Item 1A. Risk Factors 10
Item 1B. Unresolved Staff Comments 15
Item 1C. Cybersecurity 15
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Mine Safety Disclosures 15
PART II
Item 6. [Reserved.] 17
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 19
Item 8. Financial Statements and Supplementary Data 19
Item 9A. Controls and Procedures 20
Item 9B. Other Information. 20
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 20
PART III
Item 10. Directors, Executive Officers and Corporate Governance 21
Item 11. Executive Compensation 23
Item 14. Principal Accountant Fees and Services 26
PART IV
Item 15. Exhibit and Financial Statement Schedules 27
SIGNATURES 29
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 all 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.
We are developing a technology that we believe has the potential to
offer an efficient and cost-effective way to produce truly green hydrogen using sunlight and any
source of water. Just like a solar panel is comprised of multiple cells that generate electricity, our hydrogen panel encases multiple
hydrogen generators immersed in water. Each hydrogen generator contains billions of electroplated nanoparticles, autonomously splitting
water into hydrogen and oxygen. Our technology has the potential to be one of – if not the most – economical green hydrogen
solutions: Unlike traditional water electrolysis for hydrogen, our process requires no external power other than sunlight and uses efficient
and low-cost materials.
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.
Many of today’s green hydrogen producers transport their product over long distances, so although the hydrogen itself is green,
the delivery and transport infrastructure comes with a high carbon footprint and a significant capital investment. The SunHydrogen solution
is fully self-contained, offering on-site solar hydrogen generation and local distribution to eliminate carbon footprint altogether and
significantly reduce capital investments for transport and delivery.
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 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 our independent laboratory in Coralville, Iowa. Development efforts are also aided by our sponsored
research agreements with the University of Iowa and the University of Michigan, and by our relationships with specialized industry partners.
The
2023 fiscal year saw our Coralville, Iowa laboratory space grow with the addition of talented engineers and chemists, state-of-the-art
equipment, and a demonstration-ready setup fit for presenting our process to new and existing industrial partners.
Led
by Chief Scientific Officer Dr. Syed Mubeen and Director of Technology Dr. Joun Lee, our Iowa 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, our Iowa team has achieved several key milestones toward commercialization. Namely, we have:
(1)
Unveiled the largest version to-date of SunHydrogen’s nanoparticle-based green hydrogen technology, featuring 16-times more hydrogen
generator area than the previous small-scale model. The 1.5 sq. ft. prototype is currently the only self-contained nanoparticle-based
hydrogen generation device of its kind that splits water molecules into high-purity hydrogen and oxygen using the sun’s energy.
(2)
Achieved open circuit photovoltages over 0.9 volts with a single-junction semiconductor unit; open circuit photovoltages over 1.8 volts
with a dual-junction semiconductor unit; and photocurrent densities as high as 13.2 milliamps per square centimeter per substrate with
a single-junction semiconductor unit. These results confirm that SunHydrogen has consistently reached commercializable photovoltages
and photocurrent densities using our nanoparticle units.
While
the above accomplishments provide encouragement that we are on the right track toward our goal of delivering the most affordable green
hydrogen solution, we remain focused on the additional milestones we must meet to reach commercialization.
Foremost,
to achieve commercially-viable solar-to-hydrogen efficiency targets, we require a second junction unit capable of producing photocurrent
densities similar to or higher than our first junction, which we are currently working toward. Our team is currently pursuing multiple
approaches to bolster our operational photocurrent densities, and our next milestone is translating our existing lab-scale success to
larger scales.
In parallel, we are optimizing our panel design to increase hydrogen
production rates and durability while decreasing the cost per kilogram of hydrogen produced. We are working to increase the hydrogen generator
area to panel area ratio, minimize voltage loss, and improve power conversion efficiency.
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 including hydrogen collection efficiency and optimizing and testing potential oxygen evolution
and hydrogen evolution electrocatalysts to accelerate scaleup and increased efficiency of photoelectrochemically active heterostructures.
