NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
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 June 30, 2022, are not necessarily indicative of the results that may be expected
for the year ending December 31, 2022. For further information refer to the financial statements and footnotes thereto included in the
Company’s Form 10-K for the December 31, 2021.
Going
Concern Substantial Doubt Alleviated
As
of the six months ended June 30, 2022, the Company had a net loss of $6,261,722. As of June 30, 2022, its shareholders equity was $2,364,780.
Management
believes the Company’s present cash flows will enable it to meet its obligations for twenty-four months from the date of these
financial statements. Management will continue to assess it operational needs and seek additional financing as needed to fund its operations..
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company 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.
Revenue
Recognition
The
Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement
exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable
is reasonably assured. The Company adopted Accounting Standards Codification (“ASC”) 606, whereby revenue will be recognized
as performance obligations are satisfied and customers obtain control of goods or services. However, in the event of a loss on a sale
is foreseen, the Company will recognize the loss as it is determined. To date, the Company has not had significant revenues and is in
the development stage.
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 FDIC limits. As of June 30, 2022, the
cash balance in excess of the FDIC limits was $5,477,784. The Company has not experienced any losses in such accounts and believes it
is not exposed to any significant credit risk in these accounts.
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 property and equipment, the deferred tax valuation allowance, derivative
liabilities and the fair value of stock options. 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:
SCHEDULE OF PROPERTY AND EQUIPMENT
Computer
equipment |
|
|
5
Years |
|
Machinery
and equipment |
|
|
10
Years |
|
Depreciation
expense for the six months ended June 30, 2022 and 2021 was $2,161 and $2,182, respectively.
NEWHYDROGEN,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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. Intangible assets that have finite useful lives
continue to be amortized over their useful lives.
SCHEDULE OF INTANGIBLE ASSETS AMORTIZED OVER THEIR USEFUL LIVES
| |
Useful Lives | |
6/30/ 2022 | | |
12/31/2021 | |
Patents | |
| |
$ | 45,336 | | |
$ | 45,336 | |
Less accumulated amortization | |
15 years | |
| (19,645 | ) | |
| (18,134 | ) |
Intangible assets | |
| |
$ | 25,691 | | |
$ | 27,202 | |
Amortization
expense for the six months ended June 30, 2022 and the year ended December 31, 2021 was $1,511 and $3,022, respectively.
Stock-Based
Compensation
The
Company measures the cost of employee services received in exchange for an equity award based on the grant-date fair value of the award.
All grants under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during
which an employee, consultant, or director are required to provide service in exchange for the award (the vesting period). Compensation
expense for options granted to employees and non-employees is determined in accordance with the standard as the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted
is re-measured each period.
On
March 24, 2015, the Company granted 2,450,000 stock options and on September 2, 2015 granted 13,500,000 stock options to its employees
and directors for services. On March 24, 2022, the 2,450,000 options expired leaving the September 2, 2015 options of 13,500,000 outstanding.
On
February 18, 2021, the Company granted 450,000,000 stock options to its employees for services at an exercise price of $0.091. On September
29, 2021, the Company amended the exercise price to $0.028 per share. The options expire, and all rights to purchase the shares shall
terminate seven (7) years from the date of grant or termination of employment. Half of the 400,000,000 options vested immediately upon
grant, and the remaining half of the option to purchase 200,000,000 shares of the Company’s common stock shall become exercisable
in equal amounts over a twenty-four (24) month period during the term of the optionee’s employment, with the first installment
of 8,333,333 shares vesting on March 18, 2021. The 50,000,000 options are exercisable in equal amounts over a thirty-six (36) month period
during the term of the optionee’s employment, with the first installment of 1,388,889 shares, vesting on March 18, 2021. On April
12, 2022, the Company cancelled the 450,000,000 stock options dated February 18, 2021, and concurrently granted 450,000,000 new options
to its’ employees for services.
On
March 1, 2022, the Company issued 5,000,000 common stock purchase warrants through a securities purchase agreement for a purchase price
of $1,000.
On
March 15, 2022, the Company granted 5,000,000 stock options to a consultant for advisory services. The options vest at a rate of 138,889
options per month for a thirty-six (36) month period during the term of the optionee’s consultancy with the Company.
On
April 12, 2022, the Company granted 450,000,000 stock options to its employees for services at an exercise price of $0.021. The options
expire, and all rights to purchase the shares shall terminate seven (7) years from the date of grant or termination of employment. The
vesting schedule of the 400,000,000 options are exercisable in the amount of 316,666,662 immediately, and the remaining 83,333,338 shares
shall become exercisable in equal amounts over a ten (10) month period during the term of the optionee’s employment until the Option
is 100% vested. The 50,000,000 options are exercisable in the amount of 19,444,446 immediately and the remaining 30,555,554 shares shall
become exercisable in equal amounts over a twenty-two (22) month period during the term of the optionee’s employment until the
Options is 100% vested.
Determining
the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life
of the stock-based payment and stock price volatility. The Company used Black Scholes to value its stock option awards which incorporated
the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. The stock options terminate seven
(7) years from the date of grant or upon termination of employment. As of June 30, 2022, the aggregate total of 468,500,000 stock options
were outstanding.
