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.





                                       13




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.





                                       14




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.





                                       15




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.

© Edgar Online, source Glimpses