The accompanying notes are an integral part of these condensed unaudited
financial statements
SUNHYDROGEN, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED DECEMBER
30, 2021 AND 2020
(Unaudited)
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
2021
|
|
|
December 31,
2020
|
|
|
December 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and Marketing
|
|
|
87,590
|
|
|
|
-
|
|
|
|
197,366
|
|
|
|
-
|
|
General and administrative expenses
|
|
|
353,885
|
|
|
|
2,286,980
|
|
|
|
680,470
|
|
|
|
2,725,170
|
|
Research and development cost
|
|
|
285,853
|
|
|
|
439,987
|
|
|
|
437,215
|
|
|
|
578,247
|
|
Depreciation and amortization
|
|
|
10,283
|
|
|
|
4,681
|
|
|
|
22,326
|
|
|
|
6,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
737,611
|
|
|
|
2,731,648
|
|
|
|
1,337,377
|
|
|
|
3,310,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)
|
|
|
(737,611
|
)
|
|
|
(2,731,648
|
)
|
|
|
(1,337,377
|
)
|
|
|
(3,310,134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
37,877
|
|
|
|
448
|
|
|
|
54,900
|
|
|
|
448
|
|
Loss on redemption of marketable securities
|
|
|
(20,693
|
)
|
|
|
-
|
|
|
|
(20,693
|
)
|
|
|
-
|
|
Loss on settlement of derivative liability
|
|
|
(841,596
|
)
|
|
|
-
|
|
|
|
(841,596
|
)
|
|
|
-
|
|
Gain (Loss) on change in derivative liability
|
|
|
26,135,397
|
|
|
|
(122,138,753
|
)
|
|
|
75,487,522
|
|
|
|
(123,518,838
|
)
|
Interest expense
|
|
|
(141,612
|
)
|
|
|
(250,428
|
)
|
|
|
(286,150
|
)
|
|
|
(497,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSES)
|
|
|
25,169,373
|
|
|
|
(122,388,733
|
)
|
|
|
74,393,983
|
|
|
|
(124,015,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
24,431,762
|
|
|
$
|
(125,120,381
|
)
|
|
$
|
73,056,606
|
|
|
$
|
(127,325,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK WARRANTS DEEMED
DIVIDENDS
|
|
|
-
|
|
|
|
(15,928,314
|
)
|
|
|
-
|
|
|
|
(15,928,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
|
$
|
24,431,762
|
|
|
$
|
(141,048,695
|
)
|
|
$
|
73,056,606
|
|
|
$
|
(143,254,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS (LOSS) PER SHARE
|
|
$
|
0.01
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS (LOSS) PER SHARE
|
|
$
|
0.00
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
4,029,789,187
|
|
|
|
2,317,322,842
|
|
|
|
4,015,076,087
|
|
|
|
2,228,251,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
|
|
|
5,304,670,650
|
|
|
|
2,317,322,842
|
|
|
|
5,289,957,550
|
|
|
|
2,228,251,336
|
|
The accompanying notes are an integral part of
these condensed unaudited financial statements
SUNHYDROGEN, INC.
