10-K
1
f10k2020_sunhydrogeninc.htm
ANNUAL REPORT
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, 2020
☐ 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)
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 Trading Symbol(s) Name of each exchange on which registered
None None 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 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 ☐ Accelerated Filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
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 $6,059,344.
The number of shares of registrant’s common stock outstanding,
as of September 18, 2020 was 2,156,132,155.
DOCUMENTS
INCORPORATED BY REFERENCE
None
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 6
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Mine Safety Disclosures 10
PART II
Item 6. Selected Financial Data 12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 14
Item 8. Financial Statements and Supplementary Data 14
Item 9A. Controls and Procedures 14
Item 9B. Other Information. 15
PART III
Item 10. Directors, Executive Officers and Corporate Governance 16
Item 11. Executive Compensation 17
Item 14. Principal Accountant Fees and Services 19
SIGNATURES 22
i
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.
Our patented low-cost
technology is intended to produce renewable hydrogen using sunlight and any source of water, including seawater and wastewater.
Unlike non-renewable hydrocarbon fuels, such as oil, coal and natural gas, where carbon dioxide and other contaminants are released
into the atmosphere when used, hydrogen fuel produces pure water as the only product. By optimizing the science of photoelectrolysis
at the nano-level, our low-cost nanoparticles mimic photosynthesis to efficiently use sunlight to split water molecules into 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.
Hydrogen
is the lightest and most abundant chemical element, constituting roughly 75% of the universe’s chemical elemental mass (Palmer,
D. (13 September 1997). “Hydrogen in the Universe.” NASA). In its purest form, hydrogen is a non-toxic
colorless and odorless gas. However, naturally occurring elemental hydrogen is relatively rare on earth and hydrogen gas is most
often produced using fossil fuels. Industrial production of hydrogen is mainly from the steam reforming of natural gas and is usually
employed near its production site, with the two largest applications being crude oil processing (hydrocracking) and ammonia production,
mostly for the fertilizer market. We are developing what we believe is a cleaner and greener way to produce hydrogen.
Hydrogen as a fuel,
like electricity, is an energy carrier rather than an energy source. We believe that if hydrogen was easily accessible for the
world to depend on it, the challenging global issues associated with the widespread usages of fossil fuels, such as global climate
change and air pollution would be erased.
Over 99% of hydrogen
produced today is produced using a fossil fuel, methane (natural gas) in a method called steam methane reforming (SMR). Although
commercially optimized over decades, the SMR process is capital intensive and will remain so due to the fundamental nature of the
process which includes: (1) three separate reactors with different catalysts operating at different temperatures, (2) large amounts
of heat transfer needed for the endothermic reforming and exothermic water gas shift, and (3) the need to remove all carbon oxides
using capital and energy intensive methods. (source: Nikolaidis, P.; Poullikkas, A., A comparative overview of hydrogen production
processes. Renewable and Sustainable Energy Reviews 2017, 67, 597-611.)
Besides being capital
intensive, the SMR method releases harmful levels of carbon dioxide and other pollutants into the air further contributing to our
global climate crisis.
We believe renewable
hydrogen is the fuel of the future. The main challenge has been the high cost of hydrogen production and transportation. We believe
a low-cost distributed production technology, such as the SunHydrogen technology, is the way to enable a world of clean and renewable
energy.
Market Opportunity
We believe we are still
in the early stages of the hydrogen market, and yet, this market continues to grow exponentially. One of the reasons for this growth
is the adoption of hydrogen fuel technologies within an increased number of major industries and spanning many applications.
