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 and Section 21E of the Exchange Act and
“forward-looking information” within the meaning of the Ontario Securities 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.
38
Overview
New Horizon Aircraft Ltd. (the
“Company”, “Horizon”, “we,” “us” or “our”) is a British Columbia-based aerospace
company headquartered in Lindsay, Ontario, focused on developing advanced hybrid-electric vertical takeoff and landing ("eVTOL")
aircraft. Our mission is to expand regional air mobility by delivering aircraft that combines the operational flexibility of vertical
flight with the safety, speed, range, and efficiency of conventional fixed-wing aircraft.
Horizon’s
flagship aircraft, the Cavorite X7, incorporates the Company’s patented fan-in-wing technology, enabling vertical takeoff and landing
while preserving the performance characteristics of a conventional aircraft during cruise flight. The Cavorite X7 is being designed to
serve a broad range of commercial and government applications, including regional passenger transportation, emergency medical services,
disaster response, cargo operations and defense missions.
Horizon has successfully completed
flight testing of its large-scale prototype aircraft and is currently assembling a full-scale technical demonstrator, which is expected
to begin flight testing in 2026 or 2027. The Company continues to advance engineering, certification planning, manufacturing partnerships
and supply chain development as it works toward commercialization.
Organization and Nature of Business
Robinson Aircraft Ltd. (“Robinson”),
Horizon’s operating subsidiary, was incorporated in 2013. The company initially focused on hybrid-electric amphibious aircraft before
transitioning in 2018 to the development of its proprietary hybrid-electric eVTOL platform, which ultimately evolved into the Cavorite
X7.
Horizon's long-term business strategy
is centered on the design, certification, and commercialization of the Cavorite X7, while leveraging strategic manufacturing partners
and an established aerospace supply chain to efficiently scale production. In addition to aircraft sales, the Company believes its patented
fan-in-wing technology and related intellectual property may create future licensing opportunities with other OEM’s.
Horizon intends to market the
Cavorite X7 to commercial operators, aircraft lessors, government agencies and defense organizations that require aircraft capable of
both vertical and conventional runway operations. The Company believes its asset-light manufacturing strategy, combined with strategic
partnerships, will enable efficient capital deployment while supporting multiple commercial and government end markets.
Over the past year, Horizon has
continued advancing the Cavorite X7 program through completion of major structural assemblies, expansion of its strategic supplier network,
and preparation of its full-scale technical demonstrator for flight testing.
Business Combination
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.
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 pursuant to an agreement and plan of merger, dated as of August 15, 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
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 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
The markets in which we intend
to operate are highly competitive and characterized by significant capital requirements and rapid technological change. We expect to compete
with traditional helicopter manufacturers, fixed-wing aircraft manufacturers, ground-based mobility solutions, and other eVTOL developers,
many of whom have substantially greater financial, technical, and manufacturing resources than we do. 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 following well-funded competitors that are paying to create certification programs, raise awareness of eVTOL advantages, and advocate
for enhanced government funding programs.
Government Certification
Commercial operation of Horizon’s
Cavorite X7 aircraft will require Type Certification and related regulatory approvals. We have initiated engagement with TCCA in Canada
and the FAA in the United States to discuss potential certification pathways. As a Canadian company, we expect TCCA to serve as the primary
certification authority, with participation from the FAA as the program progresses, which we expect will reduce the traditional amount
of time required to achieve FAA certification.
Horizon maintains a partnership
with 3C to support aspects of our certification planning and development activities. 3C is leveraging their deep experience with TCCA
and FAA certification programs and is assisting us in developing our certification basis and advancing regulatory engagement.
40
Certification of a new aircraft
design is a complex, multi-year process that typically requires significant time and capital. We have not previously completed an aircraft
certification program, and there can be no assurance that our Cavorite X7 aircraft will achieve certification on our anticipated timeline,
or at all. In addition to type certification, we will be required to obtain production approvals prior to commercial deliveries.
Delays in certification, changes
in regulatory requirements, the need for additional testing or design modifications, or the inability to obtain required approvals could
delay or prevent commercialization of our aircraft. Any such outcomes could materially and adversely affect our business, financial condition,
results of operations, and prospects.
Dual Use Business Model
Horizon is pursuing a dual use
strategy designed to position the Cavorite X7 aircraft for both civilian and military applications. We believe this approach expands our
potential addressable market, supports earlier mission adoption opportunities, and may enable a more efficient path toward scaling production
over time.
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 necessarily require TCCA,
FAA, or related other jurisdictional 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 cost associated with assembling its
aircraft at scale remains uncertain at this stage of development.