CONDENSED STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED DECEMBER 30, 2021 AND
2020
|
|
SIX MONTHS ENDED DECEMBER 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance at June 30, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
2,053,410,161
|
|
|
$
|
2,053,410
|
|
|
$
|
11,664,657
|
|
|
$
|
(75,550,515
|
)
|
|
$
|
(61,832,448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
224,310,252
|
|
|
|
224,310
|
|
|
|
7,075,623
|
|
|
|
-
|
|
|
|
7,299,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of common stock warrants for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000,000
|
|
|
|
120,000
|
|
|
|
8,880,000
|
|
|
|
-
|
|
|
|
9,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of debt and accrued interest
|
|
|
-
|
|
|
|
-
|
|
|
|
275,532,749
|
|
|
|
275,533
|
|
|
|
482,783
|
|
|
|
-
|
|
|
|
758,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
3,806,290
|
|
|
|
3,806
|
|
|
|
114,217
|
|
|
|
-
|
|
|
|
118,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrants issued with securities purchase agreement at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,900,067
|
|
|
|
-
|
|
|
|
3,900,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock warrants deemed dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,928,314
|
|
|
|
(15,928,314
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and warrants compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
224,070
|
|
|
|
-
|
|
|
|
224,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(127,325,711
|
)
|
|
|
(127,325,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 (unaudited)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
2,677,059,452
|
|
|
$
|
2,677,059
|
|
|
$
|
48,269,731
|
|
|
$
|
(218,804,540
|
)
|
|
$
|
(167,857,750
|
)
|
|
|
SIX MONTHS ENDED DECEMBER 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance at June 30, 2021
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,849,308,495
|
|
|
$
|
3,849,308
|
|
|
$
|
88,560,321
|
|
|
$
|
(172,976,952
|
)
|
|
$
|
(80,567,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of debt and accrued interest
|
|
|
-
|
|
|
|
-
|
|
|
|
180,480,692
|
|
|
|
180,481
|
|
|
|
(9,024
|
)
|
|
|
-
|
|
|
|
171,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series C preferred stock in exchange for fair value of convertible note
|
|
|
2,700
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,340,766
|
|
|
|
-
|
|
|
|
14,340,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options redeemed by Company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,450,000
|
)
|
|
|
-
|
|
|
|
(1,450,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73,056,606
|
|
|
|
73,056,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 (unaudited)
|
|
|
2,700
|
|
|
$
|
3
|
|
|
|
4,029,789,187
|
|
|
$
|
4,029,789
|
|
|
$
|
101,442,063
|
|
|
$
|
(99,920,346
|
)
|
|
$
|
5,551,509
|
|
The accompanying notes are an integral part of
these condensed unaudited financial statements
SUNHYDROGEN, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 30, 2021 AND
2020
(Unaudited)
|
|
Six Months Ended
|
|
|
|
December 31,
2021
|
|
|
December 31,
2020
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
73,056,606
|
|
|
$
|
(127,325,711
|
)
|
Adjustment to reconcile net income (loss) to net cash (used in) provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation & amortization expense
|
|
|
22,326
|
|
|
|
6,717
|
|
Stock based compensation expense
|
|
|
-
|
|
|
|
224,070
|
|
Stock issued for services
|
|
|
-
|
|
|
|
118,023
|
|
Loss on settlement of debt and derivative
|
|
|
841,596
|
|
|
|
-
|
|
Net (Gain) Loss on change in derivative liability
|
|
|
(75,487,522
|
)
|
|
|
123,518,838
|
|
Amortization of debt discount recorded as interest expense
|
|
|
226,849
|
|
|
|
408,098
|
|
Commissions fees paid through offerings
|
|
|
-
|
|
|
|
107,700
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
(3,580
|
)
|
|
|
2,838
|
|
Accounts payable
|
|
|
(19,883
|
)
|
|
|
(22,708
|
)
|
Accrued expenses
|
|
|
2,838
|
|
|
|
4,266
|
|
Accrued interest on convertible notes
|
|
|
59,301
|
|
|
|
90,088
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(1,301,469
|
)
|
|
|
(2,867,781
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase of marketable securities
|
|
|
(8,653,392
|
)
|
|
|
-
|
|
Purchase of property and equipment
|
|
|
-
|
|
|
|
(53,961
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES:
|
|
|
(8,653,392
|
)
|
|
|
(53,961
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock warrants
|
|
|
-
|
|
|
|
9,000,000
|
|
Redemption of related parties stock options
|
|
|
(1,450,000
|
)
|
|
|
-
|
|
Net proceeds from common stock purchase agreements
|
|
|
-
|
|
|
|
11,092,300
|
|
|
|
|
|
|
|
|
|
|
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
|
|
(1,450,000
|
)
|
|
|
20,092,300
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
(11,404,861
|
)
|
|
|
17,170,558
|
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF PERIOD
|
|
|
56,006,555
|
|
|
|
195,010
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
|
$
|
44,601,694
|
|
|
$
|
17,365,568
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
803
|
|
Taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
|
|
|
|
|
|
|
|
|
Fair value of common stock upon conversion of convertible notes , and accrued interest
|
|
$
|
171,457
|
|
|
$
|
758,316
|
|
Fair value of common stock issued for services
|
|
$
|
-
|
|
|
$
|
118,023
|
|
Issuance of common stock purchase warrants deemed dividends
|
|
$
|
-
|
|
|
$
|
15,928,314
|
|
Fair value of preferred stock in exchanged for convertible note
|
|
$
|
14,340,769
|
|
|
$
|
-
|
|
Fair value of derivative liability removed
|
|
$
|
13,231,008
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of
these condensed unaudited financial statements
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL
STATEMENTS – UNAUDITED
DECEMBER 31, 2021 AND 2020
The accompanying unaudited condensed
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion
of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for
the six months ended December 31, 2021 are not necessarily indicative of the results that may be expected for the year ended June 30,
2022. For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the
year ended June 30, 2021.
