v3.26.1
Income Taxes
 12 Months Ended
May 31, 2026
Income Taxes [Abstract]  
INCOME TAXES

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 the components of deferred tax:

 

    May 31,
2026		     May 31,
2025		  
Deferred Tax Assets            
Finance Lease Liabilities   $ 19     $ 8  
Operating tax losses carried forward     10,254       4,885  
Property and equipment     310       231  
Financing Fees     1,212       16  
Share-based compensation     594       -  
Other available tax deductions     9       -  
Valuation allowance     (12,285 )     (5,132 )
Total Deferred Tax Assets     113       8  
                 
Deferred Tax Liabilities                
Right of Use assets     (19 )     (8 )
Grant income deferred for tax purposes     (94 )     -  
Total Deferred Tax Liabilities     (113 )     (8 )
Net Deferred Tax Asset   $ -     $ -  

   

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:

 

2040   $ 1,408  
2041     97  
2042     615  
2043     2,048  
2044     1,330  
2045     12,535  
2046     20,307  
Total   $ 38,340  

 

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.