Furthermore, recent
government mandates for renewable energy have created a real and sustainable market opportunity for renewable hydrogen. Most states
in the United States have legislative mandates to use between 10-45% of renewable energy by 2050, some states have mandates for
100% by 2050. These include California (100% by 2045), Colorado (100% by 2050), Hawaii (100% by 2045), Virginia (100% by 2050),
Washington (100% by 2045), Washington DC (100% by 2032) and Puerto Rico (100% by 2050). (https://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx)
While solar and wind
electricity have been the dominate form of renewable energy, the sun does not always shine and the wind does not always blow. Therefore,
we believe a direct solar-to-hydrogen technology which immediately stores solar energy as hydrogen can turn solar energy into a
primary and reliable source of energy just like coal and natural gas – but cleaner and greener.
Existing Market Growth
According
to a Global Market Insights study released in June 2019, the global hydrogen generation market size is predicted to be valued at
$180 billion by 2024. Strict regulatory norms to reduce sulfur content with measures to reduce the carbon footprint is expected
to drive the global hydrogen generation market size. 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 and which aims to lower the gasoline sulfur
content up to 10 ppm in 2017.
Growing
demand for petroleum products from developing countries is anticipated to also drive the hydrogen generation market size in the
coming years. Hydrogen is used in various refining processes including hydrocracking and hydrodesulfurization to crack bigger molecules
into lighter ones and more usable products.
Strong
investment for the expansion and upgrade of refineries to fulfill emission and sulfur content regulation is expected to stimulate
the growth of the hydrogen generation market. Increasing heavy crude oil consumption demand will complement the industry landscape.
Positive outlook towards the chemical industry including ammonia and methanol will also positively influence growth.
We believe increasing demand for clean fuel energy will be affected by:
● Stringent government regulation towards Desulphurization of Petroleum Products
● Deteriorating crude oil quality
● Transportation & Storage Issues
It is within these
industries that 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 the existing natural
gas pipeline networks, thus bypassing the high cost of dedicated hydrogen pipelines in order 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. (https://www.nrel.gov/docs/fy13osti/51995.pdf).
Hydrogen Fuel Cell Vehicles
One of the most recognized
applications for hydrogen fuel technologies falls within the auto manufacturing and vehicles industries. The three leading manufacturers
of hydrogen fuel cell vehicles (FCVs) are in order, Toyota, Hyundai, and Honda – three internationally recognized companies.
Industry reports cite the need for increased infrastructure, such as fueling stations, for the industry to garner even greater
market acceptance. However, the same report indicates there will be 22.2 million hydrogen fuel cell vehicles sold or leased by
2032, driving revenues upwards of $1.1 trillion. (https://www.researchandmarkets.com/reports/4200873/global-market-for-hydrogen-fuel-cell-vehicles).
Our Technology
Technology
for Making Renewable Hydrogen from Sunlight and Water
Hydrogen
(H2) is the third most abundant element on earth and the cleanest fuel in the universe, (Dresselhaus,
Mildred et al. (May 15, 2003). “Basic Research Needs for the Hydrogen Economy”). Unlike hydrocarbon fuels such
as oil, coal and natural gas where carbon dioxide and other contaminants are released into the atmosphere when used, hydrogen fuel
usage produces only pure water (H2O). Unfortunately, nearly no pure hydrogen exists naturally on earth and therefore
must be extracted from hydrogen containing molecules like water. Historically, the cost of manufacturing hydrogen as an alternative
fuel has been higher than the cost of the energy used to make it. This is the dilemma of the hydrogen economy, and one that we
aim to address.
For
over a century, water electrolysis, splitting water molecules into hydrogen and oxygen due to the passage of electric current,
has been a well-established technology to produce hydrogen. The produced hydrogen combusts into water that can be recycled back
into nature indefinitely. However, in practice, current commercial water electrolysis technologies require considerable energy
from coal-powered electricity and also require ultra-pure water to prevent fouling of the system components. We believe these are
the major barriers to affordable production of hydrogen.
The Perfect
and Sustainable Energy Cycle
As
it turns out, Mother Nature has been making hydrogen using sunlight since the beginning of time by splitting water molecules (H2O)
into its basic elements - hydrogen and oxygen. This is exactly what plant leaves do every day by way of photosynthesis. Since the
produced hydrogen is immediately consumed inside the plant, we cannot simply grow trees to make hydrogen.
