UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
or
For the Transition Period from _________ to _________
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (zip code)
(Registrant’s telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||
| ☒ | Smaller reporting company | ||||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Securities registered pursuant to Section 12(b) of the Act: None.
As of October 15, 2021 there were shares of registrant’s common stock outstanding.
VISION HYDROGEN CORPORATION
INDEX
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Notes receivable – Volt H2 | - | |||||||
| Other current assets | - | |||||||
| Total current assets | ||||||||
| Investment in Volt | ||||||||
| Website development costs, net | - | |||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Loan payable | - | |||||||
| Loan payable – related party | - | |||||||
| Accrued interest – related party | - | |||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities | - | - | ||||||
| Total noncurrent liabilities | - | |||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity (deficit) | ||||||||
| Preferred stock - $ par value; shares authorized; shares issued and outstanding | - | - | ||||||
| Common stock - $ par value; shares authorized; and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Total revenue | - | - | - | - | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Direct costs | - | - | - | - | ||||||||||||
| Total cost of goods sold | - | - | - | - | ||||||||||||
| Gross profit | - | - | - | - | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Management fees – related party | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) expenses | ||||||||||||||||
| Interest expense | - | - | - | |||||||||||||
| Interest expense – related party | - | - | ||||||||||||||
| Loan forgiveness | - | - | ( | ) | - | |||||||||||
| Change in fair value earn-out | - | - | - | |||||||||||||
| Total other (income) expenses | - | ( | ) | |||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations (note 12) | - | - | - | ( | ) | |||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share (continuing operations) | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share (discontinued operations) | ||||||||||||||||
| Basic | $ | $ | $ | $ | ( | ) | ||||||||||
| Diluted | $ | $ | $ | $ | ( | ) | ||||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
Common Stock | Preferred Stock | Additional | Total Stockholders’ | |||||||||||||||||||||||||
| Number of Shares | Amount | Number of shares | Amount | Paid-In Capital | Accumulated Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Beginning January 1, 2020 | | $ | - | - | $ | $ | ( | ) | $ | | ||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||
| Equity financing | - | - | - | - | ||||||||||||||||||||||||
| Debt extinguishment | - | - | - | - | - | |||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Ending March 31, 2020 | $ | - | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||
| Equity financing | - | - | - | - | ||||||||||||||||||||||||
| Share conversion | - | - | - | |||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Ending June 30, 2020 | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Ending September 30, 2020 | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| Common Stock | Preferred Stock | Additional | Total Stockholders’ | |||||||||||||||||||||||||
| Number of Shares | Amount | Number of shares | Amount | Paid-In Capital | Accumulated Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Beginning, January 1, 2021 | $ | - | - | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Equity financing | - | - | - | | ||||||||||||||||||||||||
| Conversion of related party debt to equity | - | - | - | |||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Ending, March 31, 2021 | $ | - | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Stock based compensation | - | - | - | - | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Ending June 30, 2021 | $ | - | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Ending September 30, 2021 | $ | - | $ | - | $ | $ | ( | ) | $ | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| PPP loan forgiveness | ( | ) | - | |||||
| Change in fair value contingent consideration | - | |||||||
| Change in operating assets and liabilities: | ||||||||
| Other current asset | ||||||||
| Prepaid expenses and other costs | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Net cash used in operating activities – continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by operating activities – discontinued operations | - | |||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Loans to - Volt H2 | ( | ) | - | |||||
| Investment in Volt | - | ( | ) | |||||
| Cash paid website development costs | ( | ) | - | |||||
| Cash disposed of in dissolution of subsidiaries | - | ( | ) | |||||
| Net cash used in investing activities – continuing operations | ( | ) | ( | ) | ||||
| Net cash used in investing activities – discontinued operations | - | ( | ) | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from PPP notes payable | - | |||||||
| Proceeds from related party debt | - | |||||||
| Repayment of convertible debt | - | ( | ) | |||||
| Proceeds from issuance of convertible debt | - | |||||||
| Proceeds from equity financing, net of issuance costs | ||||||||
| Net cash provided by financing activities – continuing operations | ||||||||
| Net cash used in financing activities – discontinued operations | - | ( | ) | |||||
| Net cash provided by (used in) financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Effect of foreign currency translation on cash | - | ( | ) | |||||
| Cash and cash equivalents - beginning of period | ||||||||
| Cash and cash equivalents - end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Conversion of debt and accrued interest | $ | $ | ||||||
| Reclassification of deferred offering cost to additional paid in capital | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
1. ORGANIZATION AND LINE OF BUSINESS
Vision Hydrogen Corporation (the “Company”) was incorporated in the state of Nevada on August 17, 2015 as H/Cell Energy Corporation and is based in Jersey City, New Jersey. The Company changed its name to Vision Hydrogen Corporation in October 2020.
