New Horizon Aircraft Ltd.

EXPRESSED IN CANADIAN DOLLAR 000’S, EXCEPT PER SHARE AMOUNTS

NOTE 1. Organization and Nature of Business

Organization and Nature of Business

New Horizon Aircraft Ltd. (the “Company”, “Horizon”, “we,” “us” or “our”), a British Columbia corporation, with headquarters located in Lindsay, Ontario, is an aerospace company. The Company was incorporated on March 11, 2022.

The Company is designing and developing a hybrid-electric vertical takeoff and landing (“eVTOL”) prototype aircraft for use in future regional air mobility (“RAM”) networks.

On February 14, 2023, the Company consummated an initial public offering (“IPO”). On January 12, 2024 (the “Closing date”), the Company consummated a merger (the “Merger”) with Pono Three Merger Acquisitions Corp., a British Columbia company (“Merger Sub”) and wholly-owned subsidiary of Pono Capital Three, Inc. (“Pono”), with and into Robinson Aircraft Ltd. (“Robinson”) pursuant to an agreement and plan of merger, dated as of August 15, 2023, (as amended by a Business Combination Agreement Waiver, dated as of December 27, 2023) by and among Pono, Merger Sub, Horizon, and Robinson.

The Merger and other transactions contemplated thereby (collectively, the “Business Combination”) closed on January 12, 2024, when, pursuant to the Business Combination Agreement, Merger Sub merged with and into Robinson, surviving the Merger as a wholly owned subsidiary of Pono. Pono changed its name to “New Horizon Aircraft Ltd.” and the business of Robinson became the business of New Horizon Aircraft Ltd.

The consolidated financial statements included in this report reflect (i) the historical operating results of Robinson prior to the Business Combination (“Legacy Horizon”); (ii) the combined results of Pono and Legacy Horizon following the closing of the Business Combination; (iii) the assets and liabilities of Legacy Horizon at their historical cost; and (iv) the Company’s equity structure for all periods presented.

NOTE 2. Going Concern and Liquidity

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred and expects to continue to incur significant costs in pursuit of the Company’s development plans. Funding of these activities has primarily been through the net proceeds received from the issuance of Class A ordinary shares and Preferred shares, as well as the issuance of related and third-party convertible debt and non-dilutive government grants.

Horizon is a pre-revenue organization that is currently building a full-scale technical demonstrator aircraft in pursuit to certify its Cavorite X7 aircraft. Management estimates that cash on-hand of $78.3 million will be sufficient to fund our current operating plan for at least the next 12 months from the date these consolidated financial statements were available to be issued. There is substantial doubt around the Company’s ability to meet the going concern assumption beyond that period without securing additional capital.

There can be no assurance that we will be successful in achieving our business plans, that our current capital will be sufficient to support our ongoing operations, or that any additional financing will be available in a timely manner or on acceptable terms, if at all. If events or circumstances occur such that we do not meet our business plans, we may be required to raise additional capital, alter, or scale back our aircraft design, development, and certification programs, or be unable to fund capital expenditures. Any such events could have a material adverse effect on our financial position, results of operations, cash flows, and ability to execute our business plans.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Principles of Consolidation and Financial Statement Presentation

The accompanying consolidated financial statements are presented in Canadian dollars in conformity with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated on consolidation. These consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented. These consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, except for warrant liabilities recorded at fair value. All figures are in thousands of Canadian dollars unless noted otherwise.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2 (a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (specifically, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make judgements, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period.

Making judgements, estimates, and assumptions requires management to exercise significant approximations. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating an estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ from those estimates.

Management believes the most significant judgements, estimates, and assumptions for the period include those in connection with Financial Instruments, Going Concern, and stock-based compensation.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $42.2 million of cash equivalents as of May 31, 2026 (May 31, 2025 –nil).

