UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ______ to ______
Commission
file number: 001-41607
NEW
HORIZON AIRCRAFT LTD.
(Exact
name of registrant as specified in its charter)
British Columbia N/A
(Address of principal executive offices) (Zip Code)
(613)866-1935
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Ordinary Share, no par value HOVR The Nasdaq Stock Market LLC
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2023, the last business day of the registrant’s
most recently completed second fiscal quarter, the aggregate market value of the common stock outstanding, other than securities held
by persons who may be deemed affiliates of the registrant, computed by reference to the closing sales price of $10.41 on June 30, 2023
for the Class A common stock, trading on such date, as reported on The Nasdaq Capital Market, was $119,715,000.
As of March 28, 2024 there were 18,220,436 shares
of the Company’s Class A ordinary shares, no par value, issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
TABLE
OF CONTENTS
Page
PART I
Explanatory Note 1
Cautionary Note Regarding Forward-Looking Statements; Summary of Risk Factors 2
Item 1. Business 5
Item 1A. Risk Factors 14
Item 1B. Unresolved Staff Comments 36
Item 1C. Cybersecurity 36
Item 2. Properties 38
Item 3. Legal Proceedings 38
Item 4. Mine Safety Disclosures 38
PART II
Item 6. Reserved 39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 43
Item 8. Financial Statements and Supplementary Data 44
Item 9A. Controls and Procedures 44
Item 9B. Other Information 44
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 44
PART III
Item 10. Directors, Executive Officers and Corporate Governance 45
Item 11. Executive Compensation 52
Item 14. Principal Accountant Fees and Services 66
PART IV
Item 15. Exhibits and Financial Statement Schedules 68
Signatures 71
i
PART
I
EXPLANATORY NOTE
New
Horizon Aircraft Ltd. (“New Horizon”) (formerly known as Pono Capital Three, Inc. or “Pono”) was
a blank check company originally incorporated in Delaware on March 11, 2022, for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with one or more businesses. On October 14, 2022, Pono redomiciled
in the Cayman Islands. On February 14, 2023, Pono consummated an initial public offering (the “IPO”), after which
its securities began trading on the Nasdaq Stock Market LLC (“Nasdaq”). On August 15, 2023, Pono entered into that
certain Business Combination Agreement (the “Business Combination Agreement”) by and among Pono, Pono Three Merger
Acquisitions Corp., a British Columbia company and wholly-owned subsidiary of Pono (“Merger Sub”) and Robinson Aircraft,
Ltd. d/b/a Horizon Aircraft (“Horizon” or “Legacy Horizon”)
On
January 12, 2024 (the “Closing Date”), we consummated the previously announced business combination (the “Business
Combination”) and related transactions (the “Transactions”) contemplated by the Business Combination Agreement,
pursuant to which Pono was continued and de-registered from the Cayman Islands and redomesticated as a British Columbia company on January
11, 2024; Merger Sub and Horizon were amalgamated under the laws of British Columbia; and Pono changed its name to New Horizon Aircraft
Ltd. On January 16, 2024, our Class A ordinary shares, no par value per share (the “Class A ordinary shares”) and
warrants to purchase the Class A ordinary shares at an exercise price of $11.50 per share (the “Public Warrants”)
began trading on The Nasdaq Capital Market under the symbols, “HOVR” and “HOVRW,” respectively.
As
a result of the Transactions, we are a holding company, all of whose assets are held directly by, and all of whose operations are conducted
through, Legacy Horizon and whose only direct asset consists of equity ownership of Legacy Horizon.
Unless
otherwise indicated, the historical financial information included in this Annual Report on Form 10-K (the “Annual Report”),
including the audited financial statements and the notes thereto in Part II. Item 8 and the information in Part II. Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” are that of Pono prior to the consummation of the
Transactions.
The
Business Combination was accounted for as a common control transaction, with no goodwill or other intangible assets recorded, in accordance
with GAAP. Under this method of accounting, Pono was treated as the “acquired” company for financial reporting purposes.
