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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER:
(Name of registrant in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
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| (Address of principal executive offices) (Zip Code) |
Issuer’s telephone Number:
Former address, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Ticker symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether
the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
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☒ | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of registrant’s
common stock outstanding, as of February 12, 2024 was
SUNHYDROGEN, INC.
INDEX
| Page | ||
| PART I: FINANCIAL INFORMATION | 1 | |
| Item 1: | Financial Statements | 1 |
| Condensed Balance Sheets | 1 | |
| Condensed Statements of Operations | 2 | |
| Condensed Statements of Shareholders’ Equity | 3 | |
| Condensed Statements of Cash Flows | 4 | |
| Notes to the Condensed Financial Statements | 5 | |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 4: | Controls and Procedures | 20 |
| PART II: OTHER INFORMATION | 21 | |
| Item 1 | Legal Proceedings | 21 |
| Item 1A: | Risk Factors | 21 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
| Item 3: | Defaults Upon Senior Securities | 21 |
| Item 4: | Mine Safety Disclosures | 21 |
| Item 5: | Other Information | 21 |
| Item 6: | Exhibits | 21 |
| Signatures | 22 | |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
SUNHYDROGEN, INC.
CONDENSED BALANCE SHEETS
|
December 31,
2023 |
June
30,
2023 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalent | $ |
|
$ |
|
||||
| Certificate of deposit |
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$ | ||||||
| Marketable securities at cost |
|
|||||||
| Short term investment at fair value, related party |
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||||||
| TOTAL CURRENT ASSETS |
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| OTHER ASSETS | ||||||||
| INVESTMENT | ||||||||
| Convertible notes receivable, related party |
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| TOTAL INVESTMENTS |
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||||||
| PROPERTY & EQUIPMENT | ||||||||
| Machinery and equipment |
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||||||
| Computers and peripherals |
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| Vehicle |
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||||||
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|||||||
| Less: accumulated depreciation |
(
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) |
(
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) | ||||
| NET PROPERTY AND EQUIPMENT |
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| INTANGIBLE ASSETS | ||||||||
|
Domain, net of amortization of $
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Trademark, net of amortization of $
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||||||
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Patents, net of amortization of $
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| TOTAL INTANGIBLE ASSETS |
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| TOTAL OTHER ASSETS |
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||||||
| TOTAL ASSETS | $ |
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$ |
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||||
| LIABILITIES, PREFERRED STOCK SUBJECT TO REDEMPTION AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and other payables | $ |
|
$ |
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||||
| Accrued expenses |
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||||||
| Loan payable, related party |
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||||||
| TOTAL CURRENT LIABILITIES |
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||||||
| LONG TERM LIABILITIES | ||||||||
| Loan payable, related party |
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| TOTAL LONG TERM LIABILITIES |
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| TOTAL LIABILITIES |
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||||||
| COMMIMENTS AND CONTINGENCIES (SEE NOTE 9) | ||||||||
|
Series C
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||||||
| SHAREHOLDERS’ EQUITY | ||||||||
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Preferred Stock, $
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||||||||
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Common Stock, $
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||||||
| Additional Paid in Capital |
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||||||
| Accumulated deficit |
(
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) |
(
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) | ||||
| TOTAL SHAREHOLDERS’ EQUITY |
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||||||
| TOTAL LIABILITIES, PREFERRED STOCK SUBJECT TO REDEEMPTION AND SHAREHOLDERS’ EQUITY | $ |
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$ |
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||||
The accompanying notes are an integral part of these condensed unaudited financial statements
1
SUNHYDROGEN, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022
(Unaudited)
| THREE MONTHS ENDED | SIX MONTHS ENDED | |||||||||||||||
|
December
31,
2023 |
December
31,
2022 |
December
31,
2023 |
December
31,
2022 |
|||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling and Marketing |
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| General and administrative expenses |
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| Research and development cost |
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| Depreciation and amortization |
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| TOTAL OPERATING EXPENSES |
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||||||||||||
| LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| OTHER INCOME/(EXPENSES) | ||||||||||||||||
| Investment income |
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||||||||||||
| Dividend expense |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Unrealized Gain(loss) on investments, related party |
(
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) |
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(
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) |
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||||||||||
| Realized Gain(Loss) on redemption of marketable securities |
(
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| Gain (Loss) on change in derivative liability |
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| Interest expense |
(
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) |
(
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) |
(
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(
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| TOTAL OTHER INCOME (EXPENSES) |
(
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) |
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(
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) |
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| NET INCOME (LOSS) | $ |
(
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) | $ |
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$ |
(
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) | $ |
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||||||
| BASIC EARNINGS (LOSS) PER SHARE | $ |
(
|
) | $ |
|
$ |
(
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) | $ |
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||||||
| DILUTED EARINGINS (LOSS) PER SHARE | $ |
(
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) | $ |
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$ |
(
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) | $ |
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||||||
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
| BASIC |
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| DILUTED |
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The accompanying notes are an integral part of these condensed unaudited financial statements
2
SUNHYDROGEN, INC.
CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY/(DEFICIT)
FOR THE SIX MONTHS ENDED DECEMBER 31, 2023
| SIX MONTHS ENDED DECEMBER 31, 2022 | ||||||||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||
| Shares | Amount | Mezzanine | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ |
|
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$ |
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$ |
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$ |
(
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) | $ |
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|||||||||||||||||||
| Net Loss | - | - |
(
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) |
(
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) | ||||||||||||||||||||||||||
| Balance at September 30, 2022 (unaudited) |
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(
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) |
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|||||||||||||||||||||||||
| Issuance of common stock upon partial conversion of purchase agreement for cash | - |
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|||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt and accrued interest | - |
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|
(
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) |
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||||||||||||||||||||||||||
| Issuance of common stock for the conversion of stock options | - |
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|||||||||||||||||||||||||||
| Stock compensation for conversion of restricted stock awards | - | - |
|
|
||||||||||||||||||||||||||||
| . | ||||||||||||||||||||||||||||||||
| Net Loss | - | - |
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| Balance at December 31, 2022 (unaudited) |
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(
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) |
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| SIX MONTHS ENDED DECEMBER 31, 2023 | ||||||||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||
| Shares | Amount | Mezzanine | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ |
|
|
$ |
|
$ |
|
$ |
(
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) | $ |
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|||||||||||||||||||
| Issuance of common stock upon partial conversion of purchase agreement for cash | - |
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| Issuance of common stock upon conversion of Series C Preferred stock | - |
(
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) |
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(
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) |
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||||||||||||||||||||||||
| Stock compensation expense | - | - |
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|
||||||||||||||||||||||||||||
| Net Loss | - | - |
(
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) |
(
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) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 (unaudited) |
|
|
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(
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) |
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|||||||||||||||||||||||||
| Issuance of common stock upon partial conversion of purchase agreement for cash | - |
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|
|||||||||||||||||||||||||||
| Stock compensation expense | - | - |
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||||||||||||||||||||||||||||
| Net Loss | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||
| Balance at December 31, 2023 (unaudited) | $ |
|
|
|
|
(
|
) |
|
||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed unaudited financial statements
3
SUNHYDROGEN, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2023
(Unaudited)
| Six Months Ended | ||||||||
|
December 31,
2023 |
December 31,
2022 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss |
(
|
) |
|
|||||
| Adjustment to reconcile net income (loss) to net cash (used in) provided by operating activities | ||||||||
| Depreciation & amortization expense |
|
|
||||||
| Conversion of stock options for services |
|
|||||||
| Stock based compensation expense for services |
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|
||||||
| Loss on redemption of marketable securities |
|
|||||||
| Net (Gain) Loss on change in derivative liability |
(
|
) | ||||||
| Unrealized gain on change in fair value of investment, related party |
|
(
|
) | |||||
| Change in assets and liabilities : | ||||||||
| Prepaid expense |
