What changed in this filing

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Item 1. Financial Statements

2009-04-13 compared with 2009-01-16 · 255 added, 168 removed, 210 unchanged (67% of the section changed)

1 unchanged sentence

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

BALANCE SHEETS

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Current assets:

Cash and cash equivalents

Contract receivables

Customer receivables

Investment, at fair value

4 unchanged sentences

Intangible assets, net of accumulated

amortization of $16,392 and $10,662,

Other receivables

amortization of $104,589 and $10,662, respectively

Other receivable

Liabilities and Shareholders' Equity

2 unchanged sentences

Accrued expenses

Accrued dividends

Notes payable and current portion of long-term debt

Long-term note payable

Stockholders' equity:

Preferred stock, $.001 par value, 5,000,000

shares authorized, none issued and

Common stock, $.001 par value,

50,000,000 shares authorized, 8,981,363 and

8,431,510 shares outstanding, respectively

Series A, convertible preferred stock, $.001 par value

authorized 70,000 shares, 24,400 issued and

outstanding, less notes receivable of $29,333

Common stock, $.001 par value, 50,000,000 shares

authorized, 8,981,363 and 8,431,510 shares

outstanding, respectively

Additional paid-in-capital

2 unchanged sentences

Total Liabilities and Shareholders' Equity

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these consolidated financial statements

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

STATEMENT OF OPERATIONS

FOR THE THREE-MONTHS and SIX-MONTHS ENDED

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE-MONTHS ENDED

FEBRUARY 28, 2009 AND FEBRUARY 29, 2008 (unaudited)

Three-months ended

Six-months ended

Contract revenues

Nine-months ended

Cost of revenues

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Operating loss

Interest income, net

Loss before provision for income taxes

Interest income (expense), net

Loss before provision for income

Provision for income taxes

Dividends on preferred stock

Net loss to common shareholders

$ (2,440,663)

Net loss per share:

Weighted average number of shares outstanding:

The accompanying notes are an integral part of these financial statements

Net loss per common share:

Weighted average number of common

shares outstanding:

The accompanying notes are an integral part of these consolidated financial statements

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

STATEMENTS OF CASH FLOW

FOR THE SIX-MONTHS ENDED NOVEMBER 30,

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTHS ENDED

Cash flows from operating activities:

Net loss to common shareholders

$ (1,241,830)

$ (2,440,633)

Adjustments to reconcile net loss to net cash used in

3 unchanged sentences

Gain on disposition of assets

Common stock issued pursuant to legal settlement

Changes in operating assets and liabilities:

(Increase) decrease in contract receivables

Decrease in other current assets and other

Increase (decrease) in accounts payable and

accrued expenses

Customer and other receivables

Accrued dividends

Other current assets

Accounts payable and accrued expenses

Net cash used in operating activities

3 unchanged sentences

Proceeds from sale of assets

Cash of business acquired

Payments for patents and trademarks

Net cash (used in) provided by investing activities

Net cash provided by investing activities

Cash flows from financing activities:

Proceeds from installment note

Repayment of debt

Sale of preferred stock, net of notes receivable issuance

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

and equipment and license fee

The accompanying notes are an integral part of these financial statements

Issuance of preferred stock for acquired business

Issuance of notes payable to finance prepaid expenses

Issuance of notes receivable in exchange for preferred

Proceeds on asset sale offset by amounts due

The accompanying notes are an integral part of these consolidated financial statements

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX-MONTHS ENDED NOVEMBER 30, 2007 and 2008

Additional Paid-in-Capital

Treasury Stock

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE NINE-MONTHS ENDED FEBRUARY 28, 2009 AND FEBRUARY 29, 2008

Series A Convertible

Preferred Stock

Stockholders'

$ (9,341,826)

treasury stock

November 30, 2007

Issuance of treasury stock

Common stock issued

Share-based compensation

February 29, 2008

$(11,782,459)

$(12,628,125)

Share-based compensation

Issuance of stock

November 30, 2008

Sale of preferred stock

Note payments

Acquisition of CFP

Dividend on preferred stock

February 28, 2009

$(13,869,955)

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these consolidated financial statements

FLIGHT SAFETY TECHNOLOGIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

FOR THE THREE AND NINE MONTHS ENDED

FEBRUARY 28, 2009 AND FEBRUARY 29, 2008

Basis of Presentation

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and it's newly formed wholly-owned subsidiary Advanced Plasma Products, Inc.