Income Taxes

Income taxes are provided in accordance with ASC Topic 740,Income Taxes(“ASC 740”). A deferred tax asset or liability is recorded for all temporary differences between income for financial statement purposes and income for tax purposes as well as operating loss carry forwards. Deferred tax expenses or recovery result from the net change during the year of deferred tax assets and liabilities. Any interest and penalties are recorded as part of income tax expense.

Deferred tax assets are reduced by a valuation allowance, when, in the opinion of management, it is likely that some portion of the deferred tax asset will not be realized. Deferred taxes are adjusted for the effects of changes in tax laws and rates. Interest and penalties, if applicable, are recorded in the Company’s statement of operations.

Net Income (loss) Per Share

Basic Net Income (loss) per share is calculated by dividing Net Income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding. Certain Stock options, PSU’s, Preferred Shares, and Warrants were excluded from the computation of diluted Net Income (loss) per share, as including them would have been anti-dilutive.

Fair Value of Financial Instruments

The Company applies ASC Topic 820,Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

The carrying amounts reflected in the consolidated balance sheets for current assets and current liabilities approximate fair value due to their short-term nature.

Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

Research and Development Costs

The research and development costs are accounted for in accordance withASC 730, Research and Development, which requires all research and development costs be expensed as incurred.

General and Administrative Costs

General and administrative expenses primarily consist of personnel expenses, including salaries, benefits, and stock-based compensation, related to executive management, finance, legal and human resource functions. Other costs include business development, contractor and professional services fees, audit and compliance expenses, insurance costs and general corporate expenses, including allocated depreciation, rent, information technology costs and utilities.

Stock-based Compensation

Our stock-based compensation awards consist of stock options, shares issued for services, and performance share units (“PSU’s”) granted to employees and consultants. We recognize stock-based compensation expense in accordance with the provisions of ASC 718,Compensation - Stock Compensation(“ASC 718”). ASC 718 requires the measurement and recognition of compensation expense for all stock-based compensation awards to be based on the grant date fair values of the awards as determined on the date of grant. When the observable market price or volatility that the Company uses to determine grant date fair value does not reflect certain material non-public information known to the Company but unavailable to marketplace participants at the time the market price is observed, the Company determines whether an adjustment to the observable market price is required. The Company recognizes stock-based compensation expense over the estimated life of the awards, and accounts for any forfeitures as they occur. The Company accounts for awards containing market-based vesting condition based on the probability of achieving each of the performance goals at the end of each reporting period and recognizes expense over the expected life of the award, when achievement of the goal is determined to be probable, and adjusts the expense if the probability of achieving the goal later changes. The Company selected the Black-Scholes-Merton (“Black-Scholes”) option-pricing model as the method for determining the estimated fair value for stock options and the Monte Carlo simulation model as the method for determining the estimated fair value of PSU’s. Both the Black-Scholes and Monte Carlo models require the use of highly subjective and complex assumptions, which determine the fair value of share-based awards, including the award’s expected term, expected volatility of the underlying stock, risk-free interest rate and expected dividend yield.

Property and Equipment, Net

Property and equipment is stated at historical cost less accumulated depreciation. Expenditures for major renewals and betterments are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation is removed from the accounts, and any difference between the selling price and net carrying amount is recorded as a gain or loss in the statements of operations and comprehensive loss. Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets.

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets as follows:

Impairment of Long-Lived Assets

We review our long-lived assets, consisting primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such triggering events or changes in circumstances may include: a significant decrease in the market price of a long-lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being or intended to be used, a significant adverse change in legal factors or in the business climate, the impact of competition or other factors that could affect the value of a long-lived asset, a significant adverse deterioration in the amount of revenue or cash flows expected to be generated from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. We perform impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets including any cash flows upon their eventual disposition to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. We determined there was no indicator of impairment of long-lived assets during all periods presented.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815,Derivatives and Hedging (“ASC 815”). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For derivative instruments that are classified as equity, the derivative instruments are initially measured at fair value (or allocated value), and subsequent changes in fair value are not recognized so long as the contracts continue to be classified in equity.

