UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
FOR
THE QUARTERLY PERIOD ENDED
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION
FILE NUMBER:
(Name of registrant in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone Number: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
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 issued and outstanding as of May 10, 2024 was .
NEWHYDROGEN, INC.
INDEX
| i |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWHYDROGEN, INC.
CONDENSED BALANCE SHEET
| March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Machinery and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| NET PROPERTY AND EQUIPMENT | ||||||||
| OTHER ASSETS | ||||||||
| Patents, net of amortization of $ | ||||||||
| Deposit | ||||||||
| TOTAL OTHER ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and other payable | $ | $ | ||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (See Note 9) | ||||||||
| MEZZANINE (See Note 3) | ||||||||
| Series C Convertible Preferred Stock, and shares outstanding, respectively,redeemable value of $ | ||||||||
| SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value; authorized shares | ||||||||
| Common stock, $ par value; authorized shares and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES, MEZZANINE AND SHAREHOLDERS’ EQUITY (EQUITY) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 1 |
NEWHYDROGEN, INC.
CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| REVENUE | $ | $ | ||||||
| OPERATING EXPENSES | ||||||||
| General and administrative expenses | ||||||||
| Research and development | ||||||||
| Depreciation and amortization | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) | ( | ) | ( | ) | ||||
| OTHER INCOME/(EXPENSES) | ||||||||
| Interest income | ||||||||
| TOTAL OTHER INCOME (EXPENSES) | ||||||||
| NET INCOME (LOSS) | $ | ( | ) | $ | ( | ) | ||
| BASIC AND DILUTED EARNINGS (LOSS) PER SHARE | $ | ) | $ | ) | ||||
| WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||
| BASIC AND DILUTED | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 2 |
NEWHYDROGEN, INC.
CONDENSED STATEMENT OF SHAREHOLDERS’ DEFICIT
| THREE MONTHS ENDED MARCH 31,2023 | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||
| Shares | Amount | Mezzanine | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||||||||
| Stock and warrant compensation cost | - | - | ||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2023 (unaudited) | $ | ( | ) | |||||||||||||||||||||||||||||
| THREE MONTHS ENDED MARCH 31,2024 | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||
| Shares | Amount | Mezzanine | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||||||||
| Stock compensation cost | - | - | ||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2024 (unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
NEWHYDROGEN, INC.
CONDENSED STATEMENTS OF CASH FLOWS
| Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net income(loss) to net cash (used in) provided by operating activities | ||||||||
| Depreciation and amortization expense | ||||||||
| Stock compensation expense | ||||||||
| (Increase) Decrease in Changes in Assets | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Increase (Decrease) in Changes in Liabilities | ||||||||
| Accounts payable | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| NET CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | $ | $ | ||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
NEWHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
1. Basis of Presentation
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 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 three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the December 31, 2023.
Going Concern
As of the three months ended March 31, 2024, the Company
had a loss of $
Management believes the Company’s present cash flows will enable it to meet its obligations for twenty-four months from the date of these financial statements. Management will continue to assess it operational needs and seek additional financing as needed to fund its operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The condensed unaudited 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.
Revenue Recognition
The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. The Company adopted Accounting Standards Codification (“ASC”) 606, whereby revenue will be recognized as performance obligations are satisfied and customers obtain control of goods or services. However, in the event of a loss on a sale is foreseen, the Company will recognize the loss as it is determined. To date, the Company has not had significant revenues and is in the development stage.
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 FDIC limits. As of March 31, 2024,
the cash balance in excess of the FDIC limits was $
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates.
| 5 |
NEWHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives:
| Computer equipment | |||
| Machinery and equipment |
Depreciation
expense for the three months ended March 31, 2024 and 2023 were $
Intangible Assets
The Company has patent applications to protect the inventions and processes behind its proprietary bio-based back-sheet, a protective covering for the back of photovoltaic solar modules traditionally made from petroleum-based film. Intangible assets that have finite useful lives continue to be amortized over their useful lives.
| Useful Lives | 3/31/2024 | 3/31/2023 | ||||||||
| Patents | $ | $ | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Amortization
expense for the three months ended March 31, 2024 and 2023 was $
The Company measures the cost of employee services received in exchange for an equity award based on the grant-date fair value of the award. All grants under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee, consultant, or director are required to provide service in exchange for the award (the vesting period). Compensation expense for options granted to employees and non-employees is determined in accordance with the standard as the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted is re-measured each period.
On February 18, 2021, the Company granted stock options to its employees for services at an exercise price of $. On September 29, 2021, the Company amended the exercise price to $ per share. The options expire, and all rights to purchase the shares shall terminate seven () years from the date of grant or termination of employment. , and the remaining half of the option to purchase shares of the Company’s common stock shall become exercisable in equal amounts over a twenty-four () month period during the term of the optionee’s employment, with the first installment of shares vesting on March 18, 2021. The options are exercisable in equal amounts over a thirty-six () month period during the term of the optionee’s employment, with the first installment of shares, vesting on March 18, 2021. On April 12, 2022, the Company cancelled the stock options dated February 18, 2021, and concurrently granted new options to its’ employees for services.
On
March 1, 2022, the Company issued
| 6 |
NEWHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
On March 15, 2022, the Company granted stock options to a consultant for advisory services. The options vest at a rate of options per month for a thirty-six () month period during the term of the optionee’s consultancy with the Company. As of March 31, 2024, the stock options were outstanding.
On
April 12, 2022, the Company granted an aggregate of stock options to its employees for services, at an exercise price of
$. The options expire, and all rights to purchase the shares shall terminate seven () years from the date of grant or termination
of employment. The options are exercisable in the amount of are exercisable upon grant, and the remaining
shares are exercisable in equal amounts over a ten () month period during the term of the optionee’s employment until the Option
is
On
March 20, 2023, the Company granted shares of stock options, to purchase the total number of shares of common stock equal
to the number of option shares at the exercise price of $ per share. The options were granted pursuant to the terms of the Company’s
2022 Equity Incentive Plan. The shares subject to the options, have a six-month cliff, whereby shall become vested
and exercisable on September 19, 2023 and the remaining shall become exercisable in equal amounts over a thirty () month
period during the term of the participant’s employment until the option is
On May 9, 2023, the Company granted shares of stock options to a consultant, with an exercise price of $, and an expiration date of May 31, 2033. The Options vest over a thirty-six () month period from June 1, 2023, with options vesting on November 30, 2023, and options vested at the end of each month from the end of the seventh month through May 31, 2026. As of March 31, 2024, stock options remain outstanding.
On June 15, 2023, the Company granted shares of stock options to two employees of the Company, with an exercise price of $, and an expiration date of June 15, 2030. The options were granted pursuant to the terms of the Company’s 2022 Equity Incentive Plan. The grant of the options was made in consideration of the services rendered and to be rendered by the employees to the Company. The options vest and are exercisable in four (4) separate tranches based on performance as follows: .
Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company used Black Scholes to value its stock option awards which incorporated the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. . As of March 31, 2024, the aggregate total of stock options were outstanding.
| 7 |
NEWHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
Research
and development costs are expensed as incurred. Total research and development costs were $
Advertising
The
Company expenses the cost of advertising and promotional materials when incurred. The advertising costs were $
Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing 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-based awards (Note 4), plus the assumed conversion of convertible debt (Note 5).
For
the three months ended March 31, 2024, the Company has not included shares issuable from stock options and
For
the three months ended March 31, 2023, the Company has not included shares issuable from stock options and
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Income (Loss) to common shareholders (Numerator) | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average number of common shares outstanding (Denominator) | ||||||||
| Diluted weighted average number of common shares outstanding (Denominator) | ||||||||
Fair Value of Financial Instruments
Fair Value of Financial Instruments requires disclosure of the fair value information, whether recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2024, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
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 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
| 8 |
NEWHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
We measure certain financial instruments at fair value on a recurring basis. As of March 31, 2024, there were no financial instruments to report.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
3. PREFERRED STOCK
Preferred Stock December 31, 2024 and 2023
As
of March 31, 2024,
The preferred shares have been classified under mezzanine, since it is a hybrid of capital that is between equity and senior debt in the capital structure of the Company. The lender has the option to convert their debt into an equity interest in the Company in case of default, after other senior lenders are paid.
4. COMMON STOCK
Common Stock March 31, 2024 and 2023
During the three months ended March 31, 2024 and 2023, the Company did not issue any common stocks.
Stock Options
During the three months ended March 31, 2024 and 2023, the Company granted the following stock options in the amount of , and , respectively. (See Note 2).
| 3/31/2024 | 3/31/2023 | |||||||||||||||
| Number of Options | Weighted average exercise price | Number of Options | Weighted average exercise price | |||||||||||||
| Outstanding as of the beginning of the periods | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ||||||||||||||||
| Expired/Cancelled | ||||||||||||||||
| Outstanding as of the end of the periods | $ | $ | ||||||||||||||
| Exercisable as of the end of the periods | $ | $ | ||||||||||||||
| 9 |
NEWHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
5. STOCK OPTIONS AND WARRANTS (Continued)
| 3/31/2024 | 3/31/2023 | |||||||||||||||||||||||||||||
| Exercisable Price | Stock Options Outstanding | Stock Options Exercisable | Weighted Average Remaining Contractual Life (years) | Exercisable Price | Stock Options Outstanding | Stock Options Exercisable | Weighted Average Remaining Contractual Life (years) | |||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||
| $ | $ | - | ||||||||||||||||||||||||||||
| $ | $ | - | ||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||
Determining the appropriate fair value
of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and
stock price volatility. The Company used Black Scholes to value its stock option awards which incorporated the Company’s stock price,
volatility, U.S. risk-free rate, dividend rate, and estimated life. The stock options terminate seven (
The stock-based compensation expense recognized in the statement of operations during the three months ended March 31, 2024 and 2023, were $ and $, respectively.