If
technology can be developed to mimic photosynthesis to split water into hydrogen, we believe then a truly sustainable, low cost,
and renewable energy cycle can be created to power the earth. However, cost has been the biggest barrier to realizing this vision.
Water Splitting
In
the process of splitting a water molecule, input energy is transferred into the chemical bonds. So in essence, manufactured hydrogen
is simply 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 and 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:
Technology
Water electrolysis
in its simplest form is the transfer of “input electrons” in the following chemical reactions:
● Cathode (reduction): 2H2O + 2e- ® H2 + 2OH-
● 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
PanelTM
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 product as the SunHydrogen Panel which is comprised of the following components:
Our
business and commercialization plan calls for two generations of our panels or generators. The first generation being manufactured
for demonstration utilizes readily available commercial solar cells, coated with a stabilizing polymer and catalysts, and inserted
into our proprietary panels to efficiently and safely split water into hydrogen and oxygen to produce very pure and green hydrogen
that can be piped off the panel, pressurized, and stored for use in a fuel cell to power anything electric.
The
second generation of our panels will feature a nanoparticle-based technology where billions of autonomous solar cells are
electrodeposited onto porous alumina sheets and manufactured in a roll to roll process and inserted into our proprietary panels.
For this generation, we have received multiple patents and we estimate that it will produce hydrogen for less than $4 per kilogram
before pressurization.
Our
team at the University of Iowa led by our CTO Dr. Joun Lee, has reached a milestone of well over 1000 consecutive hours of continuous
hydrogen production utilizing completely immersed solar cells with no external biases achieving simulated production equal to one
year. We believe this to be a record for completely immersed cells. Now ready to take our technology out of the lab, we are working
with several vendors to commercialize and manufacturer our first generation of renewable hydrogen panels that use sunlight and
water to generate hydrogen.
We
anticipate that the SunHydrogen Panel will be a self-contained renewable hydrogen production system that requires only sunlight
and any source of water. As a result, it can be installed almost anywhere to produce hydrogen fuel at or near the point of
distribution, for local use. We believe this model of hydrogen production addresses one of the biggest challenges of using clean
hydrogen fuel on a large scale which is the transportation of hydrogen.
Each
stage of the SunHydrogen Panel can be scaled independently according to the hydrogen demands and length of storage required for
a specific application. A small-scale system can be used to produce continuous renewable electricity for a small house, or a large
scale system can be used to produce hydrogen to power a community.
SunHydrogen
Panel Manufacturing
We
are currently working towards producing 100 demonstration SunHydrogen Panels, that will be used to display our Gen 1 technology
in a number of venues throughout the United States and internationally. We anticipate that these demonstration panels will broaden
national and global awareness of our new, green hydrogen generating technology. With the resulting increased interest, potential
customers of our technology will be able to observe the panels’ operation first hand, and determine potential uses in their
business operations.
Intellectual
Property
On November 14, 2011,
we filed a provisional patent 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.” On March 14, 2017, the part of the patent covering the structural design of Photoelectrochemically Active
Heterostructures (PAH) was granted as the United States Patent No. 9,593,053B1. On April
3, 2018, the part of the patent covering the method for manufacturing PAH was granted as United
States Patent No. 9,593,053B2. The patent protects 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.
An
important aspect of the patented technology 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.
In March of 2015, we
jointly filed a full utility patent application with UCSB for the “Multi-junction artificial photosynthetic cell with enhanced
photovoltages.” The patent covers 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. This patent was granted in Australia in April of 2018, China
and Europe in March of 2019, and in the U.S. in October of 2018.
On December 21, 2016,
we filed jointly with the University of Iowa a patent 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. In September of 2017, we filed the utility patent for this
important invention and prosecution is ongoing.
Strategic Partners
Effective
September 1, 2020, we 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 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, 2021 but may be
extended upon mutual agreement of the parties.
