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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended April 30, 2026

 

OR

 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to __________

 

Commission File Number: 000-56568

 

HNO INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   20-2781289
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

41558 Eastman Drive

Suite B

Murrieta, California 

(Address of principal executive offices)

 

 

92562

(Zip Code)

     

(951) 305-8872

(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. Yes x No ¨

 

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). Yes x No ¨

 

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                          ¨
Non-accelerated filer            x Smaller reporting company     x
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 x

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of July 6, 2026 the registrant had 102,355,323 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 February 6, 2026 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 unaudited condensed financial statements and related notes thereto included in this filing, and in our Annual Report on Form 10-K filed on February 6, 2026.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 
 

HNO INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED APRIL 30, 2026

 

TABLE OF CONTENTS

 

 

    PAGE 
PART I FINANCIAL INFORMATION  
Item 1. Financial Statements (Unaudited) 5
  Condensed Balance Sheets as of April 30, 2026 unaudited and October 31, 2025 audited 5
  Unaudited Condensed Statements of Operations for the Three and Six months Ended April 30, 2026 and April 30, 2025 6
  Unaudited Condensed Statements of Stockholders’ Deficit for the Three and Six months Ended April 30, 2026 and April 30, 2025 7
  Unaudited Condensed Statements of Cash Flows for the Six months Ended April 30, 2026 and April 30, 2025 9
  Notes to Unaudited Condensed Financial Statements 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
Item 3. Quantitative and Qualitative Disclosures About Market Risk 32
Item 4. Controls and Procedures 32
PART II OTHER INFORMATION  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34
Item 5. Other Information 34
Item 6. Exhibits 34
  Signatures 35

 

 

 

4 
 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                 
HNO INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
                 
      April 30,       October 31,  
      2026       2025  
ASSETS     Unaudited       Audited  
Current Assets                
Cash   $ 145,670     $ 9,525  
Accounts receivable              332,669  
Other receivable              1,000  
Total Current Assets     145,670       343,194  
                 
Non-Current Assets                
Property and equipment, net     1,207,704       1,323,189  
Right-of-use asset     35,161       64,637  
Total Non-Current Assets     1,242,865       1,387,826  
TOTAL ASSETS   $ 1,388,535     $ 1,731,020  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
LIABILITIES                
Current Liabilities                
Accounts payable     375,213       715,236  
Accrued payroll     (18 )     (18 )
   Accrued interest payable     69,982       56,345  
Lease liability     36,045       60,953  
Advances, related party     1,288,385       1,088,385  
Convertible note payable, at fair value     12,531       59,867  
   Notes payable, related party     785,000       785,000  
Derivative liability     192,500           
Total Current Liabilities     2,759,638       2,765,768  
                 
Non-Current Liability                
Lease liability              5,202  
   Long term notes payable, related party     590,000       590,000  
Total Non-Current Liability     590,000       595,202  
Total Liabilities     3,349,638       3,360,970  
                 
STOCKHOLDERS’ DEFICIT                
Preferred stock, par value $0.001 per share; 15,000,000 shares authorized            
Series A, par value $0.001 per share; 10,000,000 shares authorized; 5,000,000 and 5,000,000 shares issued and outstanding as of April 30, 2026 and October 31, 2025, respectively     5,000       5,000  
Series B, par value $0.001 per share; 500,000 shares authorized; 360,000 and 360,000 shares issued and outstanding as of April 30, 2026 and October 31, 2025, respectively     360       360  
Common stock, par value $0.001 per share; 985,000,000 shares authorized; 101,821,989 and 100,795,491 shares issued and outstanding as of April 30, 2026 and October 31, 2025, respectively     101,822       100,795  
Common stock payable     85,250       25,250  
Common stock subscription receivable     (13,750 )     (13,750 )
Additional paid-in capital     50,493,299       50,302,585  
Accumulated deficit     (52,633,084 )     (52,050,190 )
Total Stockholders’ Deficit     (1,961,103 )     (1,629,950 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 1,388,535     $ 1,731,020  
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
April 30,
  For the Six Months Ended
April 30,
    2026   2025   2026   2025
                 
Revenue   $ 33,821     $ 43,708     $ 33,821     $ 43,708  
Cost of goods sold                                    
Gross Profit     33,821       43,708       33,821       43,708  
                                 
Operating expenses                                
Advertising and marketing     1,706       14,810       2,559       20,160  
General and administrative expenses     165,081       314,323       286,570       5,708,985  
Share commitment expenses     55,000                55,000           
Depreciation     63,436       57,539       128,653       111,988  
Total Operating Expenses     285,223       386,672       472,782       5,841,133  
Net loss from Operations     (251,306 )     (342,964 )     (438,961 )     (5,797,425 )
Other Income (Expenses)                                
Interest income     5       5       6       5  
Interest expense     (39,633 )     (6,932 )     (46,565 )     (13,864 )
Gain/(Loss) on fair value of convertible note     (100,581 )     (14,985 )     (88,160 )     (14,985 )
Gain/(Loss) on derivative     (9,214 )              (9,214 )         
Loss on write-off of intangible asset              (105,190 )              (105,190 )
Total Other (Expenses)     (149,423 )     (127,102 )     (143,933 )     (134,034 )
                                 
Net Loss   $ (400,825 )   $ (470,066 )   $ (582,894 )   $ (5,931,459 )
PER SHARE AMOUNTS                                
Basic and diluted net loss
per share
           $ (0.01 )   $ (0.01 )   $ (0.03 )
Weighted average number of common shares outstanding - basic and diluted     101,838,843       78,534,293       101,594,846       211,773,082  
                                 
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 and six months ended April 30, 2025 and 2026
(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
For the three and six months ended April 30, 2025
Balance at October 31, 2024     5,000,000     $ 5,000              $          419,437,865     $ 419,438     $ 15,250     $ (13,750 )   $ 43,611,365     $ (45,434,694 )   $ (1,397,391 )
Regulation D stock issuances     —                  —                  29,293       29                         14,971                15,000  
Shares cancelled as per exchange agreement     —                  —                  (360,000,000 )     (360,000 )                                         (360,000 )
Series B preferred stock issuances     —                  360,000       360       —                                    359,640                360,000  
Stock-based compensation     —                  —                  16,125,000       16,125                         5,076,432                5,092,557  
Net loss for the three months ended January 31, 2025     —                  —                  —                                             (5,461,393 )     (5,461,393 )
Balance at January 31, 2025     5,000,000     $ 5,000       360,000     $ 360       75,592,158     $ 75,592     $ 15,250     $ (13,750 )   $ 49,062,408     $ (50,896,087 )   $ (1,751,227 )
Regulation D stock issuances     —                  —                  4,558,333       4,558                         522,942                527,500  
Net loss for the three months ended April 30, 2025     —                  —                  —                                             (470,066 )     (470,066 )
Balance at April 30, 2025     5,000,000     $ 5,000       360,000     $ 360       80,150,491     $ 80,150     $ 15,250       (13,750 )     49,585,350       (51,366,153 )     (1,693,793 )
                                                                                         

  

7 
 

HNO INTERNATIONAL, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
For the three and six months ended April 30, 2025 and 2026
(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
 For the three and six months ended April 30, 2026  
Balance at October 31, 2025     5,000,000     $ 5,000       360,000     $ 360       100,795,491     $ 100,795     $ 25,250     $ (13,750 )   $ 50,302,585     $ (52,050,190 )   $ (1,629,950 )
Regulation A stock issuances     —                  —                  333,334       334       5,000                49,666                55,000  
Regulation D stock issuances     —                  —                  500,000       500                         12,000                12,500  
Shares issued upon conversion of convertible note     —                  —                  193,164       193                         47,253                47,446  
Net loss for the three months ended January 31, 2026     —                  —                  —                                             (182,069 )     (182,069 )
Balance at January 31, 2026     5,000,000       5,000       360,000       360       101,821,989       101,822       30,250       (13,750 )     50,411,504       (52,232,259 )     (1,697,073 )
Commitment shares     —                  —                  —                  55,000                                  55,000  
Debt discount - Warrant     —                  —                  —                                    81,795                81,795  
Net loss for the three months ended April 30, 2026     —                  —                  —                                             (400,825 )     (400,825 )
Balance at April 30, 2026     5,000,000     $ 5,000       360,000     $ 360       101,821,989     $ 101,822     $ 85,250     $ (13,750 )   $ 50,493,299     $ (52,633,084 )   $ (1,961,103 )

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

 

