10-Q - HYSR - Equibles

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, 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: 000-54437

SUNHYDROGEN, INC.

(Name of registrant in its charter)

Nevada	26-4298300

| (State or other jurisdiction of<br> <br>incorporation or organization) | (I.R.S. Employer<br><br>Identification No.) |

BioVentures Center, 2500 Crosspark Road, Coralville, IA 52241

| (Address of principal executive offices) (Zip Code) |

Issuer’s telephone Number:

(805) 966-6566

Former address, if changed since last report

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

Title of each class	Ticker symbol(s)	Name of each exchange on which registered

| N/A | N/A | N/A |

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 outstanding, as of May 15, 2023 was 4,801,519,802.

SUNHYDROGEN, INC.

INDEX

		Page
PART I: FINANCIAL INFORMATION		1
Item 1:	Financial Statements	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Shareholders’ Equity	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	17
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4:	Controls and Procedures	20
PART II: OTHER INFORMATION		21
Item 1	Legal Proceedings	21
Item 1a:	Risk Factors	21
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3:	Defaults Upon Senior Securities	21
Item 4:	Mine Safety Disclosures	21
Item 5:	Other Information	21
Item 6:	Exhibits	21
Signatures		22

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

SUNHYDROGEN, INC.

CONDENSED BALANCE SHEETS

			June 30,<br><br> 2022

ASSETS
CURRENT ASSETS
Cash and cash equivalent	30,132,640		$	27,681,485
Marketable securities at cost	10,205,158			24,323,240
Short term investment in affiliate at fair value	11,668,651			-
Prepaid expense	-			2,526
Other receivable	-			14,868
TOTAL CURRENT ASSETS	52,006,449			52,022,119
OTHER ASSETS
INVESTMENT
Convertible notes receivable, affiliate	3,000,000			-
TOTAL INVESTMENTS	3,000,000			-
PROPERTY & EQUIPMENT
Machinery and equipment	33,814			-
Computers and peripherals	11,529			11,529
Vehicle	155,000			155,000
	200,343			166,529
Less: accumulated depreciation	(74,163	)		(46,933	)
NET PROPERTY AND EQUIPMENT	126,180			119,596
INTANGIBLE ASSETS
Domain, net of amortization of 5,197 and 4,931, respectively	118			384
Trademark, net of amortization of 686 and 601, respectively	457			542
Patents, net of amortization of 34,703 and 29,779, respectively	66,440			71,364
TOTAL INTANGIBLE ASSETS	67,015			72,290
TOTAL OTHER ASSETS	3,193,195			191,886
TOTAL ASSETS	55,199,644		$	52,214,005
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and other payables	236,460		$	57,390
Accrued expenses	3,708			3,070
Accrued expenses, related party	-			211,750
Accrued interest on convertible notes	169,359			191,763
Derivative liabilities	18,955,186			26,015,069
Loan payable, related party	78,558			-
Convertible promissory notes	600,000			677,500
TOTAL CURRENT LIABILITIES	20,043,271			27,156,542
LONG TERM LIABILITIES
Loan payable, related party	90,760			-
Convertible promissory notes	50,000			150,000
TOTAL LONG TERM LIABILITIES	140,760			150,000
TOTAL LIABILITIES	20,184,031			27,306,542
COMMIMENTS AND CONTINGENCIES (SEE NOTE 9)	-			-
Series C 10% Preferred Stock, 2,700 and 2,700 shares issued and outstanding, redeemable value of 270,000 and 0, respectively	270,000			270,000
SHAREHOLDERS’ EQUITY
Preferred Stock, 0.001 par value; 5,000,000 authorized preferred shares	-			-
Common Stock, 0.001 par value; 10,000,000,000 authorized common shares 4,629,011,989 and 4,271,749,146 shares issued and outstanding, respectively	4,629,012			4,271,749
Additional Paid in Capital	107,618,971			103,311,733
Accumulated deficit	(77,502,370	)		(82,946,019	)
TOTAL SHAREHOLDERS’ EQUITY	34,745,613			24,637,463
TOTAL LIABILITIES, PREFERRED STOCK SUBJECT TO REDEEMPTION AND SHAREHOLDERS’ EQUITY	55,199,644		$	52,214,005

All values are in US Dollars.

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

SUNHYDROGEN, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED MARCH 31,2023 AND 2022

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31, 2023			March 31, 2022			March 31, 2023			March 31, 2022
REVENUE	$	-		$	-		$	-		$	-
OPERATING EXPENSES
Selling and Marketing		-			87,648			87,745			285,014
General and administrative expenses		500,455			1,268,755			4,011,604			1,949,225
Research and development cost		764,919			765,020			2,845,239			1,202,235
Depreciation and amortization		11,064			10,284			32,504			32,610
TOTAL OPERATING EXPENSES		1,276,438			2,131,707			6,977,092			3,469,084
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)		(1,276,438	)		(2,131,707	)		(6,977,092	)		(3,469,084	)
OTHER INCOME/(EXPENSES)
Investment income		507,991			128,224			951,646			183,124
Dividend expense		(6,750	)		(1,176	)		(20,250	)		(1,176	)
Unrealized gain (loss) on investments in affiliate		(3,451,984	)		-			4,668,652			-
Realized gain(loss)		(24,617	)		-			(24,617	)		-
Loss on redemption of marketable securities		(104,035	)		-			(149,962	)		(20,693	)
Gain on change in derivative liability		6,118,044			7,814,573			7,059,883			82,460,499
Interest expense		(19,561	)		(131,610	)		(64,611	)		(417,759	)
TOTAL OTHER INCOME (EXPENSES)		3,019,088			7,810,011			12,420,741			82,203,995
NET INCOME	$	1,742,650		$	5,678,304		$	5,443,649		$	78,734,911
BASIC EARNINGS (LOSS) PER SHARE	$	0.00		$	0.00		$	0.00		$	0.02
DILUTED EARNINGS (LOSS) PER SHARE	$	0.00		$	0.00		$	0.00		$	0.02
WEIGHTED-AVERAGE<br> COMMON SHARES OUTSTANDING
BASIC		4,542,170,528			4,232,350,556			4,397,662,987			4,085,126,236
DILUTED		5,536,927,470			5,326,844,869			5,392,419,929			5,179,620,549

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

SUNHYDROGEN, INC.

CONDENSED STATEMENTS OF SHAREHOLDERS’EQUITY

FOR THE NINE MONTHS ENDED MARCH 31, 2023 AND2022

	NINE MONTHS ENDED MARCH 31, 2022
											Additional
	Preferred stock						Common stock				Paid-in			Accumulated
	Shares		Amount		Mezzanine		Shares		Amount		Capital			Deficit			Total
Balance at June 30, 2021		-	$	-	$	-		3,849,308,495	$	3,849,308	$	88,560,321		$	(172,976,952	)	$	(80,567,323	)
Issuance of common stock for cash		-		-		-		40,983,607		40,984		919,016			-			960,000
Issuance of common stock for conversion of debt and accrued interest		-		-		-		381,457,044		381,457		(19,073	)		-			362,384
Issuance of Series C preferred stock in exchange for fair value of convertible note		-		3		270,000		-		-		14,340,766			-			14,340,769
Redemption of related parties stock options		-		-		-		-		-		(1,450,000	)		-			(1,450,000	)
Stock compensation		-		-		-		-		-		960,700			-			960,700
Net Income		-		-		-		-		-		-			78,734,911			78,734,911
Balance at March 31, 2022 (unaudited)		-	$	-	$	270,000		4,271,749,146	$	4,271,749	$	103,311,730		$	(94,242,041	)	$	13,341,441
	NINE MONTHS ENDED MARCH 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
											Additional
	Preferred stock						Common stock				Paid-in			Accumulated
	Shares		Amount		Mezzanine		Shares		Amount		Capital			Deficit			Total
Balance at June 30, 2022		-	$	-	$	270,000		4,271,749,146	$	4,271,749	$	103,311,733		$	(82,946,019	)	$	24,637,463
Issuance of common stock for conversion of debt and accrued interest		-		-		-		274,198,530		274,199		(13,710	)		-			260,489
Issuance of common stock through a purchase agreement for cash		-		-		-		81,130,461		81,130		1,824,920			-			1,906,050
Issuance of common stock through a cashless exercise of stock options		-		-		-		1,933,852		1,934		30,941			-			32,875
Stock compensation for conversion of restricted stock awards		-		-		-		-		-		2,365,200			-			2,365,200
Stock compensation expense		-		-		-		-		-		99,887			-			99,887
Net income		-		-		-		-		-		-			5,443,649			5,443,649
Balance at March 31, 2023 (unaudited)		-	$	-	$	270,000		4,629,011,989	$	4,629,012	$	107,618,971		$	(77,502,370	)	$	34,745,613

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

SUNHYDROGEN, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED MARCH 31, 2023 AND2022

(Unaudited)

	Nine Months Ended
	March 31,<br> 2023			March 31,<br> 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	5,443,649		$	78,734,911
Adjustment to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation & amortization expense		32,504			32,610
Stock based compensation expense		-			960,700
Stock compensation expense for services through a cashless exercise		32,875			-
Stock compensation expense for services		99,887			-
Net stock compensation expense for conversion of restricted stock awards		2,365,200			-
Loss on redemption of marketable securities		149,962
Loss on settlement of convertible note		-			1,835
Convertible note exchanged for preferred stock		-			268,165
Loss on settlement of debt and derivative		-			1,109,761
Net (Gain) Loss on change in derivative liability		(7,059,883	)		(83,572,095	)
Unrealized gain on investment in affiliate		(4,668,652	)		-
Amortization of debt discount recorded as interest expense		-			337,808
Change in assets and liabilities:
Prepaid expense		17,394			-
Other asset		-			(14,868	)
Accounts payable		179,071			127,909
Accrued expenses		639			(91,398	)
Accrued interest on convertible notes		60,585			(106,897	)
NET CASH USED IN OPERATING ACTIVITIES		(3,346,769	)		(2,211,559	)
CASH FLOWS FROM INVESTING ACTIVITIES
Marketable securities purchased		(6,475,678	)		(10,648,389	)
Marketable securities redeemed		20,443,798			-
Purchase of investment in affiliate		(7,000,000	)		-
Purchase of long term convertible note, affiliate		(3,000,000	)		-
Purchase of property and equipment		(33,814	)		-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:		3,934,306			(10,648,389	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from purchase agreements		1,906,050			960,000
Repayment of related party note payable		(42,432	)		-
Redemption of related parties stock options		-			(1,450,000	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		1,863,618			(490,000	)
NET INCREASE (DECREASE) IN CASH		2,451,155			(13,349,948	)
CASH, BEGINNING OF PERIOD		27,681,485			56,006,555
CASH, END OF PERIOD	$	30,132,640		$	42,656,607
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	19,561		$	-
Taxes paid	$	-		$	-
SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS
Fair value of common stock upon conversion of convertible notes , and accrued interest	$	260,489		$	362,384
Fair value of preferred stock in exchange for convertible note	$	-		$	14,340,769
Fair value of derivative liability removed	$	-		$	13,231,008
Fair value of stock options issued through a cashless exercise	$	32,875		$	-
Reclassification of related party accrued salary to loan payable	$	211,750		$	-

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

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

1.	Basis<br> 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 March 31, 2023 are not necessarily indicative of the results that may be expected for the year ended June 30, 2023. 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, 2022.

2.	SUMMARY<br> OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of SunHydrogen, Inc. 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.

Concentration risk

Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of the FDIC limits. As of March 31, 2023, the cash balance in excess of the FDIC limits was $29,465,918. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

Marketable Securities

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

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

Use of Estimates

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 useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based compensation expense, Binomial lattice valuation model inputs, derivative liabilities and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates.

Property and Equipment

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

Computers and peripheral equipment	5 Years
Vehicle	5 Years

The Company recognized depreciation expense of $27,229 and $27,335 for the nine months ended March 31, 2023 and 2022, respectively.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

2.	SUMMARY OF SIGNIFICANT<br> ACCOUNTING POLICIES (Continued)

Intangible Assets

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

	Useful Lives	3/31/2023			6/30/2022
Domain-gross	15 years	$	5,315		$	5,315
Less accumulated amortization			(5,197	)		(4,931	)
Domain-net		$	118		$	384
Trademark-gross	10 years	$	1,143		$	1,143
Less accumulated amortization			(686	)		(601	)
Domain-net		$	457		$	542
Patents-gross	15 years	$	101,143		$	101,143
Less accumulated amortization			(34,703	)		(29,779	)
Patents-net		$	66,440		$	71,364

The Company recognized amortization expense of $5,275 and $5,275 for the nine months ended March 31, 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).

Nine Months Ended March 31,2023

The Company calculated the dilutive impact of 209,394,499 outstanding stock options, 94,895,239 common stock purchase warrants, and the convertible debt and accrued interest of $819,359, which is convertible into shares of common stock. The warrants and convertible debt were included because their impact is dilutive.

Nine Months Ended March 31,2022

The Company calculated the dilutive impact of 157,965,711 outstanding stock options, 94,895,239 common stock purchase warrants, and the convertible debt and accrued interest of $1,003,108, which is convertible into shares of common stock. The common stock purchase warrants were included in the calculation of net earnings per share, because their impact on income per share is dilutive.

	Nine Months Ended
	March 31,
	2023		2022
Income (Loss) to common shareholders (Numerator)	$	5,443,649	$	78,734,911
Basic weighted average number of common shares outstanding (Denominator)		4,382,210,756		4,085,126,236
Diluted weighted average number of common shares outstanding (Denominator)		5,385,011,715		5,179,620,549

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

2.	SUMMARY OF SIGNIFICANT<br> ACCOUNTING POLICIES (Continued)

Equity Incentive Plan and Stock Options

On January 27, 2022, the Company adopted the 2022 Equity Incentive Plan, to enable the Company to attract and retain the types of employees, consultants, and directors who will contribute to the Company’s long-range success. The maximum number of shares of common stock that may be issued under the 2022 Plan is initially 400,000,000. The number of shares will automatically be increased on the first day of the Company’s fiscal year beginning in 2023 so that the total number of shares issuable will at all times equal fifteen percent (15%) of the Company’s fully diluted capitalization on the first day of the Company’s fiscal year, unless the Board adopts a resolution providing that the number of shares issuable under the 2022 Plan shall not be so increased. During the period ended March 31, 2023, the Company granted options to purchase 33,000,000 stock options, with 23,000,000 vesting on January 31, 2023 and 10,000,000 options will vest on January 1, 2024.

As of March 31, 2023, under the 2022 Equity Incentive Plan, there were 23,000,000 stock options issued and a reserve of 377,000,000.

Equity Incentive Plan

On December 17, 2018, the Board of Directors approved and adopted the 2019 Equity Incentive Plan (“the Plan”), with 300,000,000 shares reserved for issuance pursuant to the Plan. The purpose of the Plan is to promote the success of the Company and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. The awards are performance-based compensation that are granted under the Plan as incentive stock options (ISO) or nonqualified stock options. The per share exercise price for each option shall not be less than 100% of the fair market value of a share of common stock on the date of grant of the option. The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing cost. The Company accounts for stock option grants issued and vesting to employees and 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. The Company granted options to purchase 170,000,000 shares of common stock options on January 23, 2019. On July 29, 2022, the Company granted restricted stock awards of 21,500,000 shares to an employee for services, which vested on March 30, 2023.

As of March 31, 2023, under the 2019 Equity Incentive Plan, there were 176,394,499 stock options issued, and a reserve of 25,241,308.

Stock Based Compensation

The Company accounts for stock option grants issued and vesting to employees and 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.

Warrant Accounting

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

Fair Value of Financial Instruments

Fair value of financial instruments requires disclosure of the fair value information, whether or not recognized on the balance sheet, where it is practicable to estimate that value. As of March 31, 2023, the amounts reported for cash, accrued interest and other expenses, notes payables, convertible notes, and derivative liability approximate the fair value because of their short maturities.

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

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

2.	SUMMARY OF SIGNIFICANT<br> ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

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

●	Level 1, defined as observable<br> inputs such as quoted prices for identical instruments in active markets.
●	Level 2, defined as inputs<br> other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments<br> in active markets or quoted prices for identical or similar instruments in markets that are not active.
---	---
●	Level 3, defined as unobservable<br> inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations<br> 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 (See Note 6):

	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents	$	16,845,517	$	16,845,517	$	-	$	-
Marketable securities measured at fair value March 31, 2023	$	21,873,810	$	-	$	21,873,810	$	-
	$	38,719,327	$	16,845,517	$	21,873,810	$	-
Liabilities:
Derivative liabilities measured at fair value March 31, 2023	$	18,955,186	$	-	$	-	$	18,955,186

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 June 30, 2022	$	26,015,069
Gain on change in derivative liability		(7,059,883	)
Balance as of March 31, 2023	$	18,955,186

The derivative liability balance consisted of the derivative liabilities for convertible notes in the amount of $18,012,870 and warrants in the amount of $942,316 for an aggregate total of $18,955,186.

Research and Development

Research and development costs are expensed as incurred. Total research and development costs were $2,845,239 and $1,202,235 for the nine months ended March 31, 2023 and 2022, respectively.

Accounting for Derivatives

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

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

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

2.	SUMMARY OF SIGNIFICANT<br> ACCOUNTING POLICIES (Continued)

Reclassification of Expenses

Certain amounts in the 2022 financial statements have been reclassified to conform to the presentation used in the 2023 financial statements. There was no material effect on the Company’s previously issued financial statements.

Recently Issued Accounting Pronouncements

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 unaudited financial statements as of March 31, 2023.

3.	CAPITAL STOCK

Series C Preferred Stock

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

The Company entered into a securities purchase agreement on December 15, 2021, with an accredited investor for an exchange of convertible debt to equity. Under the purchase agreement, the Company and investor acknowledged there was $187,800 of principal remaining under the note issued to the investor by the Company on February 3, 2017, plus $80,365 of accrued interest, representing a total aggregate note balance of $268,165. Pursuant to the purchase agreement, the Company sold to the investor 2,700 shares of the Company’s newly designated Series C Preferred Stock for a total purchase price of $268,165, and a loss on settlement of debt of $1,835. As of March 31, 2023, the Company had a total of 2,700 shares of Series C Preferred Stock outstanding with a fair value of $268,165, and a stated face value of one hundred dollars ($100) (“share value’) per share, convertible into shares of common stock of the Company. The stock was presented as mezzanine equity because it is redeemable at a fixed or determinable amount upon an event that is outside of the issuer’s control. Upon liquidation, dissolution and winding up of the Company, the holder of each outstanding share of Series C Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to its shareholders upon such liquidation, before any payments shall be made or any assets distributed to the holders of the common stock, the stated value of the Series C Preferred Shares plus any declared but unpaid dividends. No other current or future equity holders of the Company shall have higher priority of liquidation preference than holders of Series C Preferred Stock. The holder has the right, at any time, at its election, to convert shares of Series C Preferred Stock into common stock at a conversion price of $0.00095.

Common Stock

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

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

3.	CAPITAL STOCK (Continued)

Nine months ended March 31,2023

During the nine months ended March 31, 2023, the Company issued 274,198,530 shares of common stock upon conversion of convertible notes in the amount of $177,500 of principal, plus accrued interest of $82,989 based upon a conversion price of $0.00095 per share. The notes were converted per the terms of their respective agreements and therefore no gain or loss on the conversion was recorded.

On November 11, 2022, the Company entered into a Purchase Agreement with an investor for a total of $45,000,000 to purchase shares of common stock. During the nine months ended March 31, 2023, the Company issued 81,130,461 shares of common stock for $1,950,000 under a purchase agreement at prices of $0.01968 - $0.02608, pursuant to the purchase notices received from the investor. The finance cost of $43,950 was deducted from the gross proceeds converted, with net proceeds of $1,906,050

During the nine months ended March 31, 2023, a consultant exercised 3,071,412 nonqualified stock options with an exercise price of $0.01 and a market price of $0.027 per share. Upon exercise of the stock options, the Company issued 1,933,852 shares of common stock through a cashless exercise at the price of $0.017 per share for compensation expense of $32,875.

During the nine months ended March 31, 2023, two employees were granted 150,000,000 restricted stock awards for services, which vested immediately. The Company withheld 62,400,000 shares at a price of $0.027 to pay for the taxes owed by the employees in the amount of $1,684,800, and the remaining 87,600,000 shares priced at $0.027 per share in the amount of $2,365,200 in stock compensation was reported in the financial statements.

Nine months ended March 31,2022

During the nine months ended March 31, 2022, the Company issued 381,457,044 shares of common stock upon conversion of convertible notes in the amount of $255,900 of principal, plus accrued interest of $106,484 based upon a conversion price of $0.00095 per share. The notes were converted per the terms of their respective agreements and therefore no gain or loss on the conversion was recorded.

During the nine months ended March 31, 2022, the Company issued 40,983,607 shares of common stock pursuant to a purchase agreement for cash at a price of $0.02745 per share for aggregate net proceeds of $960,000.

4.	OPTIONS AND WARRANTS

OPTIONS

On October 2, 2017, the Company granted

non-qualified options to purchase 10,000,000 shares of common stock. Each option expires on the date specified in the option agreement, which date is not later than the fifth (5th) anniversary from the grant date of the options. Of the 10,000,000 non-qualified options, one-third vest immediately, and one-third vest the second and third year, such that the options are fully vested with a maturity date of October 2, 2022 and are exercisable at an exercise price of $0.01 per share. During the period the 3,071, 412 options remaining were fully exercised. As of March 31,2023, there are no remaining options outstanding.

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

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

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

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

4.	OPTIONS AND WARRANTS (Continued)

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

	3/31/2023					3/31/2022
				Weighted				Weighted
	Number			average		Number		average
	Of			exercise		Of		exercise
	Options			price		Options		price
Outstanding, beginning of period		157,965,711		$	0.0089		157,965,711	$	0.0089
Granted		54,500,000		$	0.025		-		-
Exercised		(3,071,212	)	$	0.01		-		-
Redemption of options		-			-
Outstanding, end of period		209,394,499		$	0.0124		157,965,711	$	0.0089
Exercisable at the end of period		199,394,499		$	0.0124		157,965,711	$	0.0089

Nine months ended March 31,2023

During the nine months ended March 31, 2023, a consultant exercised 3,071,412 nonqualified stock options through a cashless exercise for 1,933,852 shares. The options were fully vested and previously expensed accordingly.

Under the 2019 Equity Incentive Plan, an employee was granted 21,500,000 restricted stock awards at a price of $0.025 per share for services, which vested on March 30, 2023. The Company recorded stock compensation expense of $74,201 reported in the financial statements.

Under the 2022 Equity Incentive Plan, an employee, a director and consultant were granted 33,000,000 restricted stock awards at a price of $0.025 per share for services, whereby, 23,000,000 shares vested on January 1, 2023 and 10,000,000 will vest on January 1, 2024. The Company recorded stock compensation expense of $25,686, reported in the financial statements.

Nine months ended March 31,2022

The Company calculated the dilutive impact of the 157,965,711 outstanding stock options of 94,895,239 common stock purchase warrants of, and the convertible debt and accrued interest of $1,003,108, which is convertible into shares of common stock. The common stock purchase warrants and convertible debt were included because their impact on income per share is dilutive.

The weighted average remaining contractual life of options outstanding as of March 31, 2023 and 2022 was as follows:

3/31/2023								3/31/2022
Exercise<br> Price		Stock<br> Options<br> Outstanding		Stock<br> Options<br> Exercisable		Weighted<br> Average<br> Remaining<br> Contractual<br> Life (years)		Exercise <br> Price		Stock<br> Options<br> Outstanding		Stock<br> Options<br> Exercisable		Weighted<br> Average<br> Remaining<br> Contractual<br> Life (years)
	-		-		-		-	$	0.0100		3,071,212		3,071,212		0.76
$	0.025		10,000,000		-		7.76		-		-		-		-
$	0.025		23,000,000		23,000,000		6.76		-		-		-		-
$	0.025		21,500,000		21,500,000		7.0		-		-		-		-
$	0.0097		6,000,000		6,000,000		3.09	$	0.0097		6,000,000		6,000,000		4.09
$	0.0099		138,894,499		138,894,499		3.07	$	0.0099		138,894,499		138,894,499		4.07
$	0.0060		10,000,000		10,000,000		3.56	$	0.0060		10,000,000		10,000,000		4.56
			209,394,499		199,394,499						157,965,711		157,965,711

WARRANTS

As of March 31, 2023, the Company had an aggregate of 94,895,239 common stock purchase warrants outstanding, with exercise prices ranging from $0.0938 - $0.13125 per share. The warrants were estimated at fair value on the date of issuance as calculated using the Black-Scholes valuation model. The derivative calculated on all warrants outstanding are include in the derivative liability (See Note 6). The warrants can be exercised over periods of three (3) to five (5) years.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

4.	OPTIONS AND WARRANTS (Continued)

A summary of the Company’s warrant activity and related information follows for the period ended March 31, 2023

	12/31/2022
			Weighted
	Number		average
	of		exercise
	Warrants		price
Outstanding, beginning of period		94,895,239	$	0.11
Granted		-		-
Exercised		-		-
Forfeited/Expired		-		-
Outstanding, end of period		94,895,239	$	0.11
Exercisable at the end of period		94,895,239	$	0.11
3/31/2023						Weighted Average
---	---	---	---	---	---	---	---
Exercise<br> Price		Warrants <br> Outstanding		Warrants <br> Exercisable		Remaining Contractual <br> Life (years)
$	0.0938		16,800,000		16,800,000		0.18 - 0.75
$	0.13125		6,666,667		6,666,667		2.91
$	0.12		71,428,572		71,428,572		2.92
			94,895,239		94,895,239

At March 31, 2023, the aggregate intrinsic value of the warrants outstanding was $0.

5.	CONVERTIBLE PROMISSORY<br> NOTES

As of March 31, 2023, the outstanding convertible promissory notes are summarized as follows:

Convertible Promissory Notes	$	650,000
Less current portion		600,000
Total long-term liabilities	$	50,000

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

Period Ended March 31,	Amount
2024	$	600,000
2026		50,000
	$	650,000

At March 31, 2023, the outstanding balance of the convertible promissory notes was $749,347.

The Company issued a 10% convertible promissory note on November 9, 2017 (the “Nov 2017 Note”) in the aggregate principal amount of up to $500,000. The Company received tranches for an aggregate principal total of $500,000. The Nov 2017 Note had a maturity date of November 9, 2018, with an automatic extension of sixty (60) months from the effective date of the note. The Nov 2017 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 the note or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Company fails to deliver shares in accordance with the timeframe of three (3) business days of the receipt of a notice of conversion, the lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the principal sum with the rescinded conversion shares returned to the Company. In no event shall the lender be entitled to convert any portion of the Nov 2017 Note to the extent such conversion would result in beneficial ownership by the lender and its affiliates of more than 4.99% of the outstanding shares of common stock of the Company. In addition, for each conversion in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. During the nine months ended March 31, 2023, the Company issued 274,198,530 shares of common stock upon the conversion of principal in the amount of $177,500, plus accrued interest of $82,989. As of March 31, 2023, the balance remaining was $0.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

5.	CONVERTIBLE PROMISSORY<br> NOTES (Continued)

The Company issued a 10% convertible promissory note on June 27, 2018 (the “Jun 2018 Note”) in the aggregate principal amount of up to $500,000. The Company received tranches for an aggregate principal total of $500,000. The Jun 2018 Note matured on June 27, 2019, which was automatically extended for sixty (60) months from the effective date of the note. The Jun 2018 Note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price since the original effective date of the note or the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Company fails to deliver shares in accordance with the timeframe of three (3) business days of the receipt of a notice of conversion, the lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the principal sum with the rescinded conversion shares returned to the Company. In no event shall the lender be entitled to convert any portion of the Jun 2018 Note to the extent such conversion would result in beneficial ownership by the lender and its affiliates of more than 4.99% of the outstanding shares of common stock of the Company. In addition, for each conversion, in the event, that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $1,500 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until the shares are delivered. The balance of the Jun 2018 Note as of March 31, 2023 was $500,000.

The Company issued a 10% convertible promissory note on August 10, 2018 (the “Aug 2018 Note”) in the aggregate principal amount of up to $100,000. The Aug 2018 Note had a maturity date of August 10, 2019, with an extension of sixty (60) months from the date of the note. The Aug 2018 Note matures on August 10, 2023. The Aug 2018 Note may be converted into shares of the Company’s common stock at a conversion price of the lesser of a) $0.005 per share or b) sixty-one (61%) percent of the lowest trading price per common stock recorded on any trade day after the effective date. The conversion feature of the Aug 2018 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Note. The balance of the Aug 2018 Note as of March 31, 2023 was $100,000.

On April 15, 2020, the Company issued a convertible promissory note (the “Apr 2020 Note”) to an investor in the aggregate principal amount of $50,000. The Company received tranches for an aggregate principal total of $50,000. The Apr 2020 Note matures twelve (12) months from the effective dates of each respective tranche, such that the Apr 2020 Note matures on April 15, 2021, with an automatic extension of sixty (60) months from the effective date of each tranche. The Apr Note is convertible into shares of common stock of the Company at a variable conversion price of the lesser of $0.01 per share or fifty percent (50%) of the lowest trading price of the common stock recorded on any trade day after the effective date, or (c) the lowest effective price per share granted to any person or entity after the effective date to acquire common stock. If the Company fails to deliver shares in accordance with the timeframe of four (4) business days of the receipt of a notice of conversion, the lender, at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the principal sum with the rescinded conversion shares returned to the Company. In no event shall the lender be entitled to convert any portion of the Apr 2020 Note to the extent such conversion would result in beneficial ownership by the lender and its affiliates of more than 4.99% of the outstanding shares of common stock of the Company. In addition, for each conversion, in the event that shares are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $2,000 per day shall be assessed for each day after the fourth business day (inclusive of the day of the conversion) until the shares are delivered. The conversion feature of the April 2020 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features of the Apr 2020 Note. The balance of the Apr 2020 Note as of March 31, 2023 was $50,000.

6.	DERIVATIVE LIABILITIES

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

The convertible notes issued 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, 2023, the Company recorded a net gain in change in derivative of $7,059,883 in the statement of operations due to the change in fair value of the remaining notes, for the period ended March 31, 2023.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

6.	DERIVATIVE LIABILITIES<br> (Continued)

For the nine months ended March 31, 2023 and the year ended June 30, 2022, the fair value of the derivative liabilities are as follows;

	3/31/2023		6/30/2022
Derivative liability, convertible notes	$	18,012,870	$	24,528,774
Derivative liability, warrants		942,316		1,486,294
Total	$	18,955,186	$	26,015,068

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	4.06% - 4.97%
Stock volatility factor	41.0% - 90.0%
Weighted average expected option life	1 year - 5 years
Expected dividend yield	None
7.	CASH, CASH EQUIVALENTS, MARKETABLE SECURITIES, AND INVESTMENT IN AFFILIATE
---	---

As of March 31, 2023, the Company invested in corporate bonds and government bonds, which have been recognized in the financial statements at cost.

