10-Q

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 MARCH 31, 2017

☐   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, INC.

(Name of registrant in its charter)

Nevada	26-4298300
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

(Address of principal executive offices) (Zip Code)

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

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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer (Do not check if smaller reporting company)	☐	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 outstanding, as of May 11, 2017 was 678,342,322.

HYPERSOLAR, INC.

INDEX

		Page
PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS	3
	Condensed Balance Sheets at March 31, 2017 (unaudited) and June 30, 2016	3
	Condensed Statements of Operations for the Three months and Nine Months Ended March 31, 2017 and 2016 (unaudited)	4
	Condensed Statement of Shareholders' Deficit for the Nine Months Ended March 31, 2017 (unaudited) and June 30, 2016	5
	Condensed Statements of Cash Flows Nine Months Ended March 31, 2017 and 2016 (unaudited)	6
	Notes to the Condensed Financial Statements	7
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
ITEM 4:	CONTROLS AND PROCEDURES	17
PART II: OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	18
ITEM 1A:	RISK FACTORS	18
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	18
ITEM 4:	MINE SAFETY DISCLOSURES	18
ITEM 5:	OTHER INFORMATION	18
ITEM 6:	EXHIBITS	19
SIGNATURES		20

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HYPERSOLAR, INC.

CONDENSED BALANCE SHEETS

	March 31, 2017			June 30, 2016
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	51,955		$	119,887
Prepaid expense		6,717			-
TOTAL CURRENT ASSETS		58,672			119,887
PROPERTY & EQUIPMENT
Computers and peripherals		6,218			6,218
Less: accumulated depreciation		(6,218	)		(6,059	)
NET PROPERTY AND EQUIPMENT		-			159
OTHER ASSETS
Deposits		900			900
Domain, net of amortization $3,071 and $2,805, respectively		2,244			2,510
Patents		37,023			37,023
TOTAL OTHER ASSETS		40,167			40,433
TOTAL ASSETS	$	98,839		$	160,479
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	117,102		$	79,261
Accrued expenses		378,848			362,301
Derivative liability		2,675,450			6,230,102
Convertible promissory notes, net of debt discount of $107,836 and $97,910, respectively		12,164			1,287,590
TOTAL CURRENT LIABILITIES		3,183,564			7,959,254
LONG TERM LIABILITIES
Convertible promissory notes, net of debt discount of $73,373 and $0, respectively		1,234,127			-
TOTAL LONG TERM LIABILITIES		1,234,127			-
TOTAL LIABILITIES		4,417,691			7,959,254
SHAREHOLDERS' DEFICIT
Preferred Stock, $0.001 par value;5,000,000 authorized preferred shares, no shares issued or outstanding		-			-
Common Stock, $0.001 par value; 1,500,000,000 authorized common shares 678,342,322 and 589,552,961 shares issued and outstanding, respectively		678,342			589,553
Additional Paid in Capital		6,009,994			5,655,520
Accumulated deficit		(11,007,188	)		(14,043,848	)
TOTAL SHAREHOLDERS' DEFICIT		(4,318,852	)		(7,798,775	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	98,839		$	160,479

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

3

HYPERSOLAR, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
REVENUE	$	-		$	-		$	-		$	-
OPERATING EXPENSES
General and administrative expenses		144,152			106,579			431,036			351,233
Research and development cost		19,736			(30,004	)		60,708			(1,024	)
Depreciation and amortization		88			257			425			771
TOTAL OPERATING EXPENSES		163,976			76,832			492,169			350,980
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)		(163,976	)		(76,832	)		(492,169	)		(350,980	)
OTHER INCOME/(EXPENSES)
Gain on debt conversion and change in derivative liability		2,679,773			3,565,307			3,803,154			7,917,161
Interest expense		(99,915	)		(181,311	)		(274,325	)		(566,274	)
TOTAL OTHER INCOME/(EXPENSES)		2,579,858			3,383,996			3,528,829			7,350,887
NET INCOME	$	2,415,882		$	3,307,164		$	3,036,660		$	6,999,907
BASIC EARNINGS PER SHARE	$	0.004		$	0.006		$	0.005		$	0.014
DILUTED EARNINGS PER SHARE	$	0.004		$	0.006		$	0.005		$	0.014
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC		652,153,322			537,004,223			620,783,642			507,494,231
DILUTED		655,078,772			542,496,846			623,709,092			512,986,854

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

4

HYPERSOLAR, INC.

CONDENSED STATEMENTS OF SHAREHOLDERS' DEFICIT

FOR THE NINE MONTHS ENDED MARCH 31, 2017

									Additional
	Preferred stock				Common stock				Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance at June 30, 2016		-	$	-		589,552,961	$	589,553	$	5,655,520	$	(14,043,848	)	$	(7,798,775	)
Issuance of common stock for conversion of debt and accrued interest		-		-		88,789,361		88,789		351,786		-			440,575
Stock based compensation expense		-		-		-		-		2,688		-			2,688
Net income for the nine months ended March 31, 2017		-		-		-		-		-		3,036,660			3,036,660
Balance at March 31, 2017 (unaudited)		-	$	-		678,342,322	$	678,342	$	6,009,994	$	(11,007,188	)	$	(4,318,852	)

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

5

HYPERSOLAR, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	March 31, 2017			March 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,036,660		$	6,999,907
Adjustment to reconcile net income to net cash used in operating activities
Depreciation & amortization expense		425			771
Stock based compensation expense		2,688			-
(Gain) on change in derivative liability		(3,803,154	)		(7,917,161	)
Amortization of debt discount recorded as interest expense		55,725			478,545
(Increase) Decrease in change in assets:
Prepaid expense		(6,717	)		-
Increase (Decrease) in change in liabilities :
Accounts payable		37,841			(43,391	)
Accrued expenses		218,600			87,660
NET CASH USED IN OPERATING ACTIVITIES		(457,932	)		(393,669	)
NET CASH FLOWS FROM INVESTING ACTIVITIES		-			-
NET CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable		390,000			410,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		390,000			410,000
NET (DECREASE) INCREASE IN CASH		(67,932	)		16,331
CASH, BEGINNING OF PERIOD		119,887			39,491
CASH, END OF PERIOD	$	51,955		$	55,822
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	-		$	70
Taxes paid	$	-		$	-
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Issuance of common stock upon conversion of convertible notes and accrued interest	$	440,575		$	123,447

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

6

HYPERSOLAR, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MARCH 31, 2017

1. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements of Hypersolar, Inc. ("Hypersolar" or the Company") 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 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 nine months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending June 30, 2017. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended June 30, 2016.

Going Concern

 The accompanying 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 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 securities. 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 allow the Company to develop its core business. There can be no assurance that the Company will be able to continue to raise capital.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of HyperSolar is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting 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.

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 intangible assets, and the deferred tax valuation allowance. Actual results could differ from those estimates.

Intangible Assets

Intangible assets consist of patents that are initially measured at the lower of cost or fair value. The patents are deemed to have an indefinite life and are not amortized. The patents are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified.

Net Earnings (Loss) per Share Calculations

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 nine months ended March 31, 2017, the Company calculated the dilutive impact of the outstanding stock options of 250,000, and the convertible debt of $1,427,500, 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 was dilutive.

For the nine months ended March 31, 2016, the Company calculated the dilutive impact of the outstanding stock options of 500,000, and the convertible debt of $1,275,000, 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 was dilutive.

7

HYPERSOLAR, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MARCH 31, 2017

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the 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.

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 March 31, 2017, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

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) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

● 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. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2017 (See Note 6):

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative liability		2,675,450		-		-		2,675,450
Total liabilities measured at fair value	$	2,675,450	$	-	$	-	$	2,675,450

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

Balance as of July 1, 2016	$	6,230,102
Fair value of derivative liabilities issued		248,502
(Gain) on change in derivative liability		(3,803,154	)
Balance as of March 31, 2017	$	2,675,450

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.

8

HYPERSOLAR, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MARCH 31, 2017

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements

In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU 2016-15 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 financial statements.

3. CAPITAL STOCK

During the nine months ended March 31, 2017, the Company issued 88,789,361 shares of common stock upon the conversion of $346,863 in principal, plus accrued interest of $93,712.

4. STOCK OPTIONS

Options

As of March 31, 2017, 250,000 non-qualified common stock options were outstanding. 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 March 31, 2017, 250,000 options are fully vested with a maturity date of March 31, 2020, and are exercisable at an exercise price of $0.02245 per share.

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

	3/31/2017
				Weighted
	Number			average
	of			exercise
	Options			price
Outstanding, beginning of period		500,000		$	0.03
Granted		-			-
Exercised		-			-
Forfeited/Expired		(250,000	)	$	0.04
Outstanding, end of period		250,000		$	0.02
Exercisable at the end of period		250,000		$	0.02
Weighted average fair value of options granted during the period				$	-

5. CONVERTIBLE PROMISSORY NOTES

The Company entered into a securities purchase agreement on December 16, 2013 for the sale of a 10% convertible promissory note (the “December Note”) in the aggregate principal amount of up to $100,000. The December 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 $26,000.The Company received additional tranches in the amount of $74,000 for an”) aggregate sum of $100,000. The December Note matured on May 16, 2015, and the maturity date was extended to February 16, 2016. Subsequently, a third extension was granted to November 16, 2016. During the year ended June 30, 2016, the Company issued 42,163,679 shares of common stock upon conversion of $59,500, plus accrued interest of $14,286. On October 1, 2016, the Company issued 11,515,068 shares of common stock upon conversion of $40,500, plus accrued interest of $11,318. As of March 31, 2017, the December Note and interest were fully converted.

The Company entered into a securities purchase agreement on March 5, 2014, for the sale of a 10% convertible promissory note (the “March Note”) in the aggregate principal amount of up to $100,000. The March 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 $30,000. On April 15, 2014, the lender and borrower agreed to amend the March Note to increase the principal sum to $150,000. The Company received additional tranches in the amount of $120,000 for an aggregate sum of $150,000. During the period ended December 31, 2016, the Company issued 37,843,288 shares of common stock upon conversion of $150,000 in principal, plus accrued interest of $40,459. The March Note matured on September 5, 2015 and was extended to June 5, 2016. Subsequently, a second extension was granted to March 5, 2017. As of March 31, 2017, the March Note was fully converted.

9

HYPERSOLAR, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MARCH 31, 2017

5. CONVERTIBLE PROMISSORY NOTES (Continued)

The Company entered into a securities purchase agreement on May 23, 2014, for the sale of a 10% convertible promissory note (the “May 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 sum of $465,000. The May Note matured on May 23, 2015 and was extended to February 23, 2016. A second extension was granted to November 23, 2016. On January 19, 2017, the investor extended the May Note for additional sixty (60) months from the effective date of each tranche. The May Note matures on November 23, 2021. During the period ended March 31, 2017, the Company issued 39,431,005 shares of common stock upon conversion of $156,363 in principal, plus accrued interest of $41,934. Also, the principal was reduced by $1,137 for interest due from the investor. The remaining balance of the May Note as of March 31, 2017 was $307,500.

The Company entered into a securities purchase agreement on April 9, 2015, for the sale of a 10% convertible promissory note (the “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 advance or the lowest effective price per share granted to any person or entity 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 $450,000 for an aggregate sum of $500,000. The April Note matured nine (9) months from the effective dates of each respective tranche. A second extension was granted to October 9, 2016. On January 19, 2017, the investor extended the April Note for an additional (60) months from the effective date of each tranche. The April Note matures on October 31, 2021. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $42,303 during the nine months ended March 31, 2017.

The Company entered into a securities purchase agreement January 28, 2016, for the sale of a 10% convertible promissory note (the “January Note”) in the aggregate principal amount of up to $500,000. The January 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 tranche or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received a tranche of $10,000. The Company received additional tranches in the amount of $490,000 for an aggregate sum of $500,000. The January Note matures twelve (12) months from the effective dates of each respective tranche. On January 19, 2017, the investor extended the January Note for an additional 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 $100,691 during the nine months ended March 31, 2017.

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 February 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 tranche or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received a tranche of $60,000. The Company received an additional tranche in the amount of $60,000 for an aggregate sum of $120,000. The February Note matures twelve (12) months from the effective dates of each respective tranche. The February Note matures on February 3, 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 $12,164 during the nine months ended March 31, 2017.

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.

6. DERIVATIVE LIABILITIES

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 nine months ended March 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 convertible notes at issuance was $248,502, 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.

