Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The
following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with
our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary
Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result
of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk
Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
New Horizon Aircraft Ltd.
(the “Company,” “we,” “us,” or “Horizon”) All references
in this Annual Report on Form 10-K to the “Company,” “we,” “us,” or “Horizon”, except
that references to the “Company” “we,” “us,” “Pono,” or “New Horizon” in this
Item 7 refer to New Horizon Aircraft Ltd. f/k/a Pono Capital Three, Inc.
We
were originally a blank check company incorporated in Delaware on March 11, 2022 as Pono Capital Three, Inc., (“Pono”)
(subsequently redomiciled in the Cayman Islands on October 14, 2022) formed for the purpose of entering
into a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.
On February 14, 2023, we consummated an initial public offering (the “Initial Public Offering”). On January 12,
2024, we completed a series of transactions that resulted in the combination (the “Business Combination”) of Pono with Robinson
Aircraft, Ltd. d/b/a Horizon Aircraft (“Horizon”) pursuant to the previously announced Business Combination Agreement, dated
as of August 15, 2023, (as amended by that certain Business Combination Agreement Waiver, dated as of December 27, 2023, 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 Horizon, following the approval at the extraordinary general meeting of the shareholders of Pono
held on January 4, 2024. On January 10, 2024, pursuant to the Business Combination Agreement, Pono was continued and de-registered from
the Cayman Islands and redomesticated as a British Columbia company on January 11, 2024 (the “SPAC Continuation”). Pursuant
to the BCA, on January 12, 2024, Merger Sub and Horizon were amalgamated under the laws of British Columbia, and Pono changed its name
to New Horizon Aircraft Ltd., and the business of Horizon became the business of New Horizon. The Business Combination was accounted for
as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Pono was treated as the acquired company
and Horizon was treated as the acquirer for financial statement reporting purposes.
The Business Combination is a subsequent event that occurred after
the periods for which the financial information herein is presented. However, an annual report on Form 10-K, including financial statements
of the Company for the periods presented herein, is required to be filed with the SEC. The financial information included in this “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” reflects the historical operations of the Company prior
to the Business Combination, unless otherwise noted. For additional information on the Business Combination please see Note 10 in the
notes to the audited financial statements in this Annual Report on Form 10-K. For additional information on the corporate history of our
Company please see Note 1 in the notes to the audited financial statements in this Annual Report on Form 10-K.
Results of Operations
We have neither engaged in
any operations nor generated any revenues to date. Our only activities for the year ended
December 31, 2023 were organizational activities, and since the closing of our Public Offering, the search for a prospective initial business
combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We will
generate non-operating income in the form of interest income on investments held in our trust account after the Initial Public Offering.
We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well
as for due diligence expenses.
For the year ended December 31, 2023,
we had a net income of $8,614,602, which resulted from an interest on investments held in Trust Account of $5,216,421, partially
offset by $6,160,000 of change in fair value of the forward purchase agreement, income tax expense of $1,095,448 and formation
and operating costs of $1,666,371.
For the period from March
11, 2022 (inception) through December 31, 2022, we had a net loss of $8,687, which consisted of
formation and operating costs of $8,687.
40
Liquidity and Capital Resources
For the year ended December 31, 2023,
net cash used in operating activities was $2,124,922, which was due to interest on investments in the Trust Account of $5,216,421,
and $6,160,000 of change in fair value of the forward purchase agreement, partially offset
by our net income of $8,614,602, and changes in working capital of $636,867.
For the period from March
11, 2022 (inception) through December 31, 2022, net cash used in operating activities was $10,059,
which was due to our net loss of $8,687, and changes in working capital of $1,372.
For the year ended December
31, 2023, net cash used in investing activities was $116,745,000 which was due to the investment of cash in the Trust Account of $117,875,000,
partially offset by proceeds from the Trust Account to pay franchise taxes of $1,130,000.
There were no cash flows from
investing activities for the period from March 11, 2022 (inception) through December 31, 2022.
For the year ended December
31, 2023, net cash provided by financing activities was 118,797,783, which was due to the proceeds
from sale of Placement Units of $5,653,750, proceeds from the sale of units, net of underwriting discount paid of $113,735,000, proceeds
from stock subscriptions received of $206, proceeds from related party loans of $175,000, partially offset by the payment of offering
costs of $466,173, and repayment of the Promissory Note of $300,000.
For the period from March
11, 2022 (inception) through December 31, 2022, net cash provided by financing activities was $98,336,
which was due to the proceeds from the promissory note - related party of $300,000 and the proceeds from the issuance of Class B ordinary
shares to the Sponsor of $25,000, partially offset by the payment of offering costs of $226,664.