As of March 31, 2024, there was intrinsic value with regards to the outstanding options.
Warrants
As
of March 31, 2023, the Company issued
As of March 31, 2024 and 2023, the outstanding common stock purchase warrants were as follows:
| 3/31/2024 | 3/31/2023 | |||||||||||||||
| Number of Options | Weighted average exercise price | Number of Options | Weighted average exercise price | |||||||||||||
| Outstanding as of the beginning of the periods | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Purchased | ||||||||||||||||
| Outstanding as of the end of the periods | $ | $ | ||||||||||||||
| Exercisable as of the end of the periods | ||||||||||||||||
| 10 |
NEWHYDROGEN, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
5. STOCK OPTIONS AND WARRANTS (Continued)
The weighted average remaining contractual life of the warrants outstanding as of March 31, 2024 was as follows:
| 3/31/2024 | |||||||||||||
| Exercisable Price | Common Stock Purchase Warrants Outstanding | Common Stock Purchase Warrants Exercisable | Weighted Average Remaining Contractual Life (years) | ||||||||||
| $ | |||||||||||||
| $ | |||||||||||||
| $ | |||||||||||||
| $ | |||||||||||||
| $ | |||||||||||||
There
was
6. COMMITMENTS AND CONTINGENCIES
Office Rental
The
Company rents office space on a yearly basis with a monthly rent payment in the amount of $
Consultant Agreement
On
May 30, 2023, the Company amended the agreement dated March 15, 2022 entered into with a consultant regarding an advisory agreement for
services of various aspects of the Company’s business, including but not limited to technology, business development, and product
development. The Company granted common stock options, vesting at a rate of options per month for thirty-six () months
of consecutive service to the Company. In lieu of a fixed monthly cash compensation of $, the Company will provide the Advisor with
a cash compensation based on an hourly rate of $
Research Agreement
On
August 1, 2023, the Company entered into an agreement with the Regents of the University of California, to perform research that would
benefit both the University and the Sponsor (NewHydrogen, Inc.) and is consistent with the research and educational objectives of the
University. The cost to Sponsor for the University’s performance shall not exceed $
Legal
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
As
of March 31, 2024, there were
7. SUBSEQUENT EVENT
Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has no subsequent events to report.
| 11 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note on Forward-Looking Statements.
Certain statements in “Management’s Discussion and Analysis and Results of Operations” below, and elsewhere in this quarterly 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 are under no duty to update any of the forward-looking statements after the date of this quarterly report. Subsequent written and oral forward looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in our annual report on Form 10-K filed with the SEC on March 20, 2024, 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 report.
Overview
We are a developer of clean energy technologies. Our current focus is on developing a thermochemical green hydrogen production technology to lower the cost of green hydrogen production.
Hydrogen is the cleanest and most abundant element in the universe, and we can’t live without it. Hydrogen is the key ingredient in making fertilizers needed to grow food for the world. It is also used for transportation, refining oil and making steel, glass, pharmaceuticals and more. Nearly all the hydrogen today is made from hydrocarbons like coal, oil, and natural gas, which are dirty and limited resources. Water, on the other hand, is an infinite and renewable worldwide resource.
Currently, the most common method of making green hydrogen is to split water into oxygen and hydrogen with an electrolyzer using green electricity produced from solar or wind. However, green electricity is and always will be very expensive. It currently accounts for 73% of the cost of green hydrogen. By using heat directly, we can skip the expensive process of making electricity, and fundamentally lower the cost of green hydrogen. Inexpensive heat can be obtained from concentrated solar, geothermal, nuclear reactors and industrial waste heat for use in our novel low-cost thermochemical water splitting process. Working with a world class research team at UC Santa Barbara, our goal is to help usher in the green hydrogen economy that Goldman Sachs estimated to have a future market value of $12 trillion.
We have previously developed an innovative material technology to reduce the cost per watt of electricity produced by Photovoltaic, or PV, solar modules.
Application of Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our unaudited 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 a Binomial lattice valuation 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.
| 12 |
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Our cash, cash equivalents, investments, inventory, prepaid expenses, and accounts payable are stated at cost which approximates fair value due to the short-term nature of these instruments.
