# Sunhydrogen, Inc.: Form 10-Q for the period ended Sep 30, 2022

- Company: [Sunhydrogen, Inc.](/companies/hysr.md) (CIK 1481028)
- Form: 10-Q
- Filed: 2022-11-07
- Accepted by EDGAR: Nov 7, 2022, 16:16 ET
- Period: 2022-09-30
- Accession: 0001213900-22-069752
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1481028/000121390022069752/f10q0922_sunhydrogeninc.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1481028/000121390022069752/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2022-07-01 to 2022-09-30 | $305.5k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$638.7k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $23.4k | us-gaap:InterestExpense |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$896.9k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.00 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 4,271,749,146 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-07-01 to 2022-09-30 | −$281.5k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-07-01 to 2022-09-30 | $33.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-09-30 | $25.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $51.7m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $51.9m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $27.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $27.9m | us-gaap:Liabilities |
| Long-term debt | at 2022-09-30 | $827.5k | us-gaap:LongTermDebt |
| Shareholders' equity | at 2022-09-30 | $23.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 21,306 characters.

### Cautionary Statement Regarding Forward-Looking Statements

*The information in this report may contain forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements that are not of historical fact may be deemed to be forward-looking statements. These forward-looking statements involve substantial risks and uncertainties. In some cases you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue”, the negative of the terms or other comparable terminology. Actual events or results may differ materially from the anticipated results or other expectations expressed in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks included from time to time in our reports filed with the Securities and Exchange Commission, or the SEC. These factors may cause our actual results to differ materially from any 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.*

*Unless the context otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company” refer to SunHydrogen, Inc.*

### Overview

At SunHydrogen, our goal is to replace fossil fuels with clean, renewable hydrogen.

Hydrogen is the most abundant chemical element in the universe. When hydrogen fuel is used to power transportation and industry, the only byproduct left behind is pure water, unlike hydrocarbon fuels such as oil, coal and natural gas that emit carbon dioxide and other harmful pollutants into the atmosphere. However, naturally occurring elemental hydrogen is rare – so rare, in fact, that today about 95% of hydrogen is produced from steam reforming of natural gas (Source: US Department of Energy, *Hydrogen Fuel Basics).* This process is both economically and environmentally unsound.

The SunHydrogen solution offers an efficient and cost-effective way to produce truly green hydrogen using sunlight and any source of water. Our core technology is a self-contained, nanoparticle-based hydrogen generator that mimics photosynthesis to split water molecules, resulting in hydrogen. By optimizing the science of water electrolysis at the nano-level, we believe we have developed a low-cost method to potentially produce environmentally friendly renewable hydrogen.

We believe renewable hydrogen has already proven itself to be a key solution in helping the world meet climate targets, and we believe our technology potentially offers solutions to the challenges that the hydrogen future presents, including cost of production and transportation.

Because our process only requires sunlight and water, our technology can be installed near the point of hydrogen use. This eliminates the need for pipelines and trucks that result in high carbon emissions and high capital investment. Additionally, because our process directly uses the electrical charges created by sunlight to generate hydrogen, our nanoparticle technology does not rely on grid power or require the costly power electronics that conventional electrolyzers do. 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 green hydrogen to compete with natural gas hydrogen and gain mass market acceptance as a true replacement for fossil fuels.

Our technology is primarily developed at three laboratories – our independent laboratory in Coralville, Iowa, the SunHydrogen laboratory at the University of Iowa, and the Singh laboratory at University of Michigan.

A longtime development partner to SunHydrogen, The Iowa research team has worked over the past several years to lead the scale-up of our technology. Further, the addition of our Coralville, Iowa laboratory space has enabled us to hire several new senior engineers and chemists and accelerate our developmental targets toward commercialization.

Led by Chief Scientific Officer Dr. Syed Mubeen and Director of Technology Dr. Joun Lee, the Iowa research team is focused on building tandem photoelectrosynthetic heterostructures (nanoparticle-based tandem semiconductor units) and evaluating their manufacturability at scales relevant for commercialization. This involves porous substrate fabrication and development of SunHydrogen’s two proprietary semiconductor nanoparticle units within these porous substrates (dual junction devices).

The Iowa team has successfully met several key developmental milestones in the path to achieving a production-quality prototype of our nanoparticle technology, including the following:

(1) Developed a robust fabrication toolkit to scale porous anodic alumina on transparent conducting oxide substrates in which the tandem nanoparticle units will be fabricated. This achievement aided SunHydrogen’s industry partner InRedox in successfully developing a high-throughput substrate fabrication process.

