UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
or
For the transition period from _______________ to _______________.
Commission file number
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 14, 2024, there were shares of common stock, par value $0.001, issued and outstanding.
VICTORY OILFIELD TECH, INC.
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
ii
VICTORY CLEAN ENERGY, INC.
(Formerly Victory Oilfield Tech, Inc.)
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Intangible assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued and other short term liabilities | ||||||||
| Due to related party | ||||||||
| Loan from affiliate | ||||||||
| Notes payable | ||||||||
| Convertible note payable, net of $ | ||||||||
| Loan from shareholders | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred Series D stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Preferred Series E stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Shares to be issued | ||||||||
| Receivable for stock subscription | ( | ) | ||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 1 |
VICTORY CLEAN ENERGY, INC.
(Formerly Victory Oilfield Tech, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| Consulting expenses | ||||||||||||||||
| Licensing fees | ||||||||||||||||
| Personnel expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain (Loss) on forgiveness of debt | ||||||||||||||||
| Loss on disposal of Subsidiary | ( | ) | ||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss before income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 2 |
VICTORY CLEAN ENERGY, INC.
(Formerly Victory Oilfield Tech, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
UNAUDITED
| Preferred Stock | Common Stock | Shares to be Issued | Receivable for Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Subscription | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, December 31, 2023 (retroactively restated to effect recapitalization) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Conversion of notes payable, prior to recapitalization | — | — | ||||||||||||||||||||||||||||||||||||||
| Effects of recapitalization | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Conversion of Series D preferred stock into common stock, post recapitalization | ( | ) | ( | ) | — | ( | ) | |||||||||||||||||||||||||||||||||
| Conversion of notes payable, post recapitalization | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for services, post recapitalization | — | — | ||||||||||||||||||||||||||||||||||||||
| Warrants issued for services, post recapitalization | — | — | — | |||||||||||||||||||||||||||||||||||||
| Sale of Series E Preferred Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Sale of Series E Preferred Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Sale of Series E Preferred Stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Warrants issued with convertible notes payable | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 3 |
VICTORY CLEAN ENERGY, INC.
(Formerly Victory Oilfield Tech, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
UNAUDITED
| Preferred Stock | Common Stock | Common Stock to be Issued | Receivable for Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Subscription | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, December 31, 2022 (retroactively restated to effect recapitalization) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
VICTORY CLEAN ENERGY, INC.
(Formerly Victory Oilfield Tech, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
| For the nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization expense | ||||||||
| Amortization of debt discount | ||||||||
| Stock issued for services | ||||||||
| Warrants issued for services | ||||||||
| Changes in working capital requirements: | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued and other short-term liabilities | ||||||||
| Net cash from operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisition of assets through reverse recapitalization | ( | ) | ||||||
| Net cash from investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Cash received from sale of Series E preferred stock | ||||||||
| Cash received from convertible notes payable | ||||||||
| Cash received from loan from affiliate | ||||||||
| Cash received from loan from notes payable | ||||||||
| Cash received from related party | ||||||||
| Repayment of loans from shareholders | ( | ) | ||||||
| Net cash from financing activities | ||||||||
| NET CHANGE IN CASH | ( | ) | ||||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest expense | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash operating and financing activities: | ||||||||
| Conversion of notes payable | $ | $ | ||||||
| Gain on forgiveness of debt | $ | $ | ||||||
| Warrants issued with convertible notes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
VICTORY CLEAN ENERGY, INC.
(Formerly Victory Oilfield Tech, Inc.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
1. Organization and Summary of Significant Accounting Policies:
Organization and Nature of Operations
Victory Clean Energy, Inc., formerly Victory Oilfield Tech, Inc. (“Victory”), a Nevada corporation, has historically operated as an oilfield technology products company offering patented oil and gas drilling products. On July 31, 2018, Victory entered into an agreement to acquire Pro-Tech Hardbanding Services, Inc., an Oklahoma corporation (“Pro-Tech”), which provides various hardbanding solutions to oilfield operators for drill pipe, weight pipe, tubing and drill collars.
On January 1, 2024, Victory completed a merger agreement with H2 Energy Group Inc., a Delaware corporation (“H2EG”) (the “Merger”). As a result of the Merger, a change in control of Victory occurred, and H2EG became a wholly owned subsidiary of Victory. On January 1, 2024, Victory completed the sale of Pro-Tech to Flagstaff International, LLC, a Delaware limited liability company. On January 11, 2024, Victory amended its Articles of Incorporation to authorize common shares and change its name to Victory Clean Energy, Inc.
H2EG uses scalable and modular technology to produce low-cost hydrogen-rich syngas from renewable woody biomass. The Company plans to construct a renewable hydrogen production facility and install four hydrogen refueling stations in California.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Victory and H2EG, its wholly owned subsidiary, for all periods presented. All significant intercompany transactions and accounts between Victory and H2EG (together, the “Company”) have been eliminated.
The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any future periods.
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all adjustments, consisting of normal and recurring accruals considered necessary for a fair presentation, have been included.
Going Concern
Historically the Company has experienced, and
continues to experience, net losses, net losses from operations, negative cash flow from operating activities, and working capital
deficits. The Company has incurred an accumulated deficit of $(
The Company anticipates that operating losses will continue in the near term as its management continues its efforts to raise additional capital and pursue the development and implementation of clean, sustainable low-cost energy solutions with applications across various industries, including transportation, power generation, and industrial processes. Based upon anticipated new sources of capital, and cash flow from operations, it believes it will have enough capital to cover expenses through at least the next twelve months. The Company will continue to monitor liquidity carefully, and in the event it does not have enough capital to cover expenses, the Company will make the necessary and appropriate reductions in spending to remain cash flow positive. While management believes its plans, including the Merger, help mitigate the substantial doubt that they are a going concern, there is no guarantee that the Company’s plans will be successful or if they are, will fully alleviate the conditions that raise substantial doubt that the Company is a going concern.
| 6 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used primarily when accounting for depreciation and amortization expense, various common stock, warrants and option transactions, evaluation of intangible assets, and loss contingencies.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all liquid investments with
original maturities of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. The
Company had
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in certificates of deposit, deposit accounts or treasury bills. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity.
Fair Value
Financial Accounting Standard Board, or FASB, Accounting Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, established a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring fair value. This framework defined three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three broad levels of inputs defined by FASB ASC Topic 820 hierarchy are as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Leve1 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Leve1 2 input must be observable for substantially the full term of the asset or liability; and
Leve1 3 - unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).