Under the guidance in Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations for
transactions between entities under common control, the assets, liabilities, and noncontrolling interests of Legacy Horizon and Pono were
recognized at their carrying amounts on the date of the Business Combination. Legacy Horizon was determined to be the predecessor to the
combined entity. Accordingly, in future reporting periods, our financial statements will be prepared on a consolidated basis with
the financial statements of Legacy Horizon beginning on the Closing Date and will represent a continuation of the financial statements
of Legacy Horizon.
Unless
otherwise noted or the context otherwise requires, references to the “Legacy Horizon,” “Horizon,” “we,”
“us,” or “our” refer to the business of Legacy Horizon, which became the business of New Horizon Aircraft Ltd.
and its subsidiaries following the consummation of the Transactions.
References
to a year refer to Pono’s fiscal years ended on December 31 of the specified year.
Certain
monetary amounts, percentages and other figures included herein have been subject to rounding adjustments. Accordingly, figures shown
as totals in certain tables and charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed
as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages
that precede them.
1
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements contained in this Annual Report on Form 10-K, other than historical facts, may be considered forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements can generally be
identified by our use of forward-looking terminology such as “may,” “will,” “should,” “could,”
“would,” “expect,” “intend,” “plan,” “anticipate,” “estimate,”
“believe,” “seek,” “continue,” or other similar words. We intend for all such forward-looking statements
to be covered by the applicable safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act
and Section 21E of the Exchange Act, as applicable. Such statements include, in particular, statements regarding our expectations as
to:
● future financial performance of New Horizon;
● New Horizon’s securities’ potential liquidity and trading;
● impact from the outcome of any known and unknown litigation;
● expectations regarding future expenditures of New Horizon;
● the future mix of revenue and effect on gross margins of New Horizon;
● the ability of New Horizon to protect its intellectual property; and
● other factors detailed under the section entitled “Risk Factors.”
The
forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated.
These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These risks and uncertainties include, but are not limited to, those factors described under the section of this Annual Report entitled
“Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove
incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may
be required under applicable securities laws.
Although
we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove
to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these
and other uncertainties, the inclusion of a projection or forward-looking statements in this Annual Report should not be regarded as
a representation by us that our plans and objectives will be achieved.
2
We
have based the forward-looking statements included in this Annual Report on information available to us on the date of this Annual Report,
and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any
forward-looking statements in this Annual Report, whether as a result of new information, future events or otherwise, you are advised
to consult any additional disclosures that we may make directly to you or through reports that we may file in the future with the Securities
and Exchange Commission (the “SEC”), including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
Summary
of Risk Factors
An
investment in our securities involves a high degree of risk. The occurrence of one or more of the events or circumstances described in
the section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely
affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and
you could lose all or part of your investment. Such risks include, but are not limited to:
Risks
Related to New Horizon’s Business and Industry
3
● the need to raise additional capital;
Risks
Related to Intellectual Property
Risks
Related to the Regulatory Environment in Which We Operate
Risks
Related to New Horizon’s Organization and Structure
Risks
Related to an Investment in Our Securities
4
● New Horizon shareholders may experience dilution in the future;
Item 1.
Business
Unless
otherwise indicated or the context otherwise requires, references in this section to “New Horizon,” “we,” “us,”
“our,” and other similar terms refer to Horizon prior to the Business Combination and to New Horizon and its subsidiaries
after giving effect to the Business Combination.
Overview
We
are an advanced aerospace Original Equipment Manufacturer (“OEM”) that is designing a next generation hybrid electric
Vertical Takeoff and Landing (“eVTOL”) aircraft for the Regional Air Mobility (“RAM”) market. Our
aircraft aims to offer a more efficient way to move people and goods at a regional scale (i.e., from 50 to 500 miles), help to connect
remote communities, and will advance our ability to deal with an increasing number of climate related natural disasters such as wildfires,
floods, or droughts.
The
product we are designing and delivering is a hybrid electric 7-seat aircraft, called the Cavorite X7, that can take off and land vertically
like a helicopter. However, unlike a traditional helicopter, for the majority of its flight it will return to a configuration much like
a traditional aircraft. This would allow the Cavorite X7 to fly faster, farther, and operate more efficiently than a traditional helicopter.
