HOVR

Business Context and Reporting Period

New Horizon Aircraft Ltd. (HOVR) is a pre-revenue aerospace company designing and developing a hybrid-electric vertical takeoff and landing (eVTOL) prototype aircraft for regional air mobility. The company operates as a single segment and is currently in the research, development, and flight-testing phase. This Form 10-Q covers the quarterly period ended August 31, 2025.

Key Financial Metrics

Note: All figures are in thousands of Canadian dollars unless otherwise noted. The company reported no revenue for the period.

Material Changes vs. Prior Period

• Net Loss Expansion: Net loss increased significantly to $10.9 million from $2.9 million in the prior year quarter. This was driven by a $5.1 million expense related to the change in fair value of warrant liabilities and a $2.4 million increase in operating expenses.
• Operating Expenses: Total operating expenses rose to $5.9 million from $2.7 million. Research and Development (R&D) expenses surged to $2.7 million (from $297k) due to increased staffing for engineering and flight testing. General and Administrative (G&A) expenses increased to $3.2 million (from $2.4 million) primarily due to stock-based compensation.
• Liquidity Position: Cash and cash equivalents more than doubled to $16.3 million from $7.5 million at the end of the prior fiscal year (May 31, 2025) and significantly increased from $3.8 million in the prior year quarter. This was fueled by $8.3 million in proceeds from a Sales Agreement and $3.0 million from warrant exercises.
• Capital Structure: The company issued 3.4 million shares under its Sales Agreement and 2.9 million shares via warrant exercises during the quarter.

Outlook, Risks, and Management Commentary

• Going Concern: Management states that while current cash ($16.3 million) is sufficient to fund operations for at least the next 12 months, there is substantial doubt regarding the company's ability to continue as a going concern beyond that period without raising additional capital.
• Development Timeline: The company is building a full-scale demonstrator aircraft expected to commence flight testing in 2027. Commercialization is anticipated prior to 2030.
• Funding Strategy: The company has $14.8 million remaining eligible for sale under its Capital on Demand Sales Agreement. It is also pursuing government grants, including a proposal for the Canadian INSAT fund.
• Internal Controls: Management concluded that disclosure controls and procedures were not effective as of August 31, 2025, citing a material weakness related to the inadequate separation of financial responsibilities. Remediation is targeted for completion by May 31, 2026.
• Risks: Key risks include the failure to achieve aircraft certification (TCCA/FAA), the immaturity of the Regional Air Mobility market, and the inability to secure necessary future financing.

Investor Verification Checklist

• Cash Burn Rate: Verify the sustainability of the $2.4 million quarterly operating cash burn against the $16.3 million cash balance to confirm the 12-month runway estimate.
• Warrant Liability Volatility: Review the impact of the $5.1 million non-cash charge related to warrant fair value changes on the reported net loss.
• Internal Control Remediation: Monitor progress on fixing the material weakness in financial reporting controls identified in Item 4.
• Capital Raise Progress: Track the utilization of the remaining $14.8 million under the Sales Agreement and the status of the INSAT grant application.
• Certification Milestones: Assess the timeline and costs associated with obtaining Type Certification from Transport Canada and the FAA, which is critical for future revenue.