At September 30, 2024 and December 31, 2023, the carrying value of the Company’s financial instruments such as accounts payables approximated their fair values based on the short-term nature of these instruments. The carrying value of short-term notes and advances approximated their fair values because the underlying interest rates approximated market rates at the balance sheet dates.
| 7 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
Website Development Costs
The Company capitalizes
costs related to the development of their website in accordance with ASC 350- 50, Website Development Costs. The Company amortizes
website development costs on a straight-line basis over the estimated life of the site, which is 36 months. Amortization begins at the
completion of the website. During the year ended December 31, 2021, the Company capitalized $
Impairment of Long-Lived Assets
Long-lived assets are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The impairment testing involves comparing the carrying amount to the forecasted undiscounted future cash flows generated by that asset. In the event the carrying value of the assets exceeds the undiscounted future cash flows generated by that asset and the carrying value is not considered recoverable, impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow method. An impairment loss would be recognized in net income (loss) in the period that the impairment occurs.
Revenue Recognition
The Company will recognize revenue in accordance with ASC 606 Revenue from Contracts with Customers. The Company will determine revenue recognition through the following steps:
| · | Identification of a contract with a customer; |
| · | Identification of the performance obligations in the contract; |
| · | Determination of the transaction price; |
| · | Allocation of the transaction price to the performance obligations in the contract; and |
| · | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. No revenue has been generated to date.
| 8 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
The Company from time to time may issue stock options, warrants and restricted stock as compensation to employees, directors, officers and affiliates, as well as to acquire goods or services from third parties. In all cases, the Company calculates share-based compensation using the Black-Scholes option pricing model and expenses awards based on fair value at the grant date on a straight-line basis over the requisite service period. In the case of third-party suppliers, the service period is the shorter of the period over which services are to be received or the vesting period. For employees, directors, officers and affiliates, the service period is typically the vesting period. During the nine months ended September 30, 2024 and 2023, the Company recorded $ and $ in share-based compensation expense, respectively. There was share-based compensation expense recorded for the three months ended September 30, 2024 and 2023. Share-based compensation is included in the consolidated statements of operations under consulting expenses. See Note 8 Stockholders’ Equity, for further information.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred tax assets, if any, include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Basic earnings (loss) per share are calculated by dividing the Company’s net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share are based on the weighted average number of shares of common stock outstanding during the period plus potentially dilutive shares of common stock outstanding during the period such as options, warrants and convertible securities. Given the historical and projected future losses of the Company, all potentially dilutive common stock equivalents are considered anti-dilutive. The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:
Three and Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Convertible notes payable | ||||||||
| Total | ||||||||
Recently Adopted Accounting Standards
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, and has since issued various amendments including ASU No. 2018-19, ASU No. 2019-04, and ASU No. 2019-05. The guidance and related amendments modify the accounting for credit losses for most financial assets and require the use of an expected loss model, replacing the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The Company adopted ASU-2016-13 effective January 1, 2023. The adoption of ASU 2016-13 had no material impact on the Company’s consolidated financial statements.
| 9 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
2. Reverse Merger and Reverse Recapitalization
Merger – Acquisition of H2 Energy Group Inc.
On January 1, 2024, Victory completed a merger agreement with H2EG (the “Merger”). As a result of the Merger, a change in control of Victory occurred, and H2EG became a wholly owned subsidiary of Victory.
Pursuant to the merger each share of H2EG’s Capital Stock issued and outstanding immediately prior to the Effective Time (January 1, 2024), subject to and upon the terms and conditions set forth in the Merger Agreement, was cancelled and extinguished and converted automatically into the right to receive shares of Victory’s Common Stock (“Victory Common Stock”).
As a result of the merger on the effective date of
January 1, 2024, the H2EG Stockholders own
The Company analyzed the acquisition under applicable guidance and determined that the acquisition should be accounted as a reverse merger with H2EG as the accounting acquirer and Victory as the accounting acquiree. The financial reporting will reflect the accounting from the perspective of H2EG (“accounting acquirer”), except for the legal capital, which has retroactively adjusted to reflect the capital of Victory (“accounting acquiree”) in accordance with ASC 805-40-45-1. The cost of the acquisition, which represents the consideration transferred to Victory’s stockholders in the Victory Acquisition, was calculated based on the fair value of common stock of the combined company that Victory stockholders own as of the closing of the Victory Acquisition on January 1, 2024.
The merger transaction is considered to be a capital transaction of the legal acquiree and are equivalent to the issuance of shares by the private entity for the net monetary assets of the public shell corporation accompanied by a recapitalization.
The number of shares of Common Stock issued immediately following the consummation of the Reverse Recapitalization were as follows:
| Number of | ||||
| shares | ||||
| Common Stock outstanding at January 1, 2024 prior to Merger | ||||
| Convertible notes ($ |
||||
| Common stock issuable to H2EG holders | ||||
| Total shares of Common Stock as of close of Reverse Recapitalization | ||||
| 10 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
3. Intangible Assets
The following table shows intangible assets and related accumulated amortization as of September 30, 2024 and December 31, 2023.
| September 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| Website | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Other intangible assets, net | $ | $ | ||||||
Amortization expense
for the for the nine months ended September 30, 2024 and 2023 was $
4. Related party transactions
Effective July 1, 2020, the Company entered into an
agreement (the “License Agreement”) for certain intellectual property with a related party. On January 12, 2022, the Company
amended the License Agreement to remove the running royalty, the sublicensing revenue royalty, and the payments related to the running
royalties. No additional payments are required other than the $
The above transactions and amounts are not necessarily indicative of what third parties would have agreed to.
5. Loan from affiliate
On November 13, 2023, H2EG entered into a series of forgivable
notes with Victory Clean Energy, Inc. for the principal amount of $
The above transactions and amounts are not necessarily indicative of what third parties would have agreed to.
6. Notes payable
On
September 16, 2024, the Company issued a note payable in the amount of $
7. Convertible notes payable
On September 10, 2024, the Company issued a convertible
promissory note to a holder with a face value of $
The Company evaluated the detachable warrants
under the requirements of ASC 480 and concluded that the warrants do not fall within the scope of ASC 480. The Company next evaluated
the notes under the requirements of ASC 815 “Derivatives and Hedging” and concluded the warrants meet equity classification.
The warrants were issued during the nine months ended September 30, 2024, were valued using the Black-Scholes-Merton (“BSM”)
method and were determined to have a value of $
| 11 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
8. Loan from shareholders
In previous years, the
Company issued multiple short term notes to several of the members of the management team. Interest is to accrue and be paid with the
repayment of loans at maturity. The Company has the option to pay the note back early with interest accrued to date with no penalty. Interest
expense for the for the nine months ended September 30, 2024 and 2023 was $
| Lender | June 30, 2024 |
December 31, 2023 |
Term | Interest Rate | ||||||||||
| Note 1 | $ | $ | % | |||||||||||
| Note 2 | % | |||||||||||||
| $ | $ | |||||||||||||
Of the loans, $ is in default as of September 30, 2024 and December 31, 2023.
