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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 SEPTEMBER 30, 2023

 

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

 

FOR THE TRANSITION PERIOD FROM __________ TO __________

 

COMMISSION FILE NUMBER: 000-54819

 

NEWHYDROGEN, INC.

(Name of registrant in its charter)

 

Nevada   20-4754291

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

27936 Lost Canyon Road, Suite 202, Santa Clarita, CA 91387

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone Number: (661) 251-0001

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   None   None

 

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

 

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

 

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

 

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer Smaller reporting company
    Emerging growth company

 

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

 

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

 

The number of shares of registrant’s common stock issued and outstanding as of November 1, 2023 was 705,126,846.

 

 

 

 

 

 

NEWHYDROGEN, INC.

 

INDEX

 

    Page
PART I: FINANCIAL INFORMATION  
     
ITEM 1 FINANCIAL STATEMENTS (Unaudited) 1
  Condensed Balance Sheets 1
  Condensed Statements of Operations 2
  Condensed Statement of Shareholders’ Deficit 3
  Condensed Statements of Cash Flows 4
  Notes to the Condensed Financial Statements 5
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16
ITEM 4 CONTROLS AND PROCEDURES 16
     
PART II: OTHER INFORMATION  
     
ITEM 1 LEGAL PROCEEDINGS 17
ITEM 1A RISK FACTORS 17
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES 17
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4 MINE SAFETY DISCLOSURES 17
ITEM 5 OTHER INFORMATION 17
ITEM 6 EXHIBITS 17
     
SIGNATURES 18

 

i

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NEWHYDROGEN, INC.

CONDENSED BALANCE SHEET

 

   September 30,
2023
   December 31,
2022
 
   (Unaudited)     
ASSETS          
           
CURRENT ASSETS          
Cash  $4,043,808   $4,834,697 
Prepaid expenses   23,455    10,540 
           
TOTAL CURRENT ASSETS   4,067,263    4,845,237 
           
PROPERTY AND EQUIPMENT          
Machinery and equipment   37,225    37,225 
Less accumulated depreciation   (35,371)   (34,558)
           
NET PROPERTY AND EQUIPMENT   1,854    2,667 
           
OTHER ASSETS          
Patents, net of amortization of $23,423 and $21,157, respectively   21,913    24,179 
Deposit   770    770 
           
TOTAL OTHER ASSETS   22,683    24,949 
           
TOTAL ASSETS  $4,091,800   $4,872,853 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable and other payable  $11,377   $49 
           
TOTAL CURRENT LIABILITIES   11,377    49 
           
COMMITMENTS AND CONTINGENCIES (See Note 9)   -    - 
          
Series C Convertible Preferred Stock, 34,853 and 34,853 shares outstanding, respectively, redeemable value of $3,485,313 and $3,485,313, respectively   3,485,313    3,485,313 
           
SHAREHOLDERS’ EQUITY          
Preferred stock, $0.0001 par value; 10,000,000 authorized shares   -    - 
Common stock, $0.0001 par value; 3,000,000,000 authorized shares 705,126,846 and 715,496,051 shares issued and outstanding, respectively   70,513    70,513 
Additional paid in capital   176,212,860    174,272,031 
Accumulated deficit   (175,688,263)   (172,955,053)
           
TOTAL SHAREHOLDERS’ EQUITY   595,110    1,387,491 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $4,091,800   $4,872,853 

 

1

 

 

NEWHYDROGEN, INC.

CONDENSED STATEMENTS OF OPERATIONS

 

                 
   Three Months Ended   For the Nine Months Ended 
   September 30, 2023   September 30, 2022   September 30, 2023   September 30, 2022 
                 
REVENUE  $-   $-   $-   $- 
                     
OPERATING EXPENSES                    
General and administrative expenses   350,548    2,594,347    2,617,526    8,404,052 
Research and development   88,939    230,546    113,939    681,637 
Depreciation and amortization   1,027    1,027    3,080    3,188 
                     
TOTAL OPERATING EXPENSES   440,514    2,825,920    2,734,545    9,088,877 
                     
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)   (440,514)   (2,825,920)   (2,734,545)   (9,088,877)
                     
OTHER INCOME/(EXPENSES)                    
Interest income   421    1,295    1,335    2,530 
                     
TOTAL OTHER INCOME (EXPENSES)   421    1,295    1,335    2,530 
                     
NET INCOME (LOSS)  $(440,093)  $(2,824,625)  $(2,733,210)  $(9,086,347)
                     
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE  $(0.00)  $(0.00)  $(0.00)  $(0.01)
                     
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING                    
BASIC AND DILUTED   705,126,846    705,126,846    705,126,846    705,126,846 

 

2

 

 

NEWHYDROGEN, INC.

CONDENSED STATEMENT OF SHAREHOLDERS’ DEFICIT

 

   Shares   Amount   Mezzanine   Shares   Amount   Capital   Deficit   Total 
   NINE MONTHS ENDED SEPTEMBER 30, 2022 
   Preferred Stock   Common Stock   Additional Paid-in   Accumulated     
   Shares   Amount   Mezzanine   Shares   Amount   Capital   Deficit   Total 
Balance at December 31, 2021   -    -   $3,485,313    715,496,051   $71,549   $164,000,447    (160,869,525)   3,202,471 
                                         
Issuance of common stock warrants for cash   -    -    -    -    -    1,000    -    1,000 
                                         
Common stock returned to the Company by unregistered dealer       -          -    -    (10,369,205)   (1,036)   1,036    -    - 
                                         
Stock and warrant compensation cost   -    -    -    -    -    7,846,290    -    7,846,290 
                                         
Net Loss   -    -    -    -    -    -    (9,086,347)   (9,086,347)
                                         
Balance at September 30, 2022 (unaudited)   -   $-   $3,485,313    705,126,846   $70,513   $171,848,773   $(169,955,872)  $1,963,414 

 

   NINE MONTHS ENDED SEPTEMBER 30, 2023 
   Preferred Stock       Common Stock   Additional Paid-in   Accumulated     
   Shares   Amount   Mezzanine   Shares   Amount   Capital   Deficit   Total 
Balance at December 31, 2022   -   $-    3,485,313    705,126,846   $70,513   $174,272,031   $(172,955,053)  $1,387,491 
                                         
Stock compensation cost      -         -    -    -    -    1,940,829    -    1,940,829 
                                         
Net Loss   -    -    -    -    -    -    (2,733,210)   (2,733,210)
                                         
Balance at September 30, 2023 (unaudited)   -   $-   $3,485,313    705,126,846   $70,513   $176,212,860   $(175,688,263)  $595,110 

 

3

 

 

NEWHYDROGEN, INC.

CONDENSED STATEMENTS OF CASH FLOWS

 

         
   Nine Months Ended 
   September 30,
2023
   September 30,
2022
 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Income (Loss)  $(2,733,210)  $(9,086,347)
Adjustment to reconcile net income(loss) to net cash (used in) provided by operating activities           
Depreciation and amortization expense   3,079    3,188 
Stock compensation expense   1,940,829    7,846,290 
(Increase) Decrease in Changes in Assets          
Prepaid expenses   (12,915)   (11,641)
Increase (Decrease) in Changes in Liabilities          
Accounts payable   11,328    (1,539)
           
NET CASH USED IN OPERATING ACTIVITIES   (790,889)   (1,250,049)
           
CASH FLOWS FROM INVESTING ACTIVITIES:   -    - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Common stock purchase warrants for cash   -    1,000 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   -    1,000 
           
NET INCREASE IN CASH   (790,889)   (1,249,049)
           
CASH, BEGINNING OF PERIOD   4,834,697    6,645,710 
           
CASH, END OF PERIOD  $4,043,808   $5,396,661 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          
Interest paid  $-   $- 
Taxes paid  $-   $- 

 

4

 

 

NEWHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

1. Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the December 31, 2022.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

Revenue Recognition

 

The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. The Company adopted Accounting Standards Codification (“ASC”) 606, whereby revenue will be recognized as performance obligations are satisfied and customers obtain control of goods or services. However, in the event of a loss on a sale is foreseen, the Company will recognize the loss as it is determined. To date, the Company has not had significant revenues and is in the development stage.

 

Cash and Cash Equivalent

 

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

 

Concentration Risk

 

Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of September 30, 2023, the cash balance in excess of the FDIC limits was $3,793,808. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates.

 

5

 

 

NEWHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Property and Equipment

 

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

 

Computer equipment     5 Years  
Machinery and equipment     10 Years  

 

Depreciation expense for the nine months ended September 30, 2023 and 2022 were $813 and $921, respectively.

 

Intangible Assets

 

The Company has patent applications to protect the inventions and processes behind its proprietary bio-based back-sheet, a protective covering for the back of photovoltaic solar modules traditionally made from petroleum-based film. Intangible assets that have finite useful lives continue to be amortized over their useful lives.

 

   Useful Lives   9/30/2023   12/31/2022 
Patents       $45,336   $45,336 
Less accumulated amortization   15 years    (23,423)   (21,157)
Intangible assets       $21,913   $24,179 

 

Amortization expense for the nine months ended September 30, 2023 and 2022 was $2,267 and $2,267, respectively.

 

Stock-Based Compensation

 

The Company measures the cost of employee services received in exchange for an equity award based on the grant-date fair value of the award. All grants under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee, consultant, or director are required to provide service in exchange for the award (the vesting period). Compensation expense for options granted to employees and non-employees is determined in accordance with the standard as the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted is re-measured each period.

 

On February 18, 2021, the Company granted 450,000,000 stock options to its employees for services at an exercise price of $0.091. On September 29, 2021, the Company amended the exercise price to $0.028 per share. The options expire, and all rights to purchase the shares shall terminate seven (7) years from the date of grant or termination of employment. Half of the 400,000,000 options vested immediately upon grant, and the remaining half of the option to purchase 200,000,000 shares of the Company’s common stock shall become exercisable in equal amounts over a twenty-four (24) month period during the term of the optionee’s employment, with the first installment of 8,333,333 shares vesting on March 18, 2021. The 50,000,000 options are exercisable in equal amounts over a thirty-six (36) month period during the term of the optionee’s employment, with the first installment of 1,388,889 shares, vesting on March 18, 2021. On April 12, 2022, the Company cancelled the 450,000,000 stock options dated February 18, 2021, and concurrently granted 450,000,000 new options to its’ employees for services.

 

On March 1, 2022, the Company issued 5,000,000 common stock purchase warrants through a securities purchase agreement for a purchase price of $1,000.

 

6

 

 

NEWHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

On March 15, 2022, the Company granted 5,000,000 stock options to a consultant for advisory services. The options vest at a rate of 138,889 options per month for a thirty-six (36) month period during the term of the optionee’s consultancy with the Company. As of September 30, 2023, the 5,000,000 stock options were outstanding.

 

On April 12, 2022, the Company granted an aggregate of 450,000,000 stock options to its employees for services at an exercise price of $0.021. The options expire, and all rights to purchase the shares shall terminate seven (7) years from the date of grant or termination of employment. The 400,000,000 options are exercisable in the amount of 316,666,662 are exercisable upon grant, and the remaining 83,333,338 shares are exercisable in equal amounts over a ten (10) month period during the term of the optionee’s employment until the Option is 100% vested. The 50,000,000 options are exercisable in the amount of 19,444,446 are exercisable upon grant and the remaining 30,555,554 shares are exercisable in equal amounts over a twenty-two (22) month period during the term of the optionee’s employment until the Options is 100% vested. On March 11, 2023, one of the employees separated from the Company and 50,000,000 options were cancelled as of June 11, 2023. As of September 30, 2023, the other 400,000,000 stock options remain outstanding.

