{"url_path":"/sec/hovr/10-k/2026/item-1","section_key":"item-1","section_title":"Item 1 Business.","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-16","source_url":"https://www.sec.gov/Archives/edgar/data/1930021/0001213900-26-078490-index.html","accession_number":"0001213900-26-078490","cik":"0001930021","ticker":"HOVR","issuer_name":"New Horizon Aircraft Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1930021/0001213900-26-078490-index.html","primary_entity_key":"0001930021","primary_entity_name":"New Horizon Aircraft Ltd."},"word_count":4911,"has_tables":true,"body_markdown":"Item 1. Business.\n\n \n\nOverview\n\n \n\nWe are an advanced aerospace\nOriginal Equipment Manufacturer (“OEM”) that is designing and building a next generation hybrid-electric Vertical Takeoff\nand Landing (“eVTOL”) aircraft for the Regional Air Mobility (“RAM”) market. Our aircraft aims to offer a more\nefficient way to move people and goods at a regional level, from 50 to 500 miles, help to connect remote communities, and improve our\nability to deal with an increasing number of climate-related natural disasters such as wildfires, floods, and droughts.\n\n \n\nThe product we are building\nis a hybrid electric 7-seat aircraft, coined the Cavorite X7, that can take-off and land vertically like a helicopter. However, unlike\na traditional helicopter, for the majority of its flight the aircraft will fly in a configuration much like a traditional airplane. This\nwould allow the Cavorite X7 to fly faster, farther, and operate more efficiently than a traditional helicopter. Expected to travel at\nspeeds surpassing 250 miles per hour at a range over 500 miles, we believe this aircraft will be a disruptive force to RAM travel.\n\n \n\nThe new and developing eVTOL aircraft market has been made possible\nby a convergence of innovation across many different technologies. Batteries, strength of light materials, computing power, simulation,\nand propulsion technology have all crossed a critical threshold to enable viable aircraft designs such as our Cavorite X7. This has resulted\nin the establishment and rapid growth of the Advanced Air Mobility (“AAM”) market. Morgan Stanley has projected that the AAM\nmarket could reach $USD 1 trillion (in the base case) by 2040 and $USD 9 trillion by 2050.\n\n \n\nThe Cavorite X7 architecture\nis based on our patented fan-in-wing (“Horizon Omni-modal Vertical (HOVR) Wing” or “HOVR Wing”) technology, which\nhas been developed and tested over the last several years. While most of our competitors in the AAM industry rely on open rotor designs,\nour HOVR Wing uses a series of ducted electric fans located inside the wings to produce vertical lift. After vertical takeoff, the aircraft\naccelerates forward. At a safe speed, the wings close to conceal the fans inside the wings and the aircraft returns to a highly efficient\nconfiguration. The ability to take off and land like a helicopter and fly forward like an airplane is the key differentiator to its performance.\n\n \n\n \n\n*A rendering of Horizon’s full-scale\ndemonstrator aircraft that is currently being built.* \n\n \n\n3\n\n \n\n \n\nThe aircraft is powered by a hybrid-electric main engine. For vertical\nflight, electrical power for the powerful ducted fans in the wings and canards comes from two sources: an on-board generator driven by\nan internal combustion engine and an array of batteries. Augmenting the battery power with generator power allows us to reduce battery\nsize, recharge the aircraft after vertical takeoff or landing, and increase safety. This aircraft will be able to operate in austere locations\nwithout power, unlike other pure electric AAM aircraft designs that will be forced to fly from charging station to charging station.\n\n \n\nWe believe that the technology\nand configuration advantages of our Cavorite X7 aircraft will represent a significant market advantage. It is anticipated that our aircraft\nwill be significantly less expensive to own and operate as compared to legacy helicopters with similar payload characteristics and will\ntravel almost twice as fast. The specifications for the aircraft include the capability to transport seven people with a useful load of\n1,500 lbs., almost twice the carriage capacity of many of our AAM peers. We believe the combination of carrying more people or goods,\ntraveling faster, and operating more efficiently will provide a strong economic model for broad adoption.\n\n \n\nOur business operating model\nis predicated on building and selling the Cavorite X7 aircraft for both civilian and military use. We also believe that the extensive\nintellectual property developed to enable the successful operation of our aircraft could be licensed to third parties to generate significant\nprofit.\n\n \n\nWe have designed, built, and completed flight testing of a 50%-scale\nprototype of our Cavorite X7 aircraft. This large-scale prototype has been through hover testing and successfully transitioned to forward\nflight. We have also partnered with Cert Centre Canada (“3C”) for development of a certification basis that will be used to\nform the foundation for Type Certification with Transport Canada Civil Aviation (“TCCA”). Receiving a Type Certificate\nin accordance with stated regulatory standards will certify compliance to applicable airworthiness standards for the Cavorite X7, a prerequisite\nfor using the aircraft in commercial operations. We believe our aircraft will be one of the first eVTOL aircraft to be certified for flight\ninto known icing conditions (“FIKI”), dramatically increasing operational utility. We are targeting Type Certification prior\nto 2030.\n\n \n\nPatents and other Intellectual Property\n\n \n\nIn order to protect the novel\ntechnologies that underpin the Cavorite X7 design, we have accumulated 31 issued and allowed patents thus far, the earliest expiry of\nwhich will be 2035. The most significant of these patents are US non-provisional utility patents that protect the core fan-in-wing invention\nand various other novel details required to enable its practical use. Amongst these issued patents are several design patents that seek\nto protect the shape of the Cavorite X7 with its distinct forward swept main wings, unique empennage, and forward canards. Other intellectual\nproperty exists in the areas of hybrid-electric propulsion; ducted fan propulsion unit blade and stator design, cooling, and electrical\ncontrol; control systems including novel yaw control software and hardware; and digital twin simulation.\n\n \n\nThe eVTOL Industry, Total Addressable Market\nand its Drivers\n\n \n\nThe eVTOL aircraft market is a developing sector within the transportation\nindustry. This market sector is dependent on the successful development and implementation of eVTOL aircraft and networks, none of which\nare currently in commercial operation. Morgan Stanley has projected that the eVTOL market for moving people and moving goods could be\nbetween $USD 1 trillion by 2040 and $USD 9 trillion by 2050, as set forth in the “Morgan Stanley Research, eVTOL/Urban\nAir Mobility TAM Update” report released in May 2021 (the “Morgan Stanley Report”).\n\n \n\nFurthermore, in its 2021 RAM report, NASA has highlighted that while\nthe United States has over 5,000 airports, only 30 of them support 70% of all travelers.1 This report highlights that\nthe average American lives within 16 minutes of an airport yet must travel hours to larger hubs for even shorter regional travel.\n73% of Americans prefer road travel over flying, even if that means spending hours in gridlocked traffic. Accordingly, we believe\nthere is a significant opportunity to improve regional travel through the use of intelligently designed eVTOL aircraft.\n\n \n\n \n\n1\nNASA, REGIONAL AIR MOBILITY (2021), https://sacd.larc.nasa.gov/wp-content/uploads/sites/167/2021/04/2021-04-20-RAM.pdf.\n\n \n\n4\n\n \n\n \n\n*Regional Air Mobility*\n\n \n\nRAM is a term that represents a faster, more efficient way of moving\npeople and goods between 50 and 500 miles. With the development of more economical, versatile, and safe aircraft like Horizon’s\nCavorite X7 that can flexibly travel between regional locations, it is little wonder that the market demand is high for these types of\nmachines.\n\n \n\nNASA highlights that RAM has\nthe potential to fundamentally change how we travel and receive our goods by “bringing the convenience, speed, and safety of\nair travel to all Americans, regardless of their proximity to a travel hub or urban center” and “through targeted investments,\nRAM will increase the safety, accessibility, and affordability of regional travel while building on the extensive and underutilized federal,\nstate, and local investment in our nation’s local airports.”\n\n \n\nNew types of aircraft capable\nof operating with very limited ground infrastructure can deliver critical supplies to remote communities, transport critically injured\npeople to the hospital faster and more efficiently, help with disaster relief operations, and can help service people around the world\nin special military missions.\n\n \n\nAnother report from Morgan\nStanley projects that eVTOL technology is expected to revolutionize logistics due to advantages in speed, efficiency and accessibility\nover current trucks, airplane and train freight transportation. In addition, the Morgan Stanley Report cites the potential for eVTOL technology\nto provide a viable and affordable transportation solution in geographic locations without a current viable solution (such as rural or\nisland communities) and to expand the possibilities for 24-hour delivery or overnight parcel delivery in regions where existing transport\nmodes are slow.