Research
and Development
Research
and development costs are expensed as incurred. Total research and development costs were $451,092 and $508,440 for the six months ended
June 30, 2022 and 2021, respectively.
NEWHYDROGEN,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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
(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), plus the assumed conversion of convertible debt (Note 5).
For
the six months ended June 30, 2022, the Company has not included shares issuable from 468,500,000 stock options and 228,958,334 warrants,
because their impact on the income per share is antidilutive.
The
Company has included shares issuable from convertible debt of $107,000 and 440,950,000 stock options for the six months ended June 30,
2021, because their impact on the income per share is dilutive.
SCHEDULE OF NET EARNINGS PER SHARE
| |
1 | | |
2 | |
| |
For the Six Months Ended | |
| |
June 30, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Income (Loss) to common shareholders (Numerator) | |
$ | (6,261,722 | ) | |
$ | 47,114,733 | |
| |
| | | |
| | |
Basic weighted average number of common shares outstanding (Denominator) | |
| 715,496,051 | | |
| 267,786,651 | |
| |
| | | |
| | |
Diluted weighted average number of common shares outstanding (Denominator) | |
| 715,496,051 | | |
| 740,069,136 | |
Fair
Value of Financial Instruments
Fair
Value of Financial Instruments requires disclosure of the fair value information, whether recognized in the balance sheet, where it is
practicable to estimate that value. As of June 30, 2022, the amounts reported for cash, inventory, prepaid expenses, accounts payable,
and accrued expenses, approximate the fair value because of their short maturities.
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;
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. As of June 30, 2022, there were no financial instruments to
report.
Recently
Issued Accounting Pronouncements
Management
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.
Reclassification
Certain
amounts in the 2021 financial statements have been reclassified to conform to the presentation used in the 2022 financial statements.
There was no material impact on any of the Company’s previously issued financial statements.
NEWHYDROGEN,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
3. CAPITAL STOCK
Preferred
Stock June 30, 2022
As
of June 30, 2022, the Company had a total of 34,853 shares of Series C Preferred Stock outstanding with a fair value of $3,485,313, and
a stated face value of one hundred dollars ($100) per share which are convertible into shares of fully paid and non-assessable shares
of common stock of the Company. The holder of the Series C preferred stock are entitled to receive dividends pari passu with the holders
of common stock, except upon liquidation, dissolution and winding up of the Corporation. 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. 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 $0.0014 and has no voting rights.
Preferred
Stock March 31, 2021
On
January 14, 2021, the Board of Directors adopted a certificate of designation establishing the rights, preferences, privileges and other
terms of 1,000 Series B Preferred Stock, par value $0.0001 per share, providing for supermajority voting rights to holders of Series
B Preferred Stock. The shares of the Series B Preferred Stock were issued to David Lee, Chief Executive Officer, Chairman of the Board,
President and acting Chief Financial Officer as consideration for his continued employment with the Company.
On
March 26, 2021, the Company entered into a purchase agreement with an investor for an exchange of convertible debt into equity. The investor
exchanged convertible notes in the amount of $2,462,060, plus interest in the amount of $1,023,253 for an aggregate total of $3,485,313
in exchange for 34,853 shares of the Company’s Series C Preferred Stock. The extinguishment of the convertible debt and derivative
was recognized in the Company’s financial statement as a gain on settlement of convertible notes and derivative liability. A valuation
was prepared based on a stock price of $0.075, with a volatility of 206.03%, based on an estimated term of 5 years.
SCHEDULE OF EXTINGUISHMENT OF DEBT
Per Valuation | |
| |
Preferred shares issued | |
| 34,853 | |
Stated value of debt and interest | |
$ | 3,485,313 | |
Calculated fair value of preferred shares | |
$ | 85,555,201 | |
Fair value of derivative liability removed | |
$ | 178,736,187 | |
Gain | |
$ | (93,180,986 | ) |
The
Company recognized a gain on settlement of $93,180,986 for the extinguishment of convertible debt, plus derivative liability for the
six months ended June 30, 2021.
Common
Stock June 30, 2022
During
the six months ended June 30, 2022, the Company issued 5,000,000 common stock purchase warrants for cash in the amount of $1,000.
Common
Stock June 30, 2021
During
the six months ended June 30, 2021, the Company issued an aggregate of 52,000,000 shares of common stock and separate pre-funded warrants
to purchase up to 31,333,334 shares of common stock, plus warrants to purchase up to 83,333,334 at an exercise price of $0.06 per share.
During
the six months ended June 30, 2021, the Company issued 65,000,000 shares of common stock and separate pre-funded warrants to purchase
up to 60,000,000 shares of common stock, plus warrants to purchase up to 125,000,000 at an exercise price of $0.04 per shares.
During
the six months ended June 30, 2021, the Company issued 21,964,188 shares of common stock upon conversion of convertible promissory notes
in the amount of $184,124, plus accrued interest of $20,851, and other fees of $1,000 at prices ranging from $0.0014 - $0.0641.