8 
 

                 
HNO INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
    For the Six Months Ended
April 30,
    2026   2025
Cash Flow from Operating Activities                
Net loss   $ (582,894 )   $ (5,931,459 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation     128,653       111,988  
Non cash interest expenses     12,531           
Legal services provided in exchange for convertible note              45,000  
Loss on write-off of intangible asset              105,190  
(Gain)/Loss on fair value of convertible note     88,160       14,985  
(Gain)/Loss on derivative liability     9,214          
Share based compensation              5,092,557  
Changes in operating assets and liabilities:                
(Increase)/Decrease in accounts receivable     332,669       (8,450 )
Decrease in other receivable     1,000           
(Decrease) in accounts payable     (340,023 )     (106,116 )
Increase/(Decrease) in accrued payroll              (8,881 )
Increase in accrued interest payable     13,637       13,864  
Operating lease ROU assets and lease liabilities, net     (634 )     125  
Net Cash Used in Operating Activities     (337,687 )     (671,197 )
                 
Cash Flows from Financing Activities                
Proceeds from related party advances     230,000       509,000  
Repayment of related party advances     (30,000 )     (150,000 )
Proceeds from sale of common stock subscription payable     60,000           
Proceeds from sale of common stock     62,500       542,500  
Proceeds from issuance of convertible notes payable     314,500           
Repayment of convertible notes payable     (150,000 )         
Net Cash Provided by Financing Activities     487,000       901,500  
                 
Cash Flows from Investing Activities                
Purchase of property and equipment     (13,168 )     (177,944 )
Net Cash Used in Investing Activities     (13,168 )     (177,944 )
                 
Net increase (decrease) in cash     136,145       52,359  
Cash at beginning of period     9,525       20,255  
Cash at end of period   $ 145,670     $ 72,614  
                 
Supplemental Disclosure for Cash Paid:                
Lease liability paid during the period   31,089         
Income taxes paid during the period   $        $     
Interest paid during the period   $ 897     $     
                 
Supplemental Disclosure for Non-Cash Investing and Financing Activities:                
Property and equipment acquired through accounts payable   348,845     398,845  
Common stock cancellation per share exchange agreement   $        $ (360,000 )
Series B preferred stock issuance per exchange agreement   $        $ 360,000  
Shares issued for redemption of convertible notes payable   $ 47,446     $     
Convertible note issued in exchange for legal services, recorded at fair value   $        $ 59,985  
Derivative liability balance   $ 192,500     $     
The accompanying notes are an integral part of these condensed unaudited financial statements.
9 
 

HNO INTERNATIONAL, INC.

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

APRIL 30, 2026

(Unaudited)

 

NOTE 1 – ORGANIZATION AND BASIS OF ACCOUNTING

 

Organization

 

HNO International, Inc. (the “Company”) specializes in the design, integration, and development of green hydrogen-based clean energy technologies. With the Company’s management having over 14 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 condensed unaudited 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”) applicable to interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual financial statements and should be read in conjunction with the Company's audited financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended October 31, 2025. In the opinion of management, the accompanying condensed unaudited financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary to present fairly the Company's financial position as of April 30, 2026 and October 31, 2025, and the results of its operations for the three and six months ended April 30, 2026 and 2025, and its cash flows for the six months ended April 30, 2026 and 2025. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full fiscal year ending October 31, 2026. 

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.

 

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 April 30, 2026, and October 31, 2025, 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 maintains its cash balances at financial institutions, which at times may exceed federally insured limits. While the Company monitors the credit quality of its banking institutions, cash balances in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits expose the Company to a certain degree of credit risk in the event of the financial institutions' failure.

10 
 

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 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 employees and consultants. Compensation for stock-based awards is recognized as a non-cash expense on the statement of operations. The fair value of restricted stock grants is determined using the closing market price on the grant date, adjusted for an appropriate discount to reflect the restrictions on transferability and marketability of the shares. The discount is calculated using a weighted average of comparable restricted stock transactions, which better reflects the economic impact of larger issuances and provides a more accurate representation of fair value under ASC 718. The expense associated with these awards is recorded based on the fair value on the date of grant, as determined using a pricing model commensurate with the terms of the award. 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 statement of operations lines as cash compensation for the consultants and employees who receive the awards, currently included in general and administrative expenses on the statement of operations as the Company does not allocate compensation costs to Costs of Goods Sold. 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.

 

Employee Benefits

 

During the three months ended April 30, 2026, the Company paid $1,485 in employer retirement contributions, representing 3% of semi-monthly payroll for one employee over three pay periods. These contributions are made in accordance with the terms of the Company’s state-mandated retirement plan for eligible employees and are recorded as employee benefits expense in the period incurred.

 

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.

 

The Company follows the provisions of ASC 740, Income Taxes (“ASC 740”), related to accounting for uncertainty in income taxes. ASC 740 prescribes a recognition threshold and measurement process for uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination by the relevant taxing authorities. The Company had no unrecognized tax benefits as of April 30, 2026 and October 31, 2025, and does not anticipate any significant changes in unrecognized tax benefits within the next 12 months. 

 

Revenue Recognition

 

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). 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.

 

In certain arrangements where the Company facilitates the provision of goods or services provided by a third party, and does not take control of those goods or services, revenue is recognized on a net basis, limited to the margin or fee earned, consistent with the Company’s role as an agent under ASC 606-10-55-36 through 55-40.

11 
 

During the three months ended April 30, 2026 and April 30, 2025, the Company recognized $33,821 and $43,708 in revenue related to the facilitation of delivery of hydrogen refueling equipment and related services. Based on its evaluation of the arrangement, the Company determined that it acted as an agent with respect to the facilitation of delivery of equipment, as it did not obtain control of the goods and the third-party vendor delivered directly to the customer. As a result, revenue was recognized on a net basis, excluding gross billings and associated third-party costs, in accordance with ASC 606.

   

Basic and Diluted Net Loss per Common Share

 

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 as common stock equivalents. As the Company is currently presenting net losses the weighted-average number of common shares outstanding excludes potential 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 the statement of operations 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 consist of specialized hydrogen equipment, related processing systems, and vehicles. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Small equipment is depreciated over 3 years, vehicles are depreciated over 4 years, and large equipment is depreciated over 7 years.

   
    Useful life
Small equipment   3 Years
Large equipment   7 Years
Vehicles   4 Years

 

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.

12 
 

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820, Fair Value Measurement ("ASC 820"), establishes a three-tier fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3):

·Level 1 — observable inputs such as quoted prices for identical instruments in active markets;
·Level 2 — inputs other than quoted prices that are directly or indirectly observable, such as quoted prices for similar instruments in active markets, or quoted prices for identical or similar instruments in markets that are not active; and
·Level 3 — unobservable inputs for which little or no market data exists, requiring the Company to develop its own assumptions, including valuations derived from techniques in which one or more significant inputs or value drivers are unobservable.

 

Recurring fair value measurements. The Company's convertible promissory note issued on April 7, 2025 was classified as a liability and measured at fair value on a recurring basis under ASC 480, Distinguishing Liabilities from Equity ("ASC 480"), because it required settlement in a variable number of shares for a fixed monetary amount. The Company determined its fair value, a Level 2 measurement, from the conversion terms and the observable market price of the Company's common stock. The note had a fair value of $59,867 at October 31, 2025 and was fully converted into common stock during the three months ended January 31, 2026, at which point the liability was derecognized; the resulting $12,421 decrease in fair value was recognized as a gain on fair value of convertible note in the condensed statements of operations.

In connection with convertible notes issued in April 2026, the Company recognized a derivative liability of $192,500 as of April 30, 2026, measured at fair value on a recurring basis using the intrinsic-value method described in Note 9. Because the measurement relies on a Company-specific valuation model with significant unobservable inputs, the derivative liability is classified as a Level 3 measurement.

Other financial instruments. The carrying amounts of the Company's remaining financial instruments cash, accounts payable, accrued interest payable, advances from related parties, and notes payable to related parties approximate fair value as of April 30, 2026 and October 31, 2025, due to the short maturity of those instruments or interest rates that fluctuate with market rates, consistent with the disclosure requirements of ASC 825, Financial Instruments.

Convertible Debt Issued with Detachable Warrants

When the Company issues convertible debt with detachable common stock purchase warrants, the Company allocates the proceeds between the debt instrument and the warrants based on their relative fair values at the issuance date in accordance with ASC 470-20, Debt with Conversion and Other Options. The fair value allocated to the warrants is credited to additional paid-in capital and recorded as a debt discount on the face of the note. This debt discount, together with any original issue discount, is amortized to interest expense over the term of the debt using the straight-line method, which approximates the effective interest method given the terms of the instruments. If a note is converted or repaid prior to maturity, a proportionate share of the unamortized discount is immediately recognized as interest expense.

Embedded Conversion Features

The Company evaluates embedded conversion features within convertible debt instruments under ASC 815, Derivatives and Hedging, to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative liability at fair value, with changes in fair value reported in earnings each reporting period. Bifurcation is required when: (i) the economic characteristics and risks of the embedded feature are not clearly and closely related to those of the debt host; (ii) the hybrid instrument is not remeasured at fair value with changes in earnings; and (iii) a separate instrument with the same terms as the embedded feature would be a derivative under ASC 815.