Expected to travel at speeds up to 250 miles per hour at a range over 500 miles, we believe that this aircraft will be a disruptive force
to RAM travel.
The
new and developing eVTOL aircraft market has been made possible by a convergence of innovation across many different technologies. Batteries,
immense strength of light materials, computing power, simulation, and propulsion technology have all crossed a critical threshold to
enable viable aircraft designs such our Cavorite X7. This has resulted in the establishment and rapid growth of the Advanced Air Mobility
(“AAM”) market. Morgan Stanley has projected that the eVTOL aircraft market could reach $1 trillion (in the base
case) by 2040 and $9 trillion by 2050.
The Cavorite X7 architecture
is based on our patented fan-in-wing (“Horizon Omni-modal VeRtical (HOVR) Wing” or “HOVR Wing”)
technology, which has been developed and tested over the last several years. While most of our competitors rely on open rotor designs,
our HOVR Wing uses a series of ducted electric fans located inside the wings to produce vertical lift. After a demanding vertical takeoff,
the aircraft accelerates forward. At a safe speed, the wings close to conceal the fans in the wings and the aircraft returns to a highly
efficient configuration. The ability to take off and land like a helicopter but fly forward like a normal aircraft is the key to its performance.
5
A
picture of Horizon’s 50%-scale prototype that is currently in active flight testing
The
aircraft is also powered by a hybrid electric main engine. For vertical flight, electrical power for the powerful ducted fans in the
wings and canards comes from two sources: an on-board generator driven by an internal combustion engine and an array of batteries. Augmenting
the battery power with generator power allows us to reduce battery size, recharge the aircraft after vertical takeoff or landing, and
increase safety. This aircraft able to operate in austere locations without power, unlike other pure electric designs that will be forced
to fly from charging station to charging station.
We
believe that the technology and configuration advantages of our Cavorite X7 aircraft will represent a significant market advantage. It
is anticipated that our aircraft will be cheaper to own and operate than helicopters with similar payload characteristics and will travel
almost twice as fast. The specifications for the aircraft call for it to be able to carry seven people with a useful load of 1,500 lbs.,
almost twice the carriage capacity of many of our competitors. We believe the combination of carrying more people or goods, traveling
faster, and operating more efficiently will provide a strong economic model for broad adoption.
Our
business operating model is predicated on building and selling Cavorite X7 aircraft for both civilian and military use. We also believe
that the extensive intellectual property developed to enable the successful operation of our aircraft could be licensed to third parties
to generate significant profit.
We
have designed, built, and initiated testing of a 50%-scale prototype of our Cavorite concept. This sub-scale prototype has been through
hover testing and the team is currently investigating transition to forward flight. We have received a Special Flight Operations Certificate
(SFOC) from Transport Canada Civil Aviation (“TCCA”) that allows outdoor untethered flight of our sub-scale
prototype. Our SFOC #930370 will remain effective until its expiry on August 1st of 2024 at which point Horizon will require
a formal extension to allow continued untethered test flying. We have also partnered with Cert Centre Canada (3C) for development
of a certification basis that will be used to form the foundation for Type Certification with TCCA. Receiving a Type Certificate
in accordance with stated regulatory standards will certify compliance to the applicable airworthiness standards for the Cavorite X7,
something that is a necessary prerequisite for using the aircraft in commercial operations. We believe our aircraft will be one of the
first eVTOL aircraft to be certified for flight into known icing conditions (FIKI), dramatically increasing its operational utility.
We believe we can receive Type Certification in 2028.
6
Patents
and other Intellectual Property
In
order to protect the novel technologies that underpin the Cavorite X7 design, we have accumulated 22 issued and allowed patents thus
far, the earliest expiry of which will be 2035. The most significant of these patents are US non-provisional utility patents that protect
the core fan-in-wing invention and various other novel details required to enable its practical use. Amongst these issued patents are
several design patents that seek to protect the shape of the Cavorite X7 with its distinct forward swept main wings, unique empennage,
and forward canards. Other intellectual property exists in the areas of hybrid-electric propulsion; ducted fan propulsion unit blade
and stator design, cooling, and electrical control; control systems including novel yaw control software and hardware; and digital twin
simulation.
