Sunhydrogen, Inc.: Form 10-K for the period ended Jun 30, 2024

Unless otherwise stated or the context requires otherwise, references in this annual report on Form 10-K to “SunHydrogen”, the “Company”, “we”, “us”, or “our” refer to SunHydrogen, Inc.

Overview

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

Hydrogen is the most abundant chemical element in the universe. When hydrogen fuel is used to power transportation and industry, the only byproduct left behind is pure water, unlike hydrocarbon fuels such as oil, coal and natural gas that emit carbon dioxide and other harmful pollutants into the atmosphere. However, naturally occurring hydrogen molecules are rare – so rare that today about 95% of all molecular 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.

SunHydrogen is developing an efficient and cost-effective way to produce truly green hydrogen using sunlight and any source of water. Our innovative solar hydrogen technology uses abundant and low-cost materials, requires no external power other than sunlight, and is designed with scalability in mind. Its core components include a substrate, photovoltaic layers, and catalysts that integrate to split water molecules into green hydrogen and oxygen. 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 autonomously splits water into hydrogen and oxygen. Our technology has the potential to be one of – if not the most – economical green hydrogen solutions: Unlike traditional water electrolysis for hydrogen, our process requires no external power other than sunlight and uses efficient and low-cost materials.

We believe renewable hydrogen has already proven itself to be a key solution in helping the world meet climate targets, and we believe our technology potentially offers solutions to the challenges that the hydrogen future presents, including cost of production and transportation. Many of today’s green hydrogen producers transport their product over long distances, so although the hydrogen itself is green, the delivery and transport infrastructure come with a high carbon footprint and a significant capital investment. The SunHydrogen solution is fully self-contained, offering on-site solar hydrogen generation and local distribution to eliminate carbon footprint altogether and significantly reduce capital investments for transport and delivery.

Additionally, because our process directly uses the electrical charges created by sunlight to generate hydrogen, our technology does not rely on grid power or require the costly power electronics that conventional electrolyzers do.

With a target cost of $2.50/kg., we believe our solution has the potential to clear a path for green hydrogen to compete with natural gas hydrogen and gain mass market acceptance as a true replacement for fossil fuels.

Our technology is primarily developed at our independent laboratory in Coralville, Iowa. These development efforts are further supported through sponsored research agreements with the University of Iowa and the University of Michigan, as well as collaborations with specialized industrial partners and consultants.

Led by Chief Scientific Officer Dr. Syed Mubeen and Director of Technology Dr. Joun Lee, our Iowa team continues to focus on developing tandem photoelectrosynthetic heterostructures (nanoparticle-based tandem semiconductor units) and evaluating their manufacturability at scales suitable for commercialization. Over the past year, the team has dedicated efforts to improving the performance and scaling up of our nanoparticle-based hydrogen generators.

In parallel, we have been actively exploring a new methodology that utilizes commercially available, mass-produced thin-film PV cells and modules. These are re-engineered with our proprietary hydrogen module design to enhance fault tolerance and increase hydrogen production efficiency. While this approach is built on principles similar to our nanoparticle technology, it leverages a mature manufacturing platform, enabling a potentially faster market entry.

SunHydrogen remains fully committed to our patented nanoparticle-based approach to green hydrogen production. However, this new methodology, which aligns closely with our nanoparticle technology, benefits from an established manufacturing base. Our core mission remains the replacement of fossil fuel-derived hydrogen with truly green hydrogen. If there is an opportunity to achieve this goal more quickly and enter the market sooner, we believe it is in our shareholders' best interest to capitalize on our existing foundation and expertise to do so.

Over the past year, our Iowa team achieved significant milestones in advancing our green hydrogen production technology toward commercialization. These accomplishments span both our nanoparticle-based tandem semiconductor units and our innovative approach using thin-film PV cells and modules, as further described below.

Nanoparticle-Based Tandem Semiconductor Units:

• Validated Manufacturability at Scale: Successfully validated the manufacturability of our substrates at both 25 cm² and 100 cm² scales, confirming the scalability of our nanoparticle technology.
• Optimization of Plating Recipe for Second Junction Units: Developed and optimized a plating recipe for the semiconductor unit in the second junction, resulting in best-in-class devices demonstrating photovoltages greater than 0.9 volts and short-circuit current densities exceeding 20 mA/cm².
• E nhanced Photovoltage Achievement: Developed manufacturing recipes for the first and second semiconductor junctions, achieving combined photovoltages exceeding 1.8 volts. This surpasses the required photovoltage for water-splitting by 1.5 times, ensuring optimal performance and efficiency despite potential voltage losses.
• Demonstrated Stability Under Accelerated Conditions: Showed stable performance of the nanoparticle semiconductor units for over 100 hours under continuous 1 sun illumination at elevated temperatures, replicating accelerated degradation conditions. This stability indicates potential for significantly longer operational lifespans under standard conditions.
• Acquisition and Utilization of High-Throughput Catalyst Coating Equipment: Acquired high-throughput catalyst coating equipment capable of coating hydrogen and oxygen evolution catalysts over areas up to 1000 cm². Further using this equipment, and in collaboration with Heraeus, we demonstrated that the catalysts could achieve a combined overpotential of 350 mV or lower at 10 mA/cm², enabling hydrogen and oxygen generation at potentials below 1.6 volts, leaving room for enhanced performance as the semiconductor units can supply 1.8 volts.
• Collaboration with COTEC for Scale-Up: Collaborating with COTEC to scale up and enable high-throughput production of nanoparticle semiconductor units, aiming to replicate lab-scale performance at a larger scale (greater than or equal to 100cm2) with a manufacturing yield greater than 90%.

Thin-Film PV Cell-Based Hydrogen Modules:

• Development of a Transformative Hydrogen Module Design: Successfully developed a hydrogen module design that adapts a commercial thin-film photovoltaic (PV) module into a hydrogen module without altering the existing manufacturing process. This innovation allows the same manufacturing tools to produce both PV and hydrogen modules, streamlining the transition and reducing costs.
• Successful Fabrication of Hydrogen Modules: In collaboration with CTF Solar, we successfully implemented the hydrogen module design and fabricated hydrogen modules with a 100 cm² surface area.
• Achieved Stable Operation and High Solar-to-Hydrogen Efficiency: Developed stabilization schemes and catalyst integration strategies that enable these hydrogen modules to operate stably at solar-to-hydrogen conversion efficiencies exceeding 10%.

Additional accomplishments that span both nanoparticle-based and thin film-based hydrogen modules include:

• Advanced Housing Unit: Developed a housing unit design, in collaboration with SunHydrogen consultants Prof. Nirala Singh, Prof. Kazunari Domen, Dr. Hiroshi Nishiyama, and Dr. Taro Yamada, for both nanoparticle and thin-film modules. This design enables the production and separation of hydrogen (H₂) and oxygen (O₂) without the need for expensive ion exchange membranes, reducing costs and simplifying the manufacturing process.
• Joint Validation and Testing: Our nanoparticle-based semiconductor units and thin-film-based hydrogen modules are currently undergoing testing and validation at Honda R&D labs in Japan. Additionally, our collaborators in the NanoPEC project are focused on validating the long-term stability of the nanoparticle semiconductor units. These rigorous evaluations are essential to verify performance, stability, and scalability, ensuring our technologies meet the highest standards for commercialization.

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 hydrogen collection efficiency and optimizing and testing potential oxygen evolution and hydrogen evolution electrocatalysts to accelerate scaleup and increased efficiency of photoelectrochemically active heterostructures.

In the past year, they identified the most promising configurations to minimize the significant energy losses and produce hydrogen at a high rate. They further tested these configurations in the Generator Housing for different system areas with oxygen evolution and hydrogen evolution catalysts and measured the collection efficiency of hydrogen following its production. The effect of different pre-treatment conditions on the activity and stability of the hydrogen evolution catalyst and oxygen evolution catalyst was also evaluated for continuous operation in a three-electrode setup and the treatment variables with the most significant contribution to activity and stability identified. The overall voltage required for water splitting using these optimized conditions has been lowered from that of last year. University of Michigan is developing strategies to further improve the stability of the oxygen evolution electrocatalyst as well as alternate methods to deposit the electrocatalysts on different supports.

University of Michigan demonstrated the use of the system in the Generator Housing without membranes while maintaining a high faradaic efficiency and purity of hydrogen generation. This system was evaluated using the gas collection system developed in the previous year. University of Michigan demonstrated the high purity and faradaic efficiency under various Generator Housing orientations (e.g., angle) and temperatures. The elimination of the membrane can assist with reducing capital and processing costs. Potential causes of high series resistance have been identified and addressed to improve the overall efficiency of the system. University of Michigan also evaluated the performance of the system in the Generator Housing under different flow conditions and electrolyte compositions to determine the effect on performance and collection efficiency. University of Michigan is developing strategies to further mitigate the series resistance in the device.

Outside of our central research and development hub in Iowa and our work with the University of Iowa and the University of Michigan, we have further expanded our industrial partnerships across the U.S., Germany, South Korea, and Japan.

Our current industrial partners and vendors include: Honda R&D Co. Ltd; CTF Solar GmbH; the National Renewable Energy Laboratory (NREL); COTEC Corp.; Geomatec; Project NanoPEC; Schmid Group; Heraeus; and Strategic Analysis. By diversifying our commercialization strategy in this way, we have formed relationships with industrial partners who are specialized in individual components of our technology such as electroplating, substrate processing and catalyst/membrane integration, and techno-economics.

Honda R&D Co. Ltd is our housing unit and balance of system partner.

With CTF Solar, we are working to integrate their commercial PV cell module design into our technology for green hydrogen production.

The National Renewable Energy Laboratory (NREL) is our thin film PV cell design partner.

COTEC is a production partner for our PAH (Photoelectrosynthetically Active Heterostructures) nanoparticle technology, and Geomatec is a PAH substrate vendor.

Project NanoPEC has brought us together with a group of six partners at the cutting edge of industry and science in Germany working to accelerate the commercialization of our technology. These partners include the Fraunhofer Center for Silicon Photovoltaics, WAVELABS Solar Metrology Systems GmbH, ECH Elektrochemie Halle GmbH, Zahner-Elektrik, Helmholtz-Zentrum Berlin, and SCHMID Group. SCHMID Group is an additional manufacturing partner.