An embedded conversion feature that meets the bifurcation criteria under ASC 815 may nonetheless qualify for the equity scope exception under ASC 815-40-15 if it would be classified as equity if it were a freestanding instrument (i.e., the fixed-for-fixed test). A conversion feature that provides for settlement in a variable number of shares such as a conversion price equal to a percentage of the market price generally fails the fixed-for-fixed test and does not qualify for the equity scope exception. If the equity scope exception is not available, the conversion feature is bifurcated and recorded as a derivative liability.

13 
 

If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 for the presence of a beneficial conversion feature.

Derivative Financial Instruments

The Company evaluates all of its financial instruments, including convertible notes and stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in fair value reported as charges or credits to income.

For warrants classified as equity instruments, the Company uses the Black-Scholes option pricing model to determine the grant-date fair value for purposes of the ASC 470-20 relative fair value allocation. The classification of financial instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Debt Discount and Debt Issue Costs

The Company records debt discounts and debt issue costs in connection with the issuance of debt instruments. Debt discounts arise from the issuance of warrants with notes (ASC 470-20 allocation), original issue discounts, and bifurcated derivative liabilities (if applicable). Debt issue costs include direct costs incurred in connection with the issuance of debt, such as legal fees and placement agent fees that are not withheld from proceeds. These amounts are presented as a reduction of the carrying value of the related debt on the balance sheet and are amortized to interest expense over the term of the debt using the straight-line method. If a note is extinguished prior to maturity, any unamortized debt discount and debt issue costs are immediately recognized as a component of the gain or loss on extinguishment in accordance with ASC 470-50.

Original Issue Discount

For certain convertible debt issued, the Company provides the debt holder with an original issue discount (“OID”), which represents the difference between the face value of the note and the proceeds received. The OID is recorded as a debt discount, reducing the carrying value of the note on the balance sheet, and is amortized to interest expense over the term of the note using the straight-line method. Any unamortized OID is presented net of the related debt on the balance sheet. If a note is converted or repaid prior to maturity, the remaining unamortized OID is immediately expensed as interest expense or recognized as a component of the gain or loss on extinguishment, as applicable.

Common Stock Payable

Common stock payable represents the fair value of shares of the Company’s common stock that have been earned or sold but not yet physically issued by the transfer agent as of the balance sheet date. Common stock payable is classified as a component of stockholders’ equity (deficit). Upon physical issuance of the shares, the common stock payable balance is reclassified to common stock (at par value) and additional paid-in capital.

NOTE 3 – GOING CONCERN

On April 30, 2026, we had an accumulated deficit of $52,633,084. We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. We will be required to raise additional funds through public or private financing, additional collaborative relationships, or other arrangements until we are able to raise revenues to a point of positive cash flow. We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans and selling common stock. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support operations.

 

Based on the above factors, substantial doubt exists about our ability to continue as a going concern within one year after the date that the financial statements are issued.

 

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 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

          
  

April 30,

2026

 

October 31,

2025

Vehicles  $36,500   $36,500 
Small equipment   32,943   $32,943 
Large equipment   1,683,122    1,669,954 
Property and Equipment, Gross  $1,752,565   $1,739,397 
    Less: Accumulated depreciation   (544,861)   (416,208)
Property and Equipment, Net  $1,207,704   $1,323,189 

 

Depreciation expense for the six months ended April 30, 2026 and 2025 were $128,653 and $111,988, respectively.

 

NOTE 5 – LEASES

 

Operating leases

 

The Company has an operating lease agreement for office space in Murrieta, California, expiring on November 30, 2026.

 

On November 18, 2020, the Company entered into a lease commencing on December 1, 2020, and ending on November 30, 2023, for the office spaces located at 41558 Eastman Drive, Suites B and C, Murrieta, California 92562. The monthly rent was $4,183. 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.

 

On November 14, 2023, the lease for Suite B was extended for 36 months to November 30, 2026. The monthly rental amount for Suite B was $2,501 for the period from December 1, 2023, to November 30, 2024, with an increase to $2,573 for the period from December 1, 2024, to November 30, 2025, and an increase to $2,647 for the period from December 1, 2025, to November 30, 2026.

 

On January 4, 2024, the lease for Suite C was extended for 34 months to November 30, 2026. The monthly rental amount for Suite C is $2,434 for the period from February 1, 2024, to November 30, 2024, with an increase to $2,506 for the period from December 1, 2024, to November 30, 2025, and an increase to $2,555 for the period from December 1, 2025, to November 30, 2026.

 

The Company determined the above office space leases and related extensions are classified as operating leases under 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 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, 2026, the ROU asset was $35,161 and operating lease liabilities were $36,045. The operating lease liabilities consist of a current portion of $36,045 and a non-current portion of $0. The weighted average remaining lease term was 0.58 years and the weighted average discount rate was 4.14%.

Remaining lease term as of April 30, 2026: 

     
Year   Operating Lease Payment  
Remainder of fiscal 2026     35,531  
Total Payments   $ 35,531  

 

15 
 

Lease Not Yet Commenced

 

In April 2024, the Company entered into a lease agreement for an industrial facility located in Katy, Texas. The lease is subject to completion of landlord construction and build-out prior to commencement. Under the terms of the lease, the commencement date occurs when the leased premises are made available for the Company’s use.

 

As of April 30, 2026, the landlord’s construction had not been completed, the lease had not commenced, and the Company had not taken possession of the facility. Accordingly, no right-of-use asset or lease liability has been recorded on the Company’s balance sheet as of April 30, 2026.

 

NOTE 6 – COMMON STOCK

 

Stock Issued

 

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 (the “Securities Act”)) whereby the Company privately sold a total of 29,293 shares of its common stock for an aggregate cash purchase price of $15,000. The proceeds from the sale of common stock will be used for operating capital. The shares were issued as ‘restricted securities’ under Rule 144 of the Securities Act.

 

During the quarter ended January 31, 2025, the Company's Board of Directors granted approval for the issuance of 16,125,000 shares of our common stock valued at $5,092,557, 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. The issuance of these shares resulted in the recognition of stock-based compensation expense in the accompanying statement of operations.

 

During the quarter ended January 31, 2026, the Company entered into a Stock Subscription Agreement with an accredited investor (under Rule 506(b) of Regulation D under the Securities Act of 1933, as amended). Whereby the Company privately sold a total of 500,000 shares of its common stock for an aggregate cash purchase price of $12,500. The proceeds from the sale of common stock will be used for operating capital. The shares were issued as ‘restricted securities’ under Rule 144 of the Securities Act.

Pursuant to the Company’s Regulation A offering, which was qualified by the Securities and Exchange Commission on December 11, 2025, the Company entered into stock subscription agreement for its common stock at a purchase price of $0.15 per share. On December 13, 2025, the Company received cash proceeds of $5,000 for shares that had not yet been issued as of the reporting date. On January 12, 2026, the Company received cash proceeds of $50,000 for 333,334 shares of common stock, which were issued on January 23, 2026.

Convertible Note Conversion

On December 12, 2025, following the qualification of the Company’s Regulation A Offering Statement on Form 1-A (“Form 1-A”) by the SEC on December 11, 2025, the Company converted $47,446 of principal and accrued interest under a convertible promissory note issued to Newlan Law Firm, PLLC in exchange for legal services in connection with the Form 1-A. The conversion was effected at a price of $0.245625 per share, representing 75% of the price of the Company’s common stock on the trading day immediately preceding the conversion, and resulted in the issuance of 193,164 shares of the Company’s common stock.

Stock Receivable

 

As of April 30, 2026 and October 31, 2025, the Company issued 13,750 shares of common stock under Regulation A offering to various shareholders that have not yet paid for shares; therefore, $13,750 has been classified as common stock receivable.

 

Stock Payable

 

As of April 30, 2026, the Company sold 48,584 shares of common stock under its Regulation A offering to various shareholders that have not yet been issued by the transfer agent; therefore, $20,250 has been classified as common stock payable.

16 
 

As of April 30, 2026, the Company sold 250,000 shares of common stock under its Regulation D offering to a shareholder that have not yet been issued by the transfer agent; therefore, $10,000 has been classified as common stock payable.

 

As of April 30, 2026, the Company had agreed to issue 500,000 shares of common stock to Lambda Ventures LLC as initial commitment shares in connection with the Equity Purchase Agreement dated April 27, 2026. As these shares had not yet been issued by the transfer agent as of April 30, 2026, the fair value of $55,000 (500,000 shares at $0.11 per share, the closing price on April 27, 2026) has been classified as common stock payable.

 

As of April 30, 2026 and October 31, 2025, the Company had 101,821,989 and 100,795,491 shares of common stock issued and outstanding, respectively.