The
eVTOL Industry, Total Addressable Market and its Drivers
The
eVTOL aircraft market is a developing sector within the transportation industry. This market sector is dependent on the successful development
and implementation of eVTOL aircraft and networks, none of which are currently in commercial operation. Morgan Stanley have projected
that the eVTOL market for moving people and moving goods could be between $1 trillion by 2040 and 9 trillion by 2050, as set
forth in the “Morgan Stanley Research, eVTOL/Urban Air Mobility TAM Update” report released in May 2021 (the “Morgan
Stanley Report”).
Furthermore,
in its 2021 Regional Air Mobility report, NASA has highlighted that while the United States has over 5,000 airports, only 30 of
them support 70% of all travelers.1 This report highlights that the average American lives within 16 minutes of an airport
yet must travel hours to larger hubs for even shorter regional travel. It is little wonder that 73% of Americans prefer road travel
over flying, even if that means spending hours in gridlocked traffic. We believe there is a significant opportunity to improve regional
travel through the use of intelligently designed VTOL aircraft.
Regional
Air Mobility
Regional
Air Mobility (RAM) is simply a term that represents a faster, more efficient way of moving people and goods between 50 and 500 miles.
With the development of more economical, versatile, and safe aircraft like Horizon Aircraft’s Cavorite X7 concept that can flexibly
travel between regional locations, it is little wonder that the market demand is high for these types of machines.
NASA
highlights that RAM has the potential to fundamentally change how we travel and receive our goods by “bringing the convenience,
speed, and safety of air travel to all Americans, regardless of their proximity to a travel hub or urban center” and “[t]hrough
targeted investments, RAM will increase the safety, accessibility, and affordability of regional travel while building on the extensive
and underutilized federal, state, and local investment in our nation’s local airports.”
New
types of aircraft capable of operating with very limited ground infrastructure can deliver critical supplies to remote communities, transport
critically injured people to the hospital faster and more efficiently, help with disaster relief operations, and can help service people
around the world in special military missions.
Another
report from Morgan Stanley projects that eVTOL technology is expected to revolutionize logistics due to advantages in speed, efficiency
and accessibility over current trucks, airplane and train freight transportation. In addition, the Morgan Stanley Report cites the potential
for eVTOL technology to provide a viable and affordable transportation solution in geographic locations without a current viable solution
(such as rural or island communities) and to expand the possibilities for 24-hour delivery or overnight parcel delivery in regions where
existing transport modes are simply too slow.
The
large RAM market opportunity is precipitated by a transportation system that is insufficient to handle increasing demand without time
delays, high infrastructure and maintenance costs and adverse environmental impact. Since 1990, global passenger flows have increased
by more than 125% across all major modes of travel while global trade volume has increased by approximately 200%. To counter the rapidly
increasing demand for mobility and logistics, governments worldwide are investing a total of approximately $1 trillion per annum
into transport infrastructure, which is three times more compared to twenty years ago. Despite these investments, our regional transport
systems have fundamentally not improved.
7
In
response, governments are increasing their support for the development of both urban and regional eVTOL networks, and sustainable aviation
more generally, through regulatory incentives and investment. For example, the Canadian government recently announced the initiative
for Sustainable Aviation Technology (INSAT) where $350M will be invested into innovative companies focused on sustainable aviation
solutions. We believe that Horizon Aircraft could be an ideal match for the recent government funding opportunities.
The
History of Horizon Aircraft
Horizon
was founded in 2013 to develop an innovative prototype amphibious aircraft. However, as we investigated the latest advancements in the
areas of electric motor and battery technologies, we began to understand that a new type of aircraft concept was possible. With this
realization, the experienced aircraft development team shifted to developing the unique Cavorite X-series concept, eventually settling
on a 7-place hybrid eVTOL aircraft. In June of 2021, Horizon was acquired by Astro Aerospace Ltd. (“Astro”), an OTCQB-listed
company, in an all-stock deal. In August of 2022, after funding challenges, Astro agreed to unwind the deal and Horizon was sold back
to its original shareholders. In subsequent events, Astro Aerospace Ltd. became a revoked public company after failing to submit timely
financial information.