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

As of March 31, 2023, the components of the Company’s cash, cash equivalents, short -term investments are summarized as follows:

	Adjusted <br> Cost		Unrealized <br> Gains		Unrealized <br> Losses			Fair Value		Cash and <br> Cash<br> Equivalents		Short-Term<br> Marketable <br> Securities
Cash	$	13,287,123	$	-	$	-		$	-	$	13,287,123	$	-
Subtotal		13,287,123		-		-			-		13,287,123		-
Level 1
U.S. Treasury bills and Obligations		16,845,517		-		-			-		16,845,517		-
Subtotal		16,845,517		-		-			-		16,845,517		-
Level 2
U.S. Treasury bonds		7,017,118				(3,849	)		7,013,269				7,017,118
Corporate securities		3,188,040		-		(90,233	)		3,097,806		-		3,188,040
Investment in affiliate		7,000,000		4,668,652		-			11,668,652		-		11,668,652
Subtotal		17,205,158		4,668,652		(94,083	)		21,779,727		-		21,873,810
Total	$	47,337,798	$	4,668,652	$	(94,083	)	$	21,779,727	$	30,132,640	$	21,873,810

The Company has invested in bonds, which mature from April 4, 2023 through August 16, 2023, and are held to maturity. The current trading prices or fair market value of the securities vary, and we believe any decline in fair value is temporary. All securities are current and not in default.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

7.	MARKETABLE SECURITIES (Continued)

The following table summarizes the amortized cost of the held-to-maturity securities at March 31, 2023, aggregated by credit quality indicator.

Credit Quality Indicators for the Securities
AA/A
US Treasury Obligations	$	2,630,000
US Treasury Bills		14,215,517
US Treasury Notes and Bonds		7,017,118
Corporate Securities		1,856,405
BBB
Corporate Securities		1,331,635
Total	$	27,050,675

During the nine months ended March 31, 2023, the Company recognized interest income pertaining to the investments of $893,730 in the financial statements, which is recorded as part of investment income in the statement of operations.

8.	INVESTMENTS IN SECURITIES<br> -AFFILIATE AND CONVERTIBLE NOTES RECEIVABLE -AFFILIATE

The Company over the past year has considered many companies in the hydrogen space for strategic investments, and believed that TECO2030’s fuel cell technology, designed with their development partner AVL, has shown incredible potential to become a key player in the fuel cell market.

On November 11, 2022, the Company (“SunHydrogen”) entered into a subscription agreement with TECO2030 ASA, (TECO) a public limited company incorporated in Norway. Pursuant to the subscription agreement, the Company purchased 13,443,875 shares of TECO stock for an aggregate consideration of $7 million in USD, at an exchange rate of NOK 10.4094. The stocks purchased are adjusted to fair value at the end of each period.

The Company purchased a convertible note of TECO for a subscription amount of $3 million in USD. The issuance of the convertible note receivable is through a Tap Issue Addendum to TECO’s secured convertible notes agreement dated June 1, 2022, pursuant to which Nordic Trustee AS is acting as the security agent on behalf of the note holders. The convertible note mature on June 1, 2025, and bears interest at the rate of 8% per annum paid quarterly in arrears and are convertible into shares of TECO at a rate of NOK 5.0868 per share. For the period ended March 31, 2023, the Company recognized interest income of $57,916 in the financial statements.

The CEO of SunHydrogen is a director of TECO, as such TECO is considered an affiliate of the Company.

	Cost Basis		Unrealized Gain		Fair Value <br> March 31, 2023
Short term investments in affiliate at fair value	$	7,000,000	$	4,668,652	$	11,668,652

During the nine months ended March 31, 2023, the Company recognized an unrealized gain of $4,668,652 in the financial statements,

9.	COMMITMENTS AND CONTINGENCIES

Effective October 1, 2022, the Company extended its research agreement with the University of Iowa through September 30, 2023. As consideration under the research agreement, the University of Iowa will receive a maximum of $343,984 from the Company in four equal installments of $85,996. The agreement can be terminated by either party upon sixty (60) days prior written notice to the other.

Effective October 1, 2022, the Company extended its research agreement with the University of Michigan through September 30, 2023. As consideration under the research agreement, the University of Michigan will receive a maximum of $298,194, from the Company in four equal installments of $74,549. In the event of early termination by the Sponsor, the Sponsor will pay all costs accrued by the University as of the date of termination, including non-cancellable obligations.

Effective December 2021, the Company entered into a marketing media campaign in the amount of $350,000, during the year ended June 30, 2022. The Company paid $262,500, and the remaining balance of $87,500 was paid on July 11, 2022 leaving a zero balance as of March 31, 2023.

The Company rented lab space with the University of Iowa as of February 2022. The monthly rent was $1,468, plus an additional $500 for the rental of a lab on a month-to-month basis and is cancelable with a thirty (30) day notice. During the period the Company increased the space needed for its’ lab work for a monthly rental of $5,468 per month. Due to the rental being month-to-month, ASC 842 lease accounting is not applicable.

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. 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 consolidated financial position or results of operation.

SUNHYDROGEN, INC.

NOTES TO FINANCIAL STATEMENTS – UNAUDITED

MARCH 31, 2023 AND 2022

10.	RELATED PARTY

As of December 31, 2022, the Company reported an accrual associated with the CEO’s prior years’ salary in the amount of $211,750 for the current year, which is recorded in related party accrued expenses. The Company began accruing the salary in 2011 and used the funds for operating expenses. During the period ended December 31, 2022, the accrued salary was reclassified as a loan from the CEO, with an interest rate of five percent (5%). The loan will be repaid with monthly payments of $9,290, including interest and principal over a two-year period. As of March 31, 2023, the balance remaining on the loan was $169,359.

Under the 2022 Equity Incentive Plan, an employee, a director and consultant were granted 33,000,000 restricted stock awards at a price of $0.025 per share for services, which vested on January 1, 2023 and 2024. The Company recorded stock compensation expense of $52,307, reported in the financial statements.

Under the 2022 Equity Incentive Plan, two employees were granted 150,000,000 restricted stock awards for services, which vested immediately. The Company withheld 62,400,000 shares at a price of $0.027 to pay for the taxes owed by the employees in the amount of $1,684,800, and the remaining 87,600,000 shares priced at $0.027 per share in the amount of $2,365,200 in stock compensation reported in the financial statements.

During the nine months ended March 31, 2023, a consultant exercised 3,071,412 nonqualified stock options through a cashless exercise for $32,875 in stock compensation expense reported in the financial statements.

On November 11, 2022, the Company (“SunHydrogen”) entered into a subscription agreement with TECO2030 ASA, (TECO) a public limited company incorporated in Norway. Pursuant to the subscription agreement, the Company purchased 13,443,875 shares of TECO stock for an aggregate consideration of $7 million in USD, at an exchange rate of NOK 10.4094.The stocks purchased are adjusted to fair value at the end of each period.

The Company purchased a convertible note of TECO for a subscription amount of $3 million in USD. The issuance of the convertible note receivable is through a Tap Issue Addendum to TECO’s secured convertible notes agreement dated June 1, 2022, pursuant to which Nordic Trustee AS is acting as the security agent on behalf of the note holders. The convertible note mature on June 1, 2025, and bears interest at the rate of 8% per annum paid quarterly in arrears and are convertible into shares of TECO at a rate of NOK 5.0868 per share. During the period ended March 31, 2023, the Company recognized interest income of $57,916 in the financial statements.

The CEO of SunHydrogen is a director of TECO, as such TECO is considered an affiliate of the Company .

11.	SUBSEQUENT EVENTS

Management evaluated subsequent events as of the date of the financial statements pursuant to ASC TOPIC 855 and had the following subsequent events to report.

