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.
17
Subsequent written and oral
forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary
statements and risk factors set forth below and elsewhere in this annual report, and in other reports filed by us with the SEC.
You should read the following
description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included
in this Annual Report beginning on page F-1.
Overview
At
SunHydrogen, 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 renewable 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. Lastly, our planned scalable system configuration of many individual
hydrogen-generating panels ensures redundancy, security and stability.
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 renewable 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.
Additionally,
in parallel to the ongoing development of our own technology, we may begin pursuing synergistic strategic investments in the hydrogen
space. SunHydrogen is committed to furthering renewable hydrogen technology to grow the hydrogen ecosystem, and we are actively pursuing
opportunities for investment and acquisition of complimentary hydrogen technologies.
Results of Operations for the Year Ended June
30, 2025 compared to the Year Ended June 30, 2024
Operating Expenses
For the year ended June 30, 2025, operating expenses
were $5,816,192 compared to $5,001,300, for the year ended June 30, 2024. Operating expenses consist primarily of research and development
expenses and general and administrative expenses incurred in connection with the operation of our business. The increase of $814,892 in
operating expenses was primarily due to an increase in salary expenses and an increase in research and development costs offset by a decrease
in professional fees.
18
Other Income/(Expenses)
Other income and (expenses) for the year ended
June 30, 2025, were $(2,410,115) compared to $(4,879,903) for the year ended June 30, 2024. The net increase of $2,469,788 in other income
and (expenses) was the result of a decrease in dividend expense of $37,506, a decrease in unrealized loss on related party equity investments
of $2,592,099, a decrease in realized loss of $172,440, an increase in unrealized loss on change in fair value of short-term investments
$30,615, and a decrease in interest expense of $3,932 offset by a decrease in investment income of $276,558, a decrease in capital gain
on sale of vehicle of $55,166, and a decrease in realized gain on redemption of marketable securities of $35,080.
Net Income (Loss)
For the year ended June 30,
2025, our net loss was $8,226,307, compared to a net loss of $9,881,203 for the year ended June 30, 2024. The majority of the decrease
in net loss of $1,654,896, was related primarily to the decrease in other income (expenses) offset by the increase in operating expenses
as explained above.
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, 2025, we had
a working capital surplus of $37,048,679, compared to a working capital surplus of $42,386,683 as of June 30, 2024. This decrease in working
capital surplus of $5,338,004 was primarily due to a decrease in cash and equity securities, related party offset by an increase in short-term
investments.
Cash flow used in operating
activities was $3,647,278 for the year ended June 30 2025, compared to $1,842,726 for the year ended June 30, 2024. The increase of $1,804,552
in cash used by operating activities was primarily due to a decrease in non-cash expenses, an increase in prepaid expenses, other receivables,
and accrued expenses, and decrease in accounts payable. The Company had no revenues during the years ended June 30, 2025 and 2024.
Cash provided by (used in)
investing activities for the year ended June 30, 2025 was $(2,924,988), compared to $2,920,237 for the year ended June 30, 2024. The decrease
of $5,845,225 in cash provided by (used in) investing activities was due to the net purchase of short-term investments of $2,907,988 and
purchase of vehicles of $17,000 compared to $3,000,000 in the redemption of short-term investments in corporate securities, $53,487 for
the purchase of a related party convertible note, $5,000,000 for purchase of certificate of deposit, $5,000,000 for redemption of certificate
of deposit, purchase of research and development equipment for $3,016, and purchase of vehicles for $23,260.
Cash provided by financing
activities during the year ended June 30, 2025 was $2,156,096, compared to $781,295 for the year ended June 30, 2024. The increase in
cash provided by financing activities was primarily due to an increase 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.
19
Off-Balance Sheet Arrangements
We do not have any off-balance
sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, result
of operations, liquidity or capital expenditures.
Critical Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related
to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Binomial valuation
option 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 useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based
compensation expense, Binomial lattice valuation model inputs, derivative liabilities 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, 2025 and June 30, 2024, the amounts reported for cash, investment in affiliate,
accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.
We
adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established
a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures
about fair value measurements.
Recently Issued Accounting
Pronouncements
Management
reviewed currently issued pronouncements during the year ended June 30, 2025, and does not believe that any recently issued, but not yet
effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
Pronouncements are disclosed in notes to the financial statements.
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.
20
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, due to the material weaknesses disclosed below, our disclosure controls and procedures as of the end of the period
covered by this report 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 principal executive officer and acting principal financial officer, 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 management assessed the effectiveness of our internal control over financial reporting as of June 30, 2025.
In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control-Integrated Framework (2013). 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
weaknesses:
Changes in Internal Controls
There has been no change in
our internal control over financial reporting that occurred during the quarter ended June 30, 2025 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, 2025, 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.
21
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
David Raney 70 Director
Dr. Syed Mubeen Jawahar Hussaini 43 Chief Technology Officer
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
renewable 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
renewable 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.
David Raney – Director
Mr. Raney has been a director
of the Company since October 2024. Mr. Raney, most recently founded and served as chief executive officer of the Texas Hydrogen Alliance
(“Alliance”), a non-profit trade organization that brings together policymakers, regulators, industry leaders and innovators
to advocate for policies that advance the hydrogen economy, from 2022 to 2023. He currently serves as Executive Director Emeritus of Alliance.
Prior to that, Mr. Raney served as a corporate executive for Toyota Motor North America from 2014 to 2021. Mr. Raney holds over 40 years
of experience in the transportation industry, where he routinely served as a technical liaison between corporate R&D and executive
teams and environmental and safety federal and state government regulators. Namely, he has held leadership roles at prominent automotive
companies such as Deere & Company, Saab-Scania of America, General Motors, American Honda Motor Company and Toyota Motor North America.
Mr. Raney’s energy industry experience qualifies him to serve on our board of directors.
22
Dr. Syed Mubeen Jawahar Hussaini – Chief
Technology Officer
Prior to his appointment as
chief technology officer in February 2025, Dr. Mubeen served as the Company’s chief scientific officer from January 2022. Since
April 2021, he has also been Associate Professor, Department of Chemical and Biochemical Engineering, at the University of Iowa. From
August 2014 to March 2021, Dr. Mubeen was Assistant Professor, Department of Chemical and Biochemical Engineering, at the University of
Iowa. As the Company’s chief scientific officer, Dr. Mubeen has led the strategic direction and execution of the Company’s
technology development, focusing on advancing the Company’s Gen 2 and Gen 3 hydrogen panel systems. Dr. Mubeen received his Ph.D.
in Chemical and Environmental Engineering from the University of California, Riverside, followed by postdoctoral research at the University
of California, Santa Barbara.
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:
23
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 is available on our website at www.sunhydrogen.com
and 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.
24
Outstanding Equity Awards at Fiscal Year-End
The following table discloses
information regarding outstanding equity awards granted or accrued as of June 30, 2025, for our named executive officers.
Outstanding Equity Awards
Option Awards Stock Awards
Director Compensation
The following table sets forth
compensation information regarding the Company’s non-employee directors in fiscal 2025:
Mark Richardson $ - $ - $ - - - - - - $ -
25
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
The following table sets forth
certain information, as of September 10, 2025, concerning the number of shares of our common stock owned by: (i) each of our directors
and executive officers; (ii) all of our named executive officers as a group; 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 10, 2025, 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
10, 2025 or have been exercised and converted.
Shares Beneficially Held Percentage of Common Stock(1)
David Raney - 0.0 %
All officers and directors as a group (3 persons) 259,462,947 4.6 %
* Less than 1%
(2) Includes 125,812,947 shares underlying options.
(3) Includes 63,000,000 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 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.
26
The following table sets forth information
about our equity compensation plans as of June 30, 2025.
(a) (b)
Item 13. Certain Relationships and Related
Transactions, and Director Independence.
Certain Relationships and Related Transactions
As of June 30, 2025 and 2024,
the Company owed $0 and $45,829, respectively to Timothy Young for a loan for the payment of operating expenses in prior periods.
Director Independence
The Board has determined that
Mr. Raney is an independent director within the meaning of NASDAQ Rule 5605(a)(2).
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, 2025 and 2024 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 $69,525 and $66,725, respectively.
Audit-Related Fees
We incurred fees of $0 and
$0 for the years ended June 30, 2025 and 2024, 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,
2025 and 2024.
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.
27
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)
28
10.2 Form of Warrant (incorporated by reference to 8-K filed February 26, 2021)
10.7 Purchase Agreement (incorporated by reference to 8-K filed June 3, 2024)
14.1* Code of Ethics
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.