Recently Issued Accounting Pronouncements
Management reviewed currently issued pronouncements during the three months ended March 31, 2024, and 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.
Results of Operations – Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023.
OPERATING EXPENSES
General and Administrative Expenses
General and administrative (“G&A”) expenses decreased by $1,234,562 to $381,376 for the three months ended March 31, 2024, compared to $1,615,938 for the prior period ended March 31, 2023. The primary decrease in G&A expenses was the result of a decrease in fair value of non-cash stock compensation of $1,309,533, with an overall increase in G&A expenses of $74,971.
Research and Development
Research and Development (“R&D”) expenses increased by $73,939 to $88,939 for the three months ended March 31, 2024, compared to $15,000 for the prior period ended March 31, 2023. This overall increase in R&D expenses was the result of an increase in outside research fees.
Depreciation and Amortization Expense
Depreciation and amortization expense for the three months ended March 31, 2024 and 2023 was $1,027 and $1,026, respectively.
Other Income/(Expenses)
Other income and (expenses) decreased by $127 to $337 for the three months ended March 31, 2024, compared to $464 for the prior period ended March 31, 2023. The decrease in other income and (expenses) was the result of a decrease in interest income of $127. The decrease in other income and (expenses) was primarily due to the net change in interest income.
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Net Income (Loss)
Our net loss for the three months ended March 31, 2024 was $471,004, compared to $1,631,500 for the prior period ended March 31, 2023. The decrease in net loss was due to a decrease in non-cash expense` associated with the net change in stock option expense in the current period. These estimates were based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs were subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the stock options fluctuate, and the fluctuation may be material. The Company has not generated any revenues.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
The unaudited condensed 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 condensed financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. During the three months ended March 31, 2024, we did not generate any revenues, and recognized a net loss of $471,341, due to a change in non-cash stock compensation, and cash of $431,405 used in operations. As of March 31, 2024, we had working capital of $3,285,252 and a shareholders’ deficit of $177,578.
Management believes that we will be able to continue to raise funds through the sale of our securities to existing and new investors. Management believes that funding from existing and prospective new investors and future revenue will provide the additional cash needed to meet our obligations as they become due and will allow the development of our core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt-financing or cause substantial dilution for our stockholders, in case of equity financing.
As of March 31, 2024, we had working capital of $3,285,252 compared to $3,678,942 for the year ended December 31, 2023. This decrease in working capital was due primarily to a decrease in cash.
During the three months ended March 31, 2024, we used $431,405 of cash for operating activities, as compared to $194,320 for the prior period ended March 31, 2023. The increase in the use of cash for operating activities for the current period was a result of an increase in research and development cost, advertising and marketing, and salaries.
Net cash provided from equity financing activities for the three months ended March 31, 2024 and March 31, 2023 was $0. There was no equity financing during the current or prior period. Our capital needs have primarily been met from the proceeds of the sale of our securities, as we currently have not generated any revenues.
Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2023, expressed substantial doubt about our ability to continue as a going concern without additional capital becoming available. Our financial statements as of March 31, 2024 have been prepared under the assumption that we will continue as a going concern. Our ability to continue as a going concern ultimately is dependent upon our ability to generate revenue, which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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PLAN OF OPERATION AND FINANCING NEEDS
We are engaged in the development of clean energy technologies to lower the cost of producing green hydrogen. The Company’s current focus is on developing ThermoLoop™, a breakthrough technology that uses water and heat rather than electricity to potentially produce the world’s lowest cost green hydrogen.
Our plan of operation within the next twelve months is to utilize our cash balances to maintain the existing ThermoLoop™ technology development program at UCSB.
We believe that our current cash and investment balances will be sufficient to support development activity and general and administrative expenses for the next twenty-four months. Management estimates that it will require additional cash resources during 2025, based upon its current operating plan and condition. We do not expect increased expenses until early 2026 when we ramp up prototyping efforts related to our thermochemical water splitting technology.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and acting chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded as of March 31, 2024, that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and acting chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change to our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of this report, we are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
ITEM 1A. RISK FACTORS
There are no material changes from the risk factors previously disclosed in the Registrant’s annual report on Form 10-K filed on March 20, 2024.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| Exhibit No. | Description | |
| 31.1 | Certification by Chief Executive Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith). | |
| 31.2 | Certification by Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith). | |
| 32.1 | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith). | |
| 32.2 | Certification by Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith). | |
| EX-101.INS | Inline XBRL Instance Document | |
| EX-101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| EX-101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |
| EX-101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |
| EX-101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase | |
| EX-101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on May 13, 2024.
| NEWHYDROGEN, INC. | ||
| By: | /s/ Steven Hill | |
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ David Lee | |
| Chairman, President and Acting Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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