10-K/A: New Horizon Aircraft Files Amended 10-K, Addressing Audit and Accounting Firm Consents

New Horizon Aircraft Ltd. files an amendment to its annual report on Form 10-K to include the report of an independent registered public accounting firm and updated certifications.

Summary

• New Horizon Aircraft Ltd. has filed an amendment to its annual report on Form 10-K for the fiscal year ended May 31, 2024.
• The amendment includes the Report of Independent Registered Public Accounting Firm of Fruci & Associates II, PLLC, which contains an audit report and opinion on the company's financial statements as of and for the year ended May 31, 2023.
• Updated certifications by the company's Principal Executive Officer and acting Principal Financial and Principal Accounting Officer are also included, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
• The amendment also includes auditor consents from MNP LLP and Fruci & Associates II, PLLC.
• The original filing date for the annual report was August 15, 2024, and the amendment does not modify or update disclosures presented in the original Form 10-K or reflect any events occurring after that date.
• As of August 15, 2024, the company had 14 employees in Canada and 2 employees outside of Canada.
• The aggregate market value of voting stock held by non-affiliates of the Registrant on November 30, 2023, based on the closing price of $10.58 for shares of the Registrants Class A ordinary shares, was approximately USD $121,670,000.
• As of August 15, 2024, there were 18,607,931 of the registrants Class A ordinary shares, issued and outstanding.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive aspects such as technological advancements and market potential, the significant operating losses, going concern uncertainty, and various risks weigh heavily on the sentiment.

Positives

• The company is actively pursuing Type Certification for its Cavorite X7 aircraft, aiming for certification in 2027.
• New Horizon has accumulated 22 issued and allowed patents to protect its novel technologies.
• The company has a Special Flight Operations Certificate (SFOC) from Transport Canada Civil Aviation (TCCA) that allows outdoor untethered flight of its sub-scale prototype until August 1st of 2025.
• The company has partnered with Cert Centre Canada (3C) for development of a certification basis that will be used to form the foundation for Type Certification with TCCA.

Negatives

• The company has incurred significant operating losses, with $8,160 and $1,247 for the years ended May 31, 2024 and 2023, respectively, and expects to continue incurring losses for the foreseeable future.
• The company has a limited operating history and faces significant challenges to develop, certify, and manufacture its aircraft.
• The company may be unable to adequately control the costs associated with its pre-launch operations, and its costs will continue to be significant after it commences operations.
• The company is a relatively small company in comparison to current industry leaders in the Regional Air Mobility market and may experience difficulties in managing its growth.
• The company's forward-looking operating information and business plan forecast relies in large part upon assumptions and analyses that the company has developed or obtained from respected third parties, and if these assumptions or analyses prove to be incorrect, the company's actual operating results may be materially different from its forecasted results.
• The company anticipates delivering its first Cavorite X7 eVTOL aircraft to customers in 2027, pending receipt of regulatory approval and certification; however, the aircraft remains in the detailed design phase and has yet to complete any testing and certification process.
• The company may experience future delays or other complications in the design, certification, manufacture, and production of its aircraft and related technology.
• The company may not succeed in establishing, maintaining and strengthening its brand, which would materially and adversely affect customer acceptance of its services, reducing its anticipated sales, revenue and forecasts.
• The company is subject to cybersecurity risks to its operational systems, security systems, infrastructure, integrated software in its aircraft and customer data processed by the company or third-party vendors.
• The company is subject to substantial regulation and unfavorable changes to, or the company's failure to comply with, these regulations could substantially harm its business and operating results.
• The company is or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject the company to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect its business, results of operations, financial condition and reputation.
• The company may not be able to prevent others from unauthorized use of its intellectual property, which could harm its business and competitive position.
• The company's patent applications may not issue as patents, which may have a material adverse effect on its ability to prevent others from commercially exploiting products similar to ours.
• The company may need to defend itself against patent or trademark infringement claims, which may be time-consuming and would cause the company to incur substantial costs.
• The company may be subject to damages resulting from claims that the company or its employees have wrongfully used or disclosed alleged trade secrets of its employees former employers.
• The company's management team may not successfully or efficiently manage its transition to being a public company.
• The company will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.
• The company will need to improve its operational and financial systems to support its expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability to do so will adversely affect its billing and reporting.
• The company's management has limited experience in operating a U.S.-listed public company.
• The company may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of U.S.-listed public companies.
• The company will be an emerging growth company, and its reduced SEC reporting requirements may make its shares less attractive to investors.
• If the company qualifies as a foreign private issuer, it will be exempt from a number of rules under the U.S. securities laws and will be permitted to file less information with the SEC than a U.S. domestic public company, which may limit the information available to its shareholders.
• The company is subject to Canadian and United States tax on its worldwide income.
• Dividends, if ever paid, on the company's Common Shares will be subject to Canadian or United States withholding tax.
• The transfer of the company's Common Shares may be subject to U.S. estate and generation-skipping transfer tax.
• Changes in tax laws may affect the company's shareholders and other investors.
• An active market for the company's securities may not develop, which would adversely affect the liquidity and price of its securities.
• The company's failure to meet Nasdaqs continued listing requirements could result in a delisting of its securities.
• The company reached a determination to restate certain of its previously issued audited financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues.
• If securities or industry analysts do not publish research or reports about the company's business or publish negative reports about its business, its share price and trading volume could decline.
• The price of the company's Class A ordinary shares may decline, and you could lose all or part of your investment as a result.
• Because there are no current plans to pay cash dividends on the company's Class A ordinary shares for the foreseeable future, you may not receive any return on investment unless you sell your Class A ordinary shares at a price greater than what you paid for it.
• The company's shareholders may experience dilution in the future.
• There is no guarantee that the warrants will ever be in the money; they may expire worthless or the terms of warrants may be amended.
• The company's Warrant Agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of its warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with the company.
• The company may redeem the unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.
• The future exercise of registration rights may adversely affect the market price of the company's Class A ordinary shares.
• The company's management has concluded that, as of the end of the period covered by this Annual Report, the design and operation of its disclosure controls and procedures were not effective.
• The company's management has concluded that, as of the end of the period covered by this Annual Report, the design and operation of its disclosure controls and procedures were not effective.

