Item 7. Management’s Discussion and Analysis
of Financial Conditions and Results of Operations.
Certain statements in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” below, and elsewhere in this annual report, are not related
to historical results, and are forward-looking statements.
Forward-looking statements
present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly
to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such
words such as “may,” “will,” “should,” “could,” “expects,” “plans,”
“intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential”
or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements,
or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such
forward-looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between actual
results and those reflected in these statements, except as may be required under applicable law
Subsequent written and oral
forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary
statements and risk factors set forth below and elsewhere in this annual report, and in other reports filed by us with the SEC.
You should read the following
description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included
in this Annual Report beginning on page F-1.
Overview
SunHydrogen
is developing breakthrough technologies to make, store and use green hydrogen in a market that Goldman Sachs estimates to be worth $12
trillion by 2050. Our patented SunHydrogen Panel technology, currently in development, uses sunlight and any source of water to produce
low-cost green hydrogen. Similar to solar panels that produce electricity, our SunHydrogen Panels will produce green hydrogen. Our vision
is to become a major technology supplier in the new hydrogen economy. By developing, acquiring and partnering with other critical technologies,
we intend to enable a future of emission-free vehicles, ships, data centers, aircrafts and more.
Results of Operations for the Year Ended June
30, 2024 compared to the Year Ended June 30, 2023
Operating Expenses
For the year ended June 30, 2024, operating expenses
were $5,001,300 compared to $9,267,147, for the year ended June 30, 2023. Operating expenses consist primarily of research and development
expenses and general and administrative expenses incurred in connection with the operation of our business. The decrease of $4,265,847
in operating expenses was primarily due to, a decrease in non-cash stock compensation, a decrease in salary expenses, and a decrease in
research and development costs.
16
Other Income/(Expenses)
Other income and (expenses) for the year ended
June 30, 2024, were $(4,879,903) compared to $10,242,126 for the year ended June 30, 2023. The net decrease of $15,122,029 in other income
and (expenses) was the result of an increase in unrealized loss on related party equity investments of $7,349,102, an increase in dividend
expense of $85,940, an increase in realized loss of $169,389, a decrease in gain on derivative liability of $9,204,345, offset by an increase
in investment income of $864,115, an increase in capital gain on sale of vehicle of $55,166, an increase in realized gain on redemption
of marketable securities of $35,080, a decrease in loss on settlement of derivative liability of $664,627, and a decrease in interest
expense of $67,759.
Net Income (Loss)
For the year ended June 30,
2024, our net loss was $9,881,203, compared to net income of $974,979 for the year ended June 30, 2023. The majority of the decrease in
net income of $10,856,182, was related primarily to the decrease in gain on change of derivative liability, increase in unrealized loss
on investments, offset by the decrease in non-cash stock compensation.
Liquidity and Capital Resources
Liquidity is the ability of
a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing
basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts
payable and capital expenditures.
As of June 30, 2024, we had
a working capital surplus of $42,386,683, compared to a working capital surplus of $47,689,381 as of June 30, 2023. This decrease in working
capital surplus of $5,302,698 was primarily due to a decrease in marketable securities redeemed, and the change in fair value of a short-term
investment.
Cash flow used in operating
activities was $1,842,726 for the year ended June 30 2024, compared to $4,262,085 for the year ended June 30, 2023. The decrease of $2,419,359
in cash used by operating activities was primarily due to an increase in non-cash expense offset by a decrease in net loss. The Company
has had no revenues during the years ended June 30, 2024 and 2023.
Cash provided by investing
activities for the year ended June 30, 2024 was $2,920,237, compared to $11,101,386 for the year ended June 30, 2023. The decrease of
$8,181,149 in cash provided by investing activities was primarily due to a decrease in the net redemption of marketable securities offset
by a decrease in the purchase of related party investments, the purchase of a related party convertible note, and an increase in the redemption
of short-term investments in corporate securities.
Cash provided by financing
activities during the year ended June 30, 2024 was $781,295, compared to $2,665,203 for the year ended June 30, 2023. The decrease in
cash provided by financing activities was primarily due to a decrease in net proceeds from purchase agreements.