 

Equity Purchase Agreement – Lambda Ventures LLC

 

On April 27, 2026, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Lambda Ventures LLC, a Nevada limited liability company (the “Investor”), pursuant to which the Company has the right, but not the obligation, to direct the Investor to purchase up to $30,000,000 of the Company’s common stock, par value $0.001 per share (the “Common Stock”), over a period of up to twenty-four (24) months, subject to the terms and conditions set forth in the Purchase Agreement. Under the Purchase Agreement, from time to time during the commitment period, the Company may deliver put notices to the Investor requiring the Investor to purchase shares of Common Stock, subject to certain conditions. Each put must be in a minimum amount of $25,000 and a maximum amount up to the lesser of (i) $500,000 or (ii) 200% of the Average Daily Trading Value, each calculated using the Initial Purchase Price. The purchase price per share will be the lesser of (i) 80% of the lowest traded price of the Common Stock on the principal trading market on the trading day immediately preceding the respective put date, or (ii) 80% of the lowest traded price of the Common Stock on the principal trading market on any trading day during the applicable valuation period.

 

As consideration for the Investor’s commitment to enter into the Purchase Agreement, the Company agreed to issue to the Investor 500,000 shares of Common Stock as initial commitment shares (the “Initial Commitment Shares”), which are earned in full upon execution of the Purchase Agreement. In addition, each time aggregate gross proceeds received by the Company under the Purchase Agreement increase by $2,500,000 (each, a “Trigger Event”), the Company will issue additional shares of Common Stock to the Investor as a commitment fee (the “Fulfillment Commitment Shares” and, together with the Initial Commitment Shares, the “Commitment Shares”). If the Maximum Commitment Amount is fully drawn, a total of twelve (12) Trigger Events will have occurred. The Company also agreed to pay $10,000 to the Investor’s legal counsel for expenses relating to the preparation of the Purchase Agreement. In connection with the Purchase Agreement, on April 27, 2026, the Company also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Investor, pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission within thirty (30) calendar days from the date of the Registration Rights Agreement, covering the resale of the shares of Common Stock issuable under the Purchase Agreement, including the Initial Commitment Shares and Fulfillment Commitment Shares. The Company is required to have the registration statement declared effective within ninety (90) calendar days from the date of the Registration Rights Agreement. The Initial Commitment Shares had not been physically issued as of April 30, 2026; accordingly, the Company recorded the fair value of these shares as common stock payable in the accompanying balance sheet. The fair value was determined using the closing price of the Company’s common stock on April 27, 2026 of $0.11 per share, resulting in a total of $55,000 recorded as common stock payable and a corresponding charge to financing expense.

 

NOTE 7 – PREFERRED STOCK

 

Issued

 

On January 2, 2025, the Company entered into a Share Exchange Agreement with the CEO. Pursuant to the agreement, the CEO exchanged 245,000,000 shares of the Company’s common stock for 245,000 shares of Series B Preferred Stock. On January 9, 2025, 245,000,000 shares of common stock held by Donald Owens were cancelled, and 245,000 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. (“HNO Green Fuels”), a related party. Pursuant to the agreement, HNO Green Fuels exchanged 115,000,000 shares of the Company’s common stock for 115,000 shares of Series B Preferred Stock. On January 9, 2025, 115,000,000 shares of common stock held by HNO Green Fuels, Inc. were cancelled, and 115,000 shares of Series B Preferred Stock were issued to HNO Green Fuels, Inc.

17 
 

Authorized

 

Series A Preferred Stock

 

The Company has authorized 10,000,000 shares of Series A Preferred Stock, par value $0.001 per share, of which 5,000,000 shares were issued and outstanding as of each of April 30, 2026 and October 31, 2025. Each outstanding share of Series A Preferred Stock entitles the holder to 55 votes on all matters submitted to a vote of the Company's shareholders. The holders of Series A Preferred Stock are not entitled to receive dividends and have no rights to any distribution upon the liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary. The Series A Preferred Stock is not convertible into common stock or any other security of the Company and is not subject to redemption.

 

Series B Preferred Stock

 

The Company has authorized 500,000 shares of Series B Preferred Stock, par value $0.001 per share, of which 360,000 shares were issued and outstanding as of each of April 30, 2026 and October 31, 2025. The holders of Series B Preferred Stock have no right to vote on any matters submitted to a vote of the Company's shareholders and are not entitled to receive dividends. Upon the liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, each holder of Series B Preferred Stock is entitled to receive, for each share held, out of the assets of the Company legally available for distribution, an amount equal to the distribution that would be made on a pro rata basis with the holders of the Company's common stock, calculated as if the Series B Preferred Stock had been converted into common stock as of the date immediately prior to the record date fixed for such distribution. Each holder of Series B Preferred Stock may, from time to time, convert any or all of such holder's shares into fully paid and non-assessable shares of common stock at a rate of 1,000 shares of common stock for each share of Series B Preferred Stock surrendered for conversion; provided, however, that no such conversion may be effected to the extent it would cause the holder's beneficial ownership, when aggregated with all other shares of common stock beneficially owned by such holder (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder), to exceed 4.99% of the Company's common stock issued and outstanding at such time. The Series B Preferred Stock is not subject to redemption.

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

Notes Payable, Related Party

 

On November 19, 2021, the Company issued a note payable in the amount of $20,000 to HNO Green Fuels, of which Donald Owens is Chief Executive Officer. This note bears an interest rate of 2% per annum and had a maturity date of December 19, 2022. The Company agreed to issue 20,000,000 shares of its common stock for settlement of the $20,000 note payable dated November 19, 2021 to HNO Green Fuels. The note matured on December 19, 2022 and the $20,000 principal was settled on December 26, 2022 with the issuance of these shares. The shares are ‘restricted securities’ under Rule 144 and the issuance of the shares was made in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act of 1933, as amended.

 

As of April 30, 2026, the Company had multiple outstanding promissory notes payable to HNO Green Fuels, Inc. The notes bear interest at 2% per annum and were issued in connection with financing arrangements to support the Company’s operations. The following table summarizes the terms of these related-party notes payable, including original principal amounts, maturity dates (as extended), principal outstanding, and accrued interest as of April 30, 2026. 

                           
Issue
Date
  Original
Principal
  Maturity
Date
  Principal Outstanding   Accrued
Interest
12/1/2021   $ 500,000     12/31/2026   $ 435,000     $ 13,014  
5/31/2022   $ 590,000     5/31/2030   $ 590,000     $ 46,230  
9/29/2022   $ 50,000     12/31/2026   $ 50,000     $ 1,496  
10/20/2022   $ 50,000     12/31/2026   $ 50,000     $ 1,496  
3/1/2023   $ 50,000     12/31/2026   $ 50,000     $ 1,496  
3/8/2023   $ 50,000     12/31/2026   $ 50,000     $ 1,496  
3/23/2023   $ 50,000     12/31/2026   $ 50,000     $ 1,496  
4/3/2023   $ 50,000     12/31/2026   $ 50,000     $ 1,496  
4/13/2023   $ 20,000     12/31/2026   $ 20,000     $ 598  
4/17/2023   $ 30,000     12/31/2026   $ 30,000     $ 1,036  
Total               $ 1,375,000     $ 69,854  

 

18 
 

Extension of Promissory Notes: 

 

On December 29, 2025, the Company entered into nine separate Extension to Promissory Note agreements (the "December 2025 Extensions") with HNO Green Fuels, Inc., a Nevada corporation ("HNOGF"), a related party. These extensions amended nine promissory notes that were originally issued between December 1, 2021 and April 17, 2023, extending their maturity dates from December 31, 2025 to December 31, 2026. The extended notes bear interest at 2% per annum and have an aggregate outstanding principal balance of $785,000 as of April 30, 2026. The original issuance dates, principal amounts, and current balances of these notes are detailed in the table above.

Advances from Related Party

 

During the year ended October 31, 2024, Donald Owens, the Company’s Chairman of the Board of Directors, advanced $950,585 to the Company to cover operating expenses, and HNO Green Fuels, Inc. advanced $10,000 for the same purpose.

 

During the year ended October 31, 2025, Mr. Owens advanced an additional $18,500 to the Company and the Company repaid $107,700 as partial repayment of previously advanced funds, and HNO Green Fuels, Inc. advanced $540,000 to the Company and the Company repaid $323,000 as partial repayment of previously advanced funds.

 

During the six months ended April 30, 2026, HNO Green Fuels, Inc. advanced an additional $230,000 to the Company and the Company repaid $30,000 as partial repayment of previously advanced funds.

 

These advances are unsecured, non-interest bearing and due on demand. As of April 30, 2026, and October 31, 2025, related party advances had outstanding balances of $1,288,385 and $1,088,385, respectively.

 

NOTE 9 – CONVERTIBLE NOTES PAYABLE

 

During the six months ended April 30, 2026, the Company entered into three convertible note financing transactions. The CFI Capital note was issued and fully repaid within the quarter. The JSC and Lambda Ventures notes remained outstanding as of April 30, 2026. The material terms of each transaction are described below.

