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Item 7. Management’s Discussion and Analysis

2026-02-06 compared with 2025-03-20 · 125 added, 99 removed, 39 unchanged (85% of the section changed)

1 unchanged sentence

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.

discussion and analysis may include statements regarding our expectations with respect to our future performance, liquidity, and capital

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'').

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.

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

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,

actual results may differ materially from those contained in or implied by any of the forward-looking statements contained herein.

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:

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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;

(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.

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, 2025 and 2024

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

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.

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.

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.

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.

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.

and marketing expenses were $22,770 for the year ended October 31, 2025, compared to $7,408 for the year ended October 31, 2024.

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 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.

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.

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 $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.

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.

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

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.

For the Years Ended October 31, 2025 and 2024

The following table summarizes our cash flows for

the periods indicated below:

The following table summarizes

our cash flows for the periods indicated below:

For the Year Ended

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Cash Used in Operating Activities

$ (1,802,678 )

Cash Provided by Financing Activities

1 unchanged sentence

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.

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, 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.

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, 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.

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

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

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.

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.

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

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.

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’

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis