HNOI 10-Q
HNO International, Inc. (HNOI)
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 June 27, 2024, 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 January 29, 2024, 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 January 29, 2024.
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HNO INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 2024
TABLE OF CONTENTS
| 4 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
| HNO INTERNATIONAL, INC. CONDENSED BALANCE SHEETS (Unaudited) | ||||||||
| April 30, | October 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accrued interest receivable | ||||||||
| Due from related party | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Long term asset | ||||||||
| ROU 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 | ||||||||
| Preferred stock, par value $ per share; shares authorized | ||||||||
| Series A, par value $ per share; shares authorized; and shares issued and outstanding as of April 30, 2024 and October 31, 2023, respectively | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and outstanding as of April 30, 2024 and October 31, 2023, 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 unaudited condensed financial statements. | ||||||||
| 5 |
| HNO INTERNATIONAL, INC. CONDENSED STATEMENT OF OPERATIONS (Unaudited) | ||||||||||||||||
| For the Three Months Ended April 30, |
For the Six Months Ended April 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ( |
) | ||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Advertising and marketing | ||||||||||||||||
| 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 accompanying notes are an integral part of these unaudited condensed financial statements. | ||||||||||||||||
| 6 |
| HNO INTERNATIONAL, INC. CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT For the three months and six months ended April 30, 2024 and 2023 (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Common Stock | Stock | Share Subscription | Additional Paid-in | Accumulated | Total Stockholders' | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Payable | Receivable | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance at October 31, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||
| Regulation A stock issuances | — | |||||||||||||||||||||||||||||||||||
| Net loss for the three months ended January 31, 2024 | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Balance at January 31, 2024 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||
| Regulation A stock issuances | — | |||||||||||||||||||||||||||||||||||
| Net loss for the three months ended April 30, 2024 | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Balance at April 30, 2024 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||
| Balance at October 31, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||||||||||
| Common stock based compensation | — | |||||||||||||||||||||||||||||||||||
| Common stock issued for settlement of debt | — | |||||||||||||||||||||||||||||||||||
| Common stock to be issued from cash proceeds | — | — | ||||||||||||||||||||||||||||||||||
| Series A preferred issued pursuant to patent agreement | — | |||||||||||||||||||||||||||||||||||
| Net loss for the three months ended January 31, 2023 | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Balance at January 31, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||
| Common stock issued for cash | — | ( |
) | |||||||||||||||||||||||||||||||||
| Net loss for the three months ended April 30, 2023 | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Balance at April 30, 2023 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||
| The accompanying notes are an integral part of these unaudited condensed financial statements. | ||||||||||||||||||||||||||||||||||||
| 7 |
| HNO INTERNATIONAL, INC. CONDENSED STATEMENT OF CASH FLOWS (Unaudited) | ||||||||
| For the Six Months Ended April 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flow from Operating Activities | ||||||||
| Net loss for the period | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| ROU asset | ( |
) | ||||||
| Lease liability | ||||||||
| Shares issued for services | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in due from related party | ||||||||
| Increase in accrued interest receivable | ( |
) | ||||||
| Increase in accounts payable | ||||||||
| Increase in accrued interest payable | ||||||||
| Increase in lease liability | ||||||||
| 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 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: | ||||||||
| Series A preferred stock issued pursuant to patent agreement | $ | $ | ||||||
| Common stock issued for conversion of debt | $ | $ | ||||||
| The accompanying notes are an integral part of these unaudited condensed financial statements. | ||||||||
| 8 |
HNO INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
APRIL 30, 2024
(Unaudited)
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 – 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 six months ended April 30, 2024.
Use of Estimates
The preparation of the condensed 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 condensed 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 condensed financial statements are prepared.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718 Compensation - Stock Compensation (“ASC 718”). ASC 718 addresses all forms of share-based payment (“SBP”) awards including shares issued under employee stock purchase plans and stock incentive shares. Under ASC 718 awards result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest and will result in a charge to operations.
| 9 |
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 six months ended
April 30, 2024 and 2023, the Company had revenue of $
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.
| Useful life | ||
| Small equipment | ||
| Large equipment | ||
| Vehicles |
Intangible Assets
Intangible assets consist of patents acquired in an
asset purchase agreement (see Note 5). The estimated useful life of these assets was determined to be
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.
| 10 |
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.
Adoption of Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.