During
the year ended December 31, 2020, the Company took significant steps to transition its hydrogen energy business to focus on hydrogen
production on a scaled production plant model. During the period, the Company disposed of its interests in both PVBJ Inc. (“PVBJ”) and The Pride Group
(QLD) Pty Ltd, an Australian company (“Pride”) (See Note 12 “Discontinued Operations”) in order to facilitate
this transition. As part of the disposition the Company provided certain post-closing support to both PVBJ and Pride through Q3 2020. On
August 12, 2020, pursuant to a Seed Capital Subscription Agreement, the Company made an equity investment into VoltH2 Holdings AG (“VoltH2”),
a Swiss corporation developing scalable green hydrogen production projects primarily in Europe. VoltH2 is currently planning to develop
a 25MW green hydrogen production site near Vlissingen, Netherlands. The investment was for a total purchase price $
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or any other interim period or for any other future year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020, included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 30, 2020 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.
On
October 6, 2020, the Company effectuated a
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Reclassification
Certain prior period amounts have been reclassified to conform to current period presentation specifically as it relates to the reclassification of assets, liabilities, operating results, cash flows and the accumulated comprehensive loss as a result of the Company’s disposition of interests in our PVBJ and Pride subsidiaries.
| 8 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
Accounts Receivable
Accounts
receivable are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. The
allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in the
construction industry, and the financial stability of its customers. Accounts are written off as uncollectible after collection efforts
have failed. In addition, the Company does not generally charge interest on past-due accounts or require collateral. As of September
30, 2021 and December 31, 2020, there was
Goodwill and Finite-Lived Intangible Assets
Goodwill
represents the excess of the aggregate of the following (1) consideration transferred, (2) the fair value of any non-controlling interest
in the acquiree, and (3) if the business combination is achieved in stages, the acquisition-date fair value of our previously held equity
interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Identifiable intangible assets consist primarily of customer lists and relationships, non-compete agreements and technology-based intangibles
and other contractual agreements. The Company amortizes finite lived identifiable intangible assets over five years, on a straight-line
basis to their estimated residual values and periodically reviews them for impairment. Total goodwill and identifiable intangible assets
comprised
The Company uses the acquisition method of accounting for all business combinations and does not amortize goodwill. Goodwill is tested for possible impairment annually during the fourth quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. In the qualitative assessment, the Company must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset other than goodwill has a carrying amount that more likely than not exceeds its fair value. The Company must proceed to conducting a quantitative analysis if the Company (i) determines that such an impairment is more likely than not to exist, or (ii) foregoes the qualitative assessment entirely. Under the quantitative assessment, the impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, then an impairment loss is recognized in an amount equal to that excess. The Company generally determines the fair value of an indefinite-lived intangible asset using an income approach, such as the relief from royalty method, in instances when it does not perform the qualitative assessment of the intangible asset.
As of September 30, 2021, the Company had no goodwill and has included the write-off of goodwill in the calculation of the loss on disposal of PVBJ for the three and nine months ended September 30, 2020. (See Note 12 “Discontinued Operations”).
Comprehensive Loss
Comprehensive loss consists of two components, net loss and other comprehensive loss. The Company’s other comprehensive loss is comprised of foreign currency translation adjustments. The balance of accumulated other comprehensive loss is zero as of September 30, 2021 and December 31, 2020 due to the disposition of Pride on May 18, 2020. Comprehensive loss is included in discontinued operations on the statement of operations for the three and nine months ended September 30, 2020.
The functional and reporting currency of the Company is the United States Dollar (“U.S. Dollar”).
For
the three and nine months ended September 30, 2021, the Company recorded no other comprehensive loss. The balance of comprehensive loss
and accumulated comprehensive loss has been reclassified to discontinued operations as of December 31, 2020 due to the disposition of
Pride on May 18, 2020. For the three and nine months ended September 30, 2020, the Company recorded other comprehensive loss of $
| 9 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
Investments
The Company follows Accounting Standards Codification (“ASC”) 321-10-35-2 “Equity Securities without Readily Determinable Fair Values”, to account for its ownership interest in non-controlled entities. Under this guidance, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities and do not qualify for the practical expedient to determine the fair value at net asset value (“NAV”)) are not required to be accounted for under the equity method and carried at cost (i.e., cost method investments) less accumulated impairment. Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the non-controlled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.
Cash and Cash Equivalents
Cash
and cash equivalents include cash in bank and money market funds as well as other highly liquid investments with an original maturity
of three months or less. The Company had
Stock-Based Compensation
The Company recognizes expense for its stock-based compensation based on the fair value of the awards at the time they are granted. We estimate the value of stock option awards on the date of grant using the Black-Scholes model. The determination of the fair value of stock-based payment awards on the date of grant is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, expected term, risk-free interest rate and expected dividends. The impact of forfeitures are recorded in the period in which they occur. There were no outstanding awards as of September 30, 2021.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed. The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
| ☐ | Level 1—quoted prices in active markets for identical assets and liabilities; | |
| ☐ | Level 2—observable market-based inputs or unobservable inputs that are corroborated by market data; and | |
| ☐ | Level 3—significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
There were no fair value measurements of financial instruments as of September 30, 2021 or December 31, 2020.
The Company computes basic net income (loss) per share by dividing net income (loss) per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “if converted” method as applicable. The computation of diluted loss per share excludes dilutive securities because their inclusion would be anti-dilutive. There were no potentially dilutive securities as of September 30, 2021.
| 10 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
3. RELATED PARTY TRANSACTIONS
The Company has entered into agreements to indemnify its directors and executive officers, in addition to the indemnification provided for in the Company’s articles of incorporation and bylaws. These agreements, among other things, provide for indemnification of the Company’s directors and executive officers for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of the Company, arising out of such person’s services as a director or executive officer of the Company, any subsidiary of the Company or any other company or enterprise to which the person provided services at the Company’s request. The Company believes that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.
There
was $
On
January 2, 2018 and February 8, 2019, the Company and Andrew Hidalgo (“Hidalgo”), completed a Convertible Debenture Agreement
whereby Hidalgo, the Company’s Chief Executive Officer, lent us an aggregate of $
The
Company recorded a $
As
a result of these changes, management determined debt extinguishment which was applied and the new notes were recorded at their fair
value resulting in a discount of approximately $
May 18, 2020 Purchase and Sale Agreement
On
May 18, 2020,
On
June 19, 2020, the Company entered into a Promissory Note with Judd Brammah, a director of the Company, for a principal amount up to
$
Effective
July 17, 2020, Judd Brammah lent the Company $
| 11 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
Effective
July 22, 2020, Judd Brammah lent the Company $
On
January 29, 2021, Judd Brammah converted his note and interest payable totaling $
4. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Cash
is maintained at an authorized deposit taking institution (bank) incorporated in the United States and is insured by the U.S.
Federal Deposit Insurance Corporation up to $
5. MAJOR CUSTOMERS
Due
to the sale of Pride and PVBJ, the Company had
6. LEASES
Operating Leases
The
Company maintains its principal office at 95 Christopher Columbus Drive, 16th Floor Jersey City, NJ 07302. The Company moved
in October 2020 and its office is in a shared office space provider, at a cost of $
As
of September 30, 2021 and December 31, 2020, the Company had
Finance Leases
As
of September 30, 2021 and December 31, 2020, the Company had
On May 12, 2021 directors Michael Doyle and Charles Benton were each awarded shares each.
As of September 30, 2021, there was unrecognized compensation expense as all option holders had their options forfeited through the sale of Pride and PVBJ.
8. SEGMENT INFORMATION
Prior
to the disposition of Pride and PVBJ, the Company’s business was organized into
9. NOTES PAYABLE
QRIDA Loan
On
May 6, 2020, the Company entered into a loan for $
| 12 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
2020 Convertible Note Financing
On
January 15, 2020, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with FirstFire, pursuant
to which the Company issued a $
On
June 18, 2020, the Company and FirstFire entered into a settlement agreement whereby both the 2019 Note and 2020 Note were cancelled
and all remaining amounts due under the above notes were settled for $
The
Company incurred $
The
Notes were cancelled, and all remaining contractual obligations there under were extinguished under terms of a Settlement and Release
Agreement which resulted in a gain on the statement of operations of $
Paycheck Protection Program Loan
On
May 5, 2020, the Company entered into a term note with Comerica Bank, with a principal amount of $
The PPP Term Note is unsecured and guaranteed by the United States Small Business Administration. On January 21, 2021, the PPP Term Note was fully forgiven and as a result, the Company recorded a gain on the forgiveness in accordance with ASC-470.
Director Related Party Note
On
June 19, 2020, the Company entered into a promissory note with Judd Brammah, a director of the Company, for the principal amount up to
$
On
January 29, 2021, Judd Brammah converted his note and interest payable totaling $
10. CAPITAL RAISE
On
July 9, 2019,
In
October 2020, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission, whereby the Company
registered shares of its common stock for sale as a company offering. The registration statement was declared effective in
October 2020. The Company sold a total of shares of Common Stock in January 2021 for total consideration of $
| 13 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
11. RECENT ACCOUNTING PRONOUNCEMENTS
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). The updated guidance, which became effective for fiscal years beginning after December 15, 2019, did not have a material impact on the Company’s consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. The Company has adopted this standard and there is no impact on the current financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. The Company has not yet adopted this standard and there is no impact expected on the current financial statements.
12. DISCONTINUED OPERATIONS
Sale of PVBJ
On
April 21, 2020, the Company’s Board of Directors authorized its resale of PVBJ pursuant to the following terms: (a) the outstanding
$
Sale of Pride
On
May 18, 2020, the Company executed a Purchase and Sale Agreement with Turquino providing for its sale of
There were no discontinued operations for the three months ended September 30, 2021 or 2020 as well as the nine months ended September 30, 2021. The results of discontinued operations for nine months ended September 30, 2020 are as follows:
| Nine months ended September 30, 2020 | ||||
| PVBJ | ||||
| Revenue | ||||
| Sales | $ | |||
| Total revenue | ||||
| Cost of goods sold | ||||
| Direct costs | ||||
| Total cost of goods sold | $ | |||
| Selling, general and administrative | ||||
| Net income (loss) for period | $ | ( | ) | |
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VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)
| Nine months ended September 30, 2020 | ||||
| Pride | ||||
| Revenue | ||||
| Sales | $ | |||
| Total revenue | ||||
| Cost of goods sold | ||||
| Direct costs | ||||
| Total cost of goods sold | $ | |||
| Selling, general and administrative | ||||
| Net income (loss) for period | $ | ( | ) | |
Gain (loss) from discontinued operations:
| Results from discontinued operations | $ | ( | ) | |
| Loss on disposal of assets | ( | ) | ||
| Loss from discontinued operations | $ | ( | ) |
13. INVESTMENTS
On
August 12, 2020, pursuant to a Seed Capital Subscription Agreement, the Company made an equity investment of shares into VoltH2 a Swiss corporation developing
scalable green hydrogen production projects primarily in Europe. VoltH2 is currently developing a 25MW green hydrogen production site
near Vlissingen, Netherlands. The investment was for a total purchase price of $
14. NOTES RECEIVABLE
Effective
June 7, 2021, we loaned VoltH2 $
Effective
June 28, 2021, we loaned VoltH2 $
Effective
August 25, 2021, we loaned VoltH2 $
Effective August 25, 2021, we entered into an amendment (the “June 7 Amendment”) to a promissory note issued to VoltH2 on June 7, 2021 (The “June 7 Note”), pursuant to which the Payment Date (as defined in the June 7 Note) was changed from September 1, 2021 to November 1, 2021. Our Board of Directors approved the foregoing amendment.
Effective August 25, 2021, we entered into an amendment (the “June 28 Amendment”) to a promissory note issued to VoltH2 on June 28, 2021 (The “June 28 Note”), pursuant to which the Payment Date (as defined in the June 28 Note) was changed from September 1, 2021 to November 1, 2021. Our Board of Directors approved the foregoing amendment.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management’s current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.
Business Overview
The 2020 year was challenging for us. Originally, we set out to provide hydrogen energy systems for residential users. The original business plan, established in April 2016, focused on developing the market for residential off grid hydrogen energy systems while simultaneously acquiring companies that possessed technicians who could be trained in the design and deployment of these hydrogen energy systems.
In February 2020, we decided to adopt another approach in market development, which was to pursue the one market that was establishing momentum, hydrogen production on a plant-size scale. In order to achieve our new strategic business model, we decided to sell both our subsidiaries because they were not producing enough profit and were not a strategic fit with our goal of developing the market for hydrogen energy systems. Further, the hydrogen energy market for residential users was not developing at all based on cost inefficiencies, and debt levels were beginning to impact us adversely.
Beginning in March 2020, the following steps were undertaken to implement the business transition plan:
| ● | March 2020 - Commenced discussions with investor regarding financing options for our company and strategic acquisitions. | |
| ● | April 21, 2020 - Concluded the disposition of the PVBJ subsidiary | |
| ● | May 2020 - Commenced discussions and diligence for an investment in a hydrogen production project in the Netherlands, known as Volt H2 | |
| ● | May 18, 2020 - Concluded the disposition of The Pride Group subsidiary | |
| ● | July 2020 - Concluded 2nd and 3rd tranches of debt financing with proceeds earmarked for an investment in Volt H2. | |
| ● | August 12, 2020 - Concluded acquisition of an equity interest in Volt H2 | |
| ● | September 30, 2020 – Moved the Company’s headquarters from Dallas, Texas to Jersey City, New Jersey | |
| ● | October 6, 2020 – Changed the company name to Vision Hydrogen Corporation and effected a twenty-for-one reverse stock split of our outstanding common stock | |
| ● | January 2021 – Closed on the sale of 12,500,000 shares of common stock in a registered offering, resulting in gross proceeds of $2.5 million. |
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With the initial investment into the hydrogen production market via Volt H2, the first step in transitioning our hydrogen business focus has been completed. We now will continue to operate the business in a manner that is aligned with our primary hydrogen business strategy.
Discontinued Operations
On April 21, 2020, our Board of Directors authorized our resale of PVBJ back to PVBJ pursuant to the terms as follows: (a) Benis Holdings LLC applied the $221,800 earn-out liability as consideration towards the purchase of PVBJ; (b) Paul Benis applied the remaining salary due to him, as prorated from the Closing Date to the expiration date of the Employment Agreement (January 31, 2021), to the purchase of PVBJ by Benis Holdings LLC as additional consideration thereof, and we have no further salary obligation to Paul Benis, who resigned as our executive officer; and (c) as additional consideration for the purchase of PVBJ by Benis Holdings LLC, PVBJ continues to be responsible for the line of credit (refer to note 12).
On May 18, 2020, in accordance to Nevada Statute 78.565, we completed and executed the May 18, 2020 Purchase and Sale Agreement between us and Turquino providing for our sale of 100% of Pride’s outstanding stock Pride to Turquino in return for Turquino’s assumption of the Hidalgo Notes and the Doyle Notes and the debt obligations and accrued interest related thereto (the “Agreement”). In conjunction therewith, Hidalgo and Doyle assigned the Notes to Turquino, at which time Turquino became responsible for the debt obligations upon the Notes, we have no further note obligations to Hidalgo or Doyle, and we reduced our debt by approximately $600,000 or 65% of the corporate debt obligations. Pursuant to Nevada Statute Section 78.565, approval of the Agreement only required the approval of the board of directors and did not require shareholder approval. The Agreement provides that the Parties mutually release one another and discharge and release the other party (and their respective current and former officers, directors, employees, shareholders, note holders, attorneys, assigns, agents, representatives, predecessors and successors in interest), from any and all claims, demands, obligations, or causes of action. Hidalgo, our Chief Executive Officer, and a managing member of Turquino, are related parties in connection with the Exchange Agreement, the Notes, and the Agreement.
Results of Operations
For the three months ended September 30, 2021 and 2020
Revenue and Cost of Revenue
We had no revenue or cost of revenue for the three months ended September 30, 2021 or 2020.
Operating Expenses
During the three months ended September 30, 2021, our general and administrative expenses were $72,867, including $33,750 in management disbursements, $12,000 legal fees, $9,020 in dues and subscriptions, $15,000 in director fees and $3,097 in miscellaneous expenses.
During the three months ended September 30, 2020, our general and administrative expenses were $78,793, including $33,750 in management disbursements, $12,500 in accounting fees, $10,220 in legal fees, $8,570 in dues and subscriptions, $5,000 in director fees, $4,709 in insurance and $4,044 in miscellaneous expenses.
We incurred no other expense for the three months ended September 30, 2021.
We incurred $8,312 of other expenses for the three months ended September 30, 2020, including $10,936 of interest expense – related party offset by an interest credit of $2,625.
As a result of the foregoing, we had a net loss from continuing operations of $,72,867 for the three months ended September 30, 2021, compared to a net loss of $87,105 for the three months ended September 30, 2020.
For the nine months ended September 30, 2021 and 2020
Revenue and Cost of Revenue
We had no revenue or cost of revenue for the nine months ended September 30, 2021 and 2020.
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Operating Expenses
During the nine months ended September 30, 2021, our general and administrative expenses were $399,702, including $77,500 in accounting fees, $101,250 in management disbursements, $33,500 in director fees, $24,686 in dues and subscriptions, $75,000 in stock based compensation, $77,017 in legal fees and $10,749 in miscellaneous expenses.
During the nine months ended September 30, 2020, our general and administrative expenses were $278,550, including $87,800 in accounting fees, $63,750 in management disbursements, $62,500 of gross payroll, $26,015 in dues and subscriptions, $25,220 in legal fees and $13,265 in miscellaneous expenses.
We generated $20,000 in loan forgiveness for the nine months ended September 30, 2021.
We incurred $98,819 of other expenses for the nine months ended September 30, 2020, including $47,289 in interest expense, $46,655 of interest expense – related party and $4,875 change in fair value earn-out.
As a result of the foregoing, we had net losses from continuing operations of $379,702 and $1,322,200 for the nine months ended September 30, 2021 and 2020, respectively.
For discontinued operations please refer to note 12 of our condensed consolidated financial statements.
Liquidity and Capital Resources
As of September 30, 2021, we had working capital of $1,455,901, comprised of current assets of $390,054 in cash, $1,100,000 in loan receivable – Volt, and $14,000 in prepaid expenses, offset by $48,153 in accounts payable and accrued expenses.
We have $192,981 in long term assets consisting of our investment in Volt for $175,000 and $17,981 in website development costs. There were no long-term liabilities.
For the nine months ended September 30, 2021, we used $279,686 of cash in operating activities, which represented our net loss from continuing operations of $379,702 consisting of $75,000 in stock-based compensation, $70,000 in other current assets and $1,634 in amortization offset by $5,250 in prepaid expenses, $20,000 in loan forgiveness and $21,368 in accounts payable and other accrued expenses.
We used $1,119,615 in investing activities including $1,100,000 in notes receivable to Volt H2 and $19,615 in website development costs for the nine months ended September 30, 2021.
We generated $1,782,253 in equity financing for financing activities for the nine months ended September 30, 2021.
For the nine months ended September 30, 2020, we used $406,462 of cash in operating activities, which represented our net loss from continuing operations of $377,369, consisting of $94,180 of other assets, $50,462 of amortization, $7,993 of stock-based compensation and $4,875 of change in fair value consideration, offset by $173,853 of change in accounts payable and $12,750 change in prepaid expenses.
For the nine months ended September 30, 2020, we used $497,101 in cash in investing activities due to the cash disposed of in the disposition of the two subsidiaries Pride and PVBJ for $322,101 and $175,000 in the investment in Volt.
For the nine months ended September 30, 2020, we generated $611,240 in financing activities, which represented $580,232 in proceeds from related party debt, $75,000 in proceeds from the issuance of convertible debt, $26,008 in proceeds from equity financing and $20,000 in proceeds from PPP notes payable, offset by $90,000 in convertible debt repayment.
In the future we expect to incur expenses related to compliance for being a public company. We expect that our general and administrative expenses will increase as we expand our business development, add infrastructure, and incur additional costs related to being a public company, including incremental audit fees, investor relations programs and increased professional services.
In October 2020, we filed a registration statement on Form S-1 with the Securities and Exchange Commission, whereby we registered 12.5 million shares of our common stock for sale as a company offering. The registration statement was declared effective in October 2020. In January 2021, we sold all of the shares for gross proceeds of $2.5 million.
Our future capital requirements will depend on a number of factors, including the progress of our sales and marketing of our services, the timing and outcome of potential acquisitions, the costs involved in operating as a public reporting company, the status of competitive services, the availability of financing and our success in developing markets for our services. We believe our existing cash will be sufficient to fund our operating expenses and capital equipment requirements for at least the next 12 months.
Critical Accounting Policies
Please refer to Note 2 in the accompanying condensed consolidated financial statements.
Recent Accounting Pronouncements
Please refer to Note 11 in the accompanying condensed consolidated financial statements.
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required under Regulation S-K for “smaller reporting companies.”
ITEM 4 - CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, as a result of the material weaknesses described below, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief executive officer and Chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:
| a) | Due to our small size, we did not have sufficient personnel in our accounting and financial reporting functions. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate review of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis; and | |
| b) | We lacked sufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of U.S. GAAP and SEC disclosure requirements. |
We intend to create written policies and procedures for accounting and financial reporting with respect to the requirements and application of U.S. GAAP and SEC disclosure requirements in the future.
We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not a party to any material legal proceedings or claims.
Item 1A. Risk Factors
There is a risk that the funds we loaned to VoltH2 Holdings AG will not be repaid.
On June 7, 2021, the Company loaned VoltH2 Holdings AG (“VoltH2”) $100,000, payable on September 1, 2021. The loan is non-interest bearing and evidenced by a promissory note issued to us by VoltH2 (the “Volt Note 1”). VoltH2 may prepay the Volt Note 1 in whole or in part at any time or from time to time without penalty or premium. Effective August 25, 2021, we entered into an amendment (the “June 7 Amendment”) to the Volt Note 1, pursuant to which the Payment Date (as defined in the Volt Note 1) was changed from September 1, 2021 to November 1, 2021. Our Board of Directors approved the foregoing amendment.
On June 28, 2021, the Company loaned VoltH2 $500,000, payable on September 1, 2021. The loan is non-interest bearing and evidenced by a promissory note issued to us by VoltH2 (“Volt Note 2”). VoltH2 may prepay Volt Note 2 in whole or in part at any time or from time to time without penalty or premium. Effective August 25, 2021, we entered into an amendment (the “June 28 Amendment”) to the Volt Note 2, pursuant to which the Payment Date (as defined in the Volt Note 2) was changed from September 1, 2021 to November 1, 2021. Our Board of Directors approved the foregoing amendment.
On August 25, 2021, we loaned VoltH2 $500,000, payable on November 1, 2021. The loan is non-interest bearing and evidenced by a promissory note issued to us by VoltH2 (the “Volt Note 3”). VoltH2 may prepay the Volt Note 3 in whole or in part at any time or from time to time without penalty or premium. Our Board of Directors approved the foregoing transaction.
The Company owns approximately 16% of VoltH2, a Swiss corporation developing scalable green hydrogen production projects primarily in Europe. As with any debt obligation, there is a risk that VoltH2 will default and we as lender may not receive repayment in full of the funds loaned. This risk is increased by virtue of the fact that these loans were made on an unsecured basis. If this were to occur, it could have a material, adverse effect on our financial condition, reduce the amount of funds available to support our growth initiatives and other capital requirements and impede our ability to operate our business and focus on our primary hydrogen business strategy.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
| * | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| VISION HYDROGEN CORPORATION | ||
| Date: October 15, 2021 | By: | /s/ ANDREW HIDALGO |
| Andrew Hidalgo | ||
Chief Executive Officer (Principal Executive Officer) | ||
| Date: October 15, 2021 | By: | /s/ MATTHEW HIDALGO |
| Matthew Hidalgo | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
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