NewHydrogen, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS NEWHYDROGEN, INC. CONDENSED BALANCE SHEET March 31, 2023 December 31, 2022 (Unaudited) ASSETS CURRENT ASSETS Cash $ 4,640,377 $ 4,834,697 Prepaid expenses 48,708 10,540 TOTAL CURRENT ASSETS 4,689,085 4,845,237 PROPERTY AND EQUIPMENT Machinery and equipment 37,225 37,225 Less accumulated depreciation ( 34,829 ) ( 34,558 ) NET PROPERTY AND EQUIPMENT 2,396 2,667 OTHER ASSETS Patents, net of amortization of $ 21,912 and $ 21,157 , respectively 23,424 24,179 Deposit 770 770 TOTAL OTHER ASSETS 24,194 24,949 TOTAL ASSETS $ 4,715,675 $ 4,872,853 LIABILITIES AND SHAREHOLDERS’ DEFICIT CURRENT LIABILITIES Accounts payable $ 146 $ 49 TOTAL CURRENT LIABILITIES 146 49 COMMITMENTS AND CONTINGENCIES (See Note 9) - - Series C Convertible Preferred Stock, 34,853 and 34,853 shares outstanding, respectively, redeemable value of $ 3,485,313 and $ 3,485,313 , respectively 3,485,313 3,485,313 SHAREHOLDERS’ EQUITY Preferred stock, $ 0.0001 par value; 10,000,000 authorized shares - - Common stock, $ 0.0001 par value; 3,000,000,000 authorized shares 705,126,846 and 705,126,846 shares issued and outstanding, respectively 70,513 70,513 Preferred treasury stock, 0 and 1,000 shares outstanding, respectively - - Additional paid in capital 175,746,256 174,272,031 Accumulated deficit ( 174,586,553 ) ( 172,955,053 ) TOTAL SHAREHOLDERS’ EQUITY 1,230,216 1,387,491 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 4,715,675 $ 4,872,853 The accompanying notes are an integral part of these unaudited condensed financial statements. 1 NEWHYDROGEN, INC. CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE ENDED MARCH 31, 2023 AND 2022 (Unaudited) March 31, 2023 March 31, 2022 For the Three Months Ended March 31, 2023 March 31, 2022 REVENUE $ - $ - OPERATING EXPENSES General and administrative expenses 1,615,938 2,580,059 Research and development 15,000 220,546 Depreciation and amortization 1,026 1,091 TOTAL OPERATING EXPENSES 1,631,964 2,801,696 LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) ( 1,631,964 ) ( 2,801,696 ) OTHER INCOME/(EXPENSES) Interest income 464 634 TOTAL OTHER INCOME (EXPENSES) 464 634 NET INCOME (LOSS) $ ( 1,631,500 ) $ ( 2,801,062 ) BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ ( 0.00 ) $ ( 0.00 ) WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 705,126,846 715,496,051 The accompanying notes are an integral part of these unaudited condensed financial statements. 2 NEWHYDROGEN, INC. CONDENSED STATEMENT OF SHAREHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (Unaudited) Shares Amount Mezzanine Shares Amount Capital Deficit Total THREE MONTHS ENDED MARCH 31, 2022 Additional Preferred Stock Common Stock Paid-in Accumulated Shares Amount Mezzanine Shares Amount Capital Deficit Total Balance at December 31, 2021 - - $ 3,485,313 715,496,051 $ 71,549 $ 164,000,447 ( 160,869,525 ) 3,202,471 Issuance of common stock warrants for cash - - - - - 1,000 - 1,000 Stock and warrant compensation cost - - - - - 2,379,325 - 2,379,325 Net Loss - - - - - - ( 2,801,062 ) ( 2,801,062 ) Balance at March 31, 2022 (unaudited) - $ - $ 3,485,313 715,496,051 $ 71,549 $ 166,380,772 $ ( 163,670,587 ) $ 2,781,734 THREE MONTHS ENDED MARCH 31, 2023 Additional Preferred Stock Common Stock Paid-in Accumulated Shares Amount Mezzanine Shares Amount Capital Deficit Total Balance at December 31, 2022 - $ - 3,485,313 705,126,846 $ 70,513 $ 174,272,031 $ ( 172,955,053 ) $ 1,387,491 Stock and warrant compensation cost - - - - - 1,474,225 - 1,474,225 Net Loss - - - - - - ( 1,631,500 ) ( 1,631,500 ) Balance at March 31, 2023 (unaudited) - $ - $ 3,485,313 705,126,846 $ 70,513 $ 175,746,256 $ ( 174,586,553 ) $ 1,230,216 The accompanying notes are an integral part of these unaudited condensed financial statements. 3 NEWHYDROGEN, INC. CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (Unaudited) March 31, 2023 March 31, 2022 Three Months Ended March 31, 2023 March 31, 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ ( 1,631,500 ) $ ( 2,801,062 ) Adjustment to reconcile net income(loss) to net cash (used in) provided by operating activities Depreciation and amortization expense 1,026 1,091 Common stock issued for services - - Stock compensation expense 1,474,225 2,379,325 (Increase) Decrease in Changes in Assets Prepaid expenses ( 38,168 ) ( 39,189 ) Increase (Decrease) in Changes in Liabilities Accounts payable 97 1,389 NET CASH USED IN OPERATING ACTIVITIES ( 194,320 ) ( 458,446 ) CASH FLOWS FROM INVESTING ACTIVITIES: - - CASH FLOWS FROM FINANCING ACTIVITIES: Common stock purchase warrants for cash - 1,000 NET CASH PROVIDED BY FINANCING ACTIVITIES - 1,000 NET INCREASE IN CASH ( 194,320 ) ( 457,446 ) CASH, BEGINNING OF PERIOD 4,834,697 6,645,710 CASH, END OF PERIOD $ 4,640,377 $ 6,188,264 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ - $ - Taxes paid $ - $ - The accompanying notes are an integral part of these unaudited condensed financial statements. 4 NEWHYDROGEN, INC. CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 1. Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. For further information refer to the financial statements and footnotes thereto included in the Company’s Form 10-K for the December 31, 2022. Going Concern Substantial Doubt Alleviated As of the three months ended March 31, 2023, the Company had a loss of $ 1,631,500 , which consisted of a non-cash amount of $ 1,474,225 for a net cash loss of $ 157,275 . As of March 31, 2023, its accumulated deficit was $ 174,586,553 . Management believes the Company’s present cash flows will enable it to meet its obligations for twenty-four months from the date of these financial statements. Management will continue to assess its operational needs and seek additional financing as needed to fund its operations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The condensed unaudited financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Revenue Recognition The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. The Company adopted Accounting Standards Codification (“ASC”) 606, whereby revenue will be recognized as performance obligations are satisfied and customers obtain control of goods or services. However, in the event of a loss on a sale is foreseen, the Company will recognize the loss as it is determined. To date, the Company has not had significant revenues and is in the development stage. Cash and Cash Equivalent The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Concentration Risk Cash includes amounts deposited in financial institutions in excess of insurable Federal Deposit Insurance Company (FDIC) limits. At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of March 31, 2023, the cash balance in excess of the FDIC limits was $ 4,390,377 . The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates. Property and Equipment Property and equipment are stated at cost, and are depreciated using straight line over its estimated useful lives: SCHEDULE OF PROPERTY AND EQUIPMENT Computer equipment 5 Years Machinery and equipment 10 Years Depreciation expense for the three months ended March 31, 2023 and 2022 were $ 271 and $ 336 , respectively. 5 NEWHYDROGEN, INC. CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 2. SUMMARY OF SIGNIFICANT 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. SCHEDULE OF INTANGIBLE ASSETS AMORTIZED OVER THEIR USEFUL LIVES Useful Lives 3/31/2023 12/31/2022 Patents $ 45,336 $ 45,336 Less accumulated amortization 15 years ( 21,912 ) ( 21,157 ) Intangible assets $ 23,424 $ 24,179 Amortization expense for the three months ended March 31, 2023 and 2022 was $ 755 and $ 755 , respectively. Stock-Based Compensation The Company measures the cost of employee services received in exchange for an equity award based on the grant-date fair value of the award. All grants under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee, consultant, or director are required to provide service in exchange for the award (the vesting period). Compensation expense for options granted to employees and non-employees is determined in accordance with the standard as the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted is re-measured each period. On February 18, 2021, the Company granted 450,000,000 stock options to its employees for services at an exercise price of $ 0.091 . On September 29, 2021, the Company amended the exercise price to $ 0.028 per share. The options expire, and all rights to purchase the shares shall terminate seven ( 7 ) years from the date of grant or termination of employment. Half of the 400,000,000 options vested immediately upon grant , and the remaining half of the option to purchase 200,000,000 shares of the Company’s common stock shall become exercisable in equal amounts over a twenty-four ( 24 ) month period during the term of the optionee’s employment, with the first installment of 8,333,333 shares vesting on March 18, 2021. The 50,000,000 options are exercisable in equal amounts over a thirty-six ( 36 ) month period during the term of the optionee’s employment, with the first installment of 1,388,889 shares, vesting on March 18, 2021. On April 12, 2022, the Company cancelled the 450,000,000 stock options dated February 18, 2021, and concurrently granted 450,000,000 new options to its’ employees for services. On March 1, 2022, the Company issued 5,000,000 common stock purchase warrants through a securities purchase agreement for a purchase price of $ 1,000 . On March 15, 2022, the Company granted 5,000,000 stock options to a consultant for advisory