("APP") and as of January 1, 2009, its recently acquired wholly-owned subsidiary Cummins Family Produce, Inc.

On August 7, 2008, the Company executed a letter of intent with the University of Tennessee Research Foundation (UTRF) for the licensing of patent rights related to atmospheric glow plasma technology.

6 unchanged sentences

On September 10, 2008 , we concluded our agreement with UTRF and subsequently issued 260,417 shares of our common stock as payment for the license fee.

These interim financial statements for the three and six-months ended November 30, 2008 and November 30, 2007, included herein, have been prepared, without audit, pursuant to the rules and regulations of the SEC.

As of January 1, 2009, we acquired 100% of the outstanding stock of Cummins Family Produce, Inc., a potato packing business located in Idaho.

The consideration we provided is the assumption of a bank promissory note in the amount of approximately $204,000 and 20,000 shares Preferred Stock (see note 10) valued at $2 million.

Under a performance based earn-out provision, we are obligated to issue an additional number of shares of Preferred Stock, such that the total purchase price is equal to 4.25 times the yearly average earnings before interest, taxes, depreciation and amortization calculated over the next two years, less the value of the bank promissory note assumed.

Immediately prior to this transaction, CFP executed (a) a 5-year supply agreement with its primary growers who will provide their entire potato harvest to the packing facility and (b) a 5-year lease agreement whereby CFP will lease the packing facility and equipment from the prior owners.

We believe that both agreements reflect current pricing in the industry.

We have no rights to renew these agreements.

See Notes 10 and 11 to our consolidated financial statements for a more detailed explanation of these transactions and for related party information.

These interim financial statements for the three and nine-months ended February 28, 2009 and February 28, 2008, included herein, have been prepared, without audit, pursuant to the rules and regulations of the SEC.

Results for the periods presented are not necessarily indicative of results for the entire year.

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The report of our independent registered public accountant issued in conjunction with our audited financial statements and notes thereto for the year-ended May 31, 2008 indicated that there is substantial doubt about our ability to continue as a going concern.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

The Company has had recurring losses from operations that have diminished its financial resources.

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As a result of the lack of government funding for our aviation security technologies, we have suspended all related research and develop work.

As of November 30, 2008, we had cash on hand of $67,000 which would be insufficient to fund our operations through the current year.

On January 14, 2009, we completed a series of transactions in order to generate additional cash resources.

See Note 9 of Notes to Consolidated Financial Statements for a full description of the transactions.

As a result of these transactions, the Company anticipates it will have sufficient cash resources into its fiscal 4 th quarter, at which time it will need to seek additional working capital.

We anticipate the amount of such additional working capital could be in the range of approximately $350,000 to $500,000 but cannot predict or estimate such amount with certainty as the ultimate amount will depend on many variables, such as potential third party development or licensing fees, the pace and success of our product development and sales, and cash generated the by the transactions described in Note 9.

In the event we are unable to secure additional working capital we will have to curtail our operations accordingly, thus slowing down our product development and marketing efforts.

On January 14, 2009, we completed a series of transactions in order to generate recurring cash flow and working capital.

See Notes 9 and 10 of Notes to Consolidated Financial Statements for a full description of the transactions.

However, we anticipate that by the end of April 2009, we will need to secure additional working capital financing, until product revenues and cash flow from CFP create a sustainable operation, of which there can be no assurance.

However, we cannot predict or estimate the timing or amount of our working capital needs with certainty as the timing and amounts will depend on many variables, such as potential third party development or licensing fees, the pace and success of our product development and sales, and cash generated by the transaction described in Note 10.

In the event we are unable to secure additional working capital as and when we need it, we will have to curtail our operations accordingly, thus slowing down our product development and marketing efforts.

Any curtailment of our operations could have a material adverse effect on our operations and financial position.

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Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and the reported amounts of revenue and expenses during the reporting period.

