Item 2. Management’s Discussion and Analysis
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special
Note on Forward-Looking Statements.
Certain
statements in “Management’s Discussion and Analysis and Results of Operations” below, and elsewhere in this quarterly
report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations
or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current
facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as
“may,” “will,” “should,” “could,” “expects,” “plans,” “intends,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,”
or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness
of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking
statements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report. Subsequent
written and oral forward looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety
by the cautionary statements and risk factors set forth in our annual report on Form 10-K filed with the SEC on March 25, 2025, and in
other reports filed by us with the SEC.
You
should read the following description of our financial condition and results of operations in conjunction with the financial statements
and accompanying notes included in this report.
Overview
We
are a developer of clean energy technologies. Our current focus is on developing a thermochemical green hydrogen production technology
to lower the cost of green hydrogen production.
Hydrogen
is the cleanest and most abundant element in the universe, and we can’t live without it. Hydrogen is the key ingredient in making
fertilizers needed to grow food for the world. It is also used for transportation, refining oil and making steel, glass, pharmaceuticals
and more. Nearly all the hydrogen today is made from hydrocarbons like coal, oil, and natural gas, which are dirty and limited resources.
Water, on the other hand, is an infinite and renewable worldwide resource.
Currently,
the most common method of making green hydrogen is to split water into oxygen and hydrogen with an electrolyzer using green electricity
produced from solar or wind. However, green electricity is and always will be very expensive. It currently accounts for 73% of the cost
of green hydrogen. By using heat directly, we can skip the expensive process of making electricity, and fundamentally lower the cost
of green hydrogen. Inexpensive heat can be obtained from concentrated solar, geothermal, nuclear reactors and industrial waste heat for
use in our novel low-cost thermochemical water splitting process. Working with a world class research team at UC Santa Barbara, our goal
is to help usher in the green hydrogen economy that Goldman Sachs (in a 2022 report) estimated to have a future market value of $12 trillion.
We
have previously developed an innovative material technology to reduce the cost per watt of electricity produced by Photovoltaic, or PV,
solar modules.
Application
of Critical Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are based upon our unaudited financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using a Binomial
lattice valuation model. We base our estimates on historical experience and on various other assumptions, such as the trading value of
our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates,
including those for the above-described items, are reasonable.
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Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles, requires management to make estimates
and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these
financial statements, include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative
liabilities and the fair value of stock options. Actual results could differ from those estimates.
Fair
Value of Financial Instruments
Our
cash, cash equivalents, investments, inventory, prepaid expenses, and accounts payable are stated at cost which approximates fair value
due to the short-term nature of these instruments.
Recently
Issued Accounting Pronouncements
Management
reviewed currently issued pronouncements during the six months ended June 30, 2025, and does not believe that any other recently issued,
but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed unaudited
financial statements.
Results
of Operations – Three months ended June 30, 2025, compared to the Three months ended June 30, 2024.
OPERATING
EXPENSES
Selling
and Marketing Expenses
Selling
and marketing (“S&M”) expenses increased by $23,863 to $94,092 for the three months ended June 30, 2025, compared to
$70,229 for the prior period ended June 30, 2024. The primary increase in (S&M) expenses was the result of an increase in service
providers.
General
and Administrative Expenses
General
and administrative (“G&A”) expenses increased by $102,209 to $381,053 for the three months ended June 30, 2025, compared
to $278,844 for the prior period ended June 30, 2024. The primary increase overall was an increase in professional fees of $56,534, an
increase in non-cash stock compensation of $18,108, and an overall decrease in other expenses.
Research
and Development
Research
and Development (“R&D”) expenses increased by $58,928 to $147,867 for the three months ended June 30, 2025, compared
to $88,939 for the prior period ended June 30, 2024. This overall increase of $56,828 in R&D expenses was the result of an increase
in outside research fees and consultant cost.
Depreciation
and Amortization Expense
Depreciation
and amortization expense for the three months ended June 30, 2025 and 2024 was $820 and $1,027, respectively.
Other
Income/(Expenses)
Other
income and (expenses) decreased by $169 to $128 for the three months ended June 30, 2025, compared to $297 for the prior period ended
June 30, 2024. The decrease in other income and (expenses) was the result of an increase in interest income of $169. The decrease in
other income and (expenses) was primarily due to the net change in interest income.
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Net
Loss
Our
net loss for the three months ended June 30,2025 was $623,704, compared to $438,742 for the prior period ended June 30,2024. The Company
has not generated any revenues. The majority of the decrease in net loss was due to an overall decrease in operating expenses and non-cash
expense associated with the net change in stock option expense in the current period. These estimates were based on multiple inputs,
including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices
as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs were subject
to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the stock options
fluctuate, and the fluctuation may be material. The Company has not generated any revenues.
