UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from _________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
|
(Address of principal executive offices) |
(Zip Code) | |
(
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| 1 |
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| x | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨ No
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of April 17, 2025, the registrant had outstanding shares of Common Stock.
| 2 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains "forward-looking statements" that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our Form 10-K filed on March 20, 2025, and other filings we make with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.
The following discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with our audited financial statements and related notes thereto included elsewhere in this report, and in our Annual Report on Form 10-K filed on March 20, 2025.
| 3 |
HNO INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JANUARY 31, 2025
TABLE OF CONTENTS
| PAGE | ||
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements (Unaudited) | 5 |
| Condensed Balance Sheets as of January 31, 2025 Unaudited and October 31, 2024 Audited | 5 | |
| Unaudited Condensed Statements of Operations for the Three Ended January 31, 2025 and January 31, 2024 | 6 | |
| Unaudited Condensed Statement of Stockholders’ Deficit for the Three Ended January 31, 2025 and January 31, 2024 | 7 | |
| Unaudited Condensed Statements of Cash Flows for the Three Ended January 31, 2025 and January 31, 2024 | 8 | |
| Notes to Unaudited Condensed Financial Statements | 9 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
| Item 4. | Controls and Procedures | 26 |
| PART II | OTHER INFORMATION | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 26 |
| Item 5. | Other Information | 27 |
| Item 6. | Exhibits | 27 |
| Signatures | 28 |
| 4 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
| HNO INTERNATIONAL, INC. CONDENSED BALANCE SHEETS | ||||||||
| January 31, | October 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | Unaudited | Audited | ||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Long term asset, net | ||||||||
| Right-of-use asset | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued payroll | ||||||||
| Accrued interest payable | ||||||||
| Lease liability | ||||||||
| Payroll tax | ||||||||
| Advances, related party | ||||||||
| Customer deposits | ||||||||
| Lease vendor payable | ||||||||
| Notes payable, related party | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liability | ||||||||
| Lease liability | ||||||||
| Long term notes payable, related party | ||||||||
| Total Non-Current Liability | ||||||||
| Total Liabilities | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, par value $ per share; shares authorized | ||||||||
| Series A, par value $ per share; shares authorized; and shares issued and outstanding as of January 31, 2025 and October 31, 2024, respectively | ||||||||
| Series B, par value $ per share; shares authorized; and shares issued and outstanding as of January 31, 2025 and October 31, 2024, respectively | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and outstanding as of January 31, 2025 and October 31, 2024, respectively | ||||||||
| Common stock payable | ||||||||
| Common stock subscription receivable | ( |
) | ( |
) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholders’ Deficit | ( |
) | ( |
) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed unaudited financial statements. | ||||||||
| 5 |
| HNO INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||
| For the Three Months Ended January 31, | ||||||||
| 2025 | 2024 | |||||||
| (As Restated) | ||||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross Profit | ||||||||
| Operating expenses | ||||||||
| Advertising and marketing | ||||||||
| General and administrative expenses | ||||||||
| Share based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Total Operating Expenses | ||||||||
| Other Income (Expenses) | ||||||||
| Interest income | ||||||||
| Interest expense | ( |
) | ( |
) | ||||
| Total Other (Expenses) | ( |
) | ( |
) | ||||
| Loss from Operations | $ | ( |
) | $ | ( |
) | ||
| Net Loss | $ | ( |
) | $ | ( |
) | ||
| PER SHARE AMOUNTS | ||||||||
| Basic and diluted net loss per share |
) | ) | ||||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||
| The accompanying notes are an integral part of these condensed unaudited financial statements. | ||||||||
| 6 |
| HNO INTERNATIONAL, INC. CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT For the three months ended January 31, 2024 (As Restated) (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Stock | Share Subscription | Additional Paid-in | Accumulated | Total Stockholders' | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Payable | Receivable | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance at October 31, 2023 (Restated) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Regulation A stock issuances | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended January 31, 2024 | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Balance at January 31, 2024 (Restated) | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
|
For the three months ended January 31, 2025
| ||||||||||||||||||||||||||||||||||||||||||||
| Balance at October 31, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
| Regulation D stock issuances | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares cancelled as per exchange agreement | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Series B preferred stock issuances | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Common stock based compensation | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended January 31, 2025 | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
| Balance at January 31, 2025 | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
| The accompanying notes are an integral part of these condensed unaudited financial statements. | ||||||||||||||||||||||||||||||||||||||||||||
| 7 |
| HNO INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||
| For the Three Months Ended January 31, | ||||||||
| 2025 | 2024 | |||||||
| (As Restated) | ||||||||
| Cash Flow from Operating Activities | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-to-use asset | ||||||||
| Share based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase/(Decrease) in accounts payable | ( |
) | ||||||
| Increase in accrued payroll | ||||||||
| Increase/(Decrease) in accrued interest payable | ||||||||
| Increase in lease vendor payable | ||||||||
| Increase (Decrease) in lease liabilities | ( |
) | ( |
) | ||||
| (Decrease) increase in payroll taxes | ( |
) | ||||||
| Net Cash Used in Operating Activities | ( |
) | ( |
) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from related party advances | ||||||||
| Proceeds from security deposits | ||||||||
| Proceeds from sale of common stock subscription payable | ||||||||
| Proceeds from sale of common stock | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | ( |
) | ( |
) | ||||
| Purchase of long term asset | ( |
) | ||||||
| Net Cash Used in Investing Activities | ( |
) | ( |
) | ||||
| Net increase (decrease) in cash | ( |
) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Disclosure of Interest and Income Taxes Paid: | ||||||||
| Interest paid during the period | $ | $ | ||||||
| Income taxes paid during the period | $ | $ | ||||||
| Supplemental Disclosure for Non-Cash Investing and Financing Activities: | ||||||||
| Common stock cancellation per share exchange agreement | $ | $ | ||||||
| Series B preferred stock issuance per exchange agreement | $ | $ | ||||||
| Record right-to-use asset and lease liability per ASC 842 | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed unaudited financial statements. | ||||||||
| 8 |
HNO INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 2025
NOTE 1 – ORGANIZATION AND BASIS OF ACCOUNTING
Organization
HNO International, Inc. (the “Company”) was incorporated in the State of Nevada on May 2, 2005 under the name American Bonanza Resources Limited. On August 4, 2009, the Company acquired Clenergen Corporation Limited (UK), a United Kingdom corporation (“Limited”), and succeeded to the business of Limited. Limited acquired the assets of Rootchange Limited, a biofuel and biomass research and development company, in April 2009. On March 19, 2009, the Company changes its name to Clenergen Corporation. On July 8, 2020, the Company changed its name to Excoin Ltd. and on August 31, 2021, the Company changed its name to HNO International, Inc. its current name.
