NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
1. ORGANIZATION AND LINE OF BUSINESS
Vision
Hydrogen Corporation (the “Company”) was incorporated in the state of Nevada on August 17, 2015 as H/Cell Energy Corporation
and is based in Jersey City, New Jersey. The Company changed its name to Vision Hydrogen Corporation in October 2020.
On
November 8, 2021, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with VoltH2 Holdings AG (“VoltH2”),
a Swiss corporation, and the other shareholders of VoltH2 (each, a “Seller”, and together, the “Sellers”) pursuant
to which we acquired VoltH2 (the “Acquisition”). VoltH2 is a European-based developer of clean hydrogen production facilities
for the supply of commercial offtake volumes of clean hydrogen to manufacturers, gas and power traders, industrial consumers, and both
heavy and marine transportation sectors that have pivoted away from carbon emitting energy sources and fuels.
Pursuant
to the Purchase Agreement, we acquired an 84.1% interest of VoltH2, and together with our existing 15.9% ownership interest, we now own
100% of VoltH2. The Acquisition was completed in exchange for 8,409,091 shares of our common stock (the “Consideration Shares”).
In connection with the Acquisition, we also entered into an indemnification escrow agreement (the “Escrow Agreement”) with
one of the Sellers providing for the periodic release of up to 1,768,182 of the Consideration Shares (the “Escrowed Shares”)
and a pledge and security agreement (the “Pledge and Security Agreement”) to grant to us a continuing security interest in
the Escrowed Shares to secure such Seller’s indemnity obligations under the Purchase Agreement.
The
VoltH2 acquisition was accounted for as an asset acquisition with no step up basis due to the 15.9%
ownership of VoltH2 by Vision Hydrogen prior to the acquisition and due to VoltH2 being an early stage company that has not generated
revenues and lacks outputs. Since this transaction does not constitute the acquisition of a business, but a transfer of long lived assets
there is no step up in basis. The SEC generally will not permit the recognition of gain in the transferor’s financial statements
or a step-up in basis on the transferee’s books for sales or transfers of long-lived assets when related parties are involved.
As a result of the Company’s previously held 15.9%
interest in VoltH2, it was determined to be a related party. The acquisition consideration consisted of 8,409,091
shares of Vision Hydrogen Corporation common
stock granted on the acquisition date of November 8, 2021 at a closing market price of $11.
A deemed dividend for the excess share price over cost basis of the net assets of ($1,340,426)
was recorded in the amount of $93,840,427.
At
each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation
entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those
needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes
substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the
Company’s ability to continue as a going concern. The condensed consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the
satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments
to the specific amounts and classifications of assets and liabilities, which might be necessary should the Company be unable to continue
as a going concern.
As
reflected in the quarterly financial statements, the Company had a net loss $957,362
and net cash used in operations of $201,617
for the three months ended March 31, 2022.
In addition, the Company is a start up in the renewable energy space and has generated limited revenues to date.
Management
has evaluated the significance of these conditions and under these circumstances these conditions raise substantial doubt about the ability
to continue as a going concern. To alleviate these concerns Vision is planning multiple equity raises and/or asset dispositions
in 2022.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”)
for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by
U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s
annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments,
which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative
of the results to be expected for the year ending December 31, 2022 or any other interim period or for any other future year. These unaudited
condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements
and the notes thereto for the year ended December 31, 2021, included in the Company’s 2021 Annual Report on Form 10-K filed with
the SEC. The balance sheet as of December 30, 2021 has been derived from audited financial statements at that date but does not include
all of the information required by U.S. GAAP for complete financial statements.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
Reclassification
Certain
prior period amounts have been reclassified to conform to current period presentation specifically as it relates to the reclassification
of assets, liabilities, operating results and cash flows.
Accounts
Receivable
Accounts
receivable are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts.
The allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in
the construction industry, and the financial stability of its customers. Accounts are written off as uncollectible after collection
efforts have failed. In addition, the Company does not generally charge interest on past due accounts or require collateral. As of
March 31, 2022 and 2021, there was no
allowance for doubtful accounts required.
Comprehensive
Gain/Loss
Comprehensive
loss consists of two components, net loss and other comprehensive loss. The Company’s other comprehensive loss is comprised of
foreign currency translation adjustments. The balance of accumulated other comprehensive gain is $46,578
as of March 31, 2022 and other comprehensive
gain of $34,389
at December 31, 2021.
For
the three months ended March 31 2022 the Company recorded comprehensive gain of $12,189.
There was no
comprehensive gain or loss for the three
months ended March 31, 2021.
Currency
Translation
The
Company translates its foreign subsidiary’s assets and liabilities denominated in foreign currencies into U.S. dollars at current
rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation
adjustments resulting from exchange rate fluctuations are recorded in accumulated other comprehensive income. The Company records gains
and losses from changes in exchange rates on transactions denominated in currencies other than each reporting location’s functional
currency in net income (loss) for each period. Items included in the financial statements of each entity in the group are measured using
the currency of the primary economic environment in which the entity operates (“functional currency”).
The
functional and reporting currency of the Company is the United States Dollar (“U.S. Dollar”).
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
Website
Development Costs
Website
development costs were for a new company website created in 2021 and are amortized over 3 years.
Leases
Please
see note 5.
Property
and Equipment, and Depreciation
Property
and equipment are stated at cost. Depreciation is generally provided using the straight-line method over the estimated useful lives of
the related assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the remaining term of the lease
or the estimated useful life of the improvement.
Repairs
and maintenance that do not improve or extend the lives of the property and equipment are charged to expense as incurred.
Income
Taxes
The
Company uses the asset and liability method of accounting for income taxes pursuant to Financial Accounting Standard Board (“FASB”)
Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). Under this method, deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards,
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred
tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current
and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
The
determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation
and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items
and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s
financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge,
if any, from taxing authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes
in the financial statements as appropriate. Accrued interest and penalties related to income tax matters are classified as a component
of income tax expense.
The
Company recognizes and measures its unrecognized tax benefits in accordance with ASC 740. Under that guidance, management assesses the
likelihood that tax positions will be sustained upon examination based on the facts, circumstances and information, including the technical
merits of those positions, available at the end of each period. The measurement of unrecognized tax benefits is adjusted when new information
is available, or when an event occurs that requires a change.
The
Company did not identify any material uncertain tax positions. The Company did not recognize any interest or penalties for unrecognized
tax benefits.
The
federal income tax returns of the Company are subject to examination by the IRS, generally for the three years after they are filed.
The Company’s 2021, 2020, and 2019 income tax returns are still open for examination by the taxing authorities.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
Asset
acquisitions
Asset
acquisitions are measured based on their cost to us, including transaction costs incurred by us. An asset acquisition’s cost or
the consideration transferred by us is assumed to be equal to the fair value of the net assets acquired. If the consideration transferred
is cash, measurement is based on the amount of cash we paid to the seller, as well as transaction costs incurred by us. Consideration
given in the form of nonmonetary assets, liabilities incurred or equity interests issued is measured based on either the cost to us or
the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated
to the assets acquired based on their estimated relative fair values. We engage third-party appraisal firms to assist in the fair value
determination of inventories, identifiable long-lived assets and identifiable intangible assets. Goodwill is not recognized in an asset
acquisition.
3. RELATED PARTY TRANSACTIONS
The
Company has entered into agreements to indemnify its directors and executive officers, in addition to the indemnification provided for
in the Company’s articles of incorporation and bylaws. These agreements, among other things, provide for indemnification of the
Company’s directors and executive officers for certain expenses (including attorneys’ fees), judgments, fines and settlement
amounts incurred by any such person in any action or proceeding, including any action by or in the right of the Company, arising out
of such person’s services as a director or executive officer of the Company, any subsidiary of the Company or any other company
or enterprise to which the person provided services at the Company’s request. The Company believes that these provisions and agreements
are necessary to attract and retain qualified persons as directors and executive officers.
There
was $75,000 and $33,750 of management fees expensed for the three months ended March 31, 2022 and March 31, 2021 to Turquino Equity LLC
(“Turquino”), a former significant shareholder owned by our former Chief Executive Officer and Chief Financial Officer. Services
provided were continuing the management positions of the Company.
There
was $89,605 and $0 of management fees expensed for the three months ended March 31, 2022 and March 31, 2021 to Volt Energy B.V. a company
owned by our co-CEO Andre Jurres for the management position of the Company.
There
was $150,000 and $0 expensed for the three months ended March 31, 2022 and March 31, 2021 to First Finance Limited of which Andrew Hromyk
our co-CEO is a principal.
On
June 19, 2020, the Company entered into a Promissory Note with Judd Brammah, a director of the Company, for a principal amount up to
$230,332 bearing interest with interest at 6% per annum. The entire principal and interest of 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.
On
November 8, 2021, the Company
entered into a services agreement (the “Turquino Services Agreement”) with Turquino Equity LLC providing for payment of $25,000
per month for Mr. Andrew
Hidalgo’s services to the Company as Senior Vice President and for Matthew Hidalgo’s services
as Chief Financial Officer.
