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    HYSR   US86738R1086

SUNHYDROGEN, INC.

(HYSR)
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SUNHYDROGEN, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

11/15/2021 | 04:23pm EST

Cautionary Statement Regarding Forward-Looking Statements

The information in this report may contain forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements that are not of historical fact may be deemed to be forward-looking statements. These forward-looking statements involve substantial risks and uncertainties. In some cases you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," or "continue", the negative of the terms or other comparable terminology. Actual events or results may differ materially from the anticipated results or other expectations expressed in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks included from time to time in our reports filed with the Securities and Exchange Commission, or the SEC. These factors may cause our actual results to differ materially from any forward-looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between actual results and those reflected in these statements, except as may be required under applicable law.

Unless the context otherwise requires, references in this Form 10-Q to "we," "us," "our," or the "Company" refer to SunHydrogen, Inc.



Overview


At SunHydrogen, our goal is to replace fossil fuels with clean, renewable hydrogen.

Hydrogen is the most abundant chemical element in the universe. When hydrogen fuel is used to power transportation and industry, the only byproduct left behind is pure water, unlike hydrocarbon fuels such as oil, coal and natural gas that 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.

We believe the SunHydrogen solution potentially 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.



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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.



Critical Accounting Policies


Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Binomial valuation option pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.



Use of Estimates


In accordance with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates and assumptions relate to useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based compensation expense, Binomial lattice valuation model inputs, derivative liabilities and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.

Fair Value of Financial Instruments

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 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.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Recently Issued Accounting Pronouncements

Management reviewed currently issued pronouncements during the three months ended September 30, 2021, and does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements. Pronouncements are disclosed in notes to the financial statements.

Results of Operations for the Three Months Ended September 30, 2021 compared to Three Months Ended September 30, 2020.



Operating Expenses


Operating expenses for the three months ended September 30, 2021 were $599,766 compared to $578,486 for the prior period ended September 30, 2020. The net increase of $21,278 in operating expenses consisted primarily due an increase in office salary of $108,333, an increase in research and development of $13,102, and a decrease in stock compensation of $112,035, with an offset by $11,878 in other expenses.



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Other Income/(Expenses)


Other income and (expenses) for the three months ended September 30, 2021 were $49,224,609 compared to $(1,627,774) for the prior period ended September 30, 2020. The increase in other income of $50,852,383 was the result of the non-cash loss in net change in derivative of $50,732,210, a decrease in interest expense of $103,151, which includes the net change in amortization of debt discount of $85,599, with an increase in other income of $17,022.



Net Income/(Loss)


For the three months ended September 30, 2021, our net income was $48,624,844, as compared to a net loss of $(2,206,260) for the prior period ended September 30, 2020. The majority of the increase in net income of $50,831,104, was related primarily to the increase in net change of derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements' estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. The Company has not generated any revenues.

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 September 30, 2021, we had a working capital deficit of $38,558,325, compared to a working capital deficit of $80,099,103 as of June 30, 2021. This decrease in working capital deficit of $41,540,778 was primarily due to an increase in gain on change in derivative liability.

Cash used in operating activities was $(669,326) for the three months ended September 30, 2021 compared to $(444,366) for the prior period ended September 30, 2020. The increase in cash used in operating activities was due to an increase in office salaries, and a decrease in accounts payable. The Company has had no revenues.

Cash used in investing activities during the three months ended September 30, 2021 and 2020 was $(8,393,442) and $(50,000), respectively. The increase in investing activities was due to the purchase of marketable securities.

Cash used in financing activities was $(1,450,000) for the three months ended September 30, 2021 compared to $800,000 provided by the prior period ended September 30, 2020. The increase in cash used in financing activities was a result of the redemption of stock options. Our ability to continue as a going concern is dependent upon raising capital through financing transactions and future revenue.

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.

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© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 - - -
Net income 2021 -81,5 M - -
Net cash 2021 55,2 M - -
P/E ratio 2021 -2,05x
Yield 2021 -
Capitalization 185 M 185 M -
EV / Sales 2020 -
EV / Sales 2021 -
Nbr of Employees 4
Free-Float 93,9%
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Managers and Directors
Timothy Alan Young Chairman, President, Chief Executive Officer & CFO
Joun-Ho Lee Director-Technology
Blake Bryson Manager-Technology Development
Woosuk Kim Chief Operating Officer & Director
Mark J. Richardson Independent Director
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