UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2017For the quarterly period ended September 30, 2022

or

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER:000-54437

HYPERSOLAR,SUNHYDROGEN, INC.

(Name of registrant in its charter)

510 Castillo St., Suite 320, Santa Barbara, CA 93101

(Address of principal executive offices) (Zip Code)

Issuer’s telephone Number:(805) 966-6566

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of registrant’s common stock outstanding, as of February 9, 2018November 7, 2022 was 759,910,084.4,393,682,998.

HYPERSOLAR,SUNHYDROGEN, INC.

INDEX

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

ITEM 1. FINANCIAL STATEMENTS

HYPERSOLAR,SUNHYDROGEN, INC.

CONDENSED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed financial statements

HYPERSOLAR,SUNHYDROGEN, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2017SEPTEMBER 30, 2022 AND 20162021

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements

HYPERSOLAR,SUNHYDROGEN, INC.

CONDENSED STATEMENTSTATEMENTS OF SHAREHOLDERS' DEFICITSHAREHOLDERS’ EQUITY/(DEFICIT)

FOR THE SIXTHREE MONTHS ENDED DECEMBER 31, 2017SEPTEMBER 30, 2022 AND 2021

The accompanying notes are an integral part of these unaudited condensed financial statements

HYPERSOLAR,SUNHYDROGEN, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIXTHREE MONTHS ENDED DECEMBER 31, 2017SEPTEMBER 30, 2022 AND 20162021

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements

HYPERSOLAR,SUNHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS -– UNAUDITED

DECEMBER 31, 2017SEPTEMBER 30, 2022 AND 2021

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of S-X Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the sixthree months ended December 31, 2017September 30, 2022 are not necessarily indicative of the results that may be expected for the year endingended June 30, 2018.2023. For further information refer to the financial statements and footnotes thereto included in the Company'sCompany’s Form 10-K for the year ended June 30, 2017.2022.

Going Concern

The accompanying unaudited financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying unaudited financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has historically obtained funds through private placement offerings of equity and debt. Management believes that it will be able to continue to raise funds by sale of its securities to its existing shareholders and prospective new investors to provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core business. There is no assurance that the Company will be able to continue raising the required capital.

This summary of significant accounting policies of HyperSolar,SunHydrogen, Inc. is presented to assist in understanding the Company’s unaudited financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Cash and Cash Equivalent

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Concentration risk

Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of the FDIC limits. As of September 30, 2022, the cash balance in excess of the FDIC limits was $25,038,271. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

Marketable Securities

The Company considers corporate bonds (“bonds”) as investments due to their ratings. The bonds are rated based on their default probability, health of the corporation’s debt structure, as well as the overall health of the economy. The bonds fall into the category as investments if they have a rating of AAA and BBB.

All investments are considered current, based on to their liquidity. The investments are generally valued using quoted prices and are classified in Level 2 of the fair value hierarchy as prices are not always from active markets. We consider our investments held to maturity and we believe there are no other than temporary declines in fair value. Our investments are recorded at historical cost.

Use of Estimates

The preparation of financial statements in conformity

In accordance with accounting principles generally accepted accounting principles requiresin the United States, management to makeutilizes estimates and assumptions that affect the reported amounts reported inof assets and liabilities and the accompanying unaudited financial statements. Significant estimates made in preparing these unauditeddisclosure of contingent assets and liabilities at the date of the financial statements includeas well as the estimatereported amounts of useful lives of intangible assets,revenues and expenses during the deferred tax valuation allowance.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.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

Property and Equipment

Property and equipment are stated at cost and are depreciated using straight line over its estimated useful lives.

The Company recognized depreciation expense of $8,562 and $8,525 for the three months ended September 30, 2022 and 2021, respectively. 

Intangible Assets

The Company has patent applications to protect the inventions and processes behind its proprietary bio-based back-sheet, a protective covering for the back of photovoltaic solar modules traditionally made from petroleum-based film. Intangible assets consist of patents that are initially measured at the lower of cost or fair value. The patents are assessed annually for impairment, or whenever conditions indicate the asset mayhave finite useful lives continue to be impaired, and any such impairment will be recognized in the period identified. Patents are amortized straight-line over 15 years.their useful lives.

The Company recognized amortization expense of $1,759 and $1,759 for the three months ended September 30, 2022 and 2021, respectively.

Net Earnings (Loss) per Share Calculations

Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings (loss) per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock basedstock-based awards (Note 4), plus the assumed conversion of convertible debt (Note 5). 

For the six months ended December 31, 2017, theThree Months Ended September 30, 2022

The Company calculated the dilutive impact of the 157,965,711 outstanding stock options of, 10,250,000,94,895,239 common stock purchase warrants, and the convertible debt and accrued interest of $1,706,100,$1,042,614, which is convertible into shares of common stock. The common stock options and the convertible debtpurchase warrants were not included in the calculation of net loss per share, because their impact was antidilutive.

For the six months ended December 31, 2016, the dilutive impact of the outstanding stock options of 500,000, and the convertible debt of $1,465,000, which is convertible into shares of common stock. The stock options and the convertible debt were included in the calculation of net earnings per share, because their impact on the lossincome per share was dilutive. is antidilutive.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

Three Months Ended September 30, 2021

For the three months ended September 30, 2021, the Company calculated the dilutive impact of the outstanding stock options of 157,965,711, common stock purchase warrants of 94,895,239, and the convertible debt of $1,150,800, which is convertible into shares of common stock. The stock options were not included, because their impact was antidilutive.

Equity Incentive Plan and Stock based CompensationOptions

On January 27, 2022, the Company adopted the 2022 Equity Incentive Plan, to enable the Company to attract and retain the types of employees, consultants, and directors who will contribute to the Company’s long-range success. The maximum number of shares of common stock that may be issued under the 2022 Plan will initially be 400,000,000. The number of shares will automatically be increased on the first day of the Company’s fiscal year beginning in 2023 so that the total number of shares issuable will at all times equal fifteen percent (15%) of the Company’s fully diluted capitalization on the first day of the Company’s fiscal year, unless the Board adopts a resolution providing that the number of shares issuable under the 2022 Plan shall not be so increased.

Equity Incentive Plan

On December 17, 2018, the Board of Directors approved and adopted the 2019 Equity Incentive Plan (“the Plan”), with 300,000,000 shares reserved for issuance pursuant to the Plan. The purpose of the Plan is to promote the success of the Company and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. The awards are performance-based compensation that are granted under the Plan as incentive stock options (ISO) or nonqualified stock options. The per share exercise price for each option shall not be less than 100% of the fair market value of a share of common stock on the date of grant of the option. The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs.cost. The Company accounts for stock option and warrant grants issued and vesting to employees based onand non-employees in accordance with the authoritative guidance provided byof the Financial Accounting Standards Board whereas the value of the awardstock compensation is measured onbased upon the measurement date as determined at either a) the date of grant and recognizedat which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period. period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested, and the total stock-based compensation charge is recorded in the period of the measurement date. The Company granted options to purchase 170,000,000 shares of common stock options on January 23, 2019.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

As of September 30, 2022, there were 157,695,711 stock options issued, and a reserve of 43,670,096.

Stock Based Compensation

The Company accounts for stock option and warrant grants issued and vesting to employees and non-employees in accordance with the

HYPERSOLAR, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

DECEMBER 31, 2017

Stock based Compensation (Continued)

authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested, and the total stock-based compensation charge is recorded in the period of the measurement date.

Warrant Accounting

The Company accounts for the warrants to purchase shares of common stock using the estimated fair value on the date of issuance as calculated using the Black-Scholes valuation model.

Fair Value of Financial Instruments

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized inon the balance sheet, where it is practicable to estimate that value. As of December 31, 2017,September 30, 2022, the amounts reported for cash, accrued interest and other expenses, notes payables, convertible notes, 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.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1measurements)1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2017on June 30, 2022 and 2021 (See Note 6):

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

Research and Development

Research and development costs are expensed as incurred.  Total research and development costs were $305,530 and $151,362 for the three months ended September 30, 2022 and 2021, respectively.

Accounting for Derivatives

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average series Binomial lattice formula pricing models to value the derivative instruments at inception and on subsequent valuation dates.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Reclassification of Expenses

Certain expenses for the period ended December 31, 2016, were reclassified to conform with the expenses for the period ended December 31, 2017.

HYPERSOLAR,SUNHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS -– UNAUDITED

DECEMBER 31, 2017SEPTEMBER 30, 2022 AND 2021

Reclassification of Expenses

Certain amounts in the 2021 financial statements have been reclassified to conform to the presentation used in the 2022 financial statements. There was no material effect on the Company’s previously issued financial statements.

Recently Issued Accounting Pronouncements

In May 2017, FASB issued accounting standards update ASU-2017-09, “Compensation-Stock Compensation” (Topic 718) –Modification Accounting”, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period for public entities for reporting periods for which financial statements have not yet been issued, and all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company is currently evaluating the impact of the adoption of ASU 2017-09 on the Company’s financial statements.

In August 2017, FASB issued accounting standards update ASU-2017-12, “D” (Topic 815) – “Targeted Improvements to Accounting for Hedging Activities”, to require an entity to present the earnings effect of the hedging instrument in the same statement line item in which the earnings effect of the hedged item is reported. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance of the update. The Company is currently evaluating the impact of the adoption of ASU-2017 on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed unaudited financial statements.statements as of September 30, 2022.

Series C Preferred Stock

On December 15, 2021, the Company filed a certificate of designation of Series C Preferred Stock with the Secretary of State of Nevada, designating 17,000 shares of preferred stock as Series C Preferred Stock. Each share of Series C Preferred Stock has a stated value of $100 and is convertible into shares of common stock of the Company at a conversion price equal to $0.00095. The Series C Preferred Stock holders are entitled to receive out of any funds and assets of the Company legally available prior and in preference to any declaration or payment of any dividend on the common stock of the Company, cumulative dividends, at an annual rate of 10% of the stated value, payable in cash or shares of common stock. In the event the Company declares or pays a dividend on its shares of common stock (other than dividend payable in shares of common stock), the holders of Series C Preferred Stock will also be entitled to receive payment of such dividend on an as-if-converted basis with respect to the Series C Preferred Stock. The Series C Preferred Stock confers no voting rights on holders, except with respect to matters that materially and adversely affect the voting powers, rights or preferences of the Series C Preferred Stock or as otherwise required by applicable law.

The Company entered into a securities purchase agreement on December 15, 2021, with an accredited investor for an exchange of convertible debt to equity. Under the purchase agreement, the Company and investor acknowledged there was $187,800 of principal remaining under the note issued to the investor by the Company on February 3, 2017, plus $80,365 of accrued interest, representing a total aggregate note balance of $268,165. Pursuant to the purchase agreement, the Company sold to investor 2,700 shares of the Company’s newly designated Series C Preferred Stock for a total purchase price of $268,165, and a loss on settlement of debt of $1,835. As of June 30, 2022, the Company had a total of 2,700 shares of Series C Preferred Stock outstanding with a fair value of $268,165, and a stated face value of one hundred dollars ($100) (“share value’) per share, convertible into shares of common stock of the Company. The stock was presented as mezzanine equity because it is redeemable at a fixed or determinable amount upon an event that is outside of the issuer’s control. Upon liquidation, dissolution and winding up of the Company, the holder of each outstanding share of Series C Preferred Stock shall be entitled to receive, out of the assets of the Corporation available for distribution to its shareholders upon such liquidation, before any payments shall be made or any assets distributed to the holders of the common stock, the stated value of the Series C Preferred Shares plus any declared but unpaid dividends. No other current or future equity holders of the Corporation shall have higher priority of liquidation preference than holders of Series C Preferred Stock. The Holder has the right, at any time, at its election, to convert shares of Series C Preferred Stock into common stock at a conversion price of $0.00095.

Common Stock

On January 27, 2022, the holder of the majority of the voting power of the shareholders of the Company, and the Company’s chief executive officer, approved by written consent (i) an amendment to the Company’s articles of incorporation to increase the Company’s authorized shares of common stock from 5,000,000,000 to 10,000,000,000, (ii) an amendment to the Company’s articles of incorporation to effect a reverse stock split of the Company’s common stock by a ratio of not less than 1-for-100 and not more than 1-for-500 at any time prior to the one year anniversary of filing the definitive information statement with respect to the reverse split, with the board of directors having the discretion as to whether or not the reverse split is to be effected, and with the exact ratio of any reverse split to be set at a whole number within the above range as determined by the board in its discretion, and (iii) the adoption of the Company’s 2022 Equity Incentive Plan. Such shareholder approval for such actions became effective 20 days after the definitive information statement relating to such actions was mailed to shareholders.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

Three Months ended September 30, 2022

During the six monthsperiod ended December 31, 2017,September 30, 2022, the Company issued 60,426,825no shares of common stock for conversion of convertible notes.

Three Months ended September 30, 2021

During the period ended September 30, 2021, the Company issued 180,480,692 shares of common stock upon conversion of convertible notes in the amount of $126,900 in$120,400 of principal, plus accrued interest of $37,642, with an aggregate fair value$51,057 based upon a conversion price of $0.00095 per share. The notes were converted per the terms of their respective agreements and therefore no gain or loss on settlement of $227,764, based uponthe conversion prices of $0.0070 and $0.0058.was recorded.  

OptionsOPTIONS

As

On October 2, 2017, the Company granted options to purchase 10,000,000 shares of December 31, 2017, 10,250,000 non-qualified common stock options were outstanding.stock. Each option expires on the date specified in the option agreement, which date is not later than the fifth (5^th) anniversary from the grant date of the options. As of December 31, 2017, 250,000Of the 10,000,000 options, are fully vested with a maturity date of March 31, 2020, and are exercisable at an exercise price of $0.02245 per share. On October 2, 2017, the Company issued 10,000,000 shares of non-qualified common stock options, whichone-third vest one-third immediately, and one-third vest the second and third year, whereby,such that the options are fully vested with a maturity date of October 2, 2022 and are exercisable at an exercise price of $0.01 per share.

On January 23, 2019, the Company issued 170,000,000 stock options. One-third of the options vested immediately, and the remainder vest 1/24 per month over the first twenty-four months following the option grant. The options expire 10 years from the initial grant date. The options fully vested by January 23, 2022.

On January 31, 2019, the Company issued 6,000,000 stock options, of which two-third (2/3) vested immediately, and the remaining amount shall vest one-twelfth (1/12) per month from after the date of the option grant. The options expire 10 years from the initial grant date. The options fully vested on January 31, 2020.

On July 22, 2019, the Company issued 10,000,000 stock options, of which one-third (1/3) vested immediately, and the remaining shall vest one-twenty fourth (1/24) per month from after the date of the option grant. The options expire 10 years from the initial grant date. The options fully vested on July 22, 2020.

A summary of the Company’s stock option activity and related information follows:

The stock based compensation expense recognized inDuring the statement of operations during the sixthree months ended December 31, 2017 and 2016,September 30, 2021, the Company redeemed a total of 24,887,463 of the Company’s stock options from related to the grantingparties for a total of these$1,450,000, leaving a balance of 157,965,711 stock options was $28,713 and $0, respectively.outstanding.

For purpose of determiningThe company’s reasons for the fair market value of the stock options, the Company used the Binomial lattice formula. The significant assumptions used in the Binomial lattice formula of the stock options are as follows:option redemption action for CEO, Director, and consultant included:

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

The weighted average remaining contractual life of options outstanding as of September 30, 2022 and 2021 was as follows: 

WARRANTS

As of September 30, 2022, the Company had an aggregate of 94,895,239 common stock purchase warrants outstanding, with exercise prices ranging from $0.0938 - $0.13125 per share. The warrants were estimated at fair value on the date of issuance as calculated using the Black-Scholes valuation model. The derivative calculated on all warrants outstanding are include in the derivative liability (See Note 6). The warrants can be exercised over periods of three (3) to five (5) years.

A summary of the Company’s warrant activity and related information follows for the period ended September 30, 2022. 

At December 31, 2017,September 30, 2022, the aggregate intrinsic value of the stock optionswarrants outstanding was 0.$0.

HYPERSOLAR,SUNHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS -– UNAUDITED

DECEMBER 31, 2017SEPTEMBER 30, 2022 AND 2021

As of December 31, 2017,September 30, 2022, the outstanding convertible promissory notes are summarized as follows:

Maturities of long-term debt for the next three years are as follows:

At December 31, 2017,September 30, 2022, the $1,706,100 inoutstanding balance of the convertible promissory notes had a remaining debt discount of $45,711, leaving a net balance of $1,660,389.was $827,500.

The Company entered into a securities purchase agreement on May 23, 2014, for the sale ofissued a 10% convertible promissory note on November 9, 2017 (the “May“Nov 2017 Note”) in the aggregate principal amount of up to $500,000. The May Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.0048 per share or fifty percent (50%) of the lowest trading price after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received a tranche of $50,000. The Company received additional tranches in the amount of $415,000 for an aggregate sumprincipal total of $465,000.500,000. The MayNov 2017 Note matured on May 23, 2015 and was extended to February 23, 2016. A secondhad a maturity date of November 9, 2018, with an automatic extension was granted to November 23, 2016. On January 19, 2017, the investor extended the May Note for an additionalof sixty (60) months from the effective date of each tranche.the note. The May Note matures on November 23, 2021. The Company issued 60,426,825 shares of common stock upon conversion of $126,900 in principal, plus accrued interest of $37,642, with an aggregate fair value loss of $227,764. The remaining balance of the May Note as of December 31,Nov 2017 was $101,100.

The Company entered into a securities purchase agreement on April 9, 2015, for the sale of a 10% convertible promissory note (the “April Note”) in the aggregate principal amount of up to $500,000. The April Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price since the original effective date of each respective advancethe note or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon executionIf the Company fails to deliver shares in accordance with the timeframe of three (3) business days of the securities purchase agreement,receipt of a notice of conversion, the Company received a tranchelender, at any time prior to selling all of $50,000. The Company received additional tranchesthose shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the principal sum with the rescinded conversion shares returned to the Company. In no event shall the lender be entitled to convert any portion of the Nov 2017 Note to the extent such conversion would result in beneficial ownership by the lender and its affiliates of more than 4.99% of the outstanding shares of common stock of the Company. In addition, for each conversion in the amountevent that shares are not delivered by the fourth business day (inclusive of $450,000the day of conversion), a penalty of $1,500 per day shall be assessed for an aggregate sumeach day after the third business day (inclusive of $500,000. The April Note matured nine (9) months from the effective datesday of each respective tranche. A second extension was granted to October 9, 2016. On January 19, 2017, the investor extendedconversion) until the April Note for an additional (60) months from the effective date of each tranche. The April Note matures on October 31, 2021.shares are delivered. The balance of the AprilNov 2017 Note as of December 31, 2017September 30, 2022 was $500,000.$177,500.