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.
Marketable Securities
The Company considers corporate bonds
(“bonds”) as investments due to their ratings. The bonds are rated based on their default probability, health of the corporation’s
debt structure, as well as the overall health of the economy. The bonds fall into the category as investments if they have a rating of
AAA and BBB.
The bonds have varied due dates and
were classified as current and noncurrent, based on to their maturity dates. The bonds are generally valued using quoted prices and are
classified in Level 2 of the fair value hierarchy as prices are not always from active markets. We consider our investments held to maturity
and we believe there are no other than temporary declines in fair value. Our investments are recorded at historical cost.
Use of Estimates
In accordance
with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well
as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These
estimates and assumptions relate to useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based
compensation expense, Binomial lattice valuation model inputs, derivative liabilities and other factors. Management believes it has exercised
reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.
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
|
The Company recognized depreciation
expense of $18,809 and $3,200 for the six months ended December 31, 2021 and 2020, respectively.
Intangible Assets
The Company has patent applications
to protect the inventions and processes behind its proprietary solar-to-hydrogen based technology. Intangible assets that have finite
useful lives continue to be amortized over their useful lives.
The Company recognized amortization
expense of $3,517 and $3,517 for the six months ended December 31, 2021 and 2020, respectively.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS –
UNAUDITED
DECEMBER 31, 2021 AND 2020
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Net Earnings (Loss) per
Share Calculations
Net earnings (Loss) per share dictates
the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing
by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per share is computed similar
to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock-based awards
(Note 4), plus the assumed conversion of convertible debt (Note 5).
December 31, 2021
For the six months ended December 31,
2021, the Company calculated the dilutive impact of the outstanding stock options of 157,965,711, common stock purchase warrants of 94,895,239,
and convertible debt of $963,000 and interest of $210,384, which is convertible into shares of common stock. The stock options were not
included in the earnings per share, because their impact was antidilutive, and the warrants and convertible debt were included in earnings
per share, because their impact was dilutive.
December 31, 2020
For the six months ended December 31,
2020, the Company calculated the dilutive impact of the outstanding stock options of 196,000,000, common stock purchase warrants of 148,800,000,
and convertible debt of $1,361,200 and interest of $433,436, 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.
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 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 options are exercisable into common stock.
Stock Based Compensation
The Company accounts for stock option
grants issued and vesting to employees and non-employees in accordance with the authoritative guidance of the Financial Accounting Standards
Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based
compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are
no future performance requirements by the non-employee, option grants are immediately vested, and the total stock-based compensation charge
is recorded in the period of the measurement date.
Warrant Accounting
The Company accounts for the warrants
to purchase shares of common stock using the estimated fair value on the date of issuance as calculated using the Black-Scholes valuation
model.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL
STATEMENTS – UNAUDITED
DECEMBER 31, 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 on the balance sheet, where it is practicable to estimate
that value. As of December 31, 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.
|
|
●
|
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 on December 31,
2021 (See Note 6):
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities measured at fair value
|
|
$
|
8,480,269
|
|
|
$
|
-
|
|
|
$
|
8,480,269
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities measured at fair value
|
|
$
|
46,528,773
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
46,528,773
|
|
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, 2021
|
|
|
135,247,303
|
|
Fair value of derivative liability removed
|
|
|
(13,231,008
|
)
|
Gain on change in derivative liability
|
|
|
(75,487,522
|
)
|
Balance as of December 31, 2021
|
|
$
|
46,528,773
|
|
Research and Development
Research and development costs are
expensed as incurred. Total research and development costs were $437,215 and $578,247 for the six months ended December 31, 2021
and 2020, respectively.
Accounting for Derivatives
The Company evaluates all of its financial
instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative
financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is
then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative
financial instruments, the Company uses a probability weighted average series Binomial lattice formula pricing models to value the derivative
instruments at inception and on subsequent valuation dates.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL
STATEMENTS – UNAUDITED
DECEMBER 31, 2021 AND 2020
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative
instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the
derivative instrument could be required within 12 months of the balance sheet date.
Recently Issued Accounting Pronouncements
Management does not believe that any
other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying
condensed financial statements as of December 31, 2021.
Preferred Stock
On December 15, 2021, the Company filed
a certificate of designation of preferences, right and limitations of Series C Preferred Stock with the Secretary of State of Nevada,
designating 17,000 shares of preferred stock, par value $0.001 of the Company, as Series C Preferred Stock. Each share of Series C Preferred
Stock has a stated value of $100 and is convertible into shares of common stock of the Company at a conversion price equal to $0.00095.
The Company entered into a securities
purchase agreement on December 15, 2021, with an accredited investor for an exchange of convertible debt to equity. The investor exchanged
a convertible note in the amount of $187,800, plus accrued interest of $80,365 for an aggregate total of $268,165 for 2,700 shares of
the Company’s Series C Preferred Stock. The extinguishment of the convertible debt was recognized in the Company’s financials
as a loss on settlement of derivative liability. A valuation was prepared using the Monte Carlo Method, based on a stock price of $0.0469,
with a volatility of 131.5% and risk-free rate of 0.84% based on an estimated term of five (5) years. The note was tendered to the Company
for cancellation and foregoes all future accrued interest.
Per Valuation
|
|
|
|
Preferred shares issued
|
|
$
|
2,700
|
|
Stated value of debt and interest
|
|
$
|
268,165
|
|
Calculated fair value of preferred shares
|
|
$
|
14,340,769
|
|
Fair value of derivative liability removed
|
|
$
|
13,231,008
|
|
Loss on settlement
|
|
$
|
841,596
|
|
The Company
recognized a loss on settlement of $841,596 for the extinguishment of convertible debt, plus derivative liability for the period ended
December 31, 2021.
Common Stock
Six months ended December 31,
2021
During the six months ended December
31, 2021, the Company issued 180,480,692 shares of common stock upon conversion of convertible notes in the amount of $120,400 of principal,
plus accrued interest of $51,057 based upon a conversion price of $0.00095 per share. The notes were converted per the terms of their
respective agreements and therefore no gain or loss on the conversion was recorded.
Six months ended December 31,
2020
During the six months ended December
31, 2020, the Company issued 219,210,319 shares of common stock for cash at prices ranging from $0.022 - $0.025 for aggregate net proceeds
of $2,2092,300 plus offering cost of $107,700 for a total of $2,200,000; and issued an additional 120,000,000 shares of common stock under
a securities purchase agreement, whereby the funds were split between the fair value of the securities purchase agreement in the amount
of $5,099,933 and the warrants issued with the securities purchase agreement in the amount of $3,900,067 for a total price of $9,000,000.
During the six months ended December
31, 2020, the Company issued 120,000,000 shares of common stock upon exercise of warrants at an exercise price of $0.075 for gross proceeds
of $9,000,000.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL
STATEMENTS – UNAUDITED
DECEMBER 31, 2021 AND 2020
3.
|
CAPITAL STOCK (Continued)
|
During the six months ended December
31, 2020, the Company issued 275,532,747 shares of common stock upon conversion of convertible notes in the amount of $668,800 of principal,
plus accrued interest of $87,716 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 six months ended December
31, 2020, 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.
OPTIONS
As of September 30, 2020, 10,000,000
non-qualified common stock options were outstanding. 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 non-qualified common stock
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.
On January 23, 2019, the Company issued
170,000,000 stock options. One-third of the options vested immediately, and the remainder vest 1/24 per month over the first twenty-four
months following the option grant. The options expire 10 years from the initial grant date. The options fully vest by January 23, 2022
On January 31, 2019, the Company issued
6,000,000 stock options, of which two-third (2/3) vest immediately, and the remaining amount shall vest one-twelfth (1/12) per month from
after the date of the option grant. The options expire 10 years from the initial grant date. The options fully vested on January 31, 2020.
On July 22, 2019, the Company issued
10,000,000 stock options, of which one-third (1/3) vest immediately, and the remaining shall vest one-twenty fourth (1/24) per month from
after the date of the option grant. The options expire 10 years from the initial grant date. The options fully vested on July 22, 2020.
