UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 000-54437
SUNHYDROGEN,
INC.
(Name of registrant in its charter)
Nevada |
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26-4298300 |
(State
or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
10 E. Yanonali St.,
Suite 36 Santa Barbara, CA 93101
(Address of principal executive offices) (Zip Code)
Issuer’s telephone Number: (805) 966-6566
Securities registered pursuant to Section 12(b) of the Act:
Title of each
class |
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Trading Symbol(s) |
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Name of each exchange on which
registered |
None |
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None |
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None |
Securities registered pursuant to section 12(g) of the Act: common
stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
No ☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐
No ☒
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. Yes ☒ No
☐
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). Yes ☒ No ☐
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 |
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Accelerated
Filer |
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Non-accelerated filer |
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Smaller reporting
company |
☒ |
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Emerging growth
company |
☐ |
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 pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit
report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
The aggregate market value of the common stock held by
non-affiliates of the registrant, based upon the last sale price of
the common stock of the Company as of the last business day of its
most recently completed second fiscal quarter was approximately
$267,705,946.
The
number of shares of registrant’s common stock outstanding, as of
October 8, 2021 was 4,054,676,450.
DOCUMENTS INCORPORATED BY REFERENCE
None
TABLE OF CONTENTS
PART I
Item 1. Business.
Unless otherwise stated or the context requires otherwise,
references in this annual report on Form 10-K to “SunHydrogen”, the
“Company”, “we”, “us”, or “our” 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 release carbon dioxide
and other contaminants into the atmosphere when used. However,
naturally occurring elemental hydrogen is rare – so rare, in fact,
that today over 95% of hydrogen still comes from methane, a fossil
fuel (Source: Forbes, Estimating the Carbon Footprint of
Hydrogen Production). This hydrogen is procured through steam
methane reforming (SMR), a capital-intensive process that emits
carbon dioxide and other harmful pollutants.
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 is the fuel of the future, 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. 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 the University of Iowa,
through a sponsored research agreement. A longtime development
partner to SunHydrogen, The University of Iowa research team has
worked over the past several years to both lead and optimize the
scale-up of our nanoparticle technology.
In 2021, we made strides toward the commercialization of our
nanoparticle technology and entered agreements with two new
technology development partners; InRedox in Longmont, Colorado and
SCHMID Group in Freudenstadt, Germany.
Under our agreement with InRedox, they support the design and
production of essential materials for our nanoparticle
technology.
Concurrently, SCHMID has worked to develop the process and
equipment to manufacture and scale up our nanoparticle
technology.
In 2021, we also successfully completed production of 100
demonstration units of our Gen 1 technology, and added a Chief
Operating Officer, Woosuk Kim, a seasoned senior operations
executive with global business management and financial market
expertise spanning the U.S. and Wall Street, Europe, Asia and the
Middle East.
We will continue working diligently with our existing technology
partners to drive our technology to commercialization while we
simultaneously prepare for mass production and seek out potential
manufacturing partners for production facility, equipment design
and engineering.
Market Opportunity
The global hydrogen market is large and growing rapidly. Current
fossil fuels can’t sustain future energy requirements
environmentally or economically, and hydrogen fuel technologies are
being adopted across all sectors as the world moves toward
renewable alternatives.
Over 110 countries have set goals to achieve net-zero emissions by
2050, and as governments look to clean energy sources to help them
meet their targets, hydrogen is emerging as a promising solution
(Source: United Nations, The race to zero emissions, and why the
world depends on it). It is estimated that nearly 25% of global
energy will come from clean hydrogen alone by 2050, which could
bring in a projected $2.5 trillion in annual revenues (Source: Bank
of America Securities, New Energy Behind Green
Hydrogen).
In the US, California is leading the way in hydrogen strategies,
with more fuel cell passenger vehicles on the road than any other
state and one of the largest hydrogen refueling station networks in
the world (Source: Sierra Nevada Ally, Hydrogen Fuel Cell
Vehicles are Building Momentum in California). Globally, over
320 green hydrogen production demonstration projects have been
announced, and governments around the world have put forth
ambitious strategies to utilize hydrogen and fuel cell technologies
across all sectors of the economy including transportation,
feedstock and industrial heat use (Source: International Energy
Agency, Hydrogen Projects Database).
By 2050, the hydrogen market is expected to increase tenfold
compared to where it stands today (Source: The Hydrogen Council,
Hydrogen, scaling up).
Existing Market Growth
According to a Grand View Research study released in March
2021, the
global hydrogen generation market size was valued at $120.7 billion
in 2020 and is expected to expand at a compound annual growth rate
(CAGR) of 5.7% from 2021 to 2028. This places the market’s
projected value at $184 billion in 2028.
Among the factors driving the global hydrogen generation
market size are regulations intended to reduce sulfur content and
measures to reduce the carbon footprint. U.S. federal and state
governments have adopted various programs, including the Tier 3
program, to reduce the sulfur content in gasoline, motor oil and
diesel.
Growing demand for petroleum products from developing countries is
also anticipated to drive the hydrogen generation market in the
coming years. Hydrogen is used in various refining processes
including hydrocracking and hydrodesulfurization to crack bigger
molecules into lighter ones and produce more usable products.
We believe increasing demand for clean fuel energy will be affected
by:
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Stringent government regulation toward
desulphurization of petroleum products |
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Deteriorating crude oil quality; and |
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Transportation and storage issues |
Therefore, we believe our renewable hydrogen-producing technology
possesses significant early market opportunity, especially as
innovation and infrastructure continue to develop.
Utility Scale Hydrogen Electricity
According to a March 2013 report from NREL, a national laboratory
of the U.S. Department of Energy, hydrogen can be blended into
existing natural gas pipeline networks, thus bypassing the high
cost of dedicated hydrogen pipelines to use hydrogen at a large
scale. If implemented with relatively low concentrations, less than
5%–15% hydrogen by volume, this strategy of storing and delivering
renewable hydrogen to markets appears to be viable without
significantly increasing risks associated with utilization of the
gas blend in end-use devices (such as household appliances),
overall public safety, or the durability and integrity of the
existing natural gas pipeline network (Source: NREL, Blending
Hydrogen into Natural Gas Pipeline Networks: A review of Key
Issues).
Hydrogen Fuel Cell Vehicles
The auto manufacturing and vehicle industries are among the most
recognized applications for hydrogen fuel technologies. According
to a 2021 study by Information Trends, over 27,500 hydrogen fuel
cell vehicles had been sold by year-end 2020 since their sales
first began. Sales were held back due to the lack of a solid
hydrogen refueling infrastructure, but the numbers are projected to
rise quickly, and fuel cell vehicles are gaining momentum around
the world. In the same study, Information Trends projected that
close to 600,000 hydrogen fuel cell buses and minibuses will be in
service by 2035 (Source: Information Trends, Global Market for
Hydrogen Fuel Cell Buses). In California, executives from 25
multinational companies including Toyota, Hyundai, BMW, Chevron and
other key players have called on Governor Gavin Newsom to heavily
invest in hydrogen infrastructure in the state (Source: Ways2H,
Executives Pen Letter to Newsom Calling for Major Investments in
Hydrogen Infrastructure). Stories and projections like these
suggest a promising future for fuel cell vehicles.
Our Technology
Technology for Making Renewable Hydrogen from Sunlight and
Water
Powered by solar energy, billions of our microscopic
nanoparticles split apart water at the molecular level, extracting
hydrogen for use as a clean energy source and leaving behind only
clean oxygen as a byproduct. This process is similar to what
happens inside a plant cell during photosynthesis: Each
Photoelectrochemically Active Heterostructures (or PAH)
nanoparticle is a microscopic machine, composed of multiple layers
enabling the solar electrolysis reaction to take place.
Water Splitting
In the process of splitting a water molecule, input energy is
transferred into the chemical bonds. Essentially, manufactured
hydrogen serves as a carrier or battery-like storage of the input
energy. If the input energy is from fossil fuels, such as oil and
gas, then carbon fossil fuel energy is simply transferred into
hydrogen. If the input energy is renewable, such as solar or wind,
then new and clean energy is stored in hydrogen.
While the concept of water splitting is very appealing, the
following challenges must be addressed for renewable hydrogen to be
commercially viable:
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Energy
Inefficiency — Since hydrogen is an energy carrier,
the most energy it can store is 100% of the input energy. However,
conventional systems approach to electrolysis lose much of the
input energy in system components, wires and electrodes resulting
in only a small portion of electricity making it into the hydrogen
molecules. This translates to high production cost and is the
fundamental problem with water splitting for hydrogen production.
We intend to address this problem with our low-cost and energy
efficient particle technology. |
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Need
for Clean Water — Conventional electrolysis requires
highly purified clean water to prevent fouling of system
components. This prevents current technology from using large
quantities of available water from oceans, rivers, industrial waste
and municipal waste as feedstock. Our technology is being designed
to use any natural water or waste water for the unlimited
production of renewable hydrogen. |
Technology
Water electrolysis in its simplest form is the transfer of “input
electrons” in the following chemical reactions:
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Cathode (reduction): 2H2O +
2e- ®
H2 + 2OH- |
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Anode
(oxidation): 4OH- ® O2 + 2H2O + 4
e- |
From these equations, one can deduce that if every input electron
(e-) is put to work and not lost, then a maximum
amount of input electrons (i.e. energy) is transferred and
stored in the hydrogen molecules (H2). Additionally, if
there were a very high number of cathode and anode reaction areas
within a given volume of water, then a very high number of these
reactions could happen simultaneously throughout the medium to
split each water molecule into hydrogen wherever electrons are
available.
SunHydrogen Panel™
Since our particles are intended to mimic the natural temperature
conditions of photosynthesis, they can be housed in very low-cost
reactors. To facilitate the commercial use of our self-contained
particle technology, we are developing a modular system that will
enable the onsite daily production and storage of hydrogen for any
time use in electricity generation.
We refer to our potential product as the SunHydrogen Panel which is
comprised of the following components:
1. The Generator Housing – Our novel device design is the
first of its kind to safely separate oxygen and hydrogen in the
water splitting process without sacrificing efficiency. This device
houses the water, and the solar particles/cells and is designed
with inlets and outlets for water and gasses. Utilizing a novel
ion-exchange membrane strategy for separating the oxygen side from
the hydrogen side, ion transport is increased which is the key to
safely increasing solar-to-hydrogen efficiency. Our design can be
scaled up and manufactured for commercial use.
2. The NanoParticle or Solar Cell - Powered by solar
energy, billions of our microscopic nanoparticle solar cells split
apart water at the molecular level, extracting hydrogen for use as
a clean energy source and leaving behind only clean oxygen as a
byproduct.
3. Oxygen Evolution Catalyst - This proprietary catalyst
developed at the University of Iowa lab is uniformly applied onto
the solar cell or nanoparticle and efficiently oxidize water
molecule to generate oxygen gas. The oxygen evolution catalyst must
be robust to withstand the long operating hours of the hydrogen
generation device to ensure long lifetime. It must be stable in
alkaline, neutral and acidic environments.
4. Hydrogen Evolution Catalyst - Necessary for collecting
electrons to reduce protons for generating hydrogen gas, we have
successfully integrated a low-cost hydrogen catalyst into our
generator system, successfully coating a triple junction solar cell
with a catalyst comprised primarily of ruthenium, carbon and
nitrogen that can function as well as platinum, the current
catalyst used for hydrogen production.
5. Coating Technologies - Two major coating technologies were
developed to protect the nanoparticles and solar cells from
photocorrosion under water: A transparent conducive coating to
protect our nanoparticles and solar cells from photo corrosion and
efficiently transfer charges to catalysts for oxygen and hydrogen
evolution reactions; and a polymer combination that protects the
triple junction solar cells from any corrosive water environments
for long lifetime of the hydrogen generation device.
In the process of optimizing our nanoparticles to be efficient and
only during experimentation with earth abundant materials (an
ongoing process), we experimented with commercially available
triple junction silicon solar cells to perform tests with our
generator housing and other components. Through this
experimentation, our discovery led us to believe that we could
bring a system (Gen 1) to market utilizing these readily available
cells while our nanoparticles are still being optimized. While
these solar cells also absorb sunlight and produce the necessary
charge for splitting the water molecules into hydrogen and oxygen,
their efficiency is low, thus we have made the strategic decision
to focus on our NanoParticle strategy (Gen 2) and use the Gen 1
hydrogen generators for proof of concept and demonstration purposes
only. We anticipate these hydrogen panels will be demonstrated in
various parts of the world as further proof of concept of our
technology and to promote our nanoparticle technology that will be
more efficient and economical.
Our business and commercialization plan utilizes our second
generation of hydrogen panels featuring the nanoparticle-based
technology where billions of autonomous solar cells are
electrodeposited onto porous alumina sheets and manufactured in a
roll to roll process or wafer process and inserted into our
proprietary panels. For this generation, we have received multiple
patents and our target cost of hydrogen production is $2.50 per
kilogram before pressurization.
We are working with several vendors to help commercialize and
manufacture our renewable hydrogen panels that use sunlight and
water to generate hydrogen. In February 2021, we entered into a
cooperation agreement with Schmid Group of Freudenstadt, Germany to
design and define a process platform that enables mass
manufacturing of SunHydrogen’s Gen 2 NanoParticle hydrogen panels.
In April 2021, we entered into an agreement with InRedox of
Longmont, Colorado to produce the material components needed for
Gen 2 manufacturing development. Both Schmid and InRedox work
alongside the research team at the University of Iowa, a longtime
technology development partner to SunHydrogen under sponsored
research agreement.
Intellectual Property
On November 14, 2011, we filed a provisional application with the
U.S. Patent and Trademark Office to protect the intellectual
property rights for “Photoelectrochemically Active
Heterostructures, methods for their manufacture, and methods and
systems for producing desired products.” A year later on November
14, 2012, we filed a non-provisional application claiming priority
to the provisional application. On March 14, 2017, a first patent
covering the structural design of Photoelectrochemically Active
Heterostructures (PAH) was granted as United States Patent No.
9,593,053B1. A divisional application claiming priority to the
foregoing applications was filed, and on April 3, 2018, a second
patent covering the method for manufacturing PAH was granted as
United States Patent No. 9,593,053B2. These patents protect the
Company’s proprietary design and manufacturing method of a
self-contained solar-to-hydrogen device made up of millions of
solar-powered water-splitting nanoparticles, per square centimeter.
These nanoparticles are coated with a separate patent-pending
protective coating that prevents corrosion during extended periods
of hydrogen production. The aim of these nanoparticles is high
conversion efficiency and low cost. This patent expires on November
14, 2032.
An important aspect of the patented technology referred to in the
preceding paragraph is the integrated structures of high-density
arrays of nano-sized solar cells as part of hydrogen production
nanoparticles. The technology enables manufacturing of ultra-thin
sheets for solar-to-hydrogen production, requiring substantially
less material as compared to conventional solar cells used in
rooftop power applications.
On March 21, 2014, we jointly filed a provisional application with
UCSB for the “Multi-junction artificial photosynthetic cell with
enhanced photovoltages.” Thereafter, we filed a non-provisional
application on March 16, 2015 and a corresponding PCT Application
on March 17, 2015. These applications cover our semiconductor
designs to enhance the photovoltages of the nano-sized solar cells
in the PAH structures. The semiconductor designs stacking multiple
junctions inside the PAH structures would be an efficient and
economic solution for the photovoltaic and the photoelectrochemical
industries. Patents were granted in Australia in April of 2018,
China and Europe in March of 2019, and in the U.S. as United States
Patent No. 10,100,415 in October of 2018. A patent application is
currently pending in India. This patent expires on March 17,
2025.
On September 26, 2016, we filed jointly with the University of Iowa
a provisional application for “Integrated Membrane Solar Fuel
Production Assembly” to protect the intellectual property for our
generator housing system that safely separates oxygen and hydrogen
in the water-splitting process without sacrificing efficiency. This
device houses the water, the solar particles/cells and is designed
with inlets and outlets for water and gases. Utilizing a special
membrane for separating the oxygen side from the hydrogen side,
proton transport is increased which is the key to safely increasing
solar-to-hydrogen efficiency. On September 26, 2017, we filed a PCT
Application that was later nationalized in the U.S. on March 26,
2019. The U.S. patent application for this important invention is
pending and prosecution is ongoing.
Strategic Partners
As of September 1, 2021, we have renewed our sponsored research
agreement with the University of Iowa, As consideration under the
research agreement, the University of Iowa will receive a maximum
of $299,966 from the Company. The research agreement may be
terminated by either party upon 60 days prior written notice or by
either party upon notice of a material breach or default which is
not cured within 90 days of receipt of written notice of such
breach. This term of the research agreement runs through August 31,
2022 but may be extended upon mutual agreement of the parties.
In February 2021, we entered into a cooperation agreement with
SCHMID Group of Freudenstadt, Germany. Due to delays associated
with supply chain challenges brought on by the Covid-19 pandemic,
the cooperation agreement has been extended to fully complete the
work scope with no additional cost to the company.
In April 2021, we entered into an additional agreement with InRedox
of Longmont, Colorado to support the design and production of
essential materials for our nanoparticle technology.
Competition
Currently, most hydrogen is produced by steam reforming of natural
gas or methane. This production technology dominates due to easy
availability and low prices of natural gas. Partial oxidation of
petroleum oil is second in production capacity after steam
reforming of natural gas. The third largest production technology
in terms of production capacity is steam gasification of coal. The
current industry is heavily dominated by large players such as Air
Products, Chemicals Inc. and Air Liquide.
Green or renewable hydrogen can be produced through electrolyzers
if the electrolyzers are powered by solar or wind energy. Several
companies of this nature have emerged in the past few years. ITM
Power in England and Proton Onsite in Norway are two of the largest
companies in this industry. If not powered by solar panels or wind
power, they require external electricity most likely created by
coal, gas or oil. We believe that our process when fully developed
may potentially offer a competitive advantage as we anticipate it
will be completely green and renewable and utilize no external
power other than the sun.
Corporate Information
We were incorporated in the State of Nevada on February 18, 2009.
Our executive offices are located at 10 E. Yanonali St., Suite 36,
Santa Barbara, CA 93101.
Employees
As of September 27, 2021, we have 4 full-time employees and several
consultants. We have not experienced any work stoppages and we
consider relations with our employees and consultants to be good.
Most of our research and development work is performed by the
University of Iowa, through a sponsored research agreement, and in
collaboration with our development partners SCHMID and InRedox.
Item 1A. Risk Factors.
Risks related to our business and industry
Our limited operating history does not afford investors a
sufficient history on which to base an investment
decision.
We were formed in February 2009 and are currently developing a new
technology that has not yet gained market acceptance. There can be
no assurance that we will ever operate profitably or that we will
have adequate working capital to meet our obligations as they
become due.
Investors must consider the risks and difficulties frequently
encountered by early stage companies, particularly in rapidly
evolving markets. Such risks include the following:
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competition; |
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need
for acceptance of products; |
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ability to continue to develop and extend brand
identity; |
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ability to anticipate and adapt to a competitive
market; |
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ability to effectively manage rapidly expanding
operations; |
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amount and timing of operating costs and capital
expenditures relating to expansion of our business, operations, and
infrastructure; and |
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dependence upon key personnel. |
We cannot be certain that our business strategy will be successful
or that we will successfully address these risks. In the event that
we do not successfully address these risks, our business,
prospects, financial condition, and results of operations could be
materially and adversely affected and we may have to curtail our
business.
We have a history of losses and have never realized revenues
to date. We expect to continue to incur losses and no assurance can
be given that we will realize revenues. Accordingly, we may never
achieve and sustain profitability.
As of June 30, 2021, we have an accumulated deficit of
$172,976,952. For the year ended June 30, 2021 we incurred a net
loss of $81,498,123. We expect to continue to incur net losses
until we are able to realize revenues to fund our continuing
operations. We may fail to achieve any or significant revenues from
sales or achieve or sustain profitability. Accordingly, there can
be no assurance of when, if ever, we will be profitable or be able
to maintain profitability.
We have historically raised funds through various capital raising
transactions. We will require additional funds in the future to
fund our business plans, either through additional equity or debt
financings or collaborative agreements or from other sources. We
have no commitments to obtain such additional financing, and we may
not be able to obtain any such additional financing on terms
favorable to us, or at all. In the event we are unable to obtain
additional financing, we may be unable to implement our business
plan. Even with such financing, we have a history of operating
losses and there can be no assurance that we will ever become
profitable.
We may be unable to manage our growth or implement our
expansion strategy.
We may not be able to develop our product or implement the other
features of our business strategy at the rate or to the extent
presently planned. Our projected growth will place a significant
strain on our administrative, operational and financial resources.
If we are unable to successfully manage our future growth,
establish and continue to upgrade our operating and financial
control systems, recruit and hire necessary personnel or
effectively manage unexpected expansion difficulties, our financial
condition and results of operations could be materially and
adversely affected.
We may not be able to successfully develop and commercialize
our technologies which would result in continued losses and may
require us to curtail or cease operations.
In early-to-mid , we entered into agreements with development
partners InRedox and SCHMID Group, who are working alongside the
University of Iowa research team to take the lab-scale prototypes
of our nanoparticle technology to larger, commercial-scale
prototypes. However, we have not completed a large-scale commercial
prototype of our technology and are uncertain at this time when
completion of a commercial scale prototype will occur. Although the
lab scale prototype demonstrates the viability of our technology,
there can be no assurance that we will be able to commercialize our
technology.
Our revenues will be dependent upon acceptance of our
products by the market; the failure of which would cause us to
curtail or cease operations.
We believe that virtually all of our revenues will come from the
sale or license of our products. As a result, we will continue to
incur substantial operating losses until such time as we are able
to develop our product and generate revenues from the sale or
license of our products. There can be no assurance that businesses
and customers will adopt our technology and products, or that
businesses and prospective customers will agree to pay for or
license our products. Our technology and product, when fully
developed, may not gain market acceptance due to various factors
such as not enough cost savings between our method of producing
hydrogen and other more conventional methods. In the event that we
are not able to significantly increase the number of customers that
purchase or license our products, or if we are unable to charge the
necessary prices or license fees, our financial condition and
results of operations will be materially and adversely
affected.
We anticipate that we will face intense competition, and many
of our competitors have substantially greater resources than we
do.
We operate in a competitive environment that is characterized by
price fluctuation and technological change. We anticipate that we
will compete with major international and domestic companies. Some
of our current and future potential competitors may have greater
market recognition and customer bases, longer operating histories
and substantially greater financial, technical, marketing,
distribution, purchasing, manufacturing, personnel and other
resources than we do. In addition, competitors may be developing
similar technologies with a cost similar to, or lower than, our
projected costs. As a result, they may be able to respond more
quickly to changing customer demands or to devote greater resources
to the development, promotion and sales of solar and solar-related
products than we can.
Our business plan relies on sales of our products based on either a
demand for truly renewable clean hydrogen or economically produced
clean hydrogen. If we fail to compete successfully, our business
would suffer and we may lose or be unable to gain market share.
Neither the demand for our product nor our ability to manufacture
at commercial scale have yet been proven.
Because our industry is highly competitive and has low
barriers to entry, we may lose market share to larger companies
that are better equipped to weather a deterioration in market
conditions due to increased competition.
Our industry is highly competitive and fragmented, subject to rapid
change and has low barriers to entry. We may, in the future,
compete for potential customers with solar and heating companies
and other providers of solar power equipment or electric power.
Some of these competitors may have significantly greater financial,
technical and marketing resources and greater name recognition than
we have.
We believe that our ability to compete depends in part on a number
of factors outside of our control, including:
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the
ability of our competitors to hire, retain and motivate qualified
personnel; |
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the
ownership by competitors of proprietary tools to customize systems
to the needs of a particular customer; |
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the
price at which others offer comparable services and
equipment; |
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the
extent of our competitors’ responsiveness to customer needs;
and |
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|
● |
installation technology. |
Currently, competing methods of hydrogen production include steam
reforming of natural gas or methane, which dominates due to its
easy availability and low price; partial oxidation of petroleum
oil; steam gasification of coal; and electrolyzers powered by solar
or wind energy. There can be no assurance that we will be able to
compete successfully against current and future competitors. If we
are unable to compete effectively, or if competition results in a
deterioration of market conditions, our business and results of
operations would be adversely affected.
Our business depends on proprietary technology that we may
not be able to protect and may infringe on the intellectual
property rights of others.
Our success will depend, in part, on our technology’s commercial
viability and on the strength of our intellectual property rights.
We currently hold patents in the US, China and Australia, but still
have several patents pending in multiple countries. There is
no guarantee the pending patents will be granted. In addition, any
agreements we enter into with our employees, consultants, advisors,
customers and strategic partners will contain restrictions on the
disclosure and use of trade secrets, inventions and confidential
information relating to our technology may not provide meaningful
protection in the event of unauthorized use or disclosure.
Third parties may assert that our technology, or the products we,
our customers or partners commercialize using our technology,
infringes upon their proprietary rights. We have yet to complete an
infringement analysis and, even if such an analysis were available
at the current time, it is virtually impossible for us to be
certain that no infringement exists, particularly in our case where
our products have not yet been fully developed.
We may need to acquire licenses from third parties in order to
avoid infringement. Any required license may not be available to us
on acceptable terms, or at all.
We could incur substantial costs in defending ourselves in suits
brought against us for alleged infringement of another party’s
intellectual property rights as well as in enforcing our rights
against others, and if we are found to infringe, the manufacture,
sale and use of our or our customers’ or partners’ products could
be enjoined. Any claims against us, with or without merit, would
likely be time-consuming, requiring our management team to dedicate
substantial time to addressing the issues presented. Furthermore,
the parties bringing claims may have greater resources than we
do.
We do not maintain theft or casualty insurance and only
maintain modest liability and property insurance coverage and
therefore, we could incur losses as a result of an uninsured
loss.
We do not maintain theft, casualty insurance, or property insurance
coverage. We cannot assure that we will not incur uninsured
liabilities and losses as a result of the conduct of our business.
Any such uninsured or insured loss or liability could have a
material adverse effect on our results of operations.
If we lose key employees and consultants or are unable to
attract or retain qualified personnel, our business could
suffer.
Our success is highly dependent on our ability to attract and
retain qualified scientific, engineering and management personnel.
We are highly dependent on our CEO, Timothy Young, and our
development team at the University of Iowa. The loss of this
valuable resource could have a material adverse effect on our
operations. There can be no assurance that they will remain
associated with us. Our management’s efforts will be critical to us
as we continue to develop our technology and as we attempt to
transition from a development stage company to a company with
commercialized products and services. If we were to lose Mr. Young
or the services of the development team at the university or any
other key employees or consultants, we may experience difficulties
in competing effectively, developing our technology and
implementing our business strategies.
The loss of strategic alliances used in the development of
our products and technology could impede our ability to complete
our product and result in a material adverse effect causing the
business to suffer.
We pursue strategic alliances with other companies in areas
where collaboration can produce technological and industry
advancement. We have entered into a sponsored research
agreement with the University of Iowa which is set to terminate
August 31, 2022. If we are unable to extend the terms of this
agreement, we could suffer delays in product development or other
operational difficulties which could have a material adverse effect
on our results of operations.
The COVID-19 pandemic may negatively affect our
operations.
The COVID-19 pandemic is having widespread, rapidly evolving, and
unpredictable impacts on global society, economies, financial
markets, and business practices. The continuing impacts of COVID-19
are highly unpredictable and could be significant, and may have an
adverse effect on our business, operations and our future financial
performance.
The impact of the pandemic on our business, operations and future
financial performance could include, but is not limited to,
that:
|
● |
We
may experience delays in our product development; |
|
● |
The rapid and broad-based shift to a remote working environment
creates inherent productivity, connectivity, and oversight
challenges; and
|
|
● |
Volatility in the equity markets could affect the value of our
equity to shareholders and have an impact on our ability to raise
capital.
|
Risks relating to our common stock
There is a limited trading market for our common
stock.
Our common stock is not listed on any national securities exchange.
Accordingly, investors may find it more difficult to buy and sell
our shares than if our common stock was traded on an exchange.
Although our common stock is quoted on the OTC Pink, it is an
unorganized, inter-dealer, over-the-counter market which provides
significantly less liquidity than the Nasdaq Capital Market or
other national securities exchange. Further, there is limited
trading in our common stock. These factors may have an adverse
impact on the trading and price of our common stock.
Our common stock could be subject to extreme
volatility.
The trading price of our common stock may be affected by a number
of factors, including events described in the risk factors set
forth in this report, as well as our operating results, financial
condition and other events or factors. In addition to the
uncertainties relating to future operating performance and the
profitability of operations, factors such as variations in interim
financial results or various, as yet unpredictable, factors, many
of which are beyond our control, may have a negative effect on the
market price of our common stock. In recent years, broad stock
market indices, in general, and smaller capitalization companies,
in particular, have experienced substantial price fluctuations. In
a volatile market, we may experience wide fluctuations in the
market price of our common stock and wide bid-ask spreads. These
fluctuations may have a negative effect on the market price of our
common stock. In addition, the securities market has, from time to
time, experienced significant price and volume fluctuations that
are not related to the operating performance of particular
companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.
We anticipate that our issuance of common stock upon
conversion of outstanding convertible notes will result in dilution
to our stockholders.
As of June 30, 2021, we have outstanding $1,271,200 in convertible
notes that are convertible into common stock at variable conversion
prices (see Note 5 to the financial statements included in this
report). We anticipate that our issuance of common stock upon
conversion of outstanding convertible notes will result in dilution
to holders of our common stock, which may have a negative effect on
the price of our common stock. In addition, as of June 30, 2021, we
have outstanding warrants to purchase 94,895,239 shares of common
stock and options to purchase 182,853,174 shares of common stock,
and our issuance of shares of common stock upon exercise of
outstanding warrants or options may result in additional dilution
to our stockholders.
We have never paid common stock dividends and have no plans
to pay dividends in the future, as a result our common stock may be
less valuable because a return on an investor’s investment will
only occur if our stock price appreciates.
Holders of shares of our common stock are entitled to receive such
dividends as may be declared by our Board of Directors. To date, we
have paid no cash dividends on our shares of common stock and we do
not expect to pay cash dividends on our common stock in the
foreseeable future. We intend to retain future earnings, if any, to
provide funds for operations of our business. Therefore, any return
investors in our common stock will be in the form of appreciation
in the market value of our shares of common stock, which may not
occur.
Our common stock is subject to the SEC’s penny stock
rules.
Unless our common stock is listed on a national securities
exchange, including the Nasdaq Capital Market, or we have
stockholders’ equity of $5,000,000 or less and our common stock has
a market price per share of less than $5.00, transactions in our
common stock will be subject to the SEC’s “penny stock” rules. If
our common stock remains subject to the “penny stock” rules
promulgated under the Securities Exchange Act of 1934,
broker-dealers may find it difficult to effectuate customer
transactions and trading activity in our securities may be
adversely affected.
In accordance with these rules, broker-dealers participating in
transactions in low-priced securities must first deliver a risk
disclosure document that describes the risks associated with such
stocks, the broker-dealer’s duties in selling the stock, the
customer’s rights and remedies and certain market and other
information. Furthermore, the broker-dealer must make a suitability
determination approving the customer for low-priced stock
transactions based on the customer’s financial situation,
investment experience and objectives. Broker-dealers must also
disclose these restrictions in writing to the customer, obtain
specific written consent from the customer, and provide monthly
account statements to the customer. The effect of these
restrictions will probably decrease the willingness of
broker-dealers to make a market in our common stock, decrease
liquidity of our common stock and increase transaction costs for
sales and purchases of our common stock as compared to other
securities. Our management is aware of the abuses that have
occurred historically in the penny stock market.
This may make it more difficult for investors to dispose of our
common stock and cause a decline in the market value of our
stock.
Our articles of incorporation allow for our board to create
new series of preferred stock without further approval by our
stockholders, which could adversely affect the rights of the
holders of our common stock.
Our board of directors has the authority to fix and determine the
relative rights and preferences of preferred stock. Our board of
directors has the authority to issue up to 5,000,000 shares of our
preferred stock without further stockholder approval. As a result,
our board of directors could authorize the issuance of a series of
preferred stock that would grant to holders of preferred stock the
right to our assets upon liquidation, or the right to receive
dividend payments before dividends are distributed to the holders
of common stock. In addition, our board of directors could
authorize the issuance of a series of preferred stock that has
greater voting power than our common stock or that is convertible
into our common stock, which could decrease the relative voting
power of our common stock or result in dilution to our existing
stockholders.
Additional stock offerings in the future may dilute
then-existing shareholders’ percentage ownership of the
Company.
Given our plans and expectations that we will need additional
capital and personnel, we anticipate that we will need to issue
additional shares of common stock or securities convertible or
exercisable for shares of common stock, including convertible
preferred stock, convertible notes, stock options or warrants. We
anticipate that our issuance of additional common stock or
securities convertible into or exercisable into common stock in the
future will dilute the percentage ownership of then current
stockholders.
Item 2. Properties.
Our principal office address is 10 E. Yanonali St., Suite 36, Santa
Barbara, CA, 93101. We believe that our current premises are
sufficient to handle our administrative activities for the near
future as adequate lab space and equipment is attained through our
agreement with the University of Iowa.
Item 3. Legal Proceedings.
We are not currently a party to, nor is any of our property
currently the subject of, any material legal proceedings.
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock is quoted on the OTC Pink under the symbol
“HYSR”
Common Stock
Our Articles of Incorporation, as amended, authorizes the issuance
of 5,000,000,000 shares of common stock, $0.001 par value per share
and 5,000,000 shares of preferred stock, par value $0.001 per
share.
All outstanding shares of common stock are of the same class and
have equal rights and attributes. The holders of our common
stock are entitled to one vote per share on all matters submitted
to a vote of our stockholders. All stockholders are entitled to
share equally in dividends, if any, as may be declared from time to
time by the Board of Directors out of funds legally available. In
the event of liquidation, the holders of our common stock are
entitled to share ratably in all assets remaining after payment of
all liabilities. The stockholders do not have cumulative or
preemptive rights.
As of October 2, 2021, our common stock was held by approximately
75 stockholders of record.
Dividend Policy
We have never declared or paid any cash dividends on our common
stock. We do not anticipate paying any cash dividends to
stockholders in the foreseeable future. In addition, any future
determination to pay cash dividends will be at the discretion of
the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements, and such
other factors as the Board of Directors deem relevant. There are no
restrictions in our articles of incorporation or bylaws that
restrict us from declaring dividends.
Equity Compensation Plan Information
On January 23, 2019, our Board adopted the Company’s 2019 Equity
Incentive Plan (the “Plan”). The stated purpose of the Plan is to
promote the success of the Company and to increase stockholder
value by providing an additional means through the grant of awards
to attract, motivate, retain and reward selected employees and
other eligible persons. The maximum number of shares of the
Company’s common stock that can be issued under the Plan is
300,000,000.
The following table sets forth information about our equity
compensation plans as of June 30, 2021.
Plan Category |
|
Number of
securities to
be issued
upon
exercise of
outstanding
options,
warrants
and rights |
|
|
Weighted-
average
exercise
prices of
outstanding
options,
warrants
and rights |
|
|
Number of
securities
remaining
available for
future
issuance
under the
equity
compensation
plans
(excluding
securities
reflected in
column (a)) |
|
|
|
(a) |
|
|
(b) |
|
|
|
|
Equity compensation plans approved by
security holders |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
Equity compensation plans
not approved by security holders |
|
|
277,748,413 |
|
|
|
.0463 |
|
|
|
117,146,826 |
|
Total |
|
|
277,748,413 |
|
|
|
.0463 |
|
|
|
117,146,826 |
|
Recent Sales of Unregistered Securities
During the three months ended June 30, 2021, the Company issued
364,087,931 shares of common stock upon conversion of $257,100 in
principal of convertible notes, plus accrued interest of
$88,784.
In connection with the foregoing, the Company relied on an
exemption from registration provided under Section 4(a)(2) of the
Securities Act of 1933, as amended for transactions not involving a
public offering.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved.]
Item 7. Management’s Discussion and Analysis of Financial
Conditions and Results of Operations.
Certain statements in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” below, and elsewhere
in this annual report, are not related to historical results, and
are forward-looking statements.
Forward-looking statements present our expectations or forecasts of
future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. These
statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity,
performance or achievements to be materially different from any
future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements.
Forward-looking statements frequently are accompanied by such words
such as “may,” “will,” “should,” “could,” “expects,” “plans,”
“intends,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential” or “continue,” or the negative of such terms or other
words and terms of similar meaning. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance, achievements, or timeliness of such results. Moreover,
neither we nor any other person assumes responsibility for the
accuracy and completeness of such 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
Subsequent written and oral forward looking statements attributable
to us or to persons acting in our behalf are expressly qualified in
their entirety by the cautionary statements and risk factors set
forth below and elsewhere in this annual report, and in other
reports filed by us with the SEC.
You should read the following description of our financial
condition and results of operations in conjunction with the
financial statements and accompanying notes included in this Annual
Report beginning on page F-1.
Overview
At SunHydrogen, we are developing a breakthrough, low-cost
technology to make renewable hydrogen using sunlight and any source
of water, including seawater and wastewater. The only byproduct of
hydrogen fuel is pure water, unlike hydrocarbon fuels such as oil,
coal and natural gas that release carbon dioxide and other
contaminants into the atmosphere when used. By optimizing the
science of water electrolysis at the nano-level, our low-cost
nanoparticles mimic photosynthesis to efficiently use sunlight to
separate hydrogen from water, ultimately producing environmentally
friendly renewable hydrogen. Using our low-cost method to produce
renewable hydrogen, we intend to enable a world of distributed
hydrogen production for renewable electricity and hydrogen fuel
cell vehicles.
Results of Operations for the Year Ended June 30, 2021 compared
to the Year Ended June 30, 2020.
Operating Expenses
For the year ended June 30, 2021 operating expenses were $5,806,480
compared to $1,681,427 for the year ended June 30, 2020. Operating
expenses consist primarily of research and development expenses and
general and administrative expenses incurred in connection with the
operation of our business. The net increase of $4,125,053 in
operating expenses was a result of an increase in research and
development expenses, professional fees, and salaries.
Other Income/(Expenses)
Other income and (expenses) for the year ended June 30, 2021 was
$(75,691,643) compared to ($55,847,911) for the year ended June 30,
2020. The net increase of $19,843,732 in other income and
(expenses) was the result of the net change in derivative
liability, and interest expense.
Net Income (Loss)
For the year ended June 30, 2021 our net loss was $(81,498,123),
compared to net loss of $(57,529,338) for the year ended June 30,
2020. The majority of the increase in net loss of
$23,968,785, was related primarily to the net change in derivative
estimates each year. 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.
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 June 30, 2021, we had a working capital deficit of
$80,099,103, compared to a working capital deficit of $60,459,862
as of June 30, 2020. This increase in working capital deficit of
$19,639,241 was primarily due to an increase in change in
derivative liability.
During the year ended June 30, 2021, we raised an aggregate of
$62,223,350 in registered offerings of common stock and from the
exercise of warrants, and $450,000 in private placements of
convertible notes. During the year ended June 30, 2020, we raised
an aggregate of $856,500 in private placements of convertible
notes. Our ability to continue as a going concern is dependent upon
our ability to raise capital and potential future revenue generated
from operations.
Cash flow used in operating activities was $5,379,489 for the year
ended June 30, 2021, compared to $695,784 for the year ended June
30, 2020. The increase in cash used by operating activities was
primarily due to an increase in research and development, and
office salaries. The Company has had no revenues.
Cash used in investing activities for the year ended June 30, 2021
and 2020 was $167,866 and $780, respectively. The increase in
investing activities was as a result of the purchase of two vans
and office computers for a total of $213,866, and received sales
proceeds of $46,000 for the sale of one of the vans for a net
aggregate of $167,866 during the current period.
Cash provided by financing activities during the year ended June
30, 2021 was $61,358,900 compared to $856,500 for the year ended
June 30, 2020. The increase in cash from financing activities was
due to the funds raised through registered offerings and the
exercise of warrants in 2021.
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.
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 lattice valuation 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 recording, useful lives and impairment of tangible and
intangible assets, derivatives, accruals, income taxes, stock-based
compensation expense, binomial model inputs 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 June
30, 2021, the amounts reported for cash, accrued interest and other
expenses, notes payables, and derivative liability approximate the
fair value because of their short maturities.
Recently Adopted Accounting Pronouncements
Management adopted recently issued accounting pronouncements during
the year ended June 30, 2021, as disclosed in the Notes to the
financial statements included in this report.
Item 7A. Quantitative and Qualitative Disclosure About Market
Risk.
Not required for a smaller reporting company.
Item 8. Financial Statements.
All financial information required by this Item is attached hereto
at the end of this report beginning on page F-1 and is hereby
incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and
Procedures.
Our management, with the participation of our CEO and our Acting
CFO, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Exchange Act) as of the end of the period covered by this report.
Based on that evaluation, our CEO and our Acting CFO concluded that
our disclosure controls and procedures as of the end of the period
covered by this report were effective to ensure that
information required to be disclosed is made known to management
and others, as appropriate, to allow timely decision regarding
required disclosure and that the information required to be
disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 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 CEO and Acting CFO, or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. A controls system cannot
provide absolute assurance, however, that the objectives of the
controls system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud,
if any, within a company have been detected.
Management’s Annual Report on Internal Control over Financial
Reporting.
We are responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined
in Exchange Act Rule 13a-15(f). The Company’s internal control over
financial reporting is a process designed to provide reasonable
assurance to our management and board of directors regarding the
reliability of financial reporting and the preparation of the
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America.
Our internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the financial
statements.
Our management conducted an evaluation of the effectiveness of our
internal control over financial reporting as of June 30, 2021 based
on the criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013). Based on this evaluation,
management concluded that our internal control over financial
reporting was effective as of June 30, 2021, based on those
criteria.
A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.
This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant to
the rules of the Securities and Exchange Commission that
permanently exempt smaller reporting companies
Changes in Internal Controls
There has been no change in our internal control over financial
reporting that occurred during the three months ended June 30, 2021
that has materially affected, or is reasonably likely to materially
affect our internal control over financial reporting.
Item 9B. Other Information.
None.
Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance.
The following table sets forth information about our executive
officers and directors:
Name |
|
Age |
|
|
Position |
Timothy Young |
|
|
56 |
|
|
President, CEO, Acting
CFO and Chairman of the Board of Directors |
Mark J. Richardson |
|
|
68 |
|
|
Director |
Woosuk Kim |
|
|
56 |
|
|
Chief Operating Officer and
Director |
Timothy Young – President, CEO, Acting CFO and Chairman of the
Board of Directors
Tim Young is an accomplished executive with over fifteen years of
management experience in media and Internet technology companies.
Mr. Young was appointed President, CEO and Chairman of the Company
in August 2009. Mr. Young was appointed Acting CFO in
2010.
Mr. Young oversees the Company’s research and development
initiatives and fundraising efforts.
From September 2007 through August 2009, Mr. Young was the
President of Rovion, Inc., an internet media startup company, where
he increased revenues through a channel sales strategy that
included companies such as Clear Channel, Disney, CBS, and Fox
Television and bolstered the company’s technical capabilities
through strategic acquisitions. Prior to Rovion, Mr. Young was
employed by Time Warner Inc. from October 1998 through July 2007,
where he served as Vice President and Regional Vice President of
various divisions including America Online and Time Warner
Cable.
Mr. Young’s track record of success and over fifteen plus years of
management and leadership experience bringing new products to the
market, qualifies him to be a board member of the Company.
Mark J. Richardson –Director
Mr. Richardson was appointed as a director in June 2018. Mr.
Richardson has been a securities lawyer since he graduated from the
University of Michigan Law School in 1978. He practiced as an
associate and partner in large law firms until 1993, when he
established his own practice under the name Richardson &
Associates. He has been the principal securities counsel on a
variety of equity and debt placements for corporations,
partnerships, and real estate companies. His practice includes
public and private offerings, venture capital placements, debt
restructuring, compliance with federal and state securities laws,
representation of publicly traded companies, Nasdaq filings,
corporate law, partnerships, joint ventures, mergers, asset
acquisitions, and stock purchase agreements. As a partner in a
major international law firm in the 1980’s, Mr. Richardson
participated in the leveraged buyout and recapitalization of a
well-known producer of animated programming for children, financed
by Prudential Insurance and Bear Stearns, Inc. He was also
instrumental in restructuring the public debentures of a real
estate company without resorting to a bankruptcy proceeding. From
1986 to 1993 Mr. Richardson was a contributing author to State
Limited Partnerships Laws – California Practice Guide, Prentice
Hall Law and Business. Prior to receiving his Juris Doctor degree
cum laude from the University of Michigan Law School in 1978, Mr.
Richardson received a Bachelor of Science degree summa cum laude in
Resource Economics from the University of Michigan School of
Natural Resources in 1975, where he earned the Bankstrom Prize for
academic excellence and achieved Phi Beta Kappa honors. Mr.
Richardson is an active member of the Los Angeles County and
California State Bar Associations, including the Section on
Corporations, Business and Finance and the Section on Real
Estate.
The Board has determined that Mr. Richardson is qualified to serve
as a director because of his extensive experience as a practicing
attorney representing small companies.
Woosuk Kim –Chief Operating Officer and Director
Woosuk Kim has served as our chief operating officer and director
since April 1, 2021. From May 2011 to December 2019, Mr. Kim was
senior vice president, head of M&A group at SK Innovation in
Seoul, South Korea, responsible for expanding core businesses and
developing new business opportunities in the renewable energy
sector through cross border acquisitions and joint venture
transactions. From August 2009 to May 2011 Mr. Kim was vice
president, corporate development at SK Telekom. From August 2006 to
March 2008, Mr. Kim was chief financial officer at Axon Financial
Services in New York. From July 1998 to August 2006, Mr. Kim was
executive director at Morgan Stanley in New York, responsible for
developing and operating multi-billion dollar asset-backed
securities funding platforms, investor marketing, and the corporate
treasury function for Discover Card. He received an MBA from
Cornell University and a BA from the University of Chicago. Mr.
Kim’s financial industry knowledge and experience qualify him to
serve on our board of directors.
Directors are elected at our annual meeting of shareholders and
serve for one year until the next annual meeting of shareholders or
until their successors are elected and qualified.
Family Relationships
There are no family relationships among our executive officers and
directors.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the
Chairman and Chief Executive Officer positions should be separate
or combined, we have traditionally determined that it is in the
best interests of the Company and its shareholders to combine these
roles. Currently, our Chief Executive Officer also serves as
Chairman of the Board. Due to the small size and early stage of the
Company, we believe it is currently most effective to have the
Chairman and Chief Executive Officer positions combined.
Involvement in Certain Legal Proceedings
During the past ten years, none of our directors, executive
officers, promoters, control persons, or nominees has been:
|
● |
the
subject of any bankruptcy petition filed by or against any business
of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to
that time; |
|
● |
convicted in a criminal proceeding or is subject
to a pending criminal proceeding (excluding traffic violations and
other minor offenses); |
|
● |
subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction or any Federal or State authority,
permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business,
securities or banking activities; |
|
● |
found
by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities
law. |
|
● |
the
subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of (a) any Federal or State securities or commodities law
or regulation; (b) any law or regulation respecting financial
institutions or insurance companies including, but not limited to,
a temporary or permanent injunction, order of disgorgement or
restitution, civil money penalty or temporary or permanent
cease-and-desist order, or removal or prohibition order; or (c) any
law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or |
|
● |
the
subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization
(as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.
78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with
a member. |
Committees of the Board
Due to the small size of the Company and its Board of Directors, we
currently have no audit committee, compensation committee or
nominations and governance committee of our board of
directors. We do not have an audit committee financial
expert.
Code of Ethics
We have adopted a Code of Ethics that applies to all of our
directors, officers and employees. A copy of the Code of Ethics can
be obtained without charge upon request to Timothy Young, CEO and
President, 10 E. Yanonali, Suite 36, Santa Barbara, CA 93101 and is
also being incorporated by reference herein. Any waiver of the
provisions of the Code of Ethics for executive officers and
directors may be made only by the Board of
Directors. Any such waivers will be promptly disclosed
to our shareholders.
Changes in Nominating Procedures
None.
Item 11. Executive Compensation
The table below sets forth the compensation earned by our named
executive officers during the last two fiscal years.
Name & Principal Position |
|
Year |
|
|
Salary
($) |
|
|
Bonus
($) |
|
|
Stock
Awards
($) |
|
|
Option Awards
($) |
|
|
|
Non-Equity
Incentive Plan
Compensation ($) |
|
|
Non-Qualified
Deferred
Compensation
Earnings
($) |
|
|
All Other
Compensation ($) |
|
|
Total
($) |
|
Timothy Young, |
|
|
2021 |
|
|
$ |
315,125 |
|
|
|
335,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
650,125 |
|
CEO and Acting CFO
|
|
|
2020 |
|
|
$ |
275,000 |
|
|
|
- |
|
|
|
- |
|
|
|
757,243 |
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,012,243 |
|
Woosuk Kim COO (2) |
|
|
2021 |
|
|
|
68,750 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
68,750 |
|
(1) |
Calculated at fair value in accordance with
authoritative guidance provided by the Financial Accounting
Standards Board, where the value of the stock compensation is based
upon the grant date and recognized over the vesting period. On the
grant date of January 23, 2019, one-third (1/3) of the options
vested immediately and the remainder of the options will vest in
increments of 1/24 monthly. Mr. Young was granted options to
purchase 150,000,000 shares of common stock at an exercise price of
$0.0099, with a fair value of $757,243. As of June 30, 2021,
7,886,435 options were redeemed by the Company. |
(2) |
Mr. Kim was appointed our chief
operating officer on April 7, 2021. |
Employment Agreements
On January 21, 2021, the Company entered into an employment
agreement with Timothy Young, the Company’s president, chief
executive officer, acting chief financial officer, and chairman.
Under the employment agreement, Mr. Young will continue to serve in
such positions and will receive an annual base salary of $354,000,
effective as of January 1, 2021, which base salary will be reviewed
annually by the Board. Mr. Young received a $150,000 signing bonus
under the employment agreement and his bonus opportunities will
include up to an additional 100% of base salary upon meeting
certain objectives to be set by the Board for each calendar year,
payable at the end of each calendar quarter as the objectives are
satisfied. In addition, upon the Company being up-listed to the
Nasdaq Capital Market or New York Stock Exchange, Mr. Young will
receive a $250,000 bonus. Mr. Young will also receive a grant of
one hundred million shares of restricted stock units, subject to a
vesting schedule to be determined by the Board. If Mr. Young is
terminated without “cause” or he resigns voluntarily for “good
reason,” as each term is defined in the agreement, he will be
eligible to receive a lump sum of one year of his base salary and
of his bonus and 100% of all outstanding unvested equity awards
will vest immediately, with all outstanding unexercised stock
options remaining exercisable for one year form the date of
termination.
On April 1, 2021, the Company entered into an employment agreement
with Woosuk Kim, pursuant to which Mr. Kim serves as our chief
operating officer. Pursuant to the employment agreement, Mr. Kim
received a signing bonus of $55,000 and will receive an annual base
salary of $275,000, which will be reviewed and may be increased
annually by the board of directors. He will also be eligible for an
annual bonus of 75% of his annual base salary, upon meeting
objectives set by the board of directors. In the event the Company
uplists the Company’s common stock to Nasdaq or the New York Stock
Exchange, Mr. Kim will receive an additional bonus of $150,000. In
the event the Company merges with or acquires another company and
has an increased market capitalization after the close of the
transaction, Mr. Kim will receive an additional bonus of $150,000.
Mr. Kim will receive 50,000,000 restricted stock units of the
Company, subject to a 24-month vesting schedule to be determined by
the board of directors in its discretion. The employment agreement
will terminate April 1, 2023, subject to the right of either party
to terminate the employment agreement at any time upon written
notice, provided that, in the event Mr. Kim is terminated prior to
such date by the Company, without Cause (as defined in the
employment agreement) or the company is sold, merged, or there is a
Change of Control (as defined in the employment agreement), Mr. Kim
will be entitled to certain severance payments and benefits
including a payment equal to his annual base salary that would have
accrued until April 1, 2023, a payment of his bonus amount that
would have accrued until April 1, 2023, and immediate accelerated
vesting of all outstanding unvested equity awards and any other
stock awards.
Outstanding Equity Awards at Fiscal Year-End
The following table discloses information regarding outstanding
equity awards granted or accrued as of June 30, 2021, for our named
executive officers.
Outstanding Equity Awards |
|
|
|
Option Awards |
|
|
Stock Awards |
|
Name |
|
Number of
Securities
Underlying
Unexercised (#)
Exercisable |
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
|
|
Option
Exercise
Price ($) |
|
|
Option
Expiration
Date |
|
|
Number of
Shares or Units
of Stock that
have not
Vested (#) |
|
|
Market Value of
Shares or Units
of Stock that
have not
Vested ($) |
|
Timothy Young |
|
|
142,113,565 |
|
|
|
- |
|
|
|
.0099 |
|
|
|
1/23/2026 |
|
|
|
- |
|
|
|
- |
|
Woosuk Kim |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Director Compensation
The following table sets forth compensation information regarding
the Company’s non-employee directors in fiscal 2021:
Name |
|
Fees
earned
or paid in cash |
|
|
Stock
Award ($) |
|
|
Option
Awards ($) |
|
|
Non-equity
incentive
plan
compensation |
|
|
Nonqualified
deferred
compensation
earnings |
|
|
Non-Equity
Incentive Plan
Compensation
($) |
|
|
Non-Qualified
Deferred
Compensation
Earnings ($) |
|
|
All Other
Compensation ($) |
|
|
Total ($) |
|
Mark R. Richardson |
|
|
42,500 |
|
|
|
|
|
|
$ |
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
42,500 |
|
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
The following table sets forth certain information, as of October
2, 2021, concerning the number of shares of our common stock owned
by: (i) each of our directors; (ii) each of our named executive
officers; and (iii) each person or group known by us to
beneficially own more than 5% of our outstanding shares of common
stock.
We believe that all persons named in the table have sole voting and
investment power with respect to all shares of common stock
beneficially owned by them.
A person is deemed to be the beneficial owner of securities that
can be acquired by him within 60 days of October 2, 2021, upon the
exercise or conversion of options, warrants or convertible
securities. Each beneficial owner’s percentage ownership is
determined by assuming that options, warrants or convertible
securities that are held by him, but not those held by any other
person, and which are exercisable within 60 days of October 2, 2021
or have been exercised and converted.
Name and address |
|
Shares of
Common Stock |
|
|
Percentage
of Common
Stock (1) |
|
|
|
|
|
|
|
|
Directors and
Officers (2) |
|
|
|
|
|
|
Timothy A. Young |
|
|
133,812,947 |
(3) |
|
|
3.2 |
% |
Mark R. Richardson |
|
|
3,081,552 |
(4) |
|
|
* |
|
Woosuk Kim |
|
|
0 |
|
|
|
-- |
|
All officers and directors as a
group (3 persons) |
|
|
136,894,499 |
|
|
|
3.3 |
% |
Thunderbolt Capital LLC |
|
|
237,899,928 |
(5) |
|
|
5.9 |
% |
(1) |
Based
upon 4,054,676,450. shares issued and outstanding as of
October 2, 2021. |
(2) |
The
address for each of the officers and directors is c/o SunHydrogen,
Inc. 10 E. Yanonali, Suite 36, Santa Barbara, CA 93101 |
|
|
(3) |
Includes 125,812,947 shares underlying
options. |
|
|
(4) |
Represents shares underlying options. |
|
|
(5) |
Based
on Schedule 13G filed with the SEC on June 8, 2021. The address of
the stockholder is 62 E Serene Ave Unit 215, Las Vegas NV
89123 |
Item 13. Certain Relationships and Related Transactions, and
Director Independence.
Certain Relationships and Related Transactions
Since June 30, 2019, except as set forth below, there have
been and there are no currently proposed transaction, in which we
are or were a participant and the amount involved exceeds $120,000
or one percent of the average of our total assets at year-end for
the last two completed fiscal years, and in which any director,
executive officer, holder of more than 10% of any class of our
voting securities, had or will have a direct or indirect material
interest.
On September 10, 2020, the Company entered into rescission
agreements with Timothy Young, the Company’s chief executive
officer and director, and Mark Richardson, the Company’s director.
Under the rescission agreements, the cashless option exercises of
Mr. Young and Mr. Richardson that were completed on June 24, 2020,
were rescinded and unwound in full. Under Mr. Young’s option
exercise, Mr. Young had exercised 50,000,000 options cashless at an
exercise price of $0.0099 per share and was issued 39,239,130
shares of common stock. Under Mr. Richardson’s option exercise, Mr.
Young had exercised 8,055,542 options cashless at an exercise price
of $0.0099 per share and was issued 6,321,849 shares of common
stock.
On March 4, 2021, the Company entered into redemption agreements
with Timothy Young, the Company’s chief executive officer, Mark
Richardson, a director of the Company, and with a consultant of the
Company. Pursuant to the redemption agreements, the Company
redeemed an aggregate of 13,146,826 options to purchase shares of
common stock of the Company (including 7,886,435 options held by
Mr. Young with an exercise price of $0.0099, 2,628,812 options held
by Mr. Richardson with an exercise price of $0.0099, and 2,631,579
options held by a consultant with an exercise price of $0.01 for a
redemption price of $0.0951 per option (with respect to the options
held by Mr. Young and Mr. Richardson) or $0.095 per option (with
respect to the options held by a consultant).
On July 20, 2021, the Company entered into redemption agreements
with Timothy Young, the Company’s chief executive officer, Mark
Richardson, a director of the Company, and with a consultant of the
Company. Pursuant to the redemption agreements, the Company
redeemed an aggregate of 24,887,263 options to purchase shares of
common stock of the Company (including 16,300,618 options held by
Mr. Young with an exercise price of $0.0099, 4,289,636 options held
by Mr. Richardson with an exercise price of $0.0099, and 4,297,009
options held by the consultant with an exercise price of $0.01) for
a redemption price of $0.05828 per option (with respect to the
options held by Mr. Young and Mr. Richardson) or $0.05818 per
option (with respect to the options held by the consultant).
As of June 30, 2021, the Company owed $211,750 to Timothy Young in
accrued salary.
Director Independence
The Board has determined that Mr. Richardson is an independent
director within the meaning of NASDAQ Rule 5605(a)(2).
Item 14. Principal Accountant Fees and Services.
Audit Fees
The aggregate fees billable to us by our principal accounting
firm during 2021 and 2020 for the audit of our annual
financial statements and review of financial statements included in
the our Form 10-Qs or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for those fiscal years, were approximately
$34,800 and $12,000, respectively.
Audit-Related Fees
We incurred fees of $0 and $0 for the years ended June 30, 2021 and
2020, respectively, to our principal accountant for assurance and
related services that are reasonably related to the performance of
the audit or review of our financial statements and are not
reported under “Audit Fees” above.
Tax Fees
We did not incur fees for services rendered to us for tax
compliance, tax advice, or tax planning by our principal accountant
for the fiscal years ended June 30, 2021 and 2020.
All Other Fees
Our current policy is to not engage M&K CPAS, PLLC to provide,
among other things, bookkeeping services, appraisal or valuation
services, or international audit services. The policy provides that
we engage M&K CPAS, PLLC to provide audit, and other assurance
services, such as review of SEC reports or filings.
Item 15. Exhibits and Financial Statement Schedules.
(1) Financial statements.
The SunHydrogen, Inc. financial statements are included in Item 8.