Material estimates that are particularly susceptible to significant change in the near term relate to the carrying values of investments, inventory, intangible assets, other receivables and the calculation of share-based compensation.

Material estimates that are particularly susceptible to significant change in the near term relate to the carrying values of receivables, inventory, intangible assets, and the calculation of share-based compensation.

Actual results could differ from those estimates.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

Share-Based Compensation:

6 unchanged sentences

The Company elected the modified prospective transition method under SFAS 123R and accordingly has not restated periods prior to adoption.

The Company recognized $11,648, $8,325, $23,298 and $16,650, as compensation expense related to employee stock options in each of the three and six-month periods ended November 30, 2008 and 2007, respectively.

The Company recognized compensation expense related to employee stock options of $11,649 and $34,947 for the three and nine months ended February 28, 2009, respectively and $9,749 and $142,224 for the three and nine months ended February 28, 2008, respectively.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option pricing model.

There were no options granted in each of the six-months ended November 30, 2008 and 2007, respectively.

There were no options granted in each of the nine-months ended February 28, 2009 and February 29, 2008, respectively.

Loss Per Share:

Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

For the interim periods presented the effect of stock options and warrants was anti-dilutive;

Basic loss per share is computed by dividing net loss to common shareholders by the weighted average number of shares of common stock outstanding during the period.

For the interim periods presented the effect of stock options, warrants and convertible preferred stock was anti-dilutive;

therefore, they were not included in the computation of diluted loss per share.

The number of shares issuable upon the exercise of outstanding stock options and warrants that were excluded from the computation as their effect would be anti-dilutive, were 2,925,737, 3,840,716, 2,963,930, and 3,953,215 for the three and six-month periods ended November 30, 2008 and November 30, 2007, respectively.

The number of shares issuable upon the exercise of outstanding stock options, warrants and convertible preferred stock that were excluded from the computation as their effect would be anti-dilutive, were 7,967,875 and 3,953,215 for the nine months ended February 28, 2009 and February 29, 2008, respectively.

Cash and Cash Equivalents:

For purposes of reporting cash flows the Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash and cash equivalents.

For purposes of reporting cash flows we consider all highly liquid investments with maturities of three months or less at the date of purchase to be cash and cash equivalents.

Revenue and Cost Recognition:

5 unchanged sentences

Revenue may be adjusted for our estimate of costs that may be categorized as disputed or unallowable as a result of cost overruns or the audit process.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

Project costs include all direct material, labor and subcontracting costs.

3 unchanged sentences

Revenue related to additional claims under the contract is recorded at the lesser of actual costs incurred or the amount expected to be realized.

The Company recognizes revenue in accordance with the provision of the Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No.

104 which establishes guidance in applying generally accepted accounting principles to revenue recognition in financial statements.

104 requires that four basic criteria must be met before revenue can be recognized:

(1) persuasive evidence of an arrangement exists;

(2) delivery has occurred or services rendered;

(3) the price to the buyer is fixed or determinable;

and (4) collectability is reasonably assured.

The Company`s shipping terms are customarily FOB shipping point.

Revenues for products sold in the normal course of business are recognized upon shipment when delivery terms are FOB shipping point and all other revenue recognition criteria have been met.

In regards to our newly acquired potato packing business (CFP) the cost of product (the amount we pay to the growers) is determined by subtracting from our selling price previously negotiated packing fees with the respective growers.

Inventories consist primarily of a base stock of consumable parts as relates to APP and packing materials and packed and loose potatoes as relates to CFP.

Inventories are valued at lower of cost or market as relates to APP and estimated selling price less packing fee as relates to CFP.

Machinery and Equipment:

Machinery and equipment are stated at original cost or fair value at date acquisition in the case of the bulk purchase of machinery and equipment purchased by Advanced Plasma Products, Inc.

("APP") less accumulated depreciation.

Machinery and equipment are stated at original cost or fair value at the date of acquisition in the case of CFP and Advanced Plasma Products, Inc.

less accumulated depreciation.

Depreciation is computed using the straight-line method.