The Company specializes in the design, integration, and development of green hydrogen-based clean energy technologies. With the Company’s management having over 13 years of experience in the field of green hydrogen production, the Company is committed to providing scalable products that help businesses and communities decarbonize, reduce emissions, and cut operational costs. HNO stands for Hydrogen and Oxygen. The Company is at the forefront of developing innovative solutions, such as the Compact Hydrogen Refueling System (CHRS) and the Compact Hydrogen Production System (CHPS), which can be used to produce green hydrogen for various applications including fuel cell electric vehicles, hydrogen internal combustion engines, heating, and cooking. The CHPS is highly scalable, capable of producing 100-2,000 (or more) kilograms of hydrogen per day for commercial use in various applications. In addition, the Company develops energy systems that complement the zero-emissions EV infrastructure, reduce harmful emissions, and cut maintenance costs of commercial diesel fleets. By integrating components from leading industry partners, the Company aims to transition fossil fuels to cleaner alternatives and promote lower emissions.
NOTE 2 –FINANCIAL STATEMENT RESTATEMENT
In connection with the Company’s re-audit of its financial statements for the year ended October 31, 2023, the Company’s management, in consultation with its independent registered public accounting firm, identified corrections to the valuation of service stock issued during the year ended October 31, 2023, and the termination of the patent agreement entered into on January 24, 2023. The corrections made that impact the condensed financial statements for the quarter ended January 31, 2024, are summarized as follows:
These adjustments have been reflected in the restated financial statements for the quarter ended January 31, 2024.
| 9 |
Impact of the Restatement
The impact of the restatement on the financial statements for the affected period is presented below. In addition to the below, the related notes to the financial statements have also been adjusted as appropriate to reflect the impact of the restatements.
The impact of the restatement on the line items within the previously reported Condensed Unaudited Balance Sheet for the quarter ended January 31, 2024, previously filed is as follows:
| Balance Sheet as of January 31, 2024 | As Previously Reported | Adjustment | As Restated | |||||||||
| ASSETS | ||||||||||||
| Current Assets | ||||||||||||
| Cash | $ | $ | ( |
) | $ | |||||||
| Due from related party | $ | $ | $ | |||||||||
| Total Current Assets | $ | $ | ( |
) | $ | |||||||
| Non-Current Assets | ||||||||||||
| Property and equipment, net | $ | $ | ( |
) | $ | |||||||
| Intangible assets, net | $ | $ | ( |
) | $ | |||||||
| Long term asset, net | $ | $ | ( |
) | $ | |||||||
| Right-of-use asset | $ | |||||||||||
| Security deposits | $ | |||||||||||
| Total Non-Current Assets | $ | $ | ( |
) | $ | |||||||
| TOTAL ASSETS | $ | $ | ( |
) | $ | |||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
| LIABILITIES | ||||||||||||
| Current Liabilities | ||||||||||||
| Accounts payable | $ | $ | $ | |||||||||
| Accrued interest payable | $ | $ | $ | |||||||||
| Lease liability | $ | $ | $ | |||||||||
| Payroll tax | $ | $ | $ | |||||||||
| Advances, related party | $ | $ | $ | |||||||||
| Notes payable, related party | $ | $ | $ | |||||||||
| Total Current Liabilities | $ | $ | $ | |||||||||
| Non-Current Liability | ||||||||||||
| Lease Liability | ||||||||||||
| Long term notes payable, related party | $ | $ | $ | |||||||||
| Total Non-Current Liability | $ | $ | $ | |||||||||
| Total Liabilities | $ | $ | $ | |||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||||||
| Series A, par value $0.001 per share | $ | $ | ( |
) | $ | |||||||
| Common stock, par value $0.001 per share | $ | $ | $ | |||||||||
| Common stock payable | $ | $ | $ | |||||||||
| Common stock subscription receivable | $ | ( |
) | $ | $ | ( |
) | |||||
| Additional paid-in capital | $ | $ | $ | |||||||||
| Accumulated deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Total Stockholders’ Deficit | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ( |
) | $ | |||||||
| 10 |
The impact of the restatement on the line items within the previously reported Condensed Unaudited Statement of Operations for the three months ended January 31, 2024, previously filed is as follows:
| Statement of Operations for the three months ended January 31, 2024 | As Previously Reported | Adjustment | As Restated | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of goods sold | $ | $ | $ | |||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Operating expenses | ||||||||||||
| General and administrative expenses | $ | $ | ( |
) | $ | |||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Total Operating Expenses | $ | $ | ( |
) | $ | |||||||
| Other Income (Expenses) | ||||||||||||
| Interest income | $ | ( |
) | $ | ||||||||
| Interest expense | $ | ( |
) | $ | ( |
) | ||||||
| Total Other (Expenses) | $ | ( |
) | ( |
) | $ | ( |
) | ||||
| Loss from Operations | $ | ( |
) | $ | $ | ( |
) | |||||
| Net Loss | $ | ( |
) | $ | $ | ( |
) | |||||
| PER SHARE AMOUNTS | ||||||||||||
| Basic and diluted net loss per share |
$ | ) | $ | $ | ) | |||||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||
The impact of the restatement on the line items within the previously reported Condensed Unaudited Statement of Changes in Stockholders’ Deficit for the three months ended January 31, 2024, previously filed is as follows:
| Changes in Statement of Stockholders' Deficit for the three months ended January 31, 2024 | As Previously Reported | Adjustment | As Restated | |||||||||
| Beginning Additional Paid-in Capital - Balance at October 31, 2023 | $ | $ | $ | |||||||||
| Beginning Accumulated Deficit - Balance at October 31, 2023 | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Beginning Total Stockholders Deficit - Balance at October 31, 2023 | $ | ( |
) | ( |
) | ( |
) | |||||
| Series A preferred issued pursuant to patent agreement, shares | ( |
) | ||||||||||
| Series A preferred issued pursuant to patent agreement, amount | $ | $ | ( |
) | $ | |||||||
| Net loss for the three months ended January 31, 2024 | $ | ( |
) | $ | $ | ( |
) | |||||
| Ending Additional paid in capital - - Balance at January 31, 2024 | $ | $ | $ | |||||||||
| Ending Accumulated Deficit - Balance at January 31, 2024 | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Ending Total Stockholders Deficit - Balance at January 31, 2024 | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| 11 |
The impact of the restatement on the line items within the previously reported Condensed Unaudited Statement of Cash Flows for the three months ended January 31, 2024, previously filed is as follows:
| Statement of Cash Flows for the three months ended January 31, 2024 | As Previously Reported | Adjustment | As Restated | |||||||||
| Cash Flow from Operating Activities | ||||||||||||
| Net loss | $ | ( |
) | $ | $ | ( |
) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Amortization of right-to-use asset | $ | |||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Increase/(Decrease) in accounts payable | $ | $ | ( |
) | $ | ( |
) | |||||
| Increase/(Decrease) in accrued interest payable | $ | $ | $ | |||||||||
| Increase in lease vendor payable | $ | |||||||||||
| (Increase) of right-to-use asset | $ | ( |
) | ( |
) | |||||||
| Increase (Decrease) in lease liabilities | $ | |||||||||||
| Increase (Decrease) in payroll taxes | $ | ( |
) | ( |
) | |||||||
| Net Cash Used in Operating Activities | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Cash Flows from Financing Activities | ||||||||||||
| Proceeds from related party advances | $ | $ | $ | |||||||||
| Proceeds from security deposits | $ | $ | $ | |||||||||
| Proceeds from sale of common stock subscription payable | $ | $ | $ | |||||||||
| Proceeds from sale of common stock | $ | $ | $ | |||||||||
| Net Cash Provided by Financing Activities | $ | $ | $ | |||||||||
| Cash Flows from Investing Activities | ||||||||||||
| Purchase of property and equipment | $ | ( |
) | $ | $ | ( |
) | |||||
| Purchase of long term asset | $ | ( |
) | $ | $ | ( |
) | |||||
| Net Cash Used in Investing Activities | $ | ( |
) | $ | $ | ( |
) | |||||
| Net increase (decrease) in cash | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Cash at beginning of period | $ | $ | $ | |||||||||
| Cash at end of period | $ | $ | ( |
) | $ | |||||||
| Supplemental Disclosure for Non-Cash Investing and Financing Activities: | ||||||||||||
| Record right-to-use asset and lease liability per ASC 842 | $ | $ | $ | |||||||||
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the three months ended January 31, 2025.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The management makes its best estimate of the outcome for these items based on information available when the financial statements are prepared.
| 12 |
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of January 31, 2025, and October 31, 2024, the Company did not hold any investments that qualify as cash equivalents. Therefore, the cash and cash equivalents line item in the balance sheet solely comprises cash.