We have historically obtained
funding from investors, through private placements and registered offerings of equity and debt securities. Management believes that the
Company will be able to continue to raise funds through the sale of its securities to its existing shareholders and prospective new investors
which will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the Company to
continue to develop its core business. There can be no assurance that we will be able to continue raising the required capital for our
operations on terms and conditions that are acceptable to us, or at all. If we are unable to obtain sufficient funds, we may be forced
to curtail and/or cease our operation.
Off-Balance Sheet Arrangements
We do not have any off-balance
sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, result
of operations, liquidity or capital expenditures.
17
Critical Accounting Policies
Our discussion and analysis
of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property,
plant and equipment, intangible assets, deferred tax assets and fair value computation using the Binomial lattice valuation pricing model.
We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated
future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described
items, are reasonable.
Use of Estimates
In accordance with accounting
principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates
and assumptions relate to recording, useful lives and impairment of tangible and intangible assets, derivatives, accruals, income taxes,
stock-based compensation expense, binomial model inputs and other factors. Management believes it has exercised reasonable judgment in
deriving these estimates. Consequently, a change in conditions could affect these estimates.
Fair Value of Financial Instruments
Fair value of financial instruments,
requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate
that value. As of June 30, 2024 and 2023, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative
liability approximate the fair value because of their short maturities.
Recently Adopted Accounting Pronouncements
Management adopted recently
issued accounting pronouncements during the year ended June 30, 2024, as disclosed in the Notes to the financial statements included in
this report.
Item 7A. Quantitative and Qualitative Disclosure
About Market Risk.
Not required for a smaller
reporting company.
Item 8. Financial Statements.
All financial information
required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
18
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
Our management, with the participation
of our CEO and our Acting CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and
Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our CEO and our Acting
CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report, in light of the material
weaknesses described below, were not effective to ensure that information required to be disclosed is made known to management and
others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us
in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified
in the Commission’s rules and forms and (ii) accumulated and communicated to our management, including our CEO and Acting CFO, or
persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, including
our CEO and Acting CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or
fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the
material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements
included in this Annual Report have been prepared in accordance with generally accepted accounting principles. Accordingly, management
believes that the financial statements included in this report fairly present in all material respects our financial condition, results
of operations and cash flows for the periods presented.
Management’s Annual Report on Internal
Control over Financial Reporting.
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities
Exchange Act, as amended. Our internal control over financial reporting is a process designed to provide reasonable, but not absolute,
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have
identified the following material weakness:
In making its assessment of
internal control over financial reporting, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework (2013). Management has concluded that, at June 30, 2024, the Company’s
internal control over financial reporting were not effective based on those criteria.
The weaknesses and the related
risks are not uncommon in a company of our size because of the limitations in the size and number of staff. To address these material
weaknesses, we intend to undertake remediation measures to address the material weaknesses described in this Report, including implementing
procedures pursuant to which we can ensure segregation of duties and hire additional resources to ensure appropriate review and oversight.
This annual report does not
include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of
the SEC that permit the Company to provide only management’s report in this annual report.
Changes in Internal Controls
There has been no change in
our internal control over financial reporting that occurred during the quarter ended June 30, 2024 that has materially affected or is
reasonably likely to materially affect our internal control over financial reporting.
Item 9B. Other Information.
During the quarter ended June
30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule
10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections.
Not applicable.
19
PART III
Item 10. Directors, Executive Officers and
Corporate Governance.
The following table sets forth
information about our executive officers and directors:
Name Age Position
Woosuk Kim 59 Chief Operating Officer and Director
Timothy Young – President, CEO, Acting
CFO and Chairman of the Board of Directors
Tim Young is an accomplished
executive with over fifteen years of management experience in media and Internet technology companies. Mr. Young was appointed President,
CEO and Chairman of the Company in August 2009. Mr. Young was appointed Acting CFO in 2010.
Through his outreach to the
public and to leaders in the renewable energy field, Mr. Young has bolstered the company’s visibility as a key player in the developing
green hydrogen market and rallied a strong investor base. Mr. Young’s proven fundraising ability, along with his leadership and
direction of SunHydrogen’s long-term and short-term goals and strategies, has enabled the company to engage international industrial
partners, attract top industry scientists, and most importantly continue to hit milestones toward commercializing its nanoparticle-based
green hydrogen technology.