\n\n \n\nThe large RAM market opportunity is precipitated by a transportation\nsystem that is insufficient to handle increasing demand without time delays, high infrastructure and maintenance costs and adverse environmental\nimpact. Since 1990, global passenger flows have increased by more than 125% across all major modes of travel while global trade volume\nhas increased by approximately 200%. To counter the rapidly increasing demand for mobility and logistics, governments worldwide are investing\na total of approximately $USD 1 trillion per annum into transport infrastructure, which is three times more as compared to twenty years\nago. Despite these investments, our regional transport systems have not fundamentally improved.\n\n \n\nIn response, governments are increasing their support for the development\nof both urban and regional eVTOL networks, and sustainable aviation more generally, through regulatory incentives and investment. For\nexample, the Canadian government recently introduced the Initiative for Sustainable Aviation Technology (INSAT) where $350M will be invested\ninto innovative companies focused on sustainable aviation solutions. We believe that Horizon could be an ideal match for the recent government\nfunding opportunities and has benefited from project awards via government grants already exceeding $CAD 12 million.\n\n \n\nThe History of Horizon\n\n \n\nHorizon was founded in 2013\nto develop an innovative prototype amphibious aircraft. As we evaluated the latest advancements in the areas of electric motor and battery\ntechnologies, we realized that a new high-utility type of aircraft concept was feasible. The experienced aircraft development team shifted\nto developing the unique Cavorite X-series concept, specifically a 7-person hybrid eVTOL aircraft.\n\n \n\nHorizon successfully raised\nfunding to support the continued development and testing of its sub-scale prototypes and is currently building a full-scale technical\ndemonstrator aircraft.\n\n* *\n\n*Sub-Scale Prototypes*\n\n \n\nWe have built many sub-scale\nprototype aircraft. Commencing with a smaller 1/7th-scale aircraft, and in 2025 we successfully completed flight testing on\na half-scale prototype. This large prototype has a 22-foot wingspan and weighs approximately 600 lbs. This aircraft has been through successful\ntesting in hover, wind tunnel, and forward transition flight. All testing yielded positive results, and the aircraft has performed significantly\nabove initial expectations in respect to both power and stability.\n\n* *\n\n5\n\n \n\n \n\n*Full-Scale Cavorite X7 Aircraft Concept*\n\n \n\nBased on positive initial\ntesting results, the team transitioned to building a full-scale technical demonstrator aircraft. This demonstrator aircraft will hold\nseven (7) people: six (6) passengers and one (1) pilot. Updated performance estimates from early sub-scale testing indicate\nthat the full-scale hybrid-electric Cavorite X7 will be able to travel at speeds that may surpass 250 mph and carry 1,500 lbs. of useful\nload over 500 miles with the appropriate fuel reserves.\n\n \n\nBusiness Combination\n\n \n\nOn February 14, 2023, Pono\nconsummated its Initial Public Offering. On January 12, 2024 (the “Closing Date”), we consummated the Business Combination\nwhich resulted in the combination of Pono with Legacy Horizon, pursuant to the previously announced Business Combination Agreement, following\nthe approval at a general meeting of the shareholders of Pono held on January 4, 2024. On January 10, 2024, pursuant to the Business Combination\nAgreement, the Company initiated the SPAC Continuance when Pono was continued and de-registered from the Cayman Islands when the Cayman\nIslands Registrar of Companies issued a Certificate of De-Registration. On January 11, 2024, the Company completed the SPAC Continuance\nand re-domesticated as a British Columbia company and in connection therewith, effected the Articles, under the laws of British Columbia.\nPursuant to the Business Combination Agreement, on January 12, 2024, Merger Sub and Legacy Horizon were amalgamated under the laws of\nBritish Columbia, and Pono changed its name to New Horizon Aircraft Ltd.\n\n \n\nOur Competitive Strengths\n\n \n\nWe believe that our business\nbenefits from several competitive strengths, including the following:\n\n* *\n\n*Proprietary Ducted Fan-in-Wing Technology — the\n“HOVR Wing” System*\n\n \n\nThe majority of our competitors\nuse “open propeller” eVTOL vertical lift architectures. We employ our own proprietary HOVR Wing technology that provides a\nnumber of important advantages:\n\n \n\n \n●\nMore Efficient: Ducted fans are significantly more efficient than open propellers of similar diameter, using much less power for the same levels of thrust. Our unique HOVR Wing system also generates significant induced lift over the wing, further reducing the amount of momentum lift required by the electric ducted fans and improving efficiency.