8-K: HNO International Secures $133K Convertible Note

HNO International, Inc. has entered into a Securities Purchase Agreement with CFI Capital LLC for a $150,000 convertible redeemable promissory note, yielding $133,000 in net proceeds.

Summary

• HNO International, Inc. (the "Company") entered into a Securities Purchase Agreement with CFI Capital LLC (the "Buyer") on March 12, 2026.
• The Company issued a Convertible Redeemable Promissory Note (the "Note") with an aggregate principal amount of $150,000.
• The Note included a $12,000 original issue discount, resulting in a purchase price of $138,000.
• After deducting $5,000 for legal fees, the Company received net proceeds of approximately $133,000.
• The Note matures on March 12, 2027, and bears interest at 8% per annum from the Issue Date.
• Conversion into common stock is permitted starting six months from the Issue Date at a price equal to 60% of the lowest trading price over the 20 trading days prior to conversion.
• The conversion price can be further reduced to 50% if a DTC "Chill" is in effect, and 45% upon an Event of Default.
• Conversions are subject to a 4.99% beneficial ownership cap, increasable to 9.9% with 61 days' prior notice.
• The Company has reserved 7,861,635 shares of common stock for conversions and committed to maintain a share reservation equal to five times the amount necessary for full conversion.
• A most-favored-nation provision allows the Buyer to elect more favorable terms if the Company issues securities with better conversion discounts, lookback periods, interest rates, original issue discounts, or prepayment rates to other investors.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a necessary capital raise for HNO International, Inc., but the highly dilutive terms, including a deep conversion discount and a most-favored-nation clause, reflect a high cost of capital and significant potential negative impact on existing shareholders.

Positives

• The Company secured $133,000 in net proceeds, providing capital for operations or strategic initiatives.

Negatives

• The Note carries a significant original issue discount of $12,000 on a $150,000 principal.
• The conversion price is set at a deep discount (60% of the lowest trading price, potentially 45%), indicating substantial potential dilution for existing shareholders.
• The 8% annual interest rate adds to the cost of capital.
• The most-favored-nation provision could force the Company to offer even more favorable terms to this investor if future financings are secured on better terms for other parties.

Risks

• Significant shareholder dilution risk due to the deeply discounted conversion price, especially if the stock price declines.
• The most-favored-nation clause could limit the Company's flexibility in future capital raises and potentially lead to further unfavorable terms for existing shareholders.
• The obligation to reserve a large number of shares (7,861,635 initially, and 5x full conversion amount) for potential conversion could create an overhang on the stock.

Future Outlook

The filing primarily details a financing transaction and does not provide explicit forward-looking statements or guidance regarding the Company's operational or financial performance beyond the terms of the Note itself. The capital raised is expected to support ongoing operations.

Management Comments

• The report was signed by Donald Owens, Chief Executive Officer, on behalf of HNO International, Inc.

Industry Context

StockSavvy.ai notes that securing convertible debt with significant discounts and a most-favored-nation clause is often characteristic of micro-cap companies or those with limited access to traditional financing. Such terms reflect a lender-friendly environment, where the company's bargaining power may be constrained, and the cost of capital is high due to perceived risk or lack of alternative funding sources. This type of financing is common for companies seeking working capital or funding for growth initiatives when equity markets are less receptive or traditional bank loans are unavailable.

Comparison to Industry Standards

• The conversion price set at 60% (and potentially as low as 45%) of the lowest trading price is a deep discount, significantly more aggressive than typical convertible notes issued by more established companies, which often feature conversion premiums (e.g., 20-30% above current market price).
• The inclusion of a Most-Favored-Nation (MFN) clause is a strong protective measure for the investor, CFI Capital LLC, ensuring they receive the best terms if the Company seeks further financing. This is more common in deals with smaller, less liquid companies where investors demand greater protection against future dilution or more favorable terms.
• The 8% interest rate, combined with a $12,000 original issue discount on a $150,000 principal, represents a relatively high cost of capital, especially when compared to investment-grade corporate bonds or even convertible notes from larger, more stable companies that might secure rates in the 2-5% range with conversion premiums.

Stakeholder Impact

• Shareholders face significant potential dilution due to the deeply discounted conversion price of the Note.
• The Company's financial flexibility for future capital raises may be constrained by the most-favored-nation provision.

Next Steps

• The Company will begin accruing interest on the Note at 8% per annum.
• The Note will become convertible into common stock starting six months from the Issue Date.
• The Company is obligated to maintain a share reservation for conversions.

Key Dates

Recommendation

While the Company secured needed capital, the highly dilutive terms of the convertible note, including a deep discount on conversion and a most-favored-nation clause, present significant risks for existing shareholders. The immediate need for capital is addressed, but at a substantial long-term cost to equity value. Investors should hold and monitor future dilution and the Company's ability to utilize this capital effectively to improve its financial position and reduce reliance on such dilutive financing.

Keywords

Convertible Note, Securities Purchase Agreement, Capital Raise, Promissory Note, Dilution, CFI Capital LLC, HNO International, Financing, Debt, Equity