Financial Statements and Supplementary Data.
(2) Financial statement schedules: None.
(3) Exhibits
Exhibit
|
|
Description |
|
|
|
3.1 |
|
Articles of Incorporation of filed with the Nevada Secretary
of State on February 18, 2009 (incorporated by reference to S-1
filed on February 5, 2010). |
|
|
|
3.2 |
|
Articles of Amendment of Articles of Incorporation filed with the
Nevada Secretary of State on September 11, 2009 (incorporated by
reference to S-1 filed February 5, 2010). |
|
|
|
3.3 |
|
Articles of Amendment of Articles of Incorporation of filed with
the Nevada Secretary of State on November 21, 2013 (incorporated by
reference 8-K filed on November 21, 2013). |
|
|
|
3.4 |
|
Articles of Amendment of Articles of Incorporation filed with the
Nevada Secretary of State on September 13, 2018. (incorporated by
reference to 10-K filed on September 25, 2018). |
|
|
|
3.5 |
|
Certificate of Designation of Series B Preferred Stock
(incorporated by reference to the Company’s Form 8-K filed November
26, 2019) |
|
|
|
3.6 |
|
Certificate of Amendment to Articles of Incorporation (incorporated
by reference to 8-K filed January 3, 2020) |
|
|
|
3.7 |
|
Articles of Merger (incorporated by reference to 8-K filed June 15,
2020) |
|
|
|
3.8 |
|
Bylaws (incorporated by reference to S-1 February 5,
2010) |
|
|
|
3.9 |
|
Amendment to Bylaws
(incorporated by reference to 8-K filed March 12,
2021) |
|
|
|
4.1 |
|
Description of Registrant’s
Securities |
|
|
|
10.1 |
|
2019 Equity Incentive Plan (incorporated by reference to Form S-8
on December 19, 2018) |
|
|
|
10.2 |
|
Convertible Promissory Note dated February 3, 2017 (incorporated by
reference to Form 10-Q filed on May 15, 2018f) |
|
|
|
10.3 |
|
Convertible Promissory Note dated November 10, 2017 (incorporated
by reference to Form 10-Q on May 15, 2018) |
|
|
|
10.4 |
|
Convertible Promissory Note dated June27, 2018
(incorporated by reference to Form 8-K filed on June 29,
2018) |
|
|
|
10.5 |
|
Convertible Promissory Note issued August 10, 2018 (incorporated by
reference to Form 8-K filed on August 14, 2018) |
|
|
|
10.6 |
|
Engagement Letter
between the Company and H.C. Wainwright & Co., LLC
(incorporated by reference to 8-K filed December 3,
2020) |
|
|
|
10.7 |
|
Form of Placement Agent
Warrant (incorporated by reference to 8-K filed December 3,
2020) |
10.8 |
|
Amendment dated December
28, 2020, to Engagement Agreement between the Company and H.C.
Wainwright & Co., LLC (incorporated by reference to 8-K filed
December 29, 2020) |
|
|
|
10.9 |
|
Purchase Agreement
between the Company and GHS Investments, LLC (incorporated by
reference to 8-K filed February 5, 2021) |
|
|
|
10.10 |
|
Form of Warrant
(incorporated by reference to 8-K filed February 26,
2021) |
|
|
|
10.11 |
|
Form of Placement Agent
Warrant (incorporated by reference to 8-K filed February 26,
2021) |
|
|
|
10.12 |
|
Cooperation Agreement
between the Company and Gebr. SCHMID GmbH (incorporated by
reference to 8-K filed February 22, 2021) |
|
|
|
10.13 |
|
Employment Agreement
between the Company and Timothy Young (incorporated by reference to
8-K filed March 1, 2021) *** |
|
|
|
10.14 |
|
Employment Agreement
between the Company and Woosuk Kim (incorporated by reference to
8-K filed April 7, 2021) *** |
|
|
|
10.15 |
|
Extension Agreement between
the Company and Gebr. SCHMID GmbH |
|
|
|
10.16 |
|
Contract, dated September
1, 2021, between the Company and The University of Iowa, Iowa
City |
|
|
|
10.17 |
|
Research Agreement, dated
October 1, 2021, between the Company and Regents of the University
of Michigan |
|
|
|
14.1 |
|
Code of Ethics (incorporated by reference to 10-K filed on
September 28, 2012). |
|
|
|
16.1 |
|
Letter from Liggett & Webb, P.A. (incorporated by reference to
8-K filed January 7, 2020) |
|
|
|
23.1* |
|
Consent of M&K CPAS,
LLC |
|
|
|
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 consolidated financial statements and
accompanying notes in Part II, Item 8, “Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K. |
|
|
|
104 |
|
Inline XBRL
for the cover page of this Annual Report on Form 10-K, included in
the Exhibit 101 Inline XBRL Document Set. |
*** |
Indicates management contract or
compensatory plan or arrangement. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
SUNHYDROGEN,
INC. |
|
|
|
Date:
October 8, 2021 |
By: |
/s/
Timothy Young |
|
|
Timothy Young
Chief Executive Officer, Acting Chief
Financial Officer, and Chairman
(principal executive, financial and
accounting officer)
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/
Timothy Young |
|
Chief
Executive Officer, President |
|
October
8, 2021 |
Timothy
Young |
|
(Principal Executive Officer) Acting Chief Financial Officer
(Principal Financial and Accounting Officer), and Chairman
|
|
|
|
|
|
|
|
/s/
Mark R. Richardson |
|
Director |
|
October
8, 2021 |
Mark
R. Richardson |
|
|
|
|
|
|
|
|
|
/s/
Woosuk Kim |
|
Director |
|
October
8, 2021 |
Woosuk
Kim |
|
|
|
|

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
SunHydrogen, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of SunHydrogen,
Inc. (the Company) as of June 30, 2021 and 2020, and the related
statements of operations, shareholders’ deficit, and cash flows for
the years then ended, and the related notes (collectively referred
to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial
position of the Company as of June 30, 2021 and 2020, and the
results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB .
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and the significant
estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe our audits
provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising
from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee
and that: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing separate
opinions on the critical audit matter or on the accounts or
disclosures to which it relates.
Capital Stock and Other Equity Accounts
As discussed in Note 4, the Company issues stock options and
warrants as stock-based compensation to employees and
non-employees.
Auditing management’s calculation of the fair value of the options
and warrants issued can be a significant judgment given the fact
that the Company uses management estimates on various inputs to the
calculations.
To test the valuation of the warrants and options, we
evaluated management’s significant judgments and estimates.
Significant judgements and estimates related to the valuation of
the warrants and options include fair valuing of warrants and
options which involve significant estimates of volatility, grant
terms, risk-free rates and the use of historical trading data. We
evaluated management’s conclusions regarding their fair values and
reviewed support for the significant inputs used in the valuation
model, as well as assessing the model for reasonableness. In
addition, we evaluated the Company’s disclosure in relation to this
matter included in Notes 4 to the financial statements
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2020
Houston, TX
October 8, 2021
SUNHYDROGEN, INC.
BALANCE SHEETS
|
|
June
30,
2021 |
|
|
June
30,
2020 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
|
|
Cash
and cash equivalent |
|
$ |
56,006,555 |
|
|
$ |
195,010 |
|
Prepaid
expenses |
|
|
-
|
|
|
|
9,378 |
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS |
|
|
56,006,555 |
|
|
|
204,388 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
& EQUIPMENT |
|
|
|
|
|
|
|
|
Computers
and peripherals |
|
|
11,529 |
|
|
|
2,663 |
|
Vehicle |
|
|
155,000 |
|
|
|
-
|
|
|
|
|
166,529 |
|
|
|
2,663 |
|
Less:
accumulated depreciation |
|
|
(11,072 |
) |
|
|
(1,605 |
) |
|
|
|
|
|
|
|
|
|
NET
PROPERTY AND EQUIPMENT |
|
|
155,457 |
|
|
|
1,058 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS |
|
|
|
|
|
|
|
|
Domain,
net of amortization of $4,577 and $4,223, respectively |
|
|
738 |
|
|
|
1,092 |
|
Trademark,
net of amortization of $486 and $371, respectively |
|
|
657 |
|
|
|
772 |
|
Patents,
net of amortization of $23,215 and $16,250,
respectively |
|
|
77,928 |
|
|
|
84,492 |
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER ASSETS |
|
|
79,323 |
|
|
|
86,356 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
56,241,335 |
|
|
$ |
291,802 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts
payable and other payable |
|
$ |
223,520 |
|
|
$ |
201,243 |
|
Accrued
expenses |
|
|
11,912 |
|
|
|
- |
|
Accrued
expenses, related party |
|
|
214,820 |
|
|
|
211,496 |
|
Accrued
interest on convertible notes |
|
|
282,505 |
|
|
|
432,866 |
|
Derivative
liability |
|
|
135,247,303 |
|
|
|
59,657,719 |
|
Convertible
promissory notes, net of debt discount of $442,602 and $409,074,
respectively |
|
|
125,598 |
|
|
|
160,926 |
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT LIABILITIES |
|
|
136,105,658 |
|
|
|
60,664,250 |
|
|
|
|
|
|
|
|
|
|
LONG
TERM LIABILITIES |
|
|
|
|
|
|
|
|
Convertible
promissory notes, net of debt discount of $0 and $0,
respectively |
|
|
703,000 |
|
|
|
1,460,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LONG TERM LIABILITIES |
|
|
703,000 |
|
|
|
1,460,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
136,808,658 |
|
|
|
62,124,250 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (SEE NOTE 9) |
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’
DEFICIT |
|
|
|
|
|
|
|
|
Preferred
Stock, $0.001 par value; 5,000,000 authorized preferred shares,
no
shares issued or outstanding |
|
|
-
|
|
|
|
-
|
|
Common
Stock, $0.001 par value; 5,000,000,000 authorized common shares
3,849,308,495 and 2,053,410,164 shares issued and outstanding,
respectively |
|
|
3,849,308 |
|
|
|
2,053,410 |
|
Additional
Paid in Capital |
|
|
88,560,321 |
|
|
|
11,664,657 |
|
Accumulated
deficit |
|
|
(172,976,952 |
) |
|
|
(75,550,515 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
SHAREHOLDERS’ DEFICIT |
|
|
(80,567,323 |
) |
|
|
(61,832,448 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ DEFICIT |
|
$ |
56,241,335 |
|
|
$ |
291,802 |
|
The accompanying notes are an integral part of these audited
financial statements
SUNHYDROGEN, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
|
|
Year
Ended |
|
|
|
June
30,
2021 |
|
|
June
30,
2020 |
|
|
|
|
|
|
|
|
REVENUE |
|
$ |
-
|
|
|
$ |
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
General
and administrative expenses |
|
|
3,787,321 |
|
|
|
1,057,287 |
|
Research
and development cost |
|
|
1,997,186 |
|
|
|
615,721 |
|
Depreciation
and amortization |
|
|
21,973 |
|
|
|
8,419 |
|
|
|
|
|
|
|
|
|
|
TOTAL
OPERATING EXPENSES |
|
|
5,806,480 |
|
|
|
1,681,427 |
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) |
|
|
(5,806,480 |
) |
|
|
(1,681,427 |
) |
|
|
|
|
|
|
|
|
|
OTHER
INCOME/(EXPENSES) |
|
|
|
|
|
|
|
|
Other
income/(expenses) |
|
|
6,835 |
|
|
|
(5,426 |
) |
Gain
on sale of asset |
|
|
1,473 |
|
|
|
-
|
|
Gain
(Loss) on change in derivative liability |
|
|
(75,139,584 |
) |
|
|
(54,910,562 |
) |
Interest
expense |
|
|
(560,367 |
) |
|
|
(931,923 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
OTHER INCOME (EXPENSES) |
|
|
(75,691,643 |
) |
|
|
(55,847,911 |
) |
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) |
|
$ |
81,498,123 |
) |
|
$ |
(57,529,338 |
) |
|
|
|
|
|
|
|
|
|
COMMON
STOCK WARRANTS DEEMED DIVIDENDS |
|
|
(15,928,314 |
) |
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |
|
$ |
(97,426,437 |
) |
|
$ |
(57,529,338 |
) |
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS PER SHARE |
|
$ |
(0.04 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE
COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
BASIC
AND DILUTED |
|
|
2,756,925,374 |
|
|
|
1,551,749,054 |
|
The accompanying notes are an integral part of these audited
financial statements
SUNHYDROGEN, INC.