Efforts on our hydrogen reactor design are led by consultants Prof. Kazunari Domen, Dr. Hiroshi Nishiyama, Dr. Taro Yamada, and Prof. Nirala Singh.

We are working with Heraeus as our vendor for catalyst optimization, and lastly, we are working with Strategic Analysis to conduct robust techno-economic analysis of our process.

Finally, while we remain dedicated to our primary goal of developing our technology to commercialization, we are also passionate about furthering the renewable hydrogen ecosystem through investment in, and acquisition of, complementary hydrogen technologies.

SunHydrogen is an investor in Norway-based TECO 2030. With their zero-emission PEM hydrogen fuel cells stacks and modules, TECO 2030 is accelerating the transition to clean energy in the maritime and heavy-duty transportation sectors, and has formed strong relationships with world-leading companies in the fuel cell industry in the process. Their longtime development partner AVL is the world's largest independent company for the development, simulation and testing of powertrain systems. TECO 2030 is also partnered with thyssenkrupp Automation Engineering, which holds over 100 years of fuel cell experience and €34 billion in revenue in 2021.

Every day in the US, hundreds of thousands of diesel-powered trucks travel through routes with abundant land and sun. Our SunHydrogen panels along and around these highways, producing green hydrogen at and near refueling sites, would potentially eliminate the need to transport hydrogen fuel over long distances, lowering the high costs and hydrogen losses that would otherwise happen in long-distance transport. In the future, we believe our green hydrogen panels along major trucking routes worldwide, together with the proliferation of TECO 2030's hydrogen fuel cell technology, can make a significant mark on the industry.

Market Opportunity

Hydrogen generation is projected to become a $1 trillion per year market by 2050 (Source: Goldman Sachs, Carbonomics: The clean hydrogen revolution). Current fossil fuels can’t sustain future energy requirements environmentally or economically, and hydrogen fuel technologies are being adopted across all sectors as the world moves toward renewable alternatives.

Over 140 countries have set goals to achieve net-zero emissions by 2050, and as governments are looking to clean energy sources like hydrogen to help them meet their targets (Source: United Nations, Net Zero Coalition). It is estimated that nearly 25% of global energy will come from clean hydrogen alone by 2050 (Source: Goldman Sachs, Green Hydrogen: The next transformational driver of the Utilities industry).

Over 1,000 green hydrogen production demonstration projects have been announced around the world, and policy leaders have put forth ambitious strategies to utilize hydrogen and fuel cell technologies across all sectors of the economy including transportation, feedstock and industrial heat use (Source: The Hydrogen Council and McKinsey & Company, Hydrogen Insights 2023).

Existing Market Growth

As supply chain challenges and geopolitical conflicts continue to affect fuel prices globally, the hydrogen market is rallying support from consumers and governments alike.

In August 2022, The Inflation Reduction Act, which allotted $369 billion to renewable energy and climate projects, was signed into law in the US. “Among its features, the law has a 10-year extension of solar and wind tax credits and incentives to support new technology, with hydrogen and energy storage set to be the greatest beneficiaries,” according to Morningstar’s chief US market strategist Dave Sekera (Source: Markets Insider, Clean energy stocks are set to be the big winners of the sweeping Inflation Reduction Act just signed by Biden, Morningstar says). Specifically, the Act included a tax credit that will award up to $3/kg for low carbon hydrogen, with exact credit amounts to be determined by calculating a given project’s greenhouse gas emissions (Source: S&P Global, Hydrogen tax credits preserved in new US Inflation Reduction Act).

Since the passage of the Inflation Reduction Act, the US has seen additional promising legislation in favor of the adoption of hydrogen as a replacement for fossil fuels. Most recently, the US Department of Energy released its intent to invest up to an additional $1 billion to support the Regional Clean Hydrogen Hubs program, an already-$7 billion initiative to create six to ten regional clean hydrogen hubs across the country (Source: DOE, Biden-Harris Administration to Jumpstart Clean Hydrogen Economy with New Initiative to Provide Market Certainty and Unlock Private Investment). According to the DOE, America’s growing hydrogen economy has the potential to add 100,000 net new direct and indirect jobs by 2030 (Source: DOE, DOE’s Pathways to Commercial Liftoff: Clean Hydrogen report).

An additional factor driving the global hydrogen market is the need to reduce sulfur content in petroleum products. U.S. federal and state governments have adopted various programs, including the Tier 3 program, to reduce the sulfur content in gasoline, motor oil and diesel. Particularly, there is a growing demand for petroleum products from developing countries. Hydrogen is used in various refining processes including hydrocracking and hydrodesulfurization to crack bigger molecules into lighter ones and produce more usable products.

For all these reasons and more, we believe our renewable hydrogen-producing technology possesses significant early market opportunity, especially as innovation and infrastructure continue to develop.

Hydrogen Mobility

Industry is projected to drive the majority of clean hydrogen uptake until 2030 followed by a wider uptake in new applications by 2050, according to a 2024 report by McKinsey & Company (Source: McKinsey & Company*, Global Energy Perspective 2023: Hydrogen outlook).* Specifically, the mobility sector is expected to account for a considerable portion of the demand for clean hydrogen.