The Company’s Forward Purchase Agreement was recognized as a derivative liability in accordance with ASC 815. Accordingly, the Company recognized the instrument as an asset or liability at fair value and with changes in fair value recognized in the Company’s consolidated statements of operations. The estimated fair value of the Forward Purchase Agreement was measured at fair value using a simulation model. The Forward Purchase Agreement was terminated on November 1, 2024.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance and revalued at each balance sheet date thereafter using the Black-Scholes model, for warrants that are not publicly traded. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations.

The warrants were determined to be recorded as liabilities and are classified as Level 3 due to the lack of observable market quotes.

Public Warrants

The measurement of the Public Warrants as of May 31, 2026, is classified as Level 1 due to the use of an observable market quote in an active market under the ticker “HOVRW.” The quoted price of the Public Warrants was $USD 0.54 per warrant as of May 31, 2026.

Foreign Currency

The Company determined that the local currency is the functional currency for its foreign operations. Net gains and losses resulting from foreign currency transactions are included in Other income in the accompanying consolidated statements of operations.

Leases

The Company accounts for leases in accordance with ASC 842, Leases, and determines if an arrangement is a lease at its inception. Right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date. The incremental borrowing rate is the rate of interest the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments for a term similar to the lease term in a similar economic environment as the lease. The lease term includes renewal options when it is reasonably certain that the option will be exercised and excludes termination options.

Lease expense for leases is recognized on a straight-line basis over the lease term. The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset.

Government Grants

The Company receives payments from government entities primarily for research and development deliverables as part of ongoing development of the Company’s technology and future services offering. Under the Company’s accounting policy for government grants received as a payment for research and development services, grants are recognized on a systematic basis over the periods in which these services are provided and are presented as other income in the statement of operations.

Recent Accounting Standards

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements through enhanced disclosures about significant segment expenses, interim segment profit or loss and assets, and how the CODM uses reported segment profit or loss information in assessing segment performance and allocating resources. The Company adopted ASU 2023-07 effective June 1, 2024.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure of additional information about specific expense categories in the notes to the financial statements. The update is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The update can be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any of all prior periods presented in the financial statements. The Company is currently evaluating the impact of ASU 2024-03 on its disclosures within its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which establishes the accounting for government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The update is effective for annual periods beginning after December 15, 2028, and interim periods beginning within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. If a business entity adopts the amendments in this Update in an interim reporting period, it must adopt them as of the beginning of the annual reporting period that includes that interim reporting period. The Company is currently evaluating the impact of ASU 2024-03 on its disclosures within its consolidated financial statements.

No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s financial statements.

NOTE 4. Balance Sheet Components

Property and Equipment, net

Property and equipment consist of the following:

Depreciation expenses of $298 for the year ended May 31, 2026 (May 31, 2025 - $138), has been recorded in the consolidated statements of operations, of which $139 (May 31, 2025 - $70) was recorded in Research and Development expenses with the remainder in General and Administrative expenses.

Prepaid Expenses

Prepaid Expenses consisted of the following:

Accrued Liabilities

Accrued Expenses consisted of the following:

NOTE 5. Segmented Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates as asingle operating segment andone reportable segment, as the CODM reviews financial information presented on a consolidated basis. The CODM uses net income (loss) for purposes of making operating decisions, allocating resources, and evaluating financial performance. Given the Company’s pre-revenue operating stage, it currently has no concentration exposure to products, services, or customers. Segmented asset information is not used by the CODM to allocate resources.

NOTE 6. Common Stock

The Company’s common stock and warrants trade on the NASDAQ stock exchange under the symbol “HOVR” and “HOVRW”, respectively. Pursuant to the terms of the Company’s Articles and Notice of Articles, the Company is authorized to issue the following shares and classes of capital stock, each with no par value: (i) an unlimited number of Class A ordinary shares; and (ii) an unlimited number of Class B ordinary shares. The holder of each Class A ordinary share is entitled toone vote.