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 and Chemicals Inc. and Air Liquide.
Green
or Renewable hydrogen can be produced through electrolyzers if they are powered by solar or wind. There has been an emergence of
these companies 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 will offer a competitive advantage as it is completely green and renewable
and utilizes 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 18,
2020, we had one (1) full-time employee and several consultants. We have not experienced any work stoppages and we consider relations
with our employees and consultants to be good. Our Chief Technology Officer hired on June 1, 2016 is on a fulltime consulting
basis. Most of our research and development work is performed by the University of Iowa, through a sponsored research agreement.
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 at this time we will 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:
● competition;
● need for acceptance of products;
● ability to continue to develop and extend brand identity;
● ability to anticipate and adapt to a competitive market;
● ability to effectively manage rapidly expanding operations;
● 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, 2020, we have an accumulated deficit, of $75,550,515. For the year ended June 30, 2020 we incurred a net loss of $57,529,338.
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
May of 2012, we completed a lab scale prototype of our technology. This prototype demonstrates hydrogen production from small scale
solar devices coated with our unique, low-cost polymer coating, and submerged in waste water from a pulp and paper mill. 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 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 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 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:
● the price at which others offer comparable services and equipment;
● the extent of our competitors’ responsiveness to customer needs; and
● installation technology.
Competition
in the solar power services industry may increase in the future, partly due to low barriers to entry, as well as from other alternative
energy resources now in existence or developed in the future. Increased competition could result in price reductions, reduced margins
or loss of market share and greater competition for qualified personnel. 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. Our only officer is employed on “at will” basis. Accordingly, 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 the sponsored research agreement with the University of Iowa which is set to terminate August 31, 2021.
If we are unable to extend the terms of the agreements, we could suffer delays in product development or other operational difficulties
which could have a material adverse effect on our results of operations.
There is
substantial doubt about our ability to continue as a going concern.
Our
independent public accounting firm in their report dated September 23, 2020 included
an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital
becoming available. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time. Our ability to continue as a going concern ultimately is dependent on our ability
to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating
efficiencies and, ultimately, to achieve profitable operations. As a result, our financial statements do not reflect any adjustment
which would result from our failure to continue to operate as a going concern. Any such adjustment, if necessary, would materially
affect the value of our assets.
An occurrence of an uncontrollable
event such as the covid-19 pandemic may negatively affect our operations.
The occurrence of an
uncontrollable event such as the COVID-19 pandemic may negatively affect our operations. The COVID-19 pandemic has resulted in
social distancing, travel bans and quarantine, and this has limited and may continue to limit access to our facilities by our management,
support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and development
of our products but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to
comply with our filing obligations with the Securities and Exchange Commission, and our ability to raise capital on favorable terms,
or at all.
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.
There is
a large number of authorized but unissued shares of capital stock available for issuance, which may result in substantial dilution
to existing shareholders.
Our
articles of Incorporation authorized the issuance of up to 5,000,000,000 shares of common stock, par value $0.001 and 5,000,000
shares of preferred stock, par value $0.001, of which 2,156,132,155 shares of common stock and no shares of preferred stock are
outstanding as of September 18, 2020. Our Board of Directors has the ability to authorize the issuance of an additional 2,843,867,845
shares of common stock and 5,000,000 shares of preferred stock without shareholder approval. Any such issuance will result in substantial
dilution to existing shareholders. In addition, the availability of such a large number of capital stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.
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, if any, in the market value of our shares of common stock.
There can be no assurance that shares of our common stock will appreciate in value or even maintain the price at which our stockholders
have purchased their shares.
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. The issuance of additional securities in the future will dilute the percentage ownership of then
current stockholders.
Item 2. Properties.
Our
principal office address is 10 E. Yanonali, 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”
Securities
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 September 18,
2020, our common stock was held by 178 stockholders of record.
Dividend Policy