6 unchanged sentences

Automobiles 5 years

Software 3 years

Software and computers 3-5 years

Intangible Assets:

At November 30, 2008, intangible assets consist of patent costs associated with, AWSM, TIICM™

and atmospheric glow technologies.

At February 28, 2009, intangible assets consist of patent costs associated with, AWSM, TIICM™

and atmospheric glow technologies and the value of the supply contract between CFP and certain growers.

Acquisition costs related to obtaining new patents are capitalized.

Patent costs are being amortized using the straight-line method over the lesser of seventeen years from the date incurred or the remaining life of the underlying patent.

The supply contract is being amortized over its five-year term.

In accordance with Statement of Financial Accounting Standards No.

144, "Accounting for Impairment or Disposal of Long-Lived Assets" (SFAS 144) the Company assesses its patents for impairment whenever events or changes in circumstances indicate their carrying value may not be recoverable.

Such circumstances may include a significant adverse change in legal factors or the business climate that could affect the value of the patents.

The Company also considers the likelihood of obtaining required research and development funding.

144, "Accounting for Impairment or Disposal of Long-Lived Assets" (SFAS 144) the Company assesses its intangible assets for impairment whenever events or changes in circumstances indicate their carrying value may not be recoverable.

Such circumstances may include a significant adverse change in legal factors or the business climate that could affect the value of the intangible assets.

The Company also considers the likelihood of obtaining required research and development funding in relation to patent valuation.

In determining recoverability, the Company must determine the asset's fair value, which may require Management to make significant assumptions about the future cash generating ability of the asset.

2 unchanged sentences

Subsequent reversal of a previously recognized impairment loss is prohibited under SFAS 144.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

Concentration of Credit Risk:

12 unchanged sentences

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period of enactment.

Fair Values of Financial Instruments:

The estimated fair value of financial instruments has been determined based on the available market information and appropriate valuation methodologies.

The carrying amounts of cash and cash equivalents, accounts receivable (including other receivables), other current assets, accounts payable, notes payable and accrued expenses, approximate fair value at November 30, 2008 and May 31, 2008, because of the short maturity of these financial instruments.

Our recent acquisition of CFP will create limitations on the use of our net operating loss carryforwards.

Retirement Savings Plan:

3 unchanged sentences

The Company matching funds immediately vest 100%.

The Company match for each of the three and six-months ended November 30, 2008 and 2007 were $0, $7,780, $7,456 and $23,431 respectively.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

The Company discontinued its match in September 2008.

Recent Accounting Pronouncements:

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These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.

The Company had no such assets as of November 30, 2008.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

The Company had no such adjustments as of February 28, 2009.

At May 31, 2008 the investment consisted of an auction market preferred security, valued using Level 2 methodology.

Contract Receivables

Accounts receivable consisted of the following at:

November 30, 2008

Customer Receivables

Customer receivables consisted of the following at:

February 28, 2009

Contract receivables-billed

Contract receivables - unbilled

The amount classified as other receivables and contract receivables unbilled is a retained fee on a recently completed government contract.

Contract receivable-unbilled

Customer receivables

The amount classified as other receivables and contract receivable unbilled is a retained fee on a recently completed government contract.

Machinery and Equipment

5 unchanged sentences

Intangible Assets

Intangible assets currently consist of costs associated with the newly acquired atmospheric glow technology, as well as the company's existing TIICM and AWSM technologies.

As more fully explained in Note 2, above, the company has suspended all further research and development on the TIICM and AWSM technologies.

Accordingly, we will be evaluating the carrying value of the TIICM and AWSM technologies to determine if those values have been impaired.

The carrying values of TIICM and AWSM at November 30, 2008 were $53,196 and $12,676, respectively.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

Note payable consists of an installment note relating to the financing of certain insurance policies.

The note is payable is 10 equal installments of $7,407 commencing December 22, 2008 after a $12,750 down payment.

Interest is at 5.47%

Intangible assets currently consist of costs associated with the newly acquired atmospheric glow technology, the company's existing TIICM and AWSM technologies and a supply contract acquired through the acquisition of CFP (see Note 10).

As more fully explained in Note 2, the Company has suspended all further research and development on the TIICM and AWSM technologies, having an aggregate carrying value $64,714.