The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718 Compensation - Stock Compensation (“ASC 718”). ASC 718 requires that the cost of equity instrument awards, issued in exchange for services, including those issued to employees and predominantly to consultants, be measured at the grant-date fair value. The Company does not adhere to a formal stock-based compensation plan; rather, it issues stock awards on a discretionary basis as part of compensation agreements with selected consultants and employees. Compensation for stock-based awards is recognized as a non-cash expense on the income statement. The expense associated with these awards is recorded based on the fair value on the date of grant, as determined using the Black-Scholes-Merton option-pricing model. This cost is recognized over the period during which the award recipient is required to perform services, typically known as the vesting period. The total compensation cost related to vested stock-based awards is recognized after adjusting for estimated forfeitures at the time of vesting. The expense related to stock-based compensation is included within the same income statement lines as cash compensation for the consultants and employees who receive the awards. As of the report date, the Company has not established any plans to issue dividends on stock-based awards. Any tax benefits arising from deductions for these awards are recorded in additional paid-in capital, provided they exceed the cumulative compensation cost recognized.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
During the three months ended January 31, 2025 and
2024, the Company did
Basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed by dividing the net loss by the weighted average.
Number of shares of common stock outstanding plus the dilutive effect of shares issuable through the common stock equivalents. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.
Property and Equipment
Property and equipment are carried at cost and, less accumulated depreciation. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposal. The Company examines the possibility of decreases in the value of property and equipment when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
The Company’s property and equipment mainly consists of computer and laser equipment. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
| 13 |
| Useful life | ||
| Small equipment | ||
| Large equipment | ||
| Vehicles |
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of a long-lived asset, management evaluates whether the estimated future undiscounted net cash flows from the asset are less than its carrying amount. If impairment is indicated, the long-lived asset would be written down to fair value. Fair value is determined by an evaluation of available price information at which assets could be bought or sold, including quoted market prices, if available, or the present value of the estimated future cash flows based on reasonable and supportable assumptions.
Leases
The Company accounts for leases in accordance with ASC 842, Leases (“ASC 842”). At contract inception, the Company determines if an arrangement is or contains a lease. Where the Company is the lessee, for each lease with a term greater than twelve months, the Company records a right-of-use asset and lease liability. A right-of-use asset represents the economic benefit conveyed to the Company by the right to use the underlying asset over the lease term. A lease liability represents the obligation to make lease payments arising from the use of the asset over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the lease liability is calculated at lease commencement as the present value of unpaid lease payments using the Company’s estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using a portfolio approach based on information available at the commencement date of the lease. Leases with an initial expected term of 12 months or less are not recorded in the Balance Sheet and the related lease expense is recognized on a straight-line basis over the lease term.
Recent Accounting Pronouncements
In March 2024, the Financial Accounting Standards Board (FASB) issued ASU No. 2024-01, "Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards." This update clarifies the accounting for profits interest awards by specifying when these awards should be accounted for under ASC 718, Stock Compensation, as opposed to other compensation arrangements like cash bonuses under ASC 710. This clarification is provided through a series of illustrative examples which show how to determine whether profits interest awards meet the conditions of ASC 718, focusing on when such awards should be recognized as equity or liability. The guidance is intended to increase the comparability and consistency of financial reporting by providing clearer criteria for the accounting of profits interest awards.
For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. For private companies, the amendments are effective for fiscal years beginning after December 15, 2025, and interim periods within fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its financial statements and will continue to assess its potential effects as the adoption date approaches.
NOTE 4 – GOING CONCERN
On January 31, 2025, we had an accumulated deficit
of $
Based on the above factors, substantial doubt exists about our ability to continue as a going concern for one year from the issuance of these financial statements.
| 14 |
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
January 31, 2025 | October 31, 2024 | |||||||
| Vehicles | $ | $ | ||||||
| Small equipment | $ | $ | ||||||
| Large equipment | ||||||||
| Property and Equipment, Gross | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation
expenses for the three months ended January 31, 2025 and 2024 were $
NOTE 6 – LEASES
Operating leases
The Company has an operating lease agreement for office space in Murrieta, California, expiring on November 30, 2026.
The Company has active operating lease arrangements for office space. The Company is typically required to make fixed minimum rent payments relating to its right to use the underlying leased assets. The Company was required to classify such leases as operating leases in accordance with the provisions of ASC 842. Therefore, the Company recognized operating lease liabilities with corresponding Right-Of-Use ("ROU") assets based on the present value of the minimum rental payments of such leases.
As most of the Company’s leases do not provide
an implicit interest rate, the lease liability is calculated at lease commencement as the present value of unpaid lease payments using
the Company’s estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that the Company
would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using
a portfolio approach based on information available at the commencement date of the lease. As of January 31, 2025, the right-of-use asset
was $
Remaining lease term as of January 31, 2025:
| Year | Operating Lease Payment | |||||
| 2024 | $ | |||||
| 2025 | $ | |||||
| 2026 and above | $ | |||||
| Total Payments | $ | |||||
| 15 |
NOTE 7 – COMMON STOCK
The Company is authorized to issue shares of common stock, par value $.
Increase in Authorized Capital Stock
On January 4, 2023, the Board of Directors
and a majority of the Company’s stockholders approved the proposal to increase the number of shares of capital stock that the Company
is authorized to issue to
Stock Issued
During the quarter
ended January 31, 2023, the Company entered into Stock Subscription Agreements with Donald Owens, the Company’s Chairman of the
Board of Directors, whereby the Company privately sold a total of shares of its common stock for a cash purchase price of
$
On January 17,
2023, the Company entered into a Stock Subscription Agreement with William Parker, a member of the Company’s Board of Directors,
whereby the Company privately sold a total of shares of its common stock for a cash purchase price of $
On January 11,
2023, the Company entered into a Stock Subscription Agreement with Hossein Haririnia, the Company’s Treasurer and a member of the
Board of Directors, whereby the Company privately sold a total of shares of its common stock for a cash purchase price of $
The Company's Board of Directors granted approval for the issuance of shares of our common stock with a value of $ on January 2, 2023, in exchange for services rendered to the Company. These shares were considered "restricted securities" under Rule 144 and were issued under the exemption provided by Section 4(a)(2) of the Securities Act.