Hydrogen-powered trucks and hydrogen refueling stations present a variety of cost, scalability, and sustainability-related benefits over battery power. Namely, hydrogen-fueled trucks can refuel faster and carry a lower weight penalty than battery-powered trucks because tanks weigh considerably less than batteries. At scale, the infrastructure is less costly to create than e-truck charging infrastructure because it does not require grid upgrades and has a smaller carbon footprint. Faster refueling speed also means the hydrogen infrastructure can be used by many more trucks (Source: McKinsey & Company, Unlocking hydrogen’s power for long-haul freight transport).

Additionally, the applications for hydrogen mobility stretch far beyond road travel vehicles:

At one Amazon fulfillment center in Aurora, Colorado, a Plug Power electrolyzer system is already helping produce hydrogen to fuel more than 225 hydrogen fuel cell-powered forklift trucks at the site (Source: Utility Dive, Amazon to generate hydrogen on-site with Plug Power’s electrolyzer system).

In Norway, Norwegian state-owned technology company Enova has awarded approximately $112 million in grants to commercialize 15 hydrogen and ammonia-fueled maritime vessels (Source: Riviera Maritime Media, Norway goes big on hydrogen and ammonia-fuelled ships).

Dutch airline KLM has teamed up with ZeroAvia to develop a liquid hydrogen-powered turboprop aircraft, and they have raised over $300 million from Amazon, Airbus, and British Airways to do so (Source: The Next Web, KLM targets liquid hydrogen plane takeoff in 2026).

While infrastructure scale-up and technology advancements are still needed to meet demand, it’s clear that momentum is rapidly building among innovators, government agencies, and industry stakeholders alike.

Our Technology

Technology for Making Renewable Hydrogen from Sunlight and Water

Powered by solar energy, our technology utilizes two innovative approaches to produce renewable hydrogen from water, leaving behind only clean oxygen as a byproduct:

• Nanoparticle-Based Photoelectrosynthetically Active Heterostructures (PAH): Our microscopic PAH nanoparticles function like tiny machines that mimic the natural process of photosynthesis within a plant cell. Composed of multiple layers, these nanoparticles enable solar-powered electrolysis to occur at the molecular level, splitting water to extract hydrogen as a clean energy source. This nanoparticle-based system offers high fault tolerance and superior solar-to-hydrogen efficiencies at a low cost, making it an economically viable and scalable solution for green hydrogen production.
• Thin-Film PV Cell-Based Hydrogen Modules: In parallel, we are also developing hydrogen modules in collaboration with CTF Solar, using commercially available thin-film photovoltaic (PV) technology. These modules are re-engineered with our proprietary hydrogen module design to perform solar water splitting without altering the existing PV manufacturing process. This approach leverages mature manufacturing platforms, allowing for faster market entry while still enabling cost-effective and scalable hydrogen production.

By advancing both nanoparticle and thin-film PV cell technologies, we are strategically positioned to accelerate the production of green hydrogen, providing versatile and scalable solutions to meet global clean energy needs.

Water Splitting

In the process of splitting a water molecule, input energy is transferred into the chemical bonds. Essentially, manufactured hydrogen serves as a carrier or battery-like storage of the input energy. If the input energy is from fossil fuels, such as oil and gas, then carbon fossil fuel energy is simply transferred into hydrogen. If the input energy is renewable, such as solar or wind, then new and clean energy is stored in hydrogen.

While the concept of water splitting is very appealing, the following industry-wide challenges must be addressed for renewable hydrogen to be commercially viable:

• Energy Inefficiency — Since hydrogen is an energy carrier, the most energy it can store is 100% of the input energy. However, conventional electrolysis methods lose much of the input energy in system components, wires and electrodes resulting in only a small portion of electricity making it into the hydrogen molecules. This translates to high production cost and is the fundamental problem with water splitting for hydrogen production. We intend to address this problem with our low-cost and energy-efficient nanoparticle technology.
• Need for Clean Water — Conventional electrolysis requires highly purified clean water to prevent fouling of system components. This prevents current technology from using large quantities of available water from oceans, rivers, industrial waste and municipal waste as feedstock. We are currently working with acidic or alkaline water, as well as wastewater, to produce renewable hydrogen through our nanoparticle technology.

Technology

Water electrolysis in its simplest form is the transfer of “input electrons” in the following chemical reactions:

• Cathode (reduction): 2H2O + 2*e- +*2 + 2OH-
• Anode (oxidation): 4OH- 2 + 2H2O + 4 e-

From these equations, one can deduce that if every input electron (e-) is put to work and not lost, then a maximum amount of input electrons (i.e. energy) is transferred and stored in the hydrogen molecules (H2). Additionally, if there were a very high number of cathode and anode reaction areas within a given volume of water, then a very high number of these reactions could happen simultaneously throughout the medium to split each water molecule into hydrogen wherever electrons are available.

SunHydrogen Panel™

Since our particles are intended to mimic the natural process of photosynthesis, directly producing hydrogen and oxygen without the need for costly intermediate power conversions, they can be housed in very low-cost reactors. To facilitate the commercial use of our self-contained particle technology, we are developing a modular system that will enable the onsite daily production and storage of hydrogen for any-time use in electricity generation.