Risks

• The company's success depends on the safety and positive perception of its aircraft, the establishment of strategic relationships, and its ability to effectively market and sell aircraft that will be used in Regional Air Mobility services.
• The Regional Air Mobility market for eVTOL passenger and goods transport services does not exist; whether and how it develops is based on assumptions, and the Regional Air Mobility market may not achieve the growth potential the company expects or may grow more slowly than expected.
• The company may be unable to adequately control the costs associated with its pre-launch operations, and its costs will continue to be significant after it commences operations.
• The company is a relatively small company in comparison to current industry leaders in the Regional Air Mobility market and may experience difficulties in managing its growth.
• The company's forward-looking operating information and business plan forecast relies in large part upon assumptions and analyses that the company has developed or obtained from respected third parties, and if these assumptions or analyses prove to be incorrect, the company's actual operating results may be materially different from its forecasted results.
• The company anticipates delivering its first Cavorite X7 eVTOL aircraft to customers in 2027, pending receipt of regulatory approval and certification; however, the aircraft remains in the detailed design phase and has yet to complete any testing and certification process.
• The company may experience future delays or other complications in the design, certification, manufacture, and production of its aircraft and related technology.
• Adverse publicity stemming from any incident involving the company or its competitors, or an incident involving any air travel service or unmanned flight based on eVTOL technologies, could have a material adverse effect on its business, financial condition and results of operations.
• The company's business plans require a significant amount of capital, and its future capital needs may require it to sell additional equity or debt securities that may adversely affect the market price of its shares and dilute its shareholders or introduce covenants that may restrict its operations.
• If the company is unable to successfully design and manufacture its aircraft, its business will be harmed.
• If the Cavorite X7 eVTOL aircraft the company builds fails to perform as expected, its ability to develop, market, and sell its aircraft could be harmed.
• The company's Cavorite X7 aircraft require complex software, hybrid electric power systems, battery technology and other technology systems that remain in development and need to be commercialized in coordination with its vendors and suppliers to complete serial production.
• The company is relying on third-party suppliers to develop a number of emerging technologies for use in its products, including lithium-ion battery technology.
• The company's Cavorite X7 aircraft will make extensive use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.
• The company will rely on third-party suppliers and strategic parties for the provision and development of key emerging technologies, components and materials used in its Cavorite X7 aircraft, such as the lithium-ion batteries that will help to power the aircraft, a significant number of which may be single or limited source suppliers.
• If the company's suppliers experience any delays in providing it with or developing necessary components, or if its suppliers are unable to deliver necessary components in a timely manner and at prices and volumes acceptable to it, the company could experience delays in manufacturing its aircraft and delivering on its timelines, which could have a material adverse effect on its business, prospects and operating results.
• If any of the company's suppliers become economically distressed or go bankrupt, it may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase its costs, affect its liquidity or cause production disruptions.
• The company may not succeed in establishing, maintaining and strengthening its brand, which would materially and adversely affect customer acceptance of its services, reducing its anticipated sales, revenue and forecasts.
• The company's business depends substantially on the continuing efforts of its key employees and qualified personnel, and its operations may be severely disrupted if it loses their services.
• The company may be adversely affected by labor and union activities in the future.
• Failure of information security and privacy concerns could subject the company to penalties, damage its reputation and brand, and harm its business and results of operations.
• The company is subject to cybersecurity risks to its operational systems, security systems, infrastructure, integrated software in its aircraft and customer data processed by it or third-party vendors.
• The company faces risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt its operations.
• The company may not be able to prevent others from unauthorized use of its intellectual property, which could harm its business and competitive position.
• The company's patent applications may not issue as patents, which may have a material adverse effect on its ability to prevent others from commercially exploiting products similar to ours.
• The company may need to defend itself against patent or trademark infringement claims, which may be time-consuming and would cause it to incur substantial costs.
• The company may be subject to damages resulting from claims that it or its employees have wrongfully used or disclosed alleged trade secrets of its employees former employers.
• The company is subject to substantial regulation and unfavorable changes to, or its failure to comply with, these regulations could substantially harm its business and operating results.
• The company is or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject it to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect its business, results of operations, financial condition and reputation.
• The company may be subject to governmental export and import control laws and regulations as it expands its suppliers and commercial operations outside Canada, the U.S. and Europe.
• British Columbia law and the company's Articles contain certain provisions, including anti-takeover provisions, that limit the ability of shareholders to take certain actions and could delay or discourage takeover attempts that shareholders may consider favorable.
• The company's management team may not successfully or efficiently manage its transition to being a public company.
• The company will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.
• The company will need to improve its operational and financial systems to support its expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability to do so will adversely affect its billing and reporting.
• The company's management has limited experience in operating a U.S.-listed public company.
• The company may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of U.S.-listed public companies.
• The company will be an emerging growth company, and its reduced SEC reporting requirements may make its shares less attractive to investors.
• If the company qualifies as a foreign private issuer, it will be exempt from a number of rules under the U.S. securities laws and will be permitted to file less information with the SEC than a U.S. domestic public company, which may limit the information available to its shareholders.
• The company is subject to Canadian and United States tax on its worldwide income.
• Dividends, if ever paid, on the company's Common Shares will be subject to Canadian or United States withholding tax.
• The transfer of the company's Common Shares may be subject to U.S. estate and generation-skipping transfer tax.
• Changes in tax laws may affect the company's shareholders and other investors.
• An active market for the company's securities may not develop, which would adversely affect the liquidity and price of its securities.
• The company's failure to meet Nasdaqs continued listing requirements could result in a delisting of its securities.
• The company reached a determination to restate certain of its previously issued audited financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues.
• If securities or industry analysts do not publish research or reports about the company's business or publish negative reports about its business, its share price and trading volume could decline.
• The price of the company's Class A ordinary shares may decline, and you could lose all or part of your investment as a result.
• Because there are no current plans to pay cash dividends on the company's Class A ordinary shares for the foreseeable future, you may not receive any return on investment unless you sell your Class A ordinary shares at a price greater than what you paid for it.
• The company's shareholders may experience dilution in the future.
• There is no guarantee that the warrants will ever be in the money; they may expire worthless or the terms of warrants may be amended.
• The company's Warrant Agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of its warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with the company.
• The company may redeem the unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.
• The future exercise of registration rights may adversely affect the market price of the company's Class A ordinary shares.