On January 31,
2023, the Company entered into Stock Subscription Agreements with Donald Owens, the Company’s Chairman of the Board of Directors,
whereby the Company privately sold a total of shares of its common stock for a cash purchase price of $
On June 9, 2023,
the Company entered into a Stock Subscription Agreement with Hossein Haririnia, the Company’s Treasurer and a member of the Board
of Directors, whereby the Company privately sold a total of shares of its common stock for a cash purchase price of $
During the quarter ended July 31, 2023, the Company
issued shares of common stock for $
During the quarter ended October 31, 2023, the Company
issued shares of common stock for $
On October 9, 2023, the Company issued shares
of common stock valued at $
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During the quarter ended January 31, 2024, the Company
issued shares of common stock for $
During the quarter ended April 30, 2024, the Company
issued shares of common stock for $
During the quarter ended July 31, 2024, the Company
issued shares of common stock for $
During the quarter ended
July 31, 2024, the Company entered into a Stock Subscription Agreement with accredited investors (under Rule 506 (b) of Regulation D under
the Securities Act of 1933, as amended). Whereby the Company privately sold a total of shares of its common stock, $ par
value per share, (“common stock”) for a cash purchase price of $
During the quarter ended
October 31,2024, the Company issued Regulation A shares previously classified as common stock payable and sold Regulation
A shares, classified as $
During the quarter ended
October 31, 2024, the Company entered into a Stock Subscription Agreement with accredited investors (under Rule 506 (b) of Regulation
D under the Securities Act of 1933, as amended). Whereby the Company privately sold a total of shares of its common stock, $
par value per share, (“common stock”) for an aggregate cash purchase price of $
During the quarter
ended October 31, 2024, the Company's Board of Directors granted approval for the issuance of shares of our common stock valued
at$
During the quarter ended
January 31, 2025, the Company entered into a Stock Subscription Agreement with accredited investors (under Rule 506 (b) of Regulation
D under the Securities Act of 1933, as amended). Whereby the Company privately sold a total of shares of its common stock, $
par value per share, (“common stock”) for an aggregate cash purchase price of $
During the quarter
ended January 31, 2025, the Company's Board of Directors granted approval for the issuance of shares of our common stock valued
at $
As of January 31, 2025 and October 31, 2024, the Company had and shares of common stock issued and outstanding, respectively.
Stock Receivable
As of January 31, 2025 and October 31, 2024, the Company
issued shares of common stock under Regulation A offering to various shareholders that have not yet paid for shares; therefore,
$
On March 31, 2022, the Company issued shares of common stock to Vivaris Capital, LLC, in connection with an Advisory Agreement. However, Vivaris Capital, LLC never paid for the shares, and a dispute arose. The dispute centered around the respective performance under the Advisory Agreement.
On May 3, 2024, the Company and Vivaris Capital, LLC
executed a Settlement Agreement. As part of this agreement, the Company paid Vivaris Capital, LLC a settlement amount of $
As per the Settlement Agreement and Mutual
Release of All Claims executed on May 3, 2024, the Company and Vivaris Capital, LLC have resolved their dispute. The settlement
terms include the cancellation of the shares issued to Vivaris Capital, LLC. Additionally, the Company agreed to pay
Vivaris Capital, LLC a settlement amount of $
| 17 |
Stock Payable
As of January 31, 2025, the Company sold shares
of common stock under its Regulation A offering to various shareholders that have not yet been issued by the transfer agent; therefore,
$
NOTE 8 – PREFERRED STOCK
The Company is authorized to issue shares of preferred stock, par value $.
Series A Preferred Stock
The Company is authorized to issue shares of Series A preferred stock, par value $.
On January 24, 2023, the
Company issued shares of its Series A Preferred Stock to Mr. Owens, valued at $
As of January 31, 2025, and October 31, 2024, the Company had and shares of Series A preferred stock issued and outstanding, respectively.
Series B Preferred Stock
The Company is authorized to issue shares of Series B preferred stock, par value $.
On January 2, 2025, the Company entered into a Share Exchange Agreement with Donald Owens, the Company’s CEO and Chairman. Pursuant to the agreement, Donald Owens exchanged shares of the Company’s common stock for shares of Series B Preferred Stock. On January 9, 2025, shares of common stock held by Donald Owens were cancelled, and shares of Series B Preferred Stock were issued to Donald Owens.
On January 2, 2025, the Company entered into a Share Exchange Agreement with HNO Green Fuels, Inc. Pursuant to the agreement, HNO Green Fuels, Inc. exchanged shares of the Company’s common stock for shares of Series B Preferred Stock. On January 9, 2025, shares of common stock held by HNO Green Fuels, Inc. were cancelled, and shares of Series B Preferred Stock were issued to HNO Green Fuels, Inc.
As of January 31, 2025, and October 31, 2024, the Company had and shares of Series B preferred stock issued and outstanding, respectively.