Accordingly, we continue to evaluate the carrying value of the TIICM and AWSM technologies to determine if those values have been impaired.

Our intangibles are as follows at February 28, 2009:

Supply contract

Patents and trademarks

Long-Term Note Payable

Long-term debt consists of the following:

Bank installment note-6%-payable in equal monthly

installments of $7,616 consisting of interest and principal.

Note due May 15, 2011

Less current portion

Long-term note payable

This note is personally guaranteed by one of our directors and former shareholder of CFP.

Stockholders' Equity

As of both November 30, 2008 and May 31, 2008, the Company had 1,919,200 warrants outstanding with exercise prices ranging from $3.30 to $5.40 with an expiration date of January 29, 2009.

The weighted average exercise price was $3.49.

As of February 28, 2009 and May 31, 2008, the Company had 0 and 1,919,200 warrants outstanding, respectively, with exercise prices ranging from $3.30 to $5.40 and a weighted average exercise price of $3.49.

All of the Company's warrants expired January 29, 2009.

Stock Options:

Under the Company's 2005 Stock Incentive Plan, there are 1,302,000 shares available for future awards at November 30, 2008.

During the three and six-month period ended November 30, 2008, no award were made and 275,000 shares were cancelled.

Under the Company's 2005 Stock Incentive Plan, there are 1,470,000 shares available for future awards at February 28, 2009.

During the nine-month period ended February 28, 2009, no awards were made and 443,000 shares were cancelled.

The weighted average exercise price of the 600,000 options outstanding is $3.50.

The aggregate intrinsic value of the outstanding options is $0.

As of November 30, 2008 there was $30,055 of total unrecognized compensation cost related to the non-vested stock options that is expected to be expensed over the next one and one-quarter years.

Subsequent Events

We have filed with the Nevada Secretary of State a Certificate of Designations of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series A Convertible Preferred Stock for Flight Safety Technologies, Inc.

(the "Certificate") designating a Series A Convertible Preferred Stock ("Preferred Stock"), par value $0.01 per share.

Each share of Preferred Stock has a liquidating value of $100 per share, is convertible into 1,429 shares of Common Stock of the Company (subject to adjustment) and pays a cash dividend of 8% or a dividend in kind of 10%.

As of February 28, 2009 there was $18,400 of total unrecognized compensation cost related to the non-vested stock options that is expected to be expensed over the next 2 fiscal quarters.

Series A Convertible Preferred Stock:

Each share of Series A Convertible Preferred Stock ("Preferred Stock") has a liquidating value of $100 per share, is convertible into 1,429 shares of Common Stock of the Company (subject to adjustment) and pays a cash dividend of 8% or a dividend in kind of 10%.

The dividends are paid quarterly and are based on the original purchase price of the Preferred Stock.

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However, the Preferred Stock shareholders will not be able to vote on issues involving redemption or a liquidation event until there has been an affirmative vote on such issues by our common stock shareholders.

In that event,

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

they will be allowed to vote as a group with the Common Stock shareholders on such issues, in effect, giving them a veto right.

In that event, they will be allowed to vote as a group with the common stock shareholders on such issues, in effect, giving them a veto right.

In the event of a liquidation of the Company, the Preferred Stock will have a liquidating preference and will participate in any remaining liquidating proceeds on an as-converted basis with the common shareholders after receiving the liquidating value of their Preferred Stock.

Each share of Preferred Stock is convertible at the option of the holder at any time into shares of our common stock by dividing the liquidity value of $100 by a conversion price of $0.07 per share of common stock.

Each share of Preferred Stock is convertible at the option of the holder at any time into shares of our common stock by dividing the liquidation value of $100 by a conversion price of $0.07 per share of common stock.

The number of shares of common stock issuable upon conversion is subject to antidilution protections if we issue additional shares of common stock at less than $0.07 per share and upon stock splits, dividends and certain other events.

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Securities and Exchange Commission, and applicable state securities laws.

SALE OF SHARES OF PREFERRED STOCK TO INVESTORS

Pursuant to a Purchase Agreement dated as of January 13, 2009 (the "Investor Purchase Agreement"), we are selling 4,400 shares of Preferred Stock for $100 per share to a group of investors (the "Investors") in order to raise an aggregate of $440,000 of equity for working capital purposes.

