Quarterly Report for Quarter Ending January 31, 2026 (Form 10-Q)

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 January 31, 2026 and 2025

Revenue

For the three months ended January 31, 2026 and January 31, 2025, we generated no revenue.

Operating Expenses

General and Administrative, and Contract Labor expenses were $121,489 for the three months ended January 31, 2026, compared to $5,394,662 during the same period in 2025, a decrease of $5,273,173. The 2025 period included $5,092,557 of stock-based compensation expense. No stock-based compensation was recorded during the same period in 2026. Excluding stock-based compensation, general and administrative expenses decreased by $180,616, primarily due to reduced professional fees, lower consultant costs, and a general reduction in administrative overhead.

Depreciation and amortization expense increased by $10,768 to $65,217 for the three months ended January 31, 2026, compared to $54,449 for the same period in 2025, reflecting depreciation on additions to property and equipment.

Advertising and marketing expenses were $853 for the three months ended January 31, 2026, compared to $5,350 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 January 31, 2026, was $182,069 compared to a net loss of $5,461,393 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 January 31, 2026 of $182,069 and had an accumulated deficit of $52,232,259 at January 31, 2026. At January 31, 2026, we had a cash balance of $81,494, compared to a cash balance of $9,525 at October 31, 2025. At January 31, 2026, the working capital deficit was $2,415,029, 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.

There are no external sources of liquidity available to the Company at this time. The Company will need to raise additional capital through equity financings or other means in order to continue operations and meet its obligations. Failure to obtain additional funding could have a material adverse effect on our financial condition and the results of operations.

Cash Flow

For the Three months Ended January 31, 2026 and 2025

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

		For the Three months Ended January 31, 2026				For the Three months Ended January 31, 2025
Cash Used in Operating Activities		$	(125,531	)		$	(168,412	)
Cash Provided by Financing Activities			197,500				374,000
Cash used in investing activities		$	-			$	(177,943	)

Cash Used in Operating Activities

During the three months ended January 31, 2026, cash used in operating activities amounted to $(125,531), primarily reflecting our net loss of $(182,069). This was offset by depreciation and amortization of $65,217. Additionally, there was a decrease in accounts receivable of $332,669, a decrease in other receivable of $1,000, a decrease in accounts payable of $336,507, a decrease in accrued payroll of $96, and an increase in accrued interest payable of $6,932.

During the three months ended January 31, 2025, cash used in operating activities amounted to $(168,412), primarily reflecting our net loss of $(5,461,393). This impact was largely offset by non-cash items, primarily $5,092,557 stock-based compensation, along with depreciation and amortization of $54,449. Additionally, there was an increase in accounts payable of $121,146, an increase in accrued payroll of $17,476, and an increase in accrued interest payable of $6,931.

Cash Used in Financing Activities

During the three months ended January 31, 2026, cash provided by financing activities was $197,500, which consisted of proceeds from related party advances of $130,000 and proceeds from the sale of common stock of $67,500.

During the three months ended January 31, 2025, cash provided by financing activities was $374,000, which consisted of proceeds from related party advances of $359,000 and proceeds from the sale of common stock of $15,000.

Cash Provided by Investing Activities

During the three months ended January 31, 2026, there was no cash used in investing activities.

During the three months ended January 31, 2025, cash used in investing activities was $(177,943), which consisted of the purchase of property and equipment and long-term assets.

Going Concern

The Company's financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the three months ended January 31, 2026, the Company incurred a net loss of $182,069 and used cash in operating activities of $125,531, and on January 31, 2026, had stockholders' deficit of $1,697,073. 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.

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 quarter ended January 31, 2026, the Company paid $743 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.

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 January 31, 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