NOTE 3 – GOING CONCERN
At April 30, 2024, 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 condensed financial statements.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
April 30, 2024 | October 31, 2023 | |||||||
| Vehicles | $ | $ | ||||||
| Small equipment | $ | $ | ||||||
| Large equipment | ||||||||
| Property and Equipment, Gross | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation
expenses for the six months ended April 30, 2024, and 2023 was $
| 11 |
NOTE 5 – INTANGIBLE ASSETS
Patents Acquired Under 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 $
The details of the patents acquired are listed in the table below, which includes information on the patent numbers, titles, and status in various countries.
| COUNTRY | APPLN NO |
PATENT NUMBER |
TITLE | STATUS |
|
US |
13/844,267 |
8,757,107 |
HYDROGEN SUPPLEMENTAL SYSTEM FOR ON-DEMAND HYDROGEN GENERATION FOR INTERNAL COMBUSTION ENGINES |
Issued |
|
US |
13/922,351 |
9,453,457 |
HYDROGEN SUPPLEMENTAL SYSTEM FOR ON-DEMAND HYDROGEN GENERATION FOR INTERNAL COMBUSTION ENGINES |
Issued |
|
US |
14/016,388 |
9,476,357 |
METHOD AND APPARATUS FOR INCREASING COMBUSTION EFFICIENCY AND REDUCING PARTICULATE MATTER EMISSIONS IN JET ENGINES |
Issued |
|
US |
14/326,801 |
9,267,468 |
HYDROGEN SUPPLEMENTAL SYSTEM FOR ON-DEMAND HYDROGEN GENERATION FOR INTERNAL COMBUSTION ENGINES |
Issued |
|
US |
17/047,041 |
10,920,717 |
HYDROGEN PRODUCING SYSTEM AND DEVICE FOR IMPROVING FUEL EFFICIENCY AND REDUCING EMISSIONS OF INTERNAL COMBUSTION AND/OR DIESEL ENGINES |
Issued |
|
AUSTRALIA |
2019405749 |
2019405749 |
HYDROGEN PRODUCING SYSTEM AND DEVICE FOR IMPROVING FUEL EFFICIENCY AND REDUCING EMISSIONS OF INTERNAL COMBUSTION AND/OR DIESEL ENGINES |
Issued |
|
CHINA |
201980092511.1 | HYDROGEN PRODUCING SYSTEM AND DEVICE FOR IMPROVING FUEL EFFICIENCY |
Pending | |
|
EUROPE |
19900413.6. |
HYDROGEN PRODUCING SYSTEM AND DEVICE FOR IMPROVING FUEL EFFICIENCY |
Pending | |
|
JAPAN |
2021-535288 |
HYDROGEN PRODUCING SYSTEM AND DEVICE FOR IMPROVING FUEL EFFICIENCY |
Pending |
Intangible assets at April 30, 2024 and October 31, 2023, consisted of the following:
| Useful Life (years) |
April 30, 2024 |
October 31, 2023 | ||||||||||
| Patents | $ | $ | ||||||||||
| Less: Accumulated amortization | ( |
) | ( |
) | ||||||||
| Intangible assets, net | $ | $ | ||||||||||
Amortization
expense for the six months ended April 30, 2024, and 2023 was $
| 12 |
NOTE 6 – LEASES
Operating leases
The Company has an operating lease agreement for office space in Murrieta, California, expiring on November 30, 2026.
On December 3, 2020, the Company entered into an operating lease with the landlord, Demarius Holdings, Inc., ending November 30, 2023, for the office spaces located at 41558 Eastman Drive, Suites B and C, Murrieta, California 92562. Both suites are approximately 2,088 square feet of space. The Company’s principal executive office is located at 41558 Eastman Drive, Suite B, Murrieta, California 92562. Suite C is utilized for testing and research equipment.
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 - Leases. 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 April 30, 2024, the ROU asset was $
Remaining lease term as of April 30, 2024:
| Year | Operating Lease Payment | ||||
| 2024 | $ | ||||
| 2025 | $ | ||||
| 2026 and above | $ | ||||
| Total Payments | $ | ||||
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
| 13 |
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 at a fixed price of $ per share for a total of $
During the quarter ended October 31, 2023, the Company issued shares
of common stock at a fixed price of $ per share for a total of $
On October 9, 2023, the Company issued shares
of common stock valued at $
During the quarter ended January 31, 2024, the Company issued shares
of common stock at a fixed price of $ per share for a total of $
During the quarter ended April 30, 2024, the Company issued shares
of common stock at a fixed price of $ per share for a total of $
As of April 30, 2024 and October 31, 2023, the Company had and shares of common stock issued and outstanding, respectively.
| 14 |
Stock Receivable
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.
