10-K: New Horizon Aircraft Reports FY25 Loss, Advances eVTOL Development

New Horizon Aircraft Ltd. reported a net income of $5.2 million for fiscal year 2025, driven by a significant gain from the termination of a Forward Purchase Agreement, while continuing to advance its Cavorite X7 hybrid-electric eVTOL aircraft towards certification and commercialization.

Summary

• Reported a net income of $5.2 million CAD for fiscal year 2025, a significant improvement from a net loss of $8.16 million CAD in fiscal year 2024, primarily due to a $21.4 million CAD gain from the termination of a Forward Purchase Agreement.
• Operating expenses increased by $8.961 million CAD (193%) to $13.585 million CAD in FY2025, driven by professional fees, additional research and development staff, and administrative costs.
• Research and development expenses rose by $2.780 million CAD to $3.660 million CAD in FY2025, attributed to flight testing, engineering work, flight software, prototype manufacturing, and data analysis.
• General and administrative costs increased by $6.181 million CAD to $9.925 million CAD in FY2025, due to legal, accounting, travel, investor relations, marketing, and branding expenses related to public company status and growth efforts.
• Net cash used in operating activities increased by $6.004 million CAD to $9.312 million CAD in FY2025.
• Net cash provided by financing activities was $15.185 million CAD in FY2025, up from $5.105 million CAD in FY2024, primarily from the issuance of Class A ordinary shares, Preferred shares, and warrant exercises.
• The company is a pre-revenue organization in the research and development and flight-testing phase, with commercialization of its Cavorite X7 aircraft anticipated in 2028 or 2029.
• Successfully completed flight testing of a 50%-scale prototype of its Cavorite X7 aircraft and is now building a full-scale technical demonstrator, expected to commence flight testing in 2026 or 2027.
• Holds 31 issued and allowed patents for its fan-in-wing (HOVR Wing) technology, with the earliest expiry in 2035.
• Regained compliance with Nasdaq's $1.00 bid price rule and the Equity Standard for continued listing in January and June 2025, respectively.
• Identified a material weakness in internal control over financial reporting as of May 31, 2025, related to inadequate separation of financial responsibilities.

Sentiment

Score: 4

Explanation: The company reported a net income for FY2025, but this was primarily due to a non-recurring gain from a Forward Purchase Agreement termination, masking substantial increases in operating expenses and cash burn from operations. While significant progress is being made in eVTOL development and prototype testing, the company remains pre-revenue with a "substantial doubt" about its ability to continue as a going concern beyond the next 12 months without further capital raises. The identified material weakness in internal controls also adds a layer of concern.

Positives

• Reported a net income of $5.2 million CAD for FY2025, a significant improvement from a net loss of $8.16 million CAD in FY2024, largely due to a one-time gain from the termination of a Forward Purchase Agreement.
• Successfully completed flight testing of a 50%-scale Cavorite X7 prototype, which performed "significantly above initial expectations in respect to both power and stability."
• Is currently building a full-scale technical demonstrator aircraft, with flight testing expected to commence in 2026 or 2027.
• Possesses proprietary and patented fan-in-wing (HOVR Wing) technology, offering advantages in efficiency, lower noise, and multi-modal flight capabilities (CTOL, STOL, VTOL).
• Targets Type Certification prior to 2030 and believes the Cavorite X7 will be one of the first eVTOL aircraft certified for Flight into Known Icing (FIKI) conditions.
• The hybrid-electric power system allows for operation in austere locations without charging infrastructure and enables in-flight battery recharging.
• The Cavorite X7 is designed to carry 7 people (6 passengers, 1 pilot) with a useful load of 1,500 lbs (potentially 1,800 lbs in STOL/CTOL modes), which is almost twice the carriage capacity of many AAM peers.
• Anticipated speeds surpassing 250 miles per hour and a range over 500 miles are expected to be a disruptive force in Regional Air Mobility.
• The dual-use business model (civilian and military applications) provides a broader market and reduces certification risk for military purposes.
• Secured over $15 million CAD in cash on hand as of the filing date, which management expects to be sufficient to fund the current operating plan for at least the next 12 months.
• Regained compliance with Nasdaq listing requirements, specifically the Bid Price Rule and the Equity Standard.