On
November 8, 2021, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with VoltH2 Holdings AG (“VoltH2”),
a Swiss corporation, and the other shareholders of VoltH2 (each, a “Seller”, and together, the “Sellers”) pursuant
to which we acquired VoltH2 (the “Acquisition”). First Finance Limited Europe which is an investment firm of which co-CEO
Andrew Hromyk is a principal owned 725,000 shares of VoltH2.
On
March 21, 2022 Century Capital Management loaned the Company $60,000
at in the form of a demand note, which 18%
of the note would be due at default. Andrew Hromyk co-CEO is a principal of Century Capital Management.
On
March 25, 2022 Volt Energy BV loaned the Company $36,614 at 2% interest in the form of a demand note. Andre Jurres co-CEO is a principal
of Volt Energy BV.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
4. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Cash
is maintained at an authorized deposit taking institution (bank) incorporated in the United States and The Netherlands is insured by
the U.S. Federal Deposit Insurance Corporation and the Dutch Central Bank up to $250,000
and $114,000
respectively. As of March 31, 2022 and December 31, 2021 the balances were fully covered.
5. LEASES
Operating
Leases
For
leases with a term of 12 months or less, the Company is permitted to make and has made an accounting policy election by class of underlying
asset not to recognize lease assets and lease liabilities, and we recognize lease expense for such leases on a straight-line basis over
the lease term.
The
Company maintains its principal office at 95 Christopher Columbus Drive, 16th Floor Jersey City, NJ 07302. The Company moved
in October 2020 and its office is in a shared office space provider, at a cost of $99 per month and currently the lease is month-to-month.
Right
of use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation
to make lease payments arising from the lease. Operating lease right of use assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate,
the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value
of lease payments. The operating lease right of use asset also excludes lease incentives. The Company’s lease terms may include
options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for
lease payments is recognized on a straight-line basis over the lease term.
In
determining the discount rate to use in calculating the present value of lease payments, the Company estimates the rate of interest it
would pay on a collateralized loan with the same payment terms as the lease by utilizing bond yields traded in the secondary market to
determine the estimated cost of funds for the particular tenor.
Upon
the purchase of Volt on November 8, 2021 the Company acquired a lease for new office space in the Netherlands, for a term of three years.
The Company analyzed this lease and determined that this agreement meets the definition of a lease under ASU 2016-02 as it provides management
with the exclusive right to direct the use of and obtain substantially all of the economic benefits from the identified leased asset,
which is the office space. Management also analyzed the terms of this arrangement and concluded it should be classified as an operating
lease, as none of the criteria were met for finance lease classification. As there was only one identified asset, no allocation of the
lease payments was deemed necessary. Management did not incur any initial direct costs associated with this lease. As of the commencement
date, a right of use asset and lease liability of $102,331 was recorded on the consolidated balance sheet based on the present value
of payments in the lease agreement. Per review of the lease agreement, there was no variable terms identified and there is no implicit
rate stated. Therefore, the Company determined the present value of the future minimum lease payments based on the incremental borrowing
rate of the Company. The incremental borrowing rate was determined to be 4%, as this is the rate which represents the incremental borrowing
rate for the Company, on a collateralized basis, in a similar economic environment with similar payment terms.
The
future minimum payments on operating leases for each of the next three years and in the aggregate amount to the following:
SCHEDULE OF OPERATING LEASES PAYMENTS
| |
| | |
2022 | |
$ | 32,890 | |
2023 | |
| 43,500 | |
2024 | |
| 39,875 | |
Total
lease payments | |
| 116,265 | |
Less:
present value discount | |
| (21,839 | ) |
Total
operating lease liabilities | |
$ | 94,426 | |
The
weighted-average remaining term of the Company’s operating leases was 2.6 years and the weighted-average discount rate used to
measure the present value of the Company’s operating lease liabilities was 4% as of March 31, 2022.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
Rent
expense for the three months ended March 31, 2022 and 2021 was $10,908 and $297, respectively, and is included in “General and
Administrative” expenses on the related statements of operations.
Finance
Leases
As
of March 31, 2022 and December 31, 2021, the Company had no finance leases.
6. STOCK OPTIONS AWARDS AND GRANTS
There
was no stock option activity from the 2016 Incentive Stock Option Plan from January 1, 2022 to March 31, 2022.
As
of March 31, 2022, there was no unrecognized compensation expense.
7. NOTES PAYABLE
Paycheck
Protection Program Loan
On
May 5, 2020, the Company entered into a term note with Comerica Bank, with a principal amount of $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 were 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.
8. CAPITAL RAISE
In
October 2020, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission, whereby the Company
registered 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 10) and
gross cash proceeds of $1,903,253.
The Company incurred $70,000 of
legal fees and a $51,000 consulting
fee in connection with the capital raise.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
9. RECENT ACCOUNTING PRONOUNCEMENTS
In
February 2016, the FASB issued ASU 2016-02 and issued subsequent amendments to the initial guidance thereafter. This ASU requires an
entity to recognize a right of use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement
and presentation of expenses will depend on classification of the underlying lease as either finance or operating. Similar modifications
have been made to lessor accounting in-line with revenue recognition guidance. The amendments also require certain quantitative and qualitative
disclosures about leasing arrangements. Leases will be classified as finance or operating, with classification affecting the pattern
and classification of expense recognition in the income statement. The new standard was effective for the Company on January 1, 2019.
Entities are required to adopt ASU 2016-02 using a modified retrospective transition method. Full retrospective transition is prohibited.
The guidance permits an entity to apply the standard’s transition provisions at either the beginning of the earliest comparative
period presented in the financial statements or the beginning of the period of adoption (i.e., on the effective date). The Company adopted
the new standard on its effective date.
In
June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (ASC 718): Improvements to Nonemployee Share-Based Payment
Accounting (“ASU 2018-07”). ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions. Consequently,
the accounting for share-based payments to nonemployees and employees will be substantially aligned. The new standard will become effective
for the Company beginning January 1, 2019, with early adoption permitted. The Company has adopted this standard and has no impact on
its consolidated financial statements and disclosures.
In
August 2018, the FASB issue ASU 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements
for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements by removing, modifying, or adding
certain disclosures. The new standard will become effective for the Company January 1, 2020, with early adoption permitted. The Company
has adopted this standard and has no impact on its consolidated financial statements and disclosures.
In
January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures
(Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method
of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the
transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative.
The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those
annual periods, with early adoption permitted. The Company has adopted this standard and there is no impact on the current financial
statements.
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity,
and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after
December 15, 2021 and interim periods within those annual periods and early adoption is permitted. The Company has not yet adopted this
standard and there is no impact expected on the current financial statements.
10. NOTES RECEIVABLE
Effective
June 7, 2021, we loaned VoltH2 $100,000, payable on September 1, 2021. The loan is non-interest bearing and evidenced by a promissory
note issued to us by VoltH2 (the “Note”). VoltH2 may prepay the Note in whole or in part at any time or from time to time
without penalty or premium. We currently own approximately 16% of VoltH2. Our Board of Directors approved the foregoing transaction.
Effective
June 28, 2021, we loaned VoltH2 $500,000, payable on September 1, 2021. The loan is non-interest bearing and evidenced by a promissory
note issued to us by VoltH2 (the “Note”). VoltH2 may prepay the Note in whole or in part at any time or from time to time
without penalty or premium. We currently own approximately 16% of VoltH2. Our Board of Directors approved the foregoing transaction.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
Effective
August 25, 2021, we loaned VoltH2 $500,000, payable on November 1, 2021. The loan is non-interest bearing and evidenced by a promissory
note issued to us by VoltH2 (the “Note”). VoltH2 may prepay the Note in whole or in part at any time or from time to time
without penalty or premium. Our Board of Directors approved the foregoing transaction.
Effective
August 25, 2021, we entered into an amendment (the “June 7 Amendment”) to a promissory note issued to VoltH2 on June 7, 2021
(The “June 7 Note”), pursuant to which the Payment Date (as defined in the June 7 Note) was changed from September 1, 2021
to November 1, 2021. Our Board of Directors approved the foregoing amendment.
Effective
August 25, 2021, we entered into an amendment (the “June 28 Amendment”) to a promissory note issued to VoltH2 on June 28,
2021 (The “June 28 Note”), pursuant to which the Payment Date (as defined in the June 28 Note) was changed from September
1, 2021 to November 1, 2021. Our Board of Directors approved the foregoing amendment.
As
of November 8, 2021 as a result of the acquisition of a 100% interest in VoltH2, all notes
receivable referenced above are eliminated upon consolidation.
11. BUSINESS ACQUISITION
On
November 8, 2021, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with VoltH2 Holdings AG (“VoltH2”),
a Swiss corporation, and the other shareholders of VoltH2 (each, a “Seller”, and together, the “Sellers”) pursuant
to which we acquired VoltH2 (the “Acquisition”). VoltH2 is a European-based developer of clean hydrogen production facilities
for the supply of commercial offtake volumes of clean hydrogen to manufacturers, gas and power traders, industrial consumers, and both
heavy and marine transportation sectors that have pivoted away from carbon emitting energy sources and fuels.
Pursuant
to the Purchase Agreement, we acquired an 84.1%
interest of VoltH2, and together with our existing 15.9%
ownership interest, we now own 100%
of VoltH2. The Acquisition was completed in exchange for 8,409,091
shares of our common stock (the “Consideration
Shares”). The market price of the shares was $11
on the closing date of November 8, 2021. In connection
with the Acquisition, we also entered into an indemnification escrow agreement (the “Escrow Agreement”) with one of the Sellers
providing for the periodic release of up to 1,768,182
of the Consideration Shares (the “Escrowed
Shares”) and a pledge and security agreement (the “Pledge and Security Agreement”) to grant to us a continuing security
interest in the Escrowed Shares to secure such Seller’s indemnity obligations under the Purchase Agreement.
The
VoltH2 acquisition was accounted for as an asset acquisition with no step up basis due to the 15.9% ownership of VoltH2 by Vision Hydrogen
Corporation prior to the acquisition and due to VoltH2 being an early stage company that has not generated revenues and lacks outputs.
Since this transaction is not an acquisition of a business but yet a transfer of long lived assets (primarily) between two non-operating
companies there is no step up in basis allowed. Both of the entities are non-operating entities and the fair value business combination
rules do not apply. When related parties are involved, the SEC generally will not permit the recognition of gain in the transferor’s
financial statements or a step-up in basis on the transferee’s books for sales or transfers of long-lived assets. No exceptions
are permitted on transactions between a parent company and a subsidiary or between subsidiaries of the same parent, other than in regulated
industries when a nonregulated subsidiary sells manufactured goods to a regulated affiliate. The acquisition consideration consisted
of 8,409,091 shares of Vision Hydrogen Corporation common stock granted on the acquisition date of November 8, 2021 at a closing market
price of $11. A deemed dividend for the excess share price over cost basis of the net assets of ($1,340,426) was recorded in the amount
of $93,840,427.
There
was no acquisition related costs for the Company for the three months ended March 31, 2022 and 2021.
Pro
forma results for Vision. giving effect to the Volt. acquisition
The
following pro forma financial information presents the combined results of operations of Volt and the Company for the three months ended
March 31, 2021. The pro forma financial information presents the results as if the acquisition had occurred as of the beginning of 2021.
The
unaudited pro forma results presented include amortization charges for acquired intangible assets, interest expense and stock-based compensation
expense.
VISION
HYDROGEN CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2022 AND 2021
Pro
forma financial information is presented for informational purposes and is not indicative of the results of operations that would have
been achieved if the acquisitions had taken place as of the beginning of 2021.
SCHEDULE OF PRO FORMA FINANCIAL INFORMATION
| Three
Months Ended March 31, 2021 | |
Revenues | |
$ | - | |
Net
income (loss) | |
$ | (349,672 | ) |
Net
income per share: | |
| | |
Basic | |
$ | (0.04 | ) |
12. PROPERTY AND EQUIPMENT
At
March 31, 2022 and December 31, 2021, property and equipment were comprised of the following:
SCHEDULE
OF PROPERTY AND EQUIPMENT
| |
March
31, 2022 | | |
December
31, 2021 | |
| |
$ | - | | |
$ | - | |
| |
| - | | |
| - | |
Computer
and software (3 to 5 years) | |
| 65,259 | | |
| 22,932 | |
| |
| - | | |
| - | |
| |
| - | | |
| - | |
Property
and equipment gross | |
| 65,259 | | |
| 22,932 | |
Less
accumulated depreciation | |
| 2,341 | | |
| - | |
Property
and equipment net | |
$ | 62,918 | | |
$ | 22,932 | |
There
was depreciation expense of $3,975 and $0 for the three months ended March 31, 2022 and March 31, 2021 respectively.
There was $43,393 and $0 of computers and software purchases for the three months ended March 31, 2022 and March 31, 2021.
13. WEBSITE DEVELOPMENT COSTS
The
tables below present a reconciliation of the Company’s website development costs:
SCHEDULE OF WEBSITE DEVELOPMENT COSTS
Balance
at January 1, 2022 | |
$ | 25,233 | |
Amortization | |
| (1,635 | ) |
Balance
at March 31, 2022 | |
$ | 23,599 | |
14. SALES TAX RECEIVABLE
The
tables below present a reconciliation of the Company’s sales tax receivable:
SCHEDULE OF SALES TAX RECEIVABLE
Balance
at January 1, 2022 | |
$ | 60,613 | |
Collections | |
| (55,534 | ) |
Balance
at March 31, 2022 | |
$ | 5,079 | |