On April 7, 2023, the Company filed an amended and restated certificate of designation of Series C Preferred Stock (the “Certificate of Designation”), with the Secretary of State of Nevada, designating 12,000 shares of preferred stock as Series C Preferred Stock. The Series C Preferred Stock has a stated value of $100 per share and is convertible into shares of common stock of the Company at a conversion price equal to $0.00095.

On April 15, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor. Under the Purchase Agreement, the Company and investor acknowledge there was an aggregate of $550,000 of principal outstanding under the notes issued to the investor by the Company on November 10, 2017, June 27, 2018, and April 15, 2020, plus $126,455 of accrued interest, representing a total aggregate note balance of $676,455 (the “Note”). Pursuant to the Purchase Agreement, the Company issued and sold to the investor 6,765 shares of the Company’s Series C Preferred Stock for a total purchase price of $676,455. The investor tendered the Note to the Company for cancellation and agreed to forego all future accrued interest under the Note, as the total purchase price for the shares.

During the month of April 2023, the Company issued 132,100,000 shares of restricted stock under the Company’s equity compensation plans valued at prices ranging, from $0.025 - $0.027 per share.

On April 18, 2023, the Company issued 9,375,000 shares of common stock per the purchase notice at a price of $0.016 per share in the amount of $150,000 according to the purchase agreement.

On April 27, 2023, the Company issued 12,757,957 shares of common stock per the purchase notice at a price of $0.01556 per share in the amount of $198,514, according to the purchase agreement.

On May 3, 2023, the Company issued 18,274,854 shares of common stock per the purchase notice at a price of $0.01368 per share in the amount of $250,000, according to the purchase agreement.

Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward-LookingStatements

The information in thisreport may contain forward-looking statements. These forward-looking statements involve risks and uncertainties, including statementsregarding our capital needs, business strategy and expectations. Any statements that are not of historical fact may be deemed to be forward-lookingstatements. These forward-looking statements involve substantial risks and uncertainties. In some cases you can identify forward-lookingstatements 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 fromthe anticipated results or other expectations expressed in the forward-looking statements. In evaluating these statements, you shouldconsider various factors, including the risks included from time to time in our reports filed with the Securities and Exchange Commission,or the SEC. These factors may cause our actual results to differ materially from any forward-looking statements. We disclaim any obligationto publicly update these statements, or disclose any difference between actual results and those reflected in these statements, exceptas may be required under applicable law.

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

Overview

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

Hydrogen is the most abundant chemical element in the universe. When hydrogen fuel is used to power transportation and industry, the only byproduct left behind is pure water, unlike hydrocarbon fuels such as oil, coal and natural gas that emit carbon dioxide and other harmful pollutants into the atmosphere. However, naturally occurring elemental hydrogen is rare – so rare, in fact, that today about 95% of hydrogen is produced from steam reforming of natural gas (Source: US Department of Energy, *Hydrogen Fuel Basics).*This process is both economically and environmentally unsound.

The SunHydrogen solution offers an efficient and cost-effective way to produce truly green hydrogen using sunlight and any source of water. Our core technology is a self-contained, nanoparticle-based hydrogen generator that mimics photosynthesis to split water molecules, resulting in hydrogen. By optimizing the science of water electrolysis at the nano-level, we believe we have developed a low-cost method to potentially produce environmentally friendly renewable hydrogen.

We believe renewable hydrogen has already proven itself to be a key solution in helping the world meet climate targets, and we believe our technology potentially offers solutions to the challenges that the hydrogen future presents, including cost of production and transportation.

Because our process only requires sunlight and water, our technology can be installed near the point of hydrogen use. This eliminates the need for pipelines and trucks that result in high carbon emissions and high capital investment. Additionally, because our process directly uses the electrical charges created by sunlight to generate hydrogen, our nanoparticle technology does not rely on grid power or require the costly power electronics that conventional electrolyzers do. Lastly, our planned scalable system configuration of many individual hydrogen-generating panels ensures redundancy, security and stability.

With a target cost of $2.50/kg., we aspire for our technology to be cost-competitive with brown hydrogen and below the cost of clean hydrogen competitors. We believe our solution has the potential to clear a path for green hydrogen to compete with natural gas hydrogen and gain mass market acceptance as a true replacement for fossil fuels.

Our technology is primarily developed at three laboratories – our independent laboratory in Coralville, Iowa, the SunHydrogen laboratory at the University of Iowa, and the Singh laboratory at University of Michigan.

Additionally, in parallel to the ongoing development of our own technology, we are well-capitalized to begin pursuing synergistic strategic investments in the hydrogen space. SunHydrogen is committed to furthering renewable hydrogen technology to grow the hydrogen ecosystem, and we are actively pursuing opportunities for investment and acquisition of complimentary hydrogen technologies. We are fortunate to have the resources to maximize our impact in this fast-growing industry.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Binomial valuation 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

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, 2023, the amounts reported for cash, investment in affiliate, accrued interest and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.

Recently Issued Accounting Pronouncements

Management reviewed currently issued pronouncements during the nine months ended March 31, 2023, 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 are disclosed in notes to the financial statements.

Results of Operations for the Three MonthsEnded March 31, 2023 compared to Three Months Ended March 31, 2022

Operating Expenses

Operating expenses for the three months ended March 31, 2023 were $1,325,255 compared to $2,131,707 for the three months ended March 31, 2022. The net decrease of $806,452 in operating expenses consisted primarily of a decrease in noncash stock compensation expense.

Other Income/(Expenses)

Other income and (expenses) for the three months ended March 31, 2023 were $3,019,088 compared to $7,810,011 for the three months ended March 31, 2023. The decrease in other expenses of $4,790,923 was the result of a decrease in gain on change in derivative liability, and an increase in unrealized loss on investment in affiliate.

Net Income/(Loss)

For the three months ended March 31, 2023, our net income was $1,693,833, compared to net income of $5,678,304 for the three months ended March 31, 2022. The majority of the decrease in net income of $3,984,471, was related primarily to the decrease in net change of derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material. The Company has not generated any revenues.

Results of Operations for the Nine Months ended March 31, 2023 comparedto Nine Months Ended March 31, 2022

Operating Expenses

Operating expenses for the nine months ended March 31, 2023 were $6,977,092, compared to $3,469,084 for the nine months ended March 31, 2022. The net decrease of $3,508,008 in operating expenses consisted primarily of a decrease in salaries and research and development.

Other Income/(Expenses)

Other income and (expenses) for the nine months ended March 31, 2023 were $12,420,741, compared to $82,203,995 for the nine months ended March 31, 2022. The decrease in other expenses of $69,783,254 was the result of a decrease in the fair value change in derivative liability and the unrealized gain on investment in affiliate.

Net Income/(Loss)

For the nine months ended March 31, 2023, our net income was $5,443,649, compared to net income of $78,734,911 for the nine months ended March 31, 2022. The majority of the decrease in net income of $73,291,262 was related primarily to the decrease in net change of derivative instruments estimated each period. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price, volatility, variable conversion prices based on market prices defined in the respective agreements and probabilities of certain outcomes based on managements’ estimates. These inputs are subject to significant changes from period to period, therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, 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.

As of March 31, 2023, we had working capital of $31,963,178, compared to $24,865,577 as of June 30, 2022. This increase in working capital of $7,097,601 was primarily due to an increase in cash.

Cash used in operating activities was $3,346,769 for the nine months ended March 31, 2023, compared to $2,211,559 for the nine months ended March 31, 2022. The increase in cash used in operating activities was due to an increase in salaries and research and development. The Company has had no revenues.

Cash provided by (used in) investing activities during the nine months ended March 31, 2023 and March 31, 2022 was $3,934,306 and $(10,648,389), respectively. The increase of $14,582,695 in investing activities was due to the redemption of the securities and the purchase of assets.

