Executive Summary / Key Takeaways

• Pioneering Hybrid-Electric eVTOL: New Horizon Aircraft (HOVR) is developing the Cavorite X7, a differentiated hybrid-electric eVTOL aircraft with patented fan-in-wing (HOVR Wing) technology, targeting the underserved Regional Air Mobility (RAM) market for both civilian and military applications.
• Technological Edge for Operational Utility: The Cavorite X7's hybrid power system and unique design promise superior speed (over 250 mph), range (over 500 miles), payload capacity (1,500 lbs VTOL, 1,800 lbs STOL/CTOL), and the potential for Flight into Known Icing (FIKI) certification, offering a significant operational advantage over pure-electric competitors.
• Pre-Revenue, High-Burn Development Phase: HOVR is in an intensive R&D and certification phase, with significant operating losses expected through fiscal 2026 and beyond, and commercialization anticipated in 2028-2029. Recent financing activities have provided liquidity for the next 12 months, but substantial additional capital will be required.
• Competitive Differentiation in a Nascent Market: While the eVTOL market is competitive, HOVR's hybrid approach stands out against the predominantly pure-electric designs of rivals like Joby Aviation (JOBY) and Archer Aviation (ACHR), positioning it for specific regional and dual-use niches where range and operational flexibility are paramount.
• Certification and Capital as Critical Hurdles: The path to Type Certification (targeting pre-2030) is long, complex, and costly. The company's ability to secure substantial additional financing and successfully navigate regulatory approvals will be crucial determinants of its long-term success and ability to scale production.

The Dawn of Regional Air Mobility: HOVR's Hybrid Vision

New Horizon Aircraft (NASDAQ:HOVR) is an advanced aerospace Original Equipment Manufacturer (OEM) at the forefront of the emerging Regional Air Mobility (RAM) market. The company is designing and developing the Cavorite X7, a hybrid-electric Vertical Takeoff and Landing (eVTOL) aircraft. This innovative 7-seat aircraft aims to revolutionize regional travel, connecting remote communities and providing critical support for disaster relief and military operations.

The company's journey began in 2013 as Robinson Aircraft, initially exploring amphibious aircraft. A strategic pivot in 2018 shifted its focus to the Cavorite X-series eVTOL concept, recognizing the transformative potential of advancements in electric motor and battery technologies. This reorientation positioned HOVR to address the burgeoning Advanced Air Mobility (AAM) market, which Morgan Stanley projects could reach USD 1 trillion by 2040 and USD 9 trillion by 2050.

The broader transportation landscape underscores this opportunity. NASA's 2021 Regional Air Mobility report highlights that only 30% of the over 5,000 U.S. airports support 70% of all travelers. This inefficiency, coupled with a public preference for road travel despite gridlock, creates a significant demand for improved regional connectivity. Governments, including Canada with its CAD 350 million Initiative for Sustainable Aviation Technology (INSAT), are actively supporting eVTOL development, a trend from which HOVR has already benefited with over CAD 2 million in grants.

The Cavorite X7: A Hybrid-Electric Technological Leap

At the heart of HOVR's investment thesis lies its proprietary "HOVR Wing" technology and hybrid-electric propulsion system, which offer distinct advantages over many competitors. Unlike the open rotor designs prevalent among many AAM industry players, the HOVR Wing utilizes a series of ducted electric fans concealed within the wings for vertical lift. After takeoff, the aircraft transitions to forward flight, closing the wings to achieve a highly efficient, traditional aircraft configuration.

This design enables impressive performance metrics: the Cavorite X7 is expected to travel at speeds surpassing 250 miles per hour (over 250 knots max dash cruise, 200 knots efficient enroute) with a range exceeding 500 miles. Its useful load capacity of 1,500 lbs in VTOL mode (increasing to 1,800 lbs in STOL/CTOL modes) is almost double that of many AAM peers. The hybrid-electric system, combining an on-board generator driven by an internal combustion engine with a battery array, provides dual power sources for vertical flight, reduces battery size, allows in-flight recharging, and enhances safety. This architecture enables operations in austere locations without power infrastructure, a critical differentiator from pure-electric designs reliant on charging stations.

Safety is paramount in the Cavorite X7's design. The 50%-scale prototype successfully hovered with 20% of its fans disabled, demonstrating redundancy. Each fan unit is electrically, mechanically, and thermally isolated to prevent cascading failures. The generator can support full electrical demand for the vertical fan array at moderate forward speeds, offering a backup in case of catastrophic battery failure. Furthermore, the aircraft can fly normally with wings and canards in the open position if they fail to move, and can perform conventional or short takeoffs and landings if the vertical lift system fails.

A key operational differentiator is the Cavorite X7's potential for Flight into Known Icing (FIKI) certification. Its ability to fly enroute like a traditional aircraft, with only one exposed propeller (which can be electrically heated) and electrothermal coatings on lift surfaces, positions it as one of the few viable VTOL designs for such conditions. This significantly expands operational utility, especially in regions with challenging weather. The ducted fans also contribute to lower noise levels, allowing for operations closer to population centers.

Competitive Landscape: Carving a Niche with Hybrid Power

The eVTOL market is intensely competitive, with numerous players vying for market share. HOVR's primary competition stems from companies pursuing both purely electric and, increasingly, hybrid-electric designs for regional air mobility. While many competitors, such as Joby Aviation and Archer Aviation, focus on pure-electric urban air mobility, HOVR's hybrid approach provides a distinct competitive edge, particularly for regional applications.

Joby Aviation, for instance, has demonstrated strong progress in certification and government contracts, with a current ratio of 20.14 and a negative P/E ratio of -9.36, reflecting its heavy investment phase. Archer Aviation, similarly, focuses on urban air taxi services, showing a current ratio of 12.07 and a P/E of -6.84. Lilium (LILM), with its electric jet design, also operates in this nascent market, exhibiting a current ratio of 0.84 and a P/E of -1.40. These companies, while innovative, are largely constrained by battery technology for extended range and operations in diverse weather conditions.

HOVR's Cavorite X7, with its hybrid system, directly addresses these limitations. Its projected range of over 500 miles and speeds exceeding 250 mph significantly surpass the typical capabilities of many pure-electric eVTOLs. The ability to operate in austere locations without charging infrastructure, coupled with the potential for FIKI certification, positions HOVR uniquely for missions like medevac, remote resupply, disaster relief, and military operations. This operational flexibility and resilience are key differentiators, giving HOVR a stronger value proposition in segments where pure-electric solutions fall short.

While HOVR's current financial metrics, such as a P/E ratio of 12.61 and a P/B ratio of 25.32, reflect its pre-revenue, high-growth stage, its competitive strategy is to leverage its technological advantages to capture market share in specific, high-value niches. The company's focus on a dual-use (civilian and military) business model further reduces certification risk, as military aircraft do not require the same TCCA/FAA approvals. This strategic adaptability allows HOVR to pursue multiple revenue streams as it scales.

Financial Performance and Liquidity: Fueling Future Flight

New Horizon Aircraft is currently a pre-revenue company, deeply invested in research, development, and flight testing. For the fiscal year ended May 31, 2025, the company reported a net income of CAD 5.20 million, a notable shift from a net loss of CAD 8.16 million in 2024. This income, however, was primarily driven by a significant non-recurring gain of CAD 21.40 million from the termination of a Forward Purchase Agreement in November 2024, rather than operational revenue.

Operating expenses saw a substantial increase, rising from CAD 4.62 million in 2024 to CAD 13.59 million in 2025. This 8.96 million CAD variance reflects intensified development efforts and the costs associated with being a public company. Research and development expenses grew from CAD 0.88 million to CAD 3.66 million, driven by increased labor for flight testing, engineering, software development, and prototype manufacturing. General and administrative costs also surged from CAD 3.74 million to CAD 9.93 million, covering legal, accounting, investor relations, and marketing expenses.

The company's liquidity position is critical for its long-term objectives. As of the 10-K filing date (August 22, 2025), HOVR had over CAD 15 million in cash on hand. Management anticipates these funds will cover operating plans for at least the next 12 months. However, the company acknowledges "substantial doubt around the Company's ability to meet the going concern assumption beyond that period without raising additional capital."

HOVR has actively pursued financing to support its ambitious plans. In August 2024, a registered securities offering generated CAD 6.22 million in net proceeds. Further, a December 2024 private placement of Class A ordinary shares and Series A preferred shares raised CAD 8.36 million. In March 2025, the company initiated an At-The-Market (ATM) offering for up to USD 6.25 million, raising CAD 0.88 million by May 31, 2025, and subsequently increasing the ATM offering to an additional USD 16.50 million in June 2025. These ongoing capital raises are essential to fund the significant investments required for final engineering, prototyping, flight testing, manufacturing, and certification.

Outlook and Risks: The Path to Commercialization

HOVR's outlook is defined by its ambitious development and certification timeline. The company anticipates commencing flight testing of its full-scale technical demonstrator aircraft in 2026 or 2027, with commercialization and initial aircraft sales targeted for 2028 or 2029. Type Certification, a prerequisite for commercial operations, is aimed for prior to 2030. This aggressive schedule is supported by strategic partnerships, such as the collaboration with Cert Centre Canada (3C) for TCCA certification and initial discussions with the FAA for a parallel program.

Management expects operating expenses and losses to be "significantly higher in fiscal 2026 and beyond" as development, production, and commercialization efforts accelerate. The company plans to increase hiring to bolster engineering and certification teams. The successful fan-in-wing forward transition flights in May 2025 with the large-scale prototype represent a significant operational milestone, validating the core technology and reinforcing the company's confidence in its performance targets.

Despite these promising developments, significant risks remain. The nascent eVTOL market's growth is based on assumptions that may not materialize as expected, impacting demand. Certification is a lengthy and costly process, with no guarantee of timely or commercially viable approval. HOVR has no experience in volume manufacturing, and scaling production efficiently and cost-effectively presents a major challenge. The reliance on third-party suppliers for key emerging technologies, particularly lithium-based batteries, introduces supply chain and safety risks. Furthermore, the company's dual taxation status in Canada and the U.S. could adversely affect financial results.

HOVR also faces the ongoing challenge of maintaining Nasdaq listing compliance, though it successfully regained compliance with the minimum bid price and equity standards in early 2025. The prior restatement of financial statements, while addressed, could impact investor confidence. The need for substantial additional capital, potentially through dilutive equity offerings, remains a critical factor for investors to monitor.

Conclusion

New Horizon Aircraft stands at a pivotal juncture, poised to disrupt regional air mobility with its innovative Cavorite X7 hybrid-electric eVTOL aircraft. The company's patented HOVR Wing technology, combined with its hybrid power system, offers compelling advantages in speed, range, payload, and all-weather operational capability, setting it apart from many pure-electric competitors. This technological differentiation, coupled with a dual-use market strategy, forms the core of its investment thesis.

While HOVR has demonstrated significant operational progress, including successful prototype flight testing and strategic partnerships, the path to commercialization is capital-intensive and fraught with regulatory and manufacturing complexities. The company's ability to secure the necessary financing, navigate the rigorous certification process, and scale production efficiently will be paramount. For investors with a long-term horizon and an appetite for the transformative potential of advanced air mobility, HOVR represents a high-risk, high-reward opportunity, where technological leadership and strategic execution will ultimately determine its flight path to success.