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 May 5, 2022, 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
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Sales tax receivable | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Website development costs, net | ||||||||
| Operating lease – right of use asset | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable – related party | ||||||||
| Accrued wage taxes | ||||||||
| Current portion of operating lease | ||||||||
| Loan payable – related party | - | |||||||
| Accrued interest – related party | - | |||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities | ||||||||
| Long term portion of operating lease | ||||||||
| 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; shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive gain | ||||||||
| Total stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| 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) expense | ||||||||
| Loan forgiveness | - | ( | ) | |||||
| Interest expense | - | |||||||
| Total other expenses | ( | ) | ||||||
| Net loss | ( | ) | $ | ( | ) | |||
| Foreign currency translation adjustment | - | |||||||
| Comprehensive loss | ( | ) | $ | ( | ) | |||
| Loss per share | ||||||||
| 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 STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2021
| Common Stock | Preferred Stock | Additional | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||
| Number
of Shares | Amount | Number
of shares | Amount | Paid-In Capital | Accumulated Deficit | Comprehensive Gain(Loss) | Equity (Deficit) | |||||||||||||||||||||||||
| Beginning, January 1, 2021 | $ | - | $ | $ | ( | ) | - | $ | ( | ) | ||||||||||||||||||||||
| Equity financing | - | - | - | - | ||||||||||||||||||||||||||||
| Conversion of related party debt to equity | - | - | - | - | - | |||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Ending, March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022 (UNAUDITED)
| Common Stock | Preferred Stock | Additional | Accumulated Other | Total
Stockholders’ | ||||||||||||||||||||||||||||
| Number
of Shares | Amount | Number
of shares | Amount | Paid-In Capital | Accumulated Deficit | Comprehensive Gain(Loss) | Equity (Deficit) | |||||||||||||||||||||||||
| Beginning, January 1, 2022 | $ | - | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Ending, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
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 Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | - | |||||||
| Other current assets | - | |||||||
| PPP loan forgiveness | - | ( | ) | |||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other costs | ||||||||
| Sales tax receivable | - | |||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash used in in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Fixed asset purchases | ( | ) | - | |||||
| Net cash used in investing activities | ( | ) | - | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related party notes | - | |||||||
| Proceeds from equity financing, net of issuance costs | - | |||||||
| Net cash provided by 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 | $ | $ | ||||||
| Issuance of common stock | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
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.
On November 8, 2021, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with VoltH2 Holdings AG (“VoltH2”), a Swiss corporation, and the other shareholders of VoltH2 (each, a “Seller”, and together, the “Sellers”) pursuant to which we acquired VoltH2 (the “Acquisition”). VoltH2 is a European-based developer of clean hydrogen production facilities for the supply of commercial offtake volumes of clean hydrogen to manufacturers, gas and power traders, industrial consumers, and both heavy and marine transportation sectors that have pivoted away from carbon emitting energy sources and fuels.
Pursuant
to the Purchase Agreement, we acquired an
The
VoltH2 acquisition was accounted for as an asset acquisition with no step up basis due to the
At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should the Company be unable to continue as a going concern.
As
reflected in the quarterly financial statements, the Company had a net loss $
Management has evaluated the significance of these conditions and under these circumstances these conditions raise substantial doubt about the ability to continue as a going concern. To alleviate these concerns Vision is planning multiple equity raises and/or asset dispositions in 2022.
| 8 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
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, 2022 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, 2021, included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 30, 2021 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.
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 and cash flows.
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
March 31, 2022 and 2021, there was
Comprehensive Gain/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 gain is $
For
the three months ended March 31 2022 the Company recorded comprehensive gain of $
Currency Translation
The Company translates its foreign subsidiary’s assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in accumulated other comprehensive income. The Company records gains and losses from changes in exchange rates on transactions denominated in currencies other than each reporting location’s functional currency in net income (loss) for each period. Items included in the financial statements of each entity in the group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”).
The functional and reporting currency of the Company is the United States Dollar (“U.S. Dollar”).
| 9 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
Website Development Costs
Website development costs were for a new company website created in 2021 and are amortized over 3 years.
