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, 2022
☐
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.
(Exact name of registrant as specified in its charter)
10 E. Yanonali St., Suite 36Santa Barbara,
CA93101
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including
area code 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 an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ 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 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 registrant as of the last business
day of its most recently completed second fiscal quarter was approximately $145,969,723.
The number of shares of registrant’s common stock outstanding,
as of October 7, 2022 was 4,271,749,146.
DOCUMENTS INCORPORATED BY
REFERENCE
None
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 9
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Mine Safety Disclosures 14
PART II
Item 6. [Reserved.] 16
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 18
Item 8. Financial Statements and Supplementary Data 18
Item 9A. Controls and Procedures 19
Item 9B. Other Information. 19
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 19
PART III
Item 10. Directors, Executive Officers and Corporate Governance 20
Item 11. Executive Compensation 22
Item 14. Principal Accountant Fees and Services 25
Item 15. Exhibit and Financial Statement Schedules 26
SIGNATURES 28
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.
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 emit carbon dioxide and other harmful pollutants into the atmosphere.
However, naturally occurring elemental hydrogen is rare – so rare, in fact, that today about 95% of hydrogen is produced from steam
reforming of natural gas (Source: US Department of Energy, Hydrogen Fuel Basics). This process is both economically and environmentally
unsound.
The SunHydrogen solution offers
an efficient and cost-effective way to produce truly green hydrogen using sunlight and any source of water. Our core technology is a self-contained,
nanoparticle-based hydrogen generator that mimics photosynthesis to split water molecules, resulting in hydrogen. By optimizing the science
of water electrolysis at the nano-level, we believe we have developed a low-cost method to potentially produce environmentally friendly
renewable hydrogen.
We believe renewable hydrogen has already proven
itself to be a key solution in helping the world meet climate targets, 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. Additionally, because our process directly uses the electrical charges
created by sunlight to generate hydrogen, our nanoparticle technology does not rely on grid power or require the costly power electronics
that conventional electrolyzers do.
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 three laboratories – our independent laboratory in Coralville, Iowa, the SunHydrogen laboratory at the University of
Iowa, and the Singh laboratory at University of Michigan.
A longtime development partner
to SunHydrogen, The Iowa research team has worked over the past several years to lead the scale-up of our technology.
We started 2022 with the addition of an additional
research and development laboratory to fuel our goal of scaling up our nanoparticle-based green hydrogen technology. The Coralville, Iowa
laboratory space has enabled us to hire several new senior engineers and chemists and accelerate our developmental targets toward commercialization.
Led by Chief Scientific Officer Dr. Syed Mubeen
and Director of Technology Dr. Joun Lee, the Iowa research team is focused on building tandem photoelectrosynthetic heterostructures (nanoparticle-based
tandem semiconductor units) and evaluating their manufacturability at scales relevant for commercialization. This involves porous substrate
fabrication and development of SunHydrogen’s two proprietary semiconductor nanoparticle units within these porous substrates (dual
junction devices).
1
In the past year, the Iowa team has met several
key developmental milestones in the path to achieving a production-quality prototype of our nanoparticle technology, including the following:
In June 2022, we announced that we achieved successful
fabrication of one of our two proprietary semiconductor units at production-quality prototype scale. The Iowa team thoroughly tested its
ability for hydrogen production using sunlight and water containing organics derived from biomass resources.
In this announcement, we also shared that persisting
supply chain challenges have delayed fabrication of our second proprietary semiconductor unit at production-quality prototype scale. However,
the Iowa research team has identified alternate solutions to successfully fabricate our second proprietary nanoparticle semiconductor
unit at production-quality prototype scale. These solutions include pairing one of the SunHydrogen’s
proprietary semiconductor unit on Silicon Heterojunction solar cells, Perovskite solar cells, or CdTe-based solar cells. The Iowa team
recently had success in pairing one of SunHydrogen’s proprietary semiconductor units with Silicon and Perovskite cells and demonstrated
solar hydrogen production. The team is currently optimizing this alternate approach to maximize solar-to-hydrogen efficiency using
device housing developed by SunHydrogen’s industry partners. Moving forward, the team will develop novel deposition chemistry
that is vendor independent for growing the second semiconductor unit while working with other solar cells in parallel. Solar-to-hydrogen
efficiency for both the approaches will be evaluated using devices fabricated in prototype relevant scales.
Outside of our central research and development
hub in Iowa, we’ve entered into a sponsored research agreement with the University of Michigan and further expanded our industrial
partnerships across the U.S., Germany, South Korea, and Japan. Our current industrial partners include: SCHMID Group of Germany; MSC Co.
LTD of South Korea; Geomatec of Japan; Ionomr Innovations of British Columbia; Chromis Technologies of New Jersey; Optimum Anode of California;
and RuC2N of South Korea.
By diversifying our commercialization strategy
in this way, we have been able to form relationships with industrial partners who are specialized in individual components of our technology
such as electroplating, substrate processing and catalyst/membrane integration.
SCHMID Group will focus
on the design and engineering of our generator housing as we continue scaling our technology to larger dimensions. InRedox and MSC Co.
LTD are focused on substrate manufacturing and electroplating chemistries, respectively. Geomatec is also working to facilitate our transition
to large-scale substrate manufacturing.
We are working with Ionomr
Innovations and Chromis Technologies to integrate both proton exchange membranes (PEM) and anion exchange membranes (AEM) into our proprietary
substrates and evaluate performance metrics for sustainable hydrogen production.
2
With our newest partners, Optimum Anode and RuC2N,
we are working to achieve successful catalyst integration and identify the best catalyst for hydrogen and oxygen production.
Led by Dr. Nirala Singh, one of the lead inventors
on SunHydrogen Patent No. 9,593,053B1, the University of Michigan team is focused on understanding the requirements of the generator housing
and optimizing and testing potential oxygen evolution and hydrogen evolution electrocatalysts to accelerate scaleup and increase efficiency
of photoelectrochemically active heterostructures. In the past year, they have demonstrated deposition of oxygen evolution and hydrogen
evolution catalysts through atomic layer deposition and tested these materials for their ability to catalyze oxygen evolution and hydrogen
evolution. The hydrogen evolution catalysts match the best performing catalysts and can be deposited on our solar cell materials with
low thickness to mitigate parasitic light absorption. The atomic layer deposited oxygen evolution catalyst did not match the necessary
metrics for further evaluation. However, using a sputtering technique, they synthesized an oxygen evolution electrocatalyst that can match
the state-of-the-art oxygen evolution catalysts in the open literature. With these two catalysts, the solar cell voltage provided upon
illumination is sufficient to produce hydrogen at high rates. These catalysts are being integrated with the systems used at University
of Iowa.
University of Michigan also
identified membrane-to-light absorber integration strategies to help optimize the generator housing dimensions, in collaboration with
InRedox. They evaluated the voltage losses in various potential systems to identify the most promising configurations and eliminate configurations
that would result in significant energy losses. The most promising systems were sent to Ionomr Innovations and Chromis Technologies to
integrate membranes for testing of energy losses and stability. A model to scale up to multi-wafer systems was developed and is being
validated. This model incorporated the entire system including generator housing, oxygen evolution catalyst, and hydrogen evolution catalyst
and also helps identify the most important components for further increasing hydrogen production efficiency.
Looking ahead to the final months of 2022, we continue
making steady progress toward the developmental targets we initially set for the year, which include:
● Successful integration of membranes at production-quality prototype scales
● Successful integration of catalysts at production-quality prototype scales
● Successful testing and demonstration of production-quality prototype units
We have a dedicated scientific and executive team, a growing number
of respected industrial partners, and we will continue doing our best to push past any setbacks or supply chain challenges that come our
way.
Additionally, we are well-capitalized to begin
pursuing strategic investments in the hydrogen space. We are actively pursuing opportunities for investment and acquisition of complimentary
hydrogen technologies, and we are fortunate to have the resources to maximize our impact in this fast-growing industry.
Market Opportunity
Hydrogen generation is projected
to become a $1 trillion per year market by 2050 (Source: Goldman Sachs, Carbonomics: The clean hydrogen revolution). Current fossil
fuels can’t sustain future energy requirements environmentally or economically, and hydrogen fuel technologies are being adopted
across all sectors as the world moves toward renewable alternatives.
Over 110 countries have set
goals to achieve net-zero emissions by 2050, and as governments are looking to clean energy sources like hydrogen to help them meet their
targets (Source: United Nations, The race to zero emissions, and why the world depends on it). It is estimated that nearly 25%
of global energy will come from clean hydrogen alone by 2050 (Source: Goldman Sachs, Green Hydrogen: The next transformational driver
of the Utilities industry).
In the US, California is leading
the way in hydrogen strategies, with more fuel cell passenger vehicles on the road than any other state and one of the largest hydrogen
refueling station networks in the world (Source: Sierra Nevada Ally, Hydrogen Fuel Cell Vehicles are Building Momentum in California).
Globally, over 320 green hydrogen production demonstration projects have been announced, and governments around the world have put forth
ambitious strategies to utilize hydrogen and fuel cell technologies across all sectors of the economy including transportation, feedstock
and industrial heat use (Source: International Energy Agency, Hydrogen Projects Database).
3
Existing Market Growth
In
August 2022, The Inflation Reduction Act, which allots $369 billion to renewable energy and climate projects, was signed into law in the
US, and it is already reshaping the hydrogen market and the larger clean energy market as we know it. “Among its features, the law
has a 10-year extension of solar and wind tax credits and incentives to support new technology, with hydrogen and energy storage set to
be the greatest beneficiaries,” according to Morningstar’s chief US market strategist Dave Sekera (Source: Markets Insider,
Clean energy stocks are set to be the big winners of the sweeping Inflation Reduction Act just signed by Biden, Morningstar says).
Specifically, the Act includes a new tax credit
that will award up to $3/kg for low carbon hydrogen, with exact credit amounts to be determined by calculating a given project’s
greenhouse gas emissions (Source: S&P Global, Hydrogen tax credits preserved in new US Inflation Reduction Act).
The Inflation Reduction Act’s passage also
followed a summer of surging gas prices and increased demand for gasoline. As supply chain challenges and geopolitical conflicts continue
to affect fuel prices globally, the hydrogen market is rallying support and interest from consumers and governments alike.
An
additional factor currently driving the global hydrogen market is the need to reduce sulfur content in petroleum products. 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. Particularly, there is a growing demand for petroleum products from developing countries. Hydrogen is used in various
refining processes including hydrocracking and hydrodesulfurization to crack bigger molecules into lighter ones and produce more usable
products.
For all these reasons and
more, we believe our renewable hydrogen-producing technology possesses significant early market opportunity, especially as innovation
and infrastructure continue to develop.
Hydrogen Mobility
The auto manufacturing and vehicle industries are
among the most recognized applications for hydrogen fuel technologies. According to a 2022 study by Information Trends, close to 44,000
hydrogen fuel cell vehicles had been sold by year-end 2021 since their sales first began. Historically, sales have been held back due
to the lack of a solid hydrogen refueling infrastructure, but the numbers are projected to rise quickly, and fuel cell vehicles are gaining
momentum around the world. In another study, Information Trends projected that close to 600,000 hydrogen fuel cell buses and minibuses
will be in service by 2035 (Source: Information Trends, Global Market for Hydrogen Fuel Cell Buses).
In California, labor leaders and CEOs
of some of the world’s leading auto and energy companies including Toyota, Hyundai, Chevron, Shell, and more are urging Governor
Gavin Newsom to invest in hydrogen to meet climate goals. The joint letter, published in August 2022, calls on Newsom to allocate $300
million in the state budget to fund the final construction of 1,000 hydrogen fueling stations statewide in the next decade (Source: California
Hydrogen Coalition, Labor Leaders, CEOs Call on Governor Newson to Invest in Hydrogen to Meet Climate Goals).
Additionally,
hydrogen has emerged as an ideal solution for a myriad of mobility-related applications beyond fuel cell vehicles.
In a 2022
report from the Ocean Conservancy, researchers concluded that green hydrogen-based fuels are the best option to transition the shipping
industry away from fossil fuels. “Producing green hydrogen-based fuels can kickstart the transition to new shipping fuels along
promising green corridor routes within the U.S. and can make key down payments that will drive further investment in renewable energy
and feed the demand for climate action within the global transportation sector,” said Daniel Hubbell, shipping emissions campaign
manager for Ocean Conservancy (Source: Ocean Conservancy, Green Hydrogen-Based Fuels are the Best Option to Transition the Shipping
Industry Away from Fossil Fuels, New Report Finds).
