NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
1.
|
ORGANIZATION
AND LINE OF BUSINESS
|
Vision
Hydrogen Corporation (the “Company”) was incorporated in the state of Nevada on August 17, 2015 as H/Cell Energy Corporation
and is based in Jersey City, New Jersey. The Company changed its name to Vision Hydrogen Corporation in October 2020.
During
the year ended December 31, 2020, the Company took significant steps to transition its hydrogen energy business to focus on hydrogen
production on a scaled production plant model. During the period, the Company disposed of its interests in both PVBJ Inc. (“PVBJ”)
and The Pride Group (QLD) Pty Ltd, an Australian company (“Pride”) (See Note 12 “Discontinued Operations”) in
order to facilitate this transition. As part of the disposition the Company provided certain post-closing support to both PVBJ and Pride
through Q3 2020. On August 12, 2020, pursuant to a Seed Capital Subscription Agreement, the Company made an equity investment into VoltH2
Holdings AG (“VoltH2”), a Swiss corporation developing scalable green hydrogen production projects primarily in Europe. VoltH2
is currently planning to develop a 25MW green hydrogen production site near Vlissingen, Netherlands. The investment was for a total purchase
price $175,000, representing a 17.5% equity interest in VoltH2.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Presentation
The
Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”)
for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by
U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s
annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments,
which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative
of the results to be expected for the year ending December 31, 2021 or any other interim period or for any other future year. These unaudited
condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements
and the notes thereto for the year ended December 31, 2020, included in the Company’s 2020 Annual Report on Form 10-K filed with
the SEC. The balance sheet as of December 30, 2020 has been derived from audited financial statements at that date but does not include
all of the information required by U.S. GAAP for complete financial statements.
On
October 6, 2020, the Company effectuated a 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
Accounts
Receivable
Accounts
receivable are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. The
allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in the
construction industry, and the financial stability of its customers. Accounts are written off as uncollectible after collection efforts
have failed. In addition, the Company does not generally charge interest on past-due accounts or require collateral. As of March 31,
2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020.
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 March 31, 2021, the Company had no goodwill and has included the write-off of goodwill in the calculation of the loss on disposal
of PVBJ for the three months ended March 31, 2020. (See Note 12 “Discontinued Operations”).
Comprehensive
Loss
Comprehensive
loss consists of two components, net loss and other comprehensive loss. The Company’s other comprehensive loss is comprised of
foreign currency translation adjustments. The balance of accumulated other comprehensive loss is zero as of March 31, 2021 and December
31, 2020 due to the disposition of Pride on May 18, 2020. Comprehensive loss is included in discontinued operations on the statement
of operations for the three months ended March 31, 2020.
The
functional and reporting currency of the Company is the United States Dollar (“U.S. Dollar”).
For
the three months ended March 31, 2021, the Company recorded no other comprehensive loss. The balance of comprehensive loss and accumulated
comprehensive loss has been reclassified to discontinued operations as of December 31, 2020 due to the disposition of Pride on May 18,
2020. For the three months ended March 31, 2020, the Company recorded other comprehensive loss of $13,100, which has been reclassified
to discontinued operations on the statement of operations.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
Investments
The
Company follows Accounting Standards Codification (“ASC”) 321-10-35-2 “Equity Securities without Readily Determinable
Fair Values”, to account for its ownership interest in non-controlled entities. Under this guidance, equity securities that do
not have readily determinable fair values (i.e., non-marketable equity securities and do not qualify for the practical expedient to determine
the fair value at net asset value (“NAV”)) are not required to be accounted for under the equity method and carried at cost
(i.e., cost method investments) less accumulated impairment. Investments of this nature are initially recorded at cost. Income is recorded
for dividends received that are distributed from net accumulated earnings of the non-controlled entity subsequent to the date of investment.
Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded
as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that
is other than temporary has occurred.
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
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 March 31, 2021 or December 31, 2020.
Stock-Based
Compensation
The
Company recognizes expense for its stock-based compensation based on the fair value of the awards at the time they are granted. We estimate
the value of stock option awards on the date of grant using the Black-Scholes model. The determination of the fair value of stock-based
payment awards on the date of grant is affected by our stock price as well as assumptions regarding a number of complex and subjective
variables. These variables include our expected stock price volatility over the term of the awards, expected term, risk-free interest
rate and expected dividends. The impact of forfeitures are recorded in the period in which they occur. There were re no outstanding awards
as of March 31, 2021.
Fair
Value of Financial Instruments
The
carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the
balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets,
financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with
other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed. The Company classifies and discloses assets and liabilities carried at fair value in one
of the following three categories:
|
●
|
Level
1—quoted prices in active markets for identical assets and liabilities;
|
|
|
|
|
●
|
Level
2—observable market-based inputs or unobservable inputs that are corroborated by market data; and
|
|
|
|
|
●
|
Level
3—significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions.
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
There
were no fair value measurements as of March 31, 2021 or 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:
|
|
Three Months Ended
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
Options to purchase common stock
|
|
|
0
|
|
|
|
34,925
|
|
Convertible debt
|
|
|
0
|
|
|
|
74,525
|
|
Totals
|
|
|
0
|
|
|
|
109,450
|
|
Please
refer to Note 7 for a discussion of the decrease for the three months ended March 31, 2021 compared to March 31, 2020.
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 $33,750 of management fees expensed for the three months ended March 31, 2021 and $20,000 for the three months ended March 31, 2020
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.
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.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
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 Company obtained a valuation of the fair market value of Pride from an independent third party which
valued Pride at $425,000. 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 and no interest in 2021.
On
January 29, 2021, Judd Brammah 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.
4.
|
SIGNIFICANT
CONCENTRATIONS OF CREDIT RISK
|
Cash
is maintained at an authorized deposit-taking institution (bank) incorporated in the United States and is insured by the U.S. Federal
Deposit Insurance Corporation up to $250,000. As of March 31, 2021 the balance was $1,488,631 over this threshold and as of December
31, 2020 the balance was fully covered.
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 March 31, 2021 or December 31, 2020.
Due
to the sale of Pride and PVBJ, the Company had no major customers for the three months ended March 31, 2021. During the three months
ended March 31, 2020, there was two customers with a concentration of 10% or higher of the Company’s revenue at 13% and 12%, which
is included in discontinued operations on the income statement.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
Operating
Leases
The
Company maintains its principal office at 95 Christopher Columbus Drive, 16th Floor Jersey City, NJ 07302. The Company moved
in October 2020 and its office is in a shared office space provider, at a cost of $114 per month and currently the lease is month-to-month.
As
of March 31, 2021 and December 31, 2020, the Company had no operating leases except as noted above.
Finance
Leases
As
of March 31, 2021 and December 31, 2020, the Company had no finance leases.
7.
|
STOCK
OPTIONS AWARDS AND GRANTS
|
There
was no stock option activity from the 2016 Incentive Stock Option Plan from January 1, 2021 to March 31, 2021.
As
of March 31, 2021, there was no unrecognized compensation expense as all option holders had their options forfeited through the sale
of Pride and PVBJ.
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, the Company
operates in only one reportable segment. Please refer to Note 12 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 March 31, 2021.
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.
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.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 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. On January 21, 2021, the PPP Term Note
was fully forgiven and as a result, the Company recorded a gain on the forgiveness in accordance with ASC-470.
Director
Related Party Note
On
June 19, 2020, the Company entered into a promissory note with Judd Brammah, a director of the Company, for the principal amount up to
$230,332 bearing interest at 6% per annum. The entire principal and interest upon the promissory note are due on June 19, 2021.
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.
On
January 29, 2021, Judd Brammah 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.
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 21, 2020, the offering was terminated.
In
October 2020, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission, whereby the Company
registered 12,500,000 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 12,500,000 shares of Common Stock in January 2021 for total consideration of $2,500,000. The
consideration consisted of $596,747 of debt converted to equity (see Note 9) and gross cash proceeds of $1,903,253. The Company incurred
$70,000 of legal fees and a $51,000 advisory fee in connection with the capital raise.
11.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
In
January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures
(Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method
of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the
transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative.
The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those
annual periods, with early adoption permitted. The Company has adopted this standard and there is no impact on the current financial
statements.
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity,
and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after
December 15, 2021 and interim periods within those annual periods and early adoption is permitted. The Company has adopted this standard
and there is no impact on the current financial statements.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
12.
|
DISCONTINUED
OPERATIONS
|
Sale
of PVBJ
On
April 21, 2020, the Company’s Board of Directors authorized its resale of PVBJ pursuant to the following terms: (a) the outstanding
$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.
The
results of discontinued operations are as follows:
|
|
Three months
ended
March 31, 2021
|
|
|
Three months
ended
March 31, 2020
|
|
PVBJ
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
-
|
|
|
$
|
637,757
|
|
Total revenue
|
|
|
-
|
|
|
|
637,757
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
Direct costs
|
|
|
-
|
|
|
|
510,615
|
|
Total cost of goods sold
|
|
$
|
-
|
|
|
$
|
510,615
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
-
|
|
|
|
170,053
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for period
|
|
$
|
-
|
|
|
$
|
(42,910
|
)
|
|
|
Three months
ended
March 31, 2021
|
|
|
Three months
ended
March 31, 2020
|
|
Pride
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
-
|
|
|
$
|
1,030,190
|
|
Total revenue
|
|
|
-
|
|
|
|
1,030,190
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
Direct costs
|
|
|
-
|
|
|
|
806,843
|
|
Total cost of goods sold
|
|
$
|
-
|
|
|
$
|
806,843
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
-
|
|
|
|
279,465
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for period
|
|
$
|
-
|
|
|
$
|
(56,118
|
)
|
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
Gain
(loss) from discontinued operations:
Results from discontinued operations
|
|
$
|
-
|
|
|
$
|
(99,028
|
)
|
Loss on disposal of assets
|
|
|
-
|
|
|
|
-
|
|
Loss from discontinued operations
|
|
$
|
-
|
|
|
$
|
(99,028
|
)
|
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.