 

CFI Capital LLC – Issued and Repaid During the Quarter

 

On March 12, 2026, the Company issued an 8% Convertible Redeemable Note to CFI Capital LLC (“CFI Capital”) pursuant to a Securities Purchase Agreement. The note had a face value of $150,000, an original issue discount of $12,000, and a purchase price of $138,000, resulting in net cash received of $137,426 after a wire transfer fee of $574. The note bore interest at 8% per annum and matured on March 12, 2027. The note was convertible into shares of the Company’s common stock subject to certain conditions; however, no shares were issued or converted, as the note was repaid in full prior to the six-month conversion eligibility date.

 

On April 7, 2026, twenty-six (26) days after issuance, the Company repaid the note in full pursuant to the note’s 30-day prepayment provision. The total payoff amount was $158,397, consisting of: (i) principal of $150,000; (ii) a prepayment premium of $7,500 (5% of principal); and (iii) accrued interest of $897 (8% per annum for 26 days). Because the note was extinguished prior to its maturity, the entire unamortized original issue discount of $12,000 was written off to interest expense at the time of repayment. Total financing charges recognized in connection with the CFI Capital note during the quarter were $20,971, comprised of the $12,000 OID write-off, the $7,500 prepayment premium, $897 of accrued interest, and $574 in wire fees. The CFI Capital note had a zero 0 balance as of April 30, 2026.

 

Jefferson Street Capital, LLC

 

On April 7, 2026, the Company entered into a Securities Purchase Agreement with Jefferson Street Capital, LLC, a New Jersey limited liability company (the “JSC Buyer”), pursuant to which the Company issued a Convertible Promissory Note in the principal amount of $96,250 (the “JSC Note”) and a Common Stock Purchase Warrant to purchase up to 385,000 shares of Common Stock at an exercise price of $0.25 per share, in exchange for gross proceeds of $87,500. After deduction of $3,000 in legal fees and $2,250 in placement agent fees withheld at funding, net proceeds to the Company were approximately $82,250.

 

19 
 

The JSC Note has a principal amount of $96,250, which includes an original issue discount of $8,750. The JSC Note bears a one-time interest charge of 8% on the principal amount ($7,700), which is guaranteed and earned in full as of the issue date. The JSC Note matures on April 7, 2027. The JSC Note is convertible, at the option of the JSC Buyer, at a conversion price equal to 60% of the lowest traded price of the Common Stock on the principal trading market during the twenty (20) trading days prior to the applicable conversion date. The JSC Buyer’s right to convert is subject to a 4.99% beneficial ownership limitation. Upon an event of default, the JSC Note shall become immediately due and payable at 150% of outstanding principal and accrued interest, and default interest accrues at the lesser of 18% per annum or the maximum rate permitted by law. The JSC Warrant is exercisable commencing April 7, 2026 and expires April 7, 2031.

 

Lambda Ventures, LLC – Convertible Note

 

On April 9, 2026, the Company entered into a Securities Purchase Agreement with Lambda Ventures, LLC, a Nevada limited liability company (the “LV Buyer”), pursuant to which the Company issued a Convertible Promissory Note in the principal amount of $96,250 (the “LV Note”) and a Common Stock Purchase Warrant to purchase up to 385,000 shares of Common Stock at an exercise price of $0.25 per share, in exchange for gross proceeds of $87,500. After deduction of $3,000 in legal fees and $2,250 in placement agent fees withheld at funding, net proceeds to the Company were approximately $82,250.

 

The LV Note has a principal amount of $96,250, which includes an original issue discount of $8,750. The LV Note bears a one-time interest charge of 8% on the principal amount ($7,700), which is guaranteed and earned in full as of the issue date. The LV Note matures on April 9, 2027. The LV Note is convertible, at the option of the LV Buyer, at a conversion price equal to 60% of the lowest traded price of the Common Stock on the principal trading market during the twenty (20) trading days prior to the applicable conversion date. The LV Buyer’s right to convert is subject to a 4.99% beneficial ownership limitation. Upon an event of default, all outstanding principal and accrued interest shall become immediately due and payable, and default interest accrues at the lesser of 18% per annum or the maximum rate permitted by law. The LV Warrant is exercisable commencing April 9, 2026 and expires April 9, 2031.

 

Convertible Notes Payable

The following table summarizes the carrying value of convertible notes payable outstanding as of April 30, 2026:

               
   Jefferson Street Capital  Lambda Ventures, LLC  Total
Principal amount  $96,250   $96,250   $192,500 
Add: Guaranteed interest payable  $7,700   $7,700   $15,400 
Gross note balance  $103,950   $103,950   $207,900 
Less: Original issue discount  $(8,199)  $(8,246)  $(16,445)
Less: Warrant discount (ASC 470-20)  $(33,929)  $(42,962)  $(76,891)
Less: Debt issue Costs  $(4,919)  $(4,948)  $(9,867)
Less: Guaranteed interest cost  $(7,215)  $(7,257)  $(14,472)
Less: Derivative discount  $(43,138)  $(34,556)  $(77,694)
Net carrying value  $6,550   $5,981   $12,531 


Both notes were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D.

Warrant Accounting – ASC 470-20 Relative Fair Value Allocation

Each of the JSC Note and the LV Note was issued with a detachable Common Stock Purchase Warrant. In accordance with ASC 470-20, the Company allocated the gross proceeds of each transaction between the debt host instrument and the warrant based on their relative fair values at the issuance date. The fair value of each warrant was determined using the Black-Scholes option pricing model. The value allocated to the warrants is credited to additional paid-in capital and recorded as an additional debt discount amortized to interest expense over the note term.

Black-Scholes Assumptions

The following assumptions were used in the Black-Scholes valuation of each warrant tranche

20 
 

Jefferson Street Capital Warrant

               
Parameter    

Issuance Date
(April 7,
2026)

     

April 30,
2026

(Informational)

 
Stock Price (S)   $ 0.0946     $ 0.1040  
Exercise Price (K)   $ 0.2500     $ 0.2500  
Expected Term (Years)     5.00       4.94  
Risk-Free Rate     3.95 %     4.02 %
Expected Volatility (σ)     257.85 %     308.30 %
Expected Dividend Yield     0.00 %     0.00 %
d₁     2.7486       3.3271  
d₂     (3.0171)       (3.5252)  
N(d₁)     0.9970       0.9996  
N(d₂)     0.0013       0.0002  
Fair Value Per Share   $ 0.0941     $ 0.1039  
Total Warrant Fair Value   $ 36,211     $ 40,006  

 

The change in the fair value of the JSC Warrant from the issuance date to April 30, 2026 was $3,795. As the warrant is equity-classified, this change is not recognized in the Statements of Operations.

Lambda Ventures Warrant

               
Parameter     Issuance Date
(April 9,
2026)
      April 30,
2026  
(Informational)
 
Stock Price (S)   $ 0.1190     $ 0.1040  
Exercise Price (K)   $ 0.2500     $ 0.2500  
Expected Term (Years)     5.00       4.94  
Risk-Free Rate     3.91 %     4.02 %
Expected Volatility (σ)     258.54 %     308.30 %
Expected Dividend Yield     0.00 %     0.00 %
d₁     2.7960       3.3271  
d₂     (2.9852)       (3.5252)  
N(d₁)     0.9974       0.9996  
N(d₂)     0.0014       0.0002  
Fair Value Per Share   $ 0.1184     $ 0.1039  
Total Warrant Fair Value   $ 45,584     $ 40,006  

 

The change in the fair value of the LV Warrant from the issuance date to April 30, 2026 was $(5,578). As the warrant is equity-classified, this change is not recognized in the Statements of Operations.

Relative Fair Value Allocation and Debt Discount

The following table summarizes the ASC 470-20 allocation and total debt discount at issuance and at closing date for each note:

21 
 

Jefferson Street Capital

               
   

April 7,

2026

 

April 30,

2026

  Note Principal (Face Value)    $ 96,250      $ 96,250  
  Guaranteed Interest Payable     7,700       7,700  
     Gross Note Balance     103,950       103,950  
  Less: Unamortized Debt Discount - OID     (8,750 )     (8,199 )
  Less: Unamortized Debt Discount - Guaranteed Interest     (7,700 )     (7,215 )
  Less: Unamortized Debt Discount - Warrant     (36,211 )     (33,929 )
  Less: Unamortized Debt Issue Costs     (5,250 )     (4,919 )
  Less: Unamortized Debt Discount - Derivative     (46,039 )     (43,138 )
Convertible Note Payable, Net       6,550  

 

Lambda Ventures

                 
   

April 9,

2026

 

April 30,

2026

  Note Principal (Face Value)   $ 96,250     $ 96,250  
  Guaranteed Interest Payable     7,700       7,700  
     Gross Note Balance     103,950       103,950  
  Less: Unamortized Debt Discount - OID     (8,750 )     (8,246 )
  Less: Unamortized Debt Discount - Guar. Int.     (7,700 )     (7,257 )
  Less: Unamortized Debt Discount -Warrant     (45,584 )     (42,962 )
  Less: Unamortized Debt Issue Costs     (5,250 )     (4,948 )
  Less: Unamortized Debt Discount - Derivative     (36,666 )     (34,556 )
Convertible Note Payable, Net       5,981  