10

HYPERSOLAR, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MARCH 31, 2017

6. DERIVATIVE LIABILITIES (Continued)

During the nine months ended March 31, 2017, the Company recorded a net gain in change in derivative of $3,803,154 in the statement of operations due to the change in fair value of the remaining Notes, for the nine months ended March 31, 2017. At March 31, 2017, the fair value of the derivative liability was $2,675,450.

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:

Risk free interest rate	0.29% - 1.95%
Stock volatility factor	41.35% - 77.0%
Weighted average expected option life	1 year - 5 year
Expected dividend yield	None

7. SUBSEQUENT EVENTS

Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855, and reported the following events:

On April 11, 2017, the Company received an additional tranche in the amount of $60,000 under the February note.

11

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

The information in this discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements that are not of historical fact may be deemed to be forward-looking statements. These forward-looking statements involve substantial risks and uncertainties. In some cases you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue”, the negative of the terms or other comparable terminology. Actual events or results may differ materially from the anticipated results or other expectations expressed in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks included from time to time in other reports or registration statements filed with the United States Securities and Exchange Commission. These factors may cause our actual results to differ materially from any forward-looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between actual results and those reflected in these statements.

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

Overview

Inspired by the photosynthetic process that plants use to harness the power of the sun to create energy molecules, we are developing a novel solar-powered particle system that mimics photosynthesis to separate hydrogen from water. On November 15, 2011, we filed a patent application to protect the intellectual property rights to our unique particles called “photoelectrosythetically active heterostructures” (PAH) for the production of hydrogen and other valuable chemicals. The patent was granted on March 14, 2017 as Patent No.: US 9,593,053 B1. On Friday, January 27, we filed an additional divisional application to pursue method claims for the PAH structures.

Our research is centered on developing a low-cost and submersible hydrogen production particle that can split water molecules under the sun, emulating the core functions of photosynthesis. Each particle is a complete hydrogen generator that contains a novel high voltage solar cell bonded to chemical catalysts by a proprietary encapsulation coating. On September 15, 2015, we announced that we had surpassed the critical voltage (1.5 Volts) threshold to split water molecules for renewable hydrogen fuel production. We believe this is an extremely important step towards commercialization, as 1.5 V is the minimum voltage needed to produce hydrogen in real world systems.

Currently, the strategy of partnering with both the University of Iowa and University of California, Santa Barbara, has advanced our technology significantly. We are currently contracted with the University of California, Santa Barbara through June 30, 2017. Our contract with the University of Iowa expired April 30, 2017 and we are still negotiating a new agreement expected to be finalized before May 15, 2017. We anticipate continuing this strategy of leveraging our existing relationships, as well as potentially exploring relationships with other leading universities, to continue developing our technology.

In addition to the university teams, in June of 2016, we hired Dr. Joun Lee to be our chief-technologist to work closely with the teams and drive progress. Dr. Lee is based in the lab at the University of Iowa. Also in August of 2016, we added Professor John Stickney as Scientific Advisor. Professor Stickney is currently at the University of Georgia within the Department of Chemistry.

12

In order to achieve commercial scale production of hydrogen, we need to overcome the following challenges:

Low Cost

The overall cost depends on the cost of solar particles and catalysts for H2 production. Currently, platinum is the most desired catalyst for hydrogen production. Although used in very small amount, the use of platinum may pose a few roadblocks for wide scale adoption of this technology. To address this challenge, we are currently accelerating development of platinum metal free catalysts that can match or surpass the activity obtained from platinum metals. Recent results have shown great promise in reaching this goal.

High Performance

Our current efforts are focused on improving the H2 production efficiency to greater than 10%. In order to reach this goal, extensive research and development efforts on material synthesis and characterization are required. We are accelerating our efforts by working in parallel with the research teams at the University of Iowa and the University of California-Santa Barbara.

Commercialization

Manufacturing water splitting solar particles and integration of cost-effective silicon solar cells into prototype devices for hydrogen production will require strategic partnership with the photovoltaic industries. We are currently in process of forming partnership with solar cell companies for future prototype device development.

We have already overcome many of the challenges and steps necessary for successful realization of commercial solar H2 production systems through the following:

● Discovery and development of a novel low-cost manufacturing technique to fabricate solar particles for hydrogen production with voltages greater than 1.3 Volts. The theoretical voltage for splitting water to produce hydrogen is 1.23 Volts. These particles are made of commercially viable solar cell materials and are stabilized using patent pending proprietary nano-encapsulation techniques for efficient and stable production of H2 in water, thus addressing the biggest challenge for wide scale adoption of solar H2 production units.

● Utilizing cheap and non-toxic earth abundant materials, we have developed water splitting solar nanostructured thin films to achieve a voltage of 1.6 Volts, with currents for hydrogen production exceeding 10mA/cm².

● In order to protect the solar particles in corrosive waste water, we have developed a patent pending proprietary coating technology that stabilizes commercially available solar cells from corrosion under water environment allowing stable continuous production of hydrogen for more than hundreds of hours.

● In September of 2016, we announced and demonstrated our latest prototype device that safely and efficiently separates hydrogen and oxygen using an integrated solar cell-membrane system. This patent-pending technology not only enables safe operation but also substantially improves the hydrogen production efficiency by preventing mixing of the hydrogen and oxygen products. We are in the process of developing a 1ft² patent-pending prototype device to achieve larger scale solar hydrogen production.

13

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 Black Scholes option pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.

Use of Estimates

In accordance with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates and assumptions relate to recording net revenue, collectability of accounts receivable, useful lives and impairment of tangible and intangible assets, accruals, income taxes, inventory realization, stock-based compensation expense, Black Scholes valuation model inputs, derivative liabilities and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.

Fair Value of Financial Instruments

Fair value of financial instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2017, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

14

Recently Issued Accounting Pronouncements

Management reviewed currently issued pronouncements during the nine months ended March 31, 2017, and does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements. Pronouncements disclosed in notes to the financials.

Results of Operations for the Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016.

Operating Expenses

Operating expenses for the three months ended March 31, 2017 were $163,976 and $76,832 for the prior period ended March 31, 2016. The net increase of $87,144 in operating expenses consisted primarily of an increase in investor relations expense in the amount of $18,158, an increase in professional fees in the amount of $10,322, an increase in research and development cost in the amount of $49,740, with an overall increase in general and administrative expenses of $8,924.

Other Income/(Expenses)

Other income and (expenses) for the three months ended March 31, 2017 were $2,579,858 and $3,383,996 for the prior period ended March 31, 2016. The decrease in income of $804,138 in other income and (expenses) was the result of a decrease in net gain on debt conversion and change in fair value of the derivative instruments of $885,534, with a decrease in interest expense of $81,396, which includes a net change of $92,785 of amortization of debt discount.

15

Net Income/(Loss)

For the three months ended March 31, 2017, our net income was $2,415,882 as compared to net income of $3,307,164 for the prior period March 31, 2016. The decrease in net income of $891,282 was related primarily to the decrease in other income and (expenses) associated with non-cash cost of the fair value of the convertible notes, with an overall increase in operating expenses. The Company has not generated any revenues.

Results of Operations for the Nine Months Ended March 31, 2017 compared to Nine Months Ended March 31, 2016.

Operating Expenses

Operating expenses for the nine months ended March 31, 2017 were $492,169 and $350,980 for the prior period ended March 31, 2016. The net increase of $141,189 in operating expenses consisted primarily of an increase in investor relations expense in the amount of $47,820, an increase in professional fees in the amount of $31,799, an increase in research and development of $61,732, with an overall decrease in general and administrative expenses of $162.

Other Income/(Expenses)

Other income and (expenses) for the nine months ended March 31, 2017 were $3,528,829 and $7,350,887 for the prior period ended March 31, 2016. The decrease in income of $3,822,058 in other income and (expenses) was the result of a decrease in net gain on debt conversion and change in fair value of the derivative instruments of $4,114,007, with a decrease in interest expense of $291,949, which includes a net change of $323,387 of amortization of debt discount.

Net Income/(Loss)

For the nine months ended March 31, 2017, our net income was $3,036,660 as compared to net income of $6,999,907 for the prior period March 31, 2016. The decrease in net income of $3,963,247 was related primarily to other income and (expenses) associated with the non-cash cost of the fair value of the convertible notes, and an overall increase in operating expenses. The Company has not generated any revenues.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

As of March 31, 2017, we had a working capital deficit of $3,124,892 as compared to $7,839,367 as of June 30, 2016. This decrease in working capital deficit of $4,714,475 was due primarily to an increase in prepaid expense, accounts payable, and accrued expenses, offset by a decrease in cash, current portion of convertible notes and non-cash derivative liability.

Cash flow used in operating activities was $457,932 for the nine months ended March 31, 2017 and $393,669 for the prior period ended March 31, 2016. The increase in cash used in operating activities was due to an increase in investor relations expense and professional fees. The Company has had no revenues.

Cash provided by financing activities during the nine months ended March 31, 2017 was $390,000 and $410,000 for the prior period ended March 31, 2016. The decrease in financing activities was due to a decrease in financing with convertible notes through private placements during the current period.

16

The 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 condensed financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. During the nine months ended March 31, 2017, we did not generate any revenues, incurred net income of $3,036,660, which was primarily associated with the net change in derivative instruments, and cash used in operations of $457,932. As of March 31, 2017, we had a working capital deficiency of $3,124,892 and a shareholders’ deficit of $4,318,852. These factors, among others raise substantial doubt about our ability to continue as a going concern. Our independent auditors, in their report on our audited financial statements for the year ended June 30, 2016, expressed substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern ultimately is dependent on 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. We have historically obtained funds from our shareholders through the sale of our securities. 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.

PLAN OF OPERATION AND FINANCING NEEDS

Our plan of operation within the next twelve months is to further research, develop, and protect our technology.

We believe that our current cash and investment balances will be sufficient to support development activity, intellectual property protection, and all general and administrative expenses for the next six months. We estimate that we will require additional cash in 2017 based on our current operating plan and condition. We are investigating additional financing alternatives, including continued equity and/or debt financing. There can be no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds, we may be forced to reduce the size of our operations, which could have a material adverse impact on, or cause us to curtail and/or cease the development of our products.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for Smaller Reporting Companies.

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 chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

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

17

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not currently a party to, nor is any of our property currently the subject of, any pending legal proceeding that will have a material adverse effect on our business.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously disclosed in our annual report on Form 10-K filed with the SEC on September 21, 2016.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months March 31, 2017, the Company issued 39,431,005 shares of common stock upon conversion of $156,363 in principal, plus accrued interest of $41,934 on outstanding note.

The Company relied on an exemption pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended in connection with the sale and issuances of its shares of common stock described above.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

No disclosure required.

ITEM 5. OTHER INFORMATION

None.

18

ITEM 6. EXHIBITS

Exhibit No.	Description
31.1*	Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith).
32.2*	Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).
EX-101.INS**	XBRL Instance Document
EX-101.SCH**	XBRL Taxonomy Extension Schema Document
EX-101.CAL**	XBRL Taxonomy Extension Calculation Linkbase
EX-101.DEF**	XBRL Taxonomy Extension Definition Linkbase
EX-101.LAB**	XBRL Taxonomy Extension Labels Linkbase
EX-101.PRE**	XBRL Taxonomy Extension Presentation Linkbase

*	Filed herewith
**	Furnished herewith

19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

May 12, 2017	HYPERSOLAR, INC.
	By:	/s/ Timothy Young
		Timothy Young Chief Executive Officer and Acting Chief Financial Officer (Principal Executive Officer and Acting Principal Financial Officer and Accounting Officer)

20

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) OR RULE 15d-14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

I, Timothy Young, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Hypersolar, Inc. for the quarter ended March 31, 2017;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):  

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2017	/s/ Timothy Young
	Timothy Young
	Chief Executive Officer and
	Acting Chief Financial Officer (Principal Executive Officer and Acting Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hypersolar, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Timothy Young, Chief Executive Officer and Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 12, 2017	/s/ Timothy Young
	Timothy Young
	Chief Executive Officer and
	Acting Chief Financial Officer (Principal Executive Officer and Acting Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Mar. 31, 2017	May 11, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	Hypersolar, Inc.
Entity Central Index Key	0001481028
Trading Symbol	HYSR
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		678,342,322

XML

Condensed Balance Sheets - USD ($)	Mar. 31, 2017	Jun. 30, 2016
CURRENT ASSETS
Cash	$ 51,955	$ 119,887
Prepaid expense	6,717
TOTAL CURRENT ASSETS	58,672	119,887
PROPERTY & EQUIPMENT
Computers and peripherals	6,218	6,218
Less: accumulated depreciation	(6,218)	(6,059)
NET PROPERTY AND EQUIPMENT		159
OTHER ASSETS
Deposits	900	900
Domain, net of amortization $3,071 and $2,805, respectively	2,244	2,510
Patents	37,023	37,023
TOTAL OTHER ASSETS	40,167	40,433
TOTAL ASSETS	98,839	160,479
CURRENT LIABILITIES
Accounts payable	117,102	79,261
Accrued expenses	378,848	362,301
Derivative liability	2,675,450	6,230,102
Convertible promissory notes, net of debt discount of $107,836 and $97,910, respectively	12,164	1,287,590
TOTAL CURRENT LIABILITIES	3,183,564	7,959,254
LONG TERM LIABILITIES
Convertible promissory notes, net of debt discount of $73,373 and $0, respectively	1,234,127
TOTAL LONG TERM LIABILITIES	1,234,127
TOTAL LIABILITIES	4,417,691	7,959,254
SHAREHOLDERS' DEFICIT
Preferred Stock, $0.001 par value;5,000,000 authorized preferred shares, no shares issued or outstanding
Common Stock, $0.001 par value; 1,500,000,000 authorized common shares 678,342,322 and 589,552,961 shares issued and outstanding, respectively	678,342	589,553
Additional Paid in Capital	6,009,994	5,655,520
Accumulated deficit	(11,007,188)	(14,043,848)
TOTAL SHAREHOLDERS' DEFICIT	(4,318,852)	(7,798,775)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$ 98,839	$ 160,479

XML

Condensed Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Condensed Balance Sheets
Amortization of domain	$ 3,071	$ 2,805
Convertible promissory notes, net of debt discount	107,836	97,910
Convertible promissory notes, net of debt discount	$ 73,373	$ 0
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	5,000,000	5,000,000
Preferred Stock, shares issued
Preferred Stock, shares outstanding
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	1,500,000,000	1,500,000,000
Common Stock, shares issued	678,342,322	589,552,961
Common Stock, shares outstanding	678,342,322	589,552,961

XML

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Condensed Statements of Operations
REVENUE
OPERATING EXPENSES
General and administrative expenses	144,152	106,579	431,036	351,233
Research and development cost	19,736	(30,004)	60,708	(1,024)
Depreciation and amortization	88	257	425	771
TOTAL OPERATING EXPENSES	163,976	76,832	492,169	350,980
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)	(163,976)	(76,832)	(492,169)	(350,980)
OTHER INCOME/(EXPENSES)
Gain on debt conversion and change in derivative liability	2,679,773	3,565,307	3,803,154	7,917,161
Interest expense	(99,915)	(181,311)	(274,325)	(566,274)
TOTAL OTHER INCOME/(EXPENSES)	2,579,858	3,383,996	3,528,829	7,350,887
NET INCOME	$ 2,415,882	$ 3,307,164	$ 3,036,660	$ 6,999,907
BASIC EARNINGS PER SHARE	$ 0.004	$ 0.006	$ 0.005	$ 0.014
DILUTED EARNINGS PER SHARE	$ 0.004	$ 0.006	$ 0.005	$ 0.014
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC	652,153,322	537,004,223	620,783,642	507,494,231
DILUTED	655,078,772	542,496,846	623,709,092	512,986,854

XML

Condensed Statements of Shareholders' Deficit (Unaudited) - 9 months ended Mar. 31, 2017 - USD ($)	Total	Preferred stock	Common stock	Additional Paid-in Capital	Accumulated Deficit
Beginning balance at Jun. 30, 2016	$ (7,798,775)		$ 589,553	$ 5,655,520	$ (14,043,848)
Beginning balance, shares at Jun. 30, 2016			589,552,961
Issuance of common stock for conversion of debt and accrued interest	440,575		$ 88,789	351,786
Issuance of common stock for conversion of debt and accrued interest, Shares			88,789,361
Stock based compensation expense	2,688			2,688
Net income for the nine months ended March 31, 2017	3,036,660				3,036,660
Ending balance at Mar. 31, 2017	$ (4,318,852)		$ 678,342	$ 6,009,994	$ (11,007,188)
Ending balance, shares at Mar. 31, 2017			678,342,322

XML

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 3,036,660	$ 6,999,907
Adjustment to reconcile net income to net cash used in operating activities
Depreciation & amortization expense	425	771
Stock based compensation expense	2,688
(Gain) on change in derivative liability	(3,803,154)	(7,917,161)
Amortization of debt discount recorded as interest expense	55,725	478,545
(Increase) Decrease in change in assets:
Prepaid expense	(6,717)
Increase (Decrease) in change in liabilities :
Accounts payable	37,841	(43,391)
Accrued expenses	218,600	87,660
NET CASH USED IN OPERATING ACTIVITIES	(457,932)	(393,669)
NET CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable	390,000	410,000
NET CASH PROVIDED BY FINANCING ACTIVITIES	390,000	410,000
NET (DECREASE) INCREASE IN CASH	(67,932)	16,331
CASH, BEGINNING OF PERIOD	119,887	39,491
CASH, END OF PERIOD	51,955	55,822
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid		70
Taxes paid
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Issuance of common stock upon conversion of convertible notes and accrued interest	$ 440,575	$ 123,447

XML

Basis of Presentation

9 Months Ended

Mar. 31, 2017

Basis of Presentation [Abstract]

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements of Hypersolar, Inc. ("Hypersolar" or the Company") 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 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 nine months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending June 30, 2017. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended June 30, 2016.

Going Concern

 The accompanying 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 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 securities. 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 allow the Company to develop its core business. There can be no assurance that the Company will be able to continue to raise capital.

XML

Summary of Significant Accounting Policies

9 Months Ended

Mar. 31, 2017

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of HyperSolar is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting 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.

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 intangible assets, and the deferred tax valuation allowance. Actual results could differ from those estimates.

Intangible Assets

Intangible assets consist of patents that are initially measured at the lower of cost or fair value. The patents are deemed to have an indefinite life and are not amortized. The patents are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified.

Net Earnings (Loss) per Share Calculations

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 nine months ended March 31, 2017, the Company calculated the dilutive impact of the outstanding stock options of 250,000, and the convertible debt of $1,427,500, 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 was dilutive.

For the nine months ended March 31, 2016, the Company calculated the dilutive impact of the outstanding stock options of 500,000, and the convertible debt of $1,275,000, 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 was dilutive.

Stock based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the 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.

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 March 31, 2017, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

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) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

● 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. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2017 (See Note 6):

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative liability		2,675,450		-		-		2,675,450
Total liabilities measured at fair value	$	2,675,450	$	-	$	-	$	2,675,450

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

Balance as of July 1, 2016	$	6,230,102
Fair value of derivative liabilities issued		248,502
(Gain) on change in derivative liability		(3,803,154	)
Balance as of March 31, 2017	$	2,675,450

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.

Recently Issued Accounting Pronouncements

In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU 2016-15 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 financial statements.

XML

Capital Stock

9 Months Ended

Mar. 31, 2017

Capital Stock [Abstract]

CAPITAL STOCK

3. CAPITAL STOCK

During the nine months ended March 31, 2017, the Company issued 88,789,361 shares of common stock upon the conversion of $346,863 in principal, plus accrued interest of $93,712.

XML

Stock Options

9 Months Ended

Mar. 31, 2017

Stock Options [Abstract]

STOCK OPTIONS

4. STOCK OPTIONS

Options

As of March 31, 2017, 250,000 non-qualified common stock options were outstanding. 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 March 31, 2017, 250,000 options are fully vested with a maturity date of March 31, 2020, and are exercisable at an exercise price of $0.02245 per share.

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

	3/31/2017
				Weighted
	Number			average
	of			exercise
	Options			price
Outstanding, beginning of period		500,000		$	0.03
Granted		-			-
Exercised		-			-
Forfeited/Expired		(250,000	)	$	0.04
Outstanding, end of period		250,000		$	0.02
Exercisable at the end of period		250,000		$	0.02
Weighted average fair value of options granted during the period				$	-

XML

Convertible Promissory Notes

9 Months Ended

Mar. 31, 2017

Convertible Promissory Notes [Abstract]

CONVERTIBLE PROMISSORY NOTES

5. CONVERTIBLE PROMISSORY NOTES

The Company entered into a securities purchase agreement on December 16, 2013 for the sale of a 10% convertible promissory note (the “December Note”) in the aggregate principal amount of up to $100,000. The December 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 $26,000.The Company received additional tranches in the amount of $74,000 for an”) aggregate sum of $100,000. The December Note matured on May 16, 2015, and the maturity date was extended to February 16, 2016. Subsequently, a third extension was granted to November 16, 2016. During the year ended June 30, 2016, the Company issued 42,163,679 shares of common stock upon conversion of $59,500, plus accrued interest of $14,286. On October 1, 2016, the Company issued 11,515,068 shares of common stock upon conversion of $40,500, plus accrued interest of $11,318. As of March 31, 2017, the December Note and interest were fully converted.

The Company entered into a securities purchase agreement on March 5, 2014, for the sale of a 10% convertible promissory note (the “March Note”) in the aggregate principal amount of up to $100,000. The March 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 $30,000. On April 15, 2014, the lender and borrower agreed to amend the March Note to increase the principal sum to $150,000. The Company received additional tranches in the amount of $120,000 for an aggregate sum of $150,000. During the period ended December 31, 2016, the Company issued 37,843,288 shares of common stock upon conversion of $150,000 in principal, plus accrued interest of $40,459. The March Note matured on September 5, 2015 and was extended to June 5, 2016. Subsequently, a second extension was granted to March 5, 2017. As of March 31, 2017, the March Note was fully converted.

The Company entered into a securities purchase agreement on May 23, 2014, for the sale of a 10% convertible promissory note (the “May 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 sum of $465,000. The May Note matured on May 23, 2015 and was extended to February 23, 2016. A second extension was granted to November 23, 2016. On January 19, 2017, the investor extended the May Note for additional sixty (60) months from the effective date of each tranche. The May Note matures on November 23, 2021. During the period ended March 31, 2017, the Company issued 39,431,005 shares of common stock upon conversion of $156,363 in principal, plus accrued interest of $41,934. Also, the principal was reduced by $1,137 for interest due from the investor. The remaining balance of the May Note as of March 31, 2017 was $307,500.

The Company entered into a securities purchase agreement on April 9, 2015, for the sale of a 10% convertible promissory note (the “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 advance or the lowest effective price per share granted to any person or entity 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 $450,000 for an aggregate sum of $500,000. The April Note matured nine (9) months from the effective dates of each respective tranche. A second extension was granted to October 9, 2016. On January 19, 2017, the investor extended the April Note for an additional (60) months from the effective date of each tranche. The April Note matures on October 31, 2021. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $42,303 during the nine months ended March 31, 2017.

The Company entered into a securities purchase agreement January 28, 2016, for the sale of a 10% convertible promissory note (the “January Note”) in the aggregate principal amount of up to $500,000. The January 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 tranche or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received a tranche of $10,000. The Company received additional tranches in the amount of $490,000 for an aggregate sum of $500,000. The January Note matures twelve (12) months from the effective dates of each respective tranche. On January 19, 2017, the investor extended the January Note for an additional 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 $100,691 during the nine months ended March 31, 2017.

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 February 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 tranche or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. Upon execution of the securities purchase agreement, the Company received a tranche of $60,000. The Company received an additional tranche in the amount of $60,000 for an aggregate sum of $120,000. The February Note matures twelve (12) months from the effective dates of each respective tranche. The February Note matures on February 3, 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 $12,164 during the nine months ended March 31, 2017.

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.

XML

Derivative Liabilities

9 Months Ended

Mar. 31, 2017

Derivative Liabilities [Abstract]

DERIVATIVE LIABILITIES

6. DERIVATIVE LIABILITIES

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 nine months ended March 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 convertible notes at issuance was $248,502, 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 nine months ended March 31, 2017, the Company recorded a net gain in change in derivative of $3,803,154 in the statement of operations due to the change in fair value of the remaining Notes, for the nine months ended March 31, 2017. At March 31, 2017, the fair value of the derivative liability was $2,675,450.

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:

Risk free interest rate	0.29% - 1.95%
Stock volatility factor	41.35% - 77.0%
Weighted average expected option life	1 year - 5 year
Expected dividend yield	None

XML

Subsequent Events

9 Months Ended

Mar. 31, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

7. SUBSEQUENT EVENTS

Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855, and reported the following events:

On April 11, 2017, the Company received an additional tranche in the amount of $60,000 under the February note.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Mar. 31, 2017

Summary of Significant Accounting Policies [Abstract]

Cash and Cash Equivalent

Cash and Cash Equivalent

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

Use of Estimates

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 intangible assets, and the deferred tax valuation allowance. Actual results could differ from those estimates.

Intangible Assets

Intangible Assets

Intangible assets consist of patents that are initially measured at the lower of cost or fair value. The patents are deemed to have an indefinite life and are not amortized. The patents are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified.

Net Earnings (Loss) per Share Calculations

Net Earnings (Loss) per Share Calculations

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 nine months ended March 31, 2017, the Company calculated the dilutive impact of the outstanding stock options of 250,000, and the convertible debt of $1,427,500, 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 was dilutive.

For the nine months ended March 31, 2016, the Company calculated the dilutive impact of the outstanding stock options of 500,000, and the convertible debt of $1,275,000, 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 was dilutive.

Stock based Compensation

Stock based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the 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.

Fair Value of Financial Instruments

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 March 31, 2017, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.

We adopted ASC Topic 820 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

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) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

● 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. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2017 (See Note 6):

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative liability		2,675,450		-		-		2,675,450
Total liabilities measured at fair value	$	2,675,450	$	-	$	-	$	2,675,450

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

Balance as of July 1, 2016	$	6,230,102
Fair value of derivative liabilities issued		248,502
(Gain) on change in derivative liability		(3,803,154	)
Balance as of March 31, 2017	$	2,675,450

Accounting for Derivatives

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.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In August 2016, FASB issued accounting standards update ASU-2016-15, “Statement of Cash Flows” (Topic 230) – Classification of Certain Cash Receipts and Cash Payments”, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods with fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU 2016-15 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 financial statements.

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Mar. 31, 2017

Summary of Significant Accounting Policies [Abstract]

Schedule of measurement of assets and liabilities at fair value on recurring basis

	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative liability		2,675,450		-		-		2,675,450
Total liabilities measured at fair value	$	2,675,450	$	-	$	-	$	2,675,450

Summary of reconciliation of the derivative liability

Balance as of July 1, 2016	$	6,230,102
Fair value of derivative liabilities issued		248,502
(Gain) on change in derivative liability		(3,803,154	)
Balance as of March 31, 2017	$	2,675,450

XML

Stock Options (Tables)

9 Months Ended

Mar. 31, 2017

Stock Options [Abstract]

Schedule of the Company's stock option activity and related information

	3/31/2017
				Weighted
	Number			average
	of			exercise
	Options			price
Outstanding, beginning of period		500,000		$	0.03
Granted		-			-
Exercised		-			-
Forfeited/Expired		(250,000	)	$	0.04
Outstanding, end of period		250,000		$	0.02
Exercisable at the end of period		250,000		$	0.02
Weighted average fair value of options granted during the period				$	-

XML

Derivative Liabilities (Tables)

9 Months Ended

Mar. 31, 2017

Derivative Liabilities [Abstract]

Schedule of fair market value of the derivative liability

Risk free interest rate	0.29% - 1.95%
Stock volatility factor	41.35% - 77.0%
Weighted average expected option life	1 year - 5 year
Expected dividend yield	None

XML

Summary of Significant Accounting Policies (Details) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Liabilities
Derivative liability	$ 2,675,450	$ 6,230,102
Total liabilities measured at fair value	2,675,450
Fair value measurements on recurring basis [Member] | (Level 1) [Member]
Liabilities
Derivative liability
Total liabilities measured at fair value
Fair value measurements on recurring basis [Member] | (Level 2) [Member]
Liabilities
Derivative liability
Total liabilities measured at fair value
Fair value measurements on recurring basis [Member] | (Level 3) [Member]
Liabilities
Derivative liability	2,675,450	$ 6,230,102
Total liabilities measured at fair value	$ 2,675,450

XML

Summary of Significant Accounting Policies (Details 1) - USD ($)	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Fair Value, Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Balance as of July 1, 2016	$ 6,230,102
(Gain) on change in derivative liability	(3,803,154)	$ (7,917,161)
Balance as of March 31, 2017	2,675,450
(Level 3) [Member] | Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Balance as of July 1, 2016	6,230,102
Fair value of derivative liabilities issued	248,502
(Gain) on change in derivative liability	(3,803,154)
Balance as of March 31, 2017	$ 2,675,450

XML

Summary of Significant Accounting Policies (Details Textual) - USD ($)	Mar. 31, 2017	Jun. 30, 2016	Mar. 31, 2016
Summary of significant accounting policies (Textual)
Convertible debt	$ 1,427,500		$ 1,275,000
Stock options [Member]
Summary of significant accounting policies (Textual)
Outstanding stock options	250,000	500,000	500,000

XML

Capital Stock (Details)	9 Months Ended
	Mar. 31, 2017 USD ($) shares
Accumulated Other Comprehensive Income (Loss) [Line Items]
Principal amount of partial convertible promissory note	$ 248,502
Common Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Issuance of common stock (in shares) | shares	88,789,361
Principal amount of partial convertible promissory note	$ 346,863
Issuance of common stock on payment of accrued interest for convertible notes	$ 93,712

XML

Stock Options (Details) - Stock options [Member]	9 Months Ended
	Mar. 31, 2017 $ / shares shares
Number of Options
Outstanding, beginning of period | shares	500,000
Granted | shares
Exercised | shares
Forfeited/Expired | shares	(250,000)
Outstanding, end of period | shares	250,000
Exercisable at the end of period | shares	250,000
Weighted average exercise price
Outstanding, beginning of period	$ 0.03
Granted
Exercised
Forfeited/Expired	0.04
Outstanding, end of period	0.02
Exercisable at the end of period	0.02
Weighted average fair value of options granted during the period

XML

Stock Options (Details Textual) - $ / shares	9 Months Ended
	Mar. 31, 2017	Jun. 30, 2016	Mar. 31, 2016
Stock Options (Textual)
Description of maturity dates	Maturity date of March 31, 2020
Employee Stock Option [Member]
Stock Options (Textual)
Non-qualified common stock outstanding	250,000	500,000	500,000
Exercisable price	$ 0.02
Stock options exercisable	250,000
Non-qualified stock options [Member]
Stock Options (Textual)
Exercisable price	$ 0.02245
Stock option vested exercisable	2,500,000
Non-qualified common stock [Member]
Stock Options (Textual)
Non-qualified common stock outstanding	250,000