Prior to founding SunHydrogen,
Mr. Young demonstrated a track record of success in management and leadership positions bringing new products to the market in the digital,
cable and broadcast media industries. Mr. Young was the President of Rovion, a digital advertising
company, where he increased revenues through a channel sales strategy that included companies such as Clear Channel, Disney, CBS, and
Fox Television and bolstered the company’s technical capabilities through strategic acquisitions.
Prior
to Rovion, Mr. Young enjoyed a decade-long career at Time Warner Inc. where he served as Vice President and Regional Vice President of
various divisions including America Online and Time Warner Cable. During his tenure, Mr. Young built some of the highest performing sales
organizations at Time Warner with responsibilities ranging from product development and marketing to staff training and leadership development.
He led the California and Hawaii sales teams which accounted for over $200 million in revenues with 250 sales and marketing personnel.
Mr. Young’s track record
of success and over fifteen years of management and leadership experience bringing new products to the market qualifies him to be a board
member of the Company.
20
Woosuk Kim – Chief Operating Officer
and Director
Woosuk Kim has served as our
chief operating officer and director since April 1, 2021. From May 2011 to December 2019, Mr. Kim was senior vice president, head of M&A
group at SK Innovation in Seoul, South Korea, responsible for expanding core businesses and developing new business opportunities in the
renewable energy sector through cross border acquisitions and joint venture transactions. From August 2009 to May 2011 Mr. Kim was vice
president, corporate development at SK Telekom. From August 2006 to March 2008, Mr. Kim was chief financial officer at Axon Financial
Services in New York. From July 1998 to August 2006, Mr. Kim was executive director at Morgan Stanley in New York, responsible for developing
and operating multi-billion dollar asset-backed securities funding platforms, investor marketing, and the corporate treasury function
for Discover Card. He received an MBA from Cornell University and a BA from the University of Chicago.
Mr. Kim’s financial
industry knowledge and experience qualify him to serve on our board of directors.
Directors are elected at our
annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their successors are elected
and qualified.
Family Relationships
There are no family relationships
among our executive officers and directors.
Board Leadership Structure and Role in Risk
Oversight
Although we have not adopted
a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined
that it is in the best interests of the Company and its shareholders to combine these roles. Currently, our Chief Executive Officer also
serves as Chairman of the Board. Due to the small size and early stage of the Company, we believe it is currently most effective to have
the Chairman and Chief Executive Officer positions combined.
Involvement in Certain Legal Proceedings
During the past ten years,
none of our directors, executive officers, promoters, control persons, or nominees has been:
21
Committees of the Board
Due to the small size of the
Company and its Board of Directors, we currently have no audit committee, compensation committee or nominations and governance committee
of our board of directors. We do not have an audit committee financial expert.
Code of Ethics
We have adopted a Code of
Ethics that applies to all of our directors, officers and employees. A copy of the Code of Ethics can be obtained without charge upon
request to Timothy Young, CEO and President, BioVentures Center, 2500 Crosspark Road, Coralville, IA 52241 and is also being incorporated
by reference herein. Any waiver of the provisions of the Code of Ethics for executive officers and directors may be made only by the Board
of Directors. Any such waivers will be promptly disclosed to our shareholders.
Changes in Nominating Procedures
None.
Insider Trading Policies
We have not adopted an
insider trading policy governing the purchase, sale, and other dispositions of our securities by directors, senior management, and employees.
Item 11. Executive Compensation
The table below sets forth
the compensation earned by our named executive officers during the last two fiscal years.
(1) Mr. Young and Mr. Kim were awarded restricted stock on November 8, 2022.
Outstanding Equity Awards at Fiscal Year-End
The following table discloses
information regarding outstanding equity awards granted or accrued as of June 30, 2024, for our named executive officers.
Outstanding Equity Awards
Option Awards Stock Awards
Woosuk Kim - - - - - -
Director Compensation
The following table sets forth
compensation information regarding the Company’s non-employee directors in fiscal 2024:
Mark R. Richardson $ 42,000 $ - - - - - - - $ 42,000
22
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
The following table sets forth
certain information, as of September 23, 2024, concerning the number of shares of our common stock owned by: (i) each of our directors;
(ii) each of our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding
shares of common stock.
