NewHydrogen, Inc. 10-K

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. 13 RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2022 COMPARED TO THE YEAR ENDED DECEMBER 31, 2021 General and Administrative Expenses General and administrative (“G&A”) expenses increased by $40,240,146 to $10,988,885 for the year ended December 31, 2022, compared to $51,229,031 for the prior period December 31, 2021. This decrease in G&A expenses was the result of a decrease in non-cash stock compensation of $39,962,654, increase in salaries of $26,229, decrease in professional fees of $302,741, with an overall decrease of $980 in other G&A expenses. Research and Development Research and Development (“R&D”) expenses decreased by $125,651 to $1,095,483 for the year ended December 31, 2022, compared to $1,221,134 for the prior period ended December 31, 2021. This overall decrease in R&D expenses was the result of a decrease in corporate outside services. Depreciation and amortization Expense Depreciation and amortization expense for the years ended December 31, 2022 and 2021 was $4,214 and $4,365, respectively. Other Income/(Expenses) Other income and (expenses) decreased by $(62,640,956) to $3,054 of other expense for the year ended December 31, 2022, compared to $(62,644,010 of other income for the prior period ended December 31, 2021. The decrease in non-cash gain on change in fair value of the derivative instruments of $63,214,902, interest income of $578 with a decrease in interest expense in the amount of $(574,524), which includes the net change in amortization of debt discount in the amount of $455,989. The decrease in other income and (expenses) was primarily due to the conversion of the outstanding convertible promissory notes. Net Loss Our net loss was $(12,085,528) for the year ended December 31, 2022, compared to a net income of $10,189,480 for the prior period ended December 31, 2021. The increase in net loss was due to a decrease in non-cash change in derivative liabilities. The Company has not generated any revenues. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2022, we had $4,845,188 in working capital as compared to $6,655,953 for the prior year ended December 31, 2021. The decrease in working capital was due primarily to a decrease in cash, prepaid expenses, and accounts payable. During the year ended December 31, 2022, the Company used $1,812,013 of cash for operating activities, as compared to $2,084,486 for the prior year ended December 31, 2021. The decrease in the use of cash for operating activities was a result of a decrease in research and development and professional fees in the year ended December 31, 2022 compared to December 31, 2021. 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, 2022 and 2021 was $0, respectively. Cash provided from financing activities during the year ended December 31, 2022 was $1,000 as compared to $8,666,700 for the prior year ended December 31, 2021. 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. 14 Our financial statements as of December 31, 2022 and 2021 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 March 10, 2023 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 2025, based upon its current operating plan and condition. We expect increased expenses during the second quarter of 2023 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.