 

On March 20, 2023, the Company granted 50,000,000 shares of stock options, to purchase the total number of shares of common stock equal to the number of option shares at the exercise price of $0.0137 per share. The options were granted pursuant to the terms of the Company’s 2022 Equity Incentive Plan. The 50,000,000 shares subject to the options, have a six-month cliff, whereby 8,333,333 shall become vested and exercisable on September 19, 2023 and the remaining 41,666,667 shall become exercisable in equal amounts over a thirty (30) month period during the term of the participant’s employment until the option is 100% vested. The unvested portion of the option will not be exercisable on or after the termination of continuous service. As of September 30, 2023, 50,000,000 stock options remain outstanding.

 

On May 9, 2023, the Company granted 5,000,000 shares of stock options to a consultant, with an exercise price of $0.0126, and an expiration date of May 31, 2033. The Options vest over a thirty-six (36) month period from June 1, 2023, with 833,360 options vesting on November 30, 2023, and 138,888 options vested at the end of each month from the end of the seventh month through May 31, 2026. As of September 30, 2023, 5,000,000 stock options remain outstanding.

 

On June 15, 2023, the Company granted 100,000,000 shares of stock options to two employees of the Company, with an exercise price of $0.0121, and an expiration date of June 15, 2030. The options were granted pursuant to the terms of the Company’s 2022 Equity Incentive Plan. The grant of the options was made in consideration of the services rendered and to be rendered by the employees to the Company. The 100,000,000 options vest and are exercisable in four (4) separate tranches based on performance as follows: (a) Tranche I -12,500,000 shares shall become vested and exercisable if the Company files an S-3 registration statement with the Securities and Exchange Commission (SEC) and it is declared effective by the SEC; (b) Tranche II – 12,500,000 shares shall become vested and exercisable if the Company’s shares are traded on a national securities exchange; (c) Tranche III – 12,500,000 shares shall become vested and exercisable if the average daily market value of the Company’s shares exceeds $100,000 per day over any 20 consecutive trade days; and (d) Tranche IV – 12,500,000 shares shall become vested and exercisable if the average daily market value of the Company’s shares exceed $200,000 per day over any 20 consecutive trade days. As of September 30, 2023, none of the performance milestones were met and the options remain unvested. As of September 30, 2023, 100,000,000 shares remain outstanding.

 

Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company used Black Scholes to value its stock option awards which incorporated the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. The stock options terminate seven (7) years from the date of grant or upon termination of employment. As of September 30, 2023, the aggregate total of 560,000,000 stock options were outstanding.

 

7

 

 

NEWHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Research and Development

 

Research and development costs are expensed as incurred. Total research and development costs were $113,939 and $681,637 for the nine months ended September 30, 2023 and 2022, respectively.

 

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 September 30, 2023, the Company has not included shares issuable from 560,000,000 stock options and 228,958,334 warrants, because their impact on the income per share is antidilutive.

 

For the nine months ended September 30, 2022, the Company has not included shares issuable from 455,000,000 stock options and 228,958,334 warrants, because their impact on the income per share is antidilutive.

 

   2023   2022 
   For the Nine Months Ended 
   September 30, 
   2023   2022 
         
Income (Loss) to common shareholders (Numerator)  $(2,733,210)  $(9,086,347)
           
Basic weighted average number of common shares outstanding (Denominator)   705,126,846    705,126,846 
           
Diluted weighted average number of common shares outstanding (Denominator)   705,126,846    705,126,846 

 

Fair Value of Financial Instruments

 

Fair Value of Financial Instruments requires disclosure of the fair value information, whether recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2023, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.

 

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

 

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NEWHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

  Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

We measure certain financial instruments at fair value on a recurring basis. As of September 30, 2023, there were no financial instruments to report.