We believe that all persons
named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
A person is deemed to be the
beneficial owner of securities that can be acquired by him within 60 days of September 23, 2024, upon the exercise or conversion of options,
warrants or convertible securities. Each beneficial owner’s percentage ownership is determined by assuming that options, warrants
or convertible securities that are held by him, but not those held by any other person, and which are exercisable within 60 days of September
26, 2024 or have been exercised and converted.
Shares Beneficially Held Percentage of Common Stock(1)
All officers and directors as a group (3 persons) 227,494,499 4.3 %
* Less than 1%
(2) Includes 125,812,947 shares underlying options.
The address for each of the officers and directors is c/o SunHydrogen, Inc. BioVentures Center, 2500 Crosspark Road, Coralville, IA 52241
Securities authorized for issuance under equity
compensation plans
On January 23, 2019, our Board
adopted the Company’s 2019 Equity Incentive Plan (the “2019 Plan”). The purpose of the 2019 Plan is to promote the success
of the Company and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain
and reward selected employees and other eligible persons. The maximum number of shares of the Company’s common stock that can be
issued under the 2019 Plan is 300,000,000. The 2019 Plan has been approved by stockholders.
On
January 27, 2022, our Board adopted the Company’s 2022 Equity Incentive Plan (the “2022 Plan”). The stated purpose of
the 2022 Plan is to attract and retain the types of employees, consultants, and directors who will contribute to the Company’s long-range
success. The maximum number of shares of the Company’s common stock that can be issued under the 2022 Plan is initially 400,000,000.
The number of shares automatically increases on the first day of the Company’s fiscal year beginning in 2023 so that
the total number of shares issuable will at all times equal fifteen percent (15%) of the Company’s fully diluted capitalization
on the first day of the Company’s fiscal year, unless the Board adopts a resolution providing that the number of shares issuable
under the 2022 Plan shall not be so increased.
The following table sets forth information
about our equity compensation plans as of June 30, 2024.
(a) (b)
23
Item 13. Certain Relationships and Related
Transactions, and Director Independence.
Certain Relationships and Related Transactions
As of June 30, 2024, the Company
owed $45,829 to Timothy Young for a loan payable for the payment of operating expenses in prior periods.
Director Independence
The Board has determined that
Mr. Richardson was an independent director within the meaning of NASDAQ Rule 5605(a)(2). He resigned effective September 30, 2024.
Item 14. Principal Accountant Fees and Services.
Audit Fees
The aggregate fees billable
to us by our principal accounting firm during the years ended June 30, 2024 and 2023 for the audit of our annual financial statements
and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years, were approximately $66,725 and $32,000, respectively.
Audit-Related Fees
We incurred fees of $0 and
$0 for the years ended June 30, 2024 and 2023, respectively, to our principal accountant for assurance and related services that are reasonably
related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees” above.
Tax Fees
We did not incur fees for
services rendered to us for tax compliance, tax advice, or tax planning by our principal accountant for the fiscal years ended June 30,
2024 and 2023.
All Other Fees
Our current policy is to not
engage M&K CPAS, PLLC to provide, among other things, bookkeeping services, appraisal or valuation services, or international audit
services. The policy provides that we engage M&K CPAS, PLLC to provide audit, and other assurance services, such as review of SEC
reports or filings.
24
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(1) Financial statements.
The SunHydrogen, Inc. financial statements are
included in Item 8. Financial Statements and Supplementary Data.
(2) Financial statement schedules: None.
(3) Exhibits
Exhibit Description
3.9 Articles of Merger (incorporated by reference to 8-K filed June 15, 2020)
25
10.3 Form of Warrant (incorporated by reference to 8-K filed February 26, 2021)
10.11 Purchase Agreement (incorporated by reference to 8-K filed June 3, 2024)
23.1* Consent of M&K CPAS, LLC
* Filed herewith.
** Furnished herewith.
*** Indicates management contract or compensatory plan or arrangement.
**** Portions of this agreement have been omitted.
Item 16. Form 10-K Summary.
None.
26
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SUNHYDROGEN, INC.