Negatives

• The company is a pre-revenue organization and has incurred significant operating losses, expecting to continue doing so for the foreseeable future.
• Operating expenses increased significantly by $8.961 million CAD in FY2025, indicating a substantial increase in cash burn.
• Net cash used in operating activities increased by $6.004 million CAD to $9.312 million CAD in FY2025, reflecting higher operational costs without corresponding revenue generation.
• There is "substantial doubt" about the company's ability to meet the going concern assumption beyond the next 12 months without raising additional capital.
• A material weakness in internal control over financial reporting was identified as of May 31, 2025, due to inadequate separation of financial responsibilities.
• The company relies heavily on third-party suppliers for key emerging technologies, such as lithium-based batteries, many of which may be single or limited source suppliers.
• The eVTOL market is immature, and its projected growth potential is based on assumptions that may prove incorrect, impacting future demand.
• The company is subject to taxation in both Canada and the U.S. on its worldwide income, which could have a material adverse effect on its financial condition.
• Previously restated audited financial statements for FY2023 and unaudited interim statements for Q1 FY2024 due to reclassification of deferred development costs, which may affect investor confidence.
• Several Section 16(a) reports (insider trading reports) were filed late by directors and executive officers during the year ended May 31, 2025.

Risks

• Incurred losses and expects to incur significant expenses and continuing losses for the foreseeable future, and may not achieve or maintain profitability.
• The eVTOL market may not continue to develop, eVTOL aircraft may not be adopted by the transportation market, eVTOL aircraft may not be certified by authorities, or may not deliver expected cost/time savings.
• Success depends on the safety and positive public perception of its aircraft and the Regional Air Mobility services.
• Has a limited operating history and faces significant challenges to develop, certify, and manufacture its aircraft, with no experience in volume manufacturing.
• Forward-looking operating information and business plan forecasts rely on assumptions and analyses that may prove incorrect, leading to materially different actual results.
• Any delays in the design, production, completion, testing, or certification of the Cavorite X7 aircraft could adversely impact the business plan and financial condition.
• Adverse publicity stemming from any incident involving the company, competitors, or the eVTOL industry could have a material adverse effect on the business.
• Business plans require a significant amount of capital; future capital needs may require additional equity or debt securities that could dilute shareholders or introduce restrictive covenants.
• If the Cavorite X7 eVTOL aircraft fails to perform as expected, the ability to develop, market, and sell the aircraft could be harmed.
• Relies on third-party suppliers for key emerging technologies, components, and materials (e.g., lithium-based batteries), many of which may be single or limited source suppliers.
• The Cavorite X7 aircraft will make extensive use of lithium-based battery cells, which have been observed to catch fire or vent smoke and flame, posing safety risks and potential reputational harm.
• May not succeed in establishing, maintaining, and strengthening its brand, which would materially and adversely affect customer acceptance and anticipated sales.
• Business depends substantially on the continuing efforts of key employees and qualified personnel; loss of their services could severely disrupt operations.
• Faces significant cybersecurity risks to operational systems, security systems, infrastructure, integrated software in aircraft, and customer data.
• Risks related to natural disasters, health epidemics, and other outbreaks, which could significantly disrupt operations.
• May not be able to prevent others from unauthorized use of its intellectual property, which could harm its business and competitive position.
• Patent applications may not issue as patents, or issued patent rights may be contested, circumvented, invalidated, or limited in scope.
• May need to defend against patent or trademark infringement claims, which may be time-consuming and incur substantial costs.
• Subject to substantial and evolving regulation; unfavorable changes or failure to comply could substantially harm the business and operating results.
• Third-party air carriers operating the Cavorite X7 aircraft are subject to substantial regulation and laws; their non-compliance could harm the company's business.
• Subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions, and similar laws.
• May be subject to governmental export and import control laws and regulations as operations expand outside Canada, the U.S., and Europe.
• British Columbia law and the company's Articles contain certain anti-takeover provisions that limit the ability of shareholders to take certain actions and could delay or discourage takeover attempts.
• Management team may not successfully or efficiently manage its transition to being a public company.
• Will incur significant expenses and administrative burdens as a public company.
• Needs to improve operational and financial systems to support expected growth and increasingly complex business arrangements; inability to do so will adversely affect billing and reporting.
• As an emerging growth company, reduced SEC reporting requirements may make its shares less attractive to investors.
• Ability to utilize net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.
• Subject to Canadian and United States tax on worldwide income, which could result in double taxation.
• Dividends, if ever paid, on Class A ordinary shares will be subject to Canadian or United States withholding tax.
• The transfer of Class A ordinary shares may be subject to U.S. estate and generation-skipping transfer tax.
• Changes in tax laws may affect shareholders and other investors.
• An active market for its securities may not develop, which would adversely affect the liquidity and price of its securities.
• Failure to meet Nasdaq's continued listing requirements could result in a delisting of its securities.
• Reached a determination to restate certain previously issued audited financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues.
• If securities or certain industry analysts do not publish research or reports about the business or publish negative reports, share price and trading volume could decline.
• The price of Class A ordinary shares may decline, and investors could lose all or part of their investment due to volatility.
• There are no current plans to pay cash dividends on Class A ordinary shares for the foreseeable future, meaning investors may not receive any return on investment unless they sell shares at a greater price.
• If the company were to dissolve or wind-up operations, holders of Class A ordinary shares would not receive a liquidation preference.
• Raising additional capital could cause dilution to existing shareholders.
• Future sales, or the perception of future sales, by the company or its shareholders in the public market could cause the market price for Class A ordinary shares to decline.
• There is no guarantee that the Public Warrants will ever be in the money; they may expire worthless or the terms of warrants may be amended.
• The Warrant Agreement designates specific courts as the sole and exclusive forum for certain types of actions and proceedings, which could limit the ability of Public Warrant holders to obtain a favorable judicial forum.
• 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.