As per the Settlement Agreement executed on May 3,
2024 (see Note 12), the shares were canceled, and the Company paid Vivaris Capital, LLC a settlement amount of $
As of April 30, 2024, the Company issued shares
of common stock under Regulation A offering to various shareholders that have not yet paid for shares; therefore, $
Stock Payable
As of April 30, 2024, 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 October 14, 2019, the Company issued shares of the Series A preferred stock
to Custodian Ventures LLC, the Company controlled by David Lazar, the Company’s former Chief Executive Officer for forgiveness of
related party debt totaling $
On January 24, 2023, the
Company issued shares of its Series A Preferred Stock to Mr. Owens, valued at $
As of April 30, 2024, and October 31, 2023, the Company had and shares of Series A preferred stock issued and outstanding, respectively.
NOTE 9 – RELATED PARTY TRANSACTIONS
Notes Payable, Related Party
On December 1, 2021, the Company issued a note payable in the amount
of $
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 $
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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 $
As of April 30, 2024, and October 31, 2023, these
current and long-term notes payable had an outstanding balance of $
As of April 30, 2024 and October 31, 2023, the Company
has recorded $
Extension of Promissory Notes
On January 17, 2024, the Company entered into an Extension to Promissory Note (the "1st Extension") with HNO Green Fuels, pursuant to the terms set forth in the 1st Extension. The 1st Extension amends the Promissory Note issued on December 1, 2021, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On January 17, 2024, the Company entered into an Extension to Promissory Note (the "2nd Extension") with HNO Green Fuels, pursuant to the terms set forth in the 2nd Extension. The 2nd Extension amends the Promissory Note issued on September 29, 2022, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On January 17, 2024, the Company entered into an Extension to Promissory Note (the "3rd Extension") with HNO Green Fuels, pursuant to the terms set forth in the 3rd Extension. The 3rd Extension amends the Promissory Note issued on October 20, 2022, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On March 1, 2024, the Company entered into an Extension to Promissory Note (the "4th Extension") with HNO Green Fuels, pursuant to the terms set forth in the 4th Extension. The 4th Extension amends the Promissory Note issued on March 1, 2023, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On March 1, 2024, the Company entered into an Extension to Promissory Note (the "5th Extension") with HNO Green Fuels, pursuant to the terms set forth in the 5th Extension. The 5th Extension amends the Promissory Note issued on March 8, 2023, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On March 1, 2024, the Company entered into an Extension to Promissory Note (the "6th Extension") with HNO Green Fuels, pursuant to the terms set forth in the 6th Extension. The 6th Extension amends the Promissory Note issued on March 23, 2023, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On March 1, 2024, the Company entered into an Extension to Promissory Note (the "7th Extension") with HNO Green Fuels, pursuant to the terms set forth in the 7th Extension. The 7th Extension amends the Promissory Note issued on April 3, 2023, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On March 1, 2024, the Company entered into an Extension to Promissory Note (the "8th Extension") with HNO Green Fuels, pursuant to the terms set forth in the 8th Extension. The 8th Extension amends the Promissory Note issued on April 13, 2023, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
On March 1, 2024, the Company entered into an Extension to Promissory Note (the "9th Extension") with HNO Green Fuels, pursuant to the terms set forth in the 9th Extension. The 9th Extension amends the Promissory Note issued on April 17, 2023, extending the Maturity Date to December 31, 2024. All prior defaults were waived by HNO Green Fuels.
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Advances from Related Party
During the six months ended April 30, 2024, Donald Owens, the Company's
Chairman of the Board of Directors, 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 – SIMPLE AGREEMENT FOR FUTURE EQUITY
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.
The balance of the SAFE on April 30, 2024 and October 31, 2023, was $
NOTE 12 – 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 $
Specific conditions in the PSA were not met, the
Company chose to exercise its right to terminate the PSA. Consequently, TCF Elrod, LLC refunded the $
NOTE 13 – SUBSEQUENT EVENTS
Common Stock Issued
Subsequent to the quarter
ended April 30, 2024, the Company issued shares of common stock under Regulation A for cash totaling $
Subsequent to the quarter ended April 30, 2024, the Company issued shares of common stock under Regulation A for stock payables.