The registration statement
for the Company’s Initial Public Offering was declared effective on February 9, 2023. On February 14, 2023, the Company consummated
the Initial Public Offering of 11,500,000 units, (the “Units” and, with respect to the Class A ordinary shares included in
the Units sold, the “Public Shares”), including 1,500,000 Units issued pursuant to the exercise of the underwriter’s over-allotment
option in full, generating gross proceeds of $115,000,000, which is discussed in Note 3.
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the sale of 565,375 units (the “Placement Units”) at a price of $10.00
per Placement Unit in a private placement to the Sponsor, including 54,000 Placement Units issued pursuant to the exercise of the underwriter’s
over-allotment option in full, generating gross proceeds of $5,653,750, which is described in Note 4.
Following the closing of the Initial Public Offering
on February 14, 2023, an amount of $117,875,000 ($10.25 per Unit) from the net proceeds of the sale of the Units in the Initial Public
Offering and the sale of the Placement Units was placed in a trust account.
We intend to use substantially
all of the funds held in the trust account, including any amounts representing interest earned on the funds held in the trust account
and not previously released to us to pay our taxes (which interest shall be net of taxes payable and excluding deferred underwriting commissions)
to complete our initial business combination. We may withdraw interest to pay our taxes, if any. Our annual income tax obligations will
depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the
amount in the trust account will be sufficient to pay our taxes. We expect the only taxes payable by us out of the funds in the trust
account will be income and franchise taxes, if any. To the extent that our ordinary shares or debt is used, in whole or in part, as consideration
to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”),
which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in
the normal course of business.
41
Off-Balance Sheet Arrangements
We did not have any off-balance
sheet arrangements as of December 31, 2023 and December 31, 2022.
Contractual Obligations
Registration Rights
The holders of the Founder
Shares and Placement Units (including securities contained therein) and Units (including securities contained therein) that may be issued
upon conversion of working capital loans and extension loans, and any Class A ordinary shares issuable upon the exercise of the Placement
Warrants and any Class A ordinary shares and warrants (and underlying Class A ordinary shares) that may be issued upon conversion of the
Units issued as part of the working capital loans and extension loans and Class A ordinary shares issuable upon conversion of the Founder
Shares, will be entitled to registration rights pursuant to a registration rights agreement signed prior on the effective date of the
Initial Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion
to the Class A ordinary shares). The holders of these securities are entitled to make up to two demands, excluding short form demands,
that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to the completion of the initial Business Combination and rights to require the Company to
register for resale such securities pursuant to Rule 415 under the Securities Act.
Promissory Notes - Related Party
On April 25, 2022, the Sponsor
agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory
note (the “Promissory Note”). This loan is non-interest bearing and payable on the earlier of (i) March 31, 2023 or (ii) the
date on which Company consummates the Initial Public Offering. Prior to the Initial Public Offering, the Company had borrowed $300,000
under the Promissory Note. On February 15, 2023, the Company repaid the outstanding balance under the Promissory Note of $300,000 that
was borrowed prior to our initial public offering. As of December 31, 2023, there was no borrowings outstanding under the Promissory
Note. As of December 31, 2022, the outstanding balance under the Promissory Note was $300,000. As of December 31, 2023 and December
31, 2022, there was $175,000 and $0, respectively, borrowings outstanding under the related party loans.
Underwriters Agreement
Simultaneously with the Initial
Public Offering, the underwriters fully exercised the over-allotment option to purchase an additional 1,500,000 Units at an offering price
of $10.00 per Unit for an aggregate purchase price of $15,000,000.
The underwriters were paid
a cash underwriting discount of $0.11 per Unit, or $1,265,000 in the aggregate, upon the closing of the Initial Public Offering. In addition,
$0.30 per unit, or $3,450,000 in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred
fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes
a Business Combination, subject to the terms of the underwriting agreement.
42
Critical Accounting Estimates
We prepare our consolidated
financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates,
as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences
between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates
on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations
for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting
estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the
time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use
of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition
or results of operations. There are items within our financial statement that require estimation but are not deemed critical, as defined
above, other than the Forward Purchase Agreement, as described below.
Forward Purchase Agreement
The Forward Purchase Agreement
is recognized as a derivative liability in accordance with ASC 815. Accordingly, we recognize the instrument as an asset or liability
at fair value and with changes in fair value recognized in our consolidated statements of operations. The estimated fair value of the
Forward Purchase Agreement is measured at fair value using a Monte Carlo simulation model, which was determined using Level 3 inputs.
Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate
and dividend yield. Any changes in these assumptions can change the valuation significantly.
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, “Income Taxes
(Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater
disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve
the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after
December 15, 2024, with early adoption permitted. The accounting pronouncement is not expected to have a material impact on the Company's
disclosures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
43
Item 8. Financial Statements and Supplementary Data
This information appears following Item 15 of this
Report and is included herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure
that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure
Controls and Procedures
As
required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023. Based upon their evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2023, our disclosure controls and procedures
(as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
Changes in Internal
Control Over Financial Reporting
There
was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for
the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Management’s
Report on Internal Controls Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of
the effectiveness of internal control over financial reporting as of December 31, 2023. Internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. GAAP. Our system of internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of our company are being made only in accordance
with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management
performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023 based upon criteria
in Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on that assessment and those criteria, management determined that we did maintain effective internal control
over financial reporting as of December 31, 2023.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
44
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table sets forth, as of March 28,
2024, the name, age and position of each of our executive officers and directors.
Name Age Position
Executive Officers
Brandon Robinson(3) 44 Chief Executive Officer, Director
Jason O’Neill(2) 46 Chief Operating Officer, Director
Brian Merker 47 Chief Financial Officer
Stewart Lee 50 Head of People & Strategy
Non-Employee Directors
Trisha Nomura(1) 44 Director
John Maris(2) 66 Director
John Pinsent(1) 63 Director
(1) Class I Director
(2) Class II Director
(3) Class III Director
Background of Directors and Executive Officers
Executive Officers
Brandon Robinson.Brandon
Robinson has served as the Chief Executive Officer and as a member of the Board of New Horizon since the Business Combination, and previously
served as the founder and Chief Executive Officer of Horizon and led the Horizon team since its inception in 2013. He has dedicated his
life to aviation, initially as a CF-18 pilot in the Canadian Armed Forces (CAF) before moving into large scale military capital
projects. Upon leaving the CAF, Mr. Robinson, discovered his passion for the Advanced Air Mobility movement. Mr. Robinson serves
on the Board of Directors of the Ontario Aerospace Council. Mr. Robinson has a Bachelor of Mechanical Engineering from Royal Military
College, an MBA from Royal Roads University, has co-authored several successful aerospace patents, and holds an Airline Transport Pilots
License. His deep operational experience alongside a passion for technical innovation has propelled Horizon to the forefront of the Advanced
Air Mobility movement.
We believe that Mr. Robinson,
given his extensive experience as a front-line fighter pilot, mechanical engineering knowledge and adept managing acumen, is qualified
to serve as a member of our Board due to his unique combination of skills he brings as our co-founder and Chief Executive Officer.
Jason O’Neill. Jason
O’Neill has served as Chief Operating Officer and as a member of the Board of New Horizon since the Business Combination. Mr. O’Neill
previously served as Horizon’s Chief Operating Officer since January 2019. Mr. O’Neill has more than 20 years
of experience in senior roles scaling tech-based start-ups. Prior to joining Horizon, Mr. O’Neill worked at Centtric as the
Director of Product and Strategy for 13 years. Most recently he served as the Director of Product and Data for Thoughtwire for nearly
10 years. Mr. O’Neill’s previous organizations were focused on problem solution, leveraging leading edge computer-based
technologies. Mr. O’Neill has attended the University of Toronto and the University of Waterloo.
Mr. O’Neill is qualified
to serve on our board based on his operational experience scaling businesses, as well as his historical experience as Chief Operating
Officer of Horizon.
45
Brian Merker. Brian
Merker has served as Chief Financial Officer of New Horizon since the Business Combination. Mr. Merker has more than 20 years of senior
financial management experience including 10 years serving in the Aviation sector, most recently as Chief Financial Officer of Skyservice
Business Aviation from 2018 to 2022, supporting growth efforts in aircraft management, maintenance, fixed-based operations, charter, and
brokerage. Prior to Skyservice Business Aviation, Mr. Merker served as Vice President of Finance from 2015 to 2018, with Discovery Air,
a publicly traded organization that includes a diverse range of aviation related services including fighter jet pilot training, rotary-wing
services, a commercial fixed-wing airline, fire suppression support, as well as aircraft engineering and maintenance. Prior to his time
at Discovery Air, Mr. Merker served as Vice President of Finance from 2007 to 2012 at Score Media, a publicly traded company focused on
sports broadcast and technology innovation. Mr. Merker began his career in the KPMG audit practice, where he served from 2003 to 2006.
During this time he gained significant exposure to SEC registrants at the commencement of the Sarbanes-Oxley legislation. Mr. Merker obtained
his Honours Commerce degree in Economics from Guelph University before attending Queen’s University to complete his Chartered Professional
Accounting academia requirements.
Stewart Lee. Stewart
Lee has served as the Head of People and Strategy at New Horizon since the Business Combination, and previously served as Horizon’s
Head of People and Strategy since 2013. Prior to joining Horizon, Mr. Lee formed his own company, providing human resources consulting
services to a wide array of clients. Previously, Mr. Lee was the Director of Human Resources for Steel-Craft Door Products, a large
Canadian national manufacturing company, for 11 years. Mr. Lee also served in the Canadian Armed Forces as a Logistics Officer
for 6 years. Mr. Lee holds a Bachelor of Commerce degree from Royal Roads University. He also holds an MBA in management from
Royal Roads University and has been a Chartered Professional in Human Resources since 2009.
Non-Employee Directors
Trisha Nomura. Trisha
Nomura has served as independent director and chairperson of the Audit Committee of New Horizon since the Business Combination. Ms. Nomura
served as an independent director of Pono and was the chairperson of Pono’s Audit Committee prior to the Business Combination. She
currently serves as an independent director of Pono Capital Two, Inc. (Nasdaq: PTWO). Since July 2018, Ms. Nomura has owned
a consulting firm, Ascend Consulting, LLC. Prior to opening her own firm, Ms. Nomura worked in both public accounting and private
industry. Ms. Nomura was the Chief Operating Officer of HiHR from July 2015 to December 2016, and the Vice President of Strategic
Services from May 2014 to July 2015. Ms. Nomura also served as the Chief People Officer of ProService Hawaii from January 2017
to June 2018. Ms. Nomura began volunteering with the HSCPA since 2010 through the YCPA Squad, has been the Treasurer of Kaneohe Little
League since 2013, and is a member of the AICPA, where she was selected to attend the Leadership Academy, has served as an at-large Council
member and also served on the Association Board of Directors. Ms. Nomura is a CPA, not in public practice, and a CGMA. She is a graduate
of Creighton University, where she obtained her Bachelor of Science in Business Administration in accounting, and of the University of
Hawaii at Manoa, where she earned her Master of Accountancy degree.
Ms. Nomura’s consulting,
accounting and management skills and knowledge make her an important addition to our Board.
John Maris. John
Maris has served as an independent director of New Horizon since the Business Combination. Dr. Maris has served as the Chief Executive
Officer of Advanced Aerospace Solutions, LLC (“Advanced Aerospace”), a privately held business that provides consulting services
in the aerospace industry, since 2008. At Advanced Aerospace, Dr. Maris has served as the principal flight-test investigator and
test pilot for NASA’s Traffic Aware Strategic Aircrew Request (TASAR) technology. Since 1995, Dr. Maris has also served as President
and Chief Executive Officer of Marinvent Corporation, a company established to develop procedures and technologies to increase the efficiency
and reduce the risk of aeronautical programs, including the Electronic Flight Bag (EFB) technology. Dr. Maris also founded Maris Worden
Aerospace in 1986. From 1993 to 1995, Dr. Maris served as the Mobile Servicing System Control Equipment Manager for the International
Space Station for the Canadian Space Agency. From 1983 to 1993, Mr. Maris was a project officer and experimental test pilot for the Canadian
Department of National Defense. In 1983, Dr. Maris enlisted in the Royal Canadian Air Force and graduated from the United States Air Force
Test Pilot Course at Edwards Air Force Base in California in 1989. Dr. Maris subsequently served four years as Project Officer and Experimental
Test Pilot at the Aerospace Engineering Test Establishment at Cold Lake, Alberta. In 1995, holding the rank of Major, Dr. Maris retired
from the Canadian Forces to devote full-time to Marinvent Corporation. Dr. Maris earned a B.Sc. in Aeronautical Engineering at the
Imperial College of Science and Technology at London University in 1979, and subsequently earned a Master of Aeronautical Science degree
in 1982 and a Master of Aviation Management degree in 1983, both with Distinction from Embry-Riddle Aeronautical University (ERAU) at
Daytona Beach, Florida. In 2017, Dr. Maris received his Ph.D. from ERAU, earning his doctorate in Aviation Safety and Human Factors. In
2018 he was granted Affiliate Professor status at Concordia University in Montréal. Dr. Maris sits on a number of the Concordia
University’s boards and is also on the Centre technologique en aérospatiale board.
46
Dr. Maris’ vast
experience in the aerospace industry, both as a pilot and entrepreneur, makes him an important addition to our Board.
John Pinsent. John
Pinsent has served as an independent director of New Horizon since the Business Combination. In 2004. Mr. Pinsent founded St. Arnaud Pinsent
Steman Chartered Professional Accountants (“SPS”), a chartered professional accounting firm based out of Edmonton, Alberta,
Canada. Before founding SPS, Mr. Pinsent worked for ten years at Ernst & Young LLP, earning his Chartered Accountants designation
in 1996. From 1986 to 1994, Mr. Pinsent served as the Controller and Vice President Finance of an Alberta based international retail organization.
Mr. Pinsent earned his Bachelor of Education and Bachelor of Commerce (AD) degrees at the University of Alberta, has an ICD.D designation
from the Institute of Corporate Directors and became an FCPA in 2013. Mr. Pinsent serves as a board member of Enterprise Group, Inc.,
a Toronto Stock Exchange listed company that provides specialized equipment and services in the build out of infrastructure for energy,
pipeline, and construction industries. He also sits on the board of directors of several private companies and supports numerous non-profit
and philanthropic initiatives. He has experience serving as board and audit committee chairs and has extensive experience in compliance
and corporate governance in the public markets.
Mr. Pinsent’s experience
providing accounting, audit, tax and business advisory services, along with his public company and board experience, make him an important
addition to our Board.
Family Relationships
Brian Robinson, our Chief
Engineer and one of our named executive officers, is the father of Brandon Robinson. Jason O’Neill is the brother-in-law of Brandon
Robinson. There are no other family relationships among any of our directors or executive officers.
Board Composition
Our business and affairs are
organized under the direction of our Board. The Board consists of five members upon consummation of the Business Combination. The primary
responsibilities of the Board is to provide oversight, strategic guidance, counseling, and direction to our management. The Board will
meet on a regular basis and additionally as required.
In accordance with our Articles,
our Board is divided into three classes, Class I, Class II and Class III, with members of each class serving staggered
three-year terms. The directors are assigned to the following classes:
At each annual meeting of
shareholders to be held after the initial classification, the successors to directors whose terms then expire will be elected to serve
from the time of election and qualification until the third annual meeting following their election and until their successors are duly
elected and qualified. This classification of our Board may have the effect of delaying or preventing changes in our control or management.
47
Director Independence
As a result of our Class A
ordinary shares being listed on the Nasdaq, we adhere to the listing rules of the Nasdaq in affirmatively determining whether a director
is independent. Our Board has consulted, and will consult, with its counsel to ensure that the board’s determinations are consistent
with those rules and all relevant securities and other laws and regulations regarding the independence of directors. The Nasdaq listing
standards generally define an “independent director” as a person, other than an executive officer of a company or any other
individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
Each of the directors other
than Mr. Brandon Robinson and Mr. O’Neill qualify as independent directors as defined under the listing rules of
the Nasdaq, and our board consists of a majority of independent directors, as defined under the rules of the SEC and Nasdaq Listing
Rules relating to director independence requirements. In addition, we are subject to the rules of the SEC and Nasdaq relating
to the membership, qualifications, and operations of the audit committee, the compensation committee, and the nominating and corporate
governance committee, as discussed below.
Board Oversight of Risk
One of the key functions of
our Board will be informed oversight of its risk management process. The Board does not anticipate having a standing risk management committee,
but rather anticipates administering this oversight function directly through the Board as a whole, as well as through various standing
committees of the Board that address risks inherent in their respective areas of oversight. In particular, our Board will be responsible
for monitoring and assessing strategic risk exposure and our audit committee will have the responsibility to consider and discuss the
combined company’s major financial risk exposures and the steps its management will take to monitor and control such exposures,
including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee will
also monitor compliance with legal and regulatory requirements. Our compensation committee will also assess and monitor whether our compensation
plans, policies and programs comply with applicable legal and regulatory requirements.
Board Committees
Our Board established an audit
committee, a compensation committee and a nominating and corporate governance committee. Our Board adopted a written charter for each
of these committees, which complies with the applicable requirements of current Nasdaq Listing Rules. Copies of the charters for each
committee are available on the investor relations portion of New Horizon’s website. The composition and function of each committee
will comply with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC rules and regulations.
Audit Committee
The members of the audit committee
are Ms. Nomura (Chair), Mr. Maris, and Mr. Pinsent. Our Board has determined that each of the members of the audit committee
will be an “independent director” as defined by, and meet the other requirements of the Nasdaq Listing Rules applicable
to members of an audit committee and Rule 10A-3(b)(i) under the Exchange Act, including that each member of the audit committee
can read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements. In arriving at this determination,
the Board examined each audit committee member’s scope of experience and the nature of their prior and current employment. The audit
committee will meet on at least a quarterly basis. Both the combined company’s independent registered public accounting firm and
management intend to periodically meet privately with our audit committee.
48
The primary purpose of the
audit committee is to discharge the responsibilities of the Board with respect to our accounting, financial, and other reporting and internal
control practices and to oversee our independent registered accounting firm. Specific responsibilities of our audit committee include:
● reviewing policies on risk assessment and risk management;
● reviewing related party transactions;
Audit Committee Financial
Expert
Our Board has determined that
Ms. Nomura qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication
requirements of the Nasdaq Listing Rules. In making this determination, our Board considered Ms. Nomura’s formal education,
training, and previous experience in financial roles.
Compensation Committee
The members of the compensation
committee are Mr. Pinsent (Chair), Ms. Nomura, and Mr. Maris. Our Board has determined that each of the members will be
an “independent director” as defined by the Nasdaq Listing Rules applicable to members of a compensation committee. The
Board has determined that each of the members of the compensation committee is a non-employee director, as defined in Rule 16b-3
promulgated under the Exchange Act and satisfy the independence requirements of the Nasdaq. The compensation committee will meet from
time to time to consider matters for which approval by the committee is desirable or is required by law.
Specific responsibilities
of our compensation committee include:
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● reviewing and approving the compensation of our other executive officers;
● reviewing and recommending our Board the compensation of our directors;
● reviewing our executive compensation policies and plans;
● administering our incentive compensation equity-based incentive plans;
● reviewing our overall compensation philosophy.
Nominating and Corporate
Governance Committee
The members of the nominating
and corporate governance committee are Mr. Maris (Chair), Ms. Nomura and Mr. Pinsent. The Board determined that each of
the members will be an “independent director” as defined by the Nasdaq Listing Rules applicable to members of a nominating
committee. The nominating and corporate governance committee will meet from time to time to consider matters for which approval by the
committee is desirable or is required by law.
Specific responsibilities of our nominating and
corporate governance committee include:
● evaluating the performance of our Board and of individual directors;
● reviewing developments in corporate governance practices;
● evaluating the adequacy of our corporate governance practices and reporting;
● reviewing management succession plans; and
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Code of Ethics
We have adopted a code of
ethics that applies to all of our directors, officers and employees. A copy of our code of ethics is available on its website. We also
intend to disclose future amendments to, or waivers of, its code of ethics, as and to the extent required by SEC regulations, on its website.
Compensation Committee
Interlocks and Insider Participation
None of the members of the
compensation committee was at any time one of New Horizon’s officers or employees. None of New Horizon’s executive officers
currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other
entity that has one or more executive officers that will serve as a member of our Board or compensation committee.
Shareholder and Interested
Party Communications
Stockholders and interested
parties may communicate with our Board, any committee chairperson or the non-management directors as a group by writing to the board or
committee chairperson in care of New Horizon Aircraft Ltd., 3187 Highway 35, Lindsay, Ontario K9V 4R1 Canada. Each communication will
be forwarded, depending on the subject matter, to the Board, the appropriate committee chairperson or all non-management directors.
Limitations of Liability
and Indemnification of Directors and Officers
Under the BCBCA, a director
of a company is jointly and severally liable to restore to the company any amount paid or distributed as a result of paying dividends,
commissions and compensation, among other things, contrary to the BCBCA. A director of a company will not be found liable under the BCBCA
if the director relied, in good faith, on (i) financial statements of the company represented to the director by an officer of the company
or in a written report of the auditor of the company, (ii) a written report of a lawyer, accountant, engineer, appraiser or other person
whose profession lends credibility to a statement made by that person, (iii) a statement of fact represented to the director by an officer
of the company to be correct, or (iv) any record, information or representation that the court considers provides reasonable grounds for
the actions of the director, whether or not the record was forged, fraudulently made or inaccurate, or the information or representation
was fraudulently made or inaccurate. Further, a director of a company is not liable under the BCBCA if the director did not know and could
not reasonably have known that the act done by the director or authorized by resolution voted for or consented to by the director was
contrary to the BCBCA.
We have purchased and intend
to maintain director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their
services to the combined company, including matters arising under the Securities Act.
Our Articles provide that
we must indemnify all eligible parties (which includes our current, former or alternate directors and officers), and such person’s
heirs and legal personal representatives, as set out in the BCBCA, against all eligible penalties to which such person is or may be liable,
and we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in
respect of that proceeding. Each director is deemed to have contracted with us on the terms of indemnity contained in our Articles. In
addition, we may indemnify any other person in accordance with the BCBCA.
There is no pending litigation
or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted. We
are not aware of any threatened litigation or proceedings that may result in a claim for such indemnification.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling the combined
company, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
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Delinquent Section 16(a) Reports
Section 16(a) of the Securities
Exchange Act of 1934 requires our directors, certain officers and any beneficial owners of more than 10% of our common stock to file reports
relating to their ownership and changes in ownership of our common stock with the SEC by certain deadlines. Based on a review of Section
16 filings with respect to our Company made during or with respect to the preceding year, we are not aware of any late Section 16(a) filings.
Item 11. Executive Compensation
Executive and Director
Compensation of Pono
Prior to the Consummation
of the Transactions
As
of December 31, 2023, Pono had three executive officers, Davin Kazama (Chief Executive Officer and Director), Gary Miyashiro (Chief Financial
Officer), and Dustin Shindo (Chairman of the Board). Upon the consummation of the Transactions, and in accordance with the terms of the
Business Combination Agreement, each of the Pono executive officers ceased serving in such capacities.
We entered into an agreement with the Sponsor whereby, commencing from
the date of Pono’s initial public offering on February 14, 2023, through the earlier of the consummation of an initial business
combination and our liquidation, we agreed to pay the Sponsor, $10,000 per month for general and administrative services, including office
space, utilities and administrative services. For the period from February 14, 2023 to December 31, 2023, we incurred $105,000 of administrative
services under this arrangement. In connection with the consummation of the Business Combination, this agreement was terminated. See Note
5 in the notes to the audited financial statements in this Annual Report for further information.
No
other compensation of any kind, including finder’s and consulting fees, was paid by Pono to its Sponsor, officers and directors,
or any of their respective affiliates, for services rendered prior to or in connection with the completion of the Business Combination.
However, these individuals were reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as
identifying potential target businesses and performing due diligence on suitable initial business combinations.
Executive and Director Compensation of New Horizon
We are currently considered
an “emerging growth Company” within the meaning of the Securities Act for purposes of the SEC’s executive compensation
disclosure rules. Accordingly, we are required to provide a Summary Compensation Table, as well as limited narrative disclosures regarding
executive compensation for our last two completed fiscal years and an Outstanding Equity Awards at Fiscal Year End Table for our last
completed fiscal year. These reporting obligations extend only to the following “named executive officers,” who are the individuals
who served as our principal executive officer and the next two most highly compensated executive officers at the end of the fiscal year
2023.
This section discusses material
components of the executive compensation programs for New Horizon’s executive officers who area named in the “Summary Compensation
Table” below. In 2023, New Horizon’s “named executive officers” and their positions were as follows:
● Brandon Robinson, Chief Executive Officer;
● Jason O’Neill, Chief Operating Officer; and
● Brian Robinson, Chief Engineer.
This discussion may contain
forward-looking statements that are based on New Horizon’s current plans, considerations, expectations, and determinations regarding
future compensation programs.
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Summary Compensation Table
The following table contains
information pertaining to the compensation of New Horizon’s named executives for the years ending December 31, 2023 and 2022.
Narrative to the Summary Compensation Table
Annual Base Salary
We pay our named executive
officers a base salary to compensate them for services rendered to our company. The base salary payable to our named executive officers
is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.
Equity Compensation
We have granted stock options
to our employees, including our named executive officers, in order to attract and retain them, as well as to align their interests with
the interests of our shareholders. In order to provide a long-term incentive, these stock options vest over three years subject to
continued service.
In connection with the Business
Combination we adopted the 2023 Equity Incentive Plan, effective January 12, 2024. For additional information about the 2023 Equity Incentive
Plan, see the section titled “Summary of the 2023 Equity Incentive Plan” section of this prospectus.
Other Elements of Compensation
Retirement Savings and Health Spending Account
and Group Benefits
All of our full-time employees,
including our named executive officers, are eligible to participate in our pension and health plans. The health spending account program
will reimburse costs that include medical, dental and vision benefits A group benefits plan to provide for short-term and long-term disability
insurance; life and AD&D insurance will be offered to all full-time employees.
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Perquisites and Other Personal Benefits
We determine perquisites
on a case-by-case basis and will provide a perquisite to a named executive officer when we believe it is necessary to attract
or retain the named executive officer. We did not provide any perquisites or personal benefits to our named executive officers not otherwise
made available to our other employees in 2022.
Outstanding Equity
Awards at Fiscal Year-End
The following table
summarizes the number of Class A ordinary shares underlying unexercised option awards for each named executive officer as of December 31,
2023.
Option Awards(1)
Executive Compensation Arrangements After the Transactions
Employment Agreements
As a result of the Business
Combination, New Horizon entered into employment agreements with the New Horizon’s executive officers: Brandon Robinson (Chief
Executive Officer), James O’Neill (Chief Operating Officer), Brian Merker (Chief Financial Officer), and Brian Robinson (Chief
Engineer) (each an “Employment Agreement, and collectively, the “Employment Agreements”).
The Employment Agreements
all provide for at-will employment that may be terminated by the employee with thirty days’ notice to New Horizon of resignation
from employment; by New Horizon without notice, payment in lieu of notice, benefit continuation (if applicable) or compensation of any
kind, where permitted by the Ontario Employment Standards Act, 2000, as amended from time to time (the “ESA”), which
includes willful misconduct, disobedience or willful neglect of duty that is not trivial and has not been condoned by New Horizon; or
by New Horizon with notice or pay in lieu of notice by providing the employee (i) the minimum amount of notice, pay in lieu of notice
(or a combination of both), severance pay, vacation pay and benefit continuation (if applicable) and any other entitlements strictly required
by the ESA, calculated from the date of the employee’s original employment with Horizon; plus (ii) such additional amount of payment
of Base Salary (as defined below) in lieu of notice (“Additional Pay in Lieu of Notice”), as is necessary to ensure
that the aggregate of the statutory notice, pay in lieu of notice and severance pay entitlements under (a) above and the Additional Pay
in Lieu of Notice under sub-section (ii), (b), at a minimum equals twelve (12) months, and such aggregate shall increase by additional
one (1) month payment of the employee’s Base Salary in lieu of notice for each completed year of service from the Effective Date
to an overall cumulative maximum of 24 months of Base Salary; plus, (iii) payment of a prorated portion of any bonuses that the employee
is eligible to receive as of the date of termination, calculated to the end of the Severance Period based upon the average incentive compensation
paid to the employee in the two years prior to the year in which notice of termination is communicated. For the purposes of the Employment
Agreements, the period for which an employee receives notice and/or payment, calculated from the date the employee is advised of the termination
of his employment, is the “Severance Period.”
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If following a Change of Control
(as defined in the Employment Agreements), New Horizon gives the employee Good Reason to terminate his employment and the related Employment
Agreement, and provided the employee exercises that right within two years from the date of the Change of Control, the employee shall
be entitled to receive the benefits set forth above, as if the employee’s employment had been terminated on a without cause basis.
“Good Reason” means the occurrence of (i) a constructive termination of employment and of the Employment Agreement;
(ii) any material and unilateral change in employee’s title, responsibilities, or authority in place at the time of the Change of
Control; (iii) any material reduction in the Base Salary paid to employee at the time of the Change of Control; (iv) any termination or
material reduction in the aggregate value of the employee benefit programs, including, but not limited to, pension, life, disability,
health, medical or dental insurance, in which the employee participated or under which the employee was covered at the time of Change
of Control; or (v) the employee’s assignment to any significant, ongoing duties inconsistent with his skills, position (including
status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by New Horizon, which
results in material diminution of such position.
The Employment Agreements
provide for a base salary of $CAD295,000 for E. Brandon Robinson; $CAD225,000 for each of Jason O’Neill and Brian Merker; and $CAD170,000
for Brian Robinson (each a “Base Salary”). Possible annual performance bonuses and equity grants under the 2023 Equity
Incentive Plan are to be determined by New Horizon’s compensation committee.
Contractor Agreement
In connection with the Closing
of the Business Combination, New Horizon entered into a Contractor Agreement (the “Contractor Agreement”), dated January
12, 2024 (the “Effective Date”), by and among New Horizon, 2195790 Alberta Inc. (the “Contractor”)
and Stewart Lee (the “Keyman”). Pursuant to the Contractor Agreement, the Contractor will be providing certain services
(the “Services”) as the Head of People & Strategy through the Keyman. The term of the Contractor Agreement began