NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2016
1.
|
ORGANIZATION AND LINE OF BUSINESS
|
Organization
HyperSolar,
Inc. (the "Company") was incorporated in the state of Nevada on February 18, 2009. The Company, based in Santa Barbara,
California, began operations on February 19, 2009 to develop and market a solar concentrator technology.
Line
of Business
The
company is currently developing a novel solar-powered nanoparticle system that mimics photosynthesis to separate hydrogen from
water. We intend for technology of this system to be licensed for the production of renewable hydrogen to produce renewable electricity
and hydrogen for fuel cells.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of
operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial
statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company
does not generate revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using
the going concern basis is dependent upon, among other things, additional cash infusion. The Company has historically obtained
funds through private placement offerings of equity and debt. Management believes that it will be able to continue to raise funds
by sale of its securities to its existing shareholders and prospective new investors to provide the additional cash needed to
meet the Company’s obligations as they become due, and will allow the development of its core business. There is no assurance
that the Company will be able to continue raising the required capital.
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
This
summary of significant accounting policies of HyperSolar, 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.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing
these financial statements include the estimate of useful lives of intangible assets, and the deferred tax valuation allowance.
Actual results could differ from those estimates.
Property
and Equipment
Property
and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives:
Computers
and peripheral equipment
|
5 Years
|
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 June 30, 2016, the amounts reported for cash, 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.
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:
HYPERSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2016
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Fair
Value of Financial Instruments
(Continued)
|
●
|
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;
and
|
|
●
|
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.
|
We
measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring
basis are as follows at June 30, 2016:
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
6,230,102
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,230,102
|
|
|
Total liabilities measured at fair value
|
|
$
|
6,230,102
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,230,102
|
|
The
following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair
value:
|
Balance as of July 1, 2015
|
|
$
|
13,034,374
|
|
|
Fair value of derivative liabilities issued
|
|
|
535,765
|
|
|
Gain on change in derivative liability
|
|
|
(7,340,037
|
)
|
|
Balance as of June 30, 2016
|
|
$
|
6,230,102
|
|
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 year. Diluted net earnings
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), plus the assumed conversion of convertible notes (Note 5).
For
the year ended June 30, 2016, the dilutive impact of outstanding stock options of 500,000, and notes convertible into 548,380,952
shares of common stock have been included in the calculation of net earnings per share, because their impact was dilutive.
For
the year ended June 30, 2015, the dilutive impact of outstanding stock options of 500,000, and notes convertible into 531,109,481
shares of common stock, have been excluded, because their impact on the loss per share is anti-dilutive.
|
|
|
For the years ended
|
|
|
|
|
June 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) to common shareholders (Numerator)
|
|
$
|
6,035,993
|
|
|
$
|
(4,893,561
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares
outstanding (Denominator)
|
|
|
523,338,228
|
|
|
|
460,075,738
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares
outstanding (Denominator)
|
|
|
1,071,719,180
|
|
|
|
460,075,738
|
|
Income
Taxes
The
Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carry-forwards. The measurement of deferred tax assets and liabilities is based on
provisions of applicable tax law. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based
on the amount of tax benefits that, based on available evidence, is not expected to be realized.
HYPERSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2016
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Stock
based Compensation
The
Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for
services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based
on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured
on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and
vesting to 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.
Research
and Development
Research
and development costs are expensed as incurred. Total research and development costs were $12,134 and $81,302 for the years
ended June 30, 2016 and 2015, respectively.
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 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 pronouncements
|
In
April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” this Update as part
of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that
having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary
complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International
Financial Reporting Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial
liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges
conflicts with the guidance in FASB Concepts Statement No. 6, Elements of Financial Statements, which states that debt issuance
costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest
rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic
benefit. To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related
to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments
in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for
fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments
in this Update are effective for financial statements s issued for fiscal years beginning after December 15, 2015, and interim
periods within fiscal years beginning after December 15, 2016. The Company is currently evaluating the effects of adopting this
ASU, if it is deemed to be applicable.
On
August 27, 2014, the Company adopted the amendment to ASU 2014-15 on
Presentation of Financial Statements Going Concern (Subtopic
205-40).
The amendment provides for guidance to reduce diversity in the timing and content of footnote disclosures. The
amendment requires management to assess the Company’s ability to continue as a going concern by incorporating and expanding
upon certain principles that are currently in U.S. auditing standards. The Company has to define the term of substantial doubt,
which has to be evaluated every reporting period including interim periods. Management has to provide principles for considering
the mitigating effect of its plan, and disclose when substantial doubt is alleviated as well as when it is not alleviated. The
Company is required to assess managements plan for a period of one year after the financial statements are issued (or available
to be issued). The amendment is effective for annual periods ending after December 15, 2016. Early adoption is permitted. The
Company does not believe the accounting standards currently adopted will have a material effect on the accompanying condensed
financial statements.
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 condensed financial statements.
HYPERSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2016
3.
|
CAPITAL
STOCK
|
|
|
|
During
the year ended June 30, 2016, the Company issued 112,704,889 shares of common stock upon
conversion of $159,500 in principal, plus $37,734 in accrued interest on an outstanding
convertible note.
|
|
|
During
the year ended June 30, 2015, the Company issued 47,499,633 shares of common stock upon
conversion of $72,341 in principal, plus $10,783 in accrued interest on varies outstanding
convertible notes.
|
Options
As
of June 30, 2016, 500,000 non-qualified common stock options were outstanding. Each option shall be exercisable to the nearest
whole share, in installments or otherwise, as the respective agreements may provide. Each Option expires on the date specified
in the Option agreement, which date is not later than the fifth (5
th
) anniversary from the grant date of the options.
As of June 30, 2016, 250,000 options are fully vested with a maturity date of January 2, 2017, and are exercisable at an exercise
price of $0.04 per share. On March 31, 2015, 250,000 stock options were granted, are subject to vesting conditions which provided
that fifty (50%) percent of the options vest on March 31, 2016 and the remaining fifty (50%) on March 31, 2017. As of June 30,
2016, 125,000 of the 250,000 stock options were exercisable at an exercise price of $0.02245. These stock options are exercisable
for a period of five years from the date of grant at an exercise price of $0.02245 per share.
A
summary of the Company’s stock option activity and related information follows:
|
|
|
6/30/2016
|
|
|
6/30/2015
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number
|
|
|
average
|
|
|
Number
|
|
|
average
|
|
|
|
|
of
|
|
|
exercise
|
|
|
of
|
|
|
exercise
|
|
|
|
|
Options
|
|
|
price
|
|
|
Options
|
|
|
price
|
|
|
Outstanding, July 1, 2015
|
|
|
500,000
|
|
|
$
|
0.03
|
|
|
|
250,000
|
|
|
$
|
0.04
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
|
|
0.02
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited/Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding, June 30, 2016
|
|
|
500,000
|
|
|
$
|
0.03
|
|
|
|
500,000
|
|
|
$
|
0.03
|
|
|
Exercisable at June 30, 2016
|
|
|
375,000
|
|
|
$
|
0.02
|
|
|
|
250,000
|
|
|
$
|
0.04
|
|
|
Weighted average fair value of options granted during the period
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
0.02
|
|
During the year ended June 30,
2016, the company incurred $2,688 in stock compensation for options vested during the year.
5.
|
CONVERTIBLE PROMISSORY NOTES
|
On
August 9, 2013, the Company entered into a securities purchase agreement entered into for the sale of a 10% convertible promissory
note in the aggregate principal amount of up to $100,000. The note is convertible into shares of common stock of the Company at
a price equal to a variable conversion price of the lesser of a) $0.0048 per share; b) fifty percent (50%) of the lowest trading
price after the effective date of each respective advance or c) the lowest conversion price offered by the Company with respect
to any financing occurring before or after the date to acquire common stock. Upon execution of the securities purchase agreement,
the Company received an advance of $15,000. The Company received additional advances in the aggregate amount of $85,000 for a
total aggregate principal sum of $100,000. The Note matured on July 9, 2015, and the maturity date was extended to April 9, 2016.
The note was fully converted during the year ended June 30, 2016, the Company issued 70,541,210 shares of common stock upon conversion
of $100,000 in principal, plus accrued interest of $23,447.
On
December 16, 2013, the Company entered into a securities purchase agreement entered for the sale of a 10% convertible promissory
note in the aggregate principal amount of up to $100,000. The Note is convertible into shares of common stock of the Company at
a price equal to a variable conversion price of the lesser of $0.0048 per share or fifty percent (50%) of the lowest trading price
after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received an
advance of $26,000.The Company received additional advances in the amount of $74,000 for an aggregate sum of $100,000. The Note
matured on May 16, 2015, and the maturity date was extended to February 16, 2016. Subsequently, a third extension was granted
to November 16, 2016. During the year ended June 30, 2016, the Company issued 42,163,679 shares of common stock upon conversion
of $59,500, plus accrued interest of $14,286. As of June 30, 2016, the remaining principal balance is $40,500.
