NEWHYDROGEN,
INC.
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
Organization
NewHydrogen,
Inc. (the “Company”) was incorporated in the state of Nevada on April 24, 2006. The Company, based in Santa Clarita,
California, began operations on April 25, 2006 to develop and market Photovoltaic solar technology products.
Line
of Business
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. We are developing technologies to significantly reduce or replace rare earth materials with inexpensive earth abundant materials
in electrolyzers to help usher in a Green Hydrogen economy. We previously developed BioBacksheetR, a high performance green
back sheet for Photovoltaic solar modules.,
Going
Concern Substantial Doubt Alleviated
As of
the year ended December 31, 2021, the Company had income of $10,189,480.
As of December 31, 2021, its accumulated deficit was $160,869,525.
Management
believes the Company’s present cash flows will enable it to meet its obligations for twenty four months from the date these financial
statements are available to be issued. Management will continue to obtain new equity financing. It is probable that management will continue
to obtain new sources of financing that will enable the Company to meet its obligations for the twelve-month period from the date the
financial statements are available to be issued.
| 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
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 December 31, 2021, the cash
balance in excess of the FDIC limits was $6,395,710. 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
years ended December 31, 2021 and 2020 was $1,342 and $2,098, respectively.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 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 |
|
12/31/2021 |
|
|
12/31/2020 |
|
| Patents |
|
|
|
$ |
45,336 |
|
|
$ |
45,336 |
|
| Less accumulated amortization |
|
15 years |
|
|
(18,134 |
) |
|
|
(15,112 |
) |
| Intangible assets |
|
|
|
$ |
27,202 |
|
|
$ |
30,224 |
|
Amortization expense for the
years ended December 31, 2021 and 2020 was $3,022 and $2,267, 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 March
24, 2015 and September 2, 2015, the Company granted 12,000,000 stock options to its employees and 3,950,000 stock options to its directors
for services.
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 June 29, 2021, the Company amended the exercise price of the options to $0.028
per share. The
options expire, and all rights to purchase the shares shall terminate seven (7) years from the date of the repricing or upon termination
of employment. Half of the 400,000,000
options vested 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.
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 December 31, 2021, 465,950,000 stock options were outstanding.
Research and Development
Research
and development costs are expensed as incurred. Total research and development costs were $1,221,134 and $177,722 for the years ended
December 31, 2021 and 2020, 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).
For the
year ended December 31, 2021, the Company has included shares issuable from 465,950,000 stock options and 223,958,334 warrants, because
their impact on the income per share is dilutive.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Net
Earnings (Loss) per Share Calculations (Continued)
For the
year ended December 31, 2020 the Company’s diluted loss per share is the same as the basic loss per share, and the inclusion of
any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 15,950,000
stock options, and the shares issuable from convertible debt of $2,739,790, because their impact was anti-dilutive.
SCHEDULE OF NET EARNINGS PER SHARE
| |
|
2021 |
|
|
2020 |
|
| |
|
For the Year Ended |
|
| |
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Income (Loss) to common shareholders (Numerator) |
|
$ |
10,189,480 |
|
|
$ |
(140,544,660 |
) |
| |
|
|
|
|
|
|
|
|
| Basic weighted average number of common shares outstanding (Denominator) |
|
|
651,573,767 |
|
|
|
280,952,034 |
|
| |
|
|
|
|
|
|
|
|
| Diluted weighted average number of common shares outstanding (Denominator) |
|
|
1,117,523,767 |
|
|
|
280,952,034 |
|
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 December 31, 2021, 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 December 31, 2021, there were no financial instruments to report.
The following
is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:
SCHEDULE OF RECONCILIATION OF DERIVATIVE LIABILITY FOR LEVEL 3 INPUTS
| Balance as of January 31, 2021 |
|
$ |
148,590,100 |
|
| Fair value of derivative liabilities issued |
|
|
180,004 |
|
| Fair value of derivative liability removed |
|
|
(178,736,187 |
) |
| Loss on change in derivative liability |
|
|
29,966,083 |
|
| Balance as of December 31, 2021 |
|
$ |
- |
|
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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.
Recently Issued Accounting
Pronouncements
In May
2021, the FASB issued an amendment to accounting standards ASU 2021-04, (Subtopic 470-50) – Debt Modifications and Extinguishments”,
which requires that an entity apply the new guidance to a modification or an exchange of a freestanding equity-classified written call
option that is a part of or directly related to a modification or an exchange of an existing debt. The amendments in this update are effective
for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption
is permitted for all entities. The Company has evaluated the impact of the adoption of ASU 2021-04, which has no effect on the Company’s
financial statements.
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.
Preferred
Stock
On January
14, 2021, the
Board of Directors adopted a certificate of designation establishing the rights, preferences, privileges and other terms of 1,000 Series
B Preferred Stock, par value $0.0001 per share, providing for supermajority voting rights to holders of the Series B Preferred Stock.
The shares of the Series B Preferred Stock were issued to David Lee, Chief Executive Officer, Chairman of the Board, President
and acting Chief Financial Officer. The Series B Preferred Stock total purchase price is $0.10
for 1,000
shares of Series B Preferred Stock. The Series B Preferred stock was returned and expired on February
28, 2021. As of December 31, 2021, there were no
shares outstanding.
On April
14, 2021, the Board of Directors of the Company authorized the issuance of 1,000
shares of Series D Preferred Stock, par value $0.0001
per share, to David Lee, Chief Executive Officer, Chairman of the Board, President and acting Chief Financial Officer. The Series
D Preferred Stock total purchase price was $0.10
for 1,000
shares of Series D Preferred Stock. The Series D Preferred stock was returned and expired on May
29, 2021. As of December 31, 2021, there were no
shares of Series D Preferred Stok outstanding.
The
Company estimated the fair value of the Series B and D Preferred Stock as of the valuation dates. The market approach was utilized to
arrive at an indication of equity value by using quoted market prices of the common shares as of January 14, 2021 and April 14, 2021.
The market cap of the Company represents 100% of the minority interest for all outstanding common shares. The Preferred Series B and
D Preferred Stock fair value is based on the value of the voting rights. The Preferred Series B and D Preferred Stock represents a controlling
voting interest in the Company and therefore determining the control premium is an indication of the security’s value. The control
premium is based on publicly traded companies or comparable entities in related industries, which have been acquired in an arm’s-length
transaction. The valuation of the Series B and D Preferred Stock were valued using the common stock price of $0.1587 and $0.0439, respectively
and the market capitalization based on the fully diluted common and preferred shares outstanding. The total fair value of the voting
control of the Series B and Series D was $9,616,486 and $18,176,922, respectively, for an aggregate total of $27,793,408.
On
March 9, 2021, the Company entered into an agreement with an investor for the exchange of convertible debt to equity. The investor exchanged
convertible notes in the amount of $2,462,060, plus interest in the amount of $1,023,253 for an aggregate total of $3,485,313 for 34,853
shares of the Company’s Series C Preferred Stock with a stated face value of one hundred dollars ($100) (“share value”),
and is convertible into shares of fully paid and non-assessable shares of common stock of the Company. The Series C preferred stock shall
be 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.
The
extinguishment of the convertible debt was recognized in the Company’s financials as a gain on settlement of convertible notes
and derivative. A valuation was prepared based on a stock price of $0.075, with a volatility of 206.03%, based on an estimated term of
5 years.
SCHEDULE OF EXTINGUISHMENT OF DEBT
| Per Valuation | |
| | |
| Preferred shares issued | |
| 34,853 | |
| Stated value of debt and interest | |
$ | 3,485,313 | |
| Calculated fair value of preferred shares | |
$ | 85,555,201 | |
| Fair value of derivative liability removed | |
$ | 178,736,187 | |
| Gain | |
$ | (93,180,986 | ) |
The
Company recognized a gain on settlement of $93,180,986 for the extinguishment of convertible debt, plus derivative liability for the
year ended December 31, 2021.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 3. |
CAPITAL STOCK (Continued) |
Common
Stock December 31, 2021
On June
10, 2021, the Company filed an amendment to its Articles of Incorporation to effect an increase in the authorized number of shares of
common stock of the Corporation from 3,000,000,000 shares of common stock, par value $0.0001 per share to 6,000,000,000 shares of common
stock, par value $0.0001 per share.
During
the year ended December 31, 2021, the Company issued an aggregate of 52,000,000 shares of common stock, pre-funded warrants to purchase
up to 31,333,334 shares of common stock, and warrants to purchase up to 83,333,334 at an exercise price of $0.06 per share.
During
the year ended December 31, 2021, the Company issued 65,000,000 shares of common stock, pre-funded warrants to purchase up to 60,000,000
shares of common stock, and warrants to purchase up to 125,000,000 at an exercise price of $0.04 per shares.
During
the year ended December 31, 2021, the Company issued 21,964,188 shares of common stock upon conversion of convertible promissory notes
in the principal amount of $184,124, plus accrued interest of $20,851, and other fees of $1,000 at prices ranging from $0.0014 - $0.0641.
During
the year ended December 31, 2021, the Company issued 1,000,000 shares of common stock for services at fair value.
During
the year ended December 31, 2021, the Company issued 28,000,000 shares of common stock upon conversion of 392 shares of Series C Preferred
stock.
Common
Stock December 31, 2020
During
the year ended December 31, 2020, the Company issued 322,286,009 shares of common stock upon conversion of convertible promissory notes
in the amount of $738,850, plus accrued interest of $101,884, and other fees of $4,750 at prices ranging from $0.0014 - $0.0074.
Stock
Options
During
the year ended December 31, 2021, the Company granted 400,000,000 stock options to its CEO and 50,000,000 stock options to an employee
of the Company (See Note 2).
SCHEDULE OF STOCK OPTIONS
| |
|
12/31/2021 |
|
|
12/31/2020 |
|
| |
|
Number of
Options |
|
|
Weighted
average
exercise
price |
|
|
Number of
Options |
|
|
Weighted
average
exercise
price |
|
| Outstanding as of the beginning of the periods |
|
|
15,950,000 |
|
|
$ |
0.23 |
|
|
|
15,950,000 |
|
|
$ |
0.23 |
|
| Granted |
|
|
450,000,000 |
|
|
$ |
0.028 |
|
|
|
- |
|
|
|
- |
|
| Exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
| Outstanding as of the end of the periods |
|
|
465,950,000 |
|
|
$ |
0.035 |
|
|
|
15,950,000 |
|
|
$ |
0.23 |
|
| Exercisable as of the end of the periods |
|
|
313,172,222 |
|
|
$ |
0.039 |
|
|
|
15,950,000 |
|
|
$ |
0.23 |
|
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 4. |
STOCK OPTIONS (Continued) |
The weighted
average remaining contractual life of options outstanding as of December 31, 2021 and 2020 was as follows:
SCHEDULE OF WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF OPTIONS OUTSTANDING
| 12/31/2021 |
|
|
|
|
|
12/31/2020 |
|
|
|
|
|
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) |
|
| $ |
0.09 |
|
|
|
2,450,000 |
|
|
|
2,450,000 |
|
|
|
0.98 |
|
|
$ |
0.09 |
|
|
|
2,450,000 |
|
|
|
2,450,000 |
|
|
|
1.23 |
|
| $ |
0.26 |
|
|
|
13,500,000 |
|
|
|
13,500,000 |
|
|
|
0.93 |
|
|
$ |
0.26 |
|
|
|
13,500,000 |
|
|
|
13,500,000 |
|
|
|
1.37 |
|
| $ |
0.028 |
|
|
|
450,000,000 |
|
|
|
297,222,222 |
|
|
|
6.50 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
465,950,000 |
|
|
|
313,172,222 |
|
|
|
|
|
|
|
|
|
|
|
15,950,000 |
|
|
|
15,950,000 |
|
|
|
|
|
The stock-based
compensation expense recognized in the statement of operations during the years ended December 31, 2021 and 2020, related to the granting
of these options was $22,438,794 and $0, respectively.
As of December
31, 2021 and 2020, respectively, there was no intrinsic value with regards to the outstanding options.
| 5. |
CONVERTIBLE PROMISSORY NOTES |
As of December
31, 2021, the Company had no outstanding convertible promissory notes.
The Company
issued an unsecured convertible promissory note (the May 2014 Note”), in the amount of $500,000 on May 2, 2014. The May Note matured
on September 18, 2019 and was extended to May 2, 2022 on December 26, 2019. The May 2014 Note bears interest at 10% per annum. The May
2014 Note is convertible into shares of the Company’s common stock at a conversion price of a) the lesser of $0.25 per share of
common stock (subject to adjustment for stock splits, dividends, combinations and other similar transactions) or b) fifty percent (50%)
of the average three (3) lowest trading prices of three (3) separate trading days recorded after the effective date, or c) the lowest
effective price granted to any person or entity after the effective date to acquire common stock. If the Borrower fails to deliver shares
in accordance with the time frame of three (3) business days, 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 Borrower. In addition, for each conversion, in the
event 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 fair value of the
May 2014 Note has been determined by using the Binomial lattice formula from the effective date of each tranche. During the year ended
December 31, 2021, the Company exchanged principal of $1,560, plus accrued interest of $970 for preferred stock. The May 2014 Note, as
of December 31, 2021, was fully converted.
The Company
issued various unsecured convertible promissory notes (the 2015-2018 Notes”) in the aggregate amount of $2,145,000 on various dates
of January 30, 2015 through February 9, 2018. The 2015-2018 Notes mature on January 30, 2023. The 2015-2018 Notes bears interest at 10%
per annum. The 2015-2018 Notes are convertible into shares of the Company’s common stock at conversion prices ranging from the a)
the lesser of $0.03 to $0.25 per share of common stock (subject to adjustment for stock splits, dividends, combinations and other similar
transactions) or b) fifty percent (50%) of the lowest trade price recorded since the original 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 Borrower fails to deliver shares
in accordance within the time frame of three (3) business days, 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 Borrower. In addition, for each conversion, in the
event 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 fair value of the
2015-2018 Notes have been determined by using the Binomial lattice formula from the effective date of each tranche. During the year ended
December 31, 2021, the Company exchanged the Note for Preferred Stock for principal in the amount of $1,960,500, plus accrued interest
of $923,717. The 2015-2018 Notes, as of December 31, 2021, was fully converted.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 5. |
CONVERTIBLE PROMISSORY NOTES (Continued) |
The Company
issued various unsecured convertible promissory notes (the Feb 18 Note”) in the aggregate amount of $430,000 on various dates from
February 26, 2018 through December 22, 2018. On January 13, 2021 and February 23, 2021, the Company received additional tranches in the
amount of $70,000, associated with the Feb 2018 Note for a total aggregate of $500,000. The maturity date of the Feb 18 Note was extended,
and as a result matures on February 18, 2023. The Feb 18 Note bears interest at 10% per annum. The Feb 18 Note is convertible into shares
of the Company’s common stock at conversion prices ranging from the a) the lesser of $0.03 per share of common stock (subject to
adjustment for stock splits, dividends, combinations and other similar transactions) or b) fifty percent (50%) of the lowest trade price
recorded since the original 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 Borrower fails to deliver shares in accordance with-in the time frame of three (3) business days,
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 Borrower. In addition, for each conversion, in the event 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 fair value of the Feb 18 Note was determined by using the Binomial lattice formula
from the effective date of each tranche. The Company recorded amortization of debt discount, which was recognized as interest expense
in the amount of $126,134 during the year ended December 31, 2021. During the year ended December 31 2021, the Company exchanged the Note
for Preferred Stock for principal in the amount of $500,000, plus accrued interest of $98,566. The Feb 18 Note, as of December 31, 2021,
was fully converted.
The Company
issued an unsecured convertible promissory note on August 8, 2019 (the “August 2019 Note”), in the aggregate principal amount
of $53,500. The Company paid an original issue discount of $2,000 and received funds in the amount of $51,500. The August 2019 Note shall
mature on February 14, 2021. The August 2019 Note bears interest at 10% per annum. The August 2019 Note may be converted into shares of
the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest one (1) day trading price or lowest bid
price during the fifteen (15) trading days prior to the conversion date. The parties agree that if shares of the common stock issuable
upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of the August 2019 Note was considered
a derivative in accordance with current accounting guidelines because of the reset conversion features of the August 2019 Note. The fair
value of the August 2019 Notes has been determined by using the Binomial lattice formula from the effective date of the notes. The Company
issued 21,000,000 shares of common stock upon conversion of principal in the amount of $40,676, plus other fees of $3,000. The August
2019 Note was converted based on the terms of the agreement and the Company did not recognize a gain or loss on conversion in the financials.
During the year ended December 31, 2021, the Company issued 908,119 shares of common stock for principal in the amount of $12,824, plus
accrued interest of $5,564 and other fees of $1,000. The August 2019 Note as of December 31, 2021, was fully converted.
The Company
issued an unsecured convertible promissory note on February 13, 2020 (the “Feb 2020 Note”), in the aggregate principal amount
of $53,500. The Company paid an original issue discount of $2,000 and received funds in the amount of $51,500. The Feb 2020 Note matures
on February 13, 2021. The Feb 2020 Note bears interest at 10% per annum. The Feb 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest one (1) day trading price or lowest bid price during the fifteen
(15) trading days prior to the conversion date. The parties agree that if the shares of the common stock issuable upon conversion of these
Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline
that the Borrower fails to deliver such common stock. The conversion feature of the Feb 2020 Note was considered a derivative in accordance
with current accounting guidelines because of the reset conversion features of the Feb 2020 Note. The fair value of the Feb 2020 Note
has been determined by using the Binomial lattice formula from the effective date of the notes. During the period ended September 30,
2021, the Company issued 6,479,947 shares of common stock for principal in the amount of $53,500, plus accrued interest of $8,018. The
Company recorded amortization of debt discount, which was recognized as interest expense in the amount of $6,578 during the year ended
December 31, 2021. The Feb 2020 Note as of December 31, 2021, was fully converted.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 5. |
CONVERTIBLE PROMISSORY NOTES (Continued) |
The Company
issued an unsecured convertible promissory note on July 6, 2020 (the Jul 2020 Note), in the aggregate principal amount of $53,000. The
Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The Jul 2020 Note matures on July 6, 2021.
The Jul 2020 Note bears interest at 10% per annum. The Jul 2020 Note may be converted into shares of the Company’s common stock
at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen (15) trading
days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion of these Notes are
not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline that the
Borrower fails to deliver such common stock. The conversion feature of the Jul 2020 Note was considered a derivative in accordance with
current accounting guidelines because of the reset conversion features of the Jul 2020 Note. The fair value of the Jul 2020 Note has been
determined by using the Binomial lattice formula from the effective date of the notes. The Company recorded amortization of debt discount,
which was recognized as interest expense in the amount of $27,153 during the year ended December 31, 2021. The Company issued 4,062,044
shares of common stock upon conversion of principal in the amount of $53,000, plus accrued interest of $2,650. The Jul 2020 Note as of
December 31, 2021, was fully converted.
The Company
issued an unsecured convertible promissory note on August 4, 2020 (the Aug 2020 Note), in the aggregate principal amount of $53,000. The
Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The August 4, 2020 Note matures on August
4, 2021. The Aug 2020 Note bears interest at 10% per annum. The Aug 2020 Note may be converted into shares of the Company’s common
stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen (15) trading
days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion of these Notes are
not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline that the
Borrower fails to deliver such common stock. The conversion feature of the Aug 2020 Note was considered a derivative in accordance with
current accounting guidelines because of the reset conversion features of the Aug 2020 Note. The fair value of the Aug 2020 Note has been
determined by using the Binomial lattice formula from the effective date of the notes. The Company recorded amortization of debt discount,
which was recognized as interest expense in the amount of $31,219 during the year ended December 31, 2021. The Company issued 868,175
shares of common stock upon conversion of principal in the amount of $53,000, plus accrued interest of $2,650. The Aug 2020 Note as of
December 31, 2021 was fully converted.
The Company
issued an unsecured convertible promissory note on August 17, 2020 (the “Aug 2020 Note”), in the aggregate principal amount
of $53,500. The Company paid an original issue discount of $2,000 and received funds in the amount of $51,500. The Aug 2020 Note matures
on August 17, 2021. The Aug 2020 Note bears interest at 10% per annum. The Aug 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest one (1) day trading price or lowest bid price during the fifteen
(15) trading days prior to the conversion date. The parties agree that if the shares of the common stock issuable upon conversion of these
Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline
that the Borrower fails to deliver such common stock. The conversion feature of the Aug 2020 Note was considered a derivative in accordance
with current accounting guidelines because of the reset conversion features of the Aug 2020 Note. The fair value of the Aug 2020 Note
has been determined by using the Binomial lattice formula from the effective date of the notes. During the period the Company issued 6,440,677
shares of common stock upon conversion of principal in the amount of $53,500, plus accrued interest of $5,350. The Company recorded amortization
of debt discount, which was recognized as interest expense in the amount of $33,566 during the year ended December 31, 2021. The Aug 2020
Note as of December 31, 2021, was fully converted.
The Company
issued an unsecured convertible promissory note on September 14, 2020 (the Sep 2020 Note), in the aggregate principal amount of $53,000.
The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The September 14, 2020 Note matures
on September 14, 2021. The Sep 2020 Note bears interest at 10% per annum. The Sep 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion of these
Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline
that the Borrower fails to deliver such common stock. The conversion feature of the Sep 2020 Note was considered a derivative in accordance
with current accounting guidelines because of the reset conversion features of the Sep 2020 Note. The fair value of the Sep 2020 Note
has been determined by using the Binomial lattice formula from the effective date of the notes. The Company recorded amortization of debt
discount, which was recognized as interest expense in the amount of $37,318 during the year ended December 31, 2021. The Company issued
2,100,000 shares of common stock upon conversion of principal in the amount of $53,000, plus accrued interest of $2,650. The Sep 2020
Note as of December 31, 2021, was fully converted.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 5. |
CONVERTIBLE PROMISSORY NOTES (Continued) |
The Company
issued an unsecured convertible promissory note on November 2, 2020 (the Nov 2020 Note), in the aggregate principal amount of $53,000.
The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The November 2, 2020 Note matures on
November 2, 2021. The Nov 2020 Note bears interest at 10% per annum. The Nov 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion of these
Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline
that the Borrower fails to deliver such common stock. The conversion feature of the Nov 2020 Note was considered a derivative in accordance
with current accounting guidelines because of the reset conversion features of the Nov 2020 Note. The fair value of the Nov 2020 Note
has been determined by using the Binomial lattice formula from the effective date of the notes. The Company recorded amortization of debt
discount, which was recognized as interest expense in the amount of $44,433 during the year ended December 31, 2021. The Note was paid
off in cash for principal and interest. Company issued The Nov 2020 Note as of December 31, 2021, was fully converted.
The Company
issued an unsecured convertible promissory note on December 2, 2020 (the Dec 2020 Note), in the aggregate principal amount of $53,000.
The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The December 2, 2020 Note matures on
December 2, 2021. The Dec 2020 Note bears interest at 10% per annum. The Dec 2020 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion of these
Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline
that the Borrower fails to deliver such common stock. The conversion feature of the Dec 2020 Note was considered a derivative in accordance
with current accounting guidelines because of the reset conversion features of the Dec 2020 Note. The fair value of the Dec 2020 Note
has been determined by using the Binomial lattice formula from the effective date of the notes. The Company recorded amortization of debt
discount, which was recognized as interest expense in the amount of $3,416 during the December 31, 2021. The Note was paid off in cash
for principal and interest. The Dec 2020 Note as of December 31, 2021, was fully converted.
The Company
issued an unsecured convertible promissory note on January 4, 2021 (the Jan 4, 2021 Note), in the aggregate principal amount of $53,500.
The Company paid an original issue discount of $3,000
and received funds in the amount of $50,000.
The January 4, 2021 Note matures on March
4, 2021. The Jan 2021 Note bears interest at 10%
per annum. The
Note may be converted into shares of the Company’s common stock at a conversion price of sixty-one (61%) percent of the lowest
average two (2) day closing bid prices during the fifteen (15) trading days prior to the conversion date. The parties agree that if delivery
of the common stock issuable upon conversion of these Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000
per day in cash, for each day beyond the deadline that the Borrower fails to deliver such common stock. The conversion feature of the
Jan 4 2021 Note was considered a derivative in accordance with current accounting guidelines because of the reset conversion features
of the Jan 4 2021 Note. The fair value of the Jan 4 2021 Note has been determined by using the Binomial lattice formula from the effective
date of the notes. The Company recorded amortization of debt discount, which was recognized as interest expense in the amount
of $53,500
during the year ended December 31, 2021. The Note was paid off in cash for principal and interest. The Jan 4, 2021 Note
as of December 31, 2021, was fully converted.
The Company
issued an unsecured convertible promissory note on January 14, 2021 (the Jan 14 2021 Note), in the aggregate principal amount of $53,500.
The Company paid an original issue discount of $3,000 and received funds in the amount of $50,000. The Jan 14 2021 Note matures on January
14, 2021. The Jan 14 2021 Note bears interest at 10% per annum. The Jan 14 2021 Note may be converted into shares of the Company’s
common stock at a conversion price of sixty-one (61%) percent of the lowest average two (2) day closing bid prices during the fifteen
(15) trading days prior to the conversion date. The parties agree that if delivery of the common stock issuable upon conversion of these
Notes are not delivered by the deadline, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the deadline
that the Borrower fails to deliver such common stock. The conversion feature of the Jan 14 2021 Note was considered a derivative in accordance
with current accounting guidelines because of the reset conversion features of the Jan 14 2021 Note. The fair value of the Jan 14 2021
Note has been determined by using the Binomial lattice formula from the effective date of the notes. The Company recorded amortization
of debt discount, which was recognized as interest expense in the amount of $53,500 during the December 31, 2021. The Note was paid off
in cash for principal and interest. The Jan 14 2021 Note as of December 31, 2021, was fully converted.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 5. |
CONVERTIBLE PROMISSORY NOTES (Continued) |
During
the year ended December 31, 2021, the Company exchanged convertible notes in the amount of $2,462,060 in principal, plus accrued interest
of $1,023,253 for 34,853 shares of Series C Preferred Shares.
In addition,
the Company repaid convertible notes in the amount of $203,000
in principal, plus accrued interest of $52,780.
As
of December 31, 2021, the Company had no outstanding convertible promissory notes.
We evaluated
the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the
convertible promissory note was not afforded the exemption for conventional convertible instruments due to its variable conversion rate.
The note has no explicit limit on the number of shares issuable, so they did not meet the conditions set forth in current accounting standards
for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation
into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at
fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest
associated with the embedded derivative. The derivative liability is adjusted periodically per the stock price fluctuations.
| 6. |
DERIVATIVE LIABILITIES |
We evaluated
the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the
convertible promissory note was not afforded the exemption for conventional convertible instruments due to its variable conversion rate.
The note has no explicit limit on the number of shares issuable, so they did not meet the conditions set forth in current accounting standards
for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation
into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at
fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest
associated with the embedded derivative. The derivative liability is adjusted periodically per the stock price fluctuations.
The convertible
notes issued and described in Note 5 do not have fixed settlement provisions because their conversion prices are not fixed. The conversion
feature has 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 year ended December 31, 2021, as a result of the convertible notes (“Notes”) issued that were accounted for as derivative
liabilities, we determined that the fair value of the conversion feature of the convertible notes at issuance was $180,004, based upon
a Binomial-Model calculation. We recorded the full value of the derivative as a liability at issuance with an offset to valuation discount,
which will be amortized over the life of the Notes.
During
the ended December 31, 2021, the Company converted $184,124 in principal of convertible notes, plus accrued interest of $20,851, and other
fees of $1,000. The convertible notes were valued using the binomial lattice valuation model showing an increase in fair value of the
derivatives issued by $638,936 and the loss on the change in derivatives by $29,966,084. As of December 31, 2021, all derivatives were
fully converted or paid off.
Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forward for Federal income tax reporting purposes
are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forward may be limited as to use in future
years.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 7. |
RELATED PARTY TRANSACTION |
On January
14, 2021, the Company issued 1,000
shares of Series B Preferred Stock to its CEO, David Lee. As of September 30, 2021, there were no
Series B Preferred Stock outstanding. The total purchase price is $0.10
for 1,000
shares of Series B Preferred Stock. The Series B Preferred stock was returned and expired on January
29, 2021. As of December 31, 2021, there were no
shares of Series B outstanding.
On April
14, 2021, the Company issued 1,000
shares of Series D Preferred Stock to its CEO, David Lee. The total purchase price is $0.10
for 1,000
shares of Series D Preferred Stock. The Series D Preferred stock was returned and expired on May
29, 2021. As of December 31, 2021, there were no
shares of Series D outstanding.
| 8. |
SECURITIES PURCHASE AGREEMENT |
On January
27, 2021, the Company entered into a securities purchase agreement with an investor to sell, through a private placement, an aggregate
of 52,000,000 shares of common stock, pre-funded warrants to purchase up to 31,333,334 shares of common stock, and warrants to purchase
up to 83,333,334 at an exercise price of $0.06 per share. In addition, the combined purchase price of $0.06 per one (1) share of common
stock and associated warrant had a purchase price of $0.0599 per one (1) pre-funded and associated warrant for aggregate gross proceeds
of $4,996,866 (50,000,000 assuming full exercise of the pre-funded warrants) for gross proceeds to the Company of approximately $5,000,000.
After closing cost, the Company received net funds of $4,406,217, plus pre-funded proceeds of $3,133 for total cash received of $4,409,350.
In connection
with the closing, the Company issued an additional 6,250,000 shares of warrants to purchase common stock with an exercise price of $0.075
which will expire on July 27, 2026.
On April
4, 2021, the Company entered into a securities purchase agreement with an investor to sell, through a direct registered offering, an aggregate
of 65,000,000 shares of common stock, pre-funded warrants to purchase up to 60,000,000 shares of common stock, and warrants to purchase
up to 125,000,000 at an exercise price of $0.04 per shares. In addition, the combined purchase price of $0.04 per one (1) share of common
stock and associated warrant had a purchase price of $0.0399 per one (1) pre-funded and associated warrant for aggregate gross proceeds
of $4,994,000 (50,000,000 assuming full exercise of the pre-funded warrants) for gross proceeds to the Company of approximately $5,000,000.
After closing cost, the Company received net funds of $4,369,350, plus pre-funded proceeds of $6,000 for total cash received of $4,375,350.
In connection
with the closing, the Company issued an additional 9,375,000 shares of warrants to purchase common stock with an exercise price of $0.05
and a termination date of April 4, 2026.
SCHEDULE OF WARRANTS ACITIVITY
| |
|
12/31/2021 |
|
| |
|
Number
of
Warrants |
|
|
Weighted average
exercise price |
|
| Outstanding as of the beginning of the periods |
|
|
- |
|
|
|
- |
|
| Issued |
|
|
315,291,668 |
|
|
$ |
0.0482 |
|
| Purchased |
|
|
(91,333,334 |
) |
|
$ |
(0.0467 |
) |
| Expired |
|
|
- |
|
|
|
- |
|
| Outstanding as of the end of the periods |
|
|
223,958,334 |
|
|
$ |
0.0488 |
|
| Exercisable as of the end of the periods |
|
|
223,958,334 |
|
|
$ |
0.0488 |
|
The weighted
average remaining contractual life of the warrants outstanding as of December 31, 2021 was as follows:
SCHEDULE OF WARRANTS OUTSTANDING
| 12/31/2021 |
|
| Exercisable
Price |
|
|
Stock
Warrants
Outstanding |
|
|
Stock
Warrants
Exercisable |
|
|
Weighted
Average
Remaining Contractual
Life (years) |
|
| $ |
0.04 |
|
|
|
125,000,000 |
|
|
|
125,000,000 |
|
|
|
4.27 |
|
| $ |
0.05 |
|
|
|
9,375,000 |
|
|
|
9,375,000 |
|
|
|
4.26 |
|
| $ |
0.06 |
|
|
|
83,333,334 |
|
|
|
83,333,334 |
|
|
|
4.57 |
|
| $ |
0.075 |
|
|
|
6,250,000 |
|
|
|
6,250,000 |
|
|
|
4.57 |
|
| |
|
|
|
|
223,958,334 |
|
|
|
223,958,334 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On April 7, 2021, the Company issued 125,000,000
warrants as an incentive, with an exercise price of $0.04 per share, and were valued at fair value of $5,983,504 using Black-Scholes.
The warrants were deemed to be a dividend and were recognized in the financial statements.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
| 9. |
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.
As of December
31, 2021, there were no legal proceedings against the Company.
On December
22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The Act lowered
the Company’s U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018.
The Company
files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer
subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2018.
Included
in the balance at December 31, 2021, are no tax positions for which the ultimate deductibility is highly certain, but for which there
is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties,
the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of
cash to the taxing authority to an earlier period.
The Company’s
policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
During the year ended December 31, 2021, the Company did not recognize interest and penalties.
As of December
31, 2021, the Company had net operating loss carry forwards of approximately $11,911,000 that may be offset against future taxable income.
No tax benefit has been reported in the December 31, 2021 financial statements since the potential tax benefit is offset by a valuation
allowance of the same amount.
The income
tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rate to pretax income
from continuing operations for the years ended December 31, 2021 and 2020 due to the following:
SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Book Income (Loss) |
|
|
8,708,325 |
|
|
|
(29,514,380 |
) |
| |
|
|
|
|
|
|
|
|
| Non-deductible expenses |
|
|
(9,153,120 |
) |
|
|
29,381,500 |
|
| |
|
|
|
|
|
|
|
|
| Valuation Allowance |
|
|
444,799 |
|
|
|
132,880 |
|
| |
|
|
|
|
|
|
|
|
| Income tax expense |
|
$ |
- |
|
|
$ |
- |
|
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and
tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the
difference between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
NEWHYDROGEN,
INC.
(FORMERLY BIOSOLAR,
INC.)
NOTES TO FINANCIAL
STATEMENTS – AUDITED
FOR THE YEARS
ENDED DECEMBER 31, 2021 AND 2020
Net
deferred tax assets consist of the following components as of December 31, 2021 and 2020:
SCHEDULE
OF NET DEFERRED TAX ASSETS
| |
|
2021 |
|
|
2020 |
|
| Deferred tax assets: |
|
|
|
|
|
|
| NOL carryover |
|
|
(2,501,390 |
) |
|
|
(2,076,950 |
) |
| R & D credit |
|
|
407,660 |
|
|
|
166,875 |
|
| Depreciation |
|
|
10,735 |
|
|
|
10,735 |
|
| |
|
|
|
|
|
|
|
|
| Deferred tax liabilities: |
|
|
|
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| Less Valuation Allowance |
|
|
2,082,995 |
|
|
|
1,899,340 |
|
| |
|
|
|
|
|
|
|
|
| Net deferred tax asset |
|
$ |
- |
|
|
$ |
- |
|
Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes
are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future
years.
Management
has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has reported the following subsequent events:
On
March 1, 2022, the Company issued 5,000,000 common stock purchase warrants for $1,000, with an exercise price of $0.0255 per share subject
to adjustment. The initial exercise date is March 1, 2024, with a termination date of March 1, 2029.
On
March 15, 2022, the Company granted 5,000,000 nonqualified stock options to a contractor, with an exercise price of $0.0223 per share.
The Option shall vest at 138,888 per month over a thirty-six (36) month period from the grant date. The
grant of the Option is made in consideration of the services to be rendered by the Optionee to the Company pursuant to an advisor agreement,
or subsequent consecutive engagement by the Company as an employee, director, or consultant. The option granted under the advisor agreement
expires ten (10) years from the date of grant, unless sooner.