 

Recently Issued Accounting Pronouncements

 

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

 

3. CAPITAL STOCK

 

Preferred Stock September 30, 2023 and 2022

 

As of September 30, 2023, the Company had a total of 34,853 shares of Series C Preferred Stock outstanding with a fair value of $3,485,313, and a stated face value of one hundred dollars ($100) per share which are convertible into shares of fully paid and non-assessable shares of common stock of the Company. The holder of the Series C preferred stocks are entitled to receive dividends pari passu with the holders of common stock, except upon liquidation, dissolution and winding up of the Corporation. The holder has the right, at any time, at its election, to convert shares of Series C Preferred Stock into common stock at a conversion price of $0.0014 and has no voting rights.

 

Common Stock September 30, 2023 and 2022

 

During the nine months ended September 30, 2023, the Company did not issue any common stocks.

 

4. STOCK OPTIONS AND WARRANTS

 

Stock Options

 

During the nine months ended September 30, 2023, the Company granted stock options in the amount of 155,000,000. (See Note 2).

 

   9/30/2023   9/30/2022 
   Number of Options   Weighted average exercise price   Number of Options   Weighted average exercise price 
Outstanding as of the beginning of the periods   455,000,000   $0.0296    465,950,000   $0.0385 
Granted   155,000,000   $0.0126    455,000,000   $0.0210 
Exercised   -    -    -    - 
Expired/Cancelled   (50,000,000)   -    (465,950,000)   (0.0350)
Outstanding as of the end of the periods   560,000,000   $0.0172    455,000,000   $0.0210 
Exercisable as of the end of the periods   411,047,568   $0.0209    393,656,487   $0.0296 

 

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NEWHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

4. STOCK OPTIONS AND WARRANTS (Continued)

 

The weighted average remaining contractual life of options outstanding as of September 30, 2023 and 2022 was as follows:

 

9/30/2023       9/30/2022     
Exercisable Price   Stock Options Outstanding   Stock Options Exercisable   Weighted Average Remaining Contractual Life (years)   Exercisable Price   Stock Options Outstanding   Stock Options Exercisable   Weighted Average Remaining Contractual Life (years) 
$0.0137    50,000,000    8.333.333    6.72   $-    -    -    - 
$0.0126    5,000,000    138,893    9.93   $-    -    -    - 
$0.0121    100,000,000    -    6.96   $-    -    -    - 
$0.0223    5,000,000    2,575,342    8.46   $0.223    5,000,000    908,676    9.46 
$0.0210    400,000,000    400,000,000    5.79   $0.028    450,000,000    392,747,811    6.54 
      560,000,000    411,047,568              455,000,000    393,656,487      

 

The stock-based compensation expense recognized in the statement of operations during the nine months ended September 30, 2023 and 2022, were $1,940,830 and $7,731,188, respectively.

 

On March 11, 2023, Spencer Hall resigned from a Director of the Company. Pursuant to the terms and conditions in the Stock Option Agreement dated April 12, 2022, all of Mr. Hall’s vested and unvested stock options were cancelled on June 9, 2023.

 

As of September 30, 2023, there was no intrinsic value with regards to the outstanding options.

 

Warrants

 

As of September 30, 2023, the Company issued no common stock purchase warrants during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, the Company issued 5,000,000 common stock purchase warrants through a securities purchase agreement for a purchase price of $1,000.

 

As of September 30, 2023 and 2022, the outstanding warrants were as follows:

 

   9/30/2023   9/30/2022 
   Number of Options   Weighted average exercise price   Number of Options   Weighted average exercise price 
Outstanding as of the beginning of the periods   228,958,334   $0.0488    223,958,334   $0.0488 
Granted   -    -    -    - 
Purchased   -    -    5,000,000   $0.0255 
Outstanding as of the end of the periods   228,958,334   $0.0483    228,958,334   $0.0483 
Exercisable as of the end of the periods   228,958,334         228,958,334      

 

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NEWHYDROGEN, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 

4. STOCK OPTIONS AND WARRANTS (Continued)

 

The weighted average remaining contractual life of the warrants outstanding as of September 30, 2023 was as follows:

 

9/30/2023 
Exercisable Price   Stock Warrants Outstanding   Stock Warrants Exercisable  

Weighted Average Remaining

Contractual Life (years)

 
$0.0255    5,000,000    5,000,000    3.46 
$0.04    125,000,000    125,000,000    2.52 
$0.05    9,375,000    9,375,000    2.51 
$0.06    83,333,334    83,333,334    2.83 
$0.075    6,250,000    6,250,000    2.83 
      228,958,334    228,958,334      

 

There was no warrant compensation recognized as of September 30, 2023.