Registered Securities Offering

On August 21, 2024, the Company completed a registered securities offering (“RSO”) by issuing 2,800,000 Class A ordinary shares,3,000,000 Pre-Funded Warrants (“PFW’s”), and 5,800,000 General Warrants. The proceeds received by the Company are summarized below:

PFW’s may be exercised by warrant holders at any time at a nominal exercise price as they were funded in connection with the RSO. Upon exercise, each PFW may be exchanged forone Class A ordinary share. All 3 million PFW’s were exercised during the year-ended May 31, 2025.

During the year-ended May 31, 2026, warrant holders exercised 3,200,000 (May 31, 2025 -2,590,000) warrants in exchange for 3,200,000 (May 31, 2025 -2,590,000) Class A ordinary shares for proceeds of $3,280 (May 31, 2025 - $2,787).

Registered Direct Offering I

On May 8, 2026, the Company completed a registered direct offering (“RDO I”) by issuing 9,254,889 Class A ordinary shares. There were 277,647 warrants issued to the placement agent to purchase an equivalent number of Class A ordinary shares at an exercise price of $USD 2.47. Proceeds received by the Company in connection with RDO I are summarized below:

RDO I Warrants

In connection with the Company’s RDO I on May 8, 2026, there were 277,647 warrants issued, of which all remain outstanding as of May 31, 2026. These warrants were classified as equity and are recorded as a component of additional paid-in capital on the consolidated balance sheets. The Company used the Black-Scholes model to value these warrants with the following assumptions:

Registered Direct Offering II

On May 27, 2026, the Company completed a second registered direct offering (“RDO II”) by issuing 5,385,646 Class A ordinary shares and 4,574,514 PFW’s, of which 2,160,897 remain outstanding as of May 31, 2026. There were 298,805 RDO II Warrants issued to the placement agent to purchase an equivalent number of Class A ordinary shares at an exercise price of $USD 2.89. Proceeds received by the Company are summarized below:

PFW’s may be exercised by warrant holders at any time at a nominal exercise price as they were funded in connection with RDO II. Upon exercise, each PFW may be exchanged for one Class A ordinary share. During the year-ended May 31, 2026,2,413,617 PFW’s were exercised. The Class A ordinary shares related to these exercised PFW’s were not yet issued as of May 31, 2026, and are classified as Class A ordinary shares to be issued in the Company’s consolidated balance sheets. The remainder of these PFW’s were exercised on July 14, 2026, with the corresponding Class A ordinary shares issued on the same date.

RDO II Warrants

In connection with the Company’s RDO II on May 27, 2026, there were 298,805 warrants issued, of which all remain outstanding as of May 31, 2026. These warrants were classified as equity and are recorded as a component of additional paid-in capital on the consolidated balance sheets. The Company used the Black-Scholes model to value these warrants with the following assumptions:

Warrants Summary

A summary of warrant activity for the Company excluding the PFW’s is as follows:

Preferred Shares

On December 18, 2024, the Company entered into subscription agreements with a third-party investor pursuant to which the Company issued an aggregate of 4,166,667 Class A ordinary shares of the Company at a price of $USD 0.36 per share, and an aggregate of 4,500 Series A preferred shares of the Company at a price of $USD 1,000 per share. The financing closed on December 19, 2024.

The Series A Preferred Shares are convertible, at the option of the holder and without additional consideration, into Class A ordinary Shares on a one for 2222.222222 basis. The proceeds received by the Company are summarized below:

At-the-Market Program

In March 2025 the Company filed a shelf registration statement on Form S-3 with the SEC and a related prospectus pursuant to which it may, from time to time, sell shares of its Class A ordinary shares, having an aggregate value of up to $USD 6.25 million, pursuant to a Capital on Demand™ Sales Agreement (the “Sales Agreement”) with a placement agent for the sale of its Class A ordinary shares.