Subsequent to the quarter
ended April 30, 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 $
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Settlement with Vivaris Capital, LLC
Subsequent to the quarter ended April 30, 2024, the Company entered into a Settlement Agreement and Mutual Release of All Claims with Vivaris Capital, LLC, resolving a dispute from a prior Advisory Agreement.
On March 31, 2022, the Company issued shares of common stock to Vivaris Capital, LLC in connection with the Advisory Agreement. However, Vivaris Capital, LLC did not pay for these shares, resulting in a disagreement regarding performance under the 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 $
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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.
On May 16, 2023, the Company began accepting subscription agreements from investors as part of an offering under Regulation A. This offering concluded automatically on May 5, 2024. During this period, the Company issued 2,457,461 shares of common stock under the Regulation A offering.
Results of Operations
For the three months ended April 30, 2024 and 2023
Revenue
For the three months ended April 30, 2024, we generated no revenue, consistent with no revenue for the three months ended April 30, 2023.
Operating Expenses
Operating expenses for the three months ended April 30, 2024, were $570,225 compared to $297,849 for the same period in 2023. This increase is attributable to the Company’s efforts to expand operations, which resulted in increased costs related to contract labor and general and administrative expenses. As 2024 progressed, we experienced a significant increase in hiring contract labor to support our Research and Development program. We also expanded our staff to support increased sales and marketing efforts.
Net Loss
Net loss for the three months ended April 30, 2024, was $565,033 compared to a net loss of $297,848 during the same period in 2023.
General and Administrative, and Contract Labor Expenses
General and Administrative, and Contract Labor expenses were $279,239 for the three months ended April 30, 2024, as compared to $196,935 during the same period in 2023. Operating expenses changed due to the Company’s efforts to expand operations, resulting in increased costs related to contract labor and general and administrative expenses.
For the six months ended April 30, 2024 and 2023
Revenue
For the six months ended April 30, 2024, we generated no revenue compared to $13,000 for the six months ended April 30, 2023. Revenue generated was from hydrogen engineering services and combustion solutions.
Operating Expenses
Operating expenses for the six months ended April 30, 2024, were $1,092,389 compared to $509,340 for the same period in 2023. This is attributable to the Company’s efforts to expand operations, which resulted in increased costs related to contract labor and general and administrative expenses. As 2043 progressed, we experienced a significant increase in hiring contract labor to support our Research and Development program. We also expanded our staff to support increased sales and marketing efforts.
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Net Loss
Net loss for the six months ended April 30, 2023, was $1,087,817 compared to a net loss of $502,221 during the same period in 2023.
General and Administrative, and Contract Labor Expenses
General and Administrative, and Contract Labor expenses were $502,282 for the six months ended April 30, 2024, as compared to $301,387 during the same period in 2023. Operating expenses changed due to the Company’s efforts to expand operations, resulting in increased costs related to contract labor and general and administrative expenses.
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 April 30, 2024 and had an accumulated deficit of $42,697,762 at April 30, 2024. At April 30, 2024, we had a cash balance of $77,459, compared to a cash balance of $235,159 at October 31, 2023. At April 30, 2024, the working capital deficit was $1,637,583, compared to a working capital deficit of $553,284 at October 31, 2023. 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.
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 Six Months Ended April 30, 2024 and 2023
The following table summarizes our cash flows for the periods indicated below:
For the Six Months Ended April 30, 2024 | For the Six Months Ended April 30, 2023 | |||||||
| Cash Used in Operating Activities | (951,373 | ) | (483,467 | ) | ||||
| Cash Provided by Financing Activities | 1,069,735 | 621,300 | ||||||
| Net cash used in investing activities | (276,062 | ) | (175,724 | ) | ||||
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Cash Used in Operating Activities
During the six months ended April 30, 2024, cash used in operating activities was $(951,373), primarily reflecting our net losses for the period, adjusted by non-cash charges such as depreciation and amortization, as well as changes in our working capital accounts. These changes mainly consisted of an increase in accrued interest payable, payroll taxes, and accounts payable, a decrease in the security deposit, and the settlement of a receivable from HNO Hydrogen Generators. The receivable, totaling $56,392, was fully settled through a transfer of equipment in connection with a settlement agreement effective April 15, 2024. The settlement agreement involved the transfer of large equipment valued at $32,327 and small equipment valued at $24,065.
During the six months ended April 30, 2023, cash used in operating activities was $(483,467), primarily reflecting our net losses for the period, adjusted by non-cash charges of share-based compensation, as well as changes in our working capital accounts. These changes mainly consisted of an increase in accrued interest payable, and a decrease in the security deposit.
Cash Provided by Financing Activities
During the six months ended April 30, 2024, cash provided by financing activities was $1,069,735, which consisted of proceeds from related party advances of $710,585, proceeds from the sale of common stock subscription payable of $47,249, and proceeds from the sale of common stock of $211,901.
During the six months ended April 30, 2023, cash provided by financing activities was $621,300, which consisted of proceeds from related party advances of $230,000 and proceeds from the sale of common stock of $384,500.
Cash Provided by Investing Activities
During the six months ended April 30, 2024, cash used in investing activities was $(276,062), which consisted of the purchase of property and equipment and long-term assets.
During the six months ended April 30, 2023, cash used in investing activities was $(175,724), which consisted of the purchase of plant and equipment.
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 six months ended April 30, 2024, the Company incurred a net loss of $1,087,817 and used cash in operating activities of $951,373, and on April 30, 2024, had stockholders’ deficit of $920,868. 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.
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 incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation. Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over the period in which the related services are rendered.
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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.
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
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation. We recognize revenue for the sale of our products upon delivery to a customer.
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2023, which means it will be effective for our fiscal year beginning October 31, 2024. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
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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 April 30, 2024, the following securities were outstanding:
Common stock: 419,553,485 shares
Series A Preferred Stock: 10,000,000
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, 2024, 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.
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CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during the quarter ended April 30, 2024 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1A. RISK FACTORS
The following risk factor disclosures should be read in conjunction with the risk factors described in our Annual Report on Form 10-K for the year ended October 31, 2023 and subsequent periodic filings with the SEC. We are supplementing the risk factors previously disclosed in such filings to include the following updated risk factors:
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report, including our financial statements and the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as any additional risk factors that may be described in our other filings with the SEC from time to time, including our Annual Report on Form 10-K for fiscal year ended October 31, 2023, before deciding whether to invest in our securities. The occurrence of any of the risks, the events or developments described below could harm our business, financial condition, operating results, and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. You should consider carefully the risks and uncertainties summarized and set forth in detail below and elsewhere in this Annual Report before you decide to invest in our common stock.
You are unlikely to be able to exercise effective remedies or collect judgments against BF Borgers relating to their work as our independent registered public accounting firm.
BF Borgers CPA PC (“BF Borgers”) served as our independent registered public accounting firm from 2022 to 2024 and audited the consolidated financial statements contained in our Annual Report on Form 10-K for the years ended October 30, 2023 and 2022. On May 3, 2024, the SEC entered an order instituting settled administrative and cease-and-desist proceedings against BF Borgers, permanently barring BF Borgers from appearing or practicing before the Commission as an accountant (the “Order”). In light of the Order, we dismissed BF Borgers as our independent registered public accounting firm on May 6, 2024. We have no ability to ascertain whether BF Borgers will survive or that adequate assets will be available to satisfy any claims against it. As a result, you may not be able to exercise effective remedies or collection judgements against BF Borgers. You may also be unable to seek remedies against BF Borgers under applicable securities laws for any untrue statement of a material fact contained in our past financial statements audited by BF Borgers or any omission of a material fact required to be stated in those financial statements. Also, it is unknown if any assets would be available from BF Borgers to satisfy any claims.
We may incur material expenses or delays in financings or SEC filings due to the dismissal of BF Borgers and our stock price and access to the capital markets may be affected.
As a public company, we are required to file with the SEC financial statements that are audited or reviewed, as applicable, by an independent registered public accountant. Our access to the capital markets and our ability to make timely filings with the SEC will depend on having financial statements audited or reviewed again by a new independent registered public accounting firm. In addition, because the SEC found that BF Borgers deliberately failed to conduct audits and quarterly reviews in accordance with applicable PCAOB standards and fraudulently issued audit reports, we will not be able to rely on BF Borgers to provide other information or documents that would customarily be received by us or underwriters in connection with financings or other transactions, including consents and “comfort” letters. As a result, we may encounter delays, additional expense and other difficulties in future financings. Any resulting delay in accessing or inability to access the public capital markets could be disruptive to our operations and could affect the price and liquidity of our securities. Any negative news about the proceedings against BF Borgers may also adversely affect investor confidence in companies that were previous clients of BF Borgers. All of these factors could materially and adversely affect the market price of our common stock and our ability to access the capital markets.