Date: September 30, 2024 By: /s/ Timothy Young
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
/s/ Timothy Young Chief Executive Officer, President September 30, 2024
/s/ Woosuk Kim Director September 30, 2024
Woosuk Kim
27
SUN HYDROGEN, INC.
TABLE OF CONTENTS
Index to Financial Statements Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 2738) F-2
Statements of Operations for the Years Ended June 30, 2024 and 2023 F-4
Statements of Cash Flows for the Years Ended June 30, 2024 and 2023 F-6
Notes to Financial Statements F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Sun Hydrogen, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance
sheets of Sun Hydrogen, Inc. (the Company) as of June 30, 2024 and 2023, and the related statements of operations,
shareholders’ equity (deficit), and cash flows for each of the years in the two-year period ended June 30, 2024, and the
related notes (collectively referred to as the “ financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its
operations and its cash flows for each of the years in the two-year period ended June 30, 2024 in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is
a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions
on the critical audit matter or on the accounts or disclosures to which it relates.
Investments
As discussed in Note 8 to the financial statements,
the Company has investments in a related party, consisting of both equity securities and bonds. The investment is subject to fair value
measurement, with the equity securities marked to market in accordance with the applicable financial reporting standards. Additionally,
during the fiscal year, the Company converted the bonds held in the related party into equity securities of the same entity.
Addressing these matters required the application
of heightened professional skepticism in evaluating management’s assumptions regarding the valuation of both the equity securities and
the conversion of the bonds.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2020
The Woodlands, TX
September 30, 2024
F-2
SUNHYDROGEN, INC.
BALANCE SHEETS
ASSETS
CURRENT ASSETS
OTHER ASSETS
INVESTMENT
Convertible notes receivable, related party - 3,000,000
PROPERTY & EQUIPMENT
INTANGIBLE ASSETS
Domain, net of amortization of $5,315 and $5,286, respectively - 29
Trademark, net of amortization of $827 and $714, respectively 315 428
LIABILITIES, PREFERRED STOCK SUBJECT TO REDEMPTION AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
LONG TERM LIABILITIES
Loan payable, related party - 36,731
TOTAL LONG TERM LIABILITIES - 36,731
COMMIMENTS AND CONTINGENCIES (SEE NOTE 9)
SHAREHOLDERS’ EQUITY
Preferred Stock, $0.001 par value; 5,000,000 authorized preferred shares - -
The accompanying notes are an integral part of these financial statements
F-3
SUNHYDROGEN, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2024 AND 2023
YEARS ENDED
REVENUE $ - $ -
OPERATING EXPENSES
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) (5,001,300 ) (9,267,147 )
OTHER INCOME/(EXPENSES)
Gain on sale of vehicle 55,166 -
Unrealized Gain(loss) on equity securities, related party (6,693,501 ) 655,601
Realized gain(loss) on redemption of marketable securities 35,080 -
Gain (Loss) on settlement of derivative liability - (664,627 )
Gain (Loss) on change in derivative liability - 9,204,345
BASIC EARNINGS (LOSS) PER SHARE $ (0.00 ) $ 0.00
DILUTED EARINGINS (LOSS) PER SHARE $ (0.00 ) $ 0.00
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
The accompanying notes are an integral part of these audited financial statements
F-4
SUNHYDROGEN, INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY/(DEFICIT)
FOR THE YEARS ENDED JUNE 30, 2024 AND 2023
Additional
Preferred stock Common stock Paid-in Accumulated
Shares Amount Mezzanine Shares Amount Capital Deficit Total
Contributed capital-gain on conversion of bond - - - - - 85,815 - 85,815
Additional
Preferred stock Common stock Paid-in Accumulated
Shares Amount Mezzanine Shares Amount Capital Deficit Total
The accompanying notes are an integral part of these audited financial
statements
F-5
SUNHYDROGEN, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2024 AND 2023
Years Ended
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustment to reconcile net income (loss) to net cash
(used in) provided by operating activities
Conversion of stock options for services - 32,875
Stock based compensation expense for services 1,307,984 22,372
Cancellation of restricted stock awards (618,000 ) -
Realized loss on sale of investment 188,040 -
Gain on exchange of vehicle (55,166 ) -
Loss on settlement of debt and derivative - 664,669
Net (Gain) Loss on change in derivative liability - (9,204,387 )
Change in assets and liabilities :
Prepaid expense - 2,526
Accrued interest on convertible notes - 66,284
CASH FLOWS FROM INVESTING ACTIVITIES
Marketable securities purchased - (81,971,636 )