 

Loss on fair value of convertible note on date of issuance for the three months ended April 30, 2026

                       
    LV Note
(Day 1)
  JSC Note
(Day 1)
  Total
Note Face Value   $ 96,250     $ 96,250     $ 192,500  
Guaranteed Interest     7,700       7,700       15,400  
Gross Note Balance   $ 103,950     $ 103,950     $ 207,900  
Less Debt cost                        
(a) Original Issue Discount (OID)     (8,750 )     (8,750 )     (17,500 )
(b) Guaranteed Interest Charge     (7,700 )     (7,700 )     (15,400 )
(c) Warrant Fair Value (Black-Scholes)     (45,584 )     (36,211 )     (81,795 )
(d)Debt Issue Costs     (5,250 )     (5,250 )     (10,500 )
Net value of note   $ 36,666     $ 46,039     $ 82,705  
                         
Derivative Liability — Intrinsic Value   $ (113,986 )   $ (69,300 )   $ (183,286 )
Less: Net value of note   $ 36,666     $ 46,039     $ 82,705  
Day 1 loss on issuance of note   $ (77,320 )   $ (23,261 )   $ (100,581 )

 

Loss on fair value of convertible note for the three months ended January 31, 2026

     
  Amount
Convertible note – Newlan law firm  $59,867 
Less: Share issued for conversion   (47,446)
Gain on fair value of convertible note  $12,421 

 

22 
 

Outstanding Warrants

The following table summarizes the common stock purchase warrants outstanding as of April 30, 2026 and through the date of these financial statements:

                                           
Counterparty   Issue Date   Warrant Shares   Exercise Price   Expiration   Grant-Date Fair Value   Status
Jefferson Street Capital, LLC   Apr 7, 2026     385,000     $ 0.25       Apr 7, 2031     $ 36,211       Outstanding  
Lambda Ventures, LLC   Apr 9, 2026     385,000     $ 0.25       Apr 9, 2031     $ 45,584       Outstanding  
Total         770,000     $ 0.25             $ 81,795          

 

As of April 30, 2026, there were 770,000 warrants outstanding, all with an exercise price of $0.25 per share. All warrants may be exercised on a cashless basis when the market price of the Common Stock exceeds the exercise price and no effective registration statement covers the resale of the warrant shares. All warrants are subject to a 4.99% beneficial ownership limitation.

Interest Expense on Convertible Notes – Six Months Ended April 30, 2026

The following summarizes interest expense recognized in connection with convertible notes payable during the six months ended April 30, 2026:

JSC Note: Guaranteed interest $485; OID amortization $551; warrant discount amortization $2,282; debt issue cost $331; derivative discount amortization $ 2,901; total $6,550.

LV Note: Guaranteed interest $443; OID amortization $503; warrant discount amortization $2,623; debt issue cost $302; derivative discount amortization $ 2,110; total $5,981.

CFI Capital Note (repaid): OID write-off (extinguishment) $12,000; accrued interest $897; total $12,897.

Total interest expense on convertible notes: $25,428 for the six months ended April 30, 2026. Additionally, the $7,500 prepayment premium and $574 wire fee incurred at issuance of the note is included in operating expenses.

Embedded Conversion Features – ASC 815 Analysis

The JSC Note and LV Note each contain a variable conversion feature providing for conversion at 60% of the lowest traded price of the Company’s Common Stock during the 20 trading days prior to conversion. The Company evaluated these embedded conversion features under ASC 815, Derivatives and Hedging, to determine whether the embedded conversion features should be bifurcated from the host instruments and accounted for as derivative liabilities.

The Company evaluated the bifurcation criteria under ASC 815-15. The Company further evaluated whether the conversion features qualify for the equity scope exception under ASC 815-40-15, which provides that an embedded conversion feature is not subject to derivative accounting if it would be classified in equity if it were a freestanding instrument.

The Company concluded that the embedded conversion features in the JSC Note and LV Note do not qualify for the equity scope exception under ASC 815-40-15 and are required to be bifurcated from the debt hosts and accounted for separately as derivative liabilities. Because the conversion price is variable 60% of the lowest traded price during the 20 trading days preceding conversion the number of shares issuable is not fixed, and the features are therefore not considered indexed to the Company's own stock and would not be classified in equity if freestanding. Accordingly, each conversion feature was bifurcated and recorded at its issuance-date fair value as a derivative liability, with subsequent changes in fair value recognized in the statements of operations. The issuance-date fair value of each bifurcated derivative, together with the relative fair value allocated to the detachable warrant under ASC 470-20, was recorded as a debt discount; to the extent those amounts exceeded the proceeds of the note, the excess was recognized immediately as a loss. The resulting debt discount is amortized to interest expense over the term of each note.

23 
 

The variable conversion pricing structure at 60% of the lowest traded price over the prior 20 trading days creates significant potential dilution risk if the Company’s stock price declines. The number of shares issuable upon conversion is not fixed and could be substantially greater than the number initially anticipated. The Company has reserved 13,000,000 shares of Common Stock for each of the JSC Note and the LV Note to provide for conversion and warrant exercise.

Each of the JSC Note and the LV Note contains provisions that, upon an event of default, accelerate the outstanding balance to 150% of principal and accrued interest and impose default interest at the lesser of 18% per annum or the maximum rate permitted by law. Events of default include, among others, failure to maintain a minimum market capitalization of $3,000,000 on any Trading Day, failure to timely deliver shares upon conversion, and consummation of a Variable Rate Transaction. As of April 30, 2026, the Company was in compliance with the terms of both notes.

JSC Note Derivative Liability – Conversion Feature

The fair value of the derivative liability is measured using the intrinsic value method at each reporting date: Fair Value = (Total Face Obligation ÷ Conversion Price) × max(Stock Price − Conversion Price, 0), where the Conversion Price equals 60% of the lowest closing price of the Company’s common stock during the 20 trading days immediately preceding the measurement date.

At April 7, 2026 (issuance), the 20-trading-day low closing price for the period March 9, 2026 through April 6, 2026 was $0.0946, resulting in a conversion price of $0.05676 (60% × $0.0946). Based on the closing stock price of $0.0946 on the issuance date, the intrinsic value per share was $0.03784 ($0.0946 − $0.05676), and approximately 1,831,395 shares were issuable upon full conversion ($103,950 ÷ $0.05676), resulting in a derivative liability of $69,300 at issuance. (Note: for the JSC Note, the 20-day low and the issuance-date spot price coincide at $0.0946, so this value is unchanged from the prior draft.)

At April 30, 2026, the 20-trading-day low closing price for the period April 1, 2026 through April 29, 2026 was $0.0900, resulting in a conversion price of $0.05400 (60% × $0.0900). Based on the closing stock price of $0.1040 on April 30, 2026, the intrinsic value per share was $0.05000 ($0.1040 − $0.05400), and approximately 1,925,000 shares were issuable upon full conversion ($103,950 ÷ $0.05400), resulting in a derivative liability of $96,250 at April 30, 2026. The Company recognized a loss from the change in fair value of $26,950 for the period (an increase in the derivative liability from $69,300 to $96,250).

The following table presents the roll-forward of the derivative liability for the period:

     
Derivative Liability - Conversion Feature (JSC)  Amount
Balance - Issuance Date (April 7, 2026)  $69,300 
Change in Fair Value - Period (loss)  $26,950 
Balance at April 30, 2026  $96,250 


 

LV Note Derivative Liability – Conversion Feature

 

The fair value of the derivative liability is measured using the intrinsic value method at each reporting date: Fair Value = (Total Face Obligation ÷ Conversion Price) × max (Stock Price − Conversion Price, 0), where the Conversion Price equals 60% of the lowest closing price of the Company’s common stock during the 20 trading days immediately preceding the measurement date.

At April 9, 2026 (issuance), the 20-trading-day low closing price for the period March 11, 2026 through April 8, 2026 was $0.0946, resulting in a conversion price of $0.05676 (60% × $0.0946). Based on the closing stock price of $0.1190 on the issuance date, the intrinsic value per share was $0.06224 ($0.1190 − $0.05676), and approximately 1,831,395 shares were issuable upon full conversion ($103,950 ÷ $0.05676), resulting in a derivative liability of $113,986 at issuance.

At April 30, 2026, the 20-trading-day low closing price for the period April 1, 2026 through April 29, 2026 was $0.0900, resulting in a conversion price of $0.05400 (60% × $0.0900). Based on the closing stock price of $0.1040 on April 30, 2026, the intrinsic value per share was $0.05000 ($0.1040 − $0.05400), and approximately 1,925,000 shares were issuable upon full conversion ($103,950 ÷ $0.05400), resulting in a derivative liability of $96,250 at April 30, 2026. The Company recognized a gain from the change in fair value of $17,736 for the period (a decrease in the derivative liability from $113,986 to $96,250).

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The following table presents the roll-forward of the derivative liability for the period:

     
Derivative Liability - Conversion Feature (LV)  Amount
Balance - Issuance Date (April 9, 2026)  $113,986 
Change in Fair Value - Period (gain)  $(17,736)
Balance at April 30, 2026  $96,250 

 

NOTE 10 – SUBSEQUENT EVENTS

 

Subsequent events have been evaluated through July 1, 2026, which represents the date the financial statements were issued, and no events, other than discussed below have occurred through that date that would impact the financial statements.

 

Monroe Street Capital Partners, LP

 

On May 5, 2026, the Company entered into a Securities Purchase Agreement (the “MSC Purchase Agreement”) with Monroe Street Capital Partners, LP, a Delaware limited partnership (the “MSC Buyer”), pursuant to which the Company issued to the MSC Buyer a Convertible Promissory Note in the principal amount of $67,500 (the “MSC Note”) and a Common Stock Purchase Warrant to purchase up to 385,000 shares of the Company’s common stock (the “MSC Warrant”), in exchange for gross proceeds of $62,500, resulting in net proceeds to the Company of approximately $57,625 after deduction of legal fees and placement agent fees. The foregoing transaction was reported on Form 8-K on May 8, 2026.

 

Convertible Promissory Note

 

The MSC Note has a principal amount of $67,500, which includes an original issue discount of $5,000. The MSC Note bears a one-time interest charge of 8% on the principal amount (equal to $5,400), which is guaranteed and earned in full as of the issue date. The MSC Note matures on May 5, 2027. The MSC Note is convertible, at the option of the MSC Buyer, at any time on or following the issue date, into shares of the Company’s common stock, par value $0.001 per share, at a conversion price equal to 60% of the lowest traded price of the Common Stock on the principal trading market during the twenty (20) trading days prior to the applicable conversion date. The MSC Buyer’s right to convert the MSC Note is subject to a 4.99% beneficial ownership limitation. Upon an event of default, the MSC Note shall become immediately due and payable at an amount equal to 150% of outstanding principal and accrued interest, and default interest shall accrue at the lesser of 18% per annum or the maximum rate permitted by law.

 

Common Stock Purchase Warrant

 

In connection with the MSC Purchase Agreement, the Company issued to the MSC Buyer a Common Stock Purchase Warrant to purchase up to 385,000 shares of Common Stock at an exercise price of $0.25 per share. The MSC Warrant is exercisable at any time commencing on May 5, 2026 and expires on May 5, 2031, five (5) years from the issuance date. The MSC Warrant may be exercised on a cashless basis when the market price of one share of Common Stock exceeds the exercise price and no effective registration statement covers the resale of the Warrant Shares. The MSC Buyer’s right to exercise the MSC Warrant is subject to a 4.99% beneficial ownership limitation.

 

Share Reservation

 

In connection with the foregoing, the Company entered into an Irrevocable Transfer Agent Instruction Letter and Memorandum of Understanding with Pacific Stock Transfer Company, the Company’s transfer agent, pursuant to which the Company has irrevocably reserved 20,000,000 shares of Common Stock for issuance upon conversion of the MSC Note and exercise of the MSC Warrant. The MSC Note requires a minimum reserve of the greater of 20,000,000 shares or four times the number of shares issuable upon full conversion at the then-applicable conversion price.

 

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Expected Accounting Treatment

 

The Company is evaluating the accounting for the MSC Note and the MSC Warrant and expects to apply treatment consistent with its accounting for the JSC Note and the LV Note described in Note 9. The Company expects to allocate the gross proceeds of $62,500 between the MSC Note and the MSC Warrant based on their relative fair values in accordance with ASC 470-20, with the amount allocated to the MSC Warrant recorded as additional paid-in capital and as a corresponding debt discount. The $5,000 original issue discount and the one-time 8% guaranteed interest charge of $5,400 are expected to be recorded as debt discount, and the legal and placement agent fees withheld from proceeds as debt issuance costs, in each case amortized to interest expense over the term of the MSC Note. The Company further expects that the MSC Note's variable conversion feature, which provides for conversion at 60% of the lowest traded price of the Common Stock during the twenty (20) trading days preceding the applicable conversion date, will be bifurcated from the host instrument and accounted for as a derivative liability measured at fair value in accordance with ASC 815, consistent with the JSC Note and the LV Note. To the extent the initial fair value of the bifurcated derivative liability exceeds the net carrying value of the MSC Note, the Company expects to recognize a day-one loss. The financial effects of the MSC Note and the MSC Warrant will be reflected in the Company's condensed financial statements for the quarter ending July 31, 2026.

 

Lambda Ventures LLC – Issuance of Initial Commitment Shares

 

On May 27, 2026, subsequent to the April 30, 2026 balance sheet date, the Company issued 500,000 shares of its Common Stock (the “Initial Commitment Shares”) to Lambda Ventures LLC pursuant to the Equity Purchase Agreement dated April 27, 2026, as more fully described in Note 6. The Initial Commitment Shares were earned in full upon execution of the Purchase Agreement on April 27, 2026, and the fair value of $55,000 (500,000 shares at $0.11 per share, the closing price on April 27, 2026) was recorded as common stock payable in the accompanying balance sheet as of April 30, 2026. Upon physical issuance on May 27, 2026, the $55,000 common stock payable balance was reclassified to permanent equity, with $500 credited to common stock (par value $0.001 × 500,000 shares) and $54,500 credited to additional paid-in capital. No additional compensation expense was recognized at the time of issuance. The shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

 

Issuance of Common Stock under Regulation A

 

On May 29, 2026, the Company issued 33,334 shares of common stock under Regulation A for funds received during the quarter ended January 31, 2026.

 

 

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

HNO International, Inc., a Nevada corporation (herein referred to as “we,” “us,” “our,” “HNO” and the “Company”), 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 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.

 

HNO is at the forefront of developing innovative integrated products that cater to various uses of green hydrogen, both current and future. These include:

  

  · Hydrogen refueling and generation systems for Fuel Cell Electric vehicles, such as forklifts, drones, cars, and trucks, as well as for zero-emission heating and cooking applications.
  · Small to mid-scale green hydrogen production facilities with a capacity of 100kg/day to 5,000kg/day. These facilities can help decarbonize industrial processes and increase the use of hydrogen and hydrogen-based fuels for transportation and material handling.
  · Hydrogen technologies that decrease emissions and maintenance for existing gasoline and diesel internal combustion engines. This can aid companies in decarbonizing their operations in the short term.

 

Results of Operations

 

For the three months ended April 30, 2026 and 2025

 

Revenue

 

For the three months ended April 30, 2026 and 2025, the Company recognized revenue of $33,821 and $43,708, respectively. Revenue in the current period was generated from the facilitation of the delivery of hydrogen equipment and related integration support. The Company concluded that it acted as an agent with respect to the equipment component of the arrangement, as it did not take control of the goods and the third-party supplier shipped directly to the customer. As a result, revenue was recognized on a net basis, limited to the Company’s retained margin.

 

Cost of Goods Sold

 

Cost of Goods Sold consists of direct expenses related to hydrogen engineering services and combustion solution projects, including materials, subcontracted labor, and other project-specific implementation costs. For the three months ended April 30, 2026 and 2025, total cost of sales was $0 and $0, respectively. The Company acted as an agent in facilitating delivery of certain hydrogen refueling equipment during the 2026 period and did not generate separate cost of goods sold.

 

Gross Profit

 

For the three months ended April 30, 2026 and 2025, gross profit was $33,821 and $43,708, respectively. These amounts reflect revenue generated from the facilitation of the delivery of hydrogen equipment and integration support services. As the Company was acting as an agent with respect to the equipment delivered by a third-party vendor, no cost of goods sold was recognized, and gross profit equaled the margin retained.

 

27 
 

Operating Expenses

 

General and Administrative expenses were $165,081 for the three months ended April 30, 2026, compared to $314,323 during the same period in 2025, a decrease of $149,242, reflecting lower professional fees, reduced consultant costs, and a general decline in administrative overhead.

 

Depreciation expense increased by $5,897 to $63,436 for the three months ended April 30, 2026, compared to $57,539 for the same period in 2025, reflecting depreciation on additions to property and equipment.

 

Advertising and marketing expenses were $1,706 for the three months ended April 30, 2026, compared to $14,810 for the same period in 2025. The decrease was due to reduced outreach activities compared to the prior year, which had higher spending to support the Company’s hydrogen engineering and combustion solutions.

 

Net Loss

 

Net loss for the three months ended April 30, 2026, was $400,825 compared to a net loss of $470,066 during the same period in 2025.

 

For the six months ended April 30, 2026 and 2025

 

Revenue

 

For the six months ended April 30, 2026 and 2025, the Company recognized revenue of $33,821 and $43,708, respectively. Revenue in the current period was generated from the facilitation of the delivery of hydrogen equipment and related integration support. The Company concluded that it acted as an agent with respect to the equipment component of the arrangement, as it did not take control of the goods and the third-party supplier shipped directly to the customer. As a result, revenue was recognized on a net basis, limited to the Company’s retained margin.