|
|||||||
| Interest receivable on certificate of deposit |
(
|
) | ||||||
| Accounts payable |
|
|
||||||
| Accrued expenses |
|
(
|
) | |||||
| Accrued interest on convertible notes |
|
|||||||
| NET CASH USED IN OPERATING ACTIVITIES |
(
|
) |
(
|
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Marketable securities purchased |
(
|
) |
(
|
) | ||||
| Marketable securities redeemed |
|
|
||||||
| Purchase of certificate of deposit |
(
|
) | ||||||
| Purchase of marketable securities unsettled |
|
|||||||
| Purchase of investment, related party |
(
|
) | ||||||
| Purchase of long term convertible note, related party |
(
|
) | ||||||
| Redemption of short term investments in corporate securities |
|
|||||||
| Purchase of tangible assets |
(
|
) | ||||||
| NET USED IN INVESTING ACTIVITIES: |
(
|
) |
(
|
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of related party note payable |
(
|
) |
(
|
) | ||||
| Net proceeds from purchase agreements |
|
|
||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
||||||
| NET INCREASE (DECREASE) IN CASH |
(
|
) |
(
|
) | ||||
| CASH, BEGINNING OF PERIOD |
|
|
||||||
| CASH, END OF PERIOD |
|
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||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ |
|
$ |
|
||||
| Taxes paid | $ | |||||||
| SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS | ||||||||
| Conversion of Series C preferred shares to common shares | $ |
|
$ | |||||
| Fair value of common stock upon conversion of convertible notes, and accrued interest | $ | $ |
|
|||||
| Fair value of stock options issued through a cashless exercise | $ | $ |
|
|||||
| Reclassification of related party accrued salary to loan payable | $ | $ |
|
|||||
The accompanying notes are an integral part of these condensed unaudited financial statements
4
SUNHYDROGEN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS –UNAUDITED
DECEMBER 31, 2023 AND 2022
| 1. | Basis of Presentation |
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended December 31, 2023 are not necessarily indicative of the results that may be expected for the year ended June 30, 2024. For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended June 30, 2023.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
This summary of significant accounting policies of SunHydrogen, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Cash and Cash Equivalent
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Concentration risk
Cash
includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times
throughout the year, the Company may maintain cash balances in certain bank accounts in excess of the FDIC limits. As of December 31,
2023, the cash balance in excess of the FDIC limits was $
Marketable Securities
Corporate bonds and U.S. Treasuries are considered current, based on their liquidity. The investments are generally valued using quoted prices and are classified in Level 2 of the fair value hierarchy as prices are not always from active markets. We consider our investments held to maturity and we believe there are no other than temporary declines in fair value. Our investments are recorded at historical cost.
Use of Estimates
In accordance with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates and assumptions relate to useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based compensation expense, Binomial lattice valuation model inputs, derivative liabilities and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.
5
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Property and Equipment
| Computers and peripheral equipment |
|
|||
| Vehicle |
|
The
Company recognized depreciation expense of $
Intangible Assets
The
Company has patent applications to protect the inventions and processes behind its proprietary bio-based back-sheet, a protective covering
for the back of photovoltaic solar modules traditionally made from petroleum-based film.
| Useful Lives | 12/31/2023 | 6/30/2023 | ||||||||
| Domain-gross |
|
$ |
|
$ |
|
|||||
| Less accumulated amortization |
(
|
) |
(
|
) | ||||||
| Domain-net | $ | $ |
|
|||||||
| Trademark-gross |
|
$ |
|
$ |
|
|||||
| Less accumulated amortization |
(
|
) |
(
|
) | ||||||
| Domain-net | $ |
|
$ |
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||||||
| Patents-gross |
|
$ |
|
$ |
|
|||||
| Less accumulated amortization |
(
|
) |
(
|
) | ||||||
| Patents-net | $ |
|
$ |
|
||||||
The
Company recognized amortization expense of $
Net Earnings (Loss) per Share Calculations
Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the six months ended December 31, 2023. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock-based awards (Note 4).