After
re-privatizing from Astro, Horizon successfully raised funding to support the continued development and testing of its sub-scale prototypes
as well as to continue progress on the detailed design of a full-scale technical demonstrator aircraft.
Sub-Scale
Prototypes
We
have built many sub-scale prototype aircraft. Starting with a smaller 1/7th-scale aircraft, we are now flight testing a half-scale
prototype. This large prototype has a 20-foot wingspan, weighs almost 500 lbs., and is roughly 15 feet long. This aircraft has been through
successful hover testing, and the team has investigated forward transition speeds up to 70 mph in a wind tunnel. All testing has yielded
positive results, and the aircraft is performing significantly above initial expectations for both power and stability.
Full-Scale
Cavorite X7 Aircraft Concept
Based
on positive initial testing results, the team is actively improving the design of a full-scale technical demonstrator aircraft. For example,
the aircraft will be designed to hold seven (7) people: six (6) passengers and one (1) pilot. Updated performance estimates
from early sub-scale testing indicate that the full-scale hybrid electric Cavorite X7 will be able to travel at speeds up to 250 mph
and carry 1,500 lbs. of useful load over 500 miles with the appropriate fuel reserves. The team has identified and begun negotiating
with key suppliers globally to meet the specifications of the Cavorite X7.
Our
Competitive Strengths
We
believe that our business benefits from several competitive strengths, including the following:
Proprietary
Ducted Fan-in-Wing Technology — the “HOVR Wing” System
The
majority of our competitors use “open propeller” eVTOL vertical lift architectures. We employ our own proprietary HOVR Wing
technology that provides a number of important advantages:
8
Agile
Team with Significant Aerospace and Operational Experience
We
were founded by a team with deep experience in the aerospace industry. Our team boasts individuals who have led the design, construction
and testing of clean sheet aircraft and have a combined industry experience of over 200 years. The leadership team within New Horizon
also includes personnel with significant experience in human resources and information technology which we believe will facilitate cohesion,
effectiveness and security as the company continues to grow.
Operational
Experience
Many
of our principal engineers and technicians have significant operational experience. Many are active pilots. For example, our CEO was
an active CF-18 fighter pilot for nearly 20 years and holds a commercial Airline Transport Pilot’s License. This experience
allows the team to visualize operating this unique aircraft in the real world. Design considerations for easy field repair, safety, performance,
and a focus on lowering operational costs has been foundational to the Cavorite X7 concept and development. We believe this deep operational
experience and design consideration has led to a machine concept that will support for-profit operators, thereby increasing demand for
the aircraft.
Our
Strategy
Build
Aircraft for the Rapidly Growing Regional Air Mobility Market
We
are focusing our initial services on Regional Air Mobility. Beyond simple movement of cargo and people at the regional level — 50
to 500 miles — the aircraft will be able to economically conduct a number of unique missions such as:
9
Develop
Unique Technologies That Can be Broadly Licensed to Generate Revenue
We
feel that the technology we are developing for the Cavorite X7 aircraft may be broadly useful across the industry. For example, the unique
HOVR Wing concept could support other designs across the industry or within military applications. These technologies offer potential
to significantly boost revenue.
Our
Cavorite X7 Hybrid eVTOL Aircraft Concept
Our
full-scale Cavorite X7 Hybrid eVTOL aircraft is in the detailed design phase. The combination of unique architecture, hybrid power, and
proprietary ducted fan-in-wing technology enables it to take off and land vertically while also flying at speeds much greater than a
typical helicopter. We anticipate that the final production aircraft will be able to carry six (6) passengers and one (1) pilot
at ranges over 500 miles and at speeds up to 250 miles per hour.