On
March 5, 2014, the Company entered into a securities purchase agreement into for the sale of a 10% convertible promissory note
in the aggregate principal amount of up to $100,000. The Note is convertible into shares of common stock of the Company at a price
equal to a variable conversion price of the lesser of $0.0048 per share or fifty percent (50%) of the lowest trading price after
the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received an advance
of $30,000. On April 15, 2014, the lender and borrower agreed to amend the note to increase the principle sum to $150,000. The
Company received additional advances in the amount of $120,000 for an aggregate sum of $150,000. The Note matured on September
5, 2015 and was extended to June 5, 2016. Subsequently, a third extension was granted to March 5, 2017.
HYPERSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2016
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
On
May 23, 2014, the Company entered into a securities purchase agreement for the sale of a 10% convertible promissory note in the
aggregate principal amount of up to $500,000. The note is convertible into shares of common stock of the Company at a price equal
to a variable conversion price of the lesser of $0.0048 per share or fifty percent (50%) of the lowest trading price after the
effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received an advance of
$50,000.The Company received additional advances in the amount of $415,000 for an aggregate sum of $465,000. The Note matured
on May 23, 2015 and was extended to February 23, 2016. Subsequently, a third extension was granted to November 23, 2016. The Company
recorded amortization of debt discount, which was recognized as interest expense in the amount of $141,959 during the year ended
June 30, 2016.
On
April 9, 2015, the Company entered into a securities purchase agreement into for the sale of a 10% convertible promissory note
in the aggregate principal amount of up to $500,000. The note is convertible into shares of common stock of the Company at a price
equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price since
the original effective date of each respective advance or the lowest effective price per share granted to any person or entity
after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received an
advance of $50,000. The Company received additional advances in the amount of $450,000 for an aggregate sum of $500,000. The note
matured nine (9) months from the effective dates of each respective advance. The note matured on January 4, 2016. Subsequently,
a second extension was granted to October 9, 2016. The Company recorded amortization of debt discount, which was recognized as
interest expense in the amount of $423,026 during the year ended June 30, 2016.
On
January 28, 2016, the Company entered into a securities purchase agreement into for the sale of a 10% convertible promissory note
in the aggregate principal amount of up to $500,000. The note is convertible into shares of common stock of the Company at a price
equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price since
the original effective date of each respective advance or the lowest effective price per share granted to any person or entity
after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received an
advance of $10,000. The Company received additional advances in the amount of $220,000 for an aggregate sum of $230,000. The note
matures twelve (12) months from the effective dates of each respective advance. The Company recorded amortization of debt discount,
which was recognized as interest expense in the amount of $15,713 during the year ended June 30, 2016.
ASC
Topic 815 provides guidance applicable to convertible debt issued by the Company in instances where the number into which the
debt can be converted is not fixed. For example, when a convertible debt converts at a discount to market based on the stock price
on the date of conversion, ASC Topic 815 requires that the embedded conversion option of the convertible debt be bifurcated from
the host contract and recorded at their fair value. In accounting for derivatives under accounting standards, the Company recorded
a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s
stock, and a discount representing the imputed interest associated with the embedded derivative. The discount is amortized over
the life of the convertible debt, and the derivative liability is adjusted periodically according to stock price fluctuations.
6.
|
DERIVATIVE LIABILITIES
|
The
convertible notes (the “Notes”) issued and described in Note 5 do not have fixed settlement provisions because their
conversion prices are not fixed. The conversion features have been characterized as derivative liabilities to be re-measured at
the end of every reporting period with the change in value reported in the statement of operations.
During
the year ended June 30, 2016, as a result of the Notes issued that were accounted for as derivative liabilities, we determined
that the fair value of the conversion feature of the convertible notes at issuance was $535,765, based upon the Binomial lattice
formula. We recorded the full value of the derivative as a liability at issuance with an offset to valuation discount, which will
be amortized over the life of the Notes.
During
the year ended June 30, 2016, approximately $159,500 in principal of the Notes were converted. As a result of the conversion of
these Notes, and the change in fair value of the remaining Notes, the Company recorded a net gain in change in derivative of $7,340,037
in the statement of operations for the year ended June 30, 2016. At June 30, 2016, the fair value of the derivative liability
was $6,230,102.