 

5. COMMITMENTS AND CONTINGENCIES

 

The Company rents office space on a yearly basis with a monthly rent payment in the amount of $550.

 

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

 

On May 30, 2023, the Company amended the agreement dated March 15, 2022 entered into with a consultant regarding an advisory agreement for services of various aspects of the Company’s business, including but not limited to technology, business development, and product development. The Company granted 5,000,000 common stock options, vesting at a rate of 138,889 options per month for thirty-six (36) months of consecutive service to the Company., In lieu of a fixed monthly cash compensation of $5,000, the Company will provide the Advisor with a cash compensation based on an hourly rate of $200 for the services specifically requested by the Company. This amendment shall be effective on June 15, 2023, and will continue on a month-to-month basis until terminated at the earlier of March 15, 2025, or any time by either party with a 5-day written notice from on party to the other. All other items in the Advisory agreement dated March 15, 2022, remain effective subject to the termination claim above.

 

On August 1, 2023, the Company entered into an agreement with the Regents of the University of California, to perform research that would benefit both the University and the Sponsor (NewHydrogen, Inc.) and is consistent with the research and educational objectives of the University. The cost to Sponsor for the University’s performance shall not exceed $716,326. This agreement shall be performed on a cost-reimbursement basis. When expenditures reach the above amount, the Sponsor will not be required to fund, and the University will not be required to perform additional work hereunder unless by mutual agreement of both parties. During the period ended September 30, 2023, the University was paid $88,939.

 

As of September 30, 2023, there were no legal proceedings against the Company.

 

6. SUBSEQUENT EVENT

 

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has reported the following subsequent event.

 

On September 18, 2023, the Company entered into an agreement with certain shareholders who agreed to surrender for cancellation, an aggregate of 527,334 shares of common stock of the Company (the “Surrendered Shares”) which they own. The Surrendered Shares were cancelled and returned to the status of authorized and unissued shares of common stock of the Company on October 25, 2023.

 

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

 

Special Note on Forward-Looking Statements.

 

Certain statements in “Management’s Discussion and Analysis and Results of Operations” below, and elsewhere in this quarterly report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report. Subsequent written and oral forward looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in our annual report on Form 10-K filed with the SEC on March 10, 2023, and in other reports filed by us with the SEC.

 

You should read the following description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included in this report.

 

Overview

 

We are developing a breakthrough technology that uses clean energy and water to produce the world’s cheapest green hydrogen.

 

Hydrogen is the cleanest and most abundant element in the universe, and we can’t live without it. Hydrogen is the key ingredient in making fertilizers needed to grow food for the world. It is also used for transportation, refining oil and making steel, glass, pharmaceuticals and more. Nearly all the hydrogen today is made from hydrocarbons like coal, oil, and natural gas, which are dirty and limited resources. Water, on the other hand, is an infinite and renewable worldwide resource. However, extracting hydrogen from water is an expensive process.

 

Electrolyzer technology is mature and is currently the most reliable method to extract hydrogen from water. Unfortunately, the chemical catalysts that enable the water-splitting reactions in modern electrolyzers are currently made from platinum and iridium - both are very expensive precious metals. Working with a research team at UCLA, we are developing technologies to significantly reduce or replace catalysts made from rare materials with catalysts made from inexpensive earth abundant materials in today’s electrolyzers to lower the cost of Green Hydrogen. This technology has moved from the discovery phase to the validation and optimization phase.