Ducted
Fan-in-Wing “HOVR Wing” Technology
Our
unique HOVR Wing technology is described above and is protected by a US non-provisional utility patent. This technology allows the aircraft
to return to an aerodynamically efficient configuration enroute. The ability to fly as a traditional aircraft enroute has many operational
advantages and may offer a faster route to certification for commercial use.
During
a vertical takeoff, an array of electrically powered ducted fans located in the wings and canards provide the required lift. For transition
to forward flight, the aircraft starts its rear pusher propeller and accelerates forward to a safe speed at which point the canards and
wings close systematically to conceal the fans within the wings. At this point, the aircraft is in a normal configuration much like a
traditional aircraft. The balance of the mission can then be conducted in a highly efficient manner. For landing, the reverse process
occurs.
Not
only is this concept extremely efficient enroute, but it is also very safe. During hover, multiple fans can fail with the aircraft still
able to maintain hover. For example, the 50%-scale aircraft is able to hover with 20% of its fans disabled. Furthermore, as discussed
below, there are two sources of electricity for the fans: an onboard generator and a battery array. Even at moderate forward speed the
generator can support the full electrical power requirements in the event of a dramatic full battery array failure. For increased durability,
each fan unit is electrically, mechanically, and thermally isolated from the others, reducing the chances of a cascading failure.
This
aircraft concept also naturally allows for Conventional Takeoff and Landing (CTOL) as well as Short Takeoff and Landing (STOL). If one
end of the mission calls for loading of precious cargo at an airport logistics hub or delivery to an airport, the Cavorite X7 can easily
operate like a traditional aircraft. Notably, in CTOL and STOL operational modes, the aircraft’s payload would also increase.
10
The
Cavorite X7 hybrid eVTOL during transition to forward flight
Hybrid
Electric Power System
By
their very nature, VTOL aircraft will excel at delivering critical goods and services to remote locations. These remote locations may
not have the charging infrastructure to support purely electric VTOL aircraft. The Cavorite X7 will use a hybrid power system. This system
will provide two sources of electrical power during demanding vertical takeoff and landing operations and will allow the battery array
to re-charge in flight and after a mission. The batteries will be designed for high power draw, so they will naturally support quick
charging.
For
remote operations, the aircraft effectively becomes a power generation station. After landing the aircraft can recharge itself in minutes
and will be able to produce usable power should that be required (e.g., disaster relief mission where the power grid is offline). For
example, in a disaster relief mission the Cavorite X7 could land in a parking lot and provide charging and/or power for communications
that has been disrupted.
The
hybrid power system will also be more efficient, emitting less greenhouse gas emissions than a traditional turbine engine when compared
to a traditional helicopter. This is for two reasons. First, the aircraft draws significant electrical energy from the battery array
during vertical takeoff and landing, reducing emissions during this phase. Second, enroute the aircraft is in a very aerodynamically
efficient configuration as compared to a helicopter, dramatically lowering the power required to travel at a given speed and therefore
reduce emissions enroute. The combination of these two factors is a compelling sustainability improvement over current VTOL aircraft.
Safety
by Design
The
safety, performance, and reliability of our aircraft will be key factors in achieving customer acceptance of our aircraft for commercial
use. First and foremost, our aircraft design is focused on safety. There are several important considerations in the design concept that
augment safety:
11
Performance
The
X7 concept will also benefit from significant performance. First, due to its aerodynamically efficient configuration enroute, it will
be fast. We are anticipating a maximum dash cruise speed of 250 knots, with a more efficient enroute speed likely just over 200 knots.
Our initial calculations also indicate that in VTOL mode it will have a 1,500 lb. useful load, which is the amount of combined fuel and
payload it can carry. This could increase to 1,800 lbs. when the aircraft operates in STOL or CTOL modes. Finally, our initial estimates
indicate the aircraft will be able to travel 500 miles with medium payloads with full operational fuel reserves. This is an aircraft
concept that was designed to do work in the real world, and we believe our customers will recognize and appreciate this.