In
the past year, they identified the most promising configurations to minimize the significant energy losses and produce hydrogen at a
high rate. They further tested these configurations in the Generator Housing with oxygen evolution and hydrogen evolution catalysts synthesized
in the previous year and measured the collection efficiency of hydrogen following its production. The stability of the hydrogen evolution
catalyst and oxygen evolution catalyst synthesized in the previous year were also evaluated for continuous operation in a three-electrode
setup. University of Michigan is developing strategies to mitigate the high series resistance in the device and improved the kinetics
of the oxygen evolution electrocatalyst to lower the overpotentials while maintaining high stability of the catalyst.
University
of Michigan demonstrated the use of the system in the Generator Housing without membranes while maintaining a low crossover of the generated
gases. The elimination of the membrane can assist with reducing capital and processing costs. University of Michigan also tested the
ionic and liquid crossover of the membrane integrated configuration fabricated by partners. They evaluated the ionic conductivity as
well as mechanical, chemical, and electrochemical stability.
To
evaluate the hydrogen collection efficiency, University of Michigan integrated a gas collection system to the Generator Housing. This
system underwent successive modifications to increase efficiency of hydrogen collection process to match the desired values motivated
by technoeconomic analysis. Consequently, a high faradaic efficiency of hydrogen generation process with high hydrogen collection efficiency
was successfully achieved.
University
of Michigan also identified various voltage losses in the Generator Housing and compared with the model values calculated in the previous
year. The oxygen evolution catalyst and series resistance in the device were identified as two major sources of voltage loss.
2
Outside
of our central research and development hub in Iowa and our work with the University of Iowa and the University of Michigan, we have
further expanded our industrial partnerships across the U.S., Germany, South Korea, and Japan.
Our
current industrial partners include: COTEC Corp.; MSC Co. LTD; Chromis Technologies; the
National Renewable Energy Laboratory (NREL); Geomatec; and InRedox. By diversifying our commercialization strategy in this way, we have
formed relationships with industrial partners who are specialized in individual components of our technology such as electroplating,
substrate processing and catalyst/membrane integration.
InRedox
and Geomatec are focused on facilitating our transition to large-scale substrate manufacturing, while MSC Co. LTD is focused on developing
large-scale electroplating chemistries.
With
the National Renewable Energy Agency, we are working to improve the overall power conversion efficiency of our hydrogen panels.
With
COTEC Corp. we are working to reproduce existing lab-scale achievements using industrial electroplating processes. We expect our initial
exploration phase with COTEC to be completed by December 31, 2023. Following this phase, our next step is to produce 1m2
hydrogen panels to be utilized in multiple commercial-scale pilot projects.
We
are working with 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.
We
also recently announced the approval of $3.1M in funding for Project NanoPEC, which brings us together with six partners at the cutting
edge of industry and science in Germany, including: SCHMID Group; Fraunhofer; WAVELABS Solar Metrology Systems GmbH;
ECH Elektrochemie Halle GmbH; Zahner-Elektrik;
and Helmholtz-Zentrum Berlin.
We
believe working with some of the most innovative leaders in German industry and science can accelerate our progress toward commercialization.
Finally,
we remain well-capitalized to pursue strategic investments in the hydrogen space, as evidenced by our November 2022 investment of $10M
in Norway-based TECO2030 ASA.
With
their zero-emission PEM hydrogen fuel cells stacks and modules, TECO2030 ASA is accelerating the
transition to clean energy in the maritime and heavy-duty transportation sectors, and has formed strong relationships with world-leading
companies in the fuel cell industry in the process. Their longtime development partner AVL is the world’s largest independent
company for the development, simulation and testing of powertrain systems. TECO 2030 ASA is also partnered with thyssenkrupp Automation
Engineering, which holds over 100 years of fuel cell experience and €34 billion in revenue in 2021.
Every
day in the US, hundreds of thousands of diesel-powered trucks travel through routes with abundant land and sun. Envision SunHydrogen
panels along and around these highways, producing green hydrogen at and near refueling sites: Our technology would eliminate the need
to transport hydrogen fuel over long distances, lowering the high costs and hydrogen losses that would otherwise happen in long-distance
transport. In the future, we believe our green hydrogen panels along major trucking routes worldwide, together with the proliferation
of TECO 2030 ASA ’s hydrogen fuel cell technology, can make a significant mark on the industry.