services. The options vest at a rate of 138,889 options per month for a thirty-six ( 36 ) month period during the term of the optionee’s consultancy with the Company. As of March 31, 2023, the 5,000,000 stock options were outstanding. On April 12, 2022, the Company granted 450,000,000 stock options to its employees for services at an exercise price of $ 0.021 . The options expire, and all rights to purchase the shares shall terminate seven ( 7 ) years from the date of grant or termination of employment. The vesting schedule of the 400,000,000 options are exercisable in the amount of 316,666,662 immediately, and the remaining 83,333,338 shares shall become exercisable in equal amounts over a ten ( 10 ) month period during the term of the optionee’s employment until the Option is 100 % vested. The 50,000,000 options are exercisable in the amount of 19,444,446 immediately and the remaining 30,555,554 shares shall become exercisable in equal amounts over a twenty-two ( 22 ) month period during the term of the optionee’s employment until the Options is 100 % vested. As of March 31, 2023, the 450,000,000 stock options were outstanding. On March 20, 2023, the Company granted 50,000,000 shares of stock options, to purchase the total number of shares of common stock equal to the number of option shares at the exercise price of $ 0.0137 per share. The options were granted pursuant to the terms of the Company’s 2022 Equity Incentive Plan. The 50,000,000 shares subject to the options, have a six-month cliff, whereby 8,333,333 shall become vested and exercisable on September 19, 2023 and the remaining 41,666,667 shall become exercisable in equal amounts over a thirty ( 30 ) month period during the term of the participant’s employment until the option is 100 % vested. The unvested portion of the option will not be exercisable on or after the termination of continuous service. Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company used Black Scholes to value its stock option awards which incorporated the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. The stock options terminate seven (7) years from the date of grant or upon termination of employment. As of March 31, 2023, the aggregate total of 505,000,000 stock options were outstanding. Research and Development Research and development costs are expensed as incurred. Total research and development costs were $ 15,000 and $ 220,546 for the three months ended March 31, 2023 and 2022, respectively. 6 NEWHYDROGEN, INC. CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Net Earnings (Loss) per Share Calculations Net earnings (Loss) per share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing by the weighted average number of common shares outstanding during the year. Diluted net earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the effect of stock options and stock-based awards (Note 4), plus the assumed conversion of convertible debt (Note 5).   For the three months ended March 31, 2023, the Company has not included shares issuable from 505,000,000 stock options and 228,958,334 warrants, because their impact on the income per share is antidilutive. For the three months ended March 31, 2022, the Company has included shares issuable from 468,500,000 stock options and 228,958,334 warrants, because their impact on the income per share is dilutive. SCHEDULE OF NET EARNINGS PER SHARE 2023 2022 For the Three Months Ended March 31, 2023 2022 Income (Loss) to common shareholders (Numerator) $ ( 1,631,500 ) $ ( 2,801,062 ) Basic weighted average number of common shares outstanding (Denominator) 705,126,846 715,496,051 Diluted weighted average number of common shares outstanding (Denominator) 705,126,846 715,496,051 Fair Value of Financial Instruments Fair Value of Financial Instruments requires disclosure of the fair value information, whether recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2023, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: ● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; ● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and ● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. We measure certain financial instruments at fair value on a recurring basis. As of March 31, 2023, there were no financial instruments to report. Recently Issued Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements. 7 NEWHYDROGEN, INC. CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 3. CAPITAL STOCK Preferred Stock March 31, 2023 and 2022 As of March 31, 2023, the Company had a total of 34,853 shares of Series C Preferred Stock outstanding with a fair value of $ 3,485,313 , and a stated face value of one hundred dollars ($ 100 ) per share which are convertible into shares of fully paid and non-assessable shares of common stock of the Company. The holder of the Series C preferred stocks are entitled to receive dividends pari passu with the holders of common stock, except upon liquidation, dissolution and winding up of the Corporation. The holder has the right, at any time, at its election, to convert shares of Series C Preferred Stock into common stock at a conversion price of $ 0.0014 and has no voting rights. Common Stock March 31, 2023 During the three months ended March 31, 2023, the Company did not issue any common stocks. Common Stock March 31, 2022 During the three months ended March 31, 2022, the Company issued 5,000,000 common stock purchase warrants for cash in the amount of $ 1,000 . During the three months ended March 31, 2022, the Company issued 5,000,000 common stock purchase warrants for cash in the amount of $ 1,000 . 8 NEWHYDROGEN, INC. CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 4. STOCK OPTIONS AND WARRANTS Stock Options During the three months ended March 31, 2023, the Company granted stock options in the amount of 50,000,000 . (See Note 2). SCHEDULE OF STOCK OPTIONS 3/31/2023 3/31/22 Number of Options Weighted average exercise price Number of Options Weighted average exercise price Outstanding as of the beginning of the periods 455,000,000 $ 0.0296 465,950,000 $ 0.0350 Granted 50,000,000 $ 0.0137 5,000,000 $ 0.0210 Exercised - - - - Expired/Cancelled - - ( 2,450,000 ) ( 0.090 ) Outstanding as of the end of the periods 505,000,000 $ 0.0259 468,500,000 $ 0.0346 Exercisable as of the end of the periods 435,959,666 $ 0.0296 323,889,610 $ 0.0377 The weighted average remaining contractual life of options outstanding as of March 31 2023 and 2022 was as follows: SCHEDULE OF WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF OPTIONS OUTSTANDING 3/31/2023 3/31/2022 Exercisable Price Stock Options Outstanding Stock Options Exercisable Weighted Average Remaining Contractual Life (years) Exercisable Price Stock Options Outstanding Stock Options Exercisable Weighted Average Remaining Contractual Life (years) $ 0.0137 50,000,000 - $ - - - - $ - - - - $ 0.26 13,500,000 13,500,000 0.42 $ 0.223 5,000,000 1,739,726 1.96 $ 0.223 5,000,000 5,000,000 2.21 $ 0.021 450,000,000 434,219,940 6.04 $ 0.028 450,000,000 297,222,222 6.29 505,000,000 435,959,666 468,500,000 323,889,610 The stock-based compensation expense recognized in the statement of operations during the three months ended March 31, 2023 and 2022, were $ 1,474,225 and $ 2,379,325 , respectively. As of March 31, 2023, there was no intrinsic value with regards to the outstanding options. Warrants As of March 31, 2023, the Company issued 5,000,000 common stock purchase warrants through a securities purchase agreement for a purchase price of $ 1,000 . As of March 31, 2023 and 2022, the outstanding warrants were as follows: SCHEDULE OF WARRANTS ACTIVITY 3/31/2023 3/31/2022 Number of Options Weighted average exercise price Number of Options Weighted average exercise price Outstanding as of the beginning of the periods 228,958,334 $ 0.0488 223,958,334 $ 0.0488 Granted - - - - Purchased - - 5,000,000 $ 0.0255 Outstanding as of the end of the periods 228,958,334 $ 0.0483 228,958,334 $ 0.0483 Exercisable as of the end of the periods 228,958,334 228,958,334 9 NEWHYDROGEN, INC. CONDENSED NOTES TO FINANCIAL STATEMENTS – UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 4. STOCK OPTIONS AND WARRANTS (Continued) The weighted average remaining contractual life of the warrants outstanding as of March 31, 2023 was as follows: SCHEDULE OF WARRANTS OUTSTANDING 3/31/23 Exercisable Price Stock Warrants Outstanding Stock Warrants Exercisable Weighted Average Remaining Contractual Life (years) $ 0.0255 5,000,000 5,000,000 4.21 $ 0.04 125,000,000 125,000,000 3.27 $ 0.05 9,375,000 9,375,000 3.26 $ 0.06 83,333,334 83,333,334 3.57 $ 0.075 6,250,000 6,250,000 3.57 228,958,334 228,958,334 There was no warrant compensation recognized as of March 31, 2023. 5. COMMITMENTS AND CONTINGENCIES The Company rents office space on a yearly basis with a monthly rent payment in the amount of $ 550 . In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations. On March 15, 2022, the Company entered into an advisor agreement for services regarding various aspects of the Company’s business, including but not limited to technology, business development, and product development. The Company granted 5,000,000 common stock options, vesting at a rate of 138,889 options per month for thirty-six ( 36 ) months of consecutive service to the Company, as well as cash compensation of $ 5,000 per month for the services provided. As of March 31, 2023, there were no legal proceedings against the Company. 6. SUBSEQUENT EVENT Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has no subsequent events to report. 10