HORNE INTERNATIONAL, INC.

Furthermore, the Company failed to make monthly payments of principal and interest to a creditor commencing August 1, 2013, which failure constituted a default under the note agreement. On September 3, 2013, the creditor filed a Confession of Judgment whereby the Promissory Note will earn interest at the rate of 6% from August 2, 2013 until date of payment and the Company will be liable for the note holder’s legal and related costs of approximately $15,000. See Note 5 – Related Party Debt and Other Borrowings for a further description.

Effective July 1, 2013, the Company entered into a new month to month lease for its corporate office whereby it will rent a reduced amount of space for $6,511 per month, agreed to pay a security deposit of $6,511 in three monthly installments due August 1, September 1, and October 1, 2013 and entered into a promissory note dated August 1, 2013 in the amount of $21,462. See Note 5 – Related Party Debt and Other Borrowings.

The Company and the landlord for its corporate office entered into a promissory note dated August 1, 2013 in the amount of $21,462 representing unpaid rent due under the former lease agreement and payable in three monthly installments due September 1, October 1 and November 1, 2013, less a $3,500 credit. As part of the overall settlement, the Company ceded to its landlord certain fully depreciated furniture in exchange for a $3,500 credit against a past due obligation of $24,963. This credit is recorded as a gain on disposition of property and equipment in the accompanying statement of operations. In the event the Company vacates the premises before satisfying all financial obligations under the amended lease, it will be required to cede to its landlord the remainder of its furniture for which it would receive an additional credit of $6,500 against the remaining obligation. The August 1, 2013 note was cosigned by the Company’s Chairman, Darryl Horne. See Note 9 – Subsequent Event.

Under an amended lease agreement and related promissory note, the Company is in arrears for the October 1 and November 1, 2013 rent payments, the September 1 and October 1, 2013 security deposit payments and the September 1, October 1, and November 1, 2013 promissory note payments described in Note 5.

During the nine months ended September 30, 2013 the principal change in our internal control over financial reporting (as defined in rule 13 a-i 5(f) under the exchange act) has been the aforementioned addition of a Chief Financial Officer, which has, among other things, permitted an improvement in segregation of duties and the timely preparation of consolidated financial statements in accordance with generally accepted accounting principles or pursuant to the rules and regulations of the Securities and Exchange Commission Form l0-Q.