Sale Of Shares Of Preferred Stock

During the period January 13, 2009 through January 26, 2009, we sold 4,400 shares of our Preferred Stock for $100 per share to a group of investors (the "Investors") raising an aggregate of $440,000 of equity for working capital purposes.

Participating in this transaction are our two senior executives and three key employees (together "Employees").

Payment will be in the form of cash at closing, except for the employees who will purchase an aggregate amount of $100,000 of Preferred Stock.

Four of these employees will purchase shares with a 20% cash payment at closing and by executing a non-interest bearing promissory note payable semimonthly with a maturity date of March 31, 2009.

One of these employees will purchase shares with an 8% cash payment at closing and execute a non-interest bearing promissory note payable semimonthly with a maturity date of October 31, 2009.

The Employees purchased an aggregate amount of $100,000 of Preferred Stock.

Four of these employees purchased shares with a 20% cash payment and by executing a non-interest bearing promissory note payable semimonthly with a maturity date of March 31, 2009.

One of these employees purchased shares with an 8% cash payment and by executing a non-interest bearing promissory note payable semimonthly with a maturity date of October 31, 2009.

These notes are nonrecourse and collateralized solely by the employee's Preferred Stock.

The Preferred Stock sold herewith, is convertible at $0.07 per share into a total of 6,285,714 shares of the Company's common stock, significantly diluting our existing common stock shareholders.

In the Investor Purchase Agreement, we agree to indemnify investors against damages they may suffer as a result of our breach of certain representations and warranties we have made in that Agreement.

We agree to indemnify Investors against damages they may suffer in the event of our breach of certain representations and warranties we have made.

Reference is made to the Certificate and the Investor Purchase Agreement for a complete description of the terms of the Preferred Stock.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

DESCRIPTION OF OUR ACQUISITION OF CFP WITH SHARES OF PREFERRED STOCK

Pursuant to a Purchase Agreement dated as of January 13, 2009 (the "CFP Purchase Agreement"), we are acquiring from the Cummins Family Limited Partnership, an Idaho limited partnership (the "Purchaser"), 100% of the outstanding stock of Cummins Family Produce, Inc., ("CFP") a potato packing business located in Idaho.

The net proceeds were used for general working capital purposes.

Acquisition Of CFP With Shares Of Preferred Stock

Pursuant to a Purchase Agreement dated as of January 13, 2009 (the "CFP Purchase Agreement"), the Company acquired from the Cummins Family Limited Partnership, an Idaho limited partnership (the "Purchaser"), 100% of the outstanding stock of Cummins Family Produce, Inc., ("CFP") a potato packing business located in Idaho.

The general partner and majority limited partner of the Purchaser is Cummins Family Holdings, LLC, an Idaho limited liability company controlled by Mr.

Wes Cummins, a director of the Company.

The consideration we are providing is the assumption of a bank promissory note in the amount of approximately $211,000 owed by Mr.

Cummins in connection with the operations of CFP and 20,000 shares Preferred Stock we will issue at closing, valued at $2 million.

Under a performance based earn-out provision, we are obligated to issue an additional number of shares of Preferred Stock, such that the total purchase price is equal to 4.25 times the yearly average EBITDA calculated over the next two years, less the value of the bank promissory note assumed.

Immediately prior to this transaction, CFP will execute (a) a 5-year supply agreement with Southern Slope, Inc., and Black Rock Ag., Inc.

In exchange, the Company assumed a bank promissory note in the amount of approximately $204,000 owed by Mr.

Cummins in connection with the operations of CFP and issued 20,000 shares Preferred Stock valued at $2 million.

Under a performance based earn-out provision, the Company is obligated to issue an additional number of shares of Preferred Stock, such that the total purchase price is equal to 4.25 times the yearly average earnings before interest, taxes, depreciation, and amortization, calculated over the next two years, less the value of the bank promissory note assumed.

Immediately prior to this transaction, CFP executed (a) a 5-year supply agreement with Southern Slope, Inc., and Black Rock Ag., Inc.

