decrease airline costs are derived from QAR recordings and wireless distribution functions, by expanding data harvesting that is fully under airline control.

5-	FLYHT AEROSPACE SOLUTIONS LTD. Q2 2023 REPORT