Cash provided by financing activities during the nine months ended March 31, 2023 was $1,863,618, compared to cash used in financing activities of $(490,000) for the nine months ended March 31, 202. The increase in cash provided by financing activities was due to income received through the investment in securities.

Our ability to continue as a going concern is dependent upon raising capital through financing transactions and future revenue. Our capital needs have primarily been met from the proceeds of private placements and registered offerings of our securities, as we have not generated any revenues to date.

We have historically obtained funding from investors, through private placements and registered offerings of equity and debt securities. Management believes that the Company will be able to continue to raise funds through the sale of its securities to its existing shareholders and prospective new investors, which will provide the additional cash needed to meet the Company’s obligations as they become due and will allow the Company to continue to develop its core business. There can be no assurance that we will be able to continue raising the required capital for our operations on terms and conditions that are acceptable to us, or at all. If we are unable to obtain sufficient funds, we may be forced to curtail and/or cease our operation.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, result of operations, liquidity or capital expenditures.

Item 3. Quantitative and Qualitative DisclosuresAbout 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 FinancialReporting

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.

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 material legal proceeding.

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 October 7, 2022.

Item 2. Unregistered Sales of Equity Securitiesand Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.	Description
10.1*	Purchase Agreement
31.1*	Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to Sarbanes-Oxley Section 302*
32.1**	Certification by Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350**
101*	Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q.
104*	Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.
*	Filed herewith
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**	Furnished herewith
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SIGNATURES

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

May 15, 2023	SUNHYDROGEN, INC.
	By:	/s/ Timothy Young
		Timothy Young<br><br> <br>Chief Executive Officer and<br><br> Acting Chief Financial Officer<br><br> <br>(Principal Executive Officer,<br><br> Principal Financial Officer and<br><br> Principal Accounting Officer)

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (“Agreement”) is entered into as of April 15, 2023, by and between SunHydrogen, Inc., a Nevada corporation (the “Company”), and Bountiful Capital, LLC, a Nevada limited liability company (the “Investor”), with respect to the following facts:

R E C I T A L S

A. The Company entered into a 10% interest, 5-year maturity, convertible note transaction with the Investor on November 10, 2017 and June 27, 2018, and April 15, 2020 (collectively referred to hereinafter, the “Note”). The current aggregate outstanding principal sum of the Note is $550,000 and the accrued interest to date is $126,455 representing a total aggregate note balance of $676,455. The Note is convertible into the Company’s common stock, par value $0.001 (the “Common Stock”), at an adjustable conversion price that is the lowest of (a) fifty percent (50%) of the lowest trade price of Common Stock recorded since the original Effective Date (as defined in the Note) of the Note, or (c) the lowest effective price per share granted to any person or entity after the Effective Date (as defined in the Note).

B. The Company agrees to sell and the Investor agrees to purchase Six Thousand Seven Hundred Sixty Five (6,765) shares of the Company’s Series C Preferred Stock (the “Shares”) for a total purchase price of $676,455.00 (the “Purchase Price”). The Series C Preferred Stock has a 10% stated annual dividend, no voting rights, has a face value of $100 per share, and is convertible into the Company’s Common Stock at a fixed conversion price that equals the effective conversion price of the Note on the date of this Agreement. The terms and conditions of the Series C Preferred stock (the “Series C Preferred Stock”) is set forth in the certification of designation attached hereto as Exhibit A (the “Restated Series C Certificate of Designation”).

C. The Investor agrees to tender the Note to the Company for cancellation and foregoes all future accrued interest rights and other rights under the Note, as the total Purchase Price of the Shares.

D. The closing of the transactions contemplated by this Agreement (the “Closing”) will be deemed to have occurred upon the completion of the deliveries by each Party to this Agreement as described in Section 2 of this Agreement.

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the parties to this Agreement, and in light of the recitals stated above, the parties to this Agreement hereby agree as follows:

Section 1. PURCHASE OF SHARES

The Investor agrees to tender the Note to the Company for cancellation as the total Purchase Price of the Shares. The Investor agrees that upon the full execution of this Agreement, the Note shall be deemed fully paid and satisfied, null and void and no interest, fees or principal shall be due thereon. In the event the Note is lost or destroyed, the Investor hereby warrants that the Note is lost or destroyed and agrees to immediately surrender to the Company said Note should it later be found and the Investor shall provide the Company with an affidavit of loss of said Note. The Investor hereby agrees to indemnify and hold harmless the Company and its affiliates against all liability, costs, damages, claims or expenses which may be incurred by any of them as a result of any claim to ownership of the lost Note asserted by the Investor or by anyone other than the Investor.

Section 2. DELIVERIES

2.1 The Company. The Company agrees and represents that upon the full execution of this Agreement, the Series C Preferred Stock shall be duly authorized, and the Shares are considered immediately and validly issued, fully paid and nonassessable, free and clear of all liens imposed by the Company other than restrictions on transfer provided for in this Agreement or the Certificate of Designation. The Company will or will cause its transfer agent to deliver a certificate evidencing the Shares issuable to the Investor within five (5) business days of the Closing. For all intent and purposes, upon the full execution of this Agreement, the Company agrees that the Investor is the immediate beneficial owners of the Shares and may exercise any and all rights under this Agreement or the Certification of Designation, regardless of when the certificates were delivered to the Investor.

2.2 The Investor. The Investor agrees that the Note shall be immediately and automatically cancelled on the books of the Company upon the full execution of this Agreement. The Investor also agrees to deliver any other document reasonably requested by the Company that it deems necessary for the consummation of the transactions contemplated by this Agreement.

2.3 Reservation of Shares of Common Stock. Within five (5) business days of the date of this Agreement, the Company shall submit irrevocable written instructions to its transfer agent to reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of the Shares (the “Reserved Shares”). If at any time the Company changes its transfer agent, while any shares of Series C Preferred Stock are outstanding, then the Company shall promptly submit similar irrevocable written instructions to such new transfer agent within five (5) business days of the effective date of change in transfer agent. The Company shall promptly deliver to the Investor written confirmation from the transfer agent when the shares of Common Stock are properly reserved for the sole benefit of the Investor. If on the date of this Agreement, the Company does not have enough authorized shares of Common Stock to issue upon the full conversion of the Series C Preferred Stock, then the Company agrees to immediately instruct its current transfer agent to reserve all remaining authorized shares as Reserved Shares for the benefit of the Investor, and to undertake and use its best efforts to amend its Articles of Incorporation to increase the number of shares of Common Stock that it is authorized to issue, within 90 days of the date hereof. The Company acknowledges that failure to comply with this Section 2.3 will cause enormous and immeasurable monetary damages to the Investor. Therefore, in the event of any failure to timely and properly reserved shares under this Section 2.3, the Company agrees to immediately pay Investor a cash amount equal to one (1%) percent of the aggregate fair market value of all the Common Stock underlying the outstanding Series C Preferred Stock for every 30 days such failure is not resolved, which amount shall not exceed ten (10%) percent in the aggregate in any twelve month period, in addition to any other damages the Investor may prove in an applicable court of law.

2.4 Reservation of Shares of Series C Preferred Stock. The Company hereby agrees that the entire series of Series C Preferred Stock shall be reserved and used exclusively for issuance upon exchange of its outstanding convertible notes with an effective conversion price that is the same as the Conversion Price described in the Certification of Designation, subject to adjustment as provided in the Certificate of Designation.

Section 3. EQUITABLE RELIEF.

3.1 Damages Inadequate. Each party acknowledges that it would be impossible to measure in money the damages to the other party if there is a failure to comply with any covenants or provisions of this Agreement, and agrees that in the event of any breach of any covenant or provision, the other party to this Agreement will not have an adequate remedy at law.

3.2 Equitable Relief. It is therefore agreed that the other party to this Agreement who is entitled to the benefit of the covenants or provisions of this Agreement which have been breached, in addition to any other rights or remedies which they may have, shall be entitled to immediate equitable relief to enforce such covenants and provisions, and that in the event that any such action or proceeding is brought in equity to enforce them, the defaulting or breaching party will not urge a defense that there is an adequate remedy at law.