Future Outlook

The company anticipates commercialization of its Cavorite X7 aircraft beginning in 2028 or 2029, pending regulatory approval and certification. It expects to commence flight testing of a full-scale demonstrator aircraft in 2026 or 2027. The eVTOL market is projected by Morgan Stanley to reach USD $1 trillion by 2040 and USD $9 trillion by 2050. The company aims for Type Certification prior to 2030 and believes its aircraft will be one of the first eVTOLs certified for Flight into Known Icing conditions. Significant increases in operating expenses are expected in fiscal 2026 and beyond as development, production, and commercialization efforts accelerate. The company will require additional financing to achieve its long-term objectives.

Management Comments

• "We believe this aircraft will be a disruptive force to RAM travel."
• "We believe that the technology and configuration advantages of our Cavorite X7 aircraft will represent a significant market advantage."
• "It is anticipated that our aircraft will be significantly less expensive to own and operate than legacy helicopters with similar payload characteristics and will travel almost twice as fast."
• "We believe the combination of carrying more people or goods, traveling faster, and operating more efficiently will provide a strong economic model for broad adoption."
• "We expect that the technology we are developing for the Cavorite X7 aircraft may be broadly useful across the industry."
• "We believe this deep operational experience and design consideration has led to a machine concept that will support for-profit operators, thereby increasing demand for the aircraft."
• "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 Companys ability to meet the going concern assumption beyond that period without raising additional capital."
• "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."

Industry Context

The eVTOL aircraft market is a new and rapidly growing sector within the transportation industry, projected by Morgan Stanley to reach USD $1 trillion by 2040 and USD $9 trillion by 2050. This growth is driven by innovations in batteries, light materials, computing power, and propulsion. Regional Air Mobility (RAM) is a key focus, aiming to improve travel for distances between 50 and 500 miles, connecting remote communities, and aiding disaster relief. Governments are increasing support for sustainable aviation, with Canada investing $350 million CAD in the Initiative for Sustainable Aviation Technology (INSAT). The company's hybrid-electric, fan-in-wing design differentiates it from most competitors who pursue purely electric, open-rotor designs, offering advantages in range, speed, and operation in austere conditions.

Comparison to Industry Standards

• The Cavorite X7 is expected to travel at speeds surpassing 250 miles per hour, almost twice as fast as traditional helicopters.
• Its useful load of 1,500 lbs (potentially 1,800 lbs in STOL/CTOL modes) is almost twice the carriage capacity of many Advanced Air Mobility (AAM) peers.
• The aircraft is anticipated to be significantly less expensive to own and operate than legacy helicopters with similar payload characteristics.
• The hybrid-electric power system allows operation in austere locations without power, unlike other pure electric AAM aircraft designs that require charging stations.
• The company believes the Cavorite X7 will be one of the first eVTOL aircraft certified for Flight into Known Icing (FIKI) conditions, offering a significant operational advantage over competitors.
• While most AAM industry competitors rely on open rotor designs, New Horizon Aircraft employs a proprietary ducted fan-in-wing (HOVR Wing) technology, which is described as more efficient and quieter.