Flight
into Known Icing and Other Operational Challenges
We
believe that this concept may be one of the only viable VTOL designs that could be certified for Flight Into Known Icing (FIKI). This
is due to its unique characteristic of flying like a traditional aircraft for enroute flight, without multiple open rotors that could
accumulate ice. Transition to and from vertical flight would occur in Visual Meteorological Conditions (VMC)–essentially clear
of any clouds — so enroute there would only be one propeller exposed to icing conditions should there be a requirement
to fly through clouds that could cause ice accumulation. This propeller can be electrically heated for anti-icing purposes, something
that is very common in commercial regional turboprop operations. Furthermore, with a significant amount of on-board electrical power
available enroute, electrothermal coatings may be used to help prevent or remove ice on lift surfaces. Finally, with a turbine engine
the aircraft systems will have access to warm bleed air that could be circulated for anti-icing or de-icing.
Bird
strikes are also an area of concern for commercial flight. Our aircraft concept has only one exposed propeller that is partially protected
by the fuselage. Unlike many compound open rotor designs where losing one blade may cause a cascading failure, our aircraft operates
like any number of the thousands of commercial regional aircraft already certified and operating profitably.
Bad
weather is also a challenge for regional commercial flight operations. The Cavorite X7’s hybrid power system and efficient enroute
configuration will likely make it more resilient in the face of bad weather. Increased speed and range over pure electric VTOL regional
aircraft should allow for increased versatility, able to divert to a backup airfield or vertiport, go around unexpected storms, or deal
with unexpected winds that could negatively impact slower designs. We feel that this, coupled with FIKI certification, could offer a
significant operational advantage over our competitors.
Aviation
Regulations
In
Canada and the U.S., civil aviation is regulated by the TCCA and the Federal Aviation Administration (FAA) respectively. These two regulatory
bodies control all aspects of certifying a new aircraft for commercial flight (Type Certification), production of that aircraft (Production
Certification) and issuance of an Air Operations Certificate (AOC) to organizations who wish to use the aircraft in commercial operations.
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We
intend to seek approval for the design of the Cavorite X7 by obtaining a Type Certificate under TCCA using Canadian Air Regulations (CAR)
§523 under Normal Category, Level 2 — for aeroplanes with 2 to 6 passengers. Due to the innovative design of the
Cavorite X7, it is expected that TCCA will invoke certain regulations and standards from CAR §527, (helicopter certification
requirements) and additional Special Conditions. We have engaged Flight Test Centre of Excellence (3C) as partners who will
perform the role of Applicant’s Representative for the certification effort. 3C has extensive expertise in developing
and executing aircraft certification programs and are helping to prepare our formal application to TCCA. We have also had initial
discussions with the FAA and plan to run a parallel program that would greatly expedite certification for use in the United States.
While
working towards a Type Certificate for our aircraft that will enable sales for commercial use, we will also be pursuing a Production
Certificate. Once obtained, this will allow volume manufacturing to meet the demand that we anticipate. Companies wishing to use our
aircraft for commercial use will require an AOC.
Since
we will not be permitted to deliver commercially produced aircraft to customers until we have obtained TCCA type certification, no material
sales revenue will be generated before TCCA certification issuance. The process of obtaining a valid type certificate, production certificate
and airworthiness certificate for the Cavorite X7 will take several years. Any delay in the certification process will negatively
impact the us by requiring additional funds be spent on the certification process and by delaying our ability to sell aircraft.
Marketing
Our
marketing strategy is intended to build industry and consumer awareness of our technology. We are working with several external firms
to develop and execute a robust marketing plan. Marketing efforts will include comprehensive Communication, Investor Relations, and Public
Relations plans to ensure consumer understanding, investor confidence, and entering the public consciousness as developmental operations
continue. Our overarching value proposition will focus on the benefits of our Cavorite X7 platform and its wide array of operational
capabilities, while maintaining the highest of safety standards. We also believe that the striking visual design of the aircraft coupled
with market leading utility will be a point of differentiation from our competition.