We refer to our potential product as the SunHydrogen Panel which is comprised of the following components:

• Substrate: The base material, typically glass coated with a thin layer of transparent conducting surface.
• Semiconductor: Materials that have properties essential for photovoltaic energy conversion.
• Current Collector: Utilized for the deposition of catalysts.
• Insulator: Materials to neutralize the defects and pinholes and to stabilize semiconductors and substrates.
• Cathode: Equipped with a Hydrogen Evolution Reaction (HER) catalyst responsible for hydrogen production.
• Anode: Outfitted with an Oxygen Evolution Reaction (OER) catalyst that facilitates oxygen production.
• PV Cell: Denotes a singular Photovoltaic (PV) cell, a basic unit that converts light into electrical energy.
• Hydrogen Sub-module: Constitutes the minimum assembly of PV cells interconnected electrically and paired with catalysts to produce hydrogen and oxygen.
• Hydrogen Module: A composite of several Hydrogen Sub-modules seamlessly integrated yet electrically separate, all set on a singular substrate for efficient scaling and fault tolerance.
• Housing Unit: Designed with end plates that feature flow field channels to streamline water flow and facilitate the separation of hydrogen and oxygen.
• Hydrogen Reactor: A system that encompasses both the Hydrogen Module and its Housing, forming a complete unit for hydrogen generation.
• Hydrogen Panel: Comprises one or more Hydrogen Reactors arranged together, forming an installation-ready unit that includes necessary ancillary components like piping, as well as systems for hydrogen collection and water recirculation.
• Hydrogen Array: A term that describes an aggregation of Hydrogen Panels organized to meet a specific hydrogen production goal, with capacities that can range from 1 kW to 1 MW, or even as high as 1 GW.

In addition to our sponsored research agreements with the University of Iowa and University of Michigan, we are working with a growing group of specialized industrial partners to help commercialize our renewable hydrogen panels that use sunlight and water to generate hydrogen. Our current industrial partners include: Honda R&D Co. Ltd; CTF Solar GmbH; the National Renewable Energy Laboratory (NREL); COTEC Corp.; Geomatec; Project NanoPEC; Schmid Group; the University of Tokyo; Heraeus; and Strategic Analysis.

Intellectual Property

On November 14, 2011, we filed a provisional application with the U.S. Patent and Trademark Office to protect the intellectual property rights for “Photoelectrosynthetically Active Heterostructures” A year later on November 14, 2012, we filed a non-provisional application claiming priority to the provisional application. On March 14, 2017, a first patent covering the structural design of Photoelectrosynthetically Active Heterostructures (PAH) was granted as United States Patent No. 9,593,053B1. A divisional application claiming priority to the foregoing applications was filed, and on April 3, 2018, a second patent covering the method for manufacturing PAH was granted as United States Patent No. 9,593,053B2. These patents protect the Company’s proprietary design and manufacturing method of a self-contained solar-to-hydrogen device made up of billions of solar-powered water-splitting nanoparticles, per square centimeter. These nanoparticles are separated by a protective coating that prevents corrosion during extended periods of hydrogen production. The aim of producing these nanoparticles is to achieve high solar -to-hydrogen conversion efficiency at low cost. These patents expire on November 14, 2032.

An important aspect of the patented technology referred to in the preceding paragraph is the integrated structures of high-density arrays of nano-sized PV cells as part of hydrogen production nanoparticles. The technology enables manufacturing of ultra-thin sheets for solar hydrogen production, requiring substantially less material as compared to conventional PV cells used in rooftop power applications.

On March 21, 2014, we jointly filed a provisional application with the University of California, Santa Barbara for the “Multi-junction artificial photosynthetic cell with enhanced photovoltages.” Thereafter, we filed a non-provisional application on March 16, 2015 and a corresponding PCT Application on March 17, 2015. These applications cover our semiconductor designs to enhance the photovoltages of the nano-sized PV cells in the PAH structures. The semiconductor designs stacking multiple junctions inside the PAH structures would be an efficient and economical solution for the photovoltaic and the photoelectrochemical industries. Patents were granted in Australia in April of 2018, China and Europe in March of 2019, and in the U.S. as United States Patent No. 10,100,415 in October of 2018. The last patent from this international application was granted in India in October 2022. This patent expires on October 21, 2036.

On September 26, 2016, we filed jointly with the University of Iowa a provisional application for “Integrated Membrane Solar Fuel Production Assembly” to protect the intellectual property for our generator housing system that safely separates oxygen and hydrogen in the water-splitting process without sacrificing efficiency. This device houses the water, the solar particles/cells and is designed with inlets and outlets for water and gases. Utilizing a special architecture that integrates membranes for separating the oxygen side from the hydrogen side, proton transport is increased which is the key to safely increasing solar-to-hydrogen efficiency. On September 26, 2017, we filed a PCT Application that was later nationalized in the U.S. on March 26, 2019. On April 15, 2024, after a thorough review of our corporate commercialization plan, we made the decision to abandon the patent application. While the intellectual property was critical for the designs of the early GEN I and GEN II inventions, as our process and system designs evolved, we determined that the IP no longer aligned with our future developments.

On August 7, 2024, we filed a provisional patent application covering the design and manufacturing processes of fully integrated solar hydrogen modules, utilizing existing infrastructure from the photovoltaic (PV) industry. The protected IP facilitates the immediate commercial production of these modules, accelerating their entry into the market for rapid adoption.