Corporate Governance

Related Party Transactions

• A Voting Agreement was entered into by the majority shareholder of Horizon with Pono and Legacy Horizon simultaneously with the execution of the Business Combination Agreement.
• Certain significant shareholders of Legacy Horizon entered into Lock-Up Agreements providing for a six-month lock-up period commencing at the Closing of the Business Combination.
• Each member of the Board entered into an Indemnity Agreement with Horizon in connection with the Closing of the Business Combination.
• Non-Competition and Non-Solicitation Agreements were entered into with E. Brandon Robinson, Jason ONeill, Brian Merker, and Stewart Lee for a two-year period following the Closing of the Business Combination.
• A Registration Rights Agreement was entered into with Pono, Legacy Horizon, the Sponsor, and certain executive officers and directors of Pono to provide for the registration of Class A ordinary shares issued to them in connection with the Business Combination.
• Employment Agreements were entered into with executive officers Brandon Robinson, Jason ONeill, and Brian Merker.
• A Contractor Agreement was entered into with 2195790 Alberta Inc. and Stewart Lee (Head of People & Strategy) for services.
• The company paid $8k CAD for facility design services to the spouse of an executive officer during the year ended May 31, 2025.
• The company paid $60k CAD for aircraft certification services to Cert Centre Canada (3C), an organization where John Maris (a Director) is the Chief Executive Officer and a shareholder.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances and warrant exercises, volatility in share price, and no anticipated cash dividends. The going concern warning and material weakness in internal controls pose significant risks to investment value.
• Employees benefit from stock options, performance share units, an employee share purchase plan (ESPP), and health/pension plans. The company's growth plans suggest increased hiring, but also potential for labor union activities.
• Customers could benefit from faster, more efficient, and cost-effective regional air travel once the Cavorite X7 is commercialized. However, the nascent nature of eVTOL technology and the certification process introduce inherent risks regarding safety and availability.
• Suppliers are critical for the provision and development of key emerging technologies and components. Delays or financial distress of single/limited source suppliers could impact the company's production timelines.
• Creditors face risks associated with the company's pre-revenue status, ongoing losses, and the "substantial doubt" about its ability to continue as a going concern without additional financing.
• Regulatory authorities (TCCA, FAA, EASA) are actively involved in the aircraft certification process, which is complex and lengthy, requiring the company to meet rigorous safety and performance standards.

Next Steps

• Complete the detailed design and build of the full-scale technical demonstrator aircraft.
• Commence flight testing of the full-scale demonstrator aircraft in 2026 or 2027.
• Target Type Certification prior to 2030.
• Pursue a Production Certificate for volume manufacturing.
• Achieve commercialization of aircraft, anticipated in 2028 or 2029.
• Increase staffing to support aircraft engineering and software development.
• Build production capabilities and engage suppliers for serial production of components.
• Further enhance research and development capacities for aircraft technology, components, hardware, and software performance.
• Work with third-party providers to train pilots, mechanics, and technicians in proprietary aircraft operation and maintenance.
• Develop and launch a digital platform and customer user interface.
• Develop sales and marketing activities and vertiport infrastructure.
• Strengthen compliance programs, including internal controls, intellectual property management, privacy, and cybersecurity.
• Remediate the identified material weakness in internal control over financial reporting by hiring additional personnel in fiscal year 2026.
• Continue efforts to raise additional working capital through at least the next several years.
• Explore locations for future scalable manufacturing operations.

Key Dates

Recommendation

Despite a reported net income for FY2025, this was primarily due to a non-recurring gain, masking significant and increasing operational losses. The company is pre-revenue, burning cash at an accelerated rate, and faces "substantial doubt" about its ability to continue as a going concern beyond the next 12 months without further capital raises. While technological progress is being made, the commercialization timeline is still several years out (2028-2029 at earliest), and the eVTOL market remains highly speculative and competitive. The identified material weakness in internal controls adds another layer of risk. For a seasoned investor, the fundamental financial instability, high cash burn, and reliance on future dilutive financing in a nascent industry outweigh the promising R&D, making a 'sell' recommendation prudent to mitigate significant downside risk.

Keywords

eVTOL, hybrid-electric aircraft, Regional Air Mobility, AAM, Cavorite X7, fan-in-wing, HOVR Wing, aerospace, aviation, Type Certification, TCCA, FAA, Nasdaq, 10-K, SEC filing, Canada, Ontario, aircraft development, prototype testing, corporate governance, financial reporting