 

12

 

 

As of today, however, high capital cost and its reliance on expensive electricity and clean water are the other reasons why electrolyzers haven’t revolutionized the green hydrogen economy as everyone hoped. To address these critical cost drivers, we are also developing a revolutionary technology to efficiently split water using heat to produce cheap green hydrogen. Working with a UCSB research team, we are exploiting the oxidation reduction features of multi-component materials including high temperature liquids to directly split water continuously in a series of chemical looping reactions, producing hydrogen and oxygen in separate reaction chambers. If successful, it will be a novel, first of its kind, high efficiency thermochemical water-splitter that uses low-cost common materials and common industrial temperatures of less than 1,000°C to potentially produce the world’s cheapest green hydrogen.”

 

In a 2020 report, Goldman Sachs estimated that Green Hydrogen will be a $12 trillion market opportunity by 2050.

 

Application of Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using a Binomial lattice valuation model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

Our cash, cash equivalents, investments, inventory, prepaid expenses, and accounts payable are stated at cost which approximates fair value due to the short-term nature of these instruments.

 

Recently Issued Accounting Pronouncements

 

Management reviewed currently issued pronouncements during the nine months ended September 30, 2023, and does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed unaudited financial statements.

 

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Results of Operations – Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022.

 

OPERATING EXPENSES

 

General and Administrative Expenses

 

General and administrative (“G&A”) expenses decreased by $2,243,799 to $350,548 for the three months ended September 30, 2023, compared to $2,594,347 for the prior period ended September 30, 2022. The primary decrease in G&A expenses was the result of a decrease in fair value of non-cash stock compensation of $2,355,152, with an overall increase in G&A expenses of $111,353.

 

Research and Development

 

Research and Development (“R&D”) expenses decreased by $141,607 to $88,939 for the three months ended September 30, 2023, compared to $230,546 for the prior period ended September 30, 2022. This overall decrease in R&D expenses was the result of a decrease in outside research fees.

 

Depreciation

 

Depreciation and amortization expense for the three months ended September 30, 2023 and 2022 was $1,027 and $1,070, respectively.

 

Other Income/(Expenses)

 

Other income and (expenses) decreased by $874 to $421 for the three months ended September 30, 2023, compared to $1,295 for the prior period ended September 30, 2022. The decrease in other income and (expenses) was the result of a decrease in interest income of $874. The decrease in other income and (expenses) was primarily due to the net change in interest income.

 

Net Income (Loss)

 

Our net loss for the three months ended September 30, 2023 was $440,093, compared to $2,824,625 for the prior period ended September 30, 2022. The decrease in net loss was due to a decrease in non-cash other income associated with the net change in stock option expense in the current period. These estimates were based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs were subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the stock options fluctuate, and the fluctuation may be material. The Company has not generated any revenues.

 

Results of Operations – Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022.

 

OPERATING EXPENSES

 

General and Administrative Expenses

 

General and administrative (“G&A”) expenses decreased by $5,786,526 to $2,617,526 for the nine months ended September 30, 2023, compared to $8,404,052 for the prior period ended September 30, 2022. The primary decrease in G&A expenses was the result of a decrease in fair value of non-cash stock compensation of $5,905,461, with an overall increase in G&A expenses of $118,935.

 

Research and Development

 

Research and Development (“R&D”) expenses decreased by $567,698 to $113,939 for the nine months ended September 30, 2023, compared to $681,637 for the prior period ended September 30, 2022. This overall decrease in R&D expenses was the result of a decrease in outside research fees.

 

Depreciation

 

Depreciation and amortization expense for the nine months ended September 30, 2023 and 2022 was $3,080 and $3,188, respectively.

 

14

 

 

Other Income/(Expenses)

 

Other income and (expenses) decreased by $1,195 to $1,335 for the nine months ended September 30, 2023, compared to $2,530 for the prior period ended September 30, 2022. The decrease in other income and (expenses) was the result of a decrease in interest income of $1,195. The decrease in other income and (expenses) was primarily due to the net change in interest income.

