NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
1.
|
ORGANIZATION
AND LINE OF BUSINESS
|
Vision
Hydrogen Corporation (the “Company”) was incorporated in the state of Nevada on August 17, 2015 as H/Cell Energy Corporation
and is based in Jersey City, New Jersey. The Company changed its name to Vision Hydrogen Corporation in October 2020.
During
the year ended December 31, 2020, the Company took significant steps to transition its hydrogen energy business to focus on hydrogen
production on a scaled production plant model. During the period, the Company disposed of its interests in both PVBJ and Pride
(See Note 15 “Discontinued Operations”) in order to facilitate this transition. As part of the disposition the Company
provided certain post-closing support to both PVBJ and Pride through Q3 2020. On August 12, 2020, pursuant to a Seed Capital Subscription
Agreement, the Company made an equity investment into VoltH2 Holdings AG (“VoltH2”), a Swiss corporation developing
scalable green hydrogen production projects primarily in Europe. VoltH2 is currently planning to develop a 25MW green hydrogen
production site near Vlissingen, Netherlands. The investment was for a total purchase price $175,000, representing a 17.5% equity
interest in VoltH2.
Effective
September 30, 2020 the Company moved its principal office from Dallas, Texas to Jersey City, New Jersey.
On
September 29, 2020, the Company filed an amendment to and restatement of its Articles of Incorporation with the Secretary of State
of the State of Nevada. Pursuant to the Amendment, the Company (i) changed its name from H/Cell Energy Corporation to Vision Hydrogen
Corporation (ii) effectuated a one-for-twenty (1:20) reverse split of the issued and outstanding shares of common stock of the
Company without changing the par value of the stock and (iii) increased its authorized shares of common stock from 25,000,000
to 100,000,000. The Amendment took effect on October 6, 2020.
On
October 14, 2020, the Company filed an S-1 registration statement offering up to a maximum of 12,500,000 shares of its common
stock for gross proceeds of $2,500,000, before deduction of commissions and offering expenses. The registration statement was
declared effective on October 23, 2020. As of the date of this filing, the Company has sold all shares under the registration
statement.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Presentation
The
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”). All inter-company transactions and balances have been eliminated upon consolidation.
On
October 6, 2020, the Company effectuated a one-for-twenty (1:20) reverse split of the issued and outstanding shares of common
stock of the Company without changing the par value of the stock and increased its authorized shares of common stock from 25,000,000
to 100,000,000 which is presented on the current period financial statements. All per share amounts have been adjusted for the
impact of the reverse stock split.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.
Reclassification
Certain
prior period amounts have been reclassified to conform to current period presentation specifically as it relates to the reclassification
of assets, liabilities, operating results, cash flows and the accumulated comprehensive loss as a result of the Company’s
disposition of interests in our PVBJ and Pride subsidiaries.
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
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 December 31, 2020 and 2019, there was no allowance for doubtful accounts required.
Goodwill
and Finite-Lived Intangible Assets
Goodwill
represents the excess of the aggregate of the following (1) consideration transferred, (2) the fair value of any non-controlling
interest in the acquiree, and (3) if the business combination is achieved in stages, the acquisition-date fair value of our previously
held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed. Identifiable intangible assets consist primarily of customer lists and relationships, non-compete agreements
and technology-based intangibles and other contractual agreements. The Company amortizes finite lived identifiable intangible
assets over five years, on a straight-line basis to their estimated residual values and periodically reviews them for impairment.
Total goodwill and identifiable intangible assets comprised 0% of the Company’s consolidated total assets as of December
31, 2020 and 41% as of December 31, 2019 which is included on the balance sheet in non-current assets held for sale.
The
Company uses the acquisition method of accounting for all business combinations and does not amortize goodwill. Goodwill is tested
for possible impairment annually during the fourth quarter of each fiscal year or more frequently if events or changes in circumstances
indicate that the asset might be impaired. The Company has the option to perform a qualitative assessment to determine if an impairment
is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the
fair value of a reporting unit is less than its carrying amount, the Company would not need to perform the two-step impairment
test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative
assessment, then the first step of the goodwill impairment test is used to identify potential impairment by comparing the fair
value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds
its carrying amount, its goodwill is not impaired, and the second step of the impairment test is not necessary. If the carrying
amount of the reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed.
The second step of the goodwill impairment test compares the implied fair value of the reporting unit goodwill with its carrying
amount to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the
amount of goodwill recognized in a business combination. If the carrying amount of the reporting unit goodwill exceeds the implied
fair value of that goodwill, an impairment is recognized in an amount equal to that excess.
As
of December 31, 2020, the Company had no goodwill and has included the write-off of goodwill in the calculation of the loss on
disposal of PVBJ (See Note 15 “Discontinued Operations”).
Comprehensive
Loss
Comprehensive
loss consists of two components, net loss and other comprehensive loss. The Company’s other comprehensive loss is comprised
of foreign currency translation adjustments. The balance of accumulated other comprehensive loss is zero as of December 31, 2020
due to the disposition of Pride on May 18, 2020. Comprehensive loss is included in discontinued operations on the income statement
for the year ended December 31, 2019.
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”).
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
For
the year ended December 31, 2020, the Company recorded no other comprehensive loss. The balance of comprehensive loss and accumulated
comprehensive loss has been reclassified to discontinued operations as of December 31, 2020 due to the disposition of Pride on
May 18, 2020. For the year ended December 31, 2019, the Company recorded other comprehensive gain of $11,952, which has been reclassified
to discontinued operations on the statement of operations.
Investments
The
Company follows Accounting Standards Codification (“ASC”) 321-10-35-2 “Equity Securities without Readily Determinable
Fair Values, to account for its ownership interest in noncontrolled entities. Under this guidance, equity securities that do not
have readily determinable fair values (i.e., non-marketable equity securities and do not qualify for the practical expedient to
determine the fair value at net asset value (“NAV”) are not required to be accounted for under the equity method are
typically carried at cost (i.e., cost method investments) less accumulated impairment. Investments of this nature are initially
recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled
entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are
considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only
when there is clear evidence that a decline in value that is other than temporary has occurred.
Revenue
Recognition
The
Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 606 – Revenue from Contracts (“ASC 606”).
Under
ASC 606 requirements, the Company recognizes revenue from the installation or construction of projects and service or short-term
projects over time using the cost-based input method. The Company accounts for a contract when: (i) it has approval and commitment
from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial
substance, and (v) collectability of consideration is probable. The Company considers the start of a project to be when the above
criteria have been met and the Company either has written authorization from the customer to proceed or an executed contract.
A detailed breakdown of the five-step process is as follows:
Identify
the Contract with a Customer
The
Company used to receive almost all of its contracts from only two sources, referrals, or government bids. In a referral, a client
that the Company has an ongoing business relationship with refers the Company to perform services. In a government bid, the Company
applies to perform services for public projects. The contracts have a pattern of being stand-alone contracts.
Identify
the Performance Obligations in the Contract
The
performance obligation of the Company is to perform a contractually agreed upon task for the customer. If the contract is stated
to provide only contractual services, then the services are considered the only performance obligation. If the contractual services
include design and or engineering in addition to the contract, it is considered a single performance obligation.
Determine
the Transaction Price
The
nature of the industry involves a number of uncertainties that can affect the current state of the contract. Variable considerations
are the estimates made due to a contract modification in the contractual service. Change orders, claims, extras, or back charges
are common in contractual services activity as a form of variable consideration. If there is going to be a contract modification,
judgment by management will need to be made to determine if the variable consideration is enforceable. The following factors are
considered in determining if the variable consideration is enforceable:
|
1.
|
The
customer’s written approval of the scope of the change order;
|
|
2.
|
Current
contract language that indicates clear and enforceable entitlement relating to the change order;
|
|
3.
|
Separate
documentation for the change order costs that are identifiable and reasonable; and
|
|
4.
|
The
Company’s favorable experience in negotiating change orders, especially as it relates to the specific type of contract
and change order being evaluated
|
Once
the Company receives a contract, it generates a budget of projected costs for the contract based on the contract price. If the
scope of the contract during the contractual period needs to be modified, the Company typically files a change order. The Company
does not continue to perform services until the change modification is agreed upon with documentation by both the Company and
the customer. There are few times that claims, extras, or back charges are included in the contract.
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
Allocate
the Transaction Price to the Performance Obligations in the Contract
If
there are multiple performance obligations to the contract, the costs must be allocated appropriately and consistently to each
performance obligation. In the Company’s experience, usually only one performance obligation is stated per contract. If
there are multiple services provided for one customer, the Company has a policy of splitting out the services over multiple contracts.
Recognize
Revenue When (or As) the Entity Satisfies a Performance Obligations
The
Company uses the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation.
The input method involves measuring the resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours
used relative to the total expected inputs to the satisfaction of the performance obligation. Costs incurred prior to actual contract
(i.e. design, engineering, procurement of material, etc.) should not be recognized as the client does not have control of the
good/service provided. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood
of recoverability of such costs, the Company records the entire estimated loss in the period the loss becomes known. Project contracts
typically provide for a schedule of billings or invoices to the customer based on the Company’s job to date percentage of
completion of specific tasks inherent in the fulfillment of its performance obligation(s). The schedules for such billings usually
do not precisely match the schedule on which costs are incurred. As a result, contract revenue recognized in the statement of
operations can and usually does differ from amounts that can be billed or invoiced to the customer at any point during the contract.
Amounts by which cumulative contract revenue recognized on a contract as of a given date exceed cumulative billings and unbilled
receivables to the customer under the contract are reflected as a current asset in the Company’s balance sheet under the
captions “Costs and estimated earnings in excess of billings” and “Unbilled accounts receivable.” Amounts
by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized
on the contract are reflected as a current liability in the Company’s balance sheet under the caption “Billings in
excess of costs and estimated earnings.”
Cash
and Cash Equivalents
Cash
and cash equivalents include cash in bank and money market funds as well as other highly liquid investments with an original maturity
of three months or less. The Company had no cash equivalents as of December 31, 2020 or 2019.
Stock-Based
Compensation
The
Company recognizes expense for its stock-based compensation based on the fair value of the awards at the time they are granted.
We estimate the value of stock option awards on the date of grant using the Black-Scholes model. The determination of the fair
value of stock-based payment awards on the date of grant is affected by our stock price as well as assumptions regarding a number
of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards,
expected term, risk-free interest rate and expected dividends. The impact of forfeitures are recorded in the period in which they
occur. There are no outstanding awards as of December 31, 2020,
Fair
Value of Financial Instruments
The
carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected
in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial
assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements
together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit
risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise
only available information pertinent to fair value has been disclosed. The Company classifies and discloses assets and liabilities
carried at fair value in one of the following three categories:
|
●
|
Level
1—quoted prices in active markets for identical assets and liabilities;
|
|
|
|
|
●
|
Level
2—observable market-based inputs or unobservable inputs that are corroborated by market data; and
|
|
|
|
|
●
|
Level
3—significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop
its own assumptions.
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
There
were no fair value measurements as of December 31, 2020.
Net
Income (Loss) Per Common Share
The
Company computes basic net income (loss) per share by dividing net income (loss) per share available to common stockholders by
the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities.
Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially
dilutive securities into common stock using the “if converted” method as applicable. The computation of diluted loss
per share excludes dilutive securities because their inclusion would be anti-dilutive. Dilutive securities for the periods presented
are as follows:
|
|
Years Ended
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Options to purchase common stock
|
|
|
0
|
|
|
|
21,250
|
|
Convertible debt
|
|
|
0
|
|
|
|
55,000
|
|
Totals
|
|
|
0
|
|
|
|
76,250
|
|
Please
refer to Note 10 for a discussion of the decrease for the twelve months ended December 31, 2020 compared to December 31, 2019.
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 $97,500 of management fees expensed for the year ended December 31, 2020 and $80,500 for the year ended December 31,
2019 to Turquino Equity LLC (“Turquino”), a former significant shareholder owned by our Chief Executive Officer and
Chief Financial Officer. Services provided were continuing the management positions of the Company.
On
January 2, 2018 and February 8, 2019, the Company and Andrew Hidalgo (“Hidalgo”), completed a Convertible Debenture
Agreement whereby Hidalgo, the Company’s Chief Executive Officer, lent us an aggregate of $275,000 (the “Hidalgo Notes”).
On January 2, 2018 and February 8, 2019, the Company and Michael Doyle (“Doyle”), a then director of the Company,
completed a Convertible Debenture Agreement whereby Doyle lent the Company an aggregate of $275,000 (the “Doyle Notes”).
The
Company recorded a $395,000 discount on debt, related to the beneficial conversion feature of the note to be amortized over the
life of the note using the effective interest method, or until the note is converted or repaid. On January 3, 2020, the Company
entered into an amendment agreement (the “Amendment”) with two of its directors (the “Holders”) to convertible
notes issued by the Company to the Holders in January 2018 (the “2018 Notes”). Pursuant to the Amendment, which was
effective as of January 2, 2020, the maturity date of the 2018 Notes was amended from January 2, 2020 to February 8, 2021, and
the Holders waived any defaults that might have occurred prior to the date of the Amendment.
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
As
a result of these changes, management determined debt extinguishment which was applied and the new notes were recorded at their
fair value resulting in a discount of approximately $40,000 and a gain on extinguishment of this amount recorded to additional
paid in capital.
May
18, 2020 Purchase and Sale Agreement
On May 18, 2020, the Company’s
Board of Directors authorized the Company, in accordance with Nevada Statute 78.565, to complete and execute the May 18, 2020 Purchase
and Sale Agreement between the Company and Turquino providing for the Company’s sale of 100% of Pride’s outstanding
stock Pride to Turquino in return for Turquino’s assumption of the Hidalgo Notes and the Doyle Notes and the debt obligations
and accrued interest related thereto (the “Agreement”). In conjunction therewith, Hidalgo and Doyle assigned the Notes
to Turquino, at which time Turquino became responsible for the debt obligations upon the Notes. The Company has no further note
obligations to Hidalgo or Doyle, and it reduced its debt by approximately $600,000 or 65% of the corporate debt obligations. Pursuant
to Nevada Statute Section 78.565, approval of the Agreement only required the approval of the board of directors and did not require
shareholder approval. The Agreement provides that the Parties mutually release one another and discharge and release the other
party (and their respective current and former officers, directors, employees, shareholders, note holders, attorneys, assigns,
agents, representatives, predecessors and successors in interest), from any and all claims, demands, obligations, or causes of
action. Hidalgo, our Chief Executive Officer, and a managing member of Turquino, is a related party in connection with the Exchange
Agreement, the Notes, and the Agreement.
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 $230,332 bearing interest with interest at 6% per annum. The entire principal and interest upon the Promissory Note are
due on June 19, 2021. The proceeds from the note was used to pay accrued expenses of the Company.
Effective
July 17, 2020, Judd Brammah lent the Company $50,000 at 6% per annum payable on the due date, June 19, 2021. Effective July 22,
2020, Judd Brammah lent the Company $299,900 at 6% per annum payable on the due date of June 19, 2021.
The
Company accrued and expensed $16,515 in interest on these notes in 2020.
