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 28, 2022, there were shares of registrant’s common stock outstanding.
VISION HYDROGEN CORPORATION
INDEX
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Sales tax receivable | ||||||||
| Current assets held for sale | ||||||||
| Total current assets | ||||||||
| Website development costs, net | ||||||||
| Non-current assets held for sale | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Current liabilities held for sale | ||||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities | ||||||||
| Non-current liabilities held for sale | ||||||||
| 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, 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 September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 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 | ||||||||||||||||
| Transactional fees paid to related party | ||||||||||||||||
| Management fees – related party | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) expenses | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Loan forgiveness | ( | ) | ||||||||||||||
| Total other expenses | ( | ) | ||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss from discontinued operations (note 12) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income, net | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share (continuing operations) | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share (discontinued operations) | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic and 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 (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 (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, 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.
| 5 |
VISION HYDROGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Sale of Dutch asset | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Stock issuance ETBV acquisition | - | |||||||||||||||||||||||||||||||
| Foreign currency translation through sale of Dutch asset | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Ending June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Ending September 30, 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 Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| 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 | ||||||||
| Issuance of stock | ||||||||
| Asset purchase consideration | ||||||||
| PPP loan forgiveness | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Other current assets | ||||||||
| Sales tax receivable | ( | ) | ||||||
| Prepaid expenses and other costs | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Net cash used in operating activities – continuing operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities – discontinued operations | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Loan to Volt H2 | ( | ) | ||||||
| Cash paid website development costs | ( | ) | ( | ) | ||||
| Cash paid in asset acquisition – related party, net | ( | ) | ||||||
| Cash acquired in sale of subsidiaries, net | ||||||||
| 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 related party notes | ||||||||
| Principal repayment of related party notes | ( | ) | ||||||
| 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 | $ | $ | ||||||
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, 2022 AND 2021
1. ORGANIZATION AND LINE OF BUSINESS
Vision Hydrogen Corporation (the “Company” or “VisionH2”) is a renewable energy company developing clean hydrogen production and storage facilities for the commercial, industrial and transportation sectors through site procurement, permitting, pre-development and grid integration. The Company seeks to utilizing hydrogen as fuel, feedstock, and as a grid balancing & capacitance solution. VisionH2 is committed to providing low carbon solutions with high yield hydrogen production, storage and distribution services for the European renewable economy and supply chain.
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. Since inception the Company has been involved in the hydrogen and renewable energy space. We have three subsidiaries, VisionH2 Holdings AG, Evolution Terminals BV and VisionH2 UK Ltd.
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.
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 loss is $
For
the three month and nine months ended September 30, 2022, the Company recorded comprehensive loss of $
| 8 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
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”).
Website Development Costs
Website
development costs were for a new company website created in 2021 and are amortized over
Leases
Please see note 5.
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.
| 9 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 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.
During
2020 a director of the Company lent the Company a total of $
On
November 8, 2021 we acquired the
On
May 11, 2022 we sold our Vlissingen and Terneuzen green hydrogen development projects and related assets to Volt Energy BV, a company
controlled by a former director and co-CEO, in exchange for $
On
May 30, 2022 we acquired Evolution Terminals B.V., a Dutch corporation (“ETBV”) from an
investment firm of which our CEO is principal for a purchase price of $
On
June 20, 2022 we entered into a Management Services Agreement with a company controlled by our CEO pursuant to which we receive executive,
business consulting and advisory, business development and other services. The Agreement is for an initial term of three years and will
automatically renew for one or more additional two-year renewal periods unless terminated. The fee under the Management Services Agreement
is $
4. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Cash
is maintained at an authorized deposit-taking institution (bank) incorporated in the United States, Canada and The Netherlands and is
insured by the U.S. Federal Deposit Insurance Corporation (FDIC), the Canada Deposit Insurance Corporation (CDIC) and the Dutch Central
Bank (DNB) 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 on a month-to-month lease.
| 10 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
Finance Leases
As
of September 30, 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 September 30, 2022.
As of September 30, 2022, there was unrecognized compensation expense or dilutive securities.
7. REGISTRATION STATEMENT
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 $
8. 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 September 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.
| 11 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
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.
9. DISCONTINUED OPERATIONS
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 our
There
were
The following pro forma financial information presents the combined results of operations of VoltH2 and the Company for the three and nine months ended September 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.
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 September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||
| Revenues | $ | $ | ||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Net income per share: | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| 12 |
VISION HYDROGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022 AND 2021
On
May 6, 2022, we, through our wholly owned Swiss subsidiary,
The results of discontinued operations are as follows:
| Three months ended September 30, 2022 | Nine months ended September 30, 2022 | |||||||
| Selling, general and administrative expenses | ||||||||
| Discontinued operations for the period | $ | $ | ( | ) | ||||
10. ASSET ACQUISTION UNDER COMMON CONTROL
On May 30, 2022, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Evolution Terminals B.V., a Dutch corporation (“ETBV”), and ETBV’s sole shareholder. ETBV is developing a green energy terminal for the storage and handling of sustainable products and fuels.