Strategic Partners

We are currently engaged in a sponsored research agreement with the University of Iowa. This term of the research agreement runs through October 2024 but may be extended upon mutual agreement of the parties.

We are currently engaged in a sponsored research agreement with the University of Michigan. This term of the research agreement runs through September 2024 but may be extended upon mutual agreement of the parties.

We are currently engaged in a technology collaboration agreement with COTEC. This term of the agreement runs through September 2024 and both parties are currently continuing the collaboration while working to enter into a new collaboration agreement.

We are currently engaged in a technology collaboration agreement with Project NanoPEC. This term of the agreement runs through June 2026 but may be extended upon mutual agreement of the parties.

We are currently engaged in a technology collaboration agreement with CTF Solar. This term of the agreement runs through January 2026 but may be extended upon mutual agreement of the parties.

We are currently engaged in a joint development agreement with Honda R&D Co. This term of the agreement runs through March 2026 but may be extended upon mutual agreement of the parties.

We have also initiated a research agreement with the National Renewable Energy Laboratory (NREL). This research agreement runs through October 2025 but may be extended upon mutual agreement of the parties.

Additionally, we are engaged in an ongoing consulting contract with Strategic Analysis, Inc. to aid in further reducing our system cost through techno-economic research and evaluation.

Competition

Currently, most hydrogen is produced by steam reforming of natural gas or methane. This production technology dominates due to easy availability and low prices of natural gas. Partial oxidation of petroleum oil is second in production capacity after steam reforming of natural gas. The third largest production technology in terms of production capacity is steam gasification of coal. Key players in the traditional hydrogen production industry include Linde, Air Liquide, Air Products, Praxair, and more.

At this time, we view our primary competition as companies that have developed or are currently developing renewable hydrogen production technology. Green or renewable hydrogen can be produced through electrolyzers if the electrolyzers are powered by renewable energy sources, such as solar or wind. Some of these companies include:

Plug Power: Plug Power (Stock symbol: PLUG) is engaged in the development of hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity. The company is currently building green hydrogen plants to produce at least 70 tons of liquid green hydrogen daily by the end of 2022 and 500 tons daily by 2025.

NEL Hydrogen: NEL Hydrogen (Stock symbol: NLLSF) delivers solutions to produce, store, and distribute hydrogen from renewable energy. The company’s hydrogen solutions cover the entire value chain from hydrogen production technologies to hydrogen fueling stations, enabling industries to transition to green hydrogen.

Fusion Fuel: Fusion Fuel (Stock symbol: HTOO) has developed a modular solar to hydrogen solution, combining proven solar concentration technology with a proprietary micro-electrolyzer that allows it to produce zero-emissions green hydrogen at highly competitive costs. The company sells its HEVO-Solar technology to customers interested in producing their own green hydrogen. It also develops company-owned green hydrogen farms.

ITM Power: ITM Power (Stock symbol: ITMPF) designs, manufactures, and integrates electrolyzers based on proton exchange membrane technology to produce green hydrogen using renewable electricity and tap water. ITM Power works with strategic partners including Linde, Shell, Snam, Hyundai, and Honda to scale its impact and industrial reach.

McPhy: McPhy (Stock symbol: MCPHY) specializes in the design, production and integration of high pressure alkaline electrolyzers and hydrogen stations. McPhy has five development, engineering and production sites in France, Italy, and Germany, and it is backed by solid and constantly-evolving European industrial foundations.

If not powered by renewable sources, electrolyzers require external electricity most likely created by coal, gas or oil. We believe that our process when fully developed may potentially offer a competitive advantage as we anticipate it will be fully renewable and utilize no external power other than the sun. However, it should be noted that the renewable hydrogen market is rich with competitors, like the companies mentioned above, who have already successfully commercialized green hydrogen production technologies. We anticipate that existing leaders will continue to hone the efficiency of their products and drive down cost of green hydrogen per kilogram, creating a more competitive, challenging environment for emerging, not-yet-commercialized technologies such as our own.

Corporate Information

We were incorporated in the State of Nevada on February 18, 2009. Our executive offices are located at 2500 Crosspark Road, Coralville IA 52241.

Employees

As of September 12, 2024, we have 7 full-time employees and several consultants. We have not experienced any work stoppages and we consider relations with our employees and consultants to be good. Our research and development work is performed at our Coralville, Iowa laboratory, as well as with the University of Iowa and the University of Michigan through sponsored research agreements, and in collaboration with our industrial partners.

Risks related to our business and industry

Our limited operating history does not afford investors a sufficient history on which to base an investment decision.

We were formed in February 2009 and are currently developing a new technology that has not yet gained market acceptance. There can be no assurance that we will ever operate profitably or that we will have adequate working capital to meet our obligations as they become due.

Investors must consider the risks and difficulties frequently encountered by early-stage companies, particularly in rapidly evolving markets. Such risks include the following:

• competition;
• need for acceptance of products;
• ability to continue to develop and extend brand identity;
• ability to anticipate and adapt to a competitive market;
• ability to effectively manage rapidly expanding operations;
• amount and timing of operating costs and capital expenditures relating to expansion of our business, operations, and infrastructure; and
• dependence upon key personnel.

We cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected, and we may have to curtail our business.