\n\n \n \n \n\n \n●\nLower Noise: The presence of ducts around the fans stops the noise from radiating freely into the environment. Furthermore, we will employ acoustic liners within the fan duct that lower the noise further. We expect this to enable the Cavorite X7 aircraft to land at a large number of locations close to high population densities.\n\n \n \n \n\n \n●\nFly Enroute Like a Normal Aircraft: The HOVR Wing has the ability to return to a configuration similar to a traditional airplane for efficient enroute flight. This aerodynamically efficient enroute configuration is the key to its impressive performance metrics.\n\n \n \n \n\n \n●\nCTOL, STOL, VTOL: The HOVR Wing concept also naturally supports Conventional Takeoff and Landing (“CTOL”), able to take off and land from a conventional runway like a traditional aircraft, should that be required. It can also conduct Short Takeoff and Landing (“STOL”) operations, something that is anticipated to carry high utility for regional flight operators. In CTOL and STOL operations the aircraft can accommodate even higher payload. Finally, VTOL operations will enable remote landing opportunities, special missions, and dramatically expand its unique capabilities.\n\n \n \n \n\n \n●\nFlight into Known Icing: We believe the Cavorite X7 will be one of the first VTOL aircraft that\ncould be successfully certified for FIKI conditions. Being able to operate in poor weather should expand the operational capability of\nthe aircraft and further reinforce strong commercial business cases.\n\n \n\n6\n\n \n\n \n\n*Agile Team with Significant Aerospace and\nOperational Experience*\n\n* *\n\nWe were founded by a team\nwith deep experience in the aerospace industry. Our team boasts individuals who have led the design, construction and testing of new aircraft\ntypes and have deep industry experience. The leadership team within Horizon also includes personnel with significant experience in finance,\nhuman resources, and information technology which we believe will facilitate cohesion, effectiveness and security as the company continues\nto grow.\n\n  \n\nOperational Experience\n\n \n\nMany of our principal engineers\nand technicians have significant operational experience. Many are active pilots. For example, our CEO was an active CF-18 fighter pilot\nfor nearly 20 years and holds a commercial Airline Transport Pilot’s License. This experience allows the team to visualize\noperating this innovative aircraft in the real world. Design considerations for easy field repair, safety, performance, and a focus on\nlowering operational costs has been foundational to the Cavorite X7 design and development. We believe this deep operational experience\nand design consideration has led to a machine concept that will support safe and cost-efficient flight for operators, thereby increasing\ndemand for the aircraft.\n\n \n\nOur Strategy\n\n* *\n\n*Build Aircraft for the Rapidly Growing Regional\nAir Mobility Market*\n\n \n\nWe are focusing our initial services on RAM. Beyond simple movement\nof cargo and people at the regional level — 50 to 500 miles — the aircraft will be able to economically\nconduct a number of unique missions such as:\n\n \n\n \n●\nMedical Evacuation: Able to travel almost twice the speed as a traditional helicopter and at significantly lower operating costs. Delivering people or other time sensitive materials to a hospital in half the time of current helicopters has the potential to save many lives.\n\n \n \n \n\n \n●\nRemote Resupply: Many remote communities around the world suffer from anxiety about delivery of critical goods. Without the runway infrastructure to support traditional aircraft remote deliveries, the Cavorite X7 will be able to deliver critical medical supplies, food, and other important goods directly to these areas.\n\n \n \n \n\n \n●\nDisaster Relief: As global climate conditions become more extreme, a hybrid-electric eVTOL like the Cavorite X7 offers a unique way to save lives when a weather disaster strikes. Able to land almost anywhere and operate without power infrastructure due to its hybrid-electric architecture, the Cavorite X7 could help people when weather conditions dictate.\n\n \n \n \n\n \n●\nMilitary Missions: An aircraft capable of travelling at speeds almost twice that of a traditional helicopter offers unique military capability. Casualty evacuation, forward operating base resupply and other Special Operations will help Allied Servicepeople around the world.\n\n* *\n\n*Develop Unique Technologies That Can be\nBroadly Licensed to Generate Revenue*\n\n \n\nWe expect that the technology\nwe are developing for the Cavorite X7 aircraft may be broadly useful across the industry. For example, the unique HOVR Wing concept could\nsupport other designs across the industry or within military applications. These technologies offer potential to significantly enhance\nrevenue, including potential licensing sales in specific geographic regions.\n\n \n\nOur Cavorite X7 Hybrid eVTOL Aircraft Concept\n\n \n\nOur full-scale Cavorite X7\nHybrid eVTOL aircraft is currently being built. The combination of unique architecture, hybrid power, and proprietary ducted fan-in-wing\ntechnology enables it to take off and land vertically while also flying at speeds much greater than a typical helicopter. We anticipate\nthat the final production aircraft will be able to carry six (6) passengers and one (1) pilot at ranges over 500 miles and at\nspeeds that may surpass 250 miles per hour.\n\n* *\n\n7\n\n \n\n \n\n*Ducted Fan-in-Wing “HOVR Wing”\nTechnology*\n\n \n\nOur unique HOVR Wing technology\nis described above and is protected by a US non-provisional utility patent. This technology allows the aircraft to return to an aerodynamically\nefficient configuration enroute. The ability to fly as a traditional aircraft enroute has many operational advantages and may offer a\nfaster route to certification for commercial use.\n\n \n\nDuring a vertical takeoff,\nan array of electrically powered ducted fans located in the wings and canards provide the required lift. For transition to forward flight,\nthe aircraft starts its rear pusher propeller and accelerates forward to a safe speed at which point the canards and wings close systematically\nto conceal the fans within the wings. At this point, the aircraft is in a normal configuration much like a traditional aircraft. The balance\nof the mission can then be conducted in a highly efficient manner. For landing, the reverse process occurs.\n\n \n\nThis design is both efficient\nand safe. During hover, multiple fans can fail with the aircraft maintaining hover. For example, during flight testing the 50%-scale prototype\naircraft hovered with 20% of its fans disabled. In addition, as outlined below, there are two sources of electricity for the fans: an\nonboard generator and a battery array. Even at moderate forward speed the generator can support the full electrical power requirements\nin the unlikely event of dramatic full battery array failure. For increased durability, each fan unit is electrically, mechanically, and\nthermally isolated from the others, mitigating the chance of a cascading failure.\n\n \n\nThis aircraft concept also\nnaturally allows for Conventional Takeoff and Landing (CTOL) as well as Short Takeoff and Landing (STOL). If one end of the mission calls\nfor loading of important cargo at an airport logistics hub or delivery to an airport, the Cavorite X7 can easily operate like a traditional\naircraft. Notably, in CTOL and STOL operational modes, the aircraft’s payload would also increase.\n\n \n\n* *\n\n*The Cavorite X7 hybrid eVTOL during transition\nto forward flight*\n\n* *\n\n*Hybrid Electric Power System*\n\n \n\nBy their very nature, VTOL\naircraft will excel at delivering critical goods and services to remote locations. These remote locations may not have the charging infrastructure\nto support purely electric VTOL aircraft. The Cavorite X7 will use a hybrid power system. This system will provide two sources of electrical\npower during demanding vertical takeoff and landing operations and will allow the battery array to re-charge in flight and after a mission.\nThe batteries will be designed for high power draw, so they will naturally support quick charging.\n\n \n\n8\n\n \n\n \n\nFor remote operations, the\naircraft can effectively become a power generation station. After landing, the aircraft can recharge itself in minutes and will be able\nto produce usable power should that be required, for example during a disaster relief mission where the power grid is offline. The Cavorite\nX7 could land in a parking lot and provide charging or power for communications that has been disrupted.\n\n \n\nThe hybrid power system will\nemit less greenhouse gas emissions than a traditional turbine engine when compared to a traditional helicopter. The aircraft draws significant\nelectrical energy from the battery array during vertical takeoff and landing, reducing emissions during this phase. In addition, enroute\nthe aircraft is in an aerodynamically efficient configuration as compared to a helicopter, dramatically lowering the power required to\ntravel. The combination of these two factors is a compelling sustainability improvement over current VTOL aircraft.\n\n \n\n*Safety by Design*\n\n \n\nThe safety, performance, and\nreliability of our aircraft will be key factors in achieving customer acceptance of our aircraft for commercial use. First and foremost,\nour aircraft design is focused on safety. There are several important considerations in the design concept that augment safety:\n\n \n\n \n●\nThe hybrid electric system will be designed to provide two sources of electrical power for the vertical lifting fans.