On June 27, 2025, we filed a prospectus supplement to increase the maximum aggregate offering price of the Class A ordinary shares issuable under the Sales Agreement to up to an additional aggregate $USD 16.5 million of Class A ordinary shares. On October 31, 2025, the Company filed a prospectus supplement to increase the maximum aggregate offering price of the Class A ordinary shares issuable under the Sales Agreement to $USD 50 million of Class A ordinary shares. On May 26, 2026, the Company filed a prospectus supplement to decrease the maximum aggregate offering price of the Class A ordinary shares issuable under the Sales Agreement to $USD 28 million of Class A ordinary shares.

During the year-ended May 31, 2026, the Company sold 9,037,738 (May 31, 2025 –940,562) Class A ordinary shares under the Sales Agreement for net proceeds of $27.9 million (May 31, 2025 - $880). As of May 31, 2026, the Company had $USD 6.6 million remaining eligible for sales under the Sales Agreement.

NOTE 7. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of May 31, 2026, and May 31, 2025, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Level 1 Fair Value Measurements - Public Warrant Liabilities

The measurement of the public warrants is classified as Level 1 due to the use of an observable market quote in an active market under the ticker “HOVRW”. The quoted price of the public warrants was $USD 0.54 and $USD 0.08 per warrant as of May 31, 2026, and 2025, respectively. There were 11,500,000 Public Warrants outstanding for all periods presented, with an exercise price of $USD 11.50 and expiry on January 12, 2029. Based on the values of the Public Warrants on each measurement date, the Company recorded a Change in fair value of Warrants in the consolidated income statements of $7,305 for the year-ending May 31, 2026 (2025 - $715).

Level 3 Fair Value Measurements - Other Warrant Liabilities

Other Warrant Liabilities include the following two components:

General Warrants

In connection with the Company’s RSO on August 21, 2024,5,800,000 warrants were issued of which 10,000 remain outstanding as of May 31, 2026 (May 31, 2025 -3,210,000). These warrants were classified as a liability. The Company used the Black-Scholes model to value these warrants, and the following table provides quantitative information regarding Level 3 fair value measurement inputs related to these Warrant liabilities at their measurement dates:

Placement Warrant Liabilities

The Company has 565,375 Placement Warrants outstanding at the same terms and conditions as the Public Warrants. Accordingly, they have been estimated at the same value as the Public Warrants.

Legacy Forward Purchase Agreement

The estimated fair value of the Forward Purchase Agreement was measured at fair value using a simulation model, which was determined using Level 3 inputs. Inherent in a simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its Class A ordinary shares based on implied volatility from the Company’s traded Class A ordinary shares and from historical volatility of select peer company’s shares that matches the expected remaining life of the Forward Purchase Agreement. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the Forward Purchase Agreement. The expected life of the Forward Purchase Agreement was assumed to be equivalent to their remaining contractual term. The dividend rate was based on the historical rate, which the Company anticipated remaining at zero. Any changes in these assumptions could change the value significantly.

The following table provides quantitative information regarding Level 3 fair value measurements inputs related to the Forward Purchase Agreement at their measurement dates:

The Company mutually agreed to terminate the Forward Purchase Agreement with its counterparty on November 1, 2024, for a cost of $278. In connection with this termination, the Company recorded a $21,400 gain in the consolidated statement of operations for the year-ending May 31, 2025. There was nil value connected to this Forward Purchase agreement as of May 31, 2026, and May 31, 2025.

Summary of Level 3 fair value instruments

The change in the fair value of the assets and liabilities, measured with Level 3 inputs, for the year ended May 31, 2026, and May 31, 2025, are summarized as follows:

NOTE 8. Stock-based Compensation

In August 2022, the Company established a Stock Option Plan, superseded by the 2023 Equity Incentive Plan (the “Incentive Plan”), under which the Company’s Board of Directors may, from time-to-time, in its discretion, grant stock options, Performance Share Units (“PSU’s”), or other equity awards to its directors, officers, consultants and employees of the Company.