We have a history of losses and have never realized revenues to date. We expect to continue to incur losses and no assurance can be given that we will realize revenues. Accordingly, we may never achieve and sustain profitability.

As of June 30, 2024, we have an accumulated deficit of $91,852,243. For the year ended June 30, 2024, we incurred a net loss of $9,881,203. We expect to incur net losses until we are able to realize revenues to fund our continuing operations. We may fail to achieve any or significant revenues from sales or achieve or sustain profitability. Accordingly, we may never be profitable or be able to maintain profitability.

We have historically raised funds through various capital raising transactions. We will require additional funds in the future to fund our business plans, either through additional equity or debt financings or collaborative agreements or from other sources. We have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all. In the event we are unable to obtain additional financing, we may be unable to implement our business plan. Even with such financing, we have a history of operating losses and there can be no assurance that we will ever become profitable.

We may be unable to manage our growth or implement our expansion strategy.

We may not be able to develop our product or implement the other features of our business strategy at the rate or to the extent presently planned. Our projected growth will place a significant strain on our administrative, operational and financial resources. If we are unable to successfully manage our future growth, establish and continue to upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially and adversely affected.

We may not be able to successfully develop and commercialize our technologies which would result in continued losses and may require us to curtail or cease operations.

We are currently working to scale the lab-scale prototypes of our nanoparticle technology to larger, commercial-scale prototypes. However, we have not completed a large-scale commercial prototype of our technology and are uncertain at this time when completion of a commercial scale prototype will occur. Although the lab scale prototype demonstrates the viability of our technology, we may be unable to commercialize our technology.

Our revenues will be dependent upon acceptance of our products by the market, the failure of which would cause us to curtail or cease operations.

We believe that virtually all of our revenues will come from the sale or license of our products. As a result, we will continue to incur substantial operating losses until such time as we are able to develop our product and generate revenues from the sale or license of our products. There can be no assurance that businesses and customers will adopt our technology and products, or that businesses and prospective customers will agree to pay for or license our products. Our technology and product, when fully developed, may not gain market acceptance due to various factors such as not enough cost savings between our method of producing hydrogen and other more conventional methods. If that occurs,, our financial condition and results of operations will be materially and adversely affected.

We anticipate that we will face intense competition, and many of our competitors have substantially greater resources than we do.

We operate in a competitive environment that is characterized by price fluctuation and technological change. We anticipate that we will compete with major international and domestic companies. Some of our current and future potential competitors may have greater market recognition and customer bases, longer operating histories and substantially greater financial, technical, marketing, distribution, purchasing, manufacturing, personnel and other resources than we do. In addition, competitors may be developing similar technologies with a cost similar to, or lower than, our projected costs. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to the development, promotion and sales of solar and solar-related products than we can.

Our business plan relies on sales of our products based on either a demand for truly renewable clean hydrogen or economically produced clean hydrogen. If we fail to compete successfully, our business would suffer and we may lose or be unable to gain market share. Neither the demand for our product nor our ability to manufacture at commercial scale have yet been proven.

Because our industry is highly competitive and has low barriers to entry, we may lose market share to larger companies that are better equipped to weather a deterioration in market conditions due to increased competition.

We believe that our ability to compete depends in part on a number of factors outside of our control, including:

• the ability of our competitors to hire, retain and motivate qualified personnel;
• the ownership by competitors of proprietary tools to customize systems to the needs of a particular customer;
• the price at which others offer comparable services and equipment;
• the extent of our competitors’ responsiveness to customer needs; and
• installation technology.

Currently, competing methods of hydrogen production include steam reforming of natural gas or methane, which dominates due to its easy availability and low price; partial oxidation of petroleum oil; steam gasification of coal; and electrolyzers powered by solar or wind energy. There can be no assurance that we will be able to compete successfully against current and future competitors. If we are unable to compete effectively, or if competition results in a deterioration of market conditions, our business and results of operations would be adversely affected.

Our business depends on proprietary technology that we may not be able to protect and may infringe on the intellectual property rights of others.

Our success will depend, in part, on our technology’s commercial viability and on the strength of our intellectual property rights. We currently hold patents in the US, China, Australia, and Europe but still have several patents pending in multiple countries. There is no guarantee the pending patents will be granted. In addition, any agreements we enter into with our employees, consultants, advisors, customers and strategic partners will contain restrictions on the disclosure and use of trade secrets, inventions and confidential information relating to our technology may not provide meaningful protection in the event of unauthorized use or disclosure.

Third parties may assert that our technology, or the products we, our customers or partners commercialize using our technology, infringes upon their proprietary rights. We have yet to complete an infringement analysis and, even if such an analysis were available at the current time, it is virtually impossible for us to be certain that no infringement exists, particularly in our case where our products have not yet been fully developed.

We may need to acquire licenses from third parties in order to avoid infringement. Any required license may not be available to us on acceptable terms, or at all.

We could incur substantial costs in defending ourselves in suits brought against us for alleged infringement of another party’s intellectual property rights as well as in enforcing our rights against others, and if we are found to infringe, the manufacture, sale and use of our or our customers’ or partners’ products could be enjoined. Any claims against us, with or without merit, would likely be time-consuming, requiring our management team to dedicate substantial time to addressing the issues presented. Furthermore, the parties bringing claims may have greater resources than we do.