Section 4. Investor Representation and Warranty

4.1 Investor’s Representations and Warranties. As a material inducement to the Company to enter into this Agreement and consummate the transaction contemplated hereunder, Investor represents warrants and covenants with and to the Company as follows:

i.	Authorization and Binding Obligation. The Investor<br>has the requisite legal capacity, power and authority to enter into, and perform under this Agreement, including with respect to canceling<br>the Note and receiving the Shares. The execution, delivery and performance of this Agreement and performance by such Investor and the<br>consummation by such Investor of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate,<br>partnership or similar action on the part of such Investor and no further consent or authorization is required. This Agreement has been<br>duly executed and delivered by the Investor, and constitute the legal, valid and binding obligations of the Investor, enforceable against<br>the Investor in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable<br>bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement<br>of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or<br>state securities laws.
ii.	Beneficial Owner. With respect to the Note (i) the<br>Investor owns, beneficially and of record, good and marketable title to the Note, free and clear of any taxes, liens or encumbrances;<br>(ii) the Note is not subject to any transfer restriction, other than the restriction that the Note not been registered under the Securities<br>Act of 1933, as amended (the “1933 Act”) and, therefore, cannot be resold unless registered under the 1933 Act or in a transaction<br>exempt from or not subject to the registration requirements of the 1933 Act; (iii) the Investor has not entered into any agreement or<br>understanding with any person or entity to dispose of the Note; and (iv) at the Closing, the Investor will convey to the Company good<br>and marketable title to the Note, free and clear of any security interests, liens, adverse claims, encumbrances, taxes or encumbrances.
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iii.	Accredited Investor. The Investor is an accredited<br>investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
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iv.	Purchase Entirely for Own Account. The Shares to be<br>received by the Investor hereunder will be acquired for the Investor’s own account, not as nominee or agent, and not with a view<br>to the resale or distribution of any part thereof in violation of the 1933 Act, and the Investor has no present intention of selling,<br>granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s<br>right at all times to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities<br>laws. Nothing contained herein shall be deemed a representation or warranty by the Investor to hold the Shares for any period<br>of time. The Investor is not a broker-dealer registered with the SEC under the Securities Exchange Act of 1934, as amended (the “1934<br>Act”) or an entity engaged in a business that would require it to be so registered.
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v.	Disclosure of Information. The Investor has had an<br>opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company<br>regarding the Company, its business and the terms and conditions of the offering of the Shares. Such Investor acknowledges receipt of<br>copies of the Company’s most recent Annual Report on Form 10-K for its last fiscal year and all other reports filed by the Company<br>pursuant to the 1934 Act since the filing of the 10-K and prior to the date hereof.
vi.	Proceedings. No proceedings relating to the Note is<br>pending or, to the knowledge of the Investor, threatened before any court, arbitrator or administrative or governmental body that would<br>adversely affect the Investor’s right and ability to surrender and exchange the Note.
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vii.	Tax Consequences. The Investor acknowledges that the<br>contents of this Agreement do not contain tax advice and Investor acknowledges that it has not relied and will not rely upon the Company<br>with respect to any tax consequences related to the Note and receipt of the Shares. The Investor assumes full responsibility for all<br>such consequences and for the preparation and filing of any tax returns and elections which may or must be filed in connection with the<br>cancellation of the Note and/or the issuance of the Shares.
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viii.	Reliance on Exemptions. The Investor understands that<br>the Shares are being offered and exchanged in reliance on specific exemptions from the registration requirements of United States federal<br>and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance<br>with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein and in order to<br>determine the availability of such exemptions and the eligibility of the Investor to acquire the Shares.
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ix.	No Broker or Finder. Neither the Investor nor its agent<br>or representative has engaged any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees<br>in connection with the Transactions contemplated herein.
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Section 5. MISCELLANEOUS

5.1 Further Assurances. The parties to this Agreement hereby agree to execute any other documents and take any further actions which are reasonably necessary or appropriate in order to implement the transactions contemplated by this Agreement.

5.2 Counterparts. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.

5.3 Governing Law. This Agreement shall be construed in accordance with, and governed in all respects by, the laws of the State of Nevada.

5.4 Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective heirs, successors and assigns, if any, and shall inure to the benefit of the parties hereto and their respective heirs, successors and assigns, if any.

5.5 Legends. The Investor understands that the Shares are characterized as “restricted securities” under the 1933 Act. The Investor further acknowledges that if the Shares are issued to the Investor in accordance with the provisions of this Agreement, such Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The Investor represents that it is familiar with Rule 144 promulgated under the 1933 Act, as presently in effect, and understands the resale limitations imposed thereby and by the 1933 Act. Investor acknowledges that the certificate(s) representing the Shares shall each conspicuously set forth on the face or back thereof a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

and any legend required by the “blue sky” laws of any state to the extent such laws are applicable to the securities represented by the certificates with such legend.

5.6 Severability. The provisions of this Agreement are severable and in the event that one or more of its provisions are deemed to be unenforceable or invalid for any reason, such finding will not affect the enforceability or validity of any other provision of this Agreement, which shall remain in full force and effect.

5.7 Public Disclosure. The Company and the Investor agree not to issue any public statement with respect to the Investor’s investment or proposed investment in the Company or the terms of any agreement or covenant without the other party’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation. The Company agrees to reference the Investor only as “an accredited investor” and attach only a form copy this Agreement in any of the Company’s filings with the Securities and Exchange Commission or any other public filings, except such full disclosures as may be required under applicable law or under any applicable order, rule or regulation.

5.8 Waiver. No failure or delay on the part of either party hereto in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege.

5.9 Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto and supersedes all prior agreements and understandings between the parties relating to the subject matter hereof.

5.10 Parties in Interest. None of the provisions of this Agreement or of any other document relating hereto is intended to provide any rights or remedies to any person (including, without limitation, any employees or creditors of the Company) other than the parties hereto and their respective heirs, successors and assigns, if any.

5.11 Authorized Signatures. Each party to this Agreement hereby represents that the persons signing below are duly authorized to execute this Agreement on behalf of their respective party.

[signatures on the next page]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

COMPANY:	SUNHYDROGEN, INC.
	By:	/s/ Timothy Young
		Timothy Young, Chief Executive Officer
INVESTOR:	BOUNTIFUL CAPITAL, LLC
	By	/s/ Greg Boden, President

EXHIBIT A

RESTATED CERTIFICATE OF DESIGNATION

SERIES C PREFERRED STOCK

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I,	Timothy Young, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of SunHydrogen,<br>Inc. for the fiscal quarter ended March 31, 2023;
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2.	Based on my knowledge, this report does not contain any untrue<br>statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under<br>which such statements were made, not misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial<br>information included in this report, fairly present in all material respects the financial condition, results of operations and cash<br>flows of the registrant as of, and for, the periods presented in this report;
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4.	The registrant’s other certifying officer(s) and I are<br>responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))<br>and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d – 15(f)) for the registrant and<br>have:
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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;
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b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 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;
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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
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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
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5.	The registrant’s other certifying officer(s) and I have<br>disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the<br>audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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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
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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.
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Date: May 15, 2023

/s/ Timothy Young
Timothy Young
Chief Executive Officer &<br><br> Acting Chief Financial<br> Officer<br><br> <br>(Principal Executive and Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SunHydrogen, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended March 31, 2023 as filed with the Securities and Exchange Commission the date hereof (the “Report”), I, Timothy Young, Chief Executive Officer & Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Sections<br>13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	Information contained in the Report fairly presents, in all<br>material respects, the financial condition and results of operations of the Company.
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Dated: May 15, 2023	/s/ Timothy Young
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	Timothy Young
	Chief Executive Officer & <br><br>Acting Chief Financial Officer
	(Principal Executive and Financial Officer)