NewHydrogen, Inc. 10-K/A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Special Note on Forward-Looking Statements. Certain statements in “Management’s Discussion and Analysis or Plan of Operation” below, and elsewhere in this annual report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this annual report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth below and elsewhere in this annual report, and in other reports filed by us with the SEC. You should read the following description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included in this Annual Report beginning on page F-1. Overview We are a developer of clean energy technologies. Our current focus is on developing an electrolyzer technology to lower the cost of Green Hydrogen production. Hydrogen is the cleanest and most abundant fuel in the universe. It is zero-emission and only produces water vapor when used. However, hydrogen does not exist in its pure form on Earth so it must be extracted. For centuries, scientists have known how to electricity to split water into hydrogen and oxygen using a device called an electrolyzer. Electrolyzers installed behind a solar farm or wind farm can use renewable electricity to split water, thereby producing Green Hydrogen. However, modern electrolyzers still cost too much. The chemical catalysts that enable the water-splitting reactions are currently made from platinum and iridium – both are very expensive precious metals. These catalysts account for nearly 50% of the cost of the electrolyzer. We are developing technologies to significantly reduce or replace catalysts made from rare materials with catalysts made from inexpensive earth abundant materials in electrolyzers to lower the cost of Green Hydrogen, thus help usher in a Green Hydrogen economy. In a 2020 report, Goldman Sachs estimates that Green Hydrogen will be a $12 trillion market opportunity by 2050. We have previously developed an innovative material technology to reduce the cost per watt of electricity produced by Photovoltaic, or PV, solar modules. 12 RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2021 COMPARED TO THE YEAR ENDED DECEMBER 31, 2020 General and Administrative Expenses General and administrative (“G&A”) expenses increased by $50,781,366 to $51,229,031 for the year ended December 31, 2021, compared to $447,665 for the prior period December 31, 2020. This increase in G&A expenses was the result of an increase in non-cash stock compensation of $50,232,202, increase in salaries of $232,771, increase in professional fees of $290,208, with an increase of $26,185 in other G&A expenses. Research and Development Research and Development (“R&D”) expenses increased by $1,043,412 to $1,221,134 for the year ended December 31, 2021, compared to $177,722 for the prior period ended December 31, 2020. This overall increase in R&D expenses was the result of an increase in corporate outside services. Depreciation and amortization Expense Depreciation and amortization expense for the years ended December 31, 2021 and 2020 was $4,365 and $4,365, respectively. Other Income/(Expenses) Other income and (expenses) increased by $(206,044,226) to $62,644,010, of other expense for the year ended December 31, 2021, compared to $(139,914,908 of other income for the prior period ended December 31, 2020. The increase in non-cash loss on change in fair value of the derivative instruments of $202,253,656, interest income of $3,557 with a decrease in interest expense in the amount of $(301,705), which includes the net change in amortization of debt discount in the amount of $155,857. The decrease in other income and (expenses) was primarily due to the non-cash net change in derivatives for our outstanding convertible promissory notes. Net Loss Our net income was $10,189,480 for the year ended December 31, 2021, compared to a net loss of $(140,544,660) for the prior period ended December 31, 2020. The increase in net income was due to an increase in non-cash other income (expenses) associated with the net change in 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 as defined in the respective agreements and probabilities of certain outcomes based on the calculated estimates. These inputs are used to determine the fair value of the derivative liabilities and are subject to significant changes from period to period based on these valuations, 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 As of December 31, 2021, we had $6,655,953 in working capital as compared to $150,532,859 for the prior year ended December 31, 2020. The decrease in working capital was due primarily to a decrease in derivative liability, convertible debt, and prepaid expenses, with an increase in cash and accounts payable. During the year ended December 31, 2021, the Company used $2,084,486 of cash for operating activities, as compared to $647,298 for the prior year ended December 31, 2020. The increase in the use of cash for operating activities was a result of an increase in research and development, salary expense in the year ended December 31, 2021 compared to December 31, 2020. The Company is focused on development of silicon anode additive technology for next generation lithium-ion batteries. Cash used in investing activities for the years ended December 31, 2021 and 2020 was $0, respectively. 13 Cash provided from financing activities during the year ended December 31, 2021 was $8,666,700 as compared to $649,000 for the prior year ended December 31, 2020. Our capital needs have primarily been met from the proceeds of convertible debt offerings and equity financing. We are currently in the development stage of our business and have no revenues. Our financial statements as of December 31, 2021 and 2020 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued their report dated February 14, 2021 that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern ultimately is dependent on our ability to generate a profit which is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and, ultimately, achieve profitable operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. PLAN OF OPERATION AND FINANCING NEEDS We are engaged in the development of clean energy technologies to lower the cost of producing green hydrogen. The Company’s current focus is on developing lower cost replacements for precious metal based catalysts for hydrogen electrolyzers. Our plan of operation within the next twelve months is to utilize our cash balances to expand the existing electrolyzer technology program focused on significantly reducing or replacing rare materials in electrolyzers with inexpensive earth abundant materials to help usher in a Green Hydrogen economy. We believe that our current cash and investment balances will be sufficient to support development activity and general and administrative expenses for the next twenty four months. Management estimates that it will require additional cash resources during 2024, based upon its current operating plan and condition. We expect increased expenses during the second quarter of 2022 as we ramp up prototyping efforts for electrolyzer incorporating our catalyst technology as well as commence an additional related technology program. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.