(together the "Growers") who will provide their entire potato harvest to the packing facility and (b) a 5-year lease agreement whereby CFP will lease the packing facility and equipment from Cummins Family Holdings, LLC.

We believe that both agreements reflect current pricing in the industry.

We have no rights to renew these agreements.

The Company believes that both agreements reflect current pricing in the industry.

The Company has no rights to renew these agreements.

Cummins is a majority shareholder in Southern Slope, Inc.

and family members of his are the majority shareholders in Black Rock Ag., Inc.

The Preferred Stock initially issued to the Purchaser in regard to this transaction is convertible at $0.07 per share into a total of 28,571,429 shares of our common stock and will substantially dilute our existing common shareholders.

The Preferred Stock initially issued to the Purchaser in regard to this transaction is convertible at $0.07 per share into a total of 28,571,429 shares of our common stock and has substantially diluted our existing common shareholders.

As a result of this transaction, Mr.

Cummins will control over 60% of the voting shares of the Company.

In the CFP Purchase Agreement, we agree to indemnify the Purchaser against damages it may suffer as a result of our breach of certain representations and warranties we have made in that Agreement.

The Purchaser also has agreed to indemnify us against damages that may result if it breaches certain representations and warranties it has made relating to CFP and the Purchaser.

Reference is made to, and each investor in the Preferred Stock must review, the CFP Purchase Agreement for a complete description of the terms of the CFP transactions.

RELATED PARTY TRANSACTIONS

As previously stated, Mr.

Wesley Cummins is a director and shareholder of the Company, and holds a controlling interest in Cummins Family Limited Partnership, Cummins Family Holdings, LLC and Southern Slope, Inc.

In the CFP Purchase Agreement, the Company agreed to indemnify the Purchaser against damages it may suffer in the event of our breach of certain representations and warranties the Company has made in that Agreement.

The Purchaser also has agreed to indemnify the Company against damages in the event of breaches in representations and warranties it has made relating to CFP and the Purchaser.

This acquisition was accounted for under the purchase method of accounting with results of operations for CFP included in our results beginning January 1, 2009.

Under the purchase method of accounting, the assets and liabilities of CFP were recorded at their respective fair values as of January 1, 2009.

The following condensed balance sheet of CFP discloses the amounts assigned to each major asset and liability caption at the acquisition date.

The allocation of the final purchase price is subject to adjustment based upon future EBITDA and as additional information becomes available.

January 1, 2009

Customer receivables

Other current assets

Supply contract (1)

Accounts payable

Accruals and other

Long-term note payable

Total liabilities

Net assets acquired

(1) the supply contract is being amortized over its 5-year term

The following unaudited pro-forma condensed consolidated statements of operations for the nine-months ended February 28, 2009 and February 29, 2008, reflects the consolidated results of operations as if the acquisition of CFP had occurred as of June 1, 2008 and 2007.

The historical information of CFP was not audited and the condensed financial information is based on the historical results of the Company and the unaudited results of CFP.

Unaudited pro-forma data is not necessarily indicative of the results that would have occurred had the acquisition taken place at the beginning of the periods presented, nor of future results.

Pro Forma Consolidated Combined Financial Statements

For the Nine-Months Ended February 28, 2009

Flight Safety (1)

Cost of revenues

Operating expenses

Operating (loss)

Interest income (expense), net

Loss before provision for

Income tax expense

Dividends on preferred stock

Net loss to common

$ (1,241,830)

$ (1,704,337)

Net loss per common share:

Basic and diluted

Weighted average number of shares outstanding:

Basic and diluted

(1) Includes results of CFP from date of acquisition consisting of revenues of $1,527,604 and net income of $46,062.

(2) Amortization of growers' supply contract for the period prior to acquisition ($268,800)

(3) Adjustment for facility lease $149,304

(3) Elimination of state income tax provision

Pro Forma Consolidated Combined Financial Statements

For the Nine-Months Ended February 29, 2008

Flight Safety

Cost of revenues

Operating expenses

Operating (loss)

Interest income (expense), net

Loss before provision for

Income tax expense

$ (2,440,633)

$ (2,709,885)

Net loss per common share:

Basic and diluted

Weighted average number of shares outstanding:

Basic and diluted

(1) Amortization of growers supply contract ($345,600)

(2) Adjustment for facility lease ($180,000)

(3) Adjustment for facility lease

CFP was formed in May 2008 in connection with the acquisition of a previously existing, potato packing and trucking business that was family owned and managed.