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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 April 30, 2024:
| Date | Name | Consideration | Securities | Exemption from Registration |
| 2/1/2024 | Raymond Williams Jr | Cash | 3,000 | Regulation A |
| 2/15/2024 | Michael Ledgister | Cash | 1,000 | Regulation A |
| 2/15/2024 | Sundaramoorthy Kanagarajan | Cash | 2,000 | Regulation A |
| 2/16/2024 | Ariel Benkadmiel McCullough | Cash | 1,000 | Regulation A |
| 2/17/2024 | Nathaniel Harris | Cash | 1,000 | Regulation A |
| 2/22/2024 | Venetria Nicole Davis | Cash | 1,000 | Regulation A |
| 2/22/2024 | Ariel Benkadmiel McCullough | Cash | 1,000 | Regulation A |
| 2/25/2024 | Cory Renaldo Brown | Cash | 1,000 | Regulation A |
| 2/26/2024 | Edward L Cryer & Shirley Neal, JTWROS | Cash | 1,000 | Regulation A |
| 2/29/2024 | Annie Priester | Cash | 1,000 | Regulation A |
| 3/8/2024 | Pamela Jean Harlan | Cash | 2,000 | Regulation A |
| 3/12/2024 | Patrick Earl Nixon & Janice Lynn Nixon, JTWROS | Cash | 1,000 | Regulation A |
| 4/1/2024 | Raymond Williams Jr | Cash | 2,000 | Regulation A |
| 4/5/2024 | Ani N Rooney | Cash | 10,000 | Regulation A |
| 4/5/2024 | Farah Chikita Stephens-Travis | Cash | 1,000 | Regulation A |
| 4/5/2024 | Donte Small | Cash | 2,000 | Regulation A |
| 4/6/2024 | Jacqueline D Brooks | Cash | 1,500 | Regulation A |
| 4/6/2024 | Paul James Chatman | Cash | 1,200 | Regulation A |
| 4/6/2024 | Roland Cyprian Roberts | Cash | 5,000 | Regulation A |
| 4/6/2024 | Johnnie Edward Rozier Jr & Jacqueline Bazile Rozier, JTWROS | Cash | 3,000 | Regulation A |
| 4/6/2024 | Rachael Moore | Cash | 1,000 | Regulation A |
| 4/7/2024 | Samuel Austin Cutler | Cash | 7,500 | Regulation A |
| 4/7/2024 | Scy Vincent Banks | Cash | 1,000 | Regulation A |
| 4/8/2024 | Antoinette Almeda Benton | Cash | 1,000 | Regulation A |
| 4/9/2024 | Jacklyn L Hagood | Cash | 1,000 | Regulation A |
| 4/9/2024 | Sabrina Jackson | Cash | 1,000 | Regulation A |
| 4/9/2024 | Michelle Marie Cabrera | Cash | 2,500 | Regulation A |
| 4/11/2024 | Willie Cal Brown | Cash | 1,000 | Regulation A |
| 4/11/2024 | LaVetta Dodd-Ivy | Cash | 1,000 | Regulation A |
| 4/11/2024 | Phillip McNeal & Janeen McNeal, JTWROS | Cash | 1,200 | Regulation A |
| 4/13/2024 | Tangula Renee Hudson | Cash | 1,000 | Regulation A |
| 4/15/2024 | Edward Joe Bentley III | Cash | 3,000 | Regulation A |
| 4/15/2024 | Nathaniel Harris | Cash | 1,000 | Regulation A |
| 4/16/2024 | Raymond Williams Jr. | Cash | 7,000 | Regulation A |
| 4/17/2024 | Kevin Bens | Cash | 1,000 | Regulation A |
| 4/17/2024 | Delhia M. Emanuel - Emanuel Soler Trust | Cash | 2,000 | Regulation A |
| 4/17/2024 | Neishana Morrison | Cash | 1,000 | Regulation A |
| 4/17/2024 | Roxanne Lolita Patterson | Cash | 1,000 | Regulation A |
| 4/17/2024 | Wesley Bryant | Cash | 1,000 | Regulation A |
| 4/17/2024 | Sarita R Allen | Cash | 1,000 | Regulation A |
