10-Q: New Horizon Aircraft Reports Wider Loss Amid R&D Surge

New Horizon Aircraft Ltd. reported a significant increase in net loss for the quarter and six months ended November 30, 2025, driven by accelerated research and development for its eVTOL aircraft, while bolstering liquidity through equity sales and grants.

Summary

• New Horizon Aircraft Ltd. (HOVR) reported a net loss of $(8,650) thousand CAD for the three months ended November 30, 2025, a substantial increase from a net income of $19,664 thousand CAD in the prior year period.
• For the six months ended November 30, 2025, the net loss was $(19,553) thousand CAD, compared to a net income of $16,753 thousand CAD for the same period in 2024.
• Research and development expenses surged to $2,608 thousand CAD for the three months and $5,327 thousand CAD for the six months ended November 30, 2025, up from $427 thousand CAD and $724 thousand CAD respectively in the prior year, primarily due to full-scale prototype aircraft development.
• Cash and cash equivalents significantly increased to $24,304 thousand CAD as of November 30, 2025, from $7,547 thousand CAD at May 31, 2025, largely due to financing activities.
• The company successfully raised $19,092 thousand CAD from the sale of Class A ordinary shares under a Sales Agreement during the six months ended November 30, 2025, with $31.8 million USD remaining eligible for sales.
• New Horizon Aircraft received notification in October 2025 that its application for the Canadian government's Initiative for Sustainable Aviation Technology (INSAT) fund was successful, potentially reimbursing up to 40% of a $10.5 million project.
• A material weakness in internal control over financial reporting, related to inadequate separation of financial responsibilities, was identified, with remediation targeted by May 31, 2026.
• Management expects current cash to fund operations for at least the next 12 months, but substantial doubt exists regarding the company's ability to meet the going concern assumption beyond that period without additional capital.

Sentiment

Score: 4

Explanation: While the company significantly improved its cash position and secured grant funding, the substantial increase in net losses, the explicit 'going concern' warning beyond 12 months, and the identified material weakness in internal controls present significant concerns. The progress in R&D and capital raising are positive, but the financial performance and governance issues weigh heavily on the sentiment.

Positives

• Cash and cash equivalents significantly increased to $24,304 thousand CAD as of November 30, 2025, from $7,547 thousand CAD at May 31, 2025, providing enhanced liquidity.
• Successfully raised $19,092 thousand CAD through the sale of Class A ordinary shares under a Sales Agreement, demonstrating access to capital markets.
• The maximum aggregate offering price under the Sales Agreement was increased to $50 million USD, with $31.8 million USD remaining available for future sales, providing a clear path for additional capital.
• Warrant exercises generated $3,282 thousand CAD in proceeds during the six months ended November 30, 2025.
• Successful application for the Canadian government's INSAT fund, which could reimburse up to 40% of a $10.5 million project, providing non-dilutive funding for sustainable aviation technology.
• Received $50 thousand CAD from the Downsview Aerospace Innovation and Research Centre (DAIR) Green Fund for an eVTOL wing engineering project.
• Performance Share Units (PSUs) vested on September 26, 2025, upon the company achieving a market capitalization of $100 million USD, indicating a significant valuation milestone.
• Progress in developing the full-scale demonstrator aircraft, with flight testing expected to commence in 2027, moving closer to commercialization.

Negatives

• Reported a net loss of $(8,650) thousand CAD for the three months ended November 30, 2025, a significant decline from a net income of $19,664 thousand CAD in the prior year.
• The net loss for the six months ended November 30, 2025, was $(19,553) thousand CAD, compared to a net income of $16,753 thousand CAD in the same period of 2024.
• Substantial doubt exists regarding the company's ability to meet the going concern assumption beyond the next 12 months without raising additional capital.
• Identified a material weakness in internal control over financial reporting due to inadequate separation of financial responsibilities, which could impact financial reporting reliability.
• Operating expenses increased by $1,843 thousand CAD for the three months and $5,048 thousand CAD for the six months ended November 30, 2025, primarily driven by increased R&D costs.
• The change in fair value of Warrants resulted in a $3,992 thousand CAD expense for the three months and $9,129 thousand CAD for the six months ended November 30, 2025, negatively impacting net income.

Risks

• The company is a pre-revenue organization in a research and development and flight-testing phase, with no guarantee of future demand for its Regional Air Mobility (RAM) aircraft.
• The market for Regional Air Mobility (RAM) is currently immature, and the company's revenue is directly tied to its continued development.
• Significant investment is required for final engineering designs, prototyping, flight testing, manufacturing, software development, certification, and pilot training leading up to commercialization.
• Competition from traditional helicopters, ground-based mobility solutions, and other eVTOL developers is expected to be dynamic and increasingly competitive.
• Obtaining Type Certification for the Cavorite X7 aircraft from Transport Canada Civil Aviation (TCCA) and the Federal Aviation Association (FAA) is a long, complex, and capital-intensive process, with no guarantee of success.
• Failure to obtain required authorization or certifications in a timely manner could prevent the company from fulfilling sales of its commercial aircraft.
• The variable cost associated with assembling aircraft at scale remains uncertain at this stage of development.
• The identified material weakness in internal control over financial reporting could adversely affect the company's ability to record, process, summarize, and report financial information.

Future Outlook

The company anticipates commencing flight testing of its full-scale demonstrator aircraft in 2027 and expects commercialization of its Cavorite X7 aircraft prior to 2030. It plans to increase staffing for engineering and software development and expects research and development expenses to continue to rise. While current cash is sufficient for the next 12 months, additional financing will be required for long-term objectives and to potentially expedite business plans.

Management Comments

• Management estimates that cash and cash equivalents on-hand as of November 30, 2025, will be sufficient to fund the current operating plan for at least the next 12 months from the date these unaudited condensed interim consolidated financial statements were available to be issued.
• There is substantial doubt around the company's ability to meet the going concern assumption beyond the next 12 months without raising additional capital.
• The company 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.
• Management, including the principal executive officer and principal financial and accounting officer, believes that the unaudited condensed interim consolidated financial statements contained in this Quarterly Report fairly present, in all material respects, the financial condition, results of operations and cash flows for the fiscal period presented in conformity with GAAP, notwithstanding the identified material weakness.
• The company is in the process of formalizing additional internal controls and is targeting remediation of the material weakness prior to the end of its current fiscal year-ending May 31, 2026.

Industry Context

New Horizon Aircraft operates in the nascent but rapidly evolving Regional Air Mobility (RAM) market, specifically focusing on hybrid-electric eVTOL aircraft. The industry is characterized by significant R&D investment, long certification processes, and intense competition from both traditional aerospace players and other eVTOL startups. The company's dual-use strategy (civilian and military) aims to mitigate certification risks and broaden market opportunities, aligning with broader trends in defense and sustainable aviation. Government initiatives like Canada's INSAT fund highlight increasing public sector support for sustainable aviation technologies, which could benefit early movers like New Horizon Aircraft.

Comparison to Industry Standards

• The company's pre-revenue status and significant R&D expenditures are typical for early-stage eVTOL developers, such as Joby Aviation, Archer Aviation, and Lilium, which are also heavily investing in prototyping, testing, and certification.
• The long and complex certification process, often spanning more than five years and requiring significant capital, is a standard challenge across the eVTOL industry, as seen with companies pursuing FAA Part 23 or Part 27/29 certifications.
• The reliance on experienced aircraft manufacturing partners and supply chain vendors is a common strategy among eVTOL companies to optimize capital use and leverage existing aerospace expertise, similar to partnerships seen with Archer Aviation and Stellantis, or Joby Aviation and Toyota.
• The dual-use business model, targeting both civilian and military applications, is a strategy also pursued by some competitors (e.g., Joby Aviation's contracts with the U.S. Air Force) to diversify revenue streams and potentially accelerate development or certification pathways for military variants.

Corporate Governance

Legal Proceedings

• The company is not party to any material legal proceedings. From time to time, it may be involved in legal proceedings or subject to claims incident to the ordinary course of business, with inherently uncertain outcomes.

Related Party Transactions

• Paid $60 thousand CAD to Cert Centre Canada (3C) for certification planning services during the six months ended November 30, 2025. One of the company's Board of Directors is the Chief Executive Officer of 3C.

Stakeholder Impact

• **Shareholders**: Potential for dilution from ongoing equity sales under the Sales Agreement. Increased R&D spending and net losses could impact short-term share value, but successful development and certification could lead to long-term gains. The 'going concern' warning introduces risk.
• **Employees**: Increased staffing for R&D and engineering activities indicates growth in employment opportunities. Stock-based compensation and PSUs provide incentives.
• **Customers (future)**: Progress towards a full-scale demonstrator and certification indicates the company is moving closer to delivering its eVTOL aircraft for various applications (medevac, firefighting, military, air cargo, air-taxi).
• **Creditors**: The 'going concern' warning could raise concerns, but the improved cash position and access to capital through the Sales Agreement provide some reassurance regarding short-term liquidity.
• **Suppliers**: Increased R&D and prototype building activities suggest increased demand for materials and services from suppliers.

Next Steps

• Continue designing and developing the hybrid-electric eVTOL prototype aircraft (Cavorite X7).
• Build the full-scale demonstrator aircraft, with flight testing expected to commence in 2027.
• Pursue Type Certification with Transport Canada Civil Aviation (TCCA) and the Federal Aviation Association (FAA) for the Cavorite X7 aircraft.
• Implement and validate measures to remediate the material weakness in internal control over financial reporting, targeting completion by May 31, 2026.
• Continue efforts to raise additional capital through the Sales Agreement, warrants, or other financing means to support long-term objectives and ongoing operations beyond the next 12 months.
• Utilize funding from the INSAT grant for the approved project over the next six quarters.

Key Dates

Recommendation

New Horizon Aircraft is a pre-revenue company in a high-growth, high-risk sector. While the significant increase in net losses and the 'going concern' warning are concerning, the company has successfully raised substantial capital, secured government grants, and is making tangible progress on its full-scale prototype. The dual-use strategy and remaining capital raise capacity provide a runway for continued development. However, the identified material weakness in internal controls adds a layer of governance risk. Given the early stage of development and the mix of positive funding news against increased losses and operational risks, a 'hold' recommendation is appropriate. Investors should monitor progress on certification, internal control remediation, and further capital raises before making a more definitive investment decision.

Keywords

eVTOL, hybrid-electric aircraft, aerospace, regional air mobility, Cavorite X7, SEC filing, Form 10-Q, financial results, research and development, capital raise, going concern, internal controls, aircraft certification, INSAT, Nasdaq