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: