INTELLECTUAL PROPERTY: PROTOTYPE COMPACT HYDROGEN REFUELING STATION (CHRS)

3 Months Ended

Jan. 31, 2025

Intellectual Property Prototype Compact Hydrogen Refueling Station

INTELLECTUAL PROPERTY: PROTOTYPE COMPACT HYDROGEN REFUELING STATION (CHRS)

NOTE 11 – INTELLECTUAL PROPERTY: PROTOTYPE COMPACT HYDROGEN REFUELING STATION (CHRS)

On July 10, 2023, the Company entered into a Simple Agreement for Future Equity (the “SAFE”) with Varea, Inc. ("Varea"), a Delaware corporation. Pursuant to the SAFE, the Company is investing $500,000 (the "Purchase Amount") in Varea in exchange for the right to certain shares of Varea's Capital Stock. The agreement specifies that the Purchase Amount will be used for the Company's business operations over the next 12 months, subject to an agreed-upon budget.

Prior to entering into this SAFE, the Company had an existing financial arrangement with Varea LLC, whereby Varea LLC invoiced the Company for services rendered, which were recorded as expenses by HNOI. However, recognizing the potential for a more mutually beneficial arrangement, Varea Inc. proposed a revised approach. Under the newly proposed approach, Varea Inc. would submit a detailed budget outlining their anticipated monthly expenses, and HNO International, Inc. would view these expenses as an investment opportunity rather than mere costs. In exchange for funding Varea Inc.'s expenses, HNO International, Inc. would receive a post-money SAFE, which represents a future right to certain shares of Varea's Capital Stock. The transition from the previous invoicing system to the investment-based financial arrangement was agreed by both parties. The terms and conditions of the agreement, including the conversion of expenses into a potential future return on investment, were thoroughly assessed and discussed.

On December 6, 2023, the SAFE was terminated as part of a Mutual Release Agreement between HNO International, Inc., and Varea, Inc. Under the terms of this Mutual Release Agreement, the intellectual property related to the prototype Compact Hydrogen Refueling Station (CHRS), developed with the funds provided under the SAFE, was retained by HNO International, Inc.

The balance of the SAFE on December 6, 2023, was $136,725. Following the termination of the SAFE, the amount previously recorded under the SAFE was reclassified, and the intellectual property associated with the CHRS is now fully owned and recognized as a long-term intangible asset on HNO International, Inc.'s balance sheet. This long-term asset is solely the intellectual property associated with the CHRS and does not include any physical equipment.

Amortization

The intellectual property associated with the CHRS is being amortized over a useful life of five 5 years, beginning on December 6, 2023. The amortization expense for the three months ended January 31, 2025 is $6,836, recognizing the straight-line amortization of the asset over the remaining useful life.

Schedule of amortization expense
	Useful Life (years)		January 31, 2025			October 31, 2024
Long term asset		5	$	136,725		$	136,725
Less: Accumulated amortization				(31,535	)		(24,699	)
Long term asset, net			$	105,190		$	112,026

HNO International, Inc. 10-Q/A