Annual Report for Fiscal Year Ending October 31, 2024 (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 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.

We provide green hydrogen systems engineering design, integration, and products to multiple markets, which include: (i) the zero-emission vehicle and mobile equipment market consisting of hydrogen fuel cell electric passenger vehicles, material handling equipment such as forklifts and airport ground support equipment, as well as the medium and heavy-duty truck market; (ii) the current and emerging hydrogen gas markets encompassing ammonia, fertilizer, steel, mining, electronics, semiconductors, and fuel cell electric vehicles; (iii) and the gasoline and diesel engine emissions and maintenance reduction product and services market.

On May 16, 2023, the Company began accepting subscription agreements from investors as part of an offering under Regulation A. This offering concluded automatically on May 5, 2024. During this period, the Company issued 2,459,961 shares of common stock under the Regulation A offering.

Results of Operations

For the Years Ended October 31, 2024 and 2023

Revenues - For the year ended October 31, 2024, revenue generated from hydrogen engineering services and combustion solutions was $4,241 compared to $13,000 for the year ended October 31, 2023. The decrease in revenues of $8,759 is mainly attributable to our inability to secure additional contracts for hydrogen engineering services and combustion solutions during the current year.

Cost of Sales and Gross Profits - For the year ended October 31, 2024, our cost of goods sold was $3,688, resulting in a gross profit of $553. In comparison, for the year ended October 31, 2023, our cost of goods sold was $5,885, resulting in a gross profit of $7,115. The cost of goods sold consisted of expenses related to contract labor associated with revenue generation.

Operating Expenses - Operating expenses for the year ended October 31, 2024, were $2,208,701 compared to $1,910,168 for the same period in 2023. This increase of $298,533 is attributable to our expanded operations, which resulted in increased costs related to general and administrative expenses, as well as higher depreciation and amortization expenses. Notably, advertising and marketing expenses increased to $7,408 in 2024 from $3,000 in 2023.

Net Loss - Net loss for the year ended October 31, 2024, was $2,230,222 compared to a net loss of $1,927,494 during the same period in 2023. This increase in net loss is primarily due to the significant rise in operating expenses during the year, as well as the decline in revenues.

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, 2024 and 2023

Our cash balance of $20,255 as of October 31, 2024, 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, 2023, was $235,159, reflecting a decrease of $214,904 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, 2024 and 2023

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

		For the Year Ended October 31, 2024				For the Year Ended October 31, 2023
Cash Used in Operating Activities			(1,802,678	)			(1,334,084	)
Cash Provided by Financing Activities			2,002,612				2,426,833
Cash Used in Investing Activities			(414,838	)			(908,699	)

Cash Used in Operating Activities

During the year ended October 31, 2024, cash used in operating activities was $1,802,678. This reflects our net losses for the period, adjusted by non-cash charges such as depreciation and share-based compensation. Changes in working capital accounts also contributed to cash usage, primarily due to increases in accounts payable and decreases in payroll taxes and accrued interest payable.

In comparison, during the year ended October 31, 2023, cash used in operating activities was $1,334,084. The increase in cash usage in 2024 is attributable to higher operating expenses, including costs related to expanding operations, share based compensation and increased depreciation expenses.

Cash Provided by Financing Activities

During the year ended October 31, 2024, cash provided by financing activities was $2,002,612. This primarily consisted of proceeds from related party advances totaling $960,585, along with $958,929 raised through the Company's Regulation A offering and proceeds from customer deposits.

In comparison, during the year ended October 31, 2023, cash provided by financing activities was $2,426,833, primarily reflecting proceeds from the Company's Regulation A offering and related party loans.

Cash Provided by Investing Activities

During the year ended October 31, 2024, cash used in investing activities was $414,838, primarily due to the purchase of property and equipment and additional investments in intellectual property classified as long-term assets.

For the year ended October 31, 2023, cash used in investing activities was $908,699, which included significant purchases of property and equipment as well as investments in a SAFE agreement.

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, 2024, we incurred a net loss of $2,230,222 and used cash in operating activities of $1,802,678. 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.