Future Outlook

The company anticipates delivering its first Cavorite X7 eVTOL aircraft to customers in 2027, pending receipt of regulatory approval and certification.

Industry Context

The document references Morgan Stanley projections that the eVTOL market could reach USD $1 trillion by 2040 and USD $9 trillion by 2050, indicating the potential for significant growth in the Advanced Air Mobility (AAM) market.

Comparison to Industry Standards

• The document mentions that most competitors rely on open rotor designs, while New Horizon uses a ducted fan-in-wing technology.
• The company believes its aircraft will be cheaper to own and operate than helicopters with similar payload characteristics and will travel almost twice as fast.
• The specifications for the aircraft call for it to be able to carry seven people with a useful load of 1,500 lbs., almost twice the carriage capacity of many of its competitors.
• The company believes its aircraft will be one of the first eVTOL aircraft to be certified for flight into known icing conditions (FIKI).

Stakeholder Impact

• Shareholders may experience dilution in the future.
• The company's failure to meet Nasdaqs continued listing requirements could result in a delisting of its securities.
• The company reached a determination to restate certain of its previously issued audited financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues.
• If securities or industry analysts do not publish research or reports about the company's business or publish negative reports about its business, its share price and trading volume could decline.
• The price of the company's Class A ordinary shares may decline, and you could lose all or part of your investment as a result.
• Because there are no current plans to pay cash dividends on the company's Class A ordinary shares for the foreseeable future, you may not receive any return on investment unless you sell your Class A ordinary shares at a price greater than what you paid for it.

Next Steps

• The company intends to seek approval for the design of the Cavorite X7 by obtaining a Type Certificate under TCCA using Canadian Air Regulations (CAR) 523 under Normal Category, Level 2.
• The company intends to work with third parties to attract talented workers.
• The company intends to adopt strict information security policies and deploy advanced measures to implement the policies, including, among others, advanced encryption technologies.
• The company plans to have a formal cybersecurity committee organized by the Board, as well as third party security specialists on contract.
• The company intends to retain future earnings, if any, for future operations, expansion and debt repayment, and there are no current plans to pay any cash dividends for the foreseeable future.

Key Dates

Keywords

New Horizon Aircraft, eVTOL, Regional Air Mobility, Financials, Audit, Certification, Aircraft, Aviation, HOVR, MNP LLP, Fruci & Associates