Annual Report for Fiscal Year Ending October 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis may include statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other non-historical statements in the discussion, are forward-looking. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, factors listed in other documents we file with the Securities and Exchange Commission (the "SEC''). We do not assume an obligation to update any forward-looking statements. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements contained herein.

Overview

HNO International, Inc., a Nevada corporation, 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.

Results of Operations

For the Years Ended October 31, 2025 and 2024

Revenues

For the years ended October 31, 2025 and 2024, the Company recognized revenue of $65,561 and $4,241, respectively. Revenue in the current period was generated from the facilitation of 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. Revenue in the prior year was generated from hydrogen engineering services and combustion solutions.

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 years ended October 31, 2025 and 2024, total cost of sales was $0 and $3,688, respectively. The Company acted as an agent in facilitating delivery of certain hydrogen refueling equipment during the 2025 period and did not generate separate cost of sales. The prior year cost of goods sold related to contract labor expenses associated with revenue-generating activities.

Gross Profit

For the years ended October 31, 2025 and 2024, gross profit was $65,561 and $553, respectively. The increase reflects revenue generated from the facilitation of 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

Operating expenses for the year ended October 31, 2025, were $6,527,243 compared to $3,317,069 for the year ended October 31, 2024.

General and administrative expenses were $6,259,342 for the year ended October 31, 2025, compared to $3,129,989 for the year ended October 31, 2024, an increase of $3,129,353. The year ended October 31, 2025 included $5,333,937 of stock-based compensation expense compared to $1,192,356 of stock-based compensation in 2024. Excluding stock-based compensation, general and administrative expenses decreased by $1,012,228, primarily due to reduced professional fees, lower consultant costs, and a general reduction in administrative overhead resulting from management's cost containment measures and reduced use of third-party service providers.

Depreciation and amortization expense increased by $65,459, totaling $245,131 for the year ended October 31, 2025, compared to $179,672 for the year ended October 31, 2024, due to depreciation associated with additional property and equipment acquired during recent prior periods.

Advertising and marketing expenses were $22,770 for the year ended October 31, 2025, compared to $7,408 for the year ended October 31, 2024. The increase of $15,362 was due to expanded outreach and promotional activities supporting product development and brand awareness.

Other Income (Expenses)

Other expenses increased from $22,074 for the year ended October 31, 2024 to $153,814 for the year ended October 31, 2025, the increase primarily related to $14,867 loss on fair value of convertible note related to the issuance of a convertible note in exchange for legal services and $105,190 loss on the write-off of intangible asset as a result of an out-of-period adjustment due to the incorrect capitalization of costs associated with developed intellectual property.

Net Loss

Net loss for the year ended October 31, 2025, was $6,615,496 compared to a net loss of $3,338,590 for the year ended October 31, 2024.

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

For the Years Ended October 31, 2025 and 2024

Our cash balance of $9,525 as of October 31, 2025, combined with the current level of revenues, is insufficient to maintain operations. Therefore, we will need to raise additional funds in the near future to support our operations and growth plans. Our cash balance on October 31, 2024, was $20,255, reflecting a decrease of $10,730 over the year. This decrease is attributable to significant cash outflows related to operating and investing activities.

We have not been able to generate sufficient cash from operating activities to fund our ongoing operations and have relied primarily on raising capital through sales of common stock, Regulation A offerings, and related party loans.

The impact of existing or probable government regulations on our business remains uncertain. Due to the nature of our operations in hydrogen-based clean energy technologies, it is anticipated that government regulation may increase in the future, potentially requiring corrective actions or changes to our business model.

There are currently no external sources of liquidity available to us, other than potential equity financing or debt offerings. Failure to secure additional funding could have a material adverse effect on our financial condition and the results of our operations.

Cash Flow

For the Years Ended October 31, 2025 and 2024

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

		For the Year Ended October 31, 2025				For the Year Ended October 31, 2024
Cash Used in Operating Activities		$	(960,488	)		$	(1,802,678	)
Cash Provided by Financing Activities		$	1,176,701			$	2,002,612
Cash Used in Investing Activities		$	(226,943	)		$	(414,838	)

Cash Used in Operating Activities

During the year ended October 31, 2025, cash used in operating activities amounted to $960,488, primarily reflecting our net loss of $6,615,496. This impact was largely offset by non-cash items, primarily $5,333,937 in stock-based compensation, along with depreciation and amortization of $245,131, a $105,190 loss on write-off of an intangible asset, and $59,867 expense related to a convertible note issued for legal services, including $45,000 recognized as legal expense and a $14,867 fair value adjustment. Changes in working capital included an increase in accounts payable of $228,362 and a decrease in accrued payroll of $17,780, partially offset by a $27,500 increase in accrued interest payable.

During the year ended October 31, 2024, cash used in operating activities totaled $1,802,678, primarily reflecting our net loss of $3,338,590. This was offset by non-cash charges such as depreciation and amortization amounting to $179,672. Additionally, there was a decrease in due from related party of $56,392 and a decrease in accrued interest payable of $12,425 and a decrease in payroll taxes of $14,802.

Cash Provided by Financing Activities

During the year ended October 31, 2025, cash provided by financing activities was $1,176,701, which consisted of net proceeds from related party advances of $127,800 and proceeds from the sale of common stock of $1,049,000.

In comparison, during the year ended October 31, 2024, cash provided by financing activities was $2,002,612, which consisted of proceeds from related party advances of $960,585, $958,929 from the sale of common stock, $17,011 in proceeds from common stock subscription payable, and a $100,000 refund of a security deposit.

Cash Provided by Investing Activities

During the year ended October 31, 2025, cash used in investing activities was $226,943, which consisted of the purchase of property.

For the year ended October 31, 2024, cash used in investing activities was $414,838, which consisted of the purchase of property and equipment and purchase long-term assets.

Going Concern

Our financial statements have been prepared assuming we 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 year ended October 31, 2025, we incurred a net loss of $6,615,496 and used cash in operating activities of $960,488. These factors, among others, raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and the classification of liabilities that might result from this uncertainty.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements with any party.

Critical Accounting Policies

The preparation of financial statements in accounting principles generally accepted in the United States of America 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 amounts of revenues and expenses during the reporting period. A change in managements' estimates or assumptions could have a material impact on our financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Our financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.