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.
36
Special Note Regarding Forward-Looking Statements
This Annual Report includes
“forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of 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.
Business Combination
On February 14, 2023, we consummated
the 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.
37
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 eVTOL concept that is identified as the Cavorite X7. The Company has built several small-scale prototypes including
a 50%-scale aircraft that has completed flight testing. We are now building a full-scale demonstrator aircraft that is expected to commence
flight testing in 2026 or 2027.
Horizon intends to sell these
Cavorite X7 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 significant, it is currently immature and there is no guarantee
of future demand. Horizon anticipates commercialization of its aircraft beginning in 2028 or 2029, and its business will require significant
investment leading up to commercialization, including, but not limited to, final engineering designs, prototyping and flight testing,
manufacturing, software development, certification, and pilot training.
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
We believe that the primary sources of competition for our aircraft
sales are traditional helicopters, ground-based mobility solutions, and other eVTOL developers. While we expect to produce a versatile
aircraft that can be useful in a variety of air mobility missions, we believe this industry will be dynamic and increasingly competitive.
It is possible that our 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, we
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 advocate for enhanced
government funding programs.
38
Government Certification
For 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 is leading certification efforts. Horizon expects the FAA to participate during this process
which will likely reduce the traditional 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 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. The Company will need to obtain authorization and certifications related to the production of its aircraft. While
it anticipates being able to meet the requirements of such authorization and certifications, the Company may be unable to obtain such
authorization and certifications, or to do so on the timeline it projects. Should the Company fail to obtain any of the required authorization
or certifications, or do so in a timely manner, or any of these authorization 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 for 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 longer-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, particularly its product design. Significant 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
commercialization plans. We have devoted many resources to the design and development of our eVTOL prototype aircraft. Funding of these
activities has primarily been through the net proceeds received from the issuance of Class A ordinary shares, preferred shares, and the
issuance of related and third-party convertible debt.
Horizon is a pre-revenue organization
in a research and development and flight-testing phase of operations. With more than $15 million of cash on-hand as of the date of filing,
management expects that the proceeds from recent sales of securities will be sufficient to fund our current operating plan for at least
the next 12 months from the date the consolidated financial statements were available to be issued, however there remains substantial
doubt around the Company’s ability to meet the going concern assumption beyond that period without raising additional capital.
39
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 certify 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 is related
to the Company’s leases. 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 a shareholder facilitating future
purchases of the Company’s stock based on a simulation model. The Company mutually agreed to terminate the Forward Purchase Agreement
with its counterparty on November 1, 2024, at a cost of $278. In connection with this termination, the Company recorded a $21,400 gain.
Change in fair value of Warrants
Changes in fair value of Warrants consists of fluctuations in the fair
value of the Company’s General Warrants outstanding as of the end of each reporting period.
40
Results of Operations
We believe the following information
includes all adjustments necessary to state fairly the 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, 2025
to the Year Ended May 31, 2024
Significant 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, 2025, and May 31, 2024 (000’s CAD).
Year Ended
Operating Expenses
Operating expenses increased by $8,961, from $4,624 for the year-ended
May 31, 2024, to $13,585 for the year-ended May 31, 2025. The increase was primarily driven by professional fees, additional staff hired
to support research and development activities, and other administrative costs connected with the Company’s growth activities.
Research and Development Expenses
Research and development expenses
increased by $2,780, from $880 during the year-ended May 31, 2024, to $3,660 during the year-ended May 31, 2025. The increase was primarily
attributable to additional labour related to flight testing, engineering work, flight software, prototype manufacturing, and data analysis.
Research and development costs can be itemized into the following categories for the respective periods:
Year Ended
Depreciation 70 -
Total Research and Development costs $ 3,660 $ 880
General and Administrative
General and Administrative costs increased by $6,181, from $3,744 during
the year-ended May 31, 2024, to $9,925 during the year-ended May 31, 2025. The increase was related to legal, accounting, travel, investor
relations, marketing, and branding expenses related to the Company’s growth efforts and public company status.
41
Other expenses (income)
Other expenses (income) decreased
by $585, from income of $575 during the year-ended May 31, 2024, to an expense of $10 during the year-ended May 31, 2025. The decrease
primarily reflected foreign exchange losses and the change in grants and subsidies received in the comparative periods.
Cash Flows
The following tables set forth
a summary of our cash flows for the periods indicated (000’s CAD):
Year Ended
Net cash provided by (used in) May 31, 2025 May 31, 2024 Variance ($)
Net Cash used in Operating Activities
The Company’s cash flows
used in operating activities have been primarily comprised of compensation costs, 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 aircraft manufacturing, partially offset by periodic grants received from various government agencies
and interest earned on cash. The Company expects to increase hiring to accelerate its engineering and certification efforts in the coming
years.
For the year-ended May 31,
2025, the $6,004 increase in cash used from operations as compared to the year-ended May 31, 2024, 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 primarily comprised the acquisition of property and equipment.
For the year-ended May 31,
2025, the $67 decrease in cash used by investing activities as compared to the year-ended May 31, 2024, was primarily attributed to website
development costs incurred in the prior year.
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 and registered securities
offerings.
For the year-ended May 31,
2025, the $10,080 increase in cash provided by financing activities was primarily attributed to proceeds from the issuance of Class A
ordinary shares, the issuance of Preferred shares, and warrant exercises.
On August 21, 2024, the Company completed a registered securities offering
(“RSO”) by issuing 2,800,000 Class A ordinary shares, 3,000,000 Pre-Funded Warrants (“PFW’s”), and 5,800,000
warrants. Proceeds received by the Company are summarized below:
Gross Proceeds - Class A Shares $ 1,906
Gross Proceeds - PFW’s $ 2,041
Gross Proceeds - Warrant Exercises $ 2,787
Direct costs $ (510 )
PFW’s may be exercised
by warrant holders at any time at a nominal exercise price as they were funded in connection with the RSO. Upon exercise, each PFW may
be exchanged for one Class A ordinary share. All 3 million PFW’s were exercised during the year-ending May 31, 2025.
Warrant holders exercised
2,590,000 warrants in exchange for 2,590,000 Class A ordinary shares for proceeds of $2,787 in the year-ended May 31, 2025.
As of May 31, 2025, there
were 12,065,375 warrants outstanding at an exercise price of $11.50 USD and 3,210,000 General Warrants outstanding at an exercise price
of $0.75 USD to purchase an equivalent number of Class A ordinary shares. As of the date of this filing, there remains just 310,000 General
Warrants outstanding.
42
On December 18, 2024, the
Company entered into subscription agreements with a third-party investor pursuant to which the Company issued an aggregate of 4,166,667
Class A ordinary shares of the Company, at a price of USD $0.36 per share, and an aggregate of 4,500 Series A preferred shares (the “Series
A Preferred Shares”) of the Company at a price of $1,000 per share. The financing closed on December 19, 2024.
The Series A Preferred Shares are convertible, at the option of the
holder and without additional consideration, into Class A ordinary shares on a one for 2222.222222 basis. The proceeds received by the
Company are summarized below:
Gross Proceeds - Class A Shares $ 2,100
Gross Proceeds - Preferred Shares 6,300
Direct costs (41 )
In March 2025 the Company
filed a shelf registration statement on Form S-3 with the SEC and a related prospectus pursuant to which it may, from time to time, sell
shares of its Class A ordinary shares, having an aggregate value of up to USD $6.25 million, pursuant to a Capital
on DemandTM Sales Agreement (the “Sales Agreement”) with a placement agent for the sale of its Class A ordinary
shares. During the year-ended May 31, 2025, the Company sold 940,562 shares of Class A ordinary shares under the Sales Agreement for net
proceeds of $880. As of May 31, 2025, the Company had $7,529 remaining eligible for sales under the Sales Agreement.
On June 27, 2025, the Company
filed a prospectus supplement to increase the maximum aggregate offering price of the Class A ordinary shares issuable under the Sales
Agreement to up to an additional aggregate USD $16.5 million of Class A ordinary shares.
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. Beyond May 31, 2025, the Company’s principal
source of liquidity is expected to be cash and cash equivalents of more than $15,000 on-hand as of the date of this filing, future government
grants and subsidies, and future sales of securities.
To date, the Company has funded
its operations primarily with the issuances of Class A ordinary shares, Series A Preferred Shares, and issuances of convertible debt instruments.
Additional funding has been provided through government-backed grants.
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 Sales 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 several years.
Off-Balance Sheet Arrangements
We did not have any off-balance
sheet arrangements as of May 31, 2025, and May 31, 2024.
Significant Accounting Judgements, Estimates,
and Assumptions
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 statements of operations. The Company mutually agreed to terminate the Forward Purchase Agreement with
its counterparty on November 1, 2024, at a cost of $278 and resulting in a gain of $21,400.
43
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
to be expensed as incurred.
Recent Accounting Standards
Recently Adopted Accounting
Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements
through enhanced disclosures about significant segment expenses, interim segment profit or loss and assets, and how the CODM uses reported
segment profit or loss information in assessing segment performance and allocating resources. The Company adopted ASU 2023-07 effective
June 1, 2024.
Recently Issued Accounting Pronouncements Not
Yet Adopted
In December 2023, the FASB
issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of incremental income
tax information related to the income tax rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements.
The update is effective for annual periods beginning after December 15, 2024 on a prospective basis, and retrospective application is
permitted. The Company is currently evaluating the impact of ASU 2023-09 on its disclosures within its consolidated financial statements.
In November 2024, the FASB
issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation
of Income Statement Expenses, which requires disclosure of additional information about specific expense categories in the notes to the
financial statements. The update is effective for annual periods beginning after December 15, 2026, and interim periods beginning after
December 15, 2027. Early adoption is permitted. The update can be applied either (1) prospectively to financial statements issued for
reporting periods after the effective date or (2) retrospectively to any of all prior periods presented in the financial statements. The
Company is currently evaluating the impact of ASU 2024-03 on its disclosures within its consolidated financial statements.
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, 2025. Based upon their evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that as of May 31, 2025, our disclosure controls and procedures (as
defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective.
44
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, 2025. 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, 2025, 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 our internal controls have been sufficiently
remediated. The material weakness, as of May 31, 2025, relates to the inadequate separation of financial responsibilities. Our management,
with the oversight of the Audit Committee of our Board of Directors, continues 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. With additional personnel anticipated to be hired in fiscal year
2026, the Company expects to make significant advances towards remediating the identified material weakness.
Changes in Internal
Control Over Financial Reporting
No recent changes in our internal control over financial reporting
had or are expected to have a material impact on the Company’s internal controls.
Item 9B. Other Information.
(a) None.
Item 9C. Disclosure Regarding
Foreign Jurisdictions that Prevent Inspections.
Not
applicable.
45
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The
following table sets forth, as of August 21, 2025, the name, age and position of each of our executive officers and directors.
Name Age Position
Executive Officers
Brandon Robinson(3) 46 Chief Executive Officer, Director
Jason O’Neill(2) 47 Chief Operating Officer, Director
Brian Merker 48 Chief Financial Officer
Stewart Lee 52 Head of People & Strategy
Non-Employee Directors
Trisha Nomura(1) 45 Director
John Maris(2) 67 Director
John Pinsent(1) 65 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 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 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.
46
Brian Merker. Brian
Merker has served as Chief Financial Officer of Horizon since the Business Combination. Mr. Merker has more than 20 years of senior
financial management experience including more than 10 years serving in the Aviation sector, most recently as Chief Financial Officer
of Skyservice Business Aviation (“Skyservice”) from 2018 to 2022, supporting growth efforts in aircraft management, maintenance,
fixed-based operations, charter, and brokerage. Prior to Skyservice, Mr. Merker served as Chief Financial Officer of Great Slave Helicopters
as well as Vice President of Finance of its parent Company, Discovery Air, a publicly traded organization from 2013 to 2018. Discovery
Air 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 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 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
also served as an independent director of Pono Capital Two, Inc. (Nasdaq: PTWO) and as the Chief Financial Officer of Pono Capital
Corp (Nasdaq: PONO). 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 on the Association Board of Directors, and is currently serving as an at-large Council member.
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 Horizon since the Business Combination. Dr. Maris has served as the Chief Executive Officer
of Cert Centre Canada (“3C”), a privately held business that provides consulting services in the aerospace industry, since
2008. At 3C, Dr. Maris has overseen flight testing, research and development, and certification services provided to aerospace organizations
across the world. 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.
47
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 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. 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.
48
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 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 currently anticipate having a standing risk management committee, but rather provides
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 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.
49
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.