A summary of the Company’s stock
option activity and related information follows:
|
|
12/31/21
|
|
|
12/31/2020
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
average
|
|
|
Number
|
|
|
average
|
|
|
|
Of
|
|
|
exercise
|
|
|
Of
|
|
|
exercise
|
|
|
|
Options
|
|
|
price
|
|
|
Options
|
|
|
price
|
|
Outstanding, beginning of period
|
|
|
182,853,174
|
|
|
$
|
0.01
|
|
|
|
196,250,000
|
|
|
$
|
0.01
|
|
Granted
|
|
|
-
|
|
|
$
|
0.01
|
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Buyback of options
|
|
|
(24,887,463
|
)
|
|
$
|
0.0099
|
|
|
|
(250,000
|
)
|
|
|
0.01
|
|
Outstanding, end of period
|
|
|
157,965,711
|
|
|
$
|
0.0089
|
|
|
|
196,000,000
|
|
|
$
|
0.01
|
|
Exercisable at the end of period
|
|
|
157,965,711
|
|
|
$
|
0.0089
|
|
|
|
189,332,999
|
|
|
$
|
0.01
|
|
During the six months ended December
31, 2021, the Company bought back a total of 24,887,463 of the Company’s stock options for a total of $1,450,000. The options were
bought back for the market price at the date of the buy-back less the exercise price of the grant. All options that were bought back were
fully vested and previously expensed accordingly.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL
STATEMENTS – UNAUDITED
DECEMBER 31, 2021 AND 2020
4.
|
OPTIONS AND WARRANTS (Continued)
|
The weighted average remaining contractual life of options
outstanding as of December 31, 2021 and 2020 was as follows:
12/31/2021
|
|
|
12/31/2020
|
|
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
|
|
|
|
3,071,212
|
|
|
|
3,071,212
|
|
|
|
0.76
|
|
|
$
|
0.0100
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
1.75
|
|
$
|
0.0097
|
|
|
|
6,000,000
|
|
|
|
6,000,000
|
|
|
|
4.09
|
|
|
|
0.0097
|
|
|
|
6,000,000
|
|
|
|
6,000,000
|
|
|
|
5.07
|
|
$
|
0.0099
|
|
|
|
138,894,499
|
|
|
|
138,894,499
|
|
|
|
4.07
|
|
|
$
|
0.0099
|
|
|
|
170,000,000
|
|
|
|
165,277,541
|
|
|
|
5.09
|
|
$
|
0.0060
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
4.56
|
|
|
$
|
0.0060
|
|
|
|
10,000,000
|
|
|
|
8,055,458
|
|
|
|
5.56
|
|
|
|
|
|
|
157,965,711
|
|
|
|
157,965,711
|
|
|
|
|
|
|
|
|
|
|
|
196,250,000
|
|
|
|
189,332,999
|
|
|
|
|
|
The stock-based compensation expense
recognized in the statement of operations during the six months ended December 31, 2021 and 2020, related to the granting of these options
was $0 and $224,070, respectively.
WARRANTS
As of December 31, 2021, the Company
had an aggregate of 94,895,239 common stock purchase warrants outstanding, with 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 warrants
can be exercised over periods of three (3) to five (5) years.
A summary of the Company’s warrant
activity and related information follows for the six months ended December 31, 2021.
|
|
12/31/21
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
average
|
|
|
|
Of
|
|
|
exercise
|
|
|
|
Warrants
|
|
|
price
|
|
Outstanding, beginning of period
|
|
|
94,895,239
|
|
|
$
|
0.11
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding, end of period
|
|
|
94,895,239
|
|
|
$
|
0.11
|
|
Exercisable at the end of period
|
|
|
94,895,239
|
|
|
$
|
0.11
|
|
12/31/2021
|
|
|
|
|
Exercise Price
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual
Life (years)
|
|
$
|
0.0938
|
|
|
|
16,800,000
|
|
|
|
16,800,000
|
|
|
1.42 - 2.0
|
|
$
|
0.13125
|
|
|
|
6,666,667
|
|
|
|
6,666,667
|
|
|
4.16
|
|
$
|
0.12
|
|
|
|
71,428,572
|
|
|
|
71,428,572
|
|
|
4.16
|
|
|
|
|
|
|
94,895,239
|
|
|
|
94,895,239
|
|
|
|
|
At December 31, 2021, the aggregate
intrinsic value of the warrants outstanding was $0.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS –
UNAUDITED
DECEMBER 31, 2021 AND 2020
5.