The above transactions and amounts are not necessarily indicative of what third parties would have agreed to.
9. Stockholders’ Equity
Preferred Stock
The Company has shares of Preferred Stock authorized with a par value of $.
Series D Preferred Stock
The terms of the Series D Preferred Stock are governed by a certificate of designation (the “Series D Certificate of Designation”) filed by the Company with the Nevada Secretary of State on August 21, 2017. Pursuant to the Series D Certificate of Designation, the Company designated shares of its preferred stock as Series D Preferred Stock.
Dividends. Except for stock dividends and distributions for which adjustments are to be made pursuant to the Series D Certificate of Designation, holders of Series D Preferred Stock are not entitled to dividends.
Liquidation. Upon any liquidation, dissolution
or winding-up of the Company, whether voluntary or involuntary, the holders of shares of Series D Preferred Stock are entitled to be paid
out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of shares
of common stock, an amount equal to the Stated Value per share, plus any dividends declared but unpaid thereon. The “Stated Value”
shall initially be $
Voting Rights. Holders of shares of Series D Preferred Stock vote together with the holders of common stock on an as-if-converted-to-common-stock basis. Except as provided by law, the holders of shares of Series D Preferred Stock vote together with the holders of shares of common stock as a single class. However, as long as any shares of Series D Preferred Stock are outstanding, the Company may not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series D Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series D Preferred Stock or alter or amend the Series D Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation senior to the Series D Preferred Stock, (c) amend the Company’s articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series D Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.
| 12 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
Redemption. To the extent of funds legally available for the payment therefor, the Company is required to redeem the outstanding shares of Series D Preferred Stock, at a redemption price equal to the Stated Value per share (subject to adjustment), payable in cash in equal monthly installments commencing on the fifteenth (15th) calendar day following the date that the Company obtained stockholder approval (which was obtained on November 20, 2017) (each such date, a “Redemption Date”). If funds legally available for redemption on the Redemption Date are insufficient to redeem the total number of outstanding shares of Series D Preferred Stock, the holders of shares of Series D Preferred Stock shall share ratably in any funds legally available for redemption of such shares according to the respective amounts which would be payable with respect to the full number of shares owned by them if all such outstanding shares were redeemed in full. At any time thereafter when additional funds are legally available for the redemption, such funds will be used, at the end of the next succeeding fiscal quarter, to redeem the balance of such shares, or such portion thereof for which funds are then legally available.
Conversion. If, following the date when stockholder
approval has been obtained, any portion of the redemption price has not been paid by the Company on any Redemption Date, the holder may,
at its option, elect to convert each share of Series D Preferred Stock plus accrued, but unpaid dividends thereon, into such number of
fully paid and non-assessable shares of common stock as is determined by dividing the Stated Value by the Conversion Price in effect on
such conversion date; provided, however, that in lieu of such conversion and before giving effect thereto, the Company may elect to bring
current the redemption payments payable. The “Conversion Price” is initially equal to $
Other Rights. Holders of Series D Preferred Stock have no preemptive or subscription rights and there are no sinking fund provisions applicable to Series D Preferred Stock.
On January 1, 2024, the holder of Series D Preferred Stock converted shares into shares of common stock. As of September 30, 2024, there are shares outstanding.
Series E Preferred Stock
The series of preferred stock is designated as Series
E Preferred Stock and the number of shares so designated is , which cannot be increased without the written consent of the holders
of the Preferred Stock. Each share of Preferred Stock has a par value of $ per share and a stated value of $
Dividends. In addition to stock dividends and distributions for which adjustments are to be made pursuant to the Series E Certificate of Designation, holders of Series E Preferred Stock are entitled to receive when, as and if dividends are declared and paid on the Corporation’s Common Stock, an equivalent dividend on such Holders Preferred Stock (with the same dividend declaration date and payment date), calculated on an as-converted basis. Other than the foregoing, the Holders of Preferred Stock shall not be entitled to receive any dividends in respect of the Preferred Stock, unless and until specifically declared by the Board of Directors of the Corporation to be payable to the Holders of the Preferred Stock.
Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the Holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of shares of Common Stock or any other capital stock (other than Senior Preferred Stock) by reason of their ownership thereof, an amount equal to the stated value per share, plus any dividends declared but unpaid thereon, which amount shall be paid pari passu with all holders of the Corporation’s Senior Preferred Stock.
Voting Rights. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each Holder is entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such Holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Certificate of Designation, the Holders shall vote together with the holders of shares of Common Stock as a single class. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend the Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation senior to the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.
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VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
Conversion. Each Holder may, at its option,
at any time and from time to time, elect to convert each share of Preferred Stock plus accrued, but unpaid dividends thereon, into such
number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Stated Value by the Conversion Price in
effect on the Conversion Date. The “Conversion Price” shall initially be equal to $
Other Rights. Holders of Series E Preferred Stock have no preemptive or subscription rights and there are no sinking fund provisions applicable to Series E Preferred Stock.
On January 1, 2024, the Company entered into an agreement
with Flagstaff International, LLC under which Flagstaff committed to invest $
Common Stock
As a result of the reverse merger, the equity structure has been recast in all comparative periods up to the Closing date to reflect the number of shares of the Company’s Common Stock (), $ par value per share, issued to H2EG shareholders in connection with the Reverse Recapitalization. As such, the shares and corresponding capital amounts and loss per share related to H2EG Common Stock prior to the Reverse Recapitalization have been retroactively recast.
On January 11, 2024, Victory amended its Articles of Incorporation to authorize common shares.
Shares to be Issued
As of September 30, 2024, the Company has recorded shares of Series E Preferred Stock in shares to be issued.
Common Stock Purchase Warrants
Warrant activity is summarized as follows:
| Weighted | Weighted | |||||||||||||
| Average | Average | |||||||||||||
| Shares | Exercise Price | Remaining Term | ||||||||||||
| Warrants outstanding January 1, 2024 | ||||||||||||||
| Issued | $ | Years | ||||||||||||
| Exercised | — | |||||||||||||
| Expired | — | |||||||||||||
| Warrants outstanding at September 30, 2024 | $ | Years | ||||||||||||
| Warrants exercisable at September 30, 2024 | $ | Years | ||||||||||||
The weighted average range of inputs to the Black-Scholes Model for the warrants issued during the nine months ended September 30, 2024 is as follows:
| Stock Price | $ | |||
| Exercise Price | $ | – | ||
| Dividend yield | % | |||
| Expected volatility | - | % | ||
| Risk-Free interest rate | - | % | ||
| Expected life (in years) | - | |||
| 14 |
VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
10. Commitments and Contingencies
Legal
The Company is not currently involved with, and does not know of, any pending or threatening litigation against the Company.