The Company entered into a securities purchase agreement January 28, 2016, for the sale ofissued a 10% convertible promissory note on June 27, 2018 (the “January“Jun 2018 Note”) in the aggregate principal amount of up to $500,000. The JanuaryCompany received tranches for an aggregate principal total of $500,000. The Jun 2018 Note matured on June 27, 2019, which was automatically extended for sixty (60) months from the effective date of the note. The Jun 2018 Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price since the original effective date of each respective tranchethe note or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon executionIf the Company fails to deliver shares in accordance with the timeframe of three (3) business days of the securities purchase agreement,receipt of a notice of conversion, the lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the principal sum with the rescinded conversion shares returned to the Company. In no event shall the lender be entitled to convert any portion of the Jun 2018 Note to the extent such conversion would result in beneficial ownership by the lender and its affiliates of more than 4.99% of the outstanding shares of common stock of the Company. In addition, for each conversion, in the event, that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The balance of the Jun 2018 Note as of September 30, 2022 was $500,000.

The Company issued a 10% convertible promissory note on August 10, 2018 (the “Aug 2018 Note”) in the aggregate principal amount of up to $100,000. The Aug 2018 Note had a maturity date of August 10, 2019, with an extension of sixty (60) months from the date of the note. The Aug 2018 Note matures on August 10, 2023. The Aug 2018 Note may be converted into shares of the Company’s common stock at a conversion price of the lesser of a) $0.005 per share or b) sixty-one (61%) percent of the lowest trading price per common stock recorded on any trade day after the effective date. The conversion feature of the Aug 2018 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. The balance of the Aug 2018 Note as of September 30, 2022 was $100,000.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

On April 15, 2020, the Company receivedissued a trancheconvertible promissory note (the “Apr 2020 Note”) to an investor in the aggregate principal amount of $10,000.$50,000. The Company received additional tranches in the amount of $490,000 for an aggregate sumprincipal total of $500,000.$50,000. The JanuaryApr 2020 Note matures twelve (12) months from the effective dates of each respective tranche. On January 19, 2017,tranche, such that the investor extended the JanuaryApr 2020 Note formatures on April 15, 2021, with an additionalautomatic extension of sixty (60) months from the effective date of each tranche. The January Note matures on January 27, 2022. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $38,514 during the six months ended December 31, 2017. The balance of the January Note as of December 31, 2017 was $500,000.

The Company entered into a securities purchase agreement February 3, 2017, for the sale of a 10% convertible promissory note (the “February Note”) in the aggregate principal amount of up to $500,000. The FebruaryApr Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price sinceof the originalcommon stock recorded on any trade day after the effective date, of each respective tranche or (c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon executionIf the Company fails to deliver shares in accordance with the timeframe of four (4) business days of the securities purchase agreement,receipt of a notice of conversion, the Company received a tranchelender, at any time prior to selling all of $60,000. The Company received an additional tranchesthose shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount of $440,000 for an aggregatereturned to the principal sum of $500,000. The February Note matures twelve (12) months fromwith the effective dates of each respective tranche. The February Note matures on February 3, 2018, with an automatic extension of sixty (60) months fromrescinded conversion shares returned to the effective date of each tranche. The Company recorded amortization of debt discount, which was recognized as interest expense inCompany. In no event shall the amount of $55,183 during the six months ended December 31, 2017. The balancelender be entitled to convert any portion of the FebruaryApr 2020 Note asto the extent such conversion would result in beneficial ownership by the lender and its affiliates of December 31, 2017 was $500,000.

