Executive Summary / Key Takeaways

• Hybrid-Electric Differentiator: Horizon Aircraft is pioneering regional air mobility with its Cavorite X7, a hybrid-electric eVTOL aircraft that offers superior range, payload capacity (680 kg), speed (nearly twice that of helicopters), and significantly lower operating costs ($1.93 per passenger mile vs. $4.64 for a Bell 429) compared to pure-electric counterparts and traditional rotorcraft. This technology, including its patented fan-in-wing design, positions it uniquely for diverse applications from medevac to military.
• Strategic Dual-Use Market Entry: The company's dual-use strategy, targeting both civilian and NATO military customers, provides a crucial pathway to early adoption and potentially de-risks certification, as military aircraft do not require the same extensive TCCA or FAA approvals.
• Intensified Development and Capital Needs: As a pre-revenue entity, Horizon Aircraft's financial performance reflects significant investment in R&D, with a net loss of CAD 10.903 million for the three months ended August 31, 2025. While current cash of CAD 16.267 million is projected to fund operations for the next 12 months, substantial additional capital will be required for certification and commercialization beyond that period.
• Competitive Niche and Execution Risk: Horizon Aircraft occupies a distinct niche by combining proven technologies within an innovative design, offering a lower technological risk compared to some pure-play eVTOL developers. However, it faces intense competition and the inherent execution risks of a capital-intensive, highly regulated industry, particularly regarding timely certification and scaling production.
• Outlook and Valuation: With a full-scale demonstrator expected for flight testing in 2027 and a target for Transport Canada certification in 2028, the company is on a defined path to commercialization. Analyst sentiment suggests significant upside potential, with an average 12-month price target of $11.00, reflecting optimism for its long-term market penetration.

The Dawn of Regional Air Mobility and Horizon's Hybrid Vision

New Horizon Aircraft Ltd. (NASDAQ:HOVR), operating as Horizon Aircraft, is an aerospace company at the forefront of the burgeoning regional air mobility (RAM) market. Founded in 2013 and later becoming a public entity in March 2022, the company is dedicated to designing and developing the Cavorite X7, a hybrid-electric vertical takeoff and landing (eVTOL) aircraft. This 7-seat aircraft is engineered to bridge the gap between traditional helicopters and emerging urban air taxis, offering a compelling solution for regional transportation needs.

The global eVTOL market, valued at $0.76 billion in 2024, is projected for explosive growth, with estimates reaching $6.5 billion by 2031 and $17.3 billion by 2035, driven by the demand for faster, more efficient, and environmentally conscious air travel. Horizon Aircraft's strategy is to capture a significant share of this expanding market by offering a versatile aircraft for diverse applications, including medevac, firefighting, disaster relief, remote medical services, air cargo, business travel, and air-taxi services. A key differentiator is its dual-use business model, which aims to certify the Cavorite X7 for both civilian and NATO military applications. This approach not only broadens the potential customer base but also strategically mitigates certification risks, as military aircraft do not require the same stringent TCCA or FAA approvals as their civilian counterparts.

Technological Edge: The Cavorite X7's Differentiated Power

At the heart of Horizon Aircraft's investment thesis lies its innovative Cavorite X7 and its patented fan-in-wing technology. Unlike many pure-electric eVTOL designs, the Cavorite X7 employs a hybrid-electric propulsion system. This allows the aircraft to perform 98% of its mission like a conventional airplane, utilizing its fans only for vertical takeoff and landing. This design choice provides significant tangible benefits that directly address some of the primary limitations of pure-electric eVTOLs.

The Cavorite X7 is designed to offer greater range, speed, and payload capacity within its class. It can fly almost twice as fast as a helicopter and operate with significantly lower direct operating costs. Quantitatively, the Cavorite X7 boasts a substantial 680 kg payload capacity, significantly higher than the less than 500 kg useful payload of most other eVTOLs. Furthermore, it is designed to carry 7 people, exceeding the 5-person capacity of some competitors. The economic advantage is striking: the company estimates a cost per passenger mile of $1.93 for the Cavorite X7, a remarkable 58% to 64% reduction compared to $4.64 for a Bell 429 helicopter, alongside an almost 90% increase in speed.