We believe
military and special-mission use cases, which may not require the same certification approvals as commercial passenger operations, could
provide earlier operational opportunities and help validate performance, reliability, and mission versatility as the broader regional
air mobility market continues to develop. Over time, we expect increasing production volumes and operational experience to support improvements
in unit economics and market adoption.
Our long-term success in the civilian
sector will depend on our ability to deliver aircraft on schedule, at competitive costs, and at price points that support customer adoption
across multiple mission profiles. While our civilian market opportunity remains dependent on achieving regulatory certification, we believe
our dual-use strategy provides flexibility as we progress through development, certification, and commercialization.
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 focused on research and development
and flight-testing of our eVTOL aircraft. With $78.3 million of cash on-hand as of May 31, 2026, management expects that the Company has
sufficient funds for its current operating plan for at least the next 12 months from the date the consolidated financial statements were
available to be issued. There remains substantial doubt regarding the Company’s ability to meet the going concern assumption beyond
that period without securing additional capital.
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 could have a material adverse effect on our financial position, results of operations,
cash flows, and ability to execute our 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 certification of our eVTOL aircraft.
41
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of personnel expenses,
including salaries, benefits, other compensation costs and costs of consulting, as well as 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 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 and cash equivalents.
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 transaction, 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 Warrants outstanding as of the end of each reporting period.
42
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, 2026
to the Year Ended May 31, 2025
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, 2026,
and May 31, 2025 (000’s $CAD).
Year Ended
Interest expense (income), net (671 ) (123 ) 548
Operating Expenses
Operating expenses increased
by $9,883, from $13,585 for the year-ended May 31, 2025, to $23,468 for the year-ended May 31, 2026. The increase was primarily driven
by equipment and materials directly related to the build of the full-scale technical demonstrator aircraft, 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 $9,584, from $3,660 during
the year-ended May 31, 2025, to $13,244 during the year-ended May 31, 2026. The increase was primarily attributable to additional labour
costs 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
Total Research and Development costs $ 13,244 $ 3,660
General and Administrative
General and Administrative costs increased by $299, from $9,925 during
the year-ended May 31, 2025, to $10,224 during the year-ended May 31, 2026. The increase was related to legal, accounting, travel, investor
relations, compensation costs, marketing, and branding expenses related to the Company’s growth efforts.
43
Other expenses (income)
Other expenses (income) increased by $513, from an expense of $10 during
the year-ended May 31, 2025, to income of $503 during the year-ended May 31, 2026. The increase primarily reflected foreign exchange and
additional grants and subsidies received.
Cash Flows
The following tables set forth
a summary of our cash flows for the periods indicated (000’s $CAD):
Year Ended
Net cash provided by (used in) May 31, 2026 May 31, 2025 Variance ($)
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,
2026, the 7,180 increase in cash used from operations as compared to the year-ended May 31, 2025, was primarily attributed to increased
operating costs in connection to the Company’s engineering efforts and changes in working capital.
Net Cash used in Investing Activities
The Company’s cash flows
used in investing activities have primarily been comprised of the acquisition of property and equipment.
For the year-ended May 31, 2026, the $825 increase in cash used by
investing activities as compared to the year-ended May 31, 2025, was primarily attributed to tooling, aircraft rotables and spares, and
technology acquisition costs.
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.
44
For the year-ended May 31, 2026, the $73,006 increase in cash provided
by financing activities was primarily attributed to proceeds from the issuance of Class A ordinary 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 General 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.
During the year-ended May
31, 2026, warrant holders exercised 3,200,000 (May 31, 2025 - 2,590,000) General Warrants in exchange for 3,200,000 (May 31, 2025 - 2,590,000)
Class A ordinary shares for proceeds of $3,280 (May 31, 2025 - $2,787).
On May 8, 2026, the Company
completed a registered direct offering (“RDO I”) by issuing 9,254,889 Class A ordinary shares. There were also 277,647 warrants
issued to the placement agent to purchase an equivalent number of shares at an exercise price of $USD 2.47. Proceeds received by the Company
in connection with RDO I are summarized below:
Gross Proceeds - Class A Shares $ 27,232
Direct costs $ (2,196 )
On May 27, 2026, the Company
completed a second registered direct offering (“RDO II”) by issuing 5,385,646 Class A ordinary shares and 4,574,514 PFW’s.
There were also 298,805 RDO II Warrants issued to the placement agent to purchase an equivalent number of shares at an exercise price
of $USD 2.89. Proceeds received by the Company are summarized below:
Gross Proceeds - Class A Shares $ 18,697
Gross Proceeds - PFW’s $ 15,874
Gross Proceeds - PFW Exercises $ 3
Direct costs $ (2,611 )
PFW’s may be exercised
by warrant holders at any time at a nominal exercise price as they were funded in connection with RDO II. Upon exercise, each PFW may
be exchanged for one Class A ordinary share. 2,413,617 PFW’s were exercised during the year-ended May 31, 2026.
