Financial Analysis

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 Stock-based Compensation In August 2022, the Company established a Stock Option Plan, superseded by the 2023 Equity Incentive Plan (the Incentive Plan), under which the Companys Board of Directors may, from time-to-time, in its discretion, grant stock options, Performance Share Units (PSUs), 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: May 31, 2026 May 31, 2025 Exercise price $USD 2.01-2.57 $USD 0.27 -0.61 Risk-free interest rate 4.15% - 4.23 % 3.8%-4.5 % Term (years) 5 5 Volatility 76 % 76 % Forfeiture rate 0 % 0 % Dividend yield 0 % 0 % A summary of stock option activity for the Company is as follows: Number of Shares Weighted Average Exercise Price ($USD) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding stock options May 31, 2024 685,230 $ 0.60 6.5 $ 139 Stock Options Issued October 4, 2024 180,000 $ 0.27 9.6 $ 196 Stock Options Issued February 3, 2025 1,340,000 $ 0.61 9.9 $ 830 Outstanding stock options May 31, 2025 2,205,230 $ 0.58 8.4 $ 1,340 Stock Options Issued 413,000 $ 2.19 9.3 $ 304 Stock Options Exercised (36,721 ) $ 0.55 …

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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: 2026 2025 Canadian Statutory Tax Rate $ (5,001 ) 15 % $ 779 15 % Provincial Income Taxes, Net of Federal Income Tax Effect (3,834 ) 12 % 598 12 % Nontaxable or Nondeductible Items Stock-based compensation 244 -1 % 216 4 % Financing fees recorded in equity (1,504 ) 5 % 0 % Change in fair value of contingent liability 0 % (5,475 ) -105 % Change in fair value of warrants 2,927 -9 % 527 10 % Other expenses 15 0 % 132 3 % Change in valuation allowance 7,153 -21 % 3,223 62 % Effective tax rate $ 0 % $ 0 % 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 …

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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 statemen …

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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 Companys 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 were no other identifiable related party transactions or balances for the periods presented. …

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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 Companys CODM is its Chief Executive Officer . The Company has determined that it operates as a single operating segment and one 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 Companys 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. …

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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 Companys 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, red …

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NOTE 6. Common Stock The Companys common stock and warrants trade on the NASDAQ stock exchange under the symbol HOVR and HOVRW, respectively. Pursuant to the terms of the Companys 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 to one 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 (PFWs), and 5,800,000 General Warrants. The proceeds received by the Company are summarized below: Gross Proceeds - Class A Shares $ 1,906 Gross Proceeds - PFWs 2,041 Gross Proceeds - Warrant Exercises 2,787 Direct costs (510 ) Net Proceeds $ 6,224 PFWs 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 for one Class A ordinary share. All 3 million PFWs 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 co …

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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.

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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 Companys Board of Directors may, from time-to-time, in its discretion, grant stock options to directors, officers, consultants and employees of the Company. Stock options outstanding vest in equal tranches over a period of three years. During the three and nine months-ended February 28, 2026, the Company granted 135,000 and 413,000 stock options (February 28, 2025 - 1,340,000 and 1,520,000), respectively. 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: February 10, 2026 June 24, 2025 February 3, 2025 October 4, 2024 Stock price $USD 2.57 $USD 2.01 $USD 0.27 $USD 0.61 Risk-free interest rate 4.2 % 4.2 % 3.8 % 4.5 % Term (years) 5 5 5 5 Volatility 76 % 76 % 76 % 76 % Forfeiture rate 0 % 0 % 0 % 0 % Dividend yield 0 % 0 % 0 % 0 % A summary of stock option activity for the Company is as follows: Number of Shares Weighted Average Exercise Price (USD) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding stock options May 31, 2025 2,205,230 $ 0.58 8.4 $ 1,340 Stock options issued 413,000 $ 2.19 9.6 - Stock options exercised (36,721 ) - 4.5 $ 85 Stock options forfeited (45,000 ) $ 2.01 9.6 $ - Outstanding stock options February 28, 2026 2,536,509 $ 0.82 8.2 $ 4,028 Ex …

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Recent Accounting Standards No recently issued accounting pronouncements have had or are expected to have a material impact on the Companys unaudited condensed interim consolidated financial statements. …

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NOTE 11. Related Party Transactions During the three and nine months-ended February 28, 2026, the Company paid $0 and $60 (February 28, 2025 - $ nil and $ nil ) to Cert Centre Canada (3C) for certification planning services. One of the Companys Board of Directors is the Chief Executive Officer of 3C. There were no other identifiable related party transactions or balances for the periods presented. …

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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 Companys CODM is its Chief Executive Officer . The Company has determined that it operates as a single operating segment and one 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. The Companys segmented results are consistent with those presented in the unaudited condensed interim consolidated financial statements. As the Company is in a 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. …

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NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Principles of Consolidation and Financial Statement Presentation The accompanying unaudited condensed interim consolidated financial statements are presented in Canadian dollars in conformity with GAAP and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). These unaudited condensed interim consolidated financial statements include all the accounts of the Company and its wholly owned subsidiaries, New Horizon Aircraft Operations Ltd., a British Columbia company, and HOVR Technologies Corp. (HTC), a Delaware corporation. HTC is a dormant subsidiary. All intercompany balances and transactions have been eliminated on consolidation. These unaudited condensed interim consolidated financial statements include all adjustments necessary for the fair presentation of the Companys financial position, results of operations, and cash flows for the periods presented. Certain prior period amounts have been reclassified to conform to the current years presentation. The Companys functional and reporting currency is Canadian dollars. All figures are in thousands of Canadian dollars unless noted otherwise. There have been no changes to the Companys significant accounting policies described in Note 3 Summary of Significant Accounting Policies to the audited consolidated financial statements in the Companys annual report on Form 10-K for the year-ended May 31, 2025, filed with the SEC …

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NOTE 7. Common Stock The Companys Class A ordinary shares and public warrants trade on the Nasdaq Capital Market under the symbol HOVR and HOVRW, respectively. Pursuant to the terms of the Companys 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; (ii) an unlimited number of Class B ordinary shares; and (iii) an unlimited number of preferred shares. The holder of each ordinary share is entitled to one vote. As of February 28, 2026, there were warrants outstanding of 12,065,375 at an exercise price of $11.50 USD and 10,000 at an exercise price of $0.75 USD to purchase an equivalent number of Class A ordinary shares. Warrant holders exercised 3,200,000 warrants in exchange for 3,200,000 Class A ordinary shares for proceeds of $3,282 during the nine months-ended February 28, 2026. A summary of warrant activity for the Company is as follows: Number of Warrants Weighted Average Exercise Price(USD) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (USD) Outstanding warrants May 31, 2025 15,275,375 $ 9.24 3.7 $ 995 Exercised 3,200,000 $ 0.75 3.7 $ 3,555 Outstanding warrants February 28, 2026 12,075,375 $ 11.49 2.9 $ 12 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 sha …

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NOTE 12. Subsequent Events The Company has evaluated subsequent events from March 1, 2026, through to the date of this filing Form 10-Q and determined that there have been no reportable subsequent events.

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