On
May 30, 2022, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Evolution Terminals B.V., a Dutch
corporation (“ETBV”) pursuant to which we acquired ETBV (the “Acquisition”) from an
investment firm of which our CEO is principal for a purchase price of $
The
asset had capitalized project development costs of $
| 13 |
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
Please refer to Note 1 for our overview and line of business.
Going Concern
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 from continuing operations of $13,371,340 along with $3,479,192 of net cash used in operations for the nine months ended September 30, 2022. In addition, the Company is a start up in the renewable energy space and has generated limited revenues to date.
Even though through the sale of the Dutch Properties for $11,250,000 the Company has proven a sustainable business model, it still is representing a net loss year 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. However current cash on the balance sheet of $5,479,144 is greater than the net cash used in operations of $3,479,192 for the nine months ended September 30, 2022. In addition to alleviating these concerns the Company is planning for an equity raise in the next year and continuing to develop and evaluate its newest asset and ways to monetize the project.
Discontinued Operations
For discontinued operations please refer to Note 9.
Asset Acquisition
For our asset acquisition please refer to Note 10.
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Results of Operations
For the three months ended September 30, 2022 and 2021
Revenue and Cost of Revenue
We had no revenue or cost of revenue for the three months ended September 30, 2022 or 2021.
Operating Expenses
During the three months ended September 30, 2022, our general and administrative expenses were $667,094, including $300,000 in management fees – related party, $125,071 in project costs, $95,286 in travel and lodging, $40,500 in consulting fees, $24,247 in accounting fees, $21,000 in director fees, $19,403 in legal fees, $14,858 in internet services and domain name purchases, $8,609 in dues and subscriptions and $18,120 in miscellaneous fees.
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.
We incurred no other expense for the three and nine months ended September 30, 2021.
As a result of the foregoing, we had a net loss from continuing operations of $667,094 for the three months ended September 30, 2022, compared to a net loss of $72,867 for the three months ended September 30, 2021.
We incurred a foreign currency translation loss of $63,048 for the three months ended September 30, 2022 for a net comprehensive loss of $730,142. We had no foreign currency translation or comprehensive gain/loss for the three months ended September 30, 2021.
For the nine months ended September 30, 2022 and 2021
Revenue and Cost of Revenue
We had no revenue or cost of revenue for the nine months ended September 30, 2022 and 2021.
Operating Expenses
During the nine months ended September 30, 2022, our general and administrative expenses were $13,371,016, including $7,677,945 in issuance of stock, $4,120,145 transactional fees – related party, $840,000 in management fees - related party, $181,256 in travel and lodging, $125,071 in project costs, $123,605 in accounting fees, $72,000 in director fees, $67,500 in consulting fees, $41,338 in legal fees, $33,236 in dues and subscriptions, $20,642 in internet services and domain purchases, $14,232 in investor relations, $6,986 in business meals and $47,060 in miscellaneous 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.
We incurred interest expense for the nine months ended September 30, 2022 of $324.
We generated $20,000 in loan forgiveness/other expenses for the nine months ended September 30, 2021.
As a result of the foregoing, we had net losses from continuing operations of $13,371,340 and $379,702 for the nine months ended September 30, 2022 and 2021, respectively.
For discontinued operations please refer to note 9.
We incurred a foreign currency translation loss of $71,962 for the nine months ended September 30, 2022 for a net comprehensive loss of $14,471,390. We had no foreign currency translation or comprehensive gain/loss for the nine months ended September 30, 2021.
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Liquidity and Capital Resources
As of September 30, 2022, we had working capital of $5,450,628 comprised of current assets of $5,479,144 in cash $67,473 in prepaid expenses, $9,329 in sales tax receivable offset by $105,318 in accounts payable and accrued expenses.
We had $47,467 in website development costs in long-term assets. We had no long-term liabilities.
For the nine months ended September 30, 2022
We used $3,479,192 of cash in operating activities – continuing operations, which represented our net loss of $14,399,428 and consisted of $7,620,00 in stock issuance costs, $3,557,945 in asset acquisition costs offset by $4,290 in amortization, $200,035 in accounts payable and accrued expenses $55,099 in prepaid expenses and $6,865 in sales tax receivable.
We generated $971,694 of cash in discontinued operations.
We generated $7,876,014 of cash in investing activities including net cash acquired in sale of subsidiaries for $11,184,512, offset by $3,281,974 of cash paid in asset acquisition – related party and $26,524 in cash paid - website development costs.
We generated $1,905 in proceeds from financing activities including related party notes for $96,614 offset by principal repayment of related part notes of $94,709.
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.
We generated $1,782,253 in equity financing for financing activities.
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 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 8 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 September 30, 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 September 30, 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: October 28, 2022 | By: | /s/ ANDREW HROMYK |
| Andrew Hromyk | ||
| Chief Executive Officer | ||
| Date: October 28, 2022 | By: | /s/ MATTHEW HIDALGO |
| Matthew Hidalgo | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
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