Stock Options

Stock options outstanding vest in equal tranches over a period of three years. During the year-ended May 31, 2026, the Company granted 413,000 stock options (May 31, 2025 –1,520,000). The Company estimated the fair value of the stock options on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

A summary of stock option activity for the Company is as follows:

During the year-ended May 31, 2026, the Company recorded stock-based compensation expenses of $710 (2025 - $253), of which $355 is recorded in general and administrative and $355 in research and development expenses, in the consolidated statements of operations, respectively (2025 - $253 andnil). The weighted average grant date fair value of the stock options issued was $USD 2.19 (May 31, 2025 - $USD 0.61).

Performance Share Units

On February 3, 2025, the Company issued 335,000 Performance Share Units (“PSU’s”) that vested upon achievement of 100% Total Shareholder Return. The Company recorded $562 of compensation expenses related to these PSU’s based on a simulation model. These PSU’s vested on June 16, 2025, and were recorded in general and administrative expenses in the consolidated statement of operations during the year-ended May 31, 2025. All of the Class A ordinary shares corresponding to these vested PSU’s were issued during the year-ended May 31, 2026.

On August 27, 2025, the Company issued 1,160,001 PSU’s that vested upon achievement of the Company achieving a market capitalization of $USD 100 million. The Company recorded $3,651 of compensation expenses related to these PSU’s based on a Monte Carlo simulation model. These PSU’s vested on September 26, 2025. Included in general and administrative expenses and research and development expenses in the consolidated statement of operations during the year-ended May 31, 2026, was $1,826 and $1,825, respectively. All of the Class A ordinary shares corresponding to these vested PSU’s were issued during the year-ended May 31, 2026.

The following assumptions were used to estimate the fair value of these PSU’s:

On February 10, 2026, the Company issued 1,625,000 PSU’s that vest in two separate and equal tranches; i) upon achievement of the Company achieving a market capitalization of $USD 250 million; and ii) upon outperforming the Russell Microcap index over a two-year period. The Company recorded $3,789 of compensation expenses related to these PSU’s based on a Monte Carlo simulation model. Included in general and administrative expenses and research and development expenses in the consolidated statement of operation during the year-ended May 31, 2026, was $1,894 and $1,895, respectively.

The following assumptions were used to estimate the fair value of these PSU’s:

In May 2026,674,272 of these PSU’s vested. The corresponding Class A ordinary shares for these vested PSU’s had not been issued as of May 31, 2026.

Shares for Services

The Company periodically issues Class A ordinary shares for services provided by third parties. During the year ended May 31, 2026, the Company recorded $1,276 of operating expenses relating to 1,495,123 shares issued for services (2025 – $677). Included in general and administrative expenses and research and development expenses in the consolidated statements of operations during the year-ended May 31, 2026, was $1,103 and $47, respectively (2025 - $677 andnil).

During the year-ended May 31, 2026, the Company incurred $32 (May 31, 2025 - $528) in general and administrative costs in the consolidated statements of operations relating to 19,401 (May 31, 2025 -689,371) of Class A ordinary shares to be issued at a future date for services rendered. This has been recorded as a component of Shareholders’ Equity.

NOTE 9. Net Income (Loss) per Share Attributable to Common Stockholders

The Company computes net income (loss) per share using the two-class method. Basic net income (loss) per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of stock options, PSU’s, Preferred Shares, and Warrants. Certain Stock options, PSU’s, Preferred Shares, and Warrants were excluded from the computation of diluted net income (loss) per share as including them would have been anti-dilutive.