4
In the
long-haul trucking industry, hydrogen fuel cells present a zero-emission solution where battery-electric vehicles would be “too
heavy for the job” (Source: Truck News, Hydrogen fuel cells ready for work in work trucks). According to speakers at the
2022 Green Truck Summit, however, hydrogen fuel cells may also be well-suited for work trucks that make shorter-term journeys. “Very
high utilization vehicles, to go zero emission, absolutely need hydrogen,” said Craig Knight, CEO of Hyzon Motors. “The sweet
spot for fuel cells is the dead zone for diesel engines. These are the vehicles that stop and start all the time. These are the vehicles
that spend so much time on idle. These are the vehicles with massive PTO loads or refrigeration,” Knight continued. “So, the
best use cases are drayage, refrigerated trucks, concrete trucks, garbage trucks – all these things with the significant auxiliary
loads.” (Source: Truck News, Hydrogen fuel cells ready for work in work trucks).
In August 2022, Germany introduced
the first-ever rail line to be entirely run on hydrogen-powered trains. “Fourteen hydrogen trains powered by fuel cell propulsion
will exclusively run on the route in Bremervörde, Lower Saxony,” CNN reported. The trains have a range of 1,000 kilometers,
meaning they can run for an entire day on the network on a single tank of hydrogen, and a hydrogen filing station has already been established
on the route (Source: CNN, The world’s first hydrogen-powered passenger trains are here).
Hydrogen is even powering
factory forklifts for commerce leaders like Walmart and Amazon: In April 2022, Walmart purchased hydrogen from Plug Power to fuel as many
as 9,500 machines across the retailer’s fulfillment and distribution centers (Source: Bloomberg, Walmart Will Run Forklifts on
‘Green’ Hydrogen in Plug Power Deal). Amazon and Plug Power entered a similar agreement in August 2022, with Plug Power
providing Amazon with 10,950 tons of liquefied hydrogen per year that will be used to fuel transportation and building operations starting
in 2025 (Source: Forbes, Amazon To Buy Plug Power’s ‘Green’ Hydrogen In Deal with $2.1 Billion Stock Option).
Along with fuel for forklifts, Amazon may also use hydrogen to power a range of vehicles used in delivery operations, including long-haul
trucks, the article stated.
Whether in traditional vehicles,
marine ships, long-haul trucks, trains, or even factory forklifts, it is clear that hydrogen has already made a significant mark on the
mobility industry, and we only expect it to become more prolific as governments continue to support the development of relevant infrastructure
that the hydrogen future calls for.
Our Technology
Technology for Making Renewable Hydrogen
from Sunlight and Water
Powered by solar energy, billions
of our microscopic nanoparticles split apart water at the molecular level, extracting hydrogen for use as a clean energy source and leaving
behind only clean oxygen as a byproduct. This process is similar to what happens inside a plant cell during photosynthesis: Each Photoelectrosynthetically
Active Heterostructures (or PAH) nanoparticle is a microscopic machine, composed of multiple layers enabling the solar electrolysis reaction
to take place.
Water Splitting
In the process of splitting
a water molecule, input energy is transferred into the chemical bonds. Essentially, manufactured hydrogen serves as a carrier or battery-like
storage of the input energy. If the input energy is from fossil fuels, such as oil and gas, then carbon fossil fuel energy is simply transferred
into hydrogen. If the input energy is renewable, such as solar or wind, then new and clean energy is stored in hydrogen.
5
While the concept of water
splitting is very appealing, the following industry-wide 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 process of photosynthesis, directly producing hydrogen and oxygen without the need for costly intermediate power
conversions, they can be housed in very low-cost reactors. To facilitate the commercial use of our self-contained particle technology,
we are developing a modular system that will enable the onsite daily production and storage of hydrogen for any-time use in electricity
generation.