Six months ended December 31, 2023
The
Company calculated the dilutive impact of
6
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Six months ended December 31, 2022
The
Company calculated the dilutive impact of
| Six Months Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Income (Loss) to common shareholders (Numerator) | $ |
(
|
) | $ |
(
|
) | ||
| Basic weighted average number of common shares outstanding (Denominator) |
|
|
||||||
| Diluted weighted average number of common shares outstanding (Denominator) |
|
|
||||||
Equity Incentive Plan and Stock Options
On
January 27, 2022, the Company adopted the 2022 Equity Incentive Plan, to enable the Company to attract and retain the types of employees,
consultants, and directors who will contribute to the Company’s long-range success. The maximum number of shares of common stock
that may be issued under the 2022 Plan is initially
Equity Incentive Plan
On
December 17, 2018, the Board of Directors approved and adopted the 2019 Equity Incentive Plan (“the Plan”), with
As
of December 31, 2023, under the 2019 Equity Incentive Plan, there were
7
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Stock Based Compensation
The Company accounts for stock option grants issued and vesting to employees and non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested, and the total stock-based compensation charge is recorded in the period of the measurement date.
Warrant Accounting
The Company accounts for the warrants to purchase shares of common stock using the estimated fair value on the date of issuance as calculated using the Black-Scholes valuation model.
Fair Value of Financial Instruments
Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized on the balance sheet, where it is practicable to estimate that value. As of December 31, 2023, the amounts reported for cash, accrued interest and other expenses, notes payables, convertible notes, and derivative liability approximate the fair value because of their short maturities.
We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets. |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active. |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
8
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Cash and cash equivalents at December 31, 2023 | $ |
|
$ |
|
$ | $ | ||||||||||
| Certificate of Deposits |
|
|
||||||||||||||
| Marketable securities measured at fair value December 31, 2023 | $ |
|
$ | $ |
|
$ | ||||||||||
| $ |
|
$ |
|
$ |
|
$ | ||||||||||
| Cash and cash equivalents at December 31, 2022 | $ |
|
$ |
|
$ |
|
$ | |||||||||
| Marketable securities measured at fair value December 31, 2022 | $ |
|
$ | $ |
|
$ | ||||||||||
| $ |
|
$ |
|
$ |
|
$ | ||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities measured at fair value December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities measured at fair value September 30, 2022 | $ |
|
$ | $ | $ |
|
||||||||||
As of December 31, 2023, the Company had no derivative liabilities for which Level 3 inputs were reported.
| Balance as of June 30, 2022 | $ |
|
||
| Loss on change in derivative liability |
(
|
) | ||
| Balance as of December 31, 2022 | $ |
|
As
of December 31, 2023, the derivative liability balance was $
Research and Development
Research
and development costs are expensed as incurred. Total research and development costs were $
Accounting for Derivatives
The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average series Binomial lattice formula pricing models to value the derivative instruments at inception and on subsequent valuation dates.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Recently Issued Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited financial statements as of December 31, 2023.
9
| 3. | CAPITAL STOCK |
Series C Preferred Stock
On
December 15, 2021, the Company filed a certificate of designation of Series C Preferred Stock with the Secretary of State of Nevada,
designating
On
December 15, 2021, the Company entered into a securities purchase agreement with an accredited investor for an exchange of convertible
debt to equity. Under the purchase agreement, the Company and investor acknowledged there was $
10
| 3. | CAPITAL STOCK (Continued) |
On
June 19, 2023, the Company entered into a securities purchase agreement with an accredited investor for an exchange of convertible debt
to equity. Under the purchase agreement, the Company and investor acknowledged there was an aggregate of $
As
of December 31, 2023, the Company had a total of
Preferred
Shares plus any declared but unpaid dividends. No other current or future equity holders of the Company shall have higher priority of
liquidation preference than holders of Series C Preferred Stock. The holder has the right, at any time, at its election, to convert shares
of Series C Preferred Stock into common stock at a conversion price of $
During
the fiscal year ended June 30, 2023, the Company entered into a purchase agreement with investors for an exchange of convertible debt
into equity. The investors exchanged convertible notes in the amount of $
The stock was presented as mezzanine equity because it is redeemable at a fixed or determinable amount upon an event that is outside of the issuer’s control.