As of May 31, 2026, there
were 12,065,375 warrants outstanding at an exercise price of $11.50 USD, 10,000 General Warrants outstanding at an exercise price of $USD
0.75, 277,647 RDO I Warrants outstanding at an exercise price of $USD 2.47, and 298,805 RDO II Warrants outstanding at an exercise price
of $USD 2.89 to purchase an equivalent number of Class A ordinary shares.
45
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.
On June 27, 2025, we 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. On October 31,
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 $USD 50 million of Class A ordinary shares. On May 26, 2026, the Company filed a prospectus supplement to
decrease the maximum aggregate offering price of the Class A ordinary shares issuable under the Sales Agreement to $USD 28 million of
Class A ordinary shares.
During
the year-ended May 31, 2026, the Company sold 9,037,738 (May 31, 2025 – 940,562) Class A ordinary shares under the Sales Agreement
for net proceeds of $27.9 million (May 31, 2025 - $880). As of May 31, 2026, the Company had $USD 6.6 million remaining eligible for sales
under the Sales Agreement.
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, 2026, the Company’s principal
source of liquidity is expected to be cash and cash equivalents of more than $78 million on-hand, 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.
46
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 may be required.
Horizon is a pre-revenue organization that is currently building a full-scale
technical demonstrator aircraft in pursuit to certify its Cavorite X7 aircraft. While management estimates that cash and cash equivalents
on-hand of more than $78 million 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 securing additional capital.
Off-Balance Sheet Arrangements
We did not have any off-balance
sheet arrangements as of May 31, 2026, and May 31, 2025.
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
that are recognized as a derivative liability in accordance with ASC 815 are recognized 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 was measured at fair value using a simulation model. At the settlement date, the Forward Purchase Agreement was 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.
47
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 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.
In December 2025, the FASB
issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which establishes the
accounting for government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant
related to income. The update is effective for annual periods beginning after December 15, 2028, and interim periods beginning within
those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements
have not yet been issued or made available for issuance. If a business entity adopts the amendments in this Update in an interim reporting
period, it must adopt them as of the beginning of the annual reporting period that includes that interim reporting period. 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.
48
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, 2026. Based upon their evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that as of May 31, 2026, our disclosure controls and procedures (as
defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
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, 2026. 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.
49
Management
performed an assessment of the effectiveness of our internal control over financial reporting as of May 31, 2026, 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 effective.
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.
Changes in Internal
Control Over Financial Reporting
During the Company’s
fiscal year-ending May 31, 2026, additional resources were hired to facilitate increased and enhanced segregation of duties. The supplemental
resources have resulted in additional layers of oversight and separation of responsibilities across the processes deployed to ensure the
Company’s financial statements fairly present, in all material respects, our financial condition, results of operations, and cash
flows in conformity with GAAP.
Item 9B. Other Information.
(a) None.
Item 9C. Disclosure Regarding
Foreign Jurisdictions that Prevent Inspections.
Not
applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The
following table sets forth, as of July 16, 2026, the name, age and position of each of our executive officers and directors.
Name Age Position
Executive Officers
Brandon Robinson(3) 47 Chief Executive Officer, Director
Jason O’Neill 48 Chief Operating Officer
Brian Merker 49 Chief Financial Officer
Stewart Lee 53 Head of People & Strategy
Non-Employee Directors
Trisha Nomura(1) 46 Director
John Maris(2) 68 Director
John Pinsent(1) 66 Director
Jameel Janjua(2) 47 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 Legacy 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 of Horizon since 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.
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Brian Merker. Brian
Merker has served as Chief Financial Officer of Horizon since 2023. 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 included 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 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 a 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.
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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 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.
Jameel Janjua. Jameel Janjua
has served as an independent director of Horizon since November 2025. Jameel is a world-leading expert in experimental test flight and
has provided leadership for space missions, billion-dollar aerospace programs, and has been an advisor to aerospace startups as they navigate
through technical and business milestones. Formerly serving as a fighter pilot in the Royal Canadian Air Force and as an instructor at
USAF Test Pilot School, Jameel moved on to become an experimental test pilot with more than 5,500 hours flown in more than 65 aircraft.
Currently he is a test pilot for Virgin Galactic, an aerospace and space travel company pioneering human spaceflight. Jameel holds a Bachelor
of Engineering from the Royal Military College of Canada, a Master of Science from MIT in Aeronautics and Aeronautics and recently earned
an MBA from The Wharton School.
Mr. Janjua’s knowledge and extensive experience
with aerospace flight and business operations 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