 

Net Income (Loss)

 

Our net loss for the nine months ended September 30, 2023 was $2,733,210, compared to $9,086,347 for the prior period ended September 30, 2022. The majority of the decrease in net loss was due to a decrease in non-cash other income associated with the net change in stock option expense in the current period. These estimates were based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs were subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the stock options fluctuate, and the fluctuation may be material. The Company has not generated any revenues.

 

LIQUIDITY AND CAPITAL RESOURCES

 

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

 

The unaudited condensed financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying unaudited condensed financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. During the nine months ended September 30, 2023, we did not generate any revenues, and recognized a net loss of $2,734,545, due to a change in non-cash stock compensation, and cash of $790,889 used in operations. As of September 30, 2023, we had working capital of $4,055,886 and a shareholders’ equity of $595,110.

 

Management believes that we will be able to continue to raise funds through the sale of our securities to existing and new investors. Management believes that funding from existing and prospective new investors and future revenue will provide the additional cash needed to meet our obligations as they become due and will allow the development of our core business operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt-financing or cause substantial dilution for our stockholders, in case of equity financing.

 

As of September 30, 2023, we had working capital of $4,055,886 compared to $4,845,188 for the year ended December 31, 2022. This decrease in working capital was due primarily to a decrease in cash.

 

During the nine months ended September 30, 2023, we used $790,889 of cash for operating activities, as compared to $1,250,049 for the prior period ended September 30, 2022. The decrease in the use of cash for operating activities for the current period was a result of a decrease in research and development cost.

 

Net cash provided from equity financing activities was $0 for the nine months ended September 30, 2023, as compared to $1,000 for the prior period ended September 30, 2022. The decrease was due to less equity financing during the current period. Our capital needs have primarily been met from the proceeds of the sale of our securities, as we currently have not generated any revenues.

 

Our independent auditors, in their report on our audited financial statements for the year ended December 31, 2022, expressed substantial doubt about our ability to continue as a going concern without additional capital becoming available. Our financial statements as of September 30, 2023 have been prepared under the assumption that we will continue as a going concern. Our ability to continue as a going concern ultimately is dependent upon our ability to generate revenue, which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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PLAN OF OPERATION AND FINANCING NEEDS

 

We are engaged in the development of clean energy technologies to lower the cost of producing green hydrogen. The Company’s current focus is on developing lower cost replacements for precious metal based catalysts for existing hydrogen electrolyzers and developing a high efficiency thermochemical water splitting technology using heat to produce the cheapest green hydrogen comparable to the cost of producing gray hydrogen made from fossil fuels.

 

Our plan of operation within the next twelve months is to utilize our cash balances to continue funding the two sponsored research programs at UCSB and UCLA, as well as further solidifying our brand and social media presence in the hydrogen technology sector.

 

We believe that our current cash and investment balances will be sufficient to support development activity and general and administrative expenses for the next twenty-four months. Management estimates that it will require additional cash resources during 2025, based upon its current operating plan and condition.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and acting chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded as of September 30, 2023, that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and acting chief financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

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

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

As of the date of this report, we are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

 

ITEM 1A. RISK FACTORS

 

There are no material changes from the risk factors previously disclosed in the Registrant’s annual report on Form 10-K filed on March 10, 2023.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
31.1   Certification by Chief Executive Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith).
31.2   Certification by Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302 (filed herewith).
32.1   Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith).
32.2   Certification by Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith).
EX-101.INS   Inline XBRL Instance Document
EX-101.SCH   Inline XBRL Taxonomy Extension Schema Document
EX-101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase
EX-101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase
EX-101.LAB   Inline XBRL Taxonomy Extension Labels Linkbase
EX-101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase
104   Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on November 8, 2023.

 

  NEWHYDROGEN, INC.
     
  By: /s/ Steven Hill
    Chief Executive Officer
    (Principal Executive Officer

 

By: /s/ David Lee  
  Chairman, President and Acting Chief Financial Officer  
  (Principal Financial and Accounting Officer)  

 

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