We refer to our potential
product as the SunHydrogen Panel which is comprised of the following components:
6
In the process of optimizing our nanoparticles
to be efficient and only use earth abundant materials (an ongoing process), we experimented with
commercially available triple junction solar cells to perform tests with our generator housing and other components. Through this
experimentation, our discovery led us to believe that we could bring a system (Gen 1) to market utilizing these readily available cells
while our nanoparticles are still being optimized. While these solar cells also absorb sunlight and produce the necessary charge for splitting
the water molecules into hydrogen and oxygen, their efficiency is low, thus we have made the strategic decision to focus on our NanoParticle
strategy (Gen 2) and use the Gen 1 hydrogen generators for proof of concept purposes only.
Our business and commercialization
plan utilizes our second generation of hydrogen panels featuring the nanoparticle-based technology where billions of autonomous solar
cells are electrodeposited onto protective porous sheets and manufactured in a roll to roll process or wafer process and inserted into
our proprietary panels. For this generation, we have received multiple patents and our target cost of hydrogen production is $2.50 per
kilogram before pressurization.
In addition to our sponsored
research agreements with the University of Iowa and University of Michigan, we are working with a growing group of specialized industrial
partners to help commercialize our renewable hydrogen panels that use sunlight and water to generate hydrogen. Our current industrial
partners include: SCHMID Group of Germany; MSC Co. LTD of South Korea; Geomatec of Japan; Ionomr Innovations of British Columbia; Chromis
Technologies of New Jersey; Optimum Anode of California; and RuC2N of South Korea.
SCHMID Group will focus
on the design and engineering of our generator housing as we continue scaling our technology to larger dimensions. InRedox and MSC Co.
LTD are focused on substrate manufacturing and electroplating chemistries, respectively. Geomatec is also working to facilitate our transition
to large-scale substrate manufacturing. Ionomr Innovations and Chromis Technologies are working to integrate both proton exchange membranes
(PEM) and anion exchange membranes (AEM) into our proprietary substrates and evaluate performance metrics for sustainable hydrogen production.
With Optimum Anode and RuC2N, we are working to achieve successful catalyst integration and identify the best catalyst for hydrogen and
oxygen production.
Intellectual Property
On November 14, 2011, we filed
a provisional application with the U.S. Patent and Trademark Office to protect the intellectual property rights for “Photoelectrosynthetically
Active Heterostructures” A year later on November 14, 2012, we filed a non-provisional application claiming priority to the provisional
application. On March 14, 2017, a first patent covering the structural design of Photoelectrosynthetically Active Heterostructures (PAH)
was granted as United States Patent No. 9,593,053B1. A divisional application claiming priority to the foregoing applications was filed,
and on April 3, 2018, a second patent covering the method for manufacturing PAH was granted as United States Patent No. 9,593,053B2. These
patents protect the Company’s proprietary design and manufacturing method of a self-contained solar-to-hydrogen device made up of
billions of solar-powered water-splitting nanoparticles, per square centimeter. These nanoparticles are separated by a protective coating
that prevents corrosion during extended periods of hydrogen production. The aim of producing these nanoparticles is to achieve high solar
-to-hydrogen conversion efficiency at low cost. These patents expire on November 14, 2032.
An important aspect of the
patented technology referred to in the preceding paragraph is the integrated structures of high-density arrays of nano-sized solar cells
as part of hydrogen production nanoparticles. The technology enables manufacturing of ultra-thin sheets for solar hydrogen production,
requiring substantially less material as compared to conventional solar cells used in rooftop power applications.
On March 21, 2014, we jointly filed a provisional
application with the University of California, Santa Barbara for the “Multi-junction artificial photosynthetic cell with enhanced
photovoltages.” Thereafter, we filed a non-provisional application on March 16, 2015 and a corresponding PCT Application on March
17, 2015. These applications cover our semiconductor designs to enhance the photovoltages of the nano-sized solar cells in the PAH structures.
The semiconductor designs stacking multiple junctions inside the PAH structures would be an efficient and economical solution for the
photovoltaic and the photoelectrochemical industries. Patents were granted in Australia in April of 2018, China and Europe in March of
2019, and in the U.S. as United States Patent No. 10,100,415 in October of 2018. A patent application is currently pending in India. This
patent expires on October 21, 2036.