While we remain dedicated to our primary goal of developing our nanoparticle
technology to commercialization, we will also seek to further the renewable hydrogen ecosystem through investment in, and acquisition
of, complementary hydrogen technologies. We believe we have the resources to maximize our impact in this fast-growing industry.
3
Additionally,
we believe our recent uplisting to the OTCQB Venture Market will allow us to expose a broader range of investors to our mission of producing
low-cost, truly green hydrogen. With additional compliance and quality standards, the OTCQB provides investors improved visibility to
enhance trading decisions.
Looking
ahead to the upcoming months, we continue making steady progress toward strengthening our operational photocurrent densities, optimizing
our panel design, and engaging quality manufacturing partners that can take our existing lab-scale process to commercial-scale.
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 1,000 green hydrogen production demonstration projects have been announced around
the world, and policy leaders 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: The Hydrogen Council and McKinsey & Company, Hydrogen
Insights 2023).
Existing
Market Growth
As
supply chain challenges and geopolitical conflicts continue to affect fuel prices globally, the hydrogen market is rallying support from
consumers and governments alike.
In
August 2022, The Inflation Reduction Act, which allotted $369 billion to renewable energy and climate projects, was signed into law in
the US. “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 included a 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).
In
the year since the passage of the Inflation Reduction Act, the US has seen additional promising legislation in favor of the adoption
of hydrogen as a replacement for fossil fuels. Most recently, the US Department of Energy released its intent to invest up to an additional
$1 billion to support the Regional Clean Hydrogen Hubs program, an already-$7 billion initiative to create six to ten regional clean
hydrogen hubs across the country (DOE, Biden-Harris Administration to Jumpstart Clean Hydrogen Economy with New Initiative to Provide
Market Certainty and Unlock Private Investment). According to the DOE, America’s growing hydrogen economy has the potential
to add 100,000 net new direct and indirect jobs by 2030 (DOE, DOE’s Pathways to Commercial Liftoff: Clean Hydrogen report).
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.
4
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 2023 study by Information Trends, over 56,000 hydrogen fuel cell vehicles
had been sold by year-end 2022 (Source: Information Trends, Global Market for Hydrogen Fuel Cell Vehicles).
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. Specifically, hydrogen stands to make a significant impact on the heavy-duty,
long-haul trucking industry. Hydrogen-powered trucks and hydrogen refueling stations present a
variety of cost, scalability, and sustainability-related benefits over battery power, according to a recent McKinsey & Company report.
Namely, hydrogen-fueled trucks can refuel faster and carry a lower weight penalty than battery-powered trucks because tanks weigh considerably
less than batteries. And at scale, the infrastructure is less costly to create than e-truck charging infrastructure because it does not
require grid upgrades and has a smaller carbon footprint. Faster refueling speed also means the hydrogen infrastructure can be used by
many more trucks (McKinsey & Company, Unlocking hydrogen’s power for long-haul freight transport).
Additionally,
hydrogen has emerged as an ideal solution for a myriad of mobility-related applications beyond fuel cell cars and trucks.
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).
In
March 2023, French rail transport manufacturing company Alstom announced the debut of North America’s first green hydrogen-powered
train, which began transporting passengers this summer (Smithsonian Magazine, North America’s First Hydrogen-Powered Train Will
Debut This Summer). This follows Germany’s monumental 2022 accomplishment of completing the first-ever rail line to be entirely
run on hydrogen-powered trains. Germany’s hydrogen 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 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). In August 2023, Walmart opened a green hydrogen plant with energy
company Engie at its Quilcura distribution center in Chile, in alignment with its desire to replace lead-acid batteries in forklifts
with hydrogen fuel cells. “We are moving away from lead-acid batteries to reduce the time our associates spend on the battery charge
process, which we expect will now improve up to 80%,” a company spokesperson said (Source: Hydrogen Insight, Walmart replaces
battery-electric forklifts with hydrogen fuel-cell models to reduce charging times).