During
the six months ended June 30, 2021, the Company issued 73,273,212 shares of common stock upon conversion of convertible promissory notes
in the amount of $587,628, plus accrued interest of $74,006, and other fees of $500 at prices ranging from $0.00495 - $0.0172.
During
the six months ended June 30, 2021, the Company issued 1,000,000 shares of common stock for services at fair value.
NEWHYDROGEN,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
3. |
CAPITAL
STOCK (Continued) |
Common
Stock June 30, 2021 (Continued)
During
the six months ended June 30, 2021, the Company issued 28,000,000 shares of common stock upon conversion of 392 shares of preferred stock.
4. STOCK OPTIONS AND WARRANTS
Stock
Options
During
the six months ended June 30, 2022, the Company granted stock options in the amount of 5,000,000. (See Note 2).
SCHEDULE OF STOCK OPTIONS
| |
6/30/2022 | |
| |
Number of Options | | |
Weighted average exercise price | |
Outstanding as of the beginning of the periods | |
| 465,950,000 | | |
$ | 0.0385 | |
Granted | |
| 455,000,000 | | |
$ | 0.0210 | |
Exercised | |
| - | | |
| - | |
Expired/Cancelled | |
| (452,450,000 | ) | |
$ | 0.0283 | |
Outstanding as of the end of the periods | |
| 468,500,000 | | |
$ | 0.0279 | |
Exercisable as of the end of the periods | |
| 376,265,187 | | |
$ | 0.0296 | |
The
weighted average remaining contractual life of options outstanding as of June 30, 2022 was as follows:
SCHEDULE OF WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF OPTIONS OUTSTANDING
6/30/2022 | | |
| |
Exercisable Price | | |
Stock Options Outstanding | | |
Stock Options Exercisable | | |
Weighted Average Remaining Contractual Life (years) | |
$ | 0.26 | | |
| 13,500,000 | | |
| 13,500,000 | | |
| 0.18 | |
$ | 0.0223 | | |
| 5,000,000 | | |
| 488,584 | | |
| 2.71 | |
$ | 0.021 | | |
| 450,000,000 | | |
| 362,276,603 | | |
| 6.79 | |
| | | |
| 468,500,000 | | |
| 376,265,187 | | |
| | |
The
stock-based compensation expense recognized in the statement of operations during the six months ended June 30, 2022 related to these
options was $5,423,031.
As
of June 30, 2022, there was no intrinsic value with regards to the outstanding options.
Warrants
During
the period ended June 30, 2022, the Company issued 5,000,000 common stock purchase warrants through a securities purchase agreement for
a purchase price of $1,000.
SCHEDULE OF WARRANTS ACTIVITY
| |
6/30/2022 | |
| |
Number of Warrants | | |
Weighted average exercise price | |
Outstanding as of the beginning of the periods | |
| 223,958,334 | | |
$ | 0.0488 | |
Issued | |
| - | | |
| - | |
Purchased | |
| 5,000,000 | | |
$ | 0.0255 | |
Expired | |
| - | | |
| - | |
Outstanding as of the end of the periods | |
| 228,958,334 | | |
$ | 0.0483 | |
Exercisable as of the end of the periods | |
| 228,958,334 | | |
$ | 0.0483 | |
NEWHYDROGEN,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS – UNAUDITED
FOR
THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021
4. |
STOCK
OPTIONS AND WARRANTS (Continued) |
The
weighted average remaining contractual life of the warrants outstanding as of June 30, 2022 was as follows:
SCHEDULE OF WARRANTS OUTSTANDING
6/30/2022 |
|
Exercisable
Price |
|
|
Stock
Warrants Outstanding |
|
|
Stock
Warrants Exercisable |
|
|
Weighted
Average Remaining Contractual Life (years) |
|
$ |
0.0255 |
|
|
|
5,000,000 |
|
|
|
5,000,000 |
|
|
|
4.71 |
|
$ |
0.04 |
|
|
|
125,000,000 |
|
|
|
125,000,000 |
|
|
|
3.77 |
|
$ |
0.05 |
|
|
|
9,375,000 |
|
|
|
9,375,000 |
|
|
|
3.76 |
|
$ |
0.06 |
|
|
|
83,333,334 |
|
|
|
83,333,334 |
|
|
|
4.08 |
|
$ |
0.075 |
|
|
|
6,250,000 |
|
|
|
6,250,000 |
|
|
|
4.08 |
|
|
|
|
|
|
228,958,334 |
|
|
|
228,958,334 |
|
|
|
|
|
During
the period, the Company recognized warrant compensation at fair value in the amount $115,102.
5. COMMITMENTS AND CONTINGENCIES
The
Company rents office space on a yearly basis with a monthly rent payment in the amount of $550.
In
the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising. 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 operations.
On
March 15, 2022, the Company entered into an advisor agreement for services regarding various aspects of the Company’s business,
including but not limited to technology, business development, and product development. The Company granted 5,000,000 common stock options,
vesting at a rate of 138,889 options per month for thirty-six (36) months of consecutive service to the Company, as well as cash compensation
of $5,000 per month for the services provided.
As
of June 30, 2022, there were no legal proceedings against the Company.
6. SUBSEQUENT EVENT
Management
has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has reported no subsequent events.