Purchase of certificate of deposit (5,000,000 ) -
Redemption of certificate of deposit 5,000,000 -
Convertible note receivable interest income, related party (53,487 ) -
Purchase of investment, related party - (7,000,000 )
Purchase of long term convertible note, related party - (3,000,000 )
Redemption of short term investments in corporate securities 3,000,000 -
Purchase of research and development equipment (3,016 ) -
Purchase of vehicle (23,260 ) -
Purchase of tangible assets - (33,814 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of related party note payable (97,630 ) (68,291 )
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Taxes paid $ -
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Fair value of preferred stock in exchange for convertible note $ - $ 17,475,309
Reclassification of related party accrued salary to loan payable $ - $ 211,750
Conversion of Series C Preferred shares to common stock $ 210,000 $ -
Exchange of convertible note receivable, related party $ 3,000,000 $ -
The accompanying notes are an integral part of these audited financial
statements
F-6
SUNHYDROGEN, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023
1. ORGANIZATION AND LINE OF BUSINESS
Organization
SunHydrogen, Inc. (the “Company”)
was incorporated in the state of Nevada on February 18, 2009. The Company, based in Coralville, IA began operations on February 19, 2009.
Line of Business
The company is currently developing a novel solar-powered
nanoparticle system that mimics photosynthesis to separate hydrogen from water. We intend for technology of this system to be used for
the production of renewable hydrogen to produce renewable electricity and hydrogen for fuel cells and other applications where hydrogen
is used.
SunHydrogen is developing
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies
of SunHydrogen, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes
are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation
of the financial statements.
Cash and Cash Equivalent
The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents.
The following table provides detail of our cash
and cash equivalents.
U.S. Treasury obligations - 1,100,000
The U.S. Treasury bills and the U.S. Treasury
obligations have a credit quality indicator of AA/A.
Concentration risk
Cash includes amounts deposited in financial institutions
in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times throughout the year, the Company may maintain cash balances
in certain bank accounts in excess of the FDIC limits. As of June 30, 2024, the cash balance in excess of the FDIC limits was $37,125,346.
The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.
F-7
Marketable Securities
Corporate bonds and U.S. Treasuries are considered
current, based on their liquidity. The Company considers corporate bonds (“bonds”) as investments due to their ratings. The
bonds are rated based on their default probability, health of the corporation’s debt structure, as well as the overall health of
the economy. The bonds fall into the category as investments if they have a rating of AAA and BBB. We consider our investments held to
maturity and we believe there are no other than temporary declines in fair value. Our investments are recorded at historical cost.
Use of Estimates
In accordance with accounting
principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates
and assumptions relate to useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based compensation
expense, fair value of financial instruments, and other factors. Management believes it has exercised reasonable judgment in deriving
these estimates. Consequently, a change in conditions could affect these estimates.
Property and Equipment
Property and equipment
are stated at cost and are depreciated using straight line over its estimated useful lives.
Computers and peripheral equipment 5 Years
Vehicle 5 Years
During the year ended
June 30, 2024, the Company traded a vehicle used for a mobile office and transportation of equipment. The Company recognized a gain of
$55,166.
The Company recognized
depreciation expense of $35,247 and $36,535 for the year ended June 30, 2024 and 2023, respectively.
Intangible Assets
The Company has patent applications to protect
the inventions and processes behind its proprietary bio-based back-sheet, a protective covering for the back of photovoltaic solar modules
traditionally made from petroleum-based film. Intangible assets that have finite useful lives continue to be amortized over their useful
lives.
Less accumulated amortization (5,315 ) (5,286 )
Domain-net $ - $ 29
Less accumulated amortization (827 ) (714 )
The Company recognized amortization expense of
$6,708 and $7,033 for the year ended June 30, 2024 and June 30, 2023, respectively.
F-8
Net Earnings (Loss) per
Share Calculations
Net earnings (Loss) per share dictates
the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing