8-K/A: New Horizon Aircraft Completes Business Combination, Amends Financials

New Horizon Aircraft Ltd. files an amendment to its initial 8-K report to include historical financials of Legacy Horizon and pro forma statements following its business combination with Pono Capital Three Inc.

Summary

• New Horizon Aircraft Ltd. has filed an amendment to its original 8-K report, primarily to include the unaudited financial statements of Robinson Aircraft, Ltd. (Legacy Horizon) as of November 30, 2023, and for the six months ended November 30, 2023 and 2022.
• The amendment also includes the Management's Discussion and Analysis of Financial Condition and Results of Operations for Legacy Horizon for the same periods, and unaudited pro forma financial statements as of November 30, 2023.
• This filing is a result of the business combination between New Horizon Aircraft and Pono Capital Three Inc., which was completed on January 12, 2024.
• Legacy Horizon's financials show a net loss of $739,814 for the three months ended November 30, 2023, and a net loss of $1,156,232 for the six months ended November 30, 2023.
• As of November 30, 2023, Legacy Horizon had a working capital deficiency of $984,609 and an accumulated deficit of $6,707,364.
• The pro forma financials reflect the combined entity after the merger, showing a pro forma net loss of $3,174,000 for the six months ended November 30, 2023.

Sentiment

Score: 4

Explanation: The document highlights significant financial losses and challenges, but also notes successful financing and a completed business combination. The sentiment is cautiously negative due to the financial risks and development hurdles.

Positives

• The company received $229,197 in Scientific Research and Experimental Development credits from the Canadian federal government.
• The business combination with Pono Capital Three Inc. was successfully completed, resulting in New Horizon Aircraft Ltd. being listed on the NASDAQ.
• The company has secured approximately $7.1 million in financing through convertible notes and debentures during the six months ended November 30, 2023.

Negatives

• Legacy Horizon experienced significant net losses, with a $1,156,232 loss for the six months ended November 30, 2023.
• The company has a substantial working capital deficiency of $984,609 as of November 30, 2023.
• The accumulated deficit reached $6,707,364 as of November 30, 2023.
• Operating expenses increased by 121% in the three months ended November 30, 2023, compared to the same period in 2022.
• Interest expenses increased by 737% in the three months ended November 30, 2023, compared to the same period in 2022.

Risks

• The company is in a development stage and subject to risks including the need for successful technology development, additional financing, and competition.
• The company's ability to continue as a going concern is dependent on raising additional funding and generating positive cash flows.
• The market for Regional Air Mobility is still undeveloped, and there is no guarantee of future demand.
• The company faces competition from traditional helicopter manufacturers and other eVTOL developers.
• The certification process for the Cavorite X7 aircraft is complex and may take more than five years and cost hundreds of millions of dollars.
• The company's financial results are dependent on delivering aircraft on time and at a cost that supports sufficient sales.

Future Outlook

The company anticipates commercialization of its aircraft beginning in 2027 and expects to increase research and development expenses as it continues to develop its technology and prototypes. 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. New Horizons civilian sector financial results are dependent on achieving certification on its expected timeline.

Management Comments

• Management expects losses and negative cash flows to continue for the foreseeable future, primarily as a result of continued research and development efforts.
• Management believes the market for Regional Air Mobility (RAM) will be large, but it remains undeveloped and there is no guarantee of future demand.
• Management 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 for air cargo, business travel and air-taxi services.

Industry Context

The announcement reflects the ongoing development and investment in the eVTOL sector, with companies like New Horizon aiming to disrupt traditional air travel and transportation. The company's focus on a dual-use business model for both civilian and military applications is a common strategy in the aerospace industry. The need for significant capital investment and regulatory approvals highlights the challenges faced by companies in this emerging market.

Comparison to Industry Standards

• The financial results of Legacy Horizon, particularly the net losses and working capital deficiency, are not uncommon for early-stage aerospace companies focused on research and development.
• Compared to other eVTOL developers, New Horizon's approach of relying on experienced manufacturing partners and supply chain vendors is a strategy to manage capital expenditure.
• The timeline for certification, typically spanning more than five years and costing hundreds of millions of dollars, is consistent with industry standards for new aircraft designs.
• Companies like Joby Aviation and Archer Aviation, which are also developing eVTOL aircraft, have also faced significant development costs and regulatory hurdles.
• The dual-use business model is similar to that of some other aerospace companies that target both civilian and military markets to diversify revenue streams.

Related Party Transactions

• During the three months and six months ended November 30, 2023, the Company issued nil and nil (2022 523,500 and 523,500), respectively, stock options to its directors and recorded $25,344 and $35,542 (2022 $17,287 and $22,258) of related stock-based compensation expenses.
• The document mentions related party transactions including salaries and reimbursed expenses to officers.

Stakeholder Impact

• Shareholders will be impacted by the financial performance and the company's ability to achieve its business objectives.
• Employees will be affected by the company's ability to secure funding and continue operations.
• Customers will be impacted by the company's ability to develop and deliver its aircraft on time and at a competitive price.
• Suppliers will be affected by the company's ability to secure funding and continue operations.

Next Steps

• The company will continue to develop its Cavorite X7 aircraft and pursue certification from Transport Canada Civil Aviation (TCCA) and the Federal Aviation Association (FAA).
• The company will focus on scaling production and securing sales contracts with third parties, air operators, individual consumers, and NATO military customers.
• The company will continue to seek additional funding to support its operations and development activities.

Key Dates

Keywords

eVTOL, Vertical Takeoff and Landing, Aircraft, Business Combination, Financial Statements, Pro Forma, Legacy Horizon, Pono Capital, NASDAQ, Regional Air Mobility, Certification, Convertible Notes, Working Capital, Net Loss, Research and Development