4.
|
SIGNIFICANT
CONCENTRATIONS OF CREDIT RISK
|
Cash
is maintained at an authorized deposit-taking institution (bank) incorporated in both the United States and Australia and is insured
by the U.S. Federal Deposit Insurance Corporation and Australian Securities & Investments Commission up to $250,000 and approximately
$186,000 in total, respectively. As of December 31, 2020 and December 31, 2019, the balance was fully covered under the $250,000
threshold in the United States. In Australia, the balance was $10,563 in excess of the insured limit at December 31, 2019 which
is included in current assets held for sale on the balance sheet.
Credit
risk for trade accounts is concentrated as well because substantially all of the balances are receivable from entities located
within certain geographic regions. To reduce credit risk, the Company performs ongoing credit evaluations of its customers’
financial conditions but does not generally require collateral. There were no accounts receivable as of December 31, 2020. As
of December 31, 2019, one of the Company’s accounts receivable was due from one customer at approximately 13%, which is
included in current assets held for sale on the balance sheet.
Due
to the sale of Pride and PVBJ the Company had no major customers for the year ended December 31, 2020. During the year ended December
31, 2019, there was one customer with a concentration of 10% or higher of the Company’s revenue, at 14%, which is included
in discontinued operations on the income statement.
Costs,
estimated earnings, and billings on uncompleted contracts are summarized as follows as of December 31, 2020 and 2019, which are
included in current assets and liabilities held for sale on the balance sheet.
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Costs incurred on uncompleted contracts
|
|
$
|
-
|
|
|
$
|
465,686
|
|
Estimated earnings
|
|
|
-
|
|
|
|
454,132
|
|
Costs and estimated earnings earned on uncompleted contracts
|
|
|
-
|
|
|
|
919,818
|
|
Billings to date
|
|
|
-
|
|
|
|
750,769
|
|
Costs and estimated earnings in excess of billings on uncompleted contracts
|
|
|
-
|
|
|
|
169,049
|
|
Costs and earnings in excess of billings on completed contracts
|
|
|
-
|
|
|
|
(190,102
|
)
|
|
|
$
|
-
|
|
|
$
|
(21,053
|
)
|
|
|
|
|
|
|
|
|
|
Costs in excess of billings
|
|
$
|
-
|
|
|
$
|
26,045
|
|
Billings in excess of cost
|
|
|
-
|
|
|
|
(47,098
|
)
|
|
|
$
|
-
|
|
|
$
|
(21,053
|
)
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
Operating
Leases
The
Company maintains its principal office at 95 Christopher Columbus Drive, 16th Floor Jersey City, NJ 07302. The Company
moved in October 2020 and it’s office is in a shared office space provider, at a cost of $99 per month and currently the lease is month-to-month.
As of December 31, 2020, the Company
had no operating leases except as noted above. As of December 31, 2019, the Company had $87,897 in current operating lease
liability and $137,071 in non-current operating lease liability, which have been re-classed to current and non-current assets
held for sale on the balance sheet.
Finance
Leases
As
of December 31, 2020, the Company had no finance leases. As of December 31, 2019, the Company had $75,743 in current finance leases
and $307,804 in non-current finance leases which have been re-classed to current and non-current assets held for sale on the balance
sheet.
As
of December 31, 2020, the Company had no contract backlog. As of December 31, 2019, the Company had a contract backlog approximating
$551,850, with anticipated direct costs to completion approximating $454,132, which is included in current assets and liabilities
held for sale on the balance sheet and discontinued operations on the balance sheet.
9.
|
GOODWILL
AND OTHER INTANGIBLES
|
The
Company has no goodwill or other intangibles as of December 31, 2020. As of December 31, 2019, the Company had $1,373,621 in goodwill
and $63,161 in other intangibles which has been re-classed to non-current assets held for sale on the balance sheet.
10.
|
STOCK
OPTIONS AWARDS AND GRANTS
|
A
summary of the stock option activity and related information for the 2016 Incentive Stock Option Plan from December 31, 2019 to
December 31, 2020 is as follows:
|
|
Shares
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at December 31, 2019
|
|
|
34,925
|
|
|
$
|
6.20
|
|
|
|
2.40
|
|
|
$
|
216,535
|
|
Grants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Canceled
|
|
|
(34,925
|
)
|
|
|
(6.20
|
)
|
|
|
(2.40
|
)
|
|
|
-
|
|
Outstanding at December 31, 2020
|
|
|
-
|
|
|
$
|
0.00
|
|
|
|
-
|
|
|
|
-
|
|
Exercisable at December 31, 2020
|
|
|
-
|
|
|
$
|
0.00
|
|
|
|
-
|
|
|
|
-
|
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
The
aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on options with an exercise
price less than the Company’s weighted average grant date stock price of $6.20 per share, which would have been received
by the option holders had those option holders exercised their options as of that date.
Option
valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated
using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities
until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined
this assumption to be a more accurate indicator of value.
The
Company accounts for the expected life of options based on the contractual life of options for non-employees. For incentive options
granted to employees, the Company accounts for the expected life in accordance with the “simplified” method, which
is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate
was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term
of the options. The fair value of stock-based payment awards was estimated using the Black-Scholes pricing model.
As
of December 31, 2020, there was no unrecognized compensation expense as all option holders had their options forfeited through
the sale of Pride and PVBJ. As of December 31, 2019, there was $32,642 of unrecognized compensation expense.
Prior
to the disposition of Pride and PVBJ, the Company’s business was organized into two reportable segments: renewable systems
integration revenue and non-renewable systems integration revenue. Due to the sale of both Pride and PVBJ (See Note 15 “Discontinued
Operations”) the Company operates in only one reportable segment. Please refer to Note 15 and Management’s Discussion
and Analysis for further detail.
QRIDA
Loan
On
May 6, 2020, the Company entered into a loan for $160,410 with the Queensland Rural and Industry Development Authority. (“QRIDA”)
The interest rate was 2.5% with a term of ten years and the first year being interest free. Through the disposition of Pride,
the Company no longer has this loan as a liability on its balance sheet as of December 31, 2020.
2019
Convertible Note Financing
On
October 17, 2019, the Company entered into a securities purchase agreement with FirstFire Global Opportunities Fund LLC (“FirstFire”),
an unrelated third party, pursuant to which it issued a $110,000 convertible note (the “2019 Note”) to FirstFire for
gross proceeds of $100,000, with an original discount issuance of $10,000. The transaction closed on October 23, 2019 upon receipt
of the funds from FirstFire. The Company incurred $5,000 of legal fees for the transaction. Both the legal fees and original issue
discount are amortized over the life of the agreement.
On
May 18, 2020, FirstFire converted $15,450 of the balance due for 5,000 shares at $0.16 per share. The unpaid principal was $75,000
before the conversion and $59,550 after.
2020
Convertible Note Financing
On
January 15, 2020, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with FirstFire,
pursuant to which the Company issued a $85,250 principal amount convertible note (the “2020 Note”) for gross proceeds
of $77,500, with an original discount issuance of $7,750. The transaction closed on January 16, 2020. The Company incurred $2,500
of legal fees for this transaction.
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
On
June 18, 2020, the Company and FirstFire entered into a settlement agreement whereby both the 2019 Note and 2020 Note were cancelled
and all remaining amounts due under the above notes were settled for $90,000. The Company has no further obligations with respect
to any of the notes under terms of the First Fire Note settlement.
The
Company incurred $2,289 of interest expense in 2019 and $7,438 in 2020 which both amounts were accrued on the balance sheet. There
was an early termination penalty of $19,953. The unamortized discount of the notes was $171,203 on the cancellation date of May
20, 2020.
The
Notes were cancelled, and all remaining contractual obligations there under were extinguished under terms of a Settlement and
Release Agreement which resulted in a gain on the statement of operations of $81,203 for the year ended December 31, 2020.
Paycheck
Protection Program Loan
On
May 5, 2020, the Company entered into a term note with Comerica Bank, with a principal amount of $20,000 pursuant
to the Paycheck Protection Program (“PPP Term Note”) under the Coronavirus Aid, Relief, and Economic Security Act
(the “CARES Act”). The PPP Loan is evidenced by a promissory note. The PPP Term Note bears interest at a fixed annual
rate of 1.00%, with the first six months of interest deferred. Beginning in November 2022, the Company will make 18 equal monthly
payments of principal and interest with the final payment due in April 2022. The PPP Term Note may be accelerated upon the occurrence
of an event of default.
The
PPP Term Note is unsecured and guaranteed by the United States Small Business Administration. The Company may apply to Comerica
Bank for forgiveness of the PPP Term Note, with the amount which may be forgiven equal to the sum of payroll costs, covered rent
and mortgage obligations, and covered utility payments incurred by the Company during the eight-week period beginning upon receipt
of PPP Term Note funds, calculated in accordance with the terms of the CARES Act. The full loan amount of $20,000 is estimated
to be forgiven.
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 $230,332 bearing interest at 6% per annum. The entire principal and interest upon the promissory note are due on June 19,
2021. As of December 31, 2020, $230,332 is due on this promissory note. The promissory note incurred interest expense of $7,328
for the year ended December 31, 2020, which remains outstanding at December 31, 2020.
Effective
July 17, 2020, Judd Brammah lent the Company $50,000 at 6% per annum payable on the due date, June 19, 2021. The Company incurred
interest expense of $628 for year ended December 31, 2020. Effective July 22, 2020, Judd Brammah lent the Company $299,900 at
6% per annum payable on the due date of June 19, 2021. The Company incurred interest expense of $7,059 for the year ended December
31, 2020, which remains outstanding at December 31, 2020.
13.
|
EQUITY
PURCHASE AGREEMENT
|
On
March 12, 2019, the Company entered into an equity purchase agreement (the “Equity Purchase Agreement”) and a registration
rights agreement with an accredited investor (the “Investor”), pursuant to which the Investor has agreed to purchase
from the Company up to $450,000 in shares (the “Shares”) of the Company’s common stock, subject to certain limitations
and conditions set forth in the Equity Purchase Agreement. Additionally, on March 12, 2019, the Company agreed to donate 1,750
shares of common stock to the manager of the Investor. The Company recorded value of these shares at the market price on the grant
date and is included in general and administrative expenses.
On
June 24, 2019, the Company provided written notice to the Investor that the Company elected to terminate the Equity Agreement,
effective immediately. No Shares were sold pursuant to the Equity Purchase Agreement. On August 30, 2019, the 1,750 donation shares
were returned to the Company and canceled.
On
July 9, 2019, the Company entered into an equity financing agreement with GHS Investments LLC (the “GHS Financing Agreement”);
in connection therewith, the Company filed a Form S-1 Registration Statement (the “S-1”) registering up to 1,750 Common
Stock Shares, which S-1 was declared effective on July 31, 2019. On May 19, 2020, the Company filed a Post-Effective Amendment
No. 1 on Form S-1 amending the S-1 to deregister all securities registered pursuant to said S-1, which as of the date of such
Amendment, 22,513 Common Stock Shares were unissued (the “Post Effective S-1”). The Post Effective S-1 was declared
effective on May 21, 2020, at which time the Offering described in the S-1 was terminated, as well as the contractual obligations
under the GHS Financing Agreement. The Company incurred $135,000 of costs associated with the financing, which were subsequently
amortized with the issue of shares and the remainder written off in the second quarter of 2020.
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
In
October 2020, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission, whereby the
Company registered 12.5 million shares of its common stock for sale as a company offering. The registration statement was declared
effective in October 2020. The Company incurred $70,000 of costs associated with the financing, which are deferred until the proceeds
are received at which point they are netted against the proceeds.
14.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
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 became 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 is currently evaluating the impact of
the new guidance on its consolidated 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 is currently evaluating the impact of the new guidance on its consolidated financial statements.
15.
|
DISCONTINUED
OPERATIONS
|
Sale
of PVBJ
On
April 21, 2020, the Company’s Board of Directors authorized its resale of PVBJ pursuant to the following terms: (a) the
outstanding $221,800 earn-out liability that was used as consideration towards the purchase of PVBJ; (b) Paul Benis agreed to
apply the remaining salary due to him, as prorated from the Closing Date to the expiration date of the Employment Agreement (January
31, 2021), to the purchase of PVBJ by Benis Holdings LLC as additional consideration thereof and (c) as additional consideration
for the purchase of PVBJ by Benis Holdings LLC, PVBJ shall continue to be responsible for the line of credit (see below).
Sale
of Pride
On
May 18, 2020, the Company executed a Purchase and Sale Agreement with Turquino providing for its sale of 100% of Pride’s
outstanding stock Pride to Turquino in return for Turquino’s assumption of the Hidalgo Notes and the Doyle Notes and the
debt obligations and accrued interest related thereto (the “Agreement”). In conjunction therewith, Hidalgo and Doyle
assigned the Notes to Turquino, at which time Turquino became responsible for the debt obligations upon the Notes. The Company
has no further note obligations to Hidalgo or Doyle, and it reduced its debt by approximately $600,000 or 65% of the corporate
debt obligations.
VISION HYDROGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
The
gain/loss on discontinued operations consists of the following:
|
|
December 31, 2020
|
|
PVBJ
|
|
|
|
|
Proceeds on sale (earn-out payable exchange)
|
|
$
|
214,074
|
|
Less: net asset value
|
|
|
(1,383,440
|
)
|
Loss on sale of assets
|
|
$
|
(1,169,366
|
)
|
|
|
|
|
|
Pride
|
|
|
|
|
Proceeds on sale (assumption of debt)
|
|
$
|
500,321
|
|
Less net asset value
|
|
|
(120,380
|
)
|
Gain on sale of assets
|
|
$
|
379,941
|
|
The
results of discontinued operations are as follows:
|
|
Year ended December 31, 2020
|
|
|
Year ended December 31, 2019
|
|
PVBJ
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
722,786
|
|
|
$
|
2,873,796
|
|
Total revenue
|
|
|
722,786
|
|
|
|
2,873,796
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
Direct costs
|
|
|
560,328
|
|
|
|
2,152,120
|
|
Total
cost of goods sold
|
|
$
|
560,328
|
|
|
$
|
2,152,120
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
230,807
|
|
|
|
665,507
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for period
|
|
$
|
(68,349
|
)
|
|
$
|
56,169
|
|
|
|
Year ended December 31, 2020
|
|
|
Year ended December 31, 2019
|
|
Pride
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,474,460
|
|
|
$
|
3,943,528
|
|
Total revenue
|
|
|
1,474,460
|
|
|
|
3,943,528
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
Direct costs
|
|
|
1,121,121
|
|
|
|
2,702,758
|
|
Total
cost of goods sold
|
|
$
|
1,121,121
|
|
|
$
|
2,702,758
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
440,396
|
|
|
|
1,229,289
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for period
|
|
$
|
(87,057
|
)
|
|
$
|
11,481
|
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
Gain
(loss) from discontinued operations:
Results from discontinued operations
|
|
$
|
(155,406
|
)
|
|
$
|
67,650
|
|
Loss on disposal of assets
|
|
|
(789,425
|
)
|
|
|
-
|
|
Loss from discontinued operations
|
|
$
|
(944,831
|
)
|
|
$
|
67,650
|
|
The
discontinued operations of the balance sheet as of December 31, 2019 are as follows:
|
|
Pride
|
|
|
PVBJ
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
196,705
|
|
|
$
|
55,856
|
|
Accounts receivable
|
|
|
449,530
|
|
|
|
354,129
|
|
Prepaid expenses
|
|
|
2,108
|
|
|
|
9,071
|
|
Costs and earnings in excess of billings
|
|
|
26,045
|
|
|
|
-
|
|
Total current assets
|
|
|
674,388
|
|
|
|
419,056
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
90,847
|
|
|
|
387,391
|
|
Security deposits and other non-current assets
|
|
|
31,633
|
|
|
|
-
|
|
Deferred tax asset
|
|
|
46,000
|
|
|
|
-
|
|
Customer lists, net
|
|
|
-
|
|
|
|
63,161
|
|
Right of use asset
|
|
|
222,524
|
|
|
|
-
|
|
Goodwill
|
|
|
-
|
|
|
|
1,373,621
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,065,392
|
|
|
$
|
2,243,229
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
450,545
|
|
|
$
|
94,104
|
|
Billings in excess of costs and earnings
|
|
|
47,098
|
|
|
|
-
|
|
Sales and withholding tax payable
|
|
|
37,199
|
|
|
|
-
|
|
Current operating lease liability
|
|
|
87,897
|
|
|
|
-
|
|
Current equipment notes payable
|
|
|
17,782
|
|
|
|
9,653
|
|
Current line of credit
|
|
|
-
|
|
|
|
269,746
|
|
Current finance lease payable
|
|
|
-
|
|
|
|
75,743
|
|
Income tax payable
|
|
|
41,426
|
|
|
|
-
|
|
Total current liabilities
|
|
|
681,947
|
|
|
|
449,246
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
|
|
|
|
|
|
Earn-out payable
|
|
|
-
|
|
|
|
209,199
|
|
Lease operating liability
|
|
|
137,071
|
|
|
|
-
|
|
Finance leases
|
|
|
-
|
|
|
|
307,804
|
|
Equipment notes payable
|
|
|
33,227
|
|
|
|
38,913
|
|
Convertible notes payable – related party, net of discounts
|
|
|
473,770
|
|
|
|
-
|
|
Total
noncurrent liabilities
|
|
|
644,068
|
|
|
|
555,916
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,326,015
|
|
|
|
1,005,162
|
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
|
|
December 31, 2019
|
|
Pride current assets
|
|
$
|
674,388
|
|
PVBJ current assets
|
|
|
419,056
|
|
Current assets of discontinued operations
|
|
$
|
1,093,444
|
|
|
|
|
|
|
|
|
|
|
|
Pride non-current assets
|
|
$
|
391,004
|
|
PVBJ non-current assets
|
|
|
1,824,173
|
|
Non-current assets of discontinued operations
|
|
$
|
2,215,177
|
|
|
|
December 31, 2019
|
|
Pride current liabilities
|
|
$
|
681,947
|
|
PVBJ current liabilities
|
|
|
449,246
|
|
Current liabilities of discontinued operations
|
|
$
|
1,131,193
|
|
|
|
|
|
|
|
|
|
|
|
Pride non-current liabilities
|
|
$
|
644,068
|
|
PVBJ non-current liabilities
|
|
|
555,916
|
|
Non-current liabilities of discontinued operations
|
|
$
|
1,199,984
|
|
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 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 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.
On
March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19), a global pandemic and recommended
containment and mitigation measures worldwide. As of the date of this filing, the Company has sold its office in the U.S and Australia.
The Company will continue to monitor the situation closely and it is possible that it will
implement further measures. In light of the uncertainty as to the severity and duration of the pandemic, the impact on the Company’s
revenues, profitability and financial position is uncertain at this time.
As
reflected in the yearly financial statements, the Company has a net loss of $1,411,562 and net operating cash in continuing operations
used of $412,528 for the year ended December 31, 2020. In addition, the Company is a start up in the renewable energy space and
has generated no revenues to date.
Due
to the sale of PVBJ and Pride, the Company has extinguished liabilities on its balance sheet such as the line of credit
that was due in August 2020, earn out payable, and other notes and finance leases payables relating to vehicles. The Company also
generated proceeds of $580,232 from a related party note in 2020 along with $2,500,000 from the public sale of common stock in
the first quarter of 2021. The related party note has been further converted into equity therefore not having to be repaid. Management
has evaluated the significance of these conditions and under these circumstances expects that its current cash resources, operating
cash flows and ability to secure financing would be sufficient to sustain operations for a period greater than one year from the
annual report issuance date. Therefore, the conditions identified above have been alleviated.
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
On
August 12, 2020, pursuant to a Seed Capital Subscription Agreement, the Company made an equity investment of 175,000 shares into
VoltH2 Holdings AG (“VoltH2”), a Swiss corporation developing scalable green hydrogen production projects primarily
in Europe. VoltH2 is currently developing a 25MW green hydrogen production site near Vlissingen, Netherlands. The investment was
for a total purchase price of $175,000, representing a 17.5% equity interest in VoltH2. Due to the lack of readily determinable
fair value of VoltH2, and because this investment does not qualify for the practical expedient to determine fair value using NAV,
this investment has been recorded at cost. The Company will continually evaluate the treatment of this investment each reporting
period to determine if a fair value can be determined, and if so will reassess the accounting for this investment.
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. 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 2019, 2018 and 2017 income tax returns are still open for examination by the taxing authorities.
The
components of income tax expense (benefit) from continuing operations are as follows:
|
|
Year Ended December 31,
|
|
Current
|
|
2020
|
|
|
2019
|
|
U.S. Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
U.S. State and local
|
|
|
-
|
|
|
|
-
|
|
Australia
|
|
|
-
|
|
|
|
-
|
|
Total current tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
Year Ended December 31,
|
|
Deferred
|
|
2020
|
|
|
2019
|
|
U.S. Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
U.S. State and local
|
|
|
-
|
|
|
|
-
|
|
Australia
|
|
|
-
|
|
|
|
-
|
|
Total deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax expense
|
|
|
-
|
|
|
|
-
|
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
At
December 31, 2020 and 2019, the Company had deferred tax assets from continuing operations of $1,050,000 and $530,000, respectively,
against which a valuation allowance of $1,050,000 and $530,000, respectively, had been recorded. The change in the valuation allowance
for the year ended December 31, 2020 was an increase of $520,000. The increase in the valuation allowance for the year ended December
31, 2020 was mainly attributable to an increase in the capital loss carryforward, which resulted in an increase in the Company’s
deferred tax asset. The Company periodically assesses the likelihood that it will be able to recover the deferred tax asset. The
Company considers all available evidence, both positive and negative, including historical levels of income, expectations and
risks associated with estimates of future taxable income.
Significant
components of deferred tax assets from continuing operations at December 31, 2020 and 2019 were as follows:
|
|
December 31,
|
|
Deferred tax assets:
|
|
2020
|
|
|
2019
|
|
Net operating loss carryforward
|
|
|
373,000
|
|
|
|
371,000
|
|
Capital loss carryforward
|
|
|
677,000
|
|
|
|
-0
|
-
|
Share-based compensation
|
|
|
-0-
|
|
|
|
159,000
|
|
Gross deferred tax asset
|
|
|
1,050,000
|
|
|
|
530,000
|
|
Less: valuation allowance
|
|
|
(1,050,000
|
)
|
|
|
(530,000
|
)
|
Net deferred tax assets
|
|
|
--
|
|
|
|
--
|
|
A
reconciliation of the federal statutory tax rate and the effective tax rates from continuing operations for the years ended December
31, 2020 and 2019 were as follows:
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
U.S. federal statutory tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
State income taxes, net of federal benefit
|
|
|
(13.5
|
)
|
|
|
(7.1
|
)
|
Non-deductible expenses
|
|
|
(2.2
|
)
|
|
|
-0
|
-
|
Deferred tax asset write-down
|
|
|
(38.2
|
)
|
|
|
-0
|
-
|
Change in valuation allowance
|
|
|
32.9
|
|
|
|
(28.1
|
)
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The
Company had approximately $1,327,000 and $1,236,000 of gross net operating loss (“NOL”) carryforwards (U.S. federal
and state) as of December 31, 2020 and 2019, respectively, of which approximately $241,000 expires in 2035 through and 2037 for
U.S. federal purposes, and the remaining NOL does not expire for U.S. federal purposes. The total NOL expires between 2035 and
2040 for U.S. state purposes. The Company also had approximately $2,407,000 of capital loss carryforwards that expires in 2025
for U.S. federal and state purposes. Sections 382 and 383 of the Internal Revenue Code, and similar state regulations, contain
provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of
certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change
in ownership in excess of 50% over a three-year period, the utilization of the NOL carryforwards may be limited.
VISION
HYDROGEN CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
The
following table sets forth the information needed to compute basic and diluted loss per share:
Continuing
Operations:
|
|
Year Ended
December 31, 2020
|
|
|
Year Ended
December 31, 2019
|
|
Net loss from continuing operations
|
|
$
|
(461,731
|
)
|
|
$
|
(780,091
|
)
|
Weighted average common shares outstanding
|
|
|
394,197
|
|
|
|
382,233
|
|
Basic net loss per share
|
|
$
|
(1.18
|
)
|
|
$
|
(2.04
|
)
|
Diluted net loss per share
|
|
$
|
(1.18
|
)
|
|
$
|
(2.04
|
)
|
Discontinued
Operations:
|
|
Year Ended
December 31, 2020
|
|
|
Year Ended
December 31, 2019
|
|
Net loss
|
|
$
|
(944,381
|
)
|
|
$
|
67,650
|
|
Weighted average common shares outstanding
|
|
|
394,197
|
|
|
|
382,233
|
|
Basic net loss per share
|
|
$
|
(2.40
|
)
|
|
$
|
0.18
|
|
Diluted net loss per share
|
|
$
|
(2.40
|
)
|
|
$
|
0.18
|
|
On
January 21, 2021, the PPP Term Note was forgiven.
On
January 29, 2021, Judd Brammah, a Director of the Company, converted his note and interest payable totaling $596,747, together
with an additional cash payment of $3,253 for a total of $600,000 into 3,000,000 shares of the Company pursuant to the Company
public offering of common stock on the Form S-1 registration statement.
As
of January 31, 2021, the Company sold 12,500,000 shares of its common stock for gross proceeds of $2,5000,000 pursuant to the
Company public offering of common stock on the Form S-1 registration statement. The proceeds will be used for general working
capital.