Beyond these performance metrics, the hybrid nature of the Cavorite X7 offers critical operational flexibility. It does not rely on extensive charging infrastructure, enabling it to operate from virtually any flat surface, a crucial advantage for regional and remote operations. The company is also pursuing "Flight Into Known Icing" certification, which would allow all-weather operations, a prerequisite for commercial service in many regions. Horizon Aircraft's R&D initiatives further underscore its commitment to technological leadership. The company was recently awarded a CAD 2.0 million non-dilutive grant for its "CRYSTAL" all-weather eVTOL project, in partnership with Flight Centre of Excellence (3C) and the University of Toronto. This project aims to develop a safe, all-weather eVTOL propulsion system capable of flying in conditions that challenge most helicopters. Strategic partnerships with industry leaders like Pratt & Whitney Canada (RTX), for its world-leading PT6A engine, and MT-Propeller, for advanced composite propellers, further enhance the Cavorite X7's performance, efficiency, and noise reduction capabilities. The company is also exploring future advancements, including hydrogen eVTOL propulsion with ZeroAvia for zero-emission regional air travel solutions. These technological differentiators collectively form a strong competitive moat, positioning Horizon Aircraft for potentially higher average selling prices, lower operational costs for customers, and ultimately, stronger margins and market penetration in the long term.

Competitive Arena: Carving a Niche in a Crowded Sky

The eVTOL industry is dynamic and increasingly competitive, with Horizon Aircraft vying for market share against both traditional aerospace players and a new generation of electric aviation companies. Key direct competitors include Joby Aviation (JOBY), Archer Aviation (ACHR), and Lilium NV (LILM), each pursuing distinct strategies within the advanced air mobility landscape.

Horizon Aircraft's Cavorite X7, with its hybrid-electric design, carves out a unique niche. While competitors like Joby and Archer primarily focus on fully electric urban air mobility solutions, Horizon's hybrid approach offers a qualitative advantage in versatility, particularly for regional applications requiring longer range, higher payloads, and operational independence from charging infrastructure. The Cavorite X7's 7-seat capacity and 680 kg payload significantly surpass the capabilities of many pure-electric eVTOLs, which often carry fewer passengers and have more limited cargo capacity. This positions Horizon Aircraft to compete less directly with urban air taxis and more within the light regional aircraft or small business aircraft segments.

Compared to Joby Aviation, which has made significant strides in regulatory approvals and scalability for urban air mobility, Horizon's focus on regional markets and its hybrid technology could offer superior performance in areas with less developed infrastructure. However, Joby's more advanced progress in securing high-profile collaborations may give it an edge in market positioning and innovation speed. Similarly, Archer Aviation, with its aggressive commercialization timeline for urban air taxi services, might outpace Horizon in initial market rollout. Yet, the Cavorite X7's hybrid system could provide a qualitative edge in endurance and payload, making it more suitable for specific regional missions.

Lilium NV, with its focus on high-speed electric jets for regional connectivity, presents a different competitive angle. While Lilium emphasizes speed and advanced aerodynamic features, Horizon's hybrid system offers a balance of performance and operational flexibility. Horizon's competitive advantage also stems from its approach of combining proven, mature subsystems, which can translate to lower technological risk compared to some competitors pushing entirely novel designs. However, Horizon's smaller scale and reliance on external funding could lead to slower growth rates and potentially weaker cash flow generation compared to its more heavily capitalized rivals. The high barriers to entry in the eVTOL industry, including substantial R&D costs and stringent certification requirements, both protect Horizon's niche and present significant challenges to its financial performance and operational execution.

Financial Trajectory: Investment in Innovation, Path to Revenue

As a pre-revenue organization in a critical research and development and flight-testing phase, Horizon Aircraft's financial statements reflect its substantial investment in future growth. For the three months ended August 31, 2025, the company reported a net loss of CAD 10.903 million, a significant increase from the CAD 2.911 million net loss in the comparable period of 2024. This expanded loss is primarily attributable to increased operating expenses, which rose by CAD 3.204 million to CAD 5.909 million.

A deep dive into operating expenses reveals the company's intensified development efforts. Research and development expenses surged to CAD 2.719 million for the quarter, up from CAD 297 thousand in the prior year, driven by additional labor for flight testing, engineering work, flight software, prototype manufacturing, and data analysis. General and administrative costs also increased to CAD 3.190 million, largely due to higher stock-based compensation for employees and third-party service providers. These figures underscore that current losses are a direct consequence of strategic investments in bringing the Cavorite X7 to market, rather than operational inefficiencies.

Liquidity remains a critical focus for Horizon Aircraft. As of August 31, 2025, the company held CAD 16.267 million in cash and cash equivalents, a notable increase from CAD 7.547 million at May 31, 2025. Management estimates this cash position will be sufficient to fund its current operating plan for at least the next 12 months from the 10-Q filing date of October 10, 2025. However, the company explicitly states there is substantial doubt about its ability to meet the going concern assumption beyond this period without raising additional capital.

Horizon Aircraft has been proactive in securing financing. During the three months ended August 31, 2025, it raised CAD 8.253 million from the sale of 3.45 million Class A ordinary shares under a Sales Agreement, with CAD 14.80 million USD remaining available under this facility. Additionally, warrant exercises generated CAD 2.970 million in proceeds. The recent CAD 2.0 million non-dilutive grant from the INSAT program further bolsters its development funding. While the company's TTM P/B ratio of 7.01 is significantly higher than some competitors, it reflects market optimism for its future potential rather than current profitability, given its pre-revenue status. The absence of revenue means traditional profitability margins (Gross, Operating, Net) are currently 0.00%.

Outlook and Hurdles: The Road to Commercialization

Horizon Aircraft is on a clear, albeit challenging, trajectory toward commercialization. The company expects to complete its full-scale prototype by 2026 and commence flight testing in 2027. The ambitious target for Transport Canada certification is 2028, with initial deliveries also anticipated in the same year, though some analysts suggest 2029 is a more realistic timeline given the complexities of aerospace certification.

The path forward, however, is not without significant hurdles. The most pressing is the need for substantial additional financing beyond the next 12 months. The certification process itself is notoriously long, complex, and capital-intensive, often spanning more than five years and requiring significant investment. There is no guarantee that the Cavorite X7 will achieve certification, and any delays or failures could materially impact the company's business and financial condition. Furthermore, the variable costs associated with assembling the aircraft at scale remain uncertain, posing a risk to future profitability.

The regional air mobility market, while promising, is still immature, and there is no guarantee of future demand. Macroeconomic factors could also dampen customer adoption, particularly if eVTOL services are priced at a premium to ground-based alternatives. Operationally, the company has identified a material weakness in its internal controls related to the inadequate separation of financial responsibilities, which it aims to remediate by May 31, 2026. Despite these risks, the market shows considerable optimism. Analysts currently hold a "Moderate Buy" consensus rating for HOVR, with an average 12-month price target of $11.00, representing a forecasted upside of 456.96% from its current price. This outlook is predicated on successful execution of its development and certification roadmap, and the realization of its hybrid technology's competitive advantages.

Conclusion

Horizon Aircraft stands at a pivotal juncture, poised to disrupt regional air mobility with its differentiated hybrid-electric Cavorite X7. The company's strategic focus on a dual-use model, targeting both civilian and military applications, coupled with its patented fan-in-wing technology, offers a compelling value proposition of extended range, higher payload, greater speed, and lower operating costs compared to many emerging eVTOLs. These technological advantages, supported by key partnerships and government grants, form the bedrock of its long-term growth strategy.

While the current financial landscape reflects significant investment in R&D and the inherent capital intensity of aerospace development, the company's defined path to commercialization, with flight testing anticipated in 2027 and certification targets for 2028, provides a clear roadmap for investors. The critical challenge remains securing the substantial additional capital required to bridge the gap to commercial revenue and successfully navigate the rigorous certification process. For investors with a high tolerance for early-stage risk and a long-term vision for sustainable air mobility, Horizon Aircraft represents a high-potential opportunity, where technological leadership could ultimately translate into significant market share and shareholder value in the evolving skies of regional air travel.