 

Cost of Goods Sold

 

Cost of Goods Sold consists of direct expenses related to hydrogen engineering services and combustion solution projects, including materials, subcontracted labor, and other project-specific implementation costs. For the six months ended April 30, 2026 and 2025, total cost of sales was $0 and $0, respectively. The Company acted as an agent in facilitating delivery of certain hydrogen refueling equipment during the 2026 period and did not generate separate cost of goods sold.

 

Gross Profit

 

For the six months ended April 30, 2026 and 2025, gross profit was $33,821 and $43,708, respectively. These amounts reflect revenue generated from the facilitation of the delivery of hydrogen equipment and integration support services. As the Company was acting as an agent with respect to the equipment delivered by a third-party vendor, no cost of goods sold was recognized, and gross profit equaled the margin retained.

 

Operating Expenses

 

General and Administrative expenses were $286,570 for the six months ended April 30, 2026, a decrease of $5,422,415 from $5,708,985 in the comparable period of 2025. The decline was driven primarily by stock-based compensation, which totaled $5,092,557 in the 2025 period and was nil in 2026. Excluding stock-based compensation, general and administrative expenses decreased by $329,858, reflecting lower professional fees, reduced consultant costs, and a general decline in administrative overhead.

 

Depreciation expense increased by $16,665 to $128,653 for the six months ended April 30, 2026, compared to $111,988 for the same period in 2025, reflecting depreciation on additions to property and equipment.

 

Advertising and marketing expenses were $2,559 for the six months ended April 30, 2026, compared to $20,160 for the same period in 2025. The decrease was due to reduced outreach activities compared to the prior year, which had higher spending to support the Company’s hydrogen engineering and combustion solutions.

 

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Net Loss

 

Net loss for the six months ended April 30, 2026, was $582,894 compared to a net loss of $5,931,459 during the same period in 2025.

 

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, 2026 of $400,825 and had an accumulated deficit of $52,633,084 at April 30, 2026. At April 30, 2026, we had a cash balance of $145,670, compared to a cash balance of $9,525 at October 31, 2025. At April 30, 2026, the working capital deficit was $2,613,968, compared to a working capital deficit of $2,422,574 at October 31, 2025. 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.

 

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. While we do not currently generate sufficient cash from operations, we have access to certain external sources of financing. These include the Equity Purchase Agreement we entered into with Lambda Ventures LLC on April 27, 2026, under which we may sell up to $30,000,000 of our common stock over a period of up to 24 months; our ongoing Regulation A offering; and convertible note financings, including the notes issued in April 2026 and the note issued in May 2026. Our ability to access these sources is subject to significant conditions and limitations. Sales under the Equity Purchase Agreement are subject to the effectiveness of a resale registration statement covering the underlying shares, per-put dollar limits, and the prevailing market price of our common stock, and amounts realizable under our Regulation A offering and any future note financings depend on investor demand and market conditions. There can be no assurance that financing from these sources will be available in amounts sufficient, or on terms acceptable, to meet our needs. Accordingly, we will need to raise additional capital through equity financings or other means in order to continue operations and meet our obligations, and failure to obtain additional funding could have a material adverse effect on our financial condition and results of operations.

 

Cash Flow

 

For the Six months Ended April 30, 2026 and 2025

 

The following table summarizes our cash flows for the periods indicated below:

 

   

For the Six months Ended
April 30,
2026

 

For the Six months Ended
April 30,
2025

Cash Used in Operating Activities   $ (337,687 )   $ (671,197 )
Cash Provided by Financing Activities     487,000       901,500  
Cash Used in investing activities   $ (13,168)     $ (177,944 )

 

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Cash Used in Operating Activities

 

During the six months ended April 30, 2026, cash used in operating activities amounted to $(337,687), primarily reflecting our net loss of $(582,894). This was partially offset by non-cash items, including depreciation of $128,653, non-cash interest expense of $12,531, a loss on change in fair value of convertible notes of $88,160, and a loss on derivative liability of $9,214. Changes in operating assets and liabilities included a decrease in accounts receivable of $332,669, a decrease in other receivable of $1,000, a decrease in accounts payable of $340,023, an increase in accrued interest payable of $13,637, and a net change in operating lease right-of-use assets and lease liabilities of $(634).

 

During the six months ended April 30, 2025, cash used in operating activities amounted to $(671,197), primarily reflecting our net loss of $(5,931,459). This was largely offset by non-cash items, primarily $5,092,557 of stock-based compensation, depreciation of $111,988, a loss on write-off of intangible assets of $105,190, legal services provided in exchange for a convertible note of $45,000, and a loss on change in fair value of convertible notes of $14,985. Changes in operating assets and liabilities included an increase in accounts receivable of $8,450, a decrease in accounts payable of $106,116, a decrease in accrued payroll of $8,881, an increase in accrued interest payable of $13,864, and a net change in operating lease right-of-use assets and lease liabilities of $125.

   

Cash Provided by Financing Activities

 

During the six months ended April 30, 2026, cash provided by financing activities was $487,000, which consisted of net proceeds from related party advances of $200,000, proceeds from the sale of common stock of $62,500, proceeds from the sale of common stock subscription payable of $60,000, and proceeds from issuance of convertible notes payable of $164,500. 

During the six months ended April 30, 2025, cash provided by financing activities was $901,500, which consisted of net proceeds from related party advances of $359,000 and proceeds from the sale of common stock of $542,500.

Cash Used in Investing Activities

 

During the six months ended April 30, 2026, cash used in investing activities was $(13,168), which consisted of the purchase of property and equipment and long-term assets.

During the six months ended April 30, 2025, cash used in investing activities was $(177,944), which consisted of the purchase of property and equipment and long-term assets.

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, 2026, the Company incurred a net loss of $582,894 and used cash in operating activities of $337,687, and on April 30, 2026, had stockholders’ deficit of $1,961,103. 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.

 

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.

 

30 
 

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 fair value of restricted stock grants is determined using the closing market price on the grant date, adjusted for an appropriate discount to reflect the restrictions on transferability and marketability of the shares. The discount is calculated using a weighted average of comparable restricted stock transactions, which better reflects the economic impact of larger issuances and provides a more accurate representation of fair value under ASC 718. The 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.

 

Employee Benefits

 

During the six months ended April 30, 2026, the Company paid $2,970 in employer retirement contributions, representing 3% of semi-monthly payroll for one employee over three pay periods. These contributions are made in accordance with the terms of the Company’s state-mandated retirement plan for eligible employees and are recorded as employee benefits expense in the period incurred.

 

Fair Value Measurement of Convertible Instruments

 

The Company evaluates convertible financial instruments in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), to determine whether an instrument should be classified as a liability or as equity. Instruments that are required to be settled in a variable number of shares for a fixed monetary amount are classified as liabilities and measured at fair value on a recurring basis, with changes in fair value recognized in earnings.

 

Revenue Recognition

 

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). 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.

 

In certain arrangements where the Company facilitates the provision of goods or services provided by a third party, and does not take control of those goods or services, revenue is recognized on a net basis, limited to the margin or fee earned, consistent with the Company’s role as an agent under ASC 606-10-55-36 through 55-40.

 

31 
 

During the three months ended April 30, 2026 and April 30, 2025, the Company recognized $33,821 and $43,708 in revenue related to the facilitation of delivery of hydrogen refueling equipment and related services. Based on its evaluation of the arrangement, the Company determined that it acted as an agent with respect to the facilitation of delivery of equipment, as it did not obtain control of the goods and the third-party vendor delivered directly to the customer. As a result, revenue was recognized on a net basis, excluding gross billings and associated third-party costs, in accordance with ASC 606.

 

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 associated with the Company’s financial instruments include credit risk, market risk, and liquidity risk. The Company does not have significant exposure to foreign exchange risk, as all of it operations and transactions are denominated in U.S dollars.

 

Outstanding Share Data

 

As of April 30, 2026, the following securities were outstanding:

 

Common Stock: 101,821,989 shares

Series A Preferred Stock: 5,000,000 shares

Series B Preferred Stock: 360,000 shares 

 

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.

 

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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, 2026, 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 April 30, 2026, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

 

 

33 
 

 PART II - OTHER INFORMATION

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

  

ITEM 5. OTHER INFORMATION

 

Securities Trading Plans of Directors and Executive Officers

None of our directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as such terms are defined in Item 408(c) of Regulation S-K) during the three months ended April 30, 2026.

 

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.

 

   
   
July 7, 2026

By: /s/ Donald Owens

Donald Owens, Chief Executive Officer

(Principal Executive Officer)

   
 July 7, 2026

By: /s/ Hossein Haririnia

Hossein Haririnia, Treasurer

(Principal Financial and Accounting Officer)

 

 

 

 

 

 

 

 

 

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ATTACHMENTS / EXHIBITS

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