The following outlines the Company’s basic and diluted income (loss) per share for the year-ended May 31, 2026, and May 31, 2025:

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted Net Income (loss) per share for the periods presented because including them would have been antidilutive:

NOTE 10. Grants and Subsidies

INSAT

The Canadian government recently announced the Initiative for Sustainable Aviation Technology (“INSAT”) fund whereby $350 million will be invested into innovative companies focused on sustainable aviation solutions. The Company submitted an initial INSAT proposal in April 2025 along with its application partners for a project size of $10.5 million, of which up to 40% of project costs may be reimbursed. In October 2025, the Company was informed that this application was successful. As of May 31, 2026, the Company has submitted $1,039 of project costs, of which $308 is anticipated to be reimbursed by INSAT and has been recorded in accounts receivable in the consolidated balance sheets as of May 31, 2026, and in Other income in the consolidated income statements during the year-ended May 31, 2026 (2025 – nil).

Canadian Council for Aviation & Aerospace

In May 2025, the Company was awarded grants by the Canadian Council for Aviation & Aerospace that resulted in a portion of qualified aerospace engineering students cooperative terms compensation being reimbursed. Total amounts received were $35 during the year-ended May 31, 2026, which has been recorded as Other income in the consolidated income statements (2025 –nil).

Green Fund

In August 2024, the Company entered into a funding agreement with the Downsview Aerospace Innovation and Research Centre (“DAIR”). DAIR selected the Company with a project on the Engineering of an eVTOL wing. The funding approved to the Company was $75, of which $45 was recorded as Other income in the consolidated financial statements for the year-ended May 31, 2026 (May 31, 2025 - $50). Included in Accounts Receivable as of May 31, 2026 is $45 (2025 –nil).

Scientific Research and Experimental Development

In connection with the year-ended May 31, 2026, the Company plans to file an application for Scientific Research and Experimental Development (“SRED”) credits with the Canadian federal government. As the specific SRED amount has not yet been determined, the Company did not accrue any credits in connection with the year-ended May 31, 2026.

NOTE 11. INCOME TAXES

The Company accounts for income taxes according to the provisions of ASC 740, which prescribes an asset and liability approach for computing deferred income taxes. Reconciliations of incomes taxes computed at the statutory combined Canadian federal and provincial statutory income tax rate of 26.5% to the effective tax rate for the years ended May 31, 2026, and 2025, are as follows:

The Company intends to be treated as a United States corporation for United States federal income tax purposes under section 7874 of the U.S. Tax Code and is expected to be subject to United States federal income tax. However, for Canadian tax purposes, the Company is expected, regardless of any application of section 7874 of the U.S. Tax Code, to be treated as a Canadian resident company (as defined in the Canadian Income Tax Act for Canadian income tax purposes). Accordingly, Horizon will be subject to taxation in both Canada and the United States.

The following table summarizes the components of deferred tax:

A valuation allowance has been recognized to offset the entire effect of the Company’s net deferred tax asset as the realization of this deferred tax benefit is uncertain. The valuation allowance increased by $7,153 for the year-ended May 31, 2026 (2025 - $3,223). This is primarily due to the increase of federal, provincial, and state net operating losses.

At May 31, 2026, the Company’s Canadian non-capital losses, the benefit of which has not been recognized on the consolidated financial statements, expire as follows:

The Company has analyzed filing positions in all of the federal, provincial, and state jurisdictions where it is required to file income tax returns. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded.

NOTE 12. RELATED PARTY TRANSACTIONS

During the year-ended May 31, 2026, the Company paid $60 (May 31, 2025 - $60) to Cert Centre Canada (“3C”) for certification planning services. One of the Company’s Board of Directors is the Chief Executive Officer of 3C. During the year-ended May 31, 2025, the Company paid $8 for facility design services to the spouse of an executive officer.

There wereno other identifiable related party transactions or balances for the periods presented.

NOTE 13. SUBSEQUENT EVENTS

The Company has evaluated subsequent events from June 1, 2026, through to the date of this filing Form 10-K and determined that there have been no reportable subsequent events.

EXHIBIT INDEX