HOVR

Business Context and Reporting Period

New Horizon Aircraft Ltd. (HOVR) is a pre-revenue aerospace company developing a hybrid-electric vertical takeoff and landing (eVTOL) prototype aircraft for regional air mobility. The company, formerly a blank check entity (Pono Capital Three), completed a business combination with Robinson Aircraft Ltd. in January 2024. This Form 10-Q covers the quarterly period ended February 28, 2025, and the nine months ended on that date. The company is currently in the research, development, and flight-testing phase.

Key Financial Metrics

Note: All figures are in thousands of Canadian dollars unless otherwise noted. The nine-month net income is driven by non-cash accounting gains rather than operational profitability.

Material Changes vs. Prior Period

• Net Income Volatility: The company reported a net loss of $(4.9M) for the quarter but a net income of $11.8M for the nine-month period. This nine-month income is primarily due to a $21.4M non-cash gain from the termination of a Forward Purchase Agreement (FPA) in November 2024, offsetting operating losses.
• Operating Expenses: Total operating expenses increased significantly to $9.5M for the nine months ended Feb 28, 2025, compared to $2.5M in the prior year period. This reflects increased staffing, professional fees, and development costs.
• Liquidity Position: Cash and cash equivalents increased from $1.8M (May 31, 2024) to $9.2M (Feb 28, 2025), driven by financing activities including a Registered Securities Offering (RSO) and the issuance of Preferred Shares.
• Liabilities: Total liabilities decreased from $22.9M to $3.3M, largely due to the removal of the $20.9M FPA liability upon its termination.

Outlook, Risks, and Management Commentary

• Going Concern: Management states there is substantial doubt about the company's ability to continue as a going concern beyond the next 12 months without raising additional capital. The company is pre-revenue and expects to incur significant costs for certification and development.
• Capital Raising: The company entered into a "Capital on Demand" Sales Agreement in February 2025 to sell up to $6.25M of shares, though no shares have been sold under this program as of the filing date. Recent financing included the issuance of Series A Preferred Shares and Class A ordinary shares in December 2024.
• Nasdaq Compliance: The company previously failed to meet Nasdaq listing standards regarding net income and market value. While it regained compliance with the Equity Standard in January 2025, it remains subject to a panel monitor for one year. Additionally, the company received an extension until July 14, 2025, to regain compliance with the minimum bid price rule ($1.00/share).
• Internal Controls: Management concluded that disclosure controls and procedures were not effective as of February 28, 2025, citing a material weakness related to the inadequate separation of financial responsibilities.
• Development Timeline: Commercialization of the aircraft is anticipated to begin in 2028, pending successful Type Certification from Transport Canada and the FAA.

Investor Verification Checklist

• Cash Runway: Verify if the current cash balance of ~$9.2M is sufficient to fund operations through the next 12 months given the high burn rate (~$3.5M per quarter in operating expenses).
• Non-Cash Gains: Confirm that the $11.8M nine-month net income is entirely non-operational and driven by the FPA termination gain, not product sales.
• Nasdaq Status: Monitor the stock price to ensure it meets the $1.00 minimum bid price requirement by July 14, 2025, to avoid delisting.
• Internal Controls: Assess the remediation plan for the material weakness in internal financial controls and its potential impact on future reporting reliability.
• Capital Needs: Review the terms of the "Capital on Demand" agreement and the likelihood of successful equity raises to fund the 2028 commercialization target.