|
CONVERTIBLE PROMISSORY NOTES
|
As of December 31, 2021, the outstanding
convertible promissory notes net of debt discount are summarized as follows:
Convertible Promissory Notes, net of debt discount
|
|
$
|
747,247
|
|
Less current portion
|
|
|
339,247
|
|
Total long-term liabilities
|
|
$
|
408,000
|
|
Maturities of long-term debt for the
next five years are as follows:
Period Ended December 31,
|
|
Amount
|
|
2022
|
|
$
|
555,000
|
|
2023
|
|
|
398,000
|
|
2024
|
|
|
-
|
|
2025
|
|
|
10,000
|
|
|
|
$
|
963,000
|
|
At December 31, 2021, the $963,000
in convertible promissory notes had a remaining debt discount of $215,753, leaving a net balance of $747,247.
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. The Company received tranches for an aggregate principal total of $500,000. The Feb 2017 Note had a maturity
date of February 3, 2018, which the investor extended the Feb 2017 Note for an additional sixty (60) months from the effective date of
the note, to February 3, 2022. The Feb 2017 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, could 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 was the lender be entitled to convert any portion of the Feb 2017 Note to the extent such conversion 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 were 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 period ended on December 31, 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. Also, during the six months ended December
31, 2021, the Company exchanged the balance of the convertible note in the amount of $187,800, plus accrued interest of $80,365 for an
aggregate total of $268,165, for 2,700 Series C preferred shares with a stated value of $100 per share and a 10% annual dividend. The
preferred shares are convertible into common stock at a fixed conversion price of $0.00095. The balance of the Feb 2017 Note as of December
31, 2021 was $0.
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. The Company
received tranches for an aggregate principal total of 500,000. The Nov 2017 Note had a maturity date of November 9, 2018, with an automatic
extension of sixty (60) months from the effective date of the note. The Nov 2017 Note is convertible into shares of common stock of the
Company at a price equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading
price since the original effective date of 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 Nov 2017 Note to the extent such conversion 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 balance of the Nov 2017
Note as of December 31, 2021 was $313,000.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS –
UNAUDITED
DECEMBER 31, 2021 AND 2020
5.
|
CONVERTIBLE PROMISSORY NOTES (Continued)
|
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. The Company received
tranches for an aggregate principal total of $500,000. 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 price equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price since
the original effective date of 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 to the extent such conversion 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 $206,685 during the six months ended December 31, 2021.The balance of the Jun 2018
Note as of December 31, 2021 was $500,000.
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 December 31, 2021 was $100,000.
On April 15, 2020, the Company issued
a convertible promissory note (the “Apr 2020 Note”) to an investor in the aggregate principal amount of $50,000. The Company
received tranches for an aggregate principal total of $50,000. The Apr 2020 Note matures twelve (12) months from the effective dates of
each respective tranche, such that the Apr 2020 Note matures on April 15, 2021, with an automatic extension of sixty (60) months from
the effective date of each tranche. 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 the 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 to the
extent such conversion 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 $20,164 during the six months ended December 31, 2021. The
balance of the Apr 2020 Note as of December 31, 2021 was $50,000.
All note conversions were performed per the terms of their respective
agreements. At December 31, 2021, the Company recognized a loss of $841,596 on conversion of a convertible note in exchange for Series
C preferred stock.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS –
UNAUDITED
DECEMBER 31, 2021 AND
2020
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.
During the six months ended December
31, 2021, the Company recorded a net gain in change in derivative of $75,487,522 in the statement of operations due to the change in fair
value of the remaining notes, for the six months ended December 31, 2021.
At December 31,
2021, the fair value of the derivative liability was $46,528,773.
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
|
|
0.29% - 1.26%
|
Stock volatility factor
|
|
98.0% - 200.0%
|
Weighted average expected option life
|
|
1 year - 5 years
|
Expected dividend yield
|
|
None
|
During the period ended December 31,
2021, the Company invested in corporate bonds, which have been recognized in the financial statements at fair value.
The Company considers corporate bonds
(“bonds”) as investments due to their ratings. The bonds are rated based on their default probability, health of the corporation’s
debt structure, as well as the overall health of the economy. The bonds fall into the category as investments if they have a rating between
AAA and BBB.