STATEMENTS OF SHAREHOLDERS’DEFICIT
FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
|
|
YEAR ENDED JUNE 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
Preferred
stock |
|
|
Common
stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
Balance
at June 30, 2019 |
|
|
-
|
|
|
$ |
-
|
|
|
|
1,077,319,339 |
|
|
$ |
1,077,319 |
|
|
$ |
10,432,575 |
|
|
$ |
(18,021,177 |
) |
|
$ |
(6,511,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of debt and accrued
interest |
|
|
- |
|
|
|
-
|
|
|
|
884,989,722 |
|
|
|
884,990 |
|
|
|
492,196 |
|
|
|
-
|
|
|
|
1,377,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
|
- |
|
|
|
-
|
|
|
|
91,101,103 |
|
|
|
91,101 |
|
|
|
266,033 |
|
|
|
-
|
|
|
|
357,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
473,853 |
|
|
|
-
|
|
|
|
473,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
(57,529,338 |
) |
|
|
(57,529,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020 |
|
|
-
|
|
|
$ |
-
|
|
|
|
2,053,410,164 |
|
|
$ |
2,053,410 |
|
|
$ |
11,664,657 |
|
|
$ |
(75,550,515 |
) |
|
$ |
(61,832,448 |
) |
|
|
YEAR ENDED JUNE 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
Preferred
stock |
|
|
Common
stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
Balance
at June 30, 2020 |
|
|
-
|
|
|
$ |
-
|
|
|
|
2,053,410,164 |
|
|
$ |
2,053,410 |
|
|
$ |
11,664,657 |
|
|
$ |
(75,550,515 |
) |
|
$ |
(61,832,448 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash purchase agreements |
|
|
- |
|
|
|
- |
|
|
|
576,554,289 |
|
|
|
576,554 |
|
|
|
42,746,796 |
|
|
|
-
|
|
|
|
43,323,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash purchase of warrants |
|
|
- |
|
|
|
-
|
|
|
|
252,000,000 |
|
|
|
252,000 |
|
|
|
18,648,000 |
|
|
|
-
|
|
|
|
18,900,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of debt and accrued
interest |
|
|
- |
|
|
|
-
|
|
|
|
963,537,752 |
|
|
|
963,538 |
|
|
|
448,382 |
|
|
|
-
|
|
|
|
1,411,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services |
|
|
- |
|
|
|
-
|
|
|
|
3,806,290 |
|
|
|
3,806 |
|
|
|
114,217 |
|
|
|
-
|
|
|
|
118,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock warrants deemed dividends |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
15,928,314 |
|
|
|
(15,928,314 |
) |
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
259,955 |
|
|
|
-
|
|
|
|
259,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buyback of options by Company |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
(1,250,000 |
) |
|
|
-
|
|
|
|
(1,250,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
- |
|
|
|
-
|
|
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
(81,498,123 |
) |
|
|
(81,498,123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021 |
|
|
-
|
|
|
$ |
-
|
|
|
|
3,849,308,495 |
|
|
$ |
3,849,308 |
|
|
$ |
88,560,321 |
|
|
$ |
(172,976,952 |
) |
|
$ |
(80,567,323 |
) |
The accompanying notes are an integral part of these audited
financial statements
SUNHYDROGEN, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2021 AND 2020
|
|
Years
Ended |
|
|
|
June
30,
2021 |
|
|
June
30,
2020 |
|
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net
Income (loss) |
|
$ |
(81,498,123 |
) |
|
$ |
(57,529,338 |
) |
Adjustment
to reconcile net income (loss) to net cash (used in) provided by
operating activities |
|
|
|
|
|
|
|
|
Depreciation
& amortization expense |
|
|
21,973 |
|
|
|
8,419 |
|
Stock
based compensation expense |
|
|
259,954 |
|
|
|
473,853 |
|
Stock
issued for services |
|
|
118,023 |
|
|
|
357,134 |
|
Net
Loss on change in derivative liability |
|
|
75,139,584 |
|
|
|
54,910,562 |
|
Amortization
of debt discount recorded as interest expense |
|
|
416,472 |
|
|
|
714,145 |
|
Gain
on sale of van |
|
|
(1,473 |
) |
|
|
|
|
Net
loss on write-off of patent cost |
|
|
-
|
|
|
|
5,426 |
|
Change
in assets and liabilities : |
|
|
|
|
|
|
|
|
Prepaid
expense |
|
|
9,378 |
|
|
|
5,622 |
|
Accounts
payable |
|
|
22,277 |
|
|
|
76,257 |
|
Accrued
expenses |
|
|
15,235 |
|
|
|
54,607 |
|
Accrued
interest on convertible notes |
|
|
117,211 |
|
|
|
227,529 |
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES |
|
|
(5,379,489 |
) |
|
|
(695,784 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds
from sale of van |
|
|
46,000 |
|
|
|
- |
|
Purchase
of tangible assets |
|
|
(213,866 |
) |
|
|
(780 |
) |
|
|
|
|
|
|
|
|
|
NET
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES: |
|
|
(167,866 |
) |
|
|
(780 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Buyback
of stock options from related parties |
|
|
(1,250,000 |
) |
|
|
-
|
|
Net
proceeds from common stock purchase agreements |
|
|
62,223,350 |
|
|
|
-
|
|
Cash
Payoff of convertible notes |
|
|
(64,450 |
) |
|
|
-
|
|
Proceeds
from convertible debt |
|
|
450,000 |
|
|
|
856,500 |
|
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
61,358,900 |
|
|
|
856,500 |
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH |
|
|
55,811,545 |
|
|
|
159,936 |
|
|
|
|
|
|
|
|
|
|
CASH,
BEGINNING OF YEAR |
|
|
195,010 |
|
|
|
35,074 |
|
|
|
|
|
|
|
|
|
|
CASH,
END OF YEAR |
|
$ |
56,006,555 |
|
|
$ |
195,010 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
Interest
paid |
|
$ |
26,843 |
|
|
$ |
2,249 |
|
Taxes
paid |
|
$ |
-
|
|
|
$ |
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF NON CASH TRANSACTIONS |
|
|
|
|
|
|
|
|
Fair
value of common stock upon conversion of convertible notes ,
accrued interest and other fees |
|
$ |
1,411,920 |
|
|
$ |
1,377,186 |
|
Fair
value of common stock issued for services |
|
$ |
118,023 |
|
|
$ |
267,789 |
|
Fair
value of convertible notes at issuance |
|
$ |
450,000 |
|
|
$ |
841,436 |
|
Issurance
of common stock purchase warrants deemed dividends |
|
$ |
15,928,314 |
|
|
$ |
-
|
|
The accompanying notes are an integral part of these audited
financial statements
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
|
1. |
ORGANIZATION
AND LINE OF BUSINESS |
Organization
SunHydrogen,
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 used for the
production of renewable hydrogen to produce renewable electricity
and hydrogen for fuel cells.
Going Concern Substantial Doubt Alleviated
In connection with the preparation of its financial statements for
the years ended June 30, 2021 and 2020, the Company’s management
evaluated the Company’s ability to continue as a going concern in
accordance with the ASU 2014-15, Presentation of Financial
Statements–Going Concern (Subtopic 205-40), which requires an
assessment of relevant conditions or events, considered in the
aggregate, that are known or reasonably knowable by management on
the issuance dates of the financial statements, which indicated the
probable likelihood that the Company will be able to meet its
obligations as they become due within one year after the issuance
date of the financial statements.
As part of its evaluation, management assessed known events,
trends, commitments, and uncertainties, which included the amount
of capital recently and/or in the process of being raised, and the
current level of investment within the green hydrogen industry and
the measure of investor confidence.
For the year ended June 30, 2021, the Company’s operating loss
increased to approximately $81,498,123, compared to an operating
loss of approximately $57,529,338 in the prior year ended June 30,
2020. The increase in operating loss consisted primarily of the
non-cash change in derivative liability fair value.
During the year ended June 30, 2021, the Company consummated
financing transactions for up to $62.0 million of proceeds for the
purchase of common stock and warrants of the Company. The proceeds
were used for general and administration expenses, and the cost of
research and development. The research and development transaction
is further discussed in Note 8 – Commitments and
Contingencies.
Based on its evaluation, coupled with the afore-mentioned financing
transactions management believes that it has completely mitigated
the circumstance that led to a doubt with respect to the Company’s
ability to continue as a going concern, which existed at the time
of the filing of the Company’s prior annual report. The Company’s
cash of $56.0 million as of June 30, 2021 will enable it to meet
its obligations for twelve months from the date these financial
statements are available to be issued.
|
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 June
30, 2021, the cash balance in excess of the FDIC limits was
$55,756,555. 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
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.
SUNHYDROGEN,
INC.
NOTES
TO FINANCIAL STATEMENTS - AUDITED
JUNE
30, 2021 AND 2020
|
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.
|
|
Useful Lives |
|
|
6/30/2021 |
|
|
6/30/2020 |
|
|
|
|
|
|
|
|
|
|
|
Domain-gross |
|
|
15 years |
|
|
$ |
5,315 |
|
|
$ |
5,315 |
|
Less
accumulated amortization |
|
|
|
|
|
|
(4,577 |
) |
|
|
(4,223 |
) |
Domain-net |
|
|
|
|
|
$ |
738 |
|
|
$ |
1,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark-gross |
|
|
10 years |
|
|
$ |
1,143 |
|
|
$ |
1,143 |
|
Less
accumulated amortization |
|
|
|
|
|
|
(486 |
) |
|
|
(371 |
) |
Domain-net |
|
|
|
|
|
$ |
657 |
|
|
$ |
772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents-gross |
|
|
15 years |
|
|
$ |
101,143 |
|
|
$ |
107,491 |
|
Write-off of patent cost |
|
|
|
|
|
|
-
|
|
|
|
(6,349 |
) |
Less
accumulated amortization |
|
|
|
|
|
|
(23,215 |
) |
|
|
(16,650 |
) |
Patents-net |
|
|
|
|
|
$ |
77,928 |
|
|
$ |
84,492 |
|
The Company
recognized amortization expense of $7,033 and $7,651 for the years
ended June 30, 2021 and 2020, respectively.
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 |
Vehicle |
5
Years |
During
the year ended June 30, 2021, the Company purchased fixed assets in
the amount of $213,866. On April 19, 2021, the Company sold a
vehicle for cash of $46,000, with a book value of $44,527, and
recognized a gain of $1,473.
Depreciation
expense for the years ended June 30, 2021 and 2020 was $14,940 and
$768, respectively.
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 year ended June 30, 2021, the Company calculated the dilutive
impact of 182,853,173 outstanding stock options, 94,895,239
outstanding warrants, and convertible debt of $1,271,200, which is
convertible into shares of common stock. The stock options,
warrants and convertible debt were not included in the calculation
of net earnings per share, because their impact was
antidilutive.
SUNHYDROGEN,
INC.
NOTES
TO FINANCIAL STATEMENTS - AUDITED
JUNE
30, 2021 AND 2020
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
For the year
ended June 30, 2020, the Company calculated the dilutive impact of
the 127,944,458 outstanding stock options, and convertible debt of
$2,030,000, which is convertible into shares of common stock. The
stock options and convertible debt were not included in the
calculation of net earnings per share, because their impact was
antidilutive.
|
|
For
the Years Ended |
|
|
|
June
30, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Income
(Loss) attributable to common shareholders (Numerator) |
|
$ |
(97,426,437 |
) |
|
$ |
(57,529,338 |
) |
|
|
|
|
|
|
|
|
|
Basic
weighted average number of common shares outstanding
(Denominator) |
|
|
2,756,925,374 |
|
|
|
1,551,749,054 |
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average number of common shares outstanding
(Denominator) |
|
|
2,756,925,374 |
|
|
|
1,551,749,054 |
|
Equity Incentive Plan and Stock
Options
Equity Incentive Plan
On December 17, 2018, the Board of Directors approved and adopted
the 2019 Equity Incentive Plan (“the Plan”), with 300,000,000
shares set aside and reserved for issuance pursuant to the Plan.
The purpose of the Plan is to promote the success of the
Corporation and to increase stockholder value by providing an
additional means through the grant of awards to attract, motivate,
retain and reward selected employees and other eligible persons.
The awards are performance-based compensation that are granted
under the Plan as incentive stock options (ISO) or nonqualified
stock options. The per share exercise price for each option shall
not be less than 100% of the fair market value of a share of common
stock on the date of grant of the option. The Company periodically
issues stock options and warrants to employees and non-employees in
non-capital raising transactions for services and for financing
cost. 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. The Company granted options
to purchase 170,000,000 shares of common stock options on January
23, 2019. During the year ended June 30, 2021, the Company redeemed
13,146,826 stock options.
As of June 30, 2021, there were 182,853,174 stock options issued,
and a reserve of 117,146,826.
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,
the option grants immediately vest, and the total stock-based
compensation charge is recorded in the period of the measurement
date.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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, 2021, 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;
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, 2021 and 2020 (See Note 6):
|
|
Total |
|
|
(Level
1) |
|
|
(Level
2) |
|
|
(Level
3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability measured at fair value at 6/30/21 |
|
$ |
135,247,303 |
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
135,247,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability measured at fair value at 6/30/20 |
|
$ |
59,657,718 |
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
59,657,718 |
|
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 June 30, 2019 |
|
$ |
3,905,721 |
|
Fair
value of derivative liabilities at issuance |
|
|
841,436 |
|
Gain
on change in derivative liability |
|
|
54,910,562 |
|
Balance
as of June 30, 2020 |
|
|
59,657,719 |
|
Fair
value of derivative liabilities issued |
|
|
450,000 |
|
Loss
on change in derivative liability |
|
|
75,139,584 |
|
Balance
as of June 30, 2021 |
|
$ |
135,247,303 |
|
Research and Development
Research
and development costs are expensed as incurred. Total
research and development costs were $1,997,186 and $615,721 for the
years ended June 30, 2021 and 2020, respectively.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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.
Income Taxes
Deferred
income taxes are provided using the liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carry-forwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences
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 the deferred tax assets will not
be realized. Deferred tax assets and liabilities are adjusted
for the effects of the changes in tax laws and rates of the date of
enactment.
When
tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing
authorities, while others are subject to uncertainty about the
merits of the position taken or the amount of the position that
would be ultimately sustained. The benefit of a tax position
is recognized in the financial statements in the period during
which, based on all available evidence, management believes it is
more likely than not that the position will be sustained upon
examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or
aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than (50%) fifty percent
likely to be realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above
is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheet along with any associated interest and
penalties that would be payable to the taxing authorities upon
examination.
Recently Issued Accounting
Pronouncements
In June
2018, FASB issued accounting standards update ASU 2018-07, (Topic
505) – “Shared-Based Payment Arrangements with Nonemployees”, which
simplifies the accounting for share-based payments granted to
nonemployees for goods and services. Under the ASU, most of the
guidance on such payments to nonemployees will be aligned with the
requirements for share-based payments granted to employees. Under
the ASU 2018-07, the measurement of equity-classified nonemployee
share-based payments will be fixed on the grant date, as defined in
ASC 718, and will use the term nonemployee vesting period, rather
than requisite service period. The amendments in this update are
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. For all other
entities, the amendments are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years
beginning after December 15, 2020. Early adoption is permitted if
financial statements have not yet been issued. The Company has
evaluated the impact of the adoption of ASU-2018-07, on the
Company’s financial statements, and there was no impact.
In
August 2018, the FASB issued accounting standards update ASU
2018-13, (Topic 820) - “Fair Value Measurement”, which changes the
unrealized gains and losses, the range and weighted average of
significant unobservable inputs used to develop Level 3 fair value
measurements, and the narrative description of measurement
uncertainty should be applied prospectively for only the most
recent interim or annual period presented in the initial fiscal
year of adoption. All other amendments should be applied
retrospectively to all periods presented upon their effective date.
The amendments in this update are effective for fiscal years, and
interim periods within those fiscal years, beginning after December
15, 2019. Early adoption is permitted upon issuance. The Company
has evaluated the impact of the adoption of ASU-2018-07, on the
Company’s financial statements, and there was no impact.
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 financial
statements.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
Year ended June 30,
2021
During the
year ended June 30, 2021, the Company issued 576,554,289 shares of
common stock under purchase agreements for cash at prices ranging
from $0.022 - $0.15 per share for aggregate net proceeds of
$43,323,350.
During the
year ended June 30, 2021, the Company issued 252,000,000 shares of
common stock upon exercise of warrants at an exercise price of
$0.075 per share for gross proceeds of $18,900,000.
During the
year ended June 30, 2021, the Company issued 963,537,752 shares of
common stock upon conversion of convertible notes in the amount of
$1,144,350 of principal, plus accrued interest of $265,770 and
other fees of $1,800 based upon conversion prices ranging from
$0.00095 - $0.017995 per share. All note conversions were performed
per the terms of their respective agreements and therefore no gain
or loss on the conversion was recorded.
During the
year ended June 30, 2021, the Company issued 3,806,290 shares of
common stock for services rendered at fair value prices of $0.028 -
$0.035 per share in the aggregate amount of $118,023.
Year ended June 30,
2020
During the
year ended June 30, 2020, the Company issued 884,989,722 shares of
common stock upon conversion of convertible notes in the amount of
$1,166,986 in principal, plus accrued interest of $198,200 and
other fees of $12,000 based upon conversion prices ranging from
$0.00095 - $0.0041.
During the
year ended June 30, 2020, the Company issued 91,101,103 shares of
common stock for services rendered at fair value prices of $0.002 -
$0.0072 per share in the aggregate amount of $357,134.