During the period prior to the acquisition by CFP, the acquired business engaged in several significant transactions amongst its shareholders and other related parties that may not have been at arms-length.

Further, we believe that historical financial statements of CFP and its predecessor prior to our acquisition of CFP would not be indicative of the operations of the ongoing business that we acquired due to the restructuring and streamlining of operations that occurred subsequent to May 2008.

As a result, we believe that we cannot prepare audited financial statements.

Had we been able to conduct an audit of the acquired business's historical financial statements, potential adjustments to the amounts included above may have come to our attention.

Related Party Transactions and Change in Control

Wesley Cummins, a director and shareholder of the Company, holds a controlling interest in Cummins Family Limited Partnership, Cummins Family Holdings, LLC and Southern Slope, Inc.

Wesley Cummins' family members hold a controlling interest in Black Rock Ag., Inc.

FLIGHT SAFETY TECHNOLOGIES, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2008 AND 2007

(Unaudited) (Continued)

James Schwartz, a director of the Company, is the managing member of Harvey Partners, LLC, a Delaware limited liability company that is the manager of Harvey SMidCap Fund LP, a Delaware limited partnership, and Harvey SMidCap Offshore Fund, Ltd., a Cayman Islands exempted company, which are participating in the Preferred Stock offering.

Kenneth Wood, President and Chief Executive Officer and a director of the Company is participating in the Preferred Stock offering.

Rosenfeld, Chief Financial Officer, Vice president of Operations, Secretary/Treasurer is participating in the Preferred Stock offering.

CHANGE IN CONTROL

Amounts due from Southern Slope, Inc.

at February 28, 2009 are $4,584 and are included in customer receivables on the consolidated balance sheet.

Amounts due to Southern Slope, Inc.

and Black Rock Ag, Inc.

under the supply agreement at February 29, 2009 amount to $1,207,944 and are included in accounts payable on the consolidated balance sheet.

Kenneth Wood, President and Chief Executive Officer and a director of the Company participated in the Preferred Stock offering.

Rosenfeld, Chief Financial Officer, Vice president of Operations, Secretary/Treasurer participated in the Preferred Stock offering.

As a result of these transactions, Mr.

Wesley Cummins will exercise or control in excess of 60% of the voting power of the Company.

Wesley Cummins now exercises or controls in excess of 60% of the voting power of the Company.

This change in control will also create limitations to the use of the Company's existing net operating tax loss carryforwards.

Segment Information

Information regarding segments is presented in accordance with SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." Based on the criteria outlined in SFAS 131, the Company's operations are classified into two reportable business segments as described below.

Advanced Plasma Products, Inc.

APP has exclusive proprietary rights to a series of patents relating to One Atmospheric Uniform Glow Discharge Plasma (OAUGDP®) technology, and the rights to develop products and capabilities based upon this technology.

APP's OAUGDP®

is a technology that electrically breaks down air creating highly reactive chemical species.

This resultant unique plasma-generated chemistry is then used to produce desired outcomes such as alteration of material properties, destruction of microorganisms, and destruction of odor-causing chemicals.

The Company is currently developing commercial products utilizing this technology as well as pursuing certain research and development projects and accordingly includes revenues from previous research and development contracts.

Cummins Family Produce, Inc.

CFP is a potato packing facility that was acquired for its cash flow.

See Note 10 for a fuller description.

CFP was acquired as of January 1, 2009.

Three-months ended

Nine-months ended

Consolidated revenues

Operating income (loss):

Consolidated operating (loss)

Interest income (expense), net

Provision for income tax

Depreciation and amortization:

Consolidated depreciation and

Total assets:

Consolidated assets

For the nine months ended February 28, 2009, 3 customers accounted for 42% of revenues of the CFP segment.

All revenues are U.S.

generated and all assets are U.S.

based, for all segments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements