Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
References in this report (the “Annual
Report”) to “we,” “us” or the “Company” refer to New Horizon Aircraft Ltd. References to our
“management” or our “management team” refer to our officers and directors. The following discussion and analysis
of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements
and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties.
All figures noted are in thousands of Canadian
dollars unless noted otherwise.
Special Note Regarding Forward-Looking Statements
This Annual Report includes “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 Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties
that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical
fact included in this Annual Report including, without limitation, statements under “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans
and objectives of management for future operations, are forward-looking statements. When used in this Annual Report, words such as “expect,”
“believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar
words and expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking
statements are based on the beliefs of management, as well as assumptions made by, and information currently available to the Company’s
management. A number of factors could cause actual events, performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of this Annual Report.
Overview
New Horizon Aircraft Ltd.
(the “Company”, “Horizon”, “we,” “us” or “our”), a British Columbia corporation,
with our headquarters located in Lindsay, Ontario, is an aerospace company. The Company is a former blank check company incorporated on
March 11, 2022 under the name Pono Capital Three, Inc. (“Pono”), as a Delaware corporation, subsequently redomiciled in the
Cayman Islands on October 14, 2022, and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization, or similar business combination with one or more businesses.
Business Combination
On February 14, 2023, we consummated an initial
public offering (“IPO”). On January 12, 2024 (the “Closing date”), we consummated a merger (the “Merger”)
with Pono Three Merger Acquisitions Corp., a British Columbia company (“Merger Sub”) and wholly-owned subsidiary of Pono,
with and into Robinson Aircraft Ltd. (“Robinson”) pursuant to an agreement and plan of merger, dated as of August 15, 2023,
(as amended by a Business Combination Agreement Waiver, dated as of December 27, 2023) by and among Pono, Merger Sub, Horizon, and Robinson.
The Merger and other transactions contemplated
thereby (collectively, the “Business Combination”) closed on January 12, 2024, when, pursuant to the Business Combination
Agreement, Merger Sub merged with and into Robinson, surviving the Merger as a wholly owned subsidiary of Pono. Pono changed its name
to “New Horizon Aircraft Ltd.” and the business of Robinson became the business of New Horizon Aircraft Ltd.
The financial information included in this report
reflect (i) the historical operating results of Robinson prior to the Business Combination (“Legacy Horizon”); (ii) the combined
results of Pono and Legacy Horizon following the closing of the Business Combination; (iii) the assets and liabilities of Legacy Horizon
at their historical cost; and (iv) the Company’s equity structure for all periods presented.
39
Organization and Nature of Business
The Company’s objective is to significantly
advance the benefits of sustainable air mobility. In connection with this objective, we have designed and developed a cost effective and
energy efficient hybrid-electric vertical takeoff and landing (“eVTOL”) prototype aircraft for use in future regional air
mobility (“RAM”) networks.
Robinson was incorporated in 2013. Initially,
the company was focused on development of a hybrid electric amphibious aircraft, and in 2018 the Company pivoted to developing an innovative
hybrid electric Vertical Takeoff and Landing (“eVTOL”) concept that is identified as the Cavorite X7. The Company has built
several small-scale prototypes and now has a 50%-scale aircraft that is undergoing active flight testing.
Horizon intends to sell these aircraft to third
parties, air operators, lessors, individual consumers, and NATO military customers. The Company plans to manufacture its aircraft and
license its patented fan-in-wing technology and other core innovations to other Original Equipment Manufacturers (“OEM’s”).
Manufacturing will be accomplished with a heavy reliance on experienced aircraft manufacturing partners and supply chain vendors. Horizon
believes this highly focused business model will provide the most efficient use of capital to produce an aircraft that has a variety of
applications.
Key Factors Affecting Operating Results
See the section entitled “Risk Factors”
for a further discussion of these considerations.
Development of the Regional Air Mobility
Market
The Company’s revenue will be directly tied
to the continued development of long-distance aerial transportation and related technologies. While the Company believes the market for
Regional Air Mobility (“RAM”) will be large, it remains undeveloped and there is no guarantee of future demand. Horizon anticipates
commercialization of its aircraft beginning in 2027, and its business will require significant investment leading up to launching services,
including, but not limited to, final engineering designs, prototyping and flight testing, manufacturing, software development, certification,
pilot training and commercialization.
Horizon believes one of the primary drivers for
adoption of its aircraft is the value proposition enabled by its aircraft that can take-off and land similar to a helicopter, fly almost
twice as fast, and operate with much lower direct operating costs. Additional factors impacting adoption of eVTOL technology include but
are not limited to: perceptions about eVTOL quality, safety, performance and cost; perceptions about the environmental impact of hybrid-electric
machines; volatility in the cost of oil and gasoline; availability of competing forms of transportation, such as ground or unmanned drone
services; consumers perception about the convenience and cost of transportation using eVTOL relative to ground-based alternatives; and
increases in fuel efficiency, autonomy, or electrification of vehicles. In addition, macroeconomic factors could impact demand for RAM
services, particularly if customer pricing is at a premium to ground-based transportation. Horizon anticipates initial aircraft
sales to be used for medevac services, firefighting services, disaster relief services, remote medical services, military operations,
followed by sales to air operators and lessors for air cargo, business travel and air-taxi services. If the market for RAM does not develop
as expected, this would significantly impact the Company’s ability to generate revenue or grow its business.
Competition
The Company believes that the primary sources
of competition for its aircraft sales are traditional helicopters, ground-based mobility solutions, and other eVTOL developers. While
it expects to produce a versatile aircraft that can be useful in a variety of air mobility missions, the Company expects this industry
to be dynamic and increasingly competitive. It is possible that its competitors could gain significant market share. Horizon may not fully
realize the sales it anticipates, and it may not receive any competitive advantage from its design or may be overcome by other competitors.
If new companies or existing aerospace companies produce competing aircraft in the markets in which Horizon intends to service and obtain
large-scale capital investment, it may face increased competition. Horizon may receive an advantage from well-funded competitors that
are paying to create certification programs, raise awareness of eVTOL advantages and advocating to kickstart government funding programs.
40
Government Certification
To be utilized in for-profit commercial operations,
Horizon’s Cavorite X7 aircraft will require Type Certification. Horizon has had initial conversations with applicable regulators
Transport Canada Civil Aviation (“TCCA”) in Canada and the Federal Aviation Association (“FAA”) in the United
States of America. As a Canadian company, TCCA will initially lead certification efforts. Horizon expects the FAA to participate during
this process which will likely reduce the amount of time required to achieve FAA certification.
The Company maintains a partnership with Cert
Centre Canada (“3C”) for the purpose of collaborating on aspects of the continued development and path to certification of
Horizon’s eVTOL program. 3C is leveraging their deep experience with TCCA and FAA certification programs to develop a certification
basis for the certification of Horizon’s hybrid-electric eVTOL aircraft.
Typically, the certification of a new aircraft
design by TCCA or the FAA is a long and complex process, often spanning more than five years and costing hundreds of millions of dollars.
The Company has never undergone such a process, and there is no guarantee that its Cavorite X7 design will eventually achieve certification
despite its best efforts. The Company will need to obtain authorizations and certifications related to the production of its aircraft.
While it anticipates being able to meet the requirements of such authorizations and certifications, the Company may be unable to obtain
such authorizations and certifications, or to do so on the timeline it projects. Should the Company fail to obtain any of the required
authorizations or certifications, or do so in a timely manner, or any of these authorizations or certifications are modified, suspended
or revoked after it obtains them, the Company may be unable to fulfill sales of its commercial aircraft or do so on the timelines it projects,
which would have adverse effects on its business, prospects, financial condition, and results of operations.
Dual Use Business Model
Horizon’s business model to serve as a dual
use aircraft both civilian and military applications. Present projections indicate that sales volume of this dual use aircraft will result
in a viable business model over the long-term as production volumes scale and unit economics improve to support sufficient market adoption.
The advantage of military application of Horizon’s aircraft in addition to sales volumes leads to a reduction in the risk of certification
as aircraft used for military purposes do not need to achieve TCCA, FAA, or similar certification approval. As with any new industry and
aerospace product, numerous risks and uncertainties exist. The Company’s financial results are dependent on delivering aircraft
on-time and at a cost that supports returns at prices that support sufficient sales to customers who are willing to purchase based on
value arising from time and versatility from utilizing regional eVTOL aircraft. Horizon’s civilian sector financial results are
dependent on achieving certification on its expected timeline. Our aircraft include numerous parts and manufacturing processes unique
to eVTOL aircraft, in general, and its product design, in particular. Best efforts have been made to estimate costs in the Company’s
planning projections; however, the variable cost associated with assembling its aircraft at scale remains uncertain at this stage of development.
Going Concern and Liquidity
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. The Company has incurred and expects to continue to incur significant costs in pursuit of the Company’s development
plans. We have devoted many resources to the design and development of our eVTOL prototype. Funding of these activities has primarily
been through the net proceeds received from the issuance of related and third-party debt and the sale common stock to related and third
parties.
Through May 31, 2024, we have
incurred cumulative losses from operations, negative cash flows from operating activities, and have an accumulated deficit of $14.7 million.
Horizon is a pre-revenue organization in a research and development and flight-testing phase of operations. While management expects that
the net impact of the Business Combination along with our cash balances held prior to the Closing Date and proceeds from an anticipated
August 2024 offering will be sufficient to fund our current operating plan for at least the next 12 months from the date these consolidated
financial statements were available to be issued, there is substantial doubt around the Company’s ability to meet the going concern
assumption beyond that period without raising additional capital.
41
There can be no assurance that we will be successful
in achieving our business plans, that our current capital will be sufficient to support our ongoing operations, or that any additional
financing will be available in a timely manner or on acceptable terms, if at all. If events or circumstances occur such that we do not
meet our business plans, we may be required to raise additional capital, alter, or scale back our aircraft design, development, and certification
programs, or be unable to fund capital expenditures. Any such events would have a material adverse effect on our financial position, results
of operations, cash flows, and ability to achieve our intended business plans.
Components of Results of Operations
Revenue
The Company is working to design, develop, certify,
and manufacture our eVTOL aircraft and has not yet generated revenues in any of the periods presented. We do not expect to begin generating
significant revenues until we are able to complete the design, development, and certification, and manufacture our eVTOL aircraft.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily
of personnel expenses, including salaries, benefits, costs of consulting, equipment, engineering, data analysis, and materials.
We expect our research and development expenses
to increase as we increase staffing to support aircraft engineering and software development, build aircraft, and continue to explore
and develop our eVTOL aircraft and technologies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily
consist of personnel expenses, including salaries, benefits, and stock-based compensation, related to executive management, finance, legal,
and human resource functions. Other costs include business development, investor relations, contractor and professional services fees,
audit and compliance expenses, insurance costs and general corporate expenses, including depreciation, rent, information technology costs
and utilities.
We expect our selling, general and administrative
expenses to increase as we hire additional personnel and consultants to support our operations and comply with applicable regulations,
including the Sarbanes-Oxley Act (“SOx”) and other SEC rules and regulations.
Other Income
Other income consists of grants and subsidies
received for developmental work and foreign exchange gains and losses.
Interest Expense, net
Interest expense consists primarily of interest
on the Company’s Convertible Notes, Promissory Notes, and Convertible Debentures that have converted into common shares of the Company
on or prior to the closing of the Business Combination. Additional interest expense includes the cost of equipment financing. Interest
income consists primarily of interest earned on the Company’s cash.
Change in fair value of Forward Purchase Agreement
Change in fair value of Forward
Purchase Agreement consists of fluctuations in the deemed value of an agreement between the Company and shareholder facilitating future
purchases of the Company’s stock based on a simulation model. The Company will not have any monetary obligations in connection
with the Forward Purchase Agreement.
Warrant expense (income)
Change in warrant expense
and income consists of fluctuations in the fair value of warrants as of the end of each reporting period.
42
Results of Operations
We believe the following information includes
all adjustments necessary to state fairly its results of operations for all periods presented. This data should be read in conjunction
with Horizon’s consolidated financial statements and notes thereto. These results of operations are not necessarily indicative
of the future results of operations that may be expected for any future period.
Comparison of the Year Ended May 31, 2024
to the Year Ended May 31, 2023
Meaningful variances in the
Company’s components of operations are explained below. The following table sets forth Horizon’s statements of operations
data for the years ended May 31, 2024 and May 31, 2023 (000’s CAD).
Year Ended
Operating expenses May 31, 2024 May 31, 2023 Variance ($) Variance (%)
Change in fair value of Forward Purchase Agreement 4,342 — (4,342 ) -100 %
Operating Expenses
Operating expenses increased by $3,161, from $1,463
for the year ended May 31, 2023 to $4,624 for the year ended May 31, 2024. The increase was primarily driven by professional fees, additional
staff hired to support development activities, and other administrative costs connected with the Company’s growth activities.
Research and Development Expenses
Research and development expenses increased by
$204, or 30%, from $676 during the year ended May 31, 2023 to $880 during the year ended May 31, 2024. The increase was primarily attributable
to additional labour related to flight testing, engineering work, flight software, prototype manufacturing, and data analysis.
General and Administrative
General and Administrative costs increased by
$2,957, from $787 during the year ended May 31, 2023 to $3,744 during the year ended May 31, 2024, including $1,101 of non-cash related
service fees. The increase was related to legal, accounting, travel, investor relations, marketing, and branding expenses related to the
Company’s growth efforts.
43
Other expenses (income)
Other income increased by $285, or 98%, from $290
during the year ended May 31, 2023 to $575 during the year ended May 31, 2024. The increase primarily reflected the change in grants and
subsidies received in the comparative periods.
Interest expense, net
Interest expenses increased by $89, from $74 during
the year ended May 31, 2023 to $163 during the year ended May 31, 2024. The increase primarily related to interest expenses on the Company’s
Convertible Debentures and Convertible Promissory Notes.
Cash Flows
The following tables set forth
a summary of our cash flows for the periods indicated (000’s CAD):
Year Ended
Net Cash used in Operating Activities
The Company’s cash flows used in operating
activities have been primarily comprised of payroll, software expenses, technology costs, professional services related to research and
development and general and administrative activities, insurance, and direct research and development costs for aircraft design, simulation,
and prototype manufacturing, partially offset by periodic grants received from various government agencies. The Company expects to increase
hiring to accelerate its engineering and certification efforts in the coming years.
For the year ended May 31, 2024, the $2,221 increase
in cash used from operations as compared to the year ended May 31, 2023 was primarily attributed to increased operating costs in connection
to the Company’s growth efforts and changes in working capital.
Net Cash used in Investing Activities
The Company’s cash flows used in investing
activities to date have been primarily comprised property and equipment.
For the year ended May 31, 2024, the $209 increase
in cash used by investing activities as compared to the year ended May 31, 2023 was primarily attributed to website development and computer
equipment.
Net Cash provided by Financing Activities
The Company’s cash flows provided by financing
activities to date have primarily been composed of funding raised with convertible instruments.
44
For the year ended May 31, 2024, the $3,794 increase
in cash provided by financing activities as compared to the year ended May 31, 2023 was primarily attributed to the issuance of Convertible
Debentures in October 2023 which converted into common shares of the Company in January 2024. These were accompanied by the conversion
of Convertible Notes, partially offset by the impact from costs in connection with the Business Combination.
Sources of Liquidity
Liquidity describes the ability of a company to
generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service,
contractual obligations, and other commitments. The Company assesses liquidity in terms of its cash flows from financing activities and
their sufficiency to fund its operating and development activities. As of May 31, 2024, the Company’s principal source of liquidity
was cash and cash equivalents of $1,816.
To date, the Company has funded
its operations primarily with the issuances of common shares and issuances of convertible debt instruments. Additional funding has been
provided through government backed grants. Imminently following the publication of the Company’s form 10-K for the period ending
May 31, 2024, we expect to receive approximately $4.8 million of gross proceeds related to a registered securities offering.
The Company believes it has
sufficient cash to fulfill its business plan for at least the next 12 months from the date of this filing. To the extent the Company is
able to raise additional financing, either by way of the Forward Purchase Agreement, Warrants, or by other means, the Company may be in
a position to expedite its business plan including hiring employees at a more rapid pace. To achieve the Company’s long-term objectives,
additional financing will be required and efforts to raise such working capital will be ongoing through at least the next three years.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements
as of May 31, 2024 and May 31, 2023.
Critical Accounting Estimates
The preparation of consolidated financial statements
and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income
and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following
critical accounting policies:
Derivative Financial Instruments
The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic
815, Derivatives and Hedging (“ASC 815”). For derivative financial instruments that are accounted for as liabilities,
the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with
changes in the fair value reported in the consolidated statements of operations. For derivative instruments that are classified as equity,
the derivative instruments are initially measured at fair value (or allocated value), and subsequent changes in fair value are not recognized
so long as the contracts continue to be classified in equity.
The Company’s Forward
Purchase Agreement and Warrants outstanding are recognized as a derivative liability in accordance with ASC 815. Accordingly, the Company
recognizes the instrument as an asset or liability at fair value and with changes in fair value recognized in the Company’s consolidated
statements of operations. The estimated fair value of the Forward Purchase Agreement is measured at fair value using a simulation model.
At the settlement date, the Forward Purchase Agreement will be recognized as a derivative asset at the value of cash paid based on the
number of shares, with any changes in fair value recognized in the Company’s consolidated statements of operations.
45
Research and Development Costs
The research and development costs are accounted
for in accordance with ASC 730, Research and Development, which requires all research and development costs be expensed as incurred.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards
Board issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies
the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and
Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion features that are not required
to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted
for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments
will be accounted for as a single liability measured at amortized cost. Further, the ASU made amendments to the EPS guidance in Topic
260, Earnings Per Share, for convertible instruments, the most significant impact of which is requiring the use of the if-converted
method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40,
which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting.
The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. The ASU is effective for public
business entities, excluding smaller reporting companies, for interim and annual periods beginning after December 15, 2021, with early
adoption permitted. For all other entities, the amendments are effective for interim and annual periods beginning after December 15, 2023.
Adoption of the ASU can either be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impact
the adoption of this standard will have on its financial statements and related disclosures.
No other recently issued accounting pronouncements
had or are expected to have a material impact on the Company’s financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting
companies.
Item 8. Financial Statements and Supplementary Data.
The
consolidated financial statements and related consolidated financial statement schedules required to be filed are indexed on page
F-1 and are incorporated herein.
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.
Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control
objectives.
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 May 31, 2024. Based upon their evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that as of May 31, 2024, our disclosure controls and procedures (as
defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective.
46
Management’s
Annual 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 May 31, 2024. 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 May 31, 2024 based upon criteria in
Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based upon this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the
period covered by this Annual Report, the design and operation of our disclosure controls and procedures were not effective.
Notwithstanding the identified
material weakness, management, including our principal executive officer and principal financial and accounting officer, believe that
the consolidated financial statements contained in this Annual Report fairly present, in all material respects, our financial condition,
results of operations and cash flows for the fiscal periods presented in conformity with GAAP.
Remediation of Material Weakness
While significant progress
has been made to improve our internal control over financial reporting, not all aspects of have been sufficiently remediated. The material
weakness, as of May 31, 2024, relates to the inadequate separation of financial responsibilities. Our management, with the oversight of
the Audit Committee of our Board of Directors, continue to design and implement measures to remediate the material weakness. Remediation
of the material weakness will require further validation and testing of the operating effectiveness of the applicable remedial controls
over a sustained period of financial reporting cycles.
Changes in Internal
Control Over Financial Reporting
In
respect to changes in the internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
for the quarter ended May 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting, the Company has remediated one material weakness as disclosed during the previous quarter ending February 29, 2024.
Specifically, to address the material weakness identified in lacking sufficient accounting resources with deep technical knowledge, the
Company hired a full-time Chief Financial Officer and has implemented a plan whereby external parties with relevant skills are retained
as needed.
Item 9B. Other Information.
(a) None.
Item 9C. Disclosure Regarding
Foreign Jurisdictions that Prevent Inspections.
Not
applicable.
47
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The following table sets forth, as of August 15, 2024, the name, age
and position of each of our executive officers and directors.
Name Age Position
Executive Officers
Brandon Robinson(3) 45 Chief Executive Officer, Director
Jason O’Neill(2) 46 Chief Operating Officer, Director
Brian Merker 47 Chief Financial Officer
Stewart Lee 51 Head of People & Strategy
Non-Employee Directors
Trisha Nomura(1) 44 Director
John Maris(2) 66 Director
John Pinsent(1) 64 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 attended both 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.
48
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 2013 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.
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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, 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 are 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.
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Director Independence
As a result of our Class A
ordinary shares being listed on the Nasdaq Capital Market, 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
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 has 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.
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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 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:
● 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;
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● 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
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 posted on the “Corporate Governance
— Governance Documents” portion under the “Investors” tab of our website at https://www.horizonaircraft.com.
Information contained on or accessible through our website is not a part of this Annual Report, and the inclusion of our website address
in this Annual Report is an inactive textual reference only. 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 our website.
Insider Trading Policy
Our Board has adopted an insider
trading policy to promote compliance with federal, state and foreign securities laws that prohibit certain persons who are aware of material
nonpublic information about a company from: (i) trading in securities of that company; or (ii) providing material nonpublic information
to other persons who may trade on the basis of that information.