On September 26, 2016, we
filed jointly with the University of Iowa a provisional application for “Integrated Membrane Solar Fuel Production Assembly”
to protect the intellectual property for our generator housing system that safely separates oxygen and hydrogen in the water-splitting
process without sacrificing efficiency. This device houses the water, the solar particles/cells and is designed with inlets and outlets
for water and gases. Utilizing a special architecture that integrates membranes for separating the oxygen side from the hydrogen side,
proton transport is increased which is the key to safely increasing solar-to-hydrogen efficiency. On September 26, 2017, we filed a PCT
Application that was later nationalized in the U.S. on March 26, 2019. The U.S. patent application for this important invention is pending
and prosecution is ongoing.
7
Strategic Partners
As of October 1, 2022, we
have renewed our sponsored research agreement with the University of Iowa. In the event the research agreement is terminated by the sponsor,
the sponsor shall pay all costs accrued by the University as of the date of termination, including non-cancellable obligations. This term
of the research agreement runs through September 30, 2023.
As of October 1, 2022, the
sponsored research agreement with the University of Michigan has been extended through September 30, 2023.
In February 2021, we entered
into a cooperation agreement with SCHMID Group of Freudenstadt, Germany. Due to delays associated with supply chain challenges brought
on by the Covid-19 pandemic, the cooperation agreement was extended to fully complete the work scope with no additional cost to the company.
Through the collaboration, we identified key manufacturing needs in the areas of electroplating chemistries, substrate processing and
membrane and catalyst integration that require collaboration with specialized industry partners. To address these scale-up challenges,
we have since adopted a more diversified scale-up strategy. Our work with SCHMID Group continues with a narrowed concentration. SCHMID
Group will focus on the design and engineering of our generator housing as we continue scaling our technology to larger dimensions.
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. Key players in the traditional hydrogen production
industry include Linde, Air Liquide, Air Products, Praxair, and more.
At this time, however,
we view our primary competition as companies that have developed or are currently developing renewable hydrogen production
technology. Green or renewable hydrogen can be produced through electrolyzers if the electrolyzers are powered by renewable energy
sources, such as solar or wind. Some of these companies include:
Plug Power: Plug Power (Stock symbol: PLUG) is engaged in
the development of hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity.
The company is currently building green hydrogen plants to produce at least 70 tons of liquid green hydrogen daily by the end of
2022 and 500 tons daily by 2025.
NEL Hydrogen: NEL Hydrogen (Stock symbol: NLLSF) delivers solutions to produce,
store, and distribute hydrogen from renewable energy. The company’s hydrogen solutions cover the entire value chain from
hydrogen production technologies to hydrogen fueling stations, enabling industries to transition to green hydrogen.
Fusion
Fuel: Fusion Fuel (Stock symbol: HTOO) has developed a modular solar to hydrogen solution, combining proven solar concentration
technology with a proprietary micro-electrolyzer that allows it to produce zero-emissions green hydrogen at highly competitive
costs. The company sells its HEVO-Solar technology to customers interested in producing their own green hydrogen. It also develops
company-owned green hydrogen farms.
ITM Power: ITM Power (Stock symbol: ITMPF) designs, manufactures, and integrates
electrolyzers based on proton exchange membrane technology to produce green hydrogen using renewable electricity and tap water. ITM
Power works with strategic partners including Linde, Shell, Snam, Hyundai, and Honda to scale its impact and industrial reach.
McPhy:
McPhy (Stock symbol: MCPHY) specializes in the design, production and integration of high pressure alkaline electrolyzers and
hydrogen stations. McPhy has five development, engineering and production sites in France, Italy, and Germany, and it is backed by
solid and constantly-evolving European industrial foundations.
8
If not powered by renewable
sources, electrolyzers require external electricity most likely created by coal, gas or oil. We believe that our process when fully developed
may potentially offer a competitive advantage as we anticipate it will be fully renewable and utilize no external power other than the
sun. However, it should be noted that the renewable hydrogen market is rich with competitors, like the companies mentioned above, who
have already successfully commercialized green hydrogen production technologies. We anticipate that existing leaders will continue to
hone the efficiency of their products and drive down cost of green hydrogen per kilogram, thus creating a more competitive, challenging
environment for emerging, not-yet-commercialized technologies such as our own.
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 1, 2022, we
have 7 full-time employees and several consultants. We have not experienced any work stoppages and we consider relations with our employees
and consultants to be good. Our research and development work is performed at our Coralville, Iowa laboratory, as well as with the University
of Iowa and the University of Michigan through sponsored research agreements, and in collaboration with our industrial partners.
Item 1A. Risk Factors.
Risks related to our business and industry
Our limited operating history does not afford
investors a sufficient history on which to base an investment decision.
We were formed in February
2009 and are currently developing a new technology that has not yet gained market acceptance. There can be no assurance that we will ever
operate profitably or that we will have adequate working capital to meet our obligations as they become due.
Investors must consider the
risks and difficulties frequently encountered by early stage companies, particularly in rapidly evolving markets. Such risks include the
following:
● 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.
9
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, 2022, we have
an accumulated deficit of $82,946,019. For the year ended June 30, 2022 we incurred a net income of $90,030,933, due to a non-cash change
in derivatives. 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.
We are currently working to
scale the lab-scale prototypes of our nanoparticle technology to larger, commercial-scale prototypes. However, we have not completed a
large-scale commercial prototype of our technology and are uncertain at this time when completion of a commercial scale prototype will
occur. Although the lab scale prototype demonstrates the viability of our technology, there can be no assurance that we will be able to
commercialize our technology.
Our revenues will be dependent upon acceptance
of our products by the market; the failure of which would cause us to curtail or cease operations.
We believe that virtually
all of our revenues will come from the sale or license of our products. As a result, we will continue to incur substantial operating losses
until such time as we are able to develop our product and generate revenues from the sale or license of our products. There can be no
assurance that businesses and customers will adopt our technology and products, or that businesses and prospective customers will agree
to pay for or license our products. Our technology and product, when fully developed, may not gain market acceptance due to various factors
such as not enough cost savings between our method of producing hydrogen and other more conventional methods. In the event that we are
not able to significantly increase the number of customers that purchase or license our products, or if we are unable to charge the necessary
prices or license fees, our financial condition and results of operations will be materially and adversely affected.
10
We anticipate that we will face intense
competition, and many of our competitors have substantially greater resources than we do.
We operate in a competitive
environment that is characterized by price fluctuation and technological change. We anticipate that we will compete with major international
and domestic companies. Some of our current and future potential competitors may have greater market recognition and customer bases, longer
operating histories and substantially greater financial, technical, marketing, distribution, purchasing, manufacturing, personnel and
other resources than we do. In addition, competitors may be developing similar technologies with a cost similar to, or lower than, our
projected costs. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to
the development, promotion and sales of solar and solar-related products than we can.
Our business plan relies on
sales of our products based on either a demand for truly renewable clean hydrogen or economically produced clean hydrogen. If we fail
to compete successfully, our business would suffer and we may lose or be unable to gain market share. Neither the demand for our product
nor our ability to manufacture at commercial scale have yet been proven.
Because our industry is highly competitive
and has low barriers to entry, we may lose market share to larger companies that are better equipped to weather a deterioration in market
conditions due to increased competition.
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.
Currently, competing methods
of hydrogen production include steam reforming of natural gas or methane, which dominates due to its easy availability and low price;
partial oxidation of petroleum oil; steam gasification of coal; and electrolyzers powered by solar or wind energy. There can be no assurance
that we will be able to compete successfully against current and future competitors. If we are unable to compete effectively, or if competition
results in a deterioration of market conditions, our business and results of operations would be adversely affected.
Our business depends on proprietary technology
that we may not be able to protect and may infringe on the intellectual property rights of others.
Our success will depend, in
part, on our technology’s commercial viability and on the strength of our intellectual property rights. We currently hold patents
in the US, China, Australia, and Europe 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.
11
We may need to acquire licenses
from third parties in order to avoid infringement. Any required license may not be available to us on acceptable terms, or at all.
We could incur substantial
costs in defending ourselves in suits brought against us for alleged infringement of another party’s intellectual property rights
as well as in enforcing our rights against others, and if we are found to infringe, the manufacture, sale and use of our or our customers’
or partners’ products could be enjoined. Any claims against us, with or without merit, would likely be time-consuming, requiring
our management team to dedicate substantial time to addressing the issues presented. Furthermore, the parties bringing claims may have
greater resources than we do.
We do not maintain theft or casualty insurance
and only maintain modest liability and property insurance coverage and therefore, we could incur losses as a result of an uninsured loss.
We do not maintain theft,
casualty insurance, or property insurance coverage. We cannot assure that we will not incur uninsured liabilities and losses as a result
of the conduct of our business. Any such uninsured or insured loss or liability could have a material adverse effect on our results of
operations.
If we lose key employees and consultants
or are unable to attract or retain qualified personnel, our business could suffer.
Our success is highly dependent
on our ability to attract and retain qualified scientific, engineering and management personnel. We are highly dependent on our CEO, Timothy
Young, and our development team at the University of Iowa. The loss of this valuable resource could have a material adverse effect
on our operations. There can be no assurance that they will remain associated with us. Our management’s efforts will be critical
to us as we continue to develop our technology and as we attempt to transition from a development stage company to a company with commercialized
products and services. If we were to lose Mr. Young or the services of the development team at the university or any other key employees
or consultants, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies.
The loss of strategic alliances used in
the development of our products and technology could impede our ability to complete our product and result in a material adverse effect
causing the business to suffer.
We pursue strategic alliances
with other companies in areas where collaboration can produce technological and industry advancement. For example, we have entered into
a sponsored research agreement with the University of Michigan which expired on September 30, 2022. The Company has extended its’
agreement as of October 1, 2022.
The COVID-19 pandemic may negatively affect
our operations.
The COVID-19 pandemic is having
widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The continuing
impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on our business, operations and
our future financial performance.
The impact of the pandemic
on our business, operations and future financial performance could include, but is not limited to, that:
● We may experience delays in our product development;
12
Risks relating to our common stock
There is a limited trading market for our
common stock.
Our common stock is not listed
on any national securities exchange. Accordingly, investors may find it more difficult to buy and sell our shares than if our common stock
was traded on an exchange. Although our common stock is quoted on the OTC Pink, it is an unorganized, inter-dealer, over-the-counter market
which provides significantly less liquidity than the Nasdaq Capital Market or other national securities exchange. Further, there is limited
trading in our common stock. These factors may have an adverse impact on the trading and price of our common stock.
Our common stock could be subject to extreme
volatility.
The trading price of our common
stock may be affected by a number of factors, including events described in the risk factors set forth in this report, as well as our
operating results, financial condition and other events or factors. In addition to the uncertainties relating to future operating performance
and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors,
many of which are beyond our control, may have a negative effect on the market price of our common stock. In recent years, broad stock
market indices, in general, and smaller capitalization companies, in particular, have experienced substantial price fluctuations. In a
volatile market, we may experience wide fluctuations in the market price of our common stock and wide bid-ask spreads. These fluctuations
may have a negative effect on the market price of our common stock. In addition, the securities market has, from time to time, experienced
significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations
may also materially and adversely affect the market price of our common stock.
We anticipate that our issuance of common
stock upon conversion of outstanding convertible notes will result in dilution to our stockholders.
As of June 30, 2022, we have
outstanding $827,500 in convertible notes that are convertible into common stock at variable conversion prices (see Note 5 to the financial
statements included in this report). We anticipate that our issuance of common stock upon conversion of outstanding convertible notes
will result in dilution to holders of our common stock, which may have a negative effect on the price of our common stock. In addition,
as of June 30, 2022, we have outstanding warrants to purchase 94,895,239 shares of common stock and options to purchase 157,695,711 shares
of common stock, and our issuance of shares of common stock upon exercise of outstanding warrants or options may result in additional
dilution to our stockholders.
We have never paid common stock dividends
and have no plans to pay dividends in the future, as a result our common stock may be less valuable because a return on an investor’s
investment will only occur if our stock price appreciates.
Holders of shares of our common
stock are entitled to receive such dividends as may be declared by our Board of Directors. To date, we have paid no cash dividends on