Stock Option Plan
On October 2, 2017, the Company granted options to purchase
10,000,000 shares of common stock. Each option expires on the date
specified in the option agreement, which date is not later than the
fifth (5th) anniversary from the grant date of the
options. Of the 10,000,000 options, one-third vest immediately, and
one-third vest the second and third year, such that, the options
are fully vested with a maturity date of October 2, 2022, and are
exercisable at an exercise price of $0.01 per share. The Company
redeemed 2,631,579 of these options for $250,000. As of June 30,
2021, 7,368,421 of these options were exercisable.
On January 23, 2019, the Company granted options to purchase
170,000,000 shares of common stock. One-third of the options vested
immediately, and the remainder vested 1/24 per month over the first
twenty-four months following the option grant. The first block was
exercisable immediately for a period of seven (7) years. The
options fully vest by January 23, 2022. The Company redeemed
10,515,247 of these options for $1,000,000 in cash. As of June 30,
2021, there were 159,484,753 of these options were exercisable.
On January 31, 2019, the Company issued options to purchase
6,000,000 shares of common stock, of which two-third (2/3) vest
immediately, and the remaining options vest one-twelfth (1/12) per
month from after the date of these options (remaining block). The
first block were exercisable immediately for a period of seven (7)
years. The options fully vested on January 31, 2020 and are
exercisable.
On July 22, 2019, the Company issued options to purchase 10,000,000
shares of common stock, of which one-third (1/3) vest immediately,
and the remaining options vest one-twenty fourth (1/24) per month
from after the date of these options (remaining block). The first
block shall become exercisable immediately for a period of seven
(7) years. The options fully vest by July 22, 2021 and are
exercisable.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
A
summary of the Company’s stock option activity and related
information follows:
|
|
6/30/21 |
|
|
6/30/20 |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
Number |
|
|
average |
|
|
Number |
|
|
average |
|
|
|
Of |
|
|
exercise |
|
|
of |
|
|
exercise |
|
|
|
Options |
|
|
price |
|
|
Options |
|
|
price |
|
Outstanding, beginning of period |
|
|
196,000,000 |
|
|
$ |
0.01 |
|
|
|
186,250,000 |
|
|
$ |
0.01 |
|
Granted |
|
|
-
|
|
|
$ |
0.01 |
|
|
|
10,000,000 |
|
|
$ |
0.01 |
|
Exercised |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited |
|
|
-
|
|
|
|
-
|
|
|
|
(250,000 |
) |
|
|
-
|
|
Buyback of options |
|
|
(13,146,826 |
) |
|
$ |
0.0099 |
|
|
|
-
|
|
|
|
-
|
|
Outstanding, end of period |
|
|
182,853,174 |
|
|
$ |
0.0089 |
|
|
|
196,000,000 |
|
|
$ |
0.01 |
|
Exercisable at
the end of period |
|
|
182,853,174 |
|
|
$ |
0.0089 |
|
|
|
160,493,150 |
|
|
$ |
0.01 |
|
During the
year ended June 30, 2021, the Company bought back a total of
13,146,826 of the Company’s stock options for a total redemption
price of $1,250,000.
The weighted
average remaining contractual life of options outstanding as of
June 30, 2021 and 2020 was as follows:
6/30/21 |
|
|
6/30/20 |
|
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) |
|
$ |
0.0100 |
|
|
|
7,368,421 |
|
|
|
7,368,421 |
|
|
|
1.26 |
|
|
$ |
0.0100 |
|
|
|
10,000,000 |
|
|
|
10,000,000 |
|
|
|
2.26 |
|
$ |
0.0097 |
|
|
|
6,000,000 |
|
|
|
6,000,000 |
|
|
|
4.59 |
|
|
|
0.0097 |
|
|
|
6,000,000 |
|
|
|
6,000,000 |
|
|
|
5.59 |
|
$ |
0.0099 |
|
|
|
159,484,753 |
|
|
|
159,484,753 |
|
|
|
4.57 |
|
|
$ |
0.0099 |
|
|
|
170,000,000 |
|
|
|
156,867,579 |
|
|
|
5.57 |
|
$ |
0.0060 |
|
|
|
10,000,000 |
|
|
|
10,000,000 |
|
|
|
4.57 |
|
|
$ |
0.0060 |
|
|
|
10,000,000 |
|
|
|
10,000,000 |
|
|
|
5.57 |
|
|
|
|
|
|
182,853,174 |
|
|
|
182,853,174 |
|
|
|
|
|
|
|
|
|
|
|
196,250,000 |
|
|
|
179,117,579 |
|
|
|
|
|
|
|
6/30/2021 |
|
|
6/30/2020 |
|
Risk free interest
rate |
|
|
1.47% - 2.58% |
|
|
|
1.94% |
|
Stock volatility factor |
|
|
54.99% - 189.01% |
|
|
|
146% |
|
Weighted average expected option life |
|
|
6 years |
|
|
|
7
years |
|
Expected dividend yield |
|
|
None |
|
|
|
None |
|
The
stock-based compensation expense recognized in the statement of
operations during the years ended June 30, 2021 and 2020, related
to the granting of these options was $259,955 and $473,853,
respectively.
WARRANTS
On December 3, 2020, the Company issued warrants to purchase 120.0
million shares of common stock with an exercise price of $0.075 per
share pursuant to a securities purchase agreement. The warrants
were exercisable upon issuance. During the year ended June 30,
2021, the warrants were exercised for aggregate gross proceeds of
$9,000,000. As of June 30, 2021, all of the December 3, 2020
warrants were exercised.
On
December 29, 2020, the 120.0 million warrants issued on December 3,
2020, were exercised for aggregate gross proceeds of $9.0 million,
and as consideration for the exercise the investor was issued
additional warrants to purchase 132.0 million shares of common
stock at an exercise price of $0.075. The 132.0 million warrants
were deemed to be a dividend and were estimated at fair value of
$15,928,314 using the Black-Scholes valuation model. During the
year ended June 30, 2021, the warrants were exercised for aggregate
gross proceeds of $9,900,000. As of June 30, 2021, all of the
December 2020 warrants were exercised.
During the year ended June 30, 2021, the Company issued additional
warrants to purchase an aggregate of 94,895,239 shares of common
stock under securities purchase agreements at exercise prices
ranging from $0.0938 - $0.13125 per share. The warrants were
estimated at fair value on the date of issuance as calculated using
the Black-Scholes valuation model. The estimated fair value of the
warrants was $6,645,870, which was recognized in the financial
statements as of June 30, 2021. The warrants can be exercised over
a three (3) year period. As of June 30, 2021, all of the warrants
were exercisable.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
A
summary of the Company’s warrant activity and related information
follows for the year ended June 30, 2021 listed below.
|
|
6/30/21 |
|
|
|
|
|
|
Weighted |
|
|
|
Number |
|
|
average |
|
|
|
of |
|
|
exercise |
|
|
|
Warrants |
|
|
price |
|
Outstanding, beginning of year |
|
|
-
|
|
|
$ |
-
|
|
Granted |
|
|
346,895,239 |
|
|
$ |
0.086 |
|
Exercised |
|
|
(252,000,000 |
) |
|
$ |
(0.075 |
) |
Forfeited/Expired |
|
|
-
|
|
|
|
-
|
|
Outstanding, end of year |
|
|
94,895,239 |
|
|
$ |
0.11 |
|
Exercisable at
the end of year |
|
|
94,895,239 |
|
|
$ |
0.11 |
|
|
5. |
CONVERTIBLE PROMISSORY
NOTES |
As of June
30, 2021, the outstanding convertible promissory notes, net of debt
discount of $442,602 are summarized as follows:
Convertible Promissory
Notes, net of debt discount |
|
$ |
828,598 |
|
Less current
portion |
|
|
125,398 |
|
Total
long-term liabilities |
|
$ |
703,200 |
|
Maturities
of long-term debt net of debt discount for the next four years are
as follows:
Period Ended June 30, |
|
|
Amount |
|
2022 |
|
|
|
568,200 |
|
2023 |
|
|
|
553,000 |
|
2024 |
|
|
|
140,000 |
|
2025 |
|
|
|
10,000 |
|
|
|
|
$ |
1,271,200 |
|
At
June 30, 2021, the $1,271,200 in convertible promissory notes had a
remaining debt discount of $442,602, leaving a net balance of
$828,598.
The
Company issued a 10% convertible promissory note on January 28,
2016 (the “Jan 2016 Note”) in the aggregate principal amount of up
to $500,000. Upon execution of the convertible promissory note, the
Company received a tranche of $10,000. The Company received
additional tranches in the amount of $490,000 for an aggregate sum
of $500,000. The Jan 2016 Note matures twelve (12) months from the
effective date of the note. On January 19, 2017, the investor
extended the Jan 2016 Note for an additional sixty (60) months from
the effective date of the note, which matures on January 27, 2022.
The Jan 2016 Note was convertible into shares of common stock of
the Company at 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 the note or the lowest effective
price per share granted to any person or entity after the effective
date to acquire common stock. If the Company failed to deliver
shares in accordance with the timeframe of three (3) business days
of the receipt of a notice of conversion, the lender, at any time
prior to selling all of those shares, had the right to rescind any
portion, in whole or in part of that particular conversion
attributable to the unsold shares and have the rescinded conversion
amount returned to the principal sum with the rescinded conversion
shares returned to the Company. In no event shall the lender be
entitled to convert any portion of the Jan 2016 Note such that
would result in beneficial ownership by the lender and its
affiliates of more than 4.99% of the outstanding shares of common
stock of the Company. In addition, for each conversion, in the
event that shares are not delivered by the fourth business day
(inclusive of the day of conversion), a penalty of $1,500 per day
would be assessed for each day after the third business day
(inclusive of the day of the conversion) until the shares are
delivered. During the year ended June 30, 2021, the Company issued
367,702,192 common shares upon conversion of principal in the
amount of $245,550, plus interest of $103,768, and paid off the
balance of Note in the amount of $64,450 for cash. The balance of
the Jan 2016 Note as of June 30, 2021 was $0.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
|
5. |
CONVERTIBLE
PROMISSORY NOTES (Continued) |
The Company issued a 10% convertible promissory note on February 3,
2017 (the “Feb 2017 Note”) in the aggregate principal amount of up
to $500,000. Upon execution of the convertible promissory note, the
Company received a tranche of $60,000. The Company received
additional tranches in the amount of $440,000 for an aggregate sum
of $500,000. The Feb 2017 Note had a maturity date of February 3,
2018, the investor extended the Feb 2017 Note for an additional
sixty (60) months from the effective date of the note, which
matures on February 3, 2022. The Feb 2017 Note is convertible into
shares of common stock of the Company at a 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 the
note or the lowest effective price per share granted to any person
or entity after the effective date to acquire common stock. If the
Company fails to deliver shares in accordance with the timeframe of
three (3) business days of the receipt of a notice of conversion,
the lender, at any time prior to selling all of those shares, may
rescind any portion, in whole or in part of that particular
conversion attributable to the unsold shares and have the rescinded
conversion amount returned to the principal sum with the rescinded
conversion shares returned to the Company. In no event shall the
lender be entitled to convert any portion of the Feb 2017 Note such
that would result in beneficial ownership by the lender and its
affiliates of more than 4.99% of the outstanding shares of common
stock of the Company. In addition, for each conversion, in the
event, that shares are not delivered by the fourth business day
(inclusive of the day of conversion), a penalty of $1,500 per day
shall be assessed for each day after the third business day
(inclusive of the day of the conversion) until the shares are
delivered. During the year ended on June 30, 2021, the Company
issued 283,810,696 shares of common stock upon conversion of
principal in the amount of $191,800, plus accrued interest of
$77,820. The balance of the Feb 2017 Note as of June 30, 2021 was
$308,200.
The
Company issued a 10% convertible promissory note on November 9,
2017 (the “Nov 2017 Note”) in the aggregate principal amount of up
to $500,000. Upon execution of the convertible promissory note, the
Company received a tranche of $45,000. The Company received
additional tranches in the amount of $455,000 for an aggregate sum
of $500,000. The Nov 2017 Note matures twelve (12) months from the
effective dates of each respective tranche. The Nov 2017 Note
matures on November 9, 2018, with an automatic extension of sixty
(60) months from the effective date of each tranche. The Nov 2017
Note is convertible into shares of common stock of the Company at 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 tranche or the lowest effective
price per share granted to any person or entity after the effective
date to acquire common stock. If the Company fails to deliver
shares in accordance with the timeframe of three (3) business days
of the receipt of a notice of conversion, the lender, at any time
prior to selling all of those shares, may rescind any portion, in
whole or in part of that particular conversion attributable to the
unsold shares and have the rescinded conversion amount returned to
the principal sum with the rescinded conversion shares returned to
the Company. In no event shall the lender be entitled to convert
any portion of the Nov 2017 Note such that would result in
beneficial ownership by the lender and its affiliates of more than
4.99% of the outstanding shares of common stock of the Company. In
addition, for each conversion, in the event that shares are not
delivered by the fourth business day (inclusive of the day of
conversion), a penalty of $1,500 per day shall be assessed for each
day after the third business day (inclusive of the day of the
conversion) until the shares are delivered. During the year ended
June 30, 2021, the Company issued 258,232,440 shares of common
stock upon conversion of principal in the amount of $187,000, plus
accrued interest of $58,321. The balance of the Nov 2017 Note as of
June 30, 2021 was $313,000.
The
Company issued a 10% convertible promissory note on June 27, 2018
(the “Jun 2018 Note”) in the aggregate principal amount of up to
$500,000. Upon execution of the convertible promissory note, the
Company received a tranche of $50,000. On October 9, 2018 and June
24, 2021, the Company received another tranche of $40,000 and
$410,000 respectively, for a total aggregate of $500,000 as of June
30, 2021. The Jun 2018 Note matured on June 27, 2019, which was
automatically extended for sixty (60) months from the effective
date of the note. The Jun 2018 Note is convertible into shares of
common stock of the Company at 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 the note or the
lowest effective price per share granted to any person or entity
after the effective date to acquire common stock. If the Company
fails to deliver shares in accordance with the timeframe of three
(3) business days of the receipt of a notice of conversion, the
lender, at any time prior to selling all of those shares, may
rescind any portion, in whole or in part of that particular
conversion attributable to the unsold shares and have the rescinded
conversion amount returned to the principal sum with the rescinded
conversion shares returned to the Company. In no event shall the
lender be entitled to convert any portion of the Jun 2018 Note such
that would result in beneficial ownership by the lender and its
affiliates of more than 4.99% of the outstanding shares of common
stock of the Company. In addition, for each conversion, in the
event, that shares are not delivered by the fourth business day
(inclusive of the day of conversion), a penalty of $1,500 per day
shall be assessed for each day after the third business day
(inclusive of the day of the conversion) until the shares are
delivered. The Company recorded amortization of debt discount,
which was recognized as interest expense in the amount of $6,740
during the year ended June 30, 2021. The balance of the Jun 2018
Note as of June 30, 2021 was $500,000.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
|
5. |
CONVERTIBLE
PROMISSORY NOTES (Continued) |
The
Company issued a 10% convertible promissory note on August 10, 2018
(the “Aug 2018 Note”) in the aggregate principal amount of up to
$100,000. The Aug 2018 Note had a maturity date of August 10, 2019,
with an extension of sixty (60) months from the date of the note.
The Aug 2018 Note matures on August 10, 2023. The Aug 2018 Note may
be converted into shares of the Company’s common stock at a
conversion price of the lesser of a) $0.005 per share or b)
sixty-one (61%) percent of the lowest trading price per common
stock recorded on any trade day after the effective date. The
conversion feature of the Aug 2018 Note was considered a derivative
in accordance with current accounting guidelines because of the
reset conversion features of the Note. The balance of the Aug 2018
Note as of June 30, 2021 was $100,000.
On
January 20, 2020, the Company issued a 10% convertible promissory
note (the “Jan 2020 Note”) to an investor (the “Jan 2020 Note”) in
the principal amount of $80,000. The Company received funds of
$78,000, less other fees of $2,000. The Jan 2020 Note had a
maturity date of January 20, 2021. The Jan 2020 Note was
convertible into shares of the Company’s common stock at a
conversion price of sixty-one (61%) percent of the lowest two (2)
trading prices of the common stock during the fifteen (15) trading
day prior to the conversion date. The conversion feature of the Jan
2020 Note was considered a derivative in accordance with current
accounting guidelines because of the reset conversion features of
the Jan 2020 Note. During the year ended June 30, 2021, the Company
issued 23,420,128 shares of common stock upon conversion of
principal in the amount of $80,000, plus accrued interest of
$3,989, and other fees of $300. The Company recorded amortization
of debt discount, which was recognized as interest expense in the
amount of $42,404 during the year ended June 30, 2021. The Jan 2020
Note was fully converted as of June 30, 2021.
On
February 11, 2020, the Company issued a convertible promissory note
(the “Feb 2020 Note”) to an investor (the “Feb 2020 Note”) in the
principal amount of $80,000. The Company received funds of $78,000,
less other fees of $2,000. The Feb 2020 Note had a maturity date of
February 11, 2021. The Feb 2020 Note was convertible into shares of
the Company’s common stock at a conversion price of sixty-one (61%)
percent of the lowest two (2) trading prices of the common stock
during the fifteen (15) trading day prior to the conversion date.
The conversion feature of the Feb 2020 Note was considered a
derivative in accordance with current accounting guidelines because
of the reset conversion features of the Feb 2020 Note. During the
year ended June 30, 2021, the Company issued 5,294,205 shares of
common stock upon conversion of principal in the amount of $80,000,
plus accrued interest of $3,989, and other fees of $300. The
Company recorded amortization of debt discount, which was
recognized as interest expense in the amount of $49,399 during the
year ended June 30, 2021. The Feb 2020 Note was fully converted as
of June 30, 2021.
On
March 9, 2020, the Company issued a convertible promissory note
(the “Mar 2020 Note”) to an investor (the “Mar 2020 Note”) in the
principal amount of $40,000. The Company received funds of $38,000,
less other fees of $2,000. The Mar 2020 Note had a maturity date of
March 9, 2021. The Mar 2020 Note was convertible into shares of the
Company’s common stock at a conversion price of sixty-one (61%)
percent of the lowest two (2) trading prices of the common stock
during the fifteen (15) trading day prior to the conversion date.
The conversion feature of the Mar 2020 Note was considered a
derivative in accordance with current accounting guidelines because
of the reset conversion features of the Mar 2020 Note. During the
year ended June 30, 2021, the Company issued 2,390,871 shares of
common stock upon conversion of principal in the amount of $40,000,
plus accrued interest of $1,995, and other fees of $300. The
Company recorded amortization of debt discount, which was
recognized as interest expense in the amount of $25,708 during the
year ended June 30, 2021. The Mar 2020 Note was fully converted as
of June 30, 2021.
On
April 14, 2020, the Company issued a convertible promissory note
(the “April 2020 Note”) to an investor in the principal amount of
$80,000. The Company received funds of $78,000, less other fees of
$2,000. The April 2020 Note matures on April 14, 2021. The April
2020 Note was convertible into shares of the Company’s common stock
at a conversion price of sixty-one (61%) percent of the average of
the lowest two (2) trading prices of the common stock during the
fifteen (15) trading day prior to the conversion date. The
conversion feature of the April 2020 Note was considered a
derivative in accordance with current accounting guidelines because
of the reset conversion features of the April 2020 Note. The
Company recorded amortization of debt discount, which was
recognized as interest expense in the amount of $63,342 during the
year ended June 30, 2021. During the year ended June 30, 2021, the
Company issued 5,315,949 shares of common stock upon conversion of
principal in the amount of $80,000, plus accrued interest of
$4,011, and other fees of $300. The April 2020 Note was fully
converted as of June 30, 2021.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
5. |
CONVERTIBLE
PROMISSORY NOTES (Continued) |
On April 15, 2020, the Company entered into a convertible
promissory note (the “Apr 2020 Note”) with an investor, providing
for the sale by the Company of a 10% unsecured convertible note
(the “Apr 2020 Note”) in the aggregate principal amount of $50,000,
of which the Company received $10,000 upon execution, and an
additional tranche of $40,000, for an aggregate of $50,000. The Apr
2020 Note matures twelve (12) months from the effective dates of
each respective tranche. The Apr 2020 Note matured on April 15,
2021, and the investor extended the Apr 2020 Note for an additional
sixty (60) months from the effective date of the note, which
matures on April 15, 2025. The Apr Note is convertible into shares
of common stock of the Company at a variable conversion price of
the lesser of $0.01 per share or fifty percent (50%) of the lowest
trading price of common stock 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. If the Company fails to deliver shares in accordance with
the timeframe of four (4) business days of the receipt of a notice
of conversion, the lender, at any time prior to selling all of
those shares, may rescind any portion, in whole or in part of that
particular conversion attributable to the unsold shares and have
the rescinded conversion amount returned to the principal sum with
the rescinded conversion shares returned to the Company. In no
event shall the lender be entitled to convert any portion of the
Apr 2020 Note such that would result in beneficial ownership by the
lender and its affiliates of more than 4.99% of the outstanding
shares of common stock of the Company. In addition, for each
conversion, in the event that shares are not delivered by the
fourth business day (inclusive of the day of conversion), a penalty
of $2,000 per day shall be assessed for each day after the fourth
business day (inclusive of the day of the conversion) until the
shares are delivered. The conversion feature of the April 2020 Note
was considered a derivative in accordance with current accounting
guidelines because of the reset conversion features of the Apr 2020
Note. The Company recorded amortization of debt discount, which was
recognized as interest expense in the amount of $4,050 during the
year ended June 30, 2021. The balance of the Apr 2020 Note as of
June 30, 2021 was $50,000.
On
May 19, 2020, the Company issued a convertible promissory note (the
“May 2020 Note”) to an investor in the principal amount of $80,000.
The Company received funds of $78,000, less other fees of $2,000.
The May 2020 Note had a maturity date of May 19, 2021. The May 2020
Note was convertible into shares of the Company’s common stock at a
conversion price of sixty-one (61%) percent of the lowest two (2)
trading prices of the common stock during the fifteen (15) trading
day prior to the conversion date. The conversion feature of the May
2020 Note was considered a derivative in accordance with current
accounting guidelines because of the reset conversion features of
the May 2020 Note. The Company recorded amortization of debt
discount, which was recognized as interest expense in the amount of
$70,795 during the year ended June 30, 2021. During the year ended
June 30, 2021, the Company issued 5,933,503 shares of common stock
upon conversion of principal in the amount of $80,000, plus accrued
interest of $4,033, and other fees of $300. The May 2020 Note was
fully converted as of June 30, 2021.
On
June 18, 2020, the Company issued a convertible promissory note
(the “June 2020 Note”) to an investor in the principal amount of
$160,000. The Company received funds of $156,000, less other fees
of $4,000. The Jun 2020 Note had a maturity date of June 19,
2021.The Jun 2020 Note was convertible into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of
the average of the lowest two (2) trading prices of the common
stock during the fifteen (15) trading day prior to the conversion
date. The conversion feature of the Jun 2020 Note was considered a
derivative in accordance with current accounting guidelines because
of the reset conversion features of the Jun 2020 Note. The Company
recorded amortization of debt discount, which was recognized as
interest expense in the amount of $154,740. During the year ended
June 30, 2021 the Company issued 11,437,764 shares of common stock
upon conversion of principal in the amount of $160,000, plus
accrued interest of $7,847, and other fees of $300.The Jun 2020
Note was fully converted as of June 30, 2021.
All
note conversions were performed per the terms of their respective
agreements and therefore no gain or loss on the conversion was
recorded.
|
6. |
DERIVATIVE
LIABILITIES |
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.
The
convertible notes (the “Notes”) issued 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.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
|
6. |
DERIVATIVE
LIABILITES (Continued) |
During
the year ended June 30, 2021, 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 $450,000, 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.
As of June 30, 2021 and June 30, 2020, as the number of common
stock shares to be issued under the convertible note payable is
indeterminate, and the Company concluded that the equity
environment is tainted, and all issued warrants and convertible
notes payable are included in the value of the derivative.
During the year ended June 30, 2021, the Company recorded a net
loss in change in derivative of $75,139,584 in the statement of
operations due to the change in fair value of the remaining notes
and warrants issued, for the year ended June 30, 2021. At June 30,
2021, the fair value of the derivative liability was
$135,247,303.
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 derivatives are as
follows:
Risk
free interest rate |
|
|
0.07% - 0.87% |
|
Stock
volatility factor |
|
|
145.0% - 212.0% |
|
Weighted
average expected option life |
|
|
0 months - 5 year |
|
Expected
dividend yield |
|
|
None |
|
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 years before
2018.
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 amount when the realization is
uncertain. Included in the balance at June 30, 2021 and 2020, 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 periods ended June 30, 2021 and
2020, the Company did not recognize interest or
penalties.
At
June 30, 2021, the Company had net operating loss carry-forward of
approximately $9,497,900, which expires in future years. No tax
benefit has been reported in the June 30, 2021 and 2020 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 to pretax
income from continuing operations for the years ended June 30, 2021
and 2020 due to the following:
|
|
6/30/2021 |
|
|
6/30/2020 |
|
Book
income (loss) |
|
$ |
(15,718,840 |
) |
|
$ |
1,193,500 |
|
Non-deductible
expenses |
|
|
15,976,835 |
|
|
|
(1,520,850 |
) |
Depreciation
and amortization |
|
|
(480 |
) |
|
|
45 |
|
Related
party accrual |
|
|
-
|
|
|
|
(5,100 |
) |
Gain
on abandoned asset |
|
|
1,100 |
|
|
|
|
|
Valuation
Allowance |
|
|
-(258,622) |
|
|
|
332,405 |
|
|
|
|
|
|
|
|
|
|
Income
tax expense |
|
$ |
-
|
|
|
$ |
-
|
|
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
7. |
DEFERRED
TAX BENEFIT (Continued) |
Deferred taxes are provided on a liability method, whereby deferred
tax assets are recognized for deductible differences and operating
loss and tax credit carry-forward 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 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.
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 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.
Net
deferred tax liabilities consist of the following components as of
June 30, 2021 and 2020:
|
|
6/30/2021 |
|
|
6/30/2020 |
|
Deferred tax assets: |
|
|
|
|
|
|
NOL
carryover |
|
$ |
1,385,455
|
|
|
$ |
1,621,680 |
|
Research and
development |
|
|
351,695 |
|
|
|
104,500 |
|
Related party
accrual |
|
|
44,470 |
|
|
|
44,470 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
$ |
(4,885 |
) |
|
$ |
(3,610 |
) |
|
|
|
|
|
|
|
|
|
Less Valuation
Allowance |
|
$ |
(1,776,735 |
) |
|
$ |
(1,767,040 |
) |
|
|
|
|
|
|
|
|
|
Income tax
expense |
|
$ |
-
|
|
|
$ |
-
|
|
Due
to the change in ownership provisions of the Tax Reform Act of
1986, net operating loss carry-forward for Federal income tax
reporting purposes are subject to annual limitations. Should a
change in ownership occur, net operating loss carry-forward may be
limited as to use in future years.
The
Company’s tax returns for the previous three years remain open for
audit by the respective tax jurisdictions
8. |
COMMITMENTS AND
CONTINGENCIES |
On
September 15, 2020, the Company entered into a marketing agreement.
The fees are to be paid in cash and registered unrestricted stock.
As of March 31, 2021, the Company has paid a $34,250
deposit, with the balance of the payments and the stock issuances
due upon completion of a deliverable.
Effective September 1, 2020, the Company entered into a research
agreement with the University of Iowa. As consideration under the
research agreement, the University of Iowa will receive a maximum
of $299,966 from the Company. The research agreement may be
terminated by either party upon sixty (60) day prior written notice
or a material breach or default, which is not cured within 90 days
of receipt of a written notice of such breach.
The
term of the research agreement is from September 1, 2020 through
August 31, 2021. As of June 30, 2021, the Company has accrued
the amount due of $99,989.
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 consolidated financial
position or results of operation.
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS - AUDITED
JUNE 30, 2021 AND 2020
Year ended June 30,
2021
As of June 30, 2021, the Company reported an accrual associated
with the CEO’s prior years salary in the amount of $211,750, which
is recorded in accrued expenses, related party. The Company began
accruing the salary in 2011 and used the funds for operating
expenses. The CEO will be paid during the next fiscal year.
During the year ended June 30, 2021, the Company redeemed
13,146,826 stock options for a total redemption price of
$1,250,000.
During the year ended June 30, 2021, the Company issued 3,806,290
shares of common stock to a related party for services rendered at
fair value prices of $0.028 - $0.035 per share in the aggregate
amount of $118,023.
Year ended June 30,
2020
During the year ended June 30, 2020, the Company issued 91,101,103
shares of common stock to a related party for services rendered at
fair value prices of $0.002 - $0.0072 per share in the aggregate
amount of $357,134.
Management
evaluated subsequent events as of the date of the financial
statements pursuant to ASC TOPIC 855, and reported the following
events:
On
July 20, 2021, the Company redeemed a total of 24,887,263 stock
options for a total redemption price of $1,450,000.
On
September 2, 2021, the Company issued 180,480,692 shares of common
stock upon conversion of principal in the amount of $120,400, plus
accrued interest of $51,057.
Effective September 1, 2021, the Company entered into a new
research agreement with the University of Iowa. As consideration
under the research agreement, the University of Iowa will receive a
maximum of $350,000 from the Company. The research agreement may be
terminated by either party upon sixty (60) day prior written notice
or a material breach or default, which is not cured within 90 days
of receipt of a written notice of such breach. This agreement was
signed by the Company on September 13, 2021.
Effective October 1, 2021, the Company entered into a research
agreement with the University of Michigan. As consideration under
the research agreement, the University of Michigan will receive a
maximum of $296,448, from the Company. The research agreement may
be terminated by either party upon ninety (90) day prior written
notice or a material breach or default, which is not cured within
90 days of receipt of a written notice of such breach. This
agreement was signed by the Company on September 23, 2021.
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