Amazon
and Plug Power have entered a similar agreement, 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.
5
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.
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- +2 + 2OH-
● Anode (oxidation): 4OH- 2 + 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.
6
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:
1.
The Generator Housing - Our novel device design is the first of its kind to safely separate oxygen and hydrogen in the photoelectrochemical
process, minimizing the sacrifice of solar-to-hydrogen efficiency. This device houses the water and the solar particles/cells and is
designed with inlets and outlets for water and gasses. Utilizing a novel ion-exchange membrane integration strategy for separating the
oxygen from the hydrogen products, efficient ion transport safely enables efficient solar hydrogen production.
2.
The NanoParticle or Solar Cell - Powered by solar energy, billions of our microscopic nanoparticle solar cells 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.
3.
Oxygen Evolution Catalyst - Uniformly applied to the solar cell or nanoparticle, an oxygen evolution catalyst efficiently oxidizes water
molecules to generate oxygen gas. The oxygen evolution catalyst must be robust to withstand long operating hours under acidic and alkaline
conditions.
4.
Hydrogen Evolution Catalyst - Necessary for collecting electrons to reduce protons for generating hydrogen gas, we have identified a
strategy to minimize the use of precious metal-based catalysts and integrated the hydrogen catalyst into our generator system for efficient
solar hydrogen production.
5.
Coating Technologies - Two major coating technologies were developed to protect the nanoparticles and solar cells from photocorrosion
under water: A transparent conductive coating to protect our nanoparticles and solar cells from photocorrosion during the water splitting
process and efficiently transfer charges to catalysts for oxygen and hydrogen evolution reactions; and a polymer combination that protects
the semiconductor solar cells that would otherwise fail in aquatic environments, instead ensuring a long lifetime for solar hydrogen
production.
Our
business and commercialization plan utilizes our 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
our nanoparticle technology, 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: COTEC Corp.; MSC Co. LTD; Chromis Technologies; the National Renewable Energy Laboratory (NREL);
Geomatec; and InRedox. Our project partners through Project NanoPEC include: SCHMID Group; Fraunhofer; WAVELABS
Solar Metrology Systems GmbH; ECH Elektrochemie Halle GmbH; Zahner-Elektrik; and Helmholtz-Zentrum Berlin.
7
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. The last
patent from this international application was granted in India in October 2022. 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.
8
Strategic
Partners
We
are currently engaged in a sponsored research agreement with the University of Iowa. This term of the research agreement runs through
September 30, 2023 but may be extended upon mutual agreement of the parties.
We
are currently engaged in a sponsored research agreement with the University of Michigan. This term of the research agreement runs through
September 30, 2023 but may be extended upon mutual agreement of the parties.
We
have also initiated a research agreement with the National Renewable Energy Laboratory (NREL). This research agreement runs through April
21, 2024, but may be extended upon mutual agreement of the parties.
Additionally,
we are engaged in an ongoing consulting contract with Strategic Analysis, Inc. to aid in further reducing our system cost through techno-economic
research and evaluation.
In
February 2021, we entered into a cooperation agreement with SCHMID Group of Freudenstadt, Germany. 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. 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. Our agreement with SCHMID Group remains open-ended, and we look
forward to ongoing collaboration with SCHMID through Project NanoPEC on the design and engineering of our generator housing.
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.
9
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 2500 Crosspark Road, Coralville IA
52241.
Employees
As
of September 27, 2023, we have 8 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.
10
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, 2023, we have an accumulated deficit of $81,971,040.
For the year ended June 30, 2023 we had net income of $974,979 due to a non-cash change in derivatives. We expect 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.
During the year ended June 30, 2023, the Company received funds through an equity purchase agreement in the net amount of $2,733,494.
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.
11
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.
12
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 is set to terminate September 30, 2023. If we are unable to extend the terms of this agreement, or any of our other
agreements with our partners as described in this report, we could suffer delays in product development or other operational difficulties
which could have a material adverse effect on our results of operations.
The
COVID-19 pandemic may negatively affect our operations.
The
COVID-19 pandemic has had 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;
13
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