This Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
Management's current views with respect to future events and financial
performance. You can identify these statements by forward-looking words such as
"may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or
similar words. Those statements include statements regarding the intent, belief
or current expectations of us and members of our management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made
by us in this report and in our other reports filed with the Securities and
Exchange Commission. Important factors currently known to Management could cause
actual results to differ materially from those in forward-looking statements. We
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
in the future operating results over time. We believe that our assumptions are
based upon reasonable data derived from and known about our business and
operations. No assurances are made that actual results of operations or the
results of our future activities will not differ materially from our
assumptions. Factors that could cause differences include, but are not limited
to, expected market demand for our products, fluctuations in pricing for
materials, and competition.
Business Overview
The 2020 year was challenging for us. Originally, we set out to provide hydrogen
energy systems for residential users. The original business plan, established in
April 2016, focused on developing the market for residential off grid hydrogen
energy systems while simultaneously acquiring companies that possessed
technicians who could be trained in the design and deployment of these hydrogen
energy systems.
In February 2020, we decided to adopt another approach in market development,
which was to pursue the one market that was establishing momentum, hydrogen
production on a plant-size scale. In order to achieve our new strategic business
model, we decided to sell both our subsidiaries because they were not producing
enough profit and were not a strategic fit with our goal of developing the
market for hydrogen energy systems. Further, the hydrogen energy market for
residential users was not developing at all based on cost inefficiencies, and
debt levels were beginning to impact us adversely.
Beginning in March 2020, the following steps were undertaken to implement the
business transition plan:
? March 2020 - Commenced discussions with investor regarding financing options
for our company and strategic acquisitions.
? April 21, 2020 - Concluded the disposition of the PVBJ subsidiary
? May 2020 - Commenced discussions and diligence for an investment in a hydrogen
production project in the Netherlands, known as Volt H2
? May 18, 2020 - Concluded the disposition of The Pride Group subsidiary
? July 2020 - Concluded 2nd and 3rd tranches of debt financing with proceeds
earmarked for an investment in Volt H2.
? August 12, 2020 - Concluded acquisition of an equity interest in Volt H2
? September 30, 2020 - Moved the Company's headquarters from Dallas, Texas to
Jersey City, New Jersey
? October 6, 2020 - Changed the company name to Vision Hydrogen Corporation and
effected a twenty-for-one reverse stock split of our outstanding common stock
? January 2021 - Closed on the sale of 12,500,000 shares of common stock in a
registered offering, resulting in gross proceeds of $2.5 million.
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With the initial investment into the hydrogen production market via Volt H2, the
first step in transitioning our hydrogen business focus has been completed. We
now will continue to operate the business in a manner that is aligned with our
primary hydrogen business strategy.
Discontinued Operations
On April 21, 2020, our Board of Directors authorized our resale of PVBJ back to
PVBJ pursuant to the terms as follows: (a) Benis Holdings LLC applied the
$221,800 earn-out liability as consideration towards the purchase of PVBJ; (b)
Paul Benis applied 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 we have no further salary obligation to Paul Benis, who resigned as our
executive officer; and (c) as additional consideration for the purchase of PVBJ
by Benis Holdings LLC, PVBJ continues to be responsible for the line of credit
(refer to note 12).
On May 18, 2020, in accordance to Nevada Statute 78.565, we completed and
executed the May 18, 2020 Purchase and Sale Agreement between us and Turquino
providing for our 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,
we have no further note obligations to Hidalgo or Doyle, and we reduced our 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, are related parties in connection
with the Exchange Agreement, the Notes, and the Agreement.
Results of Operations
For the three months ended September 30, 2021 and 2020
Revenue and Cost of Revenue
We had no revenue or cost of revenue for the three months ended September 30,
2021 or 2020.
Operating Expenses
During the three months ended September 30, 2021, our general and administrative
expenses were $72,867, including $33,750 in management disbursements, $12,000
legal fees, $9,020 in dues and subscriptions, $15,000 in director fees and
$3,097 in miscellaneous expenses.
During the three months ended September 30, 2020, our general and administrative
expenses were $78,793, including $33,750 in management disbursements, $12,500 in
accounting fees, $10,220 in legal fees, $8,570 in dues and subscriptions, $5,000
in director fees, $4,709 in insurance and $4,044 in miscellaneous expenses.
We incurred no other expense for the three months ended September 30, 2021.
We incurred $8,312 of other expenses for the three months ended September 30,
2020, including $10,936 of interest expense - related party offset by an
interest credit of $2,625.
As a result of the foregoing, we had a net loss from continuing operations of
$,72,867 for the three months ended September 30, 2021, compared to a net loss
of $87,105 for the three months ended September 30, 2020.
For the nine months ended September 30, 2021 and 2020
Revenue and Cost of Revenue
We had no revenue or cost of revenue for the nine months ended September 30,
2021 and 2020.
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Operating Expenses
During the nine months ended September 30, 2021, our general and administrative
expenses were $399,702, including $77,500 in accounting fees, $101,250 in
management disbursements, $33,500 in director fees, $24,686 in dues and
subscriptions, $75,000 in stock based compensation, $77,017 in legal fees and
$10,749 in miscellaneous expenses.
During the nine months ended September 30, 2020, our general and administrative
expenses were $278,550, including $87,800 in accounting fees, $63,750 in
management disbursements, $62,500 of gross payroll, $26,015 in dues and
subscriptions, $25,220 in legal fees and $13,265 in miscellaneous expenses.
We generated $20,000 in loan forgiveness for the nine months ended September 30,
2021.
We incurred $98,819 of other expenses for the nine months ended September 30,
2020, including $47,289 in interest expense, $46,655 of interest expense -
related party and $4,875 change in fair value earn-out.
As a result of the foregoing, we had net losses from continuing operations of
$379,702 and $1,322,200 for the nine months ended September 30, 2021 and 2020,
respectively.
For discontinued operations please refer to note 12 of our condensed
consolidated financial statements.
Liquidity and Capital Resources
As of September 30, 2021, we had working capital of $1,455,901, comprised of
current assets of $390,054 in cash, $1,100,000 in loan receivable - Volt, and
$14,000 in prepaid expenses, offset by $48,153 in accounts payable and accrued
expenses.
We have $192,981 in long term assets consisting of our investment in Volt for
$175,000 and $17,981 in website development costs. There were no long-term
liabilities.
For the nine months ended September 30, 2021, we used $279,686 of cash in
operating activities, which represented our net loss from continuing operations
of $379,702 consisting of $75,000 in stock-based compensation, $70,000 in other
current assets and $1,634 in amortization offset by $5,250 in prepaid expenses,
$20,000 in loan forgiveness and $21,368 in accounts payable and other accrued
expenses.
We used $1,119,615 in investing activities including $1,100,000 in notes
receivable to Volt H2 and $19,615 in website development costs for the nine
months ended September 30, 2021.
We generated $1,782,253 in equity financing for financing activities for the
nine months ended September 30, 2021.
For the nine months ended September 30, 2020, we used $406,462 of cash in
operating activities, which represented our net loss from continuing operations
of $377,369, consisting of $94,180 of other assets, $50,462 of amortization,
$7,993 of stock-based compensation and $4,875 of change in fair value
consideration, offset by $173,853 of change in accounts payable and $12,750
change in prepaid expenses.
For the nine months ended September 30, 2020, we used $497,101 in cash in
investing activities due to the cash disposed of in the disposition of the two
subsidiaries Pride and PVBJ for $322,101 and $175,000 in the investment in Volt.
For the nine months ended September 30, 2020, we generated $611,240 in financing
activities, which represented $580,232 in proceeds from related party debt,
$75,000 in proceeds from the issuance of convertible debt, $26,008 in proceeds
from equity financing and $20,000 in proceeds from PPP notes payable, offset by
$90,000 in convertible debt repayment.
In the future we expect to incur expenses related to compliance for being a
public company. We expect that our general and administrative expenses will
increase as we expand our business development, add infrastructure, and incur
additional costs related to being a public company, including incremental audit
fees, investor relations programs and increased professional services.
In October 2020, we filed a registration statement on Form S-1 with the
Securities and Exchange Commission, whereby we registered 12.5 million shares of
our common stock for sale as a company offering. The registration statement was
declared effective in October 2020. In January 2021, we sold all of the shares
for gross proceeds of $2.5 million.
Our future capital requirements will depend on a number of factors, including
the progress of our sales and marketing of our services, the timing and outcome
of potential acquisitions, the costs involved in operating as a public reporting
company, the status of competitive services, the availability of financing and
our success in developing markets for our services. We believe our existing cash
will be sufficient to fund our operating expenses and capital equipment
requirements for at least the next 12 months.
Critical Accounting Policies
Please refer to Note 2 in the accompanying condensed consolidated financial
statements.
Recent Accounting Pronouncements
Please refer to Note 11 in the accompanying condensed consolidated financial
statements.
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