Leases
Please see note 5.
Property and Equipment, and Depreciation
Property and equipment are stated at cost. Depreciation is generally provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the remaining term of the lease or the estimated useful life of the improvement.
Repairs and maintenance that do not improve or extend the lives of the property and equipment are charged to expense as incurred.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes pursuant to Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the financial statements as appropriate. Accrued interest and penalties related to income tax matters are classified as a component of income tax expense.
The Company recognizes and measures its unrecognized tax benefits in accordance with ASC 740. Under that guidance, management assesses the likelihood that tax positions will be sustained upon examination based on the facts, circumstances and information, including the technical merits of those positions, available at the end of each period. The measurement of unrecognized tax benefits is adjusted when new information is available, or when an event occurs that requires a change.
The Company did not identify any material uncertain tax positions. The Company did not recognize any interest or penalties for unrecognized tax benefits.
The federal income tax returns of the Company are subject to examination by the IRS, generally for the three years after they are filed. The Company’s 2021, 2020, and 2019 income tax returns are still open for examination by the taxing authorities.
| 10 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
Asset acquisitions
Asset acquisitions are measured based on their cost to us, including transaction costs incurred by us. An asset acquisition’s cost or the consideration transferred by us is assumed to be equal to the fair value of the net assets acquired. If the consideration transferred is cash, measurement is based on the amount of cash we paid to the seller, as well as transaction costs incurred by us. Consideration given in the form of nonmonetary assets, liabilities incurred or equity interests issued is measured based on either the cost to us or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated relative fair values. We engage third-party appraisal firms to assist in the fair value determination of inventories, identifiable long-lived assets and identifiable intangible assets. Goodwill is not recognized in an asset acquisition.
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 $
There
was $
There was $150,000 and $0 expensed for the three months ended March 31, 2022 and March 31, 2021 to First Finance Limited of which Andrew Hromyk our co-CEO is a principal.
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 $
Effective
July 22, 2020, Judd Brammah lent the Company $
On
January 29, 2021, Judd Brammah converted his note and interest payable totaling $
On
November 8, 2021, the Company
entered into a services agreement (the “Turquino Services Agreement”) with Turquino Equity LLC providing for payment of $
On November 8, 2021, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with VoltH2 Holdings AG (“VoltH2”), a Swiss corporation, and the other shareholders of VoltH2 (each, a “Seller”, and together, the “Sellers”) pursuant to which we acquired VoltH2 (the “Acquisition”). First Finance Limited Europe which is an investment firm of which co-CEO Andrew Hromyk is a principal owned shares of VoltH2.
On
March 21, 2022 Century Capital Management loaned the Company $
On
March 25, 2022 Volt Energy BV loaned the Company $
| 11 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
4. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Cash
is maintained at an authorized deposit taking institution (bank) incorporated in the United States and The Netherlands is insured by
the U.S. Federal Deposit Insurance Corporation and the Dutch Central Bank up to $
5. LEASES
Operating Leases
For leases with a term of 12 months or less, the Company is permitted to make and has made an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities, and we recognize lease expense for such leases on a straight-line basis over the lease term.
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 $
Right of use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease right of use asset also excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In determining the discount rate to use in calculating the present value of lease payments, the Company estimates the rate of interest it would pay on a collateralized loan with the same payment terms as the lease by utilizing bond yields traded in the secondary market to determine the estimated cost of funds for the particular tenor.
Upon
the purchase of Volt on November 8, 2021 the Company acquired a lease for new office space in the Netherlands, for a term of three years.
The Company analyzed this lease and determined that this agreement meets the definition of a lease under ASU 2016-02 as it provides management
with the exclusive right to direct the use of and obtain substantially all of the economic benefits from the identified leased asset,
which is the office space. Management also analyzed the terms of this arrangement and concluded it should be classified as an operating
lease, as none of the criteria were met for finance lease classification. As there was only one identified asset, no allocation of the
lease payments was deemed necessary. Management did not incur any initial direct costs associated with this lease. As of the commencement
date, a right of use asset and lease liability of $
The future minimum payments on operating leases for each of the next three years and in the aggregate amount to the following:
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total lease payments | ||||
| Less: present value discount | ( | ) | ||
| Total operating lease liabilities | $ |
The
weighted-average remaining term of the Company’s operating leases was
| 12 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
Rent
expense for the three months ended March 31, 2022 and 2021 was $
Finance Leases
As
of March 31, 2022 and December 31, 2021, the Company had
There was no stock option activity from the 2016 Incentive Stock Option Plan from January 1, 2022 to March 31, 2022.
As of March 31, 2022, there was unrecognized compensation expense.
7. NOTES PAYABLE
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
$
Effective
July 17, 2020, Judd Brammah lent the Company $
On
January 29, 2021, Judd Brammah converted his note and interest payable totaling $
8. CAPITAL RAISE
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
MARCH 31, 2022 AND 2021
9. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02 and issued subsequent amendments to the initial guidance thereafter. This ASU requires an entity to recognize a right of use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification of the underlying lease as either finance or operating. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard was effective for the Company on January 1, 2019. Entities are required to adopt ASU 2016-02 using a modified retrospective transition method. Full retrospective transition is prohibited. The guidance permits an entity to apply the standard’s transition provisions at either the beginning of the earliest comparative period presented in the financial statements or the beginning of the period of adoption (i.e., on the effective date). The Company adopted the new standard on its effective date.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (ASC 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The new standard will become effective for the Company beginning January 1, 2019, with early adoption permitted. The Company has adopted this standard and has no impact on its consolidated financial statements and disclosures.
In August 2018, the FASB issue ASU 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The new standard will become effective for the Company January 1, 2020, with early adoption permitted. The Company has adopted this standard and has no impact on its consolidated financial statements and disclosures.
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.
10. NOTES RECEIVABLE
Effective
June 7, 2021, we loaned VoltH2 $
Effective
June 28, 2021, we loaned VoltH2 $
| 14 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
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.
As
of November 8, 2021 as a result of the acquisition of a
11. BUSINESS ACQUISITION
On November 8, 2021, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with VoltH2 Holdings AG (“VoltH2”), a Swiss corporation, and the other shareholders of VoltH2 (each, a “Seller”, and together, the “Sellers”) pursuant to which we acquired VoltH2 (the “Acquisition”). VoltH2 is a European-based developer of clean hydrogen production facilities for the supply of commercial offtake volumes of clean hydrogen to manufacturers, gas and power traders, industrial consumers, and both heavy and marine transportation sectors that have pivoted away from carbon emitting energy sources and fuels.
Pursuant
to the Purchase Agreement, we acquired an
The
VoltH2 acquisition was accounted for as an asset acquisition with no step up basis due to the
There
was
Pro forma results for Vision. giving effect to the Volt. acquisition
The following pro forma financial information presents the combined results of operations of Volt and the Company for the three months ended March 31, 2021. The pro forma financial information presents the results as if the acquisition had occurred as of the beginning of 2021.
The unaudited pro forma results presented include amortization charges for acquired intangible assets, interest expense and stock-based compensation expense.
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VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022 AND 2021
Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place as of the beginning of 2021.
| Three Months Ended March 31, 2021 | ||||
| Revenues | $ | - | ||
| Net income (loss) | $ | ( | ) | |
| Net income per share: | ||||
| Basic | $ | ( | ) | |
12. PROPERTY AND EQUIPMENT
At March 31, 2022 and December 31, 2021, property and equipment were comprised of the following:
| March 31, 2022 | December 31, 2021 | |||||||
| $ | - | $ | - | |||||
| - | - | |||||||
| Computer
and software ( | ||||||||
| - | - | |||||||
| - | - | |||||||
| Less accumulated depreciation | - | |||||||
| $ | $ | |||||||
There
was depreciation expense of $
13. WEBSITE DEVELOPMENT COSTS
The tables below present a reconciliation of the Company’s website development costs:
| Balance at January 1, 2022 | $ | |||
| Amortization | ( | ) | ||
| Balance at March 31, 2022 | $ |
14. SALES TAX RECEIVABLE
The tables below present a reconciliation of the Company’s sales tax receivable:
| Balance at January 1, 2022 | $ | |||
| Collections | ( | ) | ||
| Balance at March 31, 2022 | $ |
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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
Vision Hydrogen Corporation was incorporated in the state of Nevada on August 17, 2015 as H/Cell Energy Corporation and is based in Jersey City, New Jersey. On November 8, 2021, we entered into a Stock Purchase Agreement with VoltH2 Holdings AG, a Swiss corporation, and shareholders of VoltH2 pursuant to which we acquired VoltH2 Holdings AG (“VoltH2”). Pursuant to the Stock Purchase Agreement, we acquired an 84.1% interest of VoltH2, and together with our existing 15.9% ownership interest, we now own 100% of VoltH2. VoltH2 is a European-based developer of clean hydrogen production facilities for the supply of commercial off-take volumes of clean hydrogen to manufacturers, gas and power traders, industrial consumers, and both heavy and marine transportation sectors that have pivoted away from carbon emitting energy sources and fuels.
The VoltH2 acquisition was accounted for as an asset acquisition with no step up basis due to the 15.9% ownership of VoltH2 by Vision Hydrogen prior to the acquisition and due to VoltH2 being an early stage company that has not generated revenues and lacks outputs. Since this transaction does not constitute the acquisition of a business, but a transfer of long lived assets there is no step up in basis. The SEC generally will not permit the recognition of gain in the transferor’s financial statements or a step-up in basis on the transferee’s books for sales or transfers of long-lived assets when related parties are involved. As a result of the Company’s previously held 15.9% interest in VoltH2, it was determined to be a related party .. The acquisition consideration consisted of 8,409,091 shares of Vision Hydrogen Corporation common stock granted on the acquisition date of November 8, 2021 at a closing market price of $11. A deemed dividend for the excess share price over cost basis of the net assets of ($1,340,426) was recorded in the amount of $93,840,427.
Following our acquisition of VoltH2, we plan to expand the inventory of prospective development sites for clean hydrogen production, replicating what has been initiated in Northwestern Europe. We aim to secure development sites at enviable locations that are proximate to existing gas and power infrastructure, within industrial clusters and with access to multi-modal logistics, including road, rail, water, barge, pipeline, for the distribution of hydrogen molecules to off-takers and end users. The job development cycle of each development site typically ranges 12 months to 36 months, prior to construction, and is largely influenced by local planning, permits, regulations and economic feasibility including the cost of procuring low carbon electrons to supply the future electrolysers, and offtake contracts for the hydrogen gas. In 2021, two locations have been secured and building and environmental permits have been acquired. Both projects are being developed with an estimated final investment decision scheduled for Q4-2022/Q1-2023. Until March 31, 2022, no offtake contract have been signed. The business development team is exploring the market and is negotiating with several off takers also known as end users of hydrogen.
Every project will be integrated into a separate special purpose vehicle (“SPV”) of which VoltH2 Vlissingen B.V., our subsidiary through the acquisition of VoltH2, is the first of two. Our mission is to develop our project in Vlissingen and Terneuzen, both located in The Netherlands while seeking to identify and secure other strategic locations to expand the concept. This includes the securing of land to develop new projects in different countries. Germany, Belgium and the Netherlands also have existing large pipeline networks that have been transporting hydrogen for decades. The Belgium, Netherlands and Luxemburg area (Benelux) has the largest hydrogen network in the world and consumption of hydrogen has reached almost 1.8 million tons of hydrogen per year.
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We plan to generate revenue by divesting our projects in full, in part to energy industry participants and/or selling fractional ownership interests in sites under development. In addition, we plan to provide consulting services to other developers, industry participants, and governments focused on hydrogen production infrastructure projects. Lastly, as a long-term revenue opportunity, we plan to sell hydrogen production once plants are built and commissioned. We are currently in discussion with private landowners, such as energy companies, commodity traders, utilities, and industrial process customers. We may also purchase land if we believe it is practical and economically viable.
At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should the Company be unable to continue as a going concern.
As reflected in the quarterly financial statements, the Company had a net loss of $957,362 and net cash used in operations of $201,617 for the three months ended March 31, 2022. In addition, the Company is a start up in the renewable energy space and has generated limited revenues to date.
Management has evaluated the significance of these conditions and under these circumstances these conditions raise substantial doubt about the ability to continue as a going concern. To alleviate these concerns Vision is planning multiple equity raises and/or asset dispositions in 2022.
Results of Operations
For the three months ended March 31, 2022 and 2021
Revenue and Cost of Revenue
We had no revenue or cost of revenue for the three months ended March 31, 2022 or 2021.
General and Administrative Expenses
During the three months ended March 31, 2022, our general and administrative expenses were $956,885, which included $314,605 of management fees-related party, $220,384 of employee wages, $112,227 in project costs, $20,202 in port reservation fees, $79,305 in accounting fees, $40,862 in consultancy costs, $13,112 in dues and subscriptions, $15,000 in director fees, $ 12,000 in legal fees and $129,188 in other miscellaneous and administrative costs.
During the three months ended March 31, 2021, our general and administrative expenses were $123,291, which included $33,750 of management fees-related party, $13,017 of legal fees, $9,633 of dues and subscription fees, which pertained to EDGAR fees and OTC Market annual listing fees, $5,000 in director fees, $3,088 in insurance fees, $57,500 in accounting fees and $1,303 in miscellaneous fees.
We incurred $477 of interest expense for the three months ended March 31, 2022.
We generated a credit of $20,000 in other expense in loan forgiveness for the three months ended March 31, 2021.
As a result of the foregoing, we had net losses of $957,362 and $103,291 for the three months ended March 31, 2022 and 2021, respectively.
We incurred a foreign currency translation gain of $12,189 for the three months ended March 31, 2022 for a comprehensive loss of $945,173. We had no comprehensive loss for 2021.
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Liquidity and Capital Resources
As of March 31, 2022, we had negative working capital of $1,289,465 comprised of current assets of $2,939 in cash $19,002 in prepaid expenses and $5,079 in sales tax receivable, offset by $829,262 in accounts payable and accrued expenses, $200,165 in accounts payable – related party, $150,734 in accrued wage taxes, $39,385 in current portion of operating lease, $325 in accrued interest related party and $96,614 in loan payable related party.
We had $62,918 in property and equipment net, $23,599 in website development costs and $94,426 in operating lease right of use asset for long term assets. We had $55,041 in long term portion of operating lease for the Company’s long term liabilities.
For the three months ended March 31, 2022, we used $201,617 of cash in operating activities consisting of $3,975 in depreciation and amortization, $54,686 in sales tax receivable, $10,106 in prepaid expenses, and $686,978 in accounts payable.
For the three months ended March 31, 2021, we used $50,724 of cash in operating activities, which consisted of $70,000 in current assets and $3,250 in prepaid expenses, offset by our net loss of $103,291, $20,000 in PPP loan forgiveness and $683 in accounts payable.
For the three months ended March 31, 2022 we used $43,393 in investing activities from fixed asset purchases.
There was no cash used or generated in investing activities for the three months ended March 31, 2021.
We generated $96,614 in financing activities in proceeds from related notes payable for the three months ended March 31, 2022.
We generated $1,832,253 in financing activities for the three months ended March 31, 2021, consisting of $2,377,750 of proceeds in equity financing, $70,000 in legal fees associated with financing and $1,250 in proceeds from the issuance of stock, offset by $580,232 in loan forgiveness - related party, $20,000 in loan forgiveness and $16,515 in interest forgiveness – related party.
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 financial statements.
Recent Accounting Pronouncements
Please refer to Note 9 in the accompanying 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 March 31, 2022, 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 March 31, 2022 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
Not required under Regulation S-K for “smaller reporting companies.”
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.
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: May 5, 2022 | By: | /s/ ANDREW HROMYK |
| Andrew Hromyk | ||
| Co-Chief Executive Officer | ||
| Date: May 5, 2022 | By: | /s/ MATTHEW HIDALGO |
| Matthew Hidalgo | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
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