\n\n \n \n \n\n \n●\nThe aircraft can hover with more than 20% of the fans disabled, returning the aircraft to safety in the case of fan failure.\n\n \n \n \n\n \n●\nEach vertical lifting fan is mechanically contained, preventing catastrophic blade loss from damaging adjacent fan units.\n\n \n \n \n\n \n●\nEach vertical lifting fan is both electrically and thermally isolated. This will help to avoid any cascading electrical problems or thermal runaways from reaching adjacent fan units.\n\n \n \n \n\n \n●\nWith only moderate forward speed, the generator can support all electrical demand for the vertical fan array. This provides additional safety in the event of a catastrophic battery failure.\n\n \n \n \n\n \n●\nThe aircraft is able to fly normally with all of the wings and canards in the open position, should any of them fail to move as commanded.\n\n \n \n \n\n \n●\nIn the event of a vertical lift system failure, the aircraft can land (or take off) conventionally. It can also operate in STOL mode, should that be required.\n\n \n \n \n\n \n●\nWith the wings closed during ground operations there will be no exposed fans, increasing passenger safety.\n\n \n \n \n\n \n●\nAn early focus in the design process on human factors will ensure that the aircraft is easy to fly, increasing safety in all flight operations.\n\n \n\n*Performance*\n\n \n\nThe Cavorite X7 will also\nbenefit from significant performance. First, due to its aerodynamically efficient configuration enroute, it will be fast. We are anticipating\na maximum dash cruise speed of at least 250 knots, with a more efficient enroute speed likely just over 200 knots. Our initial estimates\nalso indicate that in VTOL mode it will have a 1,500 lb. useful load, which is the amount of combined fuel and payload it can carry. This\ncould increase to 1,800 lbs. when the aircraft operates in STOL or CTOL modes. Finally, our initial estimates indicate the aircraft will\nbe able to travel 500 miles with medium payloads with full operational fuel reserves. This is an aircraft design that was designed to\ndo work in the real world, and we believe our customers will recognize and appreciate this.\n\n* *\n\n9\n\n \n\n \n\n*Flight into Known Icing and Other Operational\nChallenges*\n\n \n\nWe believe that the Cavorite X7 design may be one of the only viable\nVTOL designs that could be certified for FIKI. This is due to its unique characteristic of flying like a traditional aircraft for enroute\nflight, without multiple open rotors that could accumulate ice. Transition to and from vertical flight would occur in Visual Meteorological\nConditions, essentially clear of any clouds. As a result, enroute there would only be one propeller exposed to icing conditions should\nthere be a requirement to fly through clouds that could cause ice accumulation. This propeller can be electrically heated for anti-icing\npurposes, something that is common in commercial regional turboprop operations. Furthermore, with a significant amount of on-board electrical\npower available enroute, electrothermal coatings may be used to help prevent or remove ice on lift surfaces. Finally, with a turbine engine\nthe aircraft systems will have access to warm bleed air that could be circulated for anti-icing or de-icing.\n\n \n\nBird strikes are also an area\nof concern for commercial flight. Our aircraft concept has only one exposed propeller that is partially protected by the fuselage. Unlike\nmany compound open rotor designs where losing one blade may cause a cascading failure, our aircraft operates like any number of the thousands\nof commercial regional aircraft already certified and operating profitably.\n\n \n\nChallenging weather is often\ndifficult for regional commercial flight operations. The Cavorite X7’s hybrid power system and efficient enroute configuration will\nlikely make it more resilient in the face of bad weather. Increased speed and range over pure electric VTOL regional aircraft should allow\nfor increased versatility, able to divert to a backup airfield or vertiport, go around unexpected storms, or deal with unexpected winds\nthat could negatively impact slower designs. We expect that this, coupled with FIKI certification, could offer a significant operational\nadvantage over our competitors.\n\n \n\nAviation Regulations\n\n \n\nIn Canada and the U.S., civil aviation is regulated by the TCCA and\nthe Federal Aviation Administration (“FAA”) respectively. These two regulatory bodies control all aspects of certifying a\nnew aircraft for commercial flight (Type Certification), production of that aircraft (Production Certification) and issuance of an Air\nOperations Certificate (AOC) to organizations who wish to use the aircraft in commercial operations.