Competition
We
acknowledge the competitive nature of the current VTOL landscape in North America and around the world. Alternative technologies, either
known or unknown, could bring more attractive VTOL designs to the marketplace. We believe that our primary competition for market share
will come from similar minded companies that come to realize that Regional Air Mobility may offer a more compelling initial business
case for early VTOL designs. These companies could employ similar design architectures alongside hybrid electric power systems and challenge
our Cavorite X7. However, at present the vast majority of our competition are pursuing purely electric flight, which leaves most lagging
behind from a speed, range and cargo carrying capability.
Human
Capital
As
of February 9, 2024, we had 10 employees in Canada and 2 employees outside of Canada. None of our employees is subject to a collective
bargaining agreement or represented by a trade or labor union. We consider our relationship with our employees to be good. We believe
that our turnover and productivity levels are at acceptable levels.
Properties
New
Horizon leases office space and an aircraft hangar in Lindsay Ontario, which serves as the corporate headquarters, and office space and
light composite manufacturing space in Haliburton Ontario. New Horizon believes that these properties are sufficient for its business
and operations as currently conducted.
Corporate
Information
On
January 11, 2024, we continued and de-registered from the Cayman Islands and redomesticated under the laws of the Province of British
Columbia, Canada. Our principal executive offices are located at 3187 Highway 35, Lindsay, Ontario, K9V 4R1, and our telephone number
is (613) 866-1935. Our website is https://www.horizonaircraft.com/. Our website and the information on or that can be accessed
through such website are not part of this prospectus.
Legal
Proceedings
As
of January 31, 2024, we were not a party to any material legal proceedings. From time to time, we may become involved in legal proceedings
arising in the ordinary course of our business. Regardless of the outcome, litigation can have an adverse impact on us due to defense
and settlement costs, diversion of management resources, negative publicity and reputational harm and other factors.
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Item
1A. Risk Factors
The
following risk factors apply to the business and operations of New Horizon and its consolidated subsidiaries. The occurrence of one or
more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may
adversely affect the ability to realize the anticipated benefits of the Business Combination and may have an adverse effect on the business,
cash flows, financial condition and results of operations of New Horizon. We may face additional risks and uncertainties that are not
presently known to us or that we currently deem immaterial, which may also impair our business, cash flows, financial condition and results
of operations.
Risks
Related to Our Business and Industry
We
have incurred losses and expect to incur significant expenses and continuing losses for the foreseeable future, and we may not achieve
or maintain profitability.
We
have incurred significant operating losses. Our operating losses were $1,652,956 and $1,169,692 for the years ended May 31,
2022 and 2023, respectively. We expect to continue to incur losses for the foreseeable future as we develop our aircraft.
We
have not yet started commercial operations, making it difficult for us to predict our future operating results, and we believe that we
will continue to incur operating losses until at least the time we begin commercial operations. As a result, our losses may be larger
than anticipated, and we may not achieve profitability when expected, or at all, and even if we do, we may not be able to maintain or
increase profitability.
We
expect our operating expenses to significantly increase over the next several years as we complete our aircraft design, build, testing
and manufacturing. We expect the rate at which we incur losses will be significantly higher for 2024 through at least 2027 as we engage
in the following activities:
● building up inventories of parts and components for our aircraft;
● testing and certifying the performance and operation of our aircraft;
● developing and launching our digital platform and customer user interface;
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Because
we will incur the costs and expenses from these efforts before we receive any associated revenue, our losses in future periods will be
significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not
result in the revenue we anticipate, which would further increase our losses. Furthermore, if our future growth and operating performance
fails to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring
customers or expanding our operations, this could have a material adverse effect on our business, financial condition and results of
operations.
The
eVTOL market may not continue to develop, eVTOL aircraft may not be adopted by the transportation market, eVTOL aircraft may not be certified
by transportation and aviation authorities or eVTOL aircraft may not deliver the expected reduction in operating costs or time savings.
eVTOL
aircraft involve a complex set of technologies and are subject to evolving regulations, many of which were originally not intended to
apply to electric and/or VTOL aircraft. Before any eVTOL aircraft can fly passengers, manufacturers and operators must receive requisite