Common Stock
On
January 27, 2022, the holder of the majority of the voting power of the shareholders of the Company, and the Company’s chief executive
officer, approved by written consent (i) an amendment to the Company’s articles of incorporation to increase the Company’s
authorized shares of common stock from
Six months ended December 31, 2023
On
November 11, 2022, the Company entered into a Purchase Agreement with an investor for a total of $
11
| 3. | CAPITAL STOCK (Continued) |
Six months ended December 31, 2022
During
the period ended December 31, 2022, the Company issued
On
November 11, 2022, the Company entered into a Purchase Agreement with an investor for a total of $
During
the period ended December 31, 2022, a consultant exercised
| 4. | OPTIONS AND WARRANTS |
RESTRICED STOCK AWARDS
On
July 29, 2022, the Board of Directors determined that in the best interest of the Company and the Shareholders to grant an employee a
restricted stock award in consideration of services to be rendered to the Company. The Board granted
On
November 8, 2022 and December 20, 2022, the Board of Directors determined that in the best interest of the Company and the Shareholders,
to grant certain employees, a director and a consultant restricted stock awards in consideration of services to be rendered to the Company.
The Board granted
OPTIONS
On
October 2, 2017, the Company granted non-qualified options to purchase
| 12/31/2023 | 12/31/2022 | |||||||||||||||
| Weighted | Weighted | |||||||||||||||
| Number | average | Number | average | |||||||||||||
| Of | exercise | Of | exercise | |||||||||||||
| Options | price | Options | price | |||||||||||||
| Outstanding, beginning of period |
|
$ |
|
|
$ |
|
||||||||||
| Granted | ||||||||||||||||
| Exercised |
|
|||||||||||||||
| Redemption of options | ||||||||||||||||
| Outstanding, end of period |
|
$ |
|
|
$ |
|
||||||||||
| Exercisable at the end of period |
|
$ |
|
|
$ |
|
||||||||||
12
| 4. | OPTIONS AND WARRANTS (Continued) |
Six months ended December 31, 2023
During the six months ended December 31, 2023, there were no stock options granted.
Under
the 2019 Equity Incentive Plan, employees were granted
Six months ended December 31, 2022
During
the period ended December 31, 2022, a consultant exercised
Under
the 2022 Equity Incentive Plan, one employee and one consultant were granted
| 12/31/2023 | 12/31/2022 | |||||||||||||||||||||||||||||
|
Exercise
Price |
Stock
Options Outstanding |
Stock
Options Exercisable |
Weighted
Average Remaining Contractual Life (years) |
Exercise
Price |
Stock
Options Outstanding |
Stock
Options Exercisable |
Weighted
Average Remaining Contractual Life (years) |
|||||||||||||||||||||||
| $ |
|
|
|
|
$ | - | ||||||||||||||||||||||||
| $ |
|
|
|
|
$ |
|
|
|
|
|||||||||||||||||||||
| $ |
|
|
|
|
$ |
|
|
|
|
|||||||||||||||||||||
| $ |
|
|
|
|
$ |
|
|
|
|
|||||||||||||||||||||
|
|
|
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|
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WARRANTS
During
the six months ended December 31, 2023,
| 12/31/2023 | ||||||||
| Weighted | ||||||||
| average | ||||||||
| Number | exercise | |||||||
| of Warrants | price | |||||||
| Outstanding, beginning of period |
|
$ |
|
|||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited/Expired |
|
$ |
|
|||||
| Outstanding, end of period |
|
$ |
|
|||||
| Exercisable at the end of period |
|
$ |
|
|||||
13
| 4. | OPTIONS AND WARRANTS (Continued) |
| 12/31/23 | Weighted Average | |||||||||||||
|
Exercise
Price |
Warrants
Outstanding |
Warrants
Exercisable |
Remaining
Contractual
Life (years) |
|||||||||||
| $ |
|
|
|
|
||||||||||
| $ |
|
|
|
|
||||||||||
|
|
|
|||||||||||||
At
December 31, 2023, the aggregate intrinsic value of the warrants outstanding was $
| 5. | CASH, CASH EQUIVALENTS, MARKETABLE SECURITIES, AND EQUITY INVESTMENT, RELATED PARTY |
As of December 31, 2023, the Company invested in marketable securities, which have been recognized in the financial statements at cost. The related party, short-term investment is recognized in the financial statements at fair value.
|
Adjusted
Cost |
Unrealized
Gains |
Unrealized
Losses |
Fair Value |
Cash
and
Cash Equivalents |
Short-Term
Marketable Securities |
|||||||||||||||||||
| Cash | $ |
|
$ | $ | $ | $ |
|
|||||||||||||||||
| Subtotal |
|
|
||||||||||||||||||||||
| Level 1 | ||||||||||||||||||||||||
| U.S. Treasury bills and Obligations |
|
|
||||||||||||||||||||||
| Subtotal |
|
|
||||||||||||||||||||||
| Level 2 | ||||||||||||||||||||||||
| Certificate of Deposits |
|
|
||||||||||||||||||||||
| Teco Investment, related party |
|
(
|
) |
|
|
|||||||||||||||||||
| Subtotal |
|
(
|
) |
|
|
|||||||||||||||||||
| Total | $ |
|
$ | $ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||
The Company has invested in marketable securities, which mature within ninety days from date of purchase, and are held to maturity. The current trading prices or fair market value of the securities vary, and we believe any decline in fair value is temporary. All securities are current and not in default.
During
the six months ended December 31, 2023, the Company recognized interest income pertaining to the investments of $
14
| 5. | CASH, CASH EQUIVALENTS, MARKETABLE SECURITIES, AND EQUITY INVESTMENT, RELATED PARTY (Continued) |
The Company over the past year has
considered many companies in the hydrogen space for strategic investments, and believed that TECO 2030 ASA (TECO)’s fuel cell technology,
designed with their development partner AVL, has shown incredible potential to become a key player in the fuel cell market. On November
11, 2022, the Company entered into a subscription agreement with TECO a public limited company incorporated in Norway. Pursuant to the
subscription agreement, the Company purchased
| 6. | EQUITY INVESTMENT IN SECURITIES -RELATED PARTY AND BOND RECEIVABLE -RELATED PARTY |
The Company purchased a bond receivable
of TECO for a subscription amount of $
| Cost Basis |
Unrealized
|
Unrealized
|
Fair
Value
12/31/2023 |
|||||||||||||
| Short term equity investments at fair value, related party | $ |
|
$ |
|
$ |
(
|
) | $ |
|
|||||||
During
the six months ended December 31, 2023, the Company recognized an unrealized loss of $(
| 7. | SHORT TERM INVESTMENTS |
On
September 12, 2023, the Company invested in a $
certificate of deposit (CD), which matures on
15
| 8. | COMMITMENTS AND CONTINGENCIES |
Effective
October 1, 2022, the Company extended its research agreement with the University of Iowa through December 31, 2023. As consideration
under the research agreement, the University of Iowa will receive a maximum of $
Effective
October 1, 2022, the Company extended its research agreement with the University of Michigan through December 31, 2023. As consideration
under the research agreement, the University of Michigan will receive a maximum of $
The
Company rented lab space with the University of Iowa as of February 2022. The monthly rent was $
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operation.
| 9. | RELATED PARTY |
As
of December 31, 2023, the Company reported an accrual associated with the CEO’s prior years’ salary in the amount of $
Under the 2022 Equity Incentive Plan,
an employee, a director and consultant were granted
On November 11, 2022, the Company entered
into a subscription agreement with TECO a public limited company incorporated in Norway. Pursuant to the subscription agreement, the Company
purchased
The stocks purchased are adjusted to fair value at the end of each period.
The
Company purchased a convertible note of TECO for a subscription amount of $
The Company has reported TECO as a
related party, due to having an
| 10. | SUBSEQUENT EVENTS |
Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855 and had no subsequent events to report.
On
January 17, 2024, the Company issued
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statement Regarding Forward-Looking Statements
The information in this report may contain forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements that are not of historical fact may be deemed to be forward-looking statements. These forward-looking statements involve substantial risks and uncertainties. In some cases you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue”, the negative of the terms or other comparable terminology. Actual events or results may differ materially from the anticipated results or other expectations expressed in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks included from time to time in our reports filed with the Securities and Exchange Commission, or the SEC. These factors may cause our actual results to differ materially from any forward-looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between actual results and those reflected in these statements, except as may be required under applicable law.
Unless the context otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company” refer to SunHydrogen, Inc.
Overview
At SunHydrogen, our goal is to replace fossil fuels with clean, renewable hydrogen.
Hydrogen is the most abundant chemical element in the universe. When hydrogen fuel is used to power transportation and industry, the only byproduct left behind is pure water, unlike hydrocarbon fuels such as oil, coal and natural gas that emit carbon dioxide and other harmful pollutants into the atmosphere. However, naturally occurring elemental hydrogen is rare – so rare, in fact, that today about 95% of hydrogen is produced from steam reforming of natural gas (Source: US Department of Energy, Hydrogen Fuel Basics). This process is both economically and environmentally unsound.
The SunHydrogen solution offers an efficient and cost-effective way to produce truly green hydrogen using sunlight and any source of water. Our core technology is a self-contained, nanoparticle-based hydrogen generator that mimics photosynthesis to split water molecules, resulting in hydrogen. By optimizing the science of water electrolysis at the nano-level, we believe we have developed a low-cost method to potentially produce environmentally friendly renewable hydrogen.
We believe renewable hydrogen has already proven itself to be a key solution in helping the world meet climate targets, and we believe our technology potentially offers solutions to the challenges that the hydrogen future presents, including cost of production and transportation.
Because our process only requires sunlight and water, our technology can be installed near the point of hydrogen use. This eliminates the need for pipelines and trucks that result in high carbon emissions and high capital investment. Additionally, because our process directly uses the electrical charges created by sunlight to generate hydrogen, our nanoparticle technology does not rely on grid power or require the costly power electronics that conventional electrolyzers do. Lastly, our planned scalable system configuration of many individual hydrogen-generating panels ensures redundancy, security and stability.
With a target cost of $2.50/kg., we aspire for our technology to be cost-competitive with brown hydrogen and below the cost of clean hydrogen competitors. We believe our solution has the potential to clear a path for green hydrogen to compete with natural gas hydrogen and gain mass market acceptance as a true replacement for fossil fuels.
Our technology is primarily developed at three laboratories – our independent laboratory in Coralville, Iowa, the SunHydrogen laboratory at the University of Iowa, and the Singh laboratory at University of Michigan.
Additionally, in parallel to the ongoing development of our own technology, we are well-capitalized to begin pursuing synergistic strategic investments in the hydrogen space. SunHydrogen is committed to furthering renewable hydrogen technology to grow the hydrogen ecosystem, and we are actively pursuing opportunities for investment and acquisition of complimentary hydrogen technologies. We are fortunate to have the resources to maximize our impact in this fast-growing industry.
17
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Binomial valuation option pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.
Use of Estimates
In accordance with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates and assumptions relate to useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based compensation expense, Binomial lattice valuation model inputs, derivative liabilities and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.
Fair Value of Financial Instruments
Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2023, the amounts reported for cash, investment in affiliate, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.
We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.
Recently Issued Accounting Pronouncements
Management reviewed currently issued pronouncements during the three months ended December 31, 2023, and does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements. Pronouncements are disclosed in notes to the financial statements.
Results of Operations for the Three Months Ended December 31, 2023 compared to Three Months Ended December 31, 2022
Operating Expenses
Operating expenses for the three months ended December 31, 2023 were $1,264,882, compared to $5,061,951 for the three months ended December 31, 2022. The net change of $3,797,069 in operating expenses consisted primarily of a decrease in salary expense.
Other Income/(Expenses)
Other income and (expenses) for the three months ended December 31, 2023 were $(1,763,825), compared to $9,659,897 for the three months ended December 31, 2022. The decrease in other income of $11,423,722 was the result of a decrease in unrealized gain in related party investments.
Net Income/(Loss)
For the three months ended December 31, 2023, our net loss was $(3,028,707), compared to net income of $4,597,946 for the three months ended December 31, 2022. The majority of the decrease in net income of $7,626,653, was related primarily to the decrease in unrealized gain in related party investments and net change of derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. The Company has not generated any revenues.
18
Results of Operations for the Six months ended December 31, 2023 compared to Six Months Ended December 31, 2022
Operating Expenses
Operating expenses for the six months ended December 31, 2023 were $2,263,612, compared to $5,700,654 for the six months ended December 31, 2022. The net decrease of $3,437,042 in operating expenses consisted primarily of a decrease in salary expense.
Other Income/(Expenses)
Other income and (expenses) for the six months ended December 31, 2023 were $(1,213,207), compared to $9,401,649, for the six months ended December 31, 2022. The net increase in other expenses of $10,614,856 was the result of a decrease in unrealized gain in related party investments.
Net Income/(Loss)
For the six months ended December 31, 2023, our net loss was $(3,476,819), compared to net income of $3,700,995, for the six months ended December 31, 2022. The majority of the decrease in net income of $7,177,814 was related primarily to the decrease in unrealized gain in related party investments. The Company has not generated any revenues.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
As of December 31, 2023, we had working capital of $44,888,730, compared to $47,689,381 as of June 30, 2023. This decrease in working capital of $2,800,651 was primarily due to a decrease in cash and cash equivalents.
Cash used in operating activities was $948,952 for the six months ended December 31, 2023, compared to $2,706,929 for the six months ended December 31, 2022. The net decrease of $1,757,977 in cash used in operating activities was due to decrease in salary expense. The Company has had no revenues.
Cash used in investing activities during the six months ended December 31, 2023 and December 31, 2022 was $2,000,000 and $6,555,114, respectively. The net decrease of $4,555,114 in cash used in investing activities was due to a decrease in the purchase of marketable securities.
Cash provided by financing activities during the three months ended December 31, 2023 and December 31, 2022 was $484,617 and $1,401,209, respectively. The net decrease of $916,592 in cash provided by financing activities was due to a decrease in net proceeds from cash purchase agreements.
Our ability to continue as a going concern is dependent upon raising capital through financing transactions and future revenue. Our capital needs have primarily been met from the proceeds of private placements and registered offerings of our securities, as we have not generated any revenues to date.
We have historically obtained funding from investors, through private placements and registered offerings of equity and debt securities. Management believes that the Company will be able to continue to raise funds through the sale of its securities to its existing shareholders and prospective new investors, which will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the Company to continue to develop its core business. There can be no assurance that we will be able to continue raising the required capital for our operations on terms and conditions that are acceptable to us, or at all. If we are unable to obtain sufficient funds, we may be forced to curtail and/or cease our operation.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, result of operations, liquidity or capital expenditures.
19
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change to our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to, nor is any of our property currently the subject of, any material legal proceeding.
Item 1A. Risk Factors.
There are no material changes from the risk factors previously disclosed in our annual report on Form 10-K filed with the SEC on September 29, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| Exhibit No. | Description | |
| 31.1* | Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302* | |
| 32.1** | Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350** | |
| 101* | Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q. | |
| 104* | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
| * | Filed herewith |
| ** | Furnished herewith |
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| February 13, 2024 | SUNHYDROGEN, INC. | |
| By: | /s/ Timothy Young | |
|
Timothy Young
Chief Executive Officer and
(Principal Executive Officer,
|
||
22