As of December 31, 2021, the components
of the Company’s short and long-term investments are summarized as follows:
Short term investments:
|
|
|
|
Bonds (held-to-maturity)
|
|
|
1,806,513
|
|
|
|
|
|
|
Long term investments:
|
|
|
|
|
Bonds (held-to-maturity)
|
|
|
6,846,879
|
|
Total short and long-term investments
|
|
$
|
8,653,392
|
|
The Company has invested in bonds maturing
from June 24, 2022 through April 15, 2025 that are held to maturity. The current trading prices or fair market value of the bonds vary,
and we believe any decline in fair value is temporary. All bonds are current and not in default.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS –
UNAUDITED
DECEMBER 31, 2021 AND 2020
7.
|
MARKETABLE SECURITIES (Continued)
|
The following table summarizes the
amortized cost of the held-to-maturity bonds at December 31, 2021, aggregated by credit quality indicator.
Credit Quality Indicators for the Corporate Bonds
|
|
|
|
AA/A
|
|
$
|
2,629,275
|
|
BBB
|
|
$
|
6,024,117
|
|
Total
|
|
$
|
8,653,392
|
|
The amortized cost of our corporate
bonds and the related gross unrealized gains and losses, were as follows at December 31, 2021:
|
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
|
|
Level
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Bonds
|
|
2
|
|
|
8,653,392
|
|
|
|
-
|
|
|
|
(173,123
|
)
|
|
$
|
8,480,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the period ended December 31,
2021, the Company recognized interest income of $46,980 in the financial statements.
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 December 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, 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 contract period is from September 1, 2021
through August 31, 2022. 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. As of December 31, 2021, the Company has accrued the amount due of $116,666.
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.
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.
As of June 30, 2021, the Company reported
an accrual associated with the CEO’s prior years’ salary in the amount of $211,750, plus current accrual of $14,750 for a
total of $226,500, which is recorded in related party accrued expenses. The Company began accruing the salary in 2011 and used the funds
for operating expenses. The CEO will be paid during the fiscal year.
During the six months ended December
31, 2021, the Company redeemed 24,887,463 shares of the Company’s stock options to related parties for a total of $1,450,000.
SUNHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS –
UNAUDITED
DECEMBER 31, 2021 AND 2020
Management evaluated subsequent events
as of the date of the financial statements pursuant to ASC TOPIC 855, and there were the following events to report.
On January 7, 2022, the Company issued
200,976,352 shares of common stock upon conversion of principal in the amount of $135,500, plus accrued interest of $55,428 associated
with the November 9, 2017 convertible note.
On January 27, 2022, the Company filed
a certificate of designation of Series A Preferred Stock with the Secretary of State of Nevada, and issued 1,000 shares of Series A Preferred
Stock to the Company’s chief executive officer, for services rendered.
Pursuant to the certificate of designation,
the Company designated 1,000 shares of preferred stock as Series A Preferred Stock. The Series A Preferred Stock is not convertible into
common stock, and does not have any dividend rights or any liquidation preference. The Series A Preferred Stock entitles the holder to
51% of the voting power of the Company’s stockholders. The Series A Preferred Stock will automatically be redeemed by the Company
at the par value of $0.001 per share, on the first to occur of the following events: (i) a date sixty days after the effective date of
the certificate of designation, (ii) the date that Timothy Young ceases to serve as officer, director or consultant of the Company, or
(iii) on the date that the Company’s shares of common stock first trade on any national securities exchange and such listing is
conditioned upon the elimination of the preferential voting rights.
On January 27, 2022, the holder of
the majority of the voting power of the shareholders of the Company, and the Company’s chief executive officer, approved by written
consent (i) an amendment to the Company’s articles of incorporation to increase the Company’s authorized shares of common
stock from 5,000,000,000 to 10,000,000,000, (ii) an amendment to the Company’s articles of incorporation to effect a reverse stock
split of the Company’s common stock by a ratio of not less than 1-for-100 and not more than 1-for-500 at any time prior to the one
year anniversary of filing the definitive information statement with respect to the reverse split, with the board of directors having
the discretion as to whether or not the reverse split is to be effected, and with the exact ratio of any reverse split to be set at a
whole number within the above range as determined by the board in its discretion, and (iii) the adoption of the Company’s 2022 Equity
Incentive Plan. Such shareholder approval for such actions will be effective 20 days after the definitive information statement relating
to such actions is mailed to shareholders.