29
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 12, 2025 By: /s/ Timothy Young
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 12, 2025
Timothy Young (Principal Executive Officer) Acting Chief Financial Officer
(Principal Financial and Accounting Officer), and Chairman
/s/ David Raney Director September 12, 2025
David Raney
30
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, 2025 and 2024 F-4
Statements of Cash Flows for the Years Ended June 30, 2025 and 2024 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, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the
two-year period ended June 30, 2025 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 Management Override of Controls and Investments 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 7 to the financial statements,
the Company has investments in a related party, consisting of equity securities. The investment is subject to fair value measurement,
with the equity securities marked to market in accordance with the applicable financial reporting standards.
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 12, 2025
F-2
SUNHYDROGEN, INC.
BALANCE SHEETS
ASSETS
CURRENT ASSETS
Equity securities, related party - 4,101,402
Interest receivable 25,223 -
OTHER ASSETS
PROPERTY & EQUIPMENT
Computers and peripherals - 11,529
INTANGIBLE ASSETS
Trademark, net of amortization of $942 and $827, respectively 200 315
LIABILITIES, PREFERRED STOCK SUBJECT TO REDEMPTION AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
Loan payable, related party - 45,829
COMMIMENTS AND CONTINGENCIES - -
SHAREHOLDERS’ EQUITY
Preferred Stock, $0.001 par value; 5,000,000 authorized preferred shares - -
The accompanying notes are an integral part of these audited condensed financial statements.
F-3
SUNHYDROGEN, INC.
STATEMENTS OF OPERATIONS
Year Ended June 30,
REVENUE $ - $ -
OPERATING EXPENSES
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) (5,816,192 ) (5,001,300 )
OTHER INCOME/(EXPENSES)
Gain on sale of vehicle - 55,166
Realized gain(loss) on redemption of marketable securities - 35,080
BASIC & DILUTED EARNINGS (LOSS) PER SHARE $ (0.00 ) $ (0.00 )
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
The accompanying notes are an integral part of these audited condensed financial statements.
F-4
SUNHYDROGEN, INC.
STATEMENTS OF SHAREHOLDER’S
DEFICIT
FOR THE YEARS ENDED JUNE 30, 2025 AND 2024
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
The accompanying notes are an integral part of these audited condensed financial statements.
F-5
SUNHYDROGEN,
INC.
STATEMENTS
OF CASH FLOWS
Year Ended June 30,
CASH FLOWS FROM OPERATING ACTIVITIES:
Cancellation of restricted stock awards - (618,000 )
Realized loss on sale of investment - 188,040
Investment income earned on short-term investments (58,857 ) -
Gain on exchange of vehicle - (55,166 )
Change in assets and liabilities :
Interest receivable on certificate of deposit (25,223 ) -
Prepaid expense (72,313 ) -
CASH FLOWS FROM INVESTING ACTIVITIES
Short-term investments purchased (8,007,988 ) -
Short-term investments sold 5,100,000 -
Convertible note receivable interest income, related party - (53,487 )
Purchase of certificate of deposit - (5,000,000 )
Redemption of certificate of deposit - 5,000,000
Purchase of research and development equipment - (3,016 )
Redemption of short-term investments in corporate securities - 3,000,000
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,924,988 ) 2,920,237
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of related party note payable (45,829 ) (97,630 )
Net proceeds from common stock purchase agreements 2,201,925 878,925
Net increase (decrease) in cash and cash equivalents (4,416,170 ) 1,858,806
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Taxes paid $ - $ -
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Conversion of Series C Preferred shares to common stock $ 220,000 $ 210,000
Exchange of convertible note receivable, related party $ - $ 3,000,000
Cashless options exercised $ 1,075 $ -
The accompanying notes are an integral part of these audited condensed financial statements.
F-6
SUNHYDROGEN,
INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2025 AND 2024
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 renewable 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. We believe our technology has the potential to be one of – if not the most – economical renewable
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
Basis of Presentation
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 principals 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.
The U.S. Treasury bills have a credit quality
indicator of AA/A.
Short Term Investments
The Company’s short-term investments are
carried at fair value with changes in fair value recognized in net income.
F-7
The following table provides detail of our short-term
investments as of June 30, 2025, which consisted of U.S. Treasury bills with an original maturity of more than three months.
Purchase Date Maturity Date Cost Basis of Investment Fair Value of Investment
During the year ended June 30, 2025, the Company
recognized a gain on change in fair value of short-term investments of $30,615.
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, 2025, the cash balance in excess of the FDIC limits was $33,114,402.
The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.
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 their estimated useful lives.
Computers and peripheral equipment 5 Years
Vehicle 5 Years
The Company recognized