Overview

New Horizon Aircraft Ltd. (the “Company”, “Horizon”, “we,” “us” or “our”) is an aerospace company based in Lindsay, Ontario, Canada. The company was previously a blank check company called Pono Capital Three, Inc. that merged with Robinson Aircraft Ltd. in January 2024.

Business Combination

On January 12, 2024, Pono Capital Three, Inc. completed a merger with Robinson Aircraft Ltd., with the combined company being renamed New Horizon Aircraft Ltd. The financial information in this report reflects the historical operating results of Robinson prior to the merger, as well as the combined results of the two companies after the merger.

Organization and Nature of Business

Horizon’s objective is to advance sustainable air mobility. The company has designed and developed a cost-effective and energy-efficient hybrid-electric vertical takeoff and landing (eVTOL) prototype aircraft for use in future regional air mobility (RAM) networks. Horizon plans to sell these aircraft to third parties, air operators, lessors, individual consumers, and military customers. The company also intends to manufacture its aircraft and license its patented technology to other Original Equipment Manufacturers (OEMs).

Key Factors Affecting Operating Results

The key factors affecting Horizon’s operating results include:

1. Development of the Regional Air Mobility Market: The company’s revenue will be directly tied to the continued development of the RAM market, which remains undeveloped. Factors impacting adoption of eVTOL technology include perceptions about quality, safety, performance, cost, and environmental impact, as well as competition from other transportation options.

2. Competition: Horizon faces competition from traditional helicopters, ground-based mobility solutions, and other eVTOL developers. The company may not fully realize the sales it anticipates or receive a competitive advantage from its design.

3. Government Certification: Horizon’s Cavorite X7 aircraft will require Type Certification from regulators like Transport Canada Civil Aviation (TCCA) and the Federal Aviation Administration (FAA) to be used in commercial operations. This is a long and complex process, and there is no guarantee the company will achieve certification.

4. Dual Use Business Model: Horizon’s business model is to serve both civilian and military applications, which the company believes will result in a viable long-term business as production volumes scale. However, numerous risks and uncertainties exist, and the company’s financial results are dependent on delivering aircraft on-time and at a cost that supports returns.

5. Going Concern and Liquidity: Horizon is a pre-revenue organization in the research and development and flight-testing phase. While management expects current funding to be sufficient for at least the next 12 months, there is substantial doubt around the company’s ability to continue as a going concern beyond that period without raising additional capital.

Components of Results of Operations

Horizon has not yet generated any revenue, as it is still in the design, development, and certification phase of its eVTOL aircraft. The company’s key expenses include:

1. Research and Development Expenses: Costs related to personnel, consulting, equipment, engineering, data analysis, and materials for aircraft development.

2. Selling, General and Administrative Expenses: Costs for personnel, business development, investor relations, professional services, compliance, and other general corporate expenses.

3. Other Income: Grants, subsidies, and foreign exchange gains/losses.

4. Interest Expense, net: Interest related to leases, offset by interest income.

5. Change in fair value and termination of Forward Purchase Agreement: Fluctuations in the deemed value of a shareholder agreement, and the gain from terminating the agreement.

6. Change in fair value of Warrants: Fluctuations in the fair value of outstanding warrants.

Results of Operations

Horizon’s operating expenses increased significantly in the three and six months ended November 30, 2024 compared to the same periods in 2023, driven by higher research and development costs as well as increased general and administrative expenses related to the company’s growth activities.

The company also recognized significant other income in the current periods, primarily from the change in fair value and termination of the Forward Purchase Agreement, as well as the change in fair value of outstanding warrants.

Cash Flows

Horizon’s cash flows have been primarily used in operating activities to fund its research and development and general and administrative expenses. The company has funded its operations through the issuance of common shares, convertible debt, and government grants.

As of November 30, 2024, the company had $887,000 in cash and cash equivalents, and it expects to have sufficient liquidity to fulfill its business plan for at least the next 12 months. However, the company will likely require additional financing to achieve its long-term objectives.

Critical Accounting Estimates

Horizon’s critical accounting estimates include the accounting for derivative financial instruments, such as the Forward Purchase Agreement and outstanding warrants, as well as the treatment of research and development costs.

In summary, Horizon is a pre-revenue aerospace company focused on developing and commercializing its eVTOL aircraft technology. The company faces a number of key risks and uncertainties, including the development of the RAM market, competition, government certification, and its ability to secure sufficient funding to continue its operations. While the company has made progress, significant challenges remain before it can achieve its long-term objectives.