NOTE 9 – RELATED PARTY TRANSACTIONS
Notes Payable, Related Party
On November 19, 2021, the Company issued a note payable
in the amount of $
On December 1, 2021, the Company issued a note payable
in the amount of $
| 18 |
On May 31, 2022, the Company issued a note payable
in the amount of $
On September 29, 2022, the Company issued a note payable
in the amount of $
On October 20, 2022, the Company issued a note payable
in the amount of $
On March 1, 2023, the Company issued a note payable
in the amount of $
On March 8, 2023, the Company issued a note payable
in the amount of $
On March 23, 2023, the Company issued a note payable
in the amount of $
On April 3, 2023, the Company issued a note payable
in the amount of $
On April 13, 2023, the Company issued a note payable
in the amount of $
On April 17, 2023, the Company issued a note payable
in the amount of $
| 19 |
On August 21, 2024, the Company repaid accrued interest
of $
As of January 31, 2025 and October 31, 2024, these
current and long-term notes payable had an aggregate outstanding balance of $
As of January 31, 2025 and October 31, 2024, the Company
has recorded $
Advances from Related Party
During the year ended October 31, 2024, Donald Owens,
the Company's Chairman of the Board of Directors, advanced $
During the year ended October 31, 2024, HNO Green
Fuels, Inc., advanced $
During the three months ended January 31, 2025, Donald
Owens, the Company's Chairman of the Board of Directors, advanced $
During the three months ended January 31, 2025, HNO
Green Fuels, Inc., advanced $
NOTE 10 – RECEIVABLE SETTLEMENT WITH RELATED PARTY
As of January 31, 2024, October 31, 2023 and October
31, 2022, the Company had a receivable from HNO Hydrogen Generators totaling $
NOTE 11 – INTELLECTUAL PROPERTY: PROTOTYPE COMPACT HYDROGEN REFUELING STATION (CHRS)
On July 10, 2023, the Company entered into a Simple
Agreement for Future Equity (the “SAFE”) with Varea, Inc. ("Varea"), a Delaware corporation. Pursuant to the SAFE,
the Company is investing $
Prior to entering into this SAFE, the Company had an existing financial arrangement with Varea LLC, whereby Varea LLC invoiced the Company for services rendered, which were recorded as expenses by HNOI. However, recognizing the potential for a more mutually beneficial arrangement, Varea Inc. proposed a revised approach. Under the newly proposed approach, Varea Inc. would submit a detailed budget outlining their anticipated monthly expenses, and HNO International, Inc. would view these expenses as an investment opportunity rather than mere costs. In exchange for funding Varea Inc.'s expenses, HNO International, Inc. would receive a post-money SAFE, which represents a future right to certain shares of Varea's Capital Stock. The transition from the previous invoicing system to the investment-based financial arrangement was agreed by both parties. The terms and conditions of the agreement, including the conversion of expenses into a potential future return on investment, were thoroughly assessed and discussed.
On December 6, 2023, the SAFE was terminated as part of a Mutual Release Agreement between HNO International, Inc., and Varea, Inc. Under the terms of this Mutual Release Agreement, the intellectual property related to the prototype Compact Hydrogen Refueling Station (CHRS), developed with the funds provided under the SAFE, was retained by HNO International, Inc.
The balance of the SAFE on December 6, 2023, was $
| 20 |
Amortization
The intellectual property associated with the CHRS
is being amortized over a useful life of five
| Useful Life (years) |
January 31, 2025 |
October 31, 2024 | ||||||||||
| Long term asset | $ | $ | ||||||||||
| Less: Accumulated amortization | ( |
) | ( |
) | ||||||||
| Long term asset, net | $ | $ | ||||||||||
NOTE 12 – TERMINATION OF PATENT AGREEMENT
Patent Purchase Agreement
On January 24, 2023, the
Company entered into a Patent Purchase Agreement with Donald Owens, the Company's Chairman of the Board of Directors, to acquire several
patents related to hydrogen supplemental systems for on-demand hydrogen generation for internal combustion engines and a method and apparatus
for increasing combustion efficiency and reducing particulate matter emissions in jet engines. In exchange for these patents, the Company
issued shares of its Series A Preferred Stock to Mr. Owens, valued at $
Termination of Patent Purchase Agreement
On March 13, 2025, the Company and Donald Owens mutually agreed to terminate the Patent Purchase Agreement as of January 24, 2023. As part of the termination, the patents were returned to Mr. Owens, and the shares of Series A Preferred Stock were canceled. See Note 2 – Correction of Previously Issued Financial Statements. A copy of the Termination Agreement was attached to the Company’s Annual Report on Form 10-K as Exhibit 10.27.
NOTE 13 – TERMINATION OF PROPERTY ACQUISITION AGREEMENT
On August 28, 2023, the Company
entered into a Purchase and Sale Agreement (the “PSA”) with TCF Elrod, LLC. Pursuant to the PSA, the Company agreed to purchase
property located in Harris County, Texas, including real property, improvements, development rights, and a lease. The purchase price for
the property was $
NOTE 14 – SUBSEQUENT EVENTS
Subsequent events have been evaluated through April 9, 2025, which represents the date the financial statements were available to be issued, and no events, other than discussed below have occurred through that date that would impact the financial statements.
