HNO International, Inc. 8-K

What Happened

• HNO International, Inc. entered a Securities Purchase Agreement with Monroe Street Capital Partners, LP and issued a Convertible Promissory Note (MSC Note) with a $67,500 principal (includes $5,000 original issue discount) and a Common Stock Purchase Warrant to buy up to 385,000 shares. The transactions closed on May 5, 2026 for gross proceeds of $62,500 and net proceeds of approximately $57,625 after $3,000 withheld for the buyer’s legal fees and $1,875 withheld for the placement agent (Craft Capital Management LLC).
• The MSC Note matures May 5, 2027, bears a one-time 8% interest charge ($5,400) earned at issuance, is convertible at the buyer’s option into common stock at a conversion price equal to 60% of the lowest traded price over the 20 trading days prior to conversion (subject to adjustments), and is subject to a 4.99% beneficial ownership cap. Upon default the note becomes immediately due at 150% of outstanding principal and accrued interest, with default interest up to 18% (or legal maximum). The MSC Warrant has an exercise price of $0.25, is exercisable May 5, 2026–May 5, 2031, and may be cashlessly exercised in certain circumstances; the warrant also carries a 4.99% ownership cap.

Key Details

• Gross proceeds: $62,500; net proceeds to HNOI: ≈ $57,625 after fees.
• MSC Note principal: $67,500 (includes $5,000 original issue discount); one-time 8% interest ($5,400); maturity May 5, 2027.
• Warrant: up to 385,000 shares at $0.25, exercisable 5/5/2026–5/5/2031; cashless exercise allowed in limited cases.
• Share reservation: company irrevocably reserved 20,000,000 shares with its transfer agent for conversions/exercise; MSC may increase the reservation; MSC has participation rights in future offerings for 18 months or until note extinguished.

Why It Matters

• This is a small, short-term financing that provides immediate cash (≈ $57.6K) but creates potential dilution because the note converts at a steep discount (60% of a recent low price) and the company reserved a large pool of shares (20 million) to satisfy conversions and warrant exercises.
• The note includes punitive default terms (150% repayment and high default interest) and conversion mechanics that could allow conversion even after maturity, which materially affects how the obligation may be satisfied (cash repayment vs. stock issuance).
• The agreement also places short-term limits on HNOI’s financing flexibility (no Variable Rate Transactions while outstanding, 30-day issuance restriction, and MSC participation rights), which investors should factor into the company’s near-term capital plan and potential dilution.