Consulting Agreement
On November 1, 2023, the Company entered into a two-year
agreement with a third party for consulting services. In connection with the agreement, the Company agreed to pay a monthly fee of $
Collaborative Arrangements
The Company has entered into collaborative arrangements with various parties for the cross promotion of technologies and services within certain geographical areas. These arrangements do not commit the Company or the counterpart to any financial obligation. If these arrangements result in a formal project, the Company and the counterparties will receive certain equity consideration in the project or be given first right of refusal to provide their products or services to the projects, as defined by the respective agreements. To date, these arrangements have not resulted in any formal projects.
Hydrogen Technology Agreement
The Company entered into a Hydrogen Technology
Purchase Agreement with Intellectual Property License Agreement signed August 20, 2024, effective April 7, 2024, between Victory Clean
Energy Inc. and Proton Power, Inc. The agreement is for the purchase of intellectual property rights to the production of hydrogen for
a purchase price of $
As of September 30, 2024, the Company has paid $
11. Disposition of Subsidiary
On January 1, 2024, the Company
entered into an agreement with Flagstaff International, LLC under which Flagstaff committed to invest $
On January 1, 2024, Victory
completed the sale of Pro-Tech to Flagstaff International, LLC, a Delaware limited liability company. As result of the sale, the Company
recorded $
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VICTORY CLEAN ENERGY, INC. (Formerly Victory Oilfield Tech, Inc.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2024 |
12. Subsequent Events
Flagstaff Agreement
As of November 14, Flagstaff has invested $
Convertible Note
In October of 2024, the Company issued
promissory note to one holder totaling $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the Victory Clean Energy, Inc. MD&A and is presented in the following seven sections:
| ● | Cautionary Information about Forward-Looking Statements; | |
| ● | Business Overview; | |
| ● | Results of Operations; | |
| ● | Liquidity and Capital Resources; | |
| ● | Critical Accounting Policies and Estimates; | |
| ● | Recently Adopted Accounting Standards; and | |
| ● | Recently Issued Accounting Standards. |
MD&A is provided as a supplement to, and should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
In MD&A, we use “we,” “our,” “us,” “Victory” and “the Company” to refer to Victory Clean Energy. and its wholly owned subsidiary, unless the context requires otherwise. Amounts and percentages in tables may not total due to rounding. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. We caution readers that important facts and factors described in MD&A and elsewhere in this document sometimes have affected, and in the future could affect our actual results, and could cause our actual results during 2024 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us.
As reported in the Report of Independent Registered Public Accounting Firm on our December 31, 2023 consolidated financial statements, we have suffered recurring losses from operations which raises substantial doubt about our ability to continue as a going concern.
CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
Many statements made in the following discussion and analysis of our financial condition and results of operations and elsewhere in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of federal securities laws and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan, strategies and capital structure. In particular, the words “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” variations of such words, and other similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include:
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| ● | continued operating losses; | |
| ● | adverse developments in economic conditions and, particularly, in conditions in the alternate energy industry; | |
| ● | volatility in the capital, credit and commodities markets; | |
| ● | our inability to successfully execute on our growth strategy; | |
| ● | the competitive nature of our industry; | |
| ● | price increases or business interruptions in our supply of raw materials; | |
| ● | failure to develop and market new products and manage product life cycles; | |
| ● | business disruptions, security threats and security breaches, including security risks to our information technology systems; | |
| ● | terrorist acts, conflicts, wars, natural disasters, pandemics and other health crises that may materially adversely affect our business, financial condition and results of operations; | |
| ● | failure to comply with anti-terrorism laws and regulations and applicable trade embargoes; | |
| ● | risks associated with protecting data privacy; | |
| ● | litigation and other commitments and contingencies; | |
| ● | ability to recruit and retain the experienced and skilled personnel we need to compete; | |
| ● | delays in obtaining permits by our future customers or acquisition targets for their operations; | |
| ● | our ability to protect and enforce intellectual property rights; | |
| ● | intellectual property infringement suits against us by third parties; | |
| ● | our ability to realize the anticipated benefits of any acquisitions and divestitures; | |
| ● | risk that the insurance we maintain may not fully cover all potential exposures; | |
| ● | risks associated with changes in tax rates or regulations, including unexpected impacts of the new U.S. TCJA legislation, which may differ with further regulatory guidance and changes in our current interpretations and assumptions; | |
| ● | risks associated with geopolitical instability, including the conflict between Russia and Ukraine, the conflicts in the Middle East, and growing tensions between U.S. and China and neighboring regions; | |
| ● | our ability to obtain additional capital on commercially reasonable terms may be limited; | |
| ● | any statements of belief and any statements of assumptions underlying any of the foregoing; | |
| ● | other factors disclosed in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission; | |
| ● | and other factors beyond our control. |
These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Quarterly Report on Form 10-Q. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Potential investors should not make an investment decision based solely on our projections, estimates or expectations.
Business Overview
General
Victory Clean Energy, Inc. is a Green Hydrogen energy company dedicated to developing and implementing clean, sustainable low-cost energy solutions with applications across various industries, including transportation, power generation, and industrial processes. We believe the Company's innovative TrueGreen Hydrogen™ production solutions will provide clean, reliable, and cost-effective energy sources to a diverse range of clients. We believe TrueGreen Hydrogen™ positions the Company as a formidable force in the low-cost Green Hydrogen sector, focusing on decarbonization in heavy transportation and industrial Hydrogen markets. Victory Clean Energy is dedicated to shaping a sustainable and cleaner future for industries and communities worldwide.
Our technology offers a viable alternative to traditional fossil fuels, with applications across various industries, including transportation, power generation, and industrial processes.
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Recent Developments
On January 1, 2024, Victory completed a merger agreement with H2 Energy Group Inc., a Delaware corporation (“H2EG”) (the “Merger”). As a result of the Merger, a change in control of Victory occurred, and H2EG became a wholly owned subsidiary of Victory.
On January 1, 2024, Victory completed the sale of Pro-Tech Hardbanding Services, Inc. to Flagstaff International, LLC, a Delaware limited liability company.
On January 11, 2024, Victory amended its Articles of Incorporation to authorize 2,000,000,000 common shares and change its name to Victory Clean Energy, Inc.
Results of Operations
The following discussion should be read in conjunction with the information contained in the accompanying unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Our historical results of operations summarized and analyzed below may not necessarily reflect what will occur in the future.
Nine months ended September 30, 2024 compared to the Nine months ended September 30, 2023
Total Revenue
The Company had no revenue during the nine months ended September 30, 2024 and 2023.
Consulting expenses
Total consulting expenses for the nine months ended September 30, 2024 was $4,473,719 compared to $0 for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company issued 102,284,990 warrants for consulting services valued at $3,483,548 and 6,807,634 shares of restricted stock valued at $401,655. Of the $401,655 in restricted stock value, $16,963 is unearned compensation as of September 30, 2024. The equity issued for services and other consulting expenses related to services performed in connection with the merger.
Licensing Fees
Total licensing fees for the nine months ended September 30, 2024 was $1,015,000 compared to $0 for the nine months ended September 30, 2023. The Company entered into a licensing agreement during the nine months ended September 30, 2024.
Personnel expenses
Personnel expenses were $1,004,346 in the nine months ended September 30, 2024 as compared to $112,597 for the nine months ended September 30, 2023. The increase was primarily due to hiring more personnel as a result of increased operations related to the merger.
General and administrative
General and administrative was $419,976 for the nine months ended September 30, 2024 as compared to $58,171 for the nine months ended September 30, 2023. The change was primarily due to an increase in operations as a result of the merger.
Professional fees
Professional fees was $295,686 for the nine months ended September 30, 2024 as compared to $27,000 for the nine months ended September 30, 2023. The professional fees in the current period were related to audit fees as a result of the merger.
Loss from Operations
The Company reported a loss from operations for the nine months ended September 30, 2024 of $(7,008,727), which was an increase of $6,810,959, compared to the loss from operations of $(197,768) for the nine months ended September 30, 2023 due primarily to an increase in operations as a result of the merger.
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Other income (expenses)
Other income (expenses) consists mainly of interest expense, gain on extinguishment of debt, and loss on disposal of subsidiary. The Company reported other income for the nine months ended September 30, 2024 of $920,170, which was an increase of $924,968, compared to other expenses of $(4,798) for the nine months ended September 30, 2023. The increase was due primarily to a gain on extinguishment of debt in the amount of $1,260,782 as a result of the merger, offset by a loss on disposal of subsidiary (Pro-Tech Hardbanding) in the amount of $328,794.
Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023
Total Revenue
The Company had no revenue during the three months ended September 30, 2024 and 2023.
Consulting expenses
Total consulting expenses for the three months ended September 30, 2024 was $136,161 compared to $0 for the three months ended September 30, 2023. The primary reason for the increase was due to increased operations as a result of the merger.
Licensing Fees
Total licensing fees for the three months ended September 30, 2024 was $415,000 compared to $0 for the three months ended September 30, 2023. The Company entered into a licensing agreement during 2024.
Personnel expenses
Personnel expenses was $447,104 for the three months ended September 30, 2024 as compared to $72,665 for the three months ended September 30, 2023. The increase was primarily due to hiring more personnel as a result of increased operations related to the merger.
General and administrative
General and administrative was $45,527 for the three months ended September 30, 2024 as compared to $38,867 for the three months ended September 30, 2023 due to an increase in operations as a result of the merger.
Professional fees
Professional fees was $115,102 for the three months ended September 30, 2024 as compared to $12,000 for the three months ended September 30, 2023. The professional fees in the current period were related to audit fees as a result of the merger.
Loss from Operations
The Company reported a loss from operations for the three months ended September 30, 2024 of $(1,155,894), which was an increase of $1,032,362, compared to the loss from operations of $(123,532) for the three months ended September 30, 2023 due primarily to an increase in operations as a result of the merger.
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Other income (expenses)
Other income (expenses) consists mainly of interest expense, gain on extinguishment of debt, and loss on disposal of subsidiary. The Company reported other expense for the three months ended September 30, 2024 of ($5,386), which was an increase of ($3,456), compared to other expenses of $(1,930) for the three months ended September 30, 2023. The increase was due primarily amortization of debt discount and increased interest expense related to issuing new notes.
Liquidity and Capital Resources
Going Concern
Historically we have experienced, and we continue to experience, net losses, net losses from operations, negative cash flow from operating activities, and working capital deficits. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date of issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not reflect any adjustments that might result if we are unable to continue as a going concern.
We anticipate that operating losses will continue in the near term. We intend to meet near-term obligations with private placement offerings. We currently have no revenue from operations.
In addition to the commitment of $4,000,000 from Flagstaff, we will be required to obtain other liquidity resources in order to support ongoing operations. We are addressing this need by developing additional capital sources, to enable us to execute our growth plan involving the use of proprietary technology to produce low-cost Green Hydrogen from a wide variety of biomass sources.
While management believes our business plans help mitigate the substantial doubt that we are a going concern, there is no guarantee that our plans will be successful or if they are, will fully alleviate the conditions that raise substantial doubt that we are a going concern.
Capital Resources
On January 1, 2024, the Company entered into an agreement with Flagstaff International, LLC under which Flagstaff committed to invest $4,000,000 in Victory in exchange for 67,797 Shares of Victory Series E Preferred Stock. As of September 30, 2024, Flagstaff has invested $1,762,500. As of November 14, 2024, Flagstaff has invested $1,772,500. The Company is currently reliant on this agreement to fund its current operations.
Material Cash Requirements
Our material short-term cash requirements include recurring payroll and benefits obligations for our employees, capital, operating expenditures, IP purchase/license payments and other working capital needs. We believe that material cash requirements for operating expenditures may range from $300,000 per month to $400,000 per month during the twelve months.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition.
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Cash Flow
The following table provides detailed information about our net cash flow for the Nine months ended September 30, 2024 and 2023:
| Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (1,535,039 | ) | $ | (224,777 | ) | ||
| Net cash used in investing activities | (863,919 | ) | — | |||||
| Net cash provided by financing activities | 2,717,500 | 296,830 | ||||||
| Net change in cash and cash equivalents | (221,458 | ) | 72,053 | |||||
| Cash and cash equivalents at beginning of period | 240,654 | 26,480 | ||||||
| Cash and cash equivalent at end of period | $ | 19,196 | $ | 98,553 | ||||
Net cash used in operating activities for the nine months ended September 30, 2024 was $1,535,039 compared to $224,777 for the nine months ended September 30, 2023. This difference primarily related to stock and warrants issued for services in the current period. During the nine months ended September 30, 2024, net cash used in investing activities was ($863,919) compared to $0 during the nine months ended September 30, 2023. This difference related to acquisition of assets through reverse recapitalization in the current period. During the nine months ended September 30, 2024, our financing activities provided cash of $2,177,500 compared to $296,830 during the nine months ended September 30, 2023. The difference primarily related to cash received from sale of Series E preferred stock in the amount of $1,762,500, cash received from convertible notes payable in the amount of $385,000 and $50,000 received from the issuance of a notes payable.
Item 3. Qualitative and Quantitative Discussions about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, we have evaluated, with the participation of our chief executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024. Based on this evaluation, our principle executive officer and principal financial officer determined that our disclosure controls and procedures were effective.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Changes in Internal Controls
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
There have been no changes in our internal control over financial reporting during the nine months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II – Other Information
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 1, 2024, the Company entered into an agreement with Flagstaff International, LLC under which Flagstaff committed to invest $4,000,000 in Victory in exchange for 67,797 Shares of Victory Series E Preferred Stock. As of November 14, 2024, Flagstaff has invested $1,772,500.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the Company’s quarter ended September
30, 2024, no director or officer
Item 6. Exhibits
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| 25 |
| * | Filed herewith. |
| † | Executive Compensation Plan or Agreement. |
| ++XBRL | (Extensible Business Reporting Language) information is furnished and not filed or a part of a report for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SIGNATURE | TITLE | DATE | ||
| /s/ Christopher Headrick | Executive Chairman (Principle Executive Officer) | November 19, 2024 | ||
| Christopher Headrick | ||||
| /s/ Neil Goulden | Chief Administrative Officer, Treasurer, Secretary, and Director (Principal Financial and Accounting Officer) | November 19, 2024 | ||
| Neil Goulden |
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EXHIBIT 31.1
CERTIFICATIONS
I, Christopher Headrick, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Victory Clean Energy Inc..; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 19, 2024
| /s/ Christopher Headrick | |
|
Christopher Headrick Executive Chairman | |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATIONS
I, Neil Goulden, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Victory Clean Energy Inc..; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 19, 2024
| /s/ Neil Goulden | |
| Neil Goulden | |
| Principal Financial and Accounting Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned Chief Executive Officer of Victory Clean Energy Inc. (the “Company”), DOES HEREBY CERTIFY that:
| 1. | The Company’s Year End Report on Form 10-Q for the period ended September 30, 2024 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this statement this November 19, 2024.
| /s/ James McGinley | |
| James McGinley | |
| Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned Principal Financial and Accounting Officer of Victory Clean Energy Inc. (the “Company”), DOES HEREBY CERTIFY that:
| 1. | The Company’s Year End Report on Form 10-Q for the period ended September 30, 2024 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, the undersigned has executed this statement this November 19, 2024.
| /s/ Neil Goulden | |
| Neil Goulden | |
| Principal Financial and Accounting Officer |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) |
Sep. 30, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Convertible note payable, debt discount | $ 13,402 | $ 0 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 2,000,000,000 | 2,000,000,000 |
| Common stock, shares issued | 530,704,753 | 418,822,708 |
| Common stock, shares outstanding | 530,704,753 | 418,822,708 |
| Series D Preferred Stock [Member] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 20,000 | 20,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Series E Preferred Stock [Member] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 67,797 | 67,797 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Revenues | ||||
| Sales | $ 0 | $ 0 | $ 0 | $ 0 |
| Operating expenses | ||||
| Consulting expenses | 136,161 | 0 | 4,273,719 | 0 |
| Licensing fees | 415,000 | 0 | 1,015,000 | 0 |
| Personnel expenses | 447,104 | 72,665 | 1,004,346 | 112,597 |
| General and administrative | 42,527 | 38,867 | 419,976 | 58,171 |
| Professional fees | 115,102 | 12,000 | 295,686 | 27,000 |
| Total operating expenses | 1,155,894 | 123,532 | 7,008,727 | 197,768 |
| Net operating loss | (1,155,894) | (123,532) | (7,008,727) | (197,768) |
| Other income (expense) | ||||
| Amortization of debt discount | (777) | 0 | (777) | 0 |
| Interest expense | (4,609) | (1,930) | (11,041) | (4,798) |
| Gain (Loss) on forgiveness of debt | 0 | 0 | 1,260,782 | 0 |
| Loss on disposal of Subsidiary | 0 | 0 | (328,794) | 0 |
| Total other income (expense) | (5,386) | (1,930) | 920,170 | (4,798) |
| Net loss before income tax expense | (1,161,280) | (125,462) | (6,088,557) | (202,566) |
| Income tax expense | 0 | 0 | 0 | 0 |
| Net loss | $ (1,161,280) | $ (125,462) | $ (6,088,557) | $ (202,566) |
| Basic loss per share | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.00) |
| Diluted loss per share | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.00) |
| Weighted average number of shares outstanding, basic | 530,704,753 | 418,822,708 | 528,063,645 | 418,822,708 |
| Weighted average number of shares outstanding, diluted | 530,704,753 | 418,822,708 | 528,063,645 | 418,822,708 |
Pay vs Performance Disclosure - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 |
Jun. 30, 2024 |
Mar. 31, 2024 |
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Pay vs Performance Disclosure [Table] | ||||||||
| Net Income (Loss) | $ (1,161,280) | $ (1,105,912) | $ (3,821,365) | $ (125,462) | $ (46,011) | $ (31,093) | $ (6,088,557) | $ (202,566) |
Insider Trading Arrangements |
3 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Insider Trading Arrangements [Line Items] | |
| Rule 10b5-1 Arrangement Adopted | false |
| Non-Rule 10b5-1 Arrangement Adopted | false |
| Rule 10b5-1 Arrangement Terminated | false |
| Non-Rule 10b5-1 Arrangement Terminated | false |
Organization and Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies:
Organization and Nature of Operations
Victory Clean Energy, Inc., formerly Victory Oilfield Tech, Inc. (“Victory”), a Nevada corporation, has historically operated as an oilfield technology products company offering patented oil and gas drilling products. On July 31, 2018, Victory entered into an agreement to acquire Pro-Tech Hardbanding Services, Inc., an Oklahoma corporation (“Pro-Tech”), which provides various hardbanding solutions to oilfield operators for drill pipe, weight pipe, tubing and drill collars.
On January 1, 2024, Victory completed a merger agreement with H2 Energy Group Inc., a Delaware corporation (“H2EG”) (the “Merger”). As a result of the Merger, a change in control of Victory occurred, and H2EG became a wholly owned subsidiary of Victory. On January 1, 2024, Victory completed the sale of Pro-Tech to Flagstaff International, LLC, a Delaware limited liability company. On January 11, 2024, Victory amended its Articles of Incorporation to authorize common shares and change its name to Victory Clean Energy, Inc.
H2EG uses scalable and modular technology to produce low-cost hydrogen-rich syngas from renewable woody biomass. The Company plans to construct a renewable hydrogen production facility and install four hydrogen refueling stations in California.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Victory and H2EG, its wholly owned subsidiary, for all periods presented. All significant intercompany transactions and accounts between Victory and H2EG (together, the “Company”) have been eliminated.
The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any future periods.
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all adjustments, consisting of normal and recurring accruals considered necessary for a fair presentation, have been included.
Going Concern
Historically the Company has experienced, and continues to experience, net losses, net losses from operations, negative cash flow from operating activities, and working capital deficits. The Company has incurred an accumulated deficit of $(7,788,159) through September 30, 2024, and has a working capital deficit of $(1,519,153) at September 30, 2024. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of the consolidated financial statements. The consolidated financial statements do not reflect any adjustments that might result if the Company was unable to continue as a going concern.
The Company anticipates that operating losses will continue in the near term as its management continues its efforts to raise additional capital and pursue the development and implementation of clean, sustainable low-cost energy solutions with applications across various industries, including transportation, power generation, and industrial processes. Based upon anticipated new sources of capital, and cash flow from operations, it believes it will have enough capital to cover expenses through at least the next twelve months. The Company will continue to monitor liquidity carefully, and in the event it does not have enough capital to cover expenses, the Company will make the necessary and appropriate reductions in spending to remain cash flow positive. While management believes its plans, including the Merger, help mitigate the substantial doubt that they are a going concern, there is no guarantee that the Company’s plans will be successful or if they are, will fully alleviate the conditions that raise substantial doubt that the Company is a going concern.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used primarily when accounting for depreciation and amortization expense, various common stock, warrants and option transactions, evaluation of intangible assets, and loss contingencies.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. The Company had no cash equivalents at September 30, 2024 and December 31, 2023.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in certificates of deposit, deposit accounts or treasury bills. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity.
Fair Value
Financial Accounting Standard Board, or FASB, Accounting Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, established a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring fair value. This framework defined three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three broad levels of inputs defined by FASB ASC Topic 820 hierarchy are as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Leve1 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Leve1 2 input must be observable for substantially the full term of the asset or liability; and
Leve1 3 - unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).
At September 30, 2024 and December 31, 2023, the carrying value of the Company’s financial instruments such as accounts payables approximated their fair values based on the short-term nature of these instruments. The carrying value of short-term notes and advances approximated their fair values because the underlying interest rates approximated market rates at the balance sheet dates.
Website Development Costs
The Company capitalizes costs related to the development of their website in accordance with ASC 350- 50, Website Development Costs. The Company amortizes website development costs on a straight-line basis over the estimated life of the site, which is 36 months. Amortization begins at the completion of the website. During the year ended December 31, 2021, the Company capitalized $7,492 for such costs. The website was placed in service in January 2022. During the first 10 months of 2022 additional costs of $6,660 were capitalized and website improvements were placed in service on November 1, 2022. No costs were capitalized during the nine months ended September 30, 2024. Amortization expense for the for the nine months ended September 30, 2024 and 2023 was $3,538. Amortization expense for the for the three months ended September 30, 2024 and 2023 was $1,179.
Impairment of Long-Lived Assets
Long-lived assets are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The impairment testing involves comparing the carrying amount to the forecasted undiscounted future cash flows generated by that asset. In the event the carrying value of the assets exceeds the undiscounted future cash flows generated by that asset and the carrying value is not considered recoverable, impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow method. An impairment loss would be recognized in net income (loss) in the period that the impairment occurs.
Revenue Recognition
The Company will recognize revenue in accordance with ASC 606 Revenue from Contracts with Customers. The Company will determine revenue recognition through the following steps:
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. No revenue has been generated to date.
The Company from time to time may issue stock options, warrants and restricted stock as compensation to employees, directors, officers and affiliates, as well as to acquire goods or services from third parties. In all cases, the Company calculates share-based compensation using the Black-Scholes option pricing model and expenses awards based on fair value at the grant date on a straight-line basis over the requisite service period. In the case of third-party suppliers, the service period is the shorter of the period over which services are to be received or the vesting period. For employees, directors, officers and affiliates, the service period is typically the vesting period. During the nine months ended September 30, 2024 and 2023, the Company recorded $ and $ in share-based compensation expense, respectively. There was share-based compensation expense recorded for the three months ended September 30, 2024 and 2023. Share-based compensation is included in the consolidated statements of operations under consulting expenses. See Note 8 Stockholders’ Equity, for further information.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred tax assets, if any, include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Basic earnings (loss) per share are calculated by dividing the Company’s net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share are based on the weighted average number of shares of common stock outstanding during the period plus potentially dilutive shares of common stock outstanding during the period such as options, warrants and convertible securities. Given the historical and projected future losses of the Company, all potentially dilutive common stock equivalents are considered anti-dilutive. The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:
Recently Adopted Accounting Standards
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, and has since issued various amendments including ASU No. 2018-19, ASU No. 2019-04, and ASU No. 2019-05. The guidance and related amendments modify the accounting for credit losses for most financial assets and require the use of an expected loss model, replacing the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The Company adopted ASU-2016-13 effective January 1, 2023. The adoption of ASU 2016-13 had no material impact on the Company’s consolidated financial statements.
|
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Reverse Merger and Reverse Recapitalization |
9 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | ||||||||||||||||||||||||||||||||||||
| Reverse Merger and Reverse Recapitalization | 2. Reverse Merger and Reverse Recapitalization
Merger – Acquisition of H2 Energy Group Inc.
On January 1, 2024, Victory completed a merger agreement with H2EG (the “Merger”). As a result of the Merger, a change in control of Victory occurred, and H2EG became a wholly owned subsidiary of Victory.
Pursuant to the merger each share of H2EG’s Capital Stock issued and outstanding immediately prior to the Effective Time (January 1, 2024), subject to and upon the terms and conditions set forth in the Merger Agreement, was cancelled and extinguished and converted automatically into the right to receive shares of Victory’s Common Stock (“Victory Common Stock”).
As a result of the merger on the effective date of January 1, 2024, the H2EG Stockholders own 81% of Victory’s issued and outstanding Common Stock immediately upon Closing. As contemplated in the Merger Agreement, Visionary Private Equity Group I, LP (“VPEG”) Note holder converted the $3,006,756 VPEG Note at the Effective Time in exchange for shares of common stock. In addition, holders of $1,087,000 in convertible notes payable converted the notes into of common stock.
The Company analyzed the acquisition under applicable guidance and determined that the acquisition should be accounted as a reverse merger with H2EG as the accounting acquirer and Victory as the accounting acquiree. The financial reporting will reflect the accounting from the perspective of H2EG (“accounting acquirer”), except for the legal capital, which has retroactively adjusted to reflect the capital of Victory (“accounting acquiree”) in accordance with ASC 805-40-45-1. The cost of the acquisition, which represents the consideration transferred to Victory’s stockholders in the Victory Acquisition, was calculated based on the fair value of common stock of the combined company that Victory stockholders own as of the closing of the Victory Acquisition on January 1, 2024. The merger transaction is considered to be a capital transaction of the legal acquiree and are equivalent to the issuance of shares by the private entity for the net monetary assets of the public shell corporation accompanied by a recapitalization. The number of shares of Common Stock issued immediately following the consummation of the Reverse Recapitalization were as follows:
|
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Intangible Assets |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets | 3. Intangible Assets
The following table shows intangible assets and related accumulated amortization as of September 30, 2024 and December 31, 2023.
Amortization expense for the for the nine months ended September 30, 2024 and 2023 was $3,538. Amortization expense for the for the three months ended September 30, 2024 and 2023 was $1,179.
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Related party transactions |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Related Party Transactions [Abstract] | |
| Related party transactions | 4. Related party transactions
Effective July 1, 2020, the Company entered into an agreement (the “License Agreement”) for certain intellectual property with a related party. On January 12, 2022, the Company amended the License Agreement to remove the running royalty, the sublicensing revenue royalty, and the payments related to the running royalties. No additional payments are required other than the $250,000 payable recorded on the consolidated balance sheets as of September 30, 2024 and December 31, 2023. See Notes 5 and 7 for additional related party transactions.
The above transactions and amounts are not necessarily indicative of what third parties would have agreed to.
|
Loan from affiliate |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Debt Disclosure [Abstract] | |
| Loan from affiliate | 5. Loan from affiliate
On November 13, 2023, H2EG entered into a series of forgivable notes with Victory Clean Energy, Inc. for the principal amount of $968,000. The term of the note is 60 days and has a coupon rate of 5%. The note was forgivable upon the completion of the merger between H2EG and Victory.
The above transactions and amounts are not necessarily indicative of what third parties would have agreed to.
|
Notes payable |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Debt Disclosure [Abstract] | |
| Notes payable | 6. Notes payable
On September 16, 2024, the Company issued a note payable in the amount of $50,000. The note matures on December 31, 2024 and has a coupon rate of 7%.
|
Convertible notes payable |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Convertible Notes Payable | |
| Convertible notes payable | 7. Convertible notes payable
On September 10, 2024, the Company issued a convertible promissory note to a holder with a face value of $200,000. The note has an interest rate of 12% and matures one year after the issuance date. The note can be converted at a fixed rate of $0.061 per share. The note also includes a warrant feature providing 2.25 warrants per principal dollar exercisable at $0.061 expiring 5 years from issuance.
The Company evaluated the detachable warrants under the requirements of ASC 480 and concluded that the warrants do not fall within the scope of ASC 480. The Company next evaluated the notes under the requirements of ASC 815 “Derivatives and Hedging” and concluded the warrants meet equity classification. The warrants were issued during the nine months ended September 30, 2024, were valued using the Black-Scholes-Merton (“BSM”) method and were determined to have a value of $14,180.
|
Loan from shareholders |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan from shareholders | 8. Loan from shareholders
In previous years, the Company issued multiple short term notes to several of the members of the management team. Interest is to accrue and be paid with the repayment of loans at maturity. The Company has the option to pay the note back early with interest accrued to date with no penalty. Interest expense for the for the nine months ended September 30, 2024 and 2023 was $3,164 and $4,798, respectively. Interest for the for the three months ended September 30, 2024 and 2023 was $1,583 and $1,930, respectively. As of September 30, 2024 and December 31, 2023 the total principal due was $ and $ with total interest accrued of $ and $, respectively. Accrued interest is included in the consolidated balance sheets under accrued and other short-term liabilities. The details are as follows:
Of the loans, $ is in default as of September 30, 2024 and December 31, 2023. The above transactions and amounts are not necessarily indicative of what third parties would have agreed to.
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Stockholders’ Equity |
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| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Equity | 9. Stockholders’ Equity
Preferred Stock
The Company has shares of Preferred Stock authorized with a par value of $.
Series D Preferred Stock
The terms of the Series D Preferred Stock are governed by a certificate of designation (the “Series D Certificate of Designation”) filed by the Company with the Nevada Secretary of State on August 21, 2017. Pursuant to the Series D Certificate of Designation, the Company designated shares of its preferred stock as Series D Preferred Stock.
Dividends. Except for stock dividends and distributions for which adjustments are to be made pursuant to the Series D Certificate of Designation, holders of Series D Preferred Stock are not entitled to dividends.
Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of shares of Series D Preferred Stock are entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of shares of common stock, an amount equal to the Stated Value per share, plus any dividends declared but unpaid thereon. The “Stated Value” shall initially be $19.01615 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Preferred Stock.
Voting Rights. Holders of shares of Series D Preferred Stock vote together with the holders of common stock on an as-if-converted-to-common-stock basis. Except as provided by law, the holders of shares of Series D Preferred Stock vote together with the holders of shares of common stock as a single class. However, as long as any shares of Series D Preferred Stock are outstanding, the Company may not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series D Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series D Preferred Stock or alter or amend the Series D Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation senior to the Series D Preferred Stock, (c) amend the Company’s articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series D Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.
Redemption. To the extent of funds legally available for the payment therefor, the Company is required to redeem the outstanding shares of Series D Preferred Stock, at a redemption price equal to the Stated Value per share (subject to adjustment), payable in cash in equal monthly installments commencing on the fifteenth (15th) calendar day following the date that the Company obtained stockholder approval (which was obtained on November 20, 2017) (each such date, a “Redemption Date”). If funds legally available for redemption on the Redemption Date are insufficient to redeem the total number of outstanding shares of Series D Preferred Stock, the holders of shares of Series D Preferred Stock shall share ratably in any funds legally available for redemption of such shares according to the respective amounts which would be payable with respect to the full number of shares owned by them if all such outstanding shares were redeemed in full. At any time thereafter when additional funds are legally available for the redemption, such funds will be used, at the end of the next succeeding fiscal quarter, to redeem the balance of such shares, or such portion thereof for which funds are then legally available.
Conversion. If, following the date when stockholder approval has been obtained, any portion of the redemption price has not been paid by the Company on any Redemption Date, the holder may, at its option, elect to convert each share of Series D Preferred Stock plus accrued, but unpaid dividends thereon, into such number of fully paid and non-assessable shares of common stock as is determined by dividing the Stated Value by the Conversion Price in effect on such conversion date; provided, however, that in lieu of such conversion and before giving effect thereto, the Company may elect to bring current the redemption payments payable. The “Conversion Price” is initially equal to $0.04, subject to adjustment as set forth in the Series D Certificate of Designation.
Other Rights. Holders of Series D Preferred Stock have no preemptive or subscription rights and there are no sinking fund provisions applicable to Series D Preferred Stock.
On January 1, 2024, the holder of Series D Preferred Stock converted shares into shares of common stock. As of September 30, 2024, there are shares outstanding.
Series E Preferred Stock
The series of preferred stock is designated as Series E Preferred Stock and the number of shares so designated is , which cannot be increased without the written consent of the holders of the Preferred Stock. Each share of Preferred Stock has a par value of $ per share and a stated value of $ 58.999