On April
7, 2025, the Company entered into a Legal Services Agreement with Newlan Law Firm, PLLC, pursuant to which the Company issued a $
Common Stock Issued
The
Company entered into Stock Subscription Agreements with accredited investors (under Rule 506(b) of Regulation D under the Securities
Act of 1933, as amended), whereby the Company privately sold a total of shares of its common stock, $ par value per
share (“common stock”), for a cash purchase price of $
Termination of Patent Purchase Agreement
On March 13, 2025, the Company and Donald Owens mutually agreed to terminate the Patent Purchase Agreement as of January 24, 2023. As part of the termination, the patents were returned to Mr. Owens, and the 5,000,000 shares of Series A Preferred Stock were canceled. A copy of the Termination Agreement was attached to the Company’s Annual Report filed on Form 10-K as Exhibit 10.27.
| 21 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
HNO International, Inc. focuses on systems engineering design, integration, and product development to generate green hydrogen-based clean energy solutions to help businesses and communities decarbonize in the near term.
HNO stands for Hydrogen and Oxygen and our experienced management team has over 14 years of expertise in the green hydrogen production industry.
HNO International provides green hydrogen systems engineering design, integration, and products to multiple markets, which include: (i) the zero-emission vehicle and mobile equipment market consisting of hydrogen fuel cell electric passenger vehicles, material handling equipment such as forklifts and airport ground support equipment, as well as the medium and heavy-duty truck market; (ii) the current and emerging hydrogen gas markets encompassing ammonia, fertilizer, steel, mining, electronics, semiconductors, and fuel cell electric vehicles; (iii) and the gasoline and diesel engine emissions and maintenance reduction product and services market.
Results of Operations
For the three months ended January 31, 2025 and 2024
Revenue
For the three months ended January 31, 2025 and January 31, 2024, we generated no revenue.
Operating Expenses
Operating expenses for the three months ended January 31, 2025, were $627,406 compared to $500,441 for the same period in 2024. This increase is attributable to the Company’s efforts to expand operations.
Net Loss
Net loss for the three months ended January 31, 2025, was $634,338 compared to a net loss of $507,073 during the same period in 2024.
General and Administrative, and Contract Labor Expenses
General and Administrative, and Contract Labor expenses were $302,105 for the three months ended January 31, 2025, as compared to $464,005 during the same period in 2024. Operating expenses changed due to the Company’s efforts to streamline operations and reduce overhead costs.
Forward-Looking Considerations
The Company recognizes the possibility of future increases in labor or material costs. Factors such as evolving market conditions, potential inflation, and global economic dynamics are considered. We are actively monitoring these aspects to anticipate and navigate any forthcoming rises in labor or material expenses.
Cost-to-Revenue - The Company is assessing alterations in the relationship between cost of sales and revenue. We are examining the factors influencing these changes, including shifts in prices and fluctuations in the volume of services sold. Understanding the impact of these elements is crucial for maintaining a balanced and effective cost-to-revenue structure.
Liquidity and Capital Resources
We incurred a net loss for the three months ended January 31, 2025 of $634,338 and had an accumulated deficit of $44,960,664 at January 31, 2025. At January 31, 2025, we had a cash balance of $47,900, compared to a cash balance of $20,255 at October 31, 2024. At January 31, 2025, the working capital deficit was $2,448,140, compared to a working capital deficit of $1,969,965 at October 31, 2024. Our existing and available capital resources are not expected to be sufficient to satisfy our funding requirements through one year from the date of this filing in the absence of share issuances or other sources of financing.
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We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. We have raised capital through sales of common stock and debt securities.
The effect of existing or probable government regulations on our business is not known at this time. Due to the nature of our business, it is anticipated that there may be increasing government regulation that may cause us to have to take serious corrective actions or make changes to the business plan.
There are no external sources of liquidity available to the Company at this time. The Company will need to raise additional capital through equity financings or other means in order to continue operations and meet its obligations. Failure to obtain additional funding could have a material adverse effect on our financial condition and the results of operations.
Cash Flow
For the Three months Ended January 31, 2025 and 2023
The following table summarizes our cash flows for the periods indicated below:
For the Three months Ended January 31, 2025 | For the Three months Ended January 31, 2024 | |||||||
| Cash Used in Operating Activities | $ | (168,402 | ) | $ | (496,703 | ) | ||
| Cash Provided by Financing Activities | 374,000 | 491,085 | ||||||
| Net cash used in investing activities | $ | (177,943 | ) | $ | (160,739 | ) | ||
Cash Used in Operating Activities
During the three months ended January 31, 2025, cash used in operating activities amounted to $(168,412), primarily reflecting our net loss of $(634,338). This impact was partially offset by non-cash charges, including depreciation and amortization of $54,449 and share-based compensation totaling $265,502. Additionally, there was an increase in accounts payable of $121,146, an increase in accrued payroll of $17,476, and an increase in accrued interest payable of $6,931.
During the three months ended January 31, 2024, cash used in operating activities totaled $(496,703), primarily reflecting our net loss of $(507,073). This was offset by non-cash charges such as depreciation and amortization amounting to $36,436. Additionally, there was an increase in accrued interest payable and a decrease in payroll taxes, contributing to the overall cash movements during the period.
Cash Used in Financing Activities
During the three months ended January 31, 2025, cash provided by financing activities was $374,000, which consisted of proceeds from related party advances of $359,000, proceeds from the sale of common stock and proceeds from the sale of common stock of $15,000.
During the three months ended January 31, 2024, cash provided by financing activities was $491,085, which consisted of proceeds from related party advances of $365,585 and proceeds from the sale of common stock of $125,500.
Cash Provided by Investing Activities
During the three months ended January 31, 2025, cash used in investing activities was $(177,943), which consisted of the purchase of property and equipment and long-term assets.
During the three months ended January 31, 2024, cash used in investing activities was $(160,739), which consisted of the purchase of plant and equipment and the purchase long term asset.
Going Concern
The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the three months ended January 31, 2025, the Company incurred a net loss of $634,338 and used cash in operating activities of $168,412, and on January 31, 2025, had stockholders’ deficit of $1,751,227. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and the classification of liabilities that might result from this uncertainty.
| 23 |
Management is actively seeking additional sources of capital through the sale of equity, advances from related parties, and exploring strategic partnerships. The Company is also focused on attracting suitable investors to support its business plan without relying heavily on existing cash reserves. Additionally, management is implementing cost-saving measures and exploring opportunities to diversify through acquisitions or entering into new markets. However, there can be no assurance that these efforts will result in sufficient funding, and the Company may continue to face substantial uncertainty regarding its ability to achieve profitable operations and sustain its business.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements with any party.
Critical Accounting Policies
Our discussion and analysis of results of operations and financial condition are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718 Compensation - Stock Compensation (“ASC 718”). ASC 718 requires that the cost of equity instrument awards, issued in exchange for services, including those issued to employees and predominantly to consultants, be measured at the grant-date fair value. The Company does not adhere to a formal stock-based compensation plan; rather, it issues stock awards on a discretionary basis as part of compensation agreements with selected consultants and employees. Compensation for stock-based awards is recognized as a non-cash expense on the income statement. The expense associated with these awards is recorded based on the fair value on the date of grant, as determined using the Black-Scholes-Merton option-pricing model. This cost is recognized over the period during which the award recipient is required to perform services, typically known as the vesting period. The total compensation cost related to vested stock-based awards is recognized after adjusting for estimated forfeitures at the time of vesting. The expense related to stock-based compensation is included within the same income statement lines as cash compensation for the consultants and employees who receive the awards. As of the report date, the Company has not established any plans to issue dividends on stock-based awards. Any tax benefits arising from deductions for these awards are recorded in additional paid-in capital, provided they exceed the cumulative compensation cost recognized.
DERIVATIVE LIABILITY
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Paragraph 815-15-25-1 the conversion feature and certain other features are considered embedded derivative instruments, such as a conversion reset provision, a penalty provision and redemption option, which are to be recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The Company records the resulting discount on debt related to the conversion features at initial transaction and amortizes the discount using the effective interest rate method over the life of the debt instruments. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The Company follows ASC Section 815-40-15 (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.
| 24 |
The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.
The Company utilizes the binomial option pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The binomial option pricing model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the remaining contractual term of the instrument granted.
REVENUE RECOGNITION
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2024, the Financial Accounting Standards Board (FASB) issued ASU No. 2024-01, "Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards." This update clarifies the accounting for profits interest awards by specifying when these awards should be accounted for under ASC 718, Stock Compensation, as opposed to other compensation arrangements like cash bonuses under ASC 710. This clarification is provided through a series of illustrative examples which show how to determine whether profits interest awards meet the conditions of ASC 718, focusing on when such awards should be recognized as equity or liability. The guidance is intended to increase the comparability and consistency of financial reporting by providing clearer criteria for the accounting of profits interest awards.
For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. For private companies, the amendments are effective for fiscal years beginning after December 15, 2025, and interim periods within fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its financial statements and will continue to assess its potential effects as the adoption date approaches.
PROPOSED TRANSACTIONS
The Company is not anticipating any transactions.
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
There were no recent accounting pronouncements that have or will have a material effect on the Company’s financial position or results of operations.
FINANCIAL INSTRUMENTS
The main risks of the Company’s financial instruments are exposed to are credit risk, market risk, foreign exchange risk, and liquidity risk.
OUTSTANDING SHARE DATA
As of January 31, 2025, the following securities were outstanding:
Common stock: 75,592,158 shares
Series A Preferred Stock: 5,000,000
Series B Preferred Stock: 360,000
| 25 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a Smaller Reporting Company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending October 31, 2025, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during the quarter ended January 31, 2025 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following table includes all unregistered sales of securities made by the Company during the quarter ended January 31, 2025:
| Date | Name | Consideration | Securities | Exemption from Registration |
| 11/13/2024 | Grishmeshwar Prasad Sinha | Cash | 11,111 | Rule 506 (b) of Regulation D |
| 12/5/2024 | Dharunkumar Sadasivam | Cash | 9,091 | Rule 506 (b) of Regulation D |
| 1/7/2025 | Dharunkumar Sadasivam | Cash | 9,091 | Rule 506 (b) of Regulation D |
No commissions were paid in connection with the sales of securities above. Proceeds from the sale of common stock were applied toward operating capital to support the Company's operations.
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ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
None of our directors or executive officers
ITEM 6. EXHIBITS
| Incorporated by reference | ||||||
| Exhibit | Exhibit Description | Filed herewith | Form | Period ending | Exhibit | Filing date |
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 32.1* | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 32.2* | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document XBRL Instance Document | X | ||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Definition | X | ||||
| 104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 | |||||
* Furnished, not filed.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
HNO INTERNATIONAL INC.
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| April 17, 2025 |
By: /s/ Donald Owens Donald Owens, Chief Executive Officer (Principal Executive Officer) |
|
By: /s/ Hossein Haririnia Hossein Haririnia, Treasurer (Principal Financial and Accounting Officer) |
******
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