XML

Convertible Promissory Notes (Details) - USD ($)								1 Months Ended	9 Months Ended	12 Months Ended
	Feb. 03, 2017	Oct. 01, 2016	Jan. 28, 2016	Apr. 09, 2015	May 23, 2014	Mar. 05, 2014	Dec. 16, 2013	Dec. 31, 2016	Mar. 31, 2017	Jun. 30, 2016	Apr. 15, 2014
Convertible Promissory Notes (Textual)
Debt instrument, maturity date description									Maturity date of March 31, 2020
Convertible notes payable									$ 248,502
December Note [Member] | Securities Purchase Agreements [Member] | 10% Convertible Promissory Notes [Member]
Convertible Promissory Notes (Textual)
Amount received in consideration of sale of debt							$ 26,000
Convertible promissory notes, interest rate							10.00%
Accrued interest		$ 11,318								$ 14,286
Amount of additional tranches received							$ 74,000
Convertible promissory note principal amount							100,000
Aggregate principal amount							$ 100,000
Conversion price							$ 0.0048
Percentage of trading price							50.00%
Debt instrument, maturity date description							Note matured on May 16, 2015, and the maturity date was extended to February 16, 2016.
Debt instrument, convertible, terms of conversion feature							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.
Issuance of common stock (in shares)		11,515,068								42,163,679
Convertible notes payable		$ 40,500								$ 59,500
March Note [Member] | Securities Purchase Agreements [Member] | 10% Convertible Promissory Notes [Member]
Convertible Promissory Notes (Textual)
Amount received in consideration of sale of debt						$ 30,000
Convertible promissory notes, interest rate						10.00%
Accrued interest								$ 40,459
Amount of additional tranches received						$ 120,000
Convertible promissory note principal amount						150,000					$ 150,000
Aggregate principal amount						$ 100,000
Conversion price						$ 0.0048
Percentage of trading price						50.00%
Debt instrument, maturity date description						Note matured on September 5, 2015 and was extended to June 5, 2016.
Debt instrument, convertible, terms of conversion feature						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.
Issuance of common stock (in shares)								37,843,288
Convertible notes payable								$ 150,000
May Note [Member] | Securities Purchase Agreements [Member] | 10% Convertible Promissory Notes [Member]
Convertible Promissory Notes (Textual)
Amount received in consideration of sale of debt					$ 50,000
Convertible promissory notes, interest rate					10.00%
Accrued interest									41,934
Amount of additional tranches received					$ 415,000
Convertible promissory note principal amount					465,000				$ 307,500
Aggregate principal amount					$ 500,000
Conversion price					$ 0.0048
Percentage of trading price					50.00%
Debt instrument, term					60 months
Debt instrument, maturity date description					Note matured on May 23, 2015 and was extended to February 23, 2016.
Maturity date					Nov. 23, 2021
Debt instrument, convertible, terms of conversion feature					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.
Issuance of common stock (in shares)									39,431,005
Convertible notes payable									$ 156,363
Interest due from the investor									1,137
April Note [Member] | Securities Purchase Agreements [Member] | 10% Convertible Promissory Notes [Member]
Convertible Promissory Notes (Textual)
Amount received in consideration of sale of debt				$ 50,000
Convertible promissory notes, interest rate				10.00%
Accrued interest									42,303
Amount of additional tranches received				$ 450,000
Convertible promissory note principal amount				500,000
Aggregate principal amount				$ 500,000
Conversion price				$ 0.01
Percentage of trading price				50.00%
Debt instrument, term				9 months
Debt instrument, maturity date description				Note matured nine (9) months from the effective dates of each respective tranche.
Maturity date				Oct. 31, 2021
Debt instrument, convertible, terms of conversion feature				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 advance or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock.
January Note [Member] | Securities Purchase Agreements [Member] | 10% Convertible Promissory Notes [Member]
Convertible Promissory Notes (Textual)
Amount received in consideration of sale of debt			$ 10,000
Convertible promissory notes, interest rate			10.00%
Accrued interest									100,691
Amount of additional tranches received			$ 490,000
Convertible promissory note principal amount			500,000
Aggregate principal amount			$ 500,000
Conversion price			$ 0.01
Percentage of trading price			50.00%
Debt instrument, term			12 months
Debt instrument, maturity date description			Note matures twelve (12) months from the effective dates of each respective tranche.
Maturity date			Jan. 27, 2022
Debt instrument, convertible, terms of conversion feature			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 tranche or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock.
February Note [Member] | Securities Purchase Agreements [Member] | 10% Convertible Promissory Notes [Member]
Convertible Promissory Notes (Textual)
Amount received in consideration of sale of debt	$ 60,000
Convertible promissory notes, interest rate	10.00%
Accrued interest									$ 12,164
Amount of additional tranches received	$ 60,000
Convertible promissory note principal amount	120,000
Aggregate principal amount	$ 500,000
Conversion price	$ 0.01
Percentage of trading price	50.00%
Debt instrument, term	12 months
Debt instrument, maturity date description	Note matures twelve (12) months from the effective dates of each respective tranche.
Maturity date	Feb. 03, 2018
Debt instrument, convertible, terms of conversion feature	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 tranche or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock.

XML

Derivative Liabilities (Details)	9 Months Ended
	Mar. 31, 2017
Derivative [Line Items]
Risk free interest rate, minimum	0.29%
Risk free interest rate, maximum	1.95%
Stock volatility factor, minimum	41.35%
Stock volatility factor, maximum	77.00%
Expected dividend yield
Maximum [Member]
Derivative [Line Items]
Weighted average expected option life	5 years
Minimum [Member]
Derivative [Line Items]
Weighted average expected option life	1 year

XML

Derivative Liabilities (Details Textual) - USD ($)	9 Months Ended
	Mar. 31, 2017	Jun. 30, 2016
Derivative Liabilities (Textual)
Convertible notes payable	$ 248,502
(Gain) loss on change in derivative liability	3,803,154
Derivative liability	$ 2,675,450	$ 6,230,102

XML

Subsequent Events (Details)	Apr. 11, 2017 USD ($)
February Note [Member] | Subsequent Events [Member]
Subsequent Events (Textual)
Amount of additional tranches received	$ 60,000