\n\n \n\nWe intend to seek approval\nfor the design of the Cavorite X7 by obtaining a Type Certificate under TCCA using Canadian Air Regulations (CAR) §523 under Normal\nCategory, Level 2 — for aeroplanes with 2 to 6 passengers. Due to the innovative design of the Cavorite X7, it is expected\nthat TCCA will invoke certain regulations and standards from CAR §527, (helicopter certification requirements) and\nadditional Special Conditions. We have engaged Flight Test Centre of Excellence (3C) as partners who will perform the role of\nApplicant’s Representative for the certification effort. 3C has extensive expertise in developing and executing aircraft\ncertification programs and is helping to prepare our formal application to TCCA. We have also had initial discussions with the FAA\nand plan to run a parallel program that would greatly expedite certification for use in the United States.\n\n \n\nWhile working towards a Type\nCertificate for our aircraft that will enable sales for commercial use, we will also be pursuing a Production Certificate. Once obtained,\nthis will allow volume manufacturing to meet the demand that we anticipate. Companies using our aircraft for commercial operations will\nrequire an AOC.\n\n \n\nAs we will not be permitted\nto deliver commercially produced aircraft to customers until we have obtained TCCA type certification, no material sales revenue from\naircraft deliveries is expected to be generated before TCCA certification issuance. The process of obtaining a valid type certificate,\nproduction certificate and airworthiness certificate for the Cavorite X7 will take several years. Any delay in the certification\nprocess could negatively impact us by requiring additional funds to be spent on the certification process and by delaying our ability\nto sell aircraft.\n\n \n\n10\n\n \n\n \n\nMarketing\n\n \n\nOur marketing strategy is\nintended to build industry and consumer awareness of our technology. We are working to develop and execute a robust marketing plan. Marketing\nefforts will include comprehensive Communication, Investor Relations, and Public Relations plans to ensure consumer understanding, investor\nconfidence, and entering the public consciousness as developmental operations continue. Our overarching value proposition will focus on\nthe benefits of our Cavorite X7 platform and its wide array of superior operational capabilities, while maintaining the highest safety\nstandards. We also believe that the striking visual design of the aircraft coupled with market leading utility will be an important point\nof differentiation from our competition.\n\n \n\nCompetition\n\n \n\nThe current eVTOL landscape in North America and more broadly from\na global perspective is competitive. Alternative technologies, either known or unknown, could bring more attractive eVTOL designs to the\nmarketplace. We believe that our primary competition for market share will come from similar minded companies that come to realize that\nRAM may offer a more compelling initial business case as compared to early eVTOL designs. These companies could employ similar design\narchitectures alongside hybrid-electric power systems and challenge our Cavorite X7.\n\n \n\nHuman Resources\n\n \n\nAs of July 16, 2026, we had\n56 employees in Canada and 2 employees outside of Canada.  None of our employees are subject to a collective bargaining agreement\nor represented by a trade or labor union. We consider our relationship with our employees to be suitable. We believe that our turnover\nand productivity levels are at acceptable levels.\n\n \n\nProperties\n\n \n\nHorizon leases office space and an aircraft hangar in Lindsay, Ontario,\nwhich serves as the corporate headquarters, as well as office space and light composite manufacturing space in Haliburton, Ontario and\noffice space in Ottawa, Ontario. Horizon believes that these properties are sufficient for its business and operations as currently conducted.\nThe Company is currently exploring locations for future scalable manufacturing operations.\n\n \n\nCorporate Information\n\n \n\nOn January 11, 2024, we continued\nand de-registered from the Cayman Islands and redomiciled under the laws of the Province of British Columbia, Canada. Our principal executive\noffices are located at 3187 Highway 35, Lindsay, Ontario, K9V 4R1, and our telephone number is (613) 866-1935. Our website is *https://www.horizonaircraft.com/*.\nOur website and the related information that can be accessed through such website does not form part of this report.\n\n \n\nLegal Proceedings\n\n \n\nAs of July 16, 2026, we were\nnot a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary\ncourse of our business. Regardless of the outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion\nof management resources, negative publicity and reputational harm and other factors.\n\n \n\n11"}