We do not maintain theft or casualty insurance and only maintain modest liability and property insurance coverage and therefore, we could incur losses as a result of an uninsured loss.

We do not maintain theft, casualty insurance, or property insurance coverage. We may incur uninsured liabilities and losses as a result of the conduct of our business. Any such uninsured or insured loss or liability could have a material adverse effect on our results of operations.

If we lose key employees and consultants or are unable to attract or retain qualified personnel, our business could suffer.

Our success is highly dependent on our ability to attract and retain qualified scientific, engineering and management personnel. We are highly dependent on our Chief Science Officer, Dr. Syed Mubeen, our development team in Iowa and our industrial partners and vendors. There can be no assurance that they will remain associated with us. Our management’s efforts will be critical to us as we continue to develop our technology and as we attempt to transition from a development stage company to a company with commercialized products and services. If we were to lose Dr. Mubeen, one of our development partners, any other key employees or consultants, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies.

The loss of strategic alliances used in the development of our products and technology could impede our ability to complete our product and result in a material adverse effect causing the business to suffer.

We pursue strategic alliances with other companies in areas where collaboration can produce technological and industry advancement. For example, we have entered into a sponsored research agreement with the University of Michigan which, which was extended through September 30, 2024. If we are unable to extend the terms of this agreement, or any of our other agreements with our partners as described in this report, we could suffer delays in product development or other operational difficulties which could have a material adverse effect on our results of operations.

Risks relating to our common stock

There is a limited trading market for our common stock.

Our common stock is not listed on any national securities exchange. Accordingly, investors may find it more difficult to buy and sell our shares than if our common stock was traded on an exchange. Although our common stock is quoted on the OTCQB, it is an unorganized, inter-dealer, over-the-counter market which provides significantly less liquidity than the Nasdaq Capital Market or other national securities exchange. Further, there is limited trading in our common stock. These factors may have an adverse impact on the trading and price of our common stock.

Our common stock could be subject to extreme volatility.

The trading price of our common stock may be affected by a number of factors, including events described in the risk factors set forth in this report, as well as our operating results, financial condition and other events or factors. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common stock. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock and wide bid-ask spreads. These fluctuations may have a negative effect on the market price of our common stock. In addition, the securities market has, from time to time, experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We anticipate that our issuance of common stock upon conversion of Series C Preferred Shares will result in dilution to our stockholders.

As of June 30, 2024, we have outstanding shares of redeemable Series C Preferred Stock with an aggregate stated value of $885,100 that are convertible into common stock at a fixed conversion price of $0.00095 (see Note 3 to the financial statements included in this report). We anticipate that our issuance of common stock upon conversion of outstanding preferred shares will result in dilution to holders of our common stock, which may have a negative effect on the price of our common stock. In addition, as of June 30, 2024, we have outstanding warrants to purchase 78,095,239 shares of common stock and options to purchase 266,894,499 shares of common stock, and our issuance of shares of common stock upon exercise of outstanding warrants or options may result in additional dilution to our stockholders.

We have never paid common stock dividends and have no plans to pay dividends in the future, as a result our common stock may be less valuable because a return on an investor’s investment will only occur if our stock price appreciates.

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our Board of Directors. To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in our common stock will be in the form of appreciation in the market value of our shares of common stock, which may not occur.

Our common stock is subject to the SEC’s penny stock rules.

Unless our common stock is listed on a national securities exchange, including the Nasdaq Capital Market, or we have stockholders’ equity of $5,000,000 or less and our common stock has a market price per share of less than $5.00, transactions in our common stock will be subject to the SEC’s “penny stock” rules. If our common stock remains subject to the “penny stock” rules promulgated under the Securities Exchange Act of 1934, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected.

In accordance with these rules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure document that describes the risks associated with such stocks, the broker-dealer’s duties in selling the stock, the customer’s rights and remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination approving the customer for low-priced stock transactions based on the customer’s financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent from the customer, and provide monthly account statements to the customer. The effect of these restrictions will probably decrease the willingness of broker-dealers to make a market in our common stock, decrease liquidity of our common stock and increase transaction costs for sales and purchases of our common stock as compared to other securities. Our management is aware of the abuses that have occurred historically in the penny stock market.

This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Our articles of incorporation allow for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.

Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors has the authority to issue up to 5,000,000 shares of our preferred stock without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders of preferred stock the right to our assets upon liquidation, or the right to receive dividend payments before dividends are distributed to the holders of common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.

Additional stock offerings in the future may dilute then-existing shareholders’ percentage ownership of the Company.

Given our plans and expectations that we will need additional capital, we anticipate that we will need to issue additional shares of common stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible notes, stock options or warrants. We anticipate that our issuance of additional common stock or securities convertible into or exercisable into common stock in the future will dilute the percentage ownership of then current stockholders.

Our principal office address and independent laboratories are located at the BioVentures Center at 2500 Crosspark Rd., Coralville, IA 52241.

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.

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.

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.

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:

1. As of June 30, 2024, due to the inherent issue of segregation of duties in a small company, we have relied heavily on entity or management review controls and engaged an outside financial consultant to lessen the issue of segregation of duties over accounting, financial close procedures and controls over financial statement disclosure. Accordingly, management has determined that this control deficiency constitutes a 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.