For
purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used the
Binomial lattice formula. The significant assumptions used in the Binomial lattice formula of the derivative are as follows:
|
|
|
|
|
|
|
Risk free interest rate
|
|
|
0.01% - 0.59
|
%
|
|
Stock volatility factor
|
|
|
15.55% - 318.08
|
%
|
|
Weighted average expected option life
|
|
|
1 month - 1 year
|
|
|
Expected dividend yield
|
|
|
None
|
|
HYPERSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2016
|
|
Intangible
assets that have finite useful lives continue to be amortized over their useful lives,
and are reviewed for impairment when warranted by economic condition. Any impairment
is included in the income statement.
|
|
|
|
Useful Lives
|
|
6/30/2016
|
|
|
6/30/2015
|
|
|
Domain-gross
|
|
15 years
|
|
$
|
5,315
|
|
|
$
|
5,315
|
|
|
Less amortization
|
|
|
|
|
(2,805
|
)
|
|
|
(2,451
|
)
|
|
Domain-net
|
|
|
|
$
|
2,510
|
|
|
$
|
2,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents-gross
|
|
|
|
$
|
37,023
|
|
|
$
|
32,736
|
|
The
Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company
is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for fiscal years
before 2013.
Deferred
income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against
the deferred tax assets for amounts when the realization is uncertain. Included in the balances at June 30, 2016 and 2015, are
no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of
such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the
shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing
authority to an earlier period.
The
Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating
expenses. During the period ended June 30, 2016 and 2015, the Company did not recognize interest and penalties.
9.
|
DEFERRED
TAX BENEFIT
|
|
|
|
At
June 30, 2016, the Company had net operating loss carry-forwards of approximately $4,538,100
that may be offset against future taxable income from 2015 through 2035. No tax benefit
has been reported in the financial statements since the potential tax benefit is offset
by a valuation allowance of the same amount.
|
|
|
The
income tax provision differs from the amount of income tax determined by applying the
U.S. federal income tax rate of 40% to pretax income from continuing operations for the
period ended June 30, 2016 and 2015 due to the following:
|
|
|
|
6/30/2016
|
|
|
6/30/2015
|
|
|
Book income (loss)
|
|
$
|
2,414,397
|
|
|
$
|
(1,953,400
|
)
|
|
Non deductible expenses
|
|
|
(2,605,352
|
)
|
|
|
1,712,200
|
|
|
Loss on abandoned intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
Depreciation and amortization
|
|
|
(635
|
)
|
|
|
(500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
191,590
|
|
|
|
241,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for
deductible differences and operating loss and tax credit carry-forwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary differences
are the difference between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
|
HYPERSOLAR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2016
|
9.
|
DEFERRED
TAX BENEFIT (Continued)
|
|
|
Net
deferred tax liabilities consist of the following components as of June 30, 2016 and
2015:
|
|
|
|
6/30/2016
|
|
|
6/30/2015
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
NOL carryover
|
|
$
|
1,815,241
|
|
|
$
|
1,513,300
|
|
|
Research & development
|
|
|
36,380
|
|
|
|
36,400
|
|
|
Related party accrual
|
|
|
76,500
|
|
|
|
76,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(1,124
|
)
|
|
|
(2,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Less Valuation Allowance
|
|
|
(1,926,997
|
)
|
|
|
(1,623,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss
carry-forwards for Federal income tax reporting purposes are subject to annual limitations.
Should a change in ownership occur, net operating loss carry-forwards may be limited
as to use in future years.
|
The
Company entered into a rental lease for office space on April 15, 2016 for a term of one year. If the lease is not renewed by
either party, the lease will continue on a month-to-month basis. The monthly rent is $900 and is due by the fifteenth of each
month.
Management evaluated subsequent
events as of the date of the financial statements pursuant to ASC TOPIC 855, and has determined that there are the following subsequent
events:
On August 15, 2016, the
Company received an additional consideration of $60,000 on a securities purchase agreement entered into on January 28, 2016.
The securities purchase agreement is a 10 % unsecured convertible note in the aggregate principal amount of up to $500,000.
The note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of a) the
lesser of $0.01 per share of common stock, b) fifty percent (50%) of the lowest trade price recorded on any trade day after
the effective date or c) the lowest effective price per share granted to any person or entity after the effective date to
acquire common stock.
F-13