| 4/18/2024 | Patrick Earl Nixon & Janice Lynn Nixon, JTWROS | Cash | 2,000 | Regulation A |
| 4/18/2024 | Cynthia Dianne Walls | Cash | 1,000 | Regulation A |
| 4/21/2024 | Wesley Clifford Allen | Cash | 5,000 | Regulation A |
| 4/22/2024 | Kevin Bens | Cash | 1,000 | Regulation A |
| 4/22/2024 | Vivian D Carlo & Delhia M. Emanuel, JTWROS | Cash | 2,000 | Regulation A |
| 4/22/2024 | Marion D Fulce & Dwight D Fulce, JTWROS | Cash | 1,500 | Regulation A |
| 4/23/2024 | Hortensia M. Emanuel Revocable Living Trust | Cash | 1,000 | Regulation A |
| 4/24/2024 | Alice Jones | Cash | 1,000 | Regulation A |
| 4/25/2024 | Omega Ashanti Dennis | Cash | 1,000 | Regulation A |
| 25 |
| 4/25/2024 | Sammie Lucille Love | Cash | 1,250 | Regulation A |
| 4/25/2024 | Rickey Anthony Lumpkin & Bertha Lois Lumpkin, JTWROS | Cash | 5,000 | Regulation A |
| 4/25/2024 | Clarence R Simmons | Cash | 2,000 | Regulation A |
| 4/26/2024 | Sabrina Jackson | Cash | 1,000 | Regulation A |
| 4/26/2024 | Dixie Robinson Miss | Cash | 1,000 | Regulation A |
| 4/26/2024 | Laura Weida | Cash | 1,000 | Regulation A |
| 4/27/2024 | Dyland S Haile | Cash | 1,000 | Regulation A |
| 4/27/2024 | Antonio L. Jones | Cash | 2,000 | Regulation A |
| 4/28/2024 | Justin Albert Brannon | Cash | 2,500 | Regulation A |
| 4/28/2024 | Sonia Hansen | Cash | 2,000 | Regulation A |
| 4/28/2024 | Sara Hare | Cash | 3,000 | Regulation A |
| 4/28/2024 | Lorna Karen Haynes | Cash | 1,000 | Regulation A |
| 4/28/2024 | Michael Sanford King | Cash | 2,500 | Regulation A |
| 4/28/2024 | Edward G. McCurbin | Cash | 2,000 | Regulation A |
| 4/28/2024 | Christopher Norwood | Cash | 1,000 | Regulation A |
| 4/28/2024 | Darryl Christopher Wood | Cash | 1,000 | Regulation A |
| 4/29/2024 | Ezekiel Carter & Ruby J Carter, JTWROS | Cash | 1,000 | Regulation A |
| 4/29/2024 | Theresa Johnson | Cash | 1,000 | Regulation A |
| 4/29/2024 | Niecole D Kelly | Cash | 1,000 | Regulation A |
| 4/29/2024 | Steven L Martin | Cash | 2,500 | Regulation A |
| 4/29/2024 | John Moncure | Cash | 1,000 | Regulation A |
| 4/29/2024 | Randolph David Plunkett | Cash | 1,000 | Regulation A |
| 4/29/2024 | Joanne Simone Rollocks | Cash | 1,500 | Regulation A |
| 4/29/2024 | Antonio Renard Woodfin | Cash | 10,000 | Regulation A |
| 4/30/2024 | Jefferson Davis Lewis III | Cash | 1,000 | Regulation A |
| 4/30/2024 | Ani N Rooney | Cash | 40,000 | Regulation A |
| 4/30/2024 | Tonjia Lynn Stone | Cash | 1,000 | Regulation A |
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
None of our directors or executive officers
| 26 |
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.
| 27 |
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.
| |
| June 27, 2024 |
By: /s/ Paul Mueller Paul Mueller, Chief Executive Officer (Principal Executive Officer) |
| June 27, 2024 |
By: /s/ Hossein Haririnia Hossein Haririnia, Treasurer (Principal Financial and Accounting Officer) |
| 28 |