Results
of Operations – Six months ended June 30, 2025, compared to the Six months ended June 30, 2024.
OPERATING
EXPENSES
Selling
and Marketing Expenses
Selling
and marketing (“S&M”) expenses increased by $55,371 to $200,571 for the six months ended June 30, 2025, compared to $145,200
for the prior period ended June 30, 2024. The primary increase in (S&M) expenses was the result of an increase in service providers
General
and Administrative Expenses
General
and administrative (“G&A”) expenses increased by $63,258 to $648,506 for the six months ended June 30, 2025, compared
to $585,248 for the prior period ended June 30, 2024. The primary increase overall was an increase in professional fees of $56,534, an
increase in non-cash stock compensation of $18,108, and an overall decrease in other expenses.
Research
and Development
Research
and Development (“R&D”) expenses increased by $71,507 to $249,385 for the six months ended June 30, 2025, compared to
$177,878 for the prior period ended June 30, 2024. This increase in R&D expenses was the result of an increase in outside research
fees of $22,407 and consultant cost of $47,000, overall increase in materials and supplies of $2100.
Depreciation
and Amortization Expense
Depreciation
and amortization expense for the six months ended June 30, 2025 and 2024 was $1,641 and $2,054, respectively.
Other
Income/(Expenses)
Other
income and (expenses) decreased by $329 to $305 for the six months ended June 30, 2025, compared to $634 for the prior period ended June
30, 2024. The decrease in other income and (expenses) was the result of an increase in interest income of $169. The decrease in other
income and (expenses) was primarily due to the net change in interest income.
Net
Loss
Our
net loss for the six months ended June 30,2025 was $1,099,798, compared to $909,746 for the prior period ended June 30,2024. The Company
has not generated any revenues. The majority of the decrease in net loss was due to an overall decrease in operating expenses and non-cash
expense associated with the net change in stock option expense in the current period. These estimates were based on multiple inputs,
including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices
as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs were subject
to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the stock options
fluctuate, and the fluctuation may be material. The Company has not generated any revenues.
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LIQUIDITY
AND CAPITAL RESOURCES
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate
on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable
and accounts payable and capital expenditures.
The
unaudited condensed financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of
operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying unaudited condensed
financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern. During the six
months ended June 30, 2025, we did not generate any revenues, and recognized a net loss of $1,099,798, due to a change in operating expenses
and cash of $1,100,906 used in operations. As of June 30, 2025, we had working capital of $1,150,677 and a shareholders’ deficit
of $179,042,345.
Management
believes that we will be able to continue to raise funds through the sale of our securities to existing and new investors. Management
believes that funding from existing and prospective new investors and future revenue will provide the additional cash needed to meet
our obligations as they become due and will allow the development of our core business operations. No assurance can be given that any
future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company
is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt-financing or cause substantial
dilution for our stockholders, in case of equity financing.
As
of June 30, 2025, we had working capital of $1,150,677 compared to $2,102,308 for the year ended December 31, 2024. This decrease in
working capital was due primarily to a decrease in cash.
During
the six months ended June 30, 2025, we used $1,003,615 of cash for operating activities, as compared to $824,205 for the prior period
ended June 30, 2024. The increase in the use of cash for operating activities for the current period was a result of an increase in research
and development cost, and advertising and marketing.
Net
cash provided from equity financing activities for the six months ended June 30, 2025 and June 30, 2024 was $0. There was no equity financing
during the current or prior period. Our capital needs have primarily been met from the proceeds of the sale of our securities, as we
currently have not generated any revenues.
Our
independent auditors, in their report on our audited financial statements for the year ended December 31, 2024, expressed substantial
doubt about our ability to continue as a going concern without additional capital becoming available. Our financial statements as of
June 30, 2025, have been prepared under the assumption that we will continue as a going concern. Our ability to continue as a going concern,
ultimately is dependent upon our ability to generate revenue, which is dependent upon our ability to obtain additional equity or debt
financing, attain further operating efficiencies and, ultimately, to achieve profitable operations. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
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 ThermoLoop™, a breakthrough technology that uses water and heat rather than electricity to potentially produce
the world’s lowest cost green hydrogen.
Our
plan of operation within the next twelve months is to utilize our cash balances to maintain the existing ThermoLoop™ technology
development program at UCSB.
We
believe that our current cash and investment balances will be sufficient to support development activity and general and administrative
expenses for the next nine months. Management estimates that it will require additional cash resources during 2025, based upon its current
operating plan and condition. We do not expect increased expenses until early 2026 when we ramp up prototyping efforts related to our
thermochemical water splitting technology.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As
a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required
by this Item.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.