HYPERSOLAR, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

DECEMBER 31, 2017 

The Company entered into a securities purchase agreement November 9, 2017, formore than 4.99% of the sale of a 10% convertible promissory note (the “November Note”) in the aggregate principal amount of up to $500,000. The November Note is convertible intooutstanding shares of common stock of the Company at a price equal to a variableCompany. In addition, for each conversion, pricein the event that shares are not delivered by the fourth business day (inclusive of the lesserday of $0.01conversion), a penalty of $2,000 per share or fifty percent (50%)day shall be assessed for each day after the fourth business day (inclusive of the lowest trading price since the original effective date of each respective tranche or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon executionday of the securities purchase agreement,conversion) until the Company receivedshares are delivered. The conversion feature of the April 2020 Note was considered a tranchederivative in accordance with current accounting guidelines because of $45,000. The Company received an additional tranches in the amountreset conversion features of $60,000 for an aggregate sum of $105,000. The November Note matures twelve (12) months from the effective dates of each respective tranche. The November Note matures on November 9, 2018, with an automatic extension of sixty (60) months from the effective date of each tranche. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $332 during the six months ended December 31, 2017.Apr 2020 Note. The balance of the NovemberApr 2020 Note as of December 31, 2017September 30, 2022 was $105,000.$50,000.

ASC Topic 815 provides guidance applicable to convertible debt issued by the Company in instances where the number into which the debt can be converted is not fixed. For example, when a convertible debt converts at a discount to market based on the stock price on the date of conversion, ASC Topic 815 requires that the embedded conversion option of the convertible debt be bifurcated from the host contract and recorded at their fair value. In accounting for derivatives under accounting standards, the Company recorded a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the embedded derivative. The discount is amortized over the life of the convertible debt, and the derivative liability is adjusted periodically according to stock price fluctuations.

The convertible notes (the “Notes”) issued and described in Note 5 do not have fixed settlement provisions because their conversion prices are not fixed. The conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

During the six monthsperiod ended December 31, 2017, as a result of the Notes issued that were accounted for as derivative liabilities, we determined that the fair value of the conversion feature of the Notes at issuance was $34,892, based upon the Binomial lattice formula. We recorded the full value of the derivative as a liability at issuance with an offset to valuation discount, which will be amortized over the life of the Notes.

During the six months ended December 31, 2017,September 30 2022, the Company recorded a net loss in change in derivative of $1,054,161$464,037 in the statement of operations due to the change in fair value of the remaining Notes. At December 31, 2017,notes, for the period ended September 30, 2022.

For the three months ended September 30, 2022 and the year ended June 30, 2022, the fair value of the derivative liability was $3,571,895.liabilities are as follows;

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

SEPTEMBER 30, 2022 AND 2021

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used the Binomial lattice formula. The significant assumptions used in the Binomial lattice formula of the derivatives are as follows:

As of September 30, 2022, the Company invested in corporate bonds and government bonds, which have been recognized in the financial statements at cost.

The Company considers corporate bonds and government bonds (“bonds”) as investments due to their ratings. The bonds are rated based on their default probability, health of the corporation’s debt structure, as well as the overall health of the economy. The bonds fall into the category as investments if they have a rating between AAA and BBB.

As of September 30, 2022, the components of the Company’s short -term investments are summarized as follows:

The Company has invested in bonds maturing from October 31, 2022 through August 16, 2023 that are held to maturity. The current trading prices or fair market value of the securities vary, and we believe any decline in fair value is temporary. All securities are current and not in default.

The following table summarizes the amortized cost of the held-to-maturity securities at September 30, 2022, aggregated by credit quality indicator.

During the period ended September 30, 2022, the Company recognized interest income of $255,012 in the financial statements, which is recorded as part of investment income in the statement of operations.

Effective October 1, 2022, the Company extended its research agreement with the University of Iowa through September 30, 2022. As consideration under the research agreement, the University of Iowa will receive a maximum of $343,984 from the Company in four equal installments. The agreement can be terminated by either party upon sixty (60) days prior written notice to the other.

Effective October 1, 2022, the Company extended its research agreement with the University of Michigan through September 30, 2023. As consideration under the research agreement, the University of Michigan will receive a maximum of $296,448, from the Company in four equal installments. In the event of early termination by the Sponsor, the Sponsor will pay all costs accrued by University as of the date of termination, including non-cancellable obligations.