(2) Developed facile deposition chemistries to fabricate semiconductors, interconnects, and contacts needed for tandem nanoparticle devices. This achievement aided the work of our industry partner MSC Co. LTD, who is supplying SunHydrogen with bulk chemicals for nanoparticle growth.

(3) Successfully fabricated both of our proprietary semiconductor units and demonstrated photocurrents greater than 10 mA/cm2 for each unit and photovoltages greater than 800 mV for each unit in substrates relevant for prototype demonstration.

(4) Demonstrated dual junction devices with photovoltages that exceed the theoretical voltage needed for water-splitting.

In June 2022, we announced that we achieved successful fabrication of one of our two proprietary semiconductor units at production-quality prototype scale. The Iowa team thoroughly tested its ability for hydrogen production using sunlight and water containing organics derived from biomass resources. In this announcement, we also shared that persisting supply chain challenges have delayed fabrication of our second proprietary semiconductor unit at production-quality prototype scale. However, the Iowa research team has identified alternate solutions to successfully fabricate our second proprietary nanoparticle semiconductor unit at production-quality prototype scale. These solutions include pairing one of the SunHydrogen’s proprietary semiconductor unit on Silicon Heterojunction solar cells, Perovskite solar cells, or CdTe-based solar cells. The Iowa team recently had success in pairing one of SunHydrogen’s proprietary semiconductor units with Silicon and Perovskite cells and demonstrated solar hydrogen production. The team is currently optimizing this alternate approach to maximize solar-to-hydrogen efficiency using device housing developed by SunHydrogen’s industry partners. Moving forward, the team will develop novel deposition chemistry that is vendor independent for growing the second semiconductor unit while working with other solar cells in parallel. Solar-to-hydrogen efficiency for both the approaches will be evaluated using devices fabricated in prototype relevant scales.

Outside of our central research and development hub in Iowa, we have entered into a sponsored research agreement with the University of Michigan and further expanded our industrial partnerships across the U.S., Germany, South Korea, and Japan. Our current industrial partners include: SCHMID Group of Germany; MSC Co. LTD of South Korea; Geomatec of Japan; Ionomr Innovations of British Columbia; Chromis Technologies of New Jersey; Optimum Anode of California; and RuC2N of South Korea.

By diversifying our commercialization strategy in this way, we have been able to form relationships with industrial partners who are specialized in individual components of our technology such as electroplating, substrate processing and catalyst/membrane integration.

SCHMID Group will focus on the design and engineering of our generator housing as we continue scaling our technology to larger dimensions. InRedox and MSC Co. LTD are focused on substrate manufacturing and electroplating chemistries, respectively. Geomatec is also working to facilitate our transition to large-scale substrate manufacturing.

We are working with Ionomr Innovations and Chromis Technologies to integrate both proton exchange membranes (PEM) and anion exchange membranes (AEM) into our proprietary substrates and evaluate performance metrics for sustainable hydrogen production.

With our newest partners, Optimum Anode and RuC2N, we are working to achieve successful catalyst integration and identify the best catalyst for hydrogen and oxygen production.

Led by Dr. Nirala Singh, one of the lead inventors on SunHydrogen Patent No. 9,593,053B1, the University of Michigan team is focused on understanding the requirements of the generator housing and optimizing and testing potential oxygen evolution and hydrogen evolution electrocatalysts to accelerate scaleup and increase efficiency of photoelectrochemically active heterostructures. In the past year, they have demonstrated deposition of oxygen evolution and hydrogen evolution catalysts through atomic layer deposition and tested these materials for their ability to catalyze oxygen evolution and hydrogen evolution. The hydrogen evolution catalysts match the best performing catalysts and can be deposited on our solar cell materials with low thickness to mitigate parasitic light absorption. The atomic layer deposited oxygen evolution catalyst did not match the necessary metrics for further evaluation. However, using a sputtering technique, they synthesized an oxygen evolution electrocatalyst that can match the state-of-the-art oxygen evolution catalysts in the open literature. With these two catalysts, the solar cell voltage provided upon illumination is sufficient to produce hydrogen at high rates. These catalysts are being integrated with the systems used at University of Iowa.

University of Michigan also identified membrane-to-light absorber integration strategies to help optimize the generator housing dimensions, in collaboration with InRedox. They evaluated the voltage losses in various potential systems to identify the most promising configurations and eliminate configurations that would result in significant energy losses. The most promising systems were sent to Ionomr Innovations and Chromis Technologies to integrate membranes for testing of energy losses and stability. A model to scale up to multi-wafer systems was developed and is being validated. This model incorporated the entire system including generator housing, oxygen evolution catalyst, and hydrogen evolution catalyst and also helps identify the most important components for further increasing hydrogen production efficiency.

Looking ahead to the remainder of the year, we continue making progress toward the developmental targets we initially set for 2022, which include:

- Successful fabrication of semiconductor units at production-quality prototype scales
- Successful integration of membranes at production-quality prototype scales
- Successful integration of catalysts at production-quality prototype scales
- Successful testing and demonstration of production-quality prototype units

Most recently, we published the prototype design for the first-ever, production-quality prototype of our nanoparticle-based green hydrogen technology. The design incorporates all essential system elements in one unit, including our nanoparticle-based hydrogen panel, integrated with catalysts and membranes, and the entire flow system for water input and gas outlet. Our scientific team is currently evaluating a physical, working model of the published prototype design, and is preparing to demonstrate solar hydrogen production using this prototype.

Additionally, in October 2022 we were pleased to receive the India Patent Office’s decision to grant our patent “Multi-junction artificial photosynthetic cell with enhanced photovoltages.” The patent, which is currently active in the US, Australia, China and Europe, protects the foundation of our technology. Specifically, it protects our semiconductor design, which features high-density arrays of nano-sized, high-voltage solar cells.

We have a dedicated scientific and executive team, a growing number of respected industrial partners, and we will continue doing our best to push past setbacks or supply chain challenges that may come our way.

Additionally, we are pleased to share that in parallel to the ongoing development of our own technology, we are well-capitalized begin pursuing 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. We are fortunate to have the resources to maximize our impact in this fast-growing industry.

### 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 September 30, 2022, the amounts reported for cash, 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 three months ended September 30, 2022, 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.

### Results of Operations for the Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

### Operating Expenses

Operating expenses for the three months ended September 30, 2022 were $638,703 compared to $599,766 for the three months ended September 30, 2021. The net increase of $38,937 in operating expenses consisted primarily of a decrease in officer salaries of $76,776, marketing of $18,693 and an overall increase in operating expenses of $56,532.

### Other Income/(Expenses)

Other income and (expenses) for the three months ended September 30, 2022 were $(258,246), compared to $49,224,610 for the three months ended September 30, 2021. The decrease in other expenses of $49,482,856 was the result of a decrease in non-cash accounts associated with the net change in derivatives of $49,816,162, with an overall decrease in other expenses of $333,306.

### Net Income/(Loss)

For the three months ended September 30, 2022, our net loss was $(896,949), compared to a net income of $48,624,844 for the three months ended September 30, 2021. The majority of the decrease in net loss of $49,521,793 was related primarily to the decrease in net change of derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. The Company has not generated any revenues.

### 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 September 30, 2022, we had working capital of $23,845,136, compared to $24,865,577 as of June 30, 2022. This decrease in working capital of $1,020,441 was primarily due to an increase in net change in derivative liability, with a decrease in cash and cash equivalents.

Cash used in operating activities was $(281,544) for the three months ended September 30, 2022, compared to $(669,326) for the three months ended September 30, 2021. The decrease in cash used in operating activities was due to a decrease in officer salary and other expenses. The Company has had no revenues.

Cash used in investing activities during the three months ended September 30, 2022 and September 30, 2021 was $(1,824,549) and $(8,393,442), respectively. The decrease in cash used in investing activities was due to a decrease in securities investment.

Cash provided by financing activities during the three months ended September 30, 2022 and 2021 was S0, and $(1,450,000) respectively. The decrease in cash provided in financing activities was due to a decrease in redemption of related parties stock options.

Our ability to continue as a going concern is dependent upon raising capital through financing transactions and future revenue. Our capital needs have primarily been met from the proceeds of private placements and registered offerings of our securities, as we have not generated any revenues to date.

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.

## Controls and procedures

As filed, 1,278 characters.

### Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the 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 chief executive officer and chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There was no change to our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 145 characters.

There are no material changes from the risk factors previously disclosed in our annual report on Form 10-K filed with the SEC on October 7, 2022.

Filed Nov 7, 2022.
Source: SEC EDGAR, the filing index for accession 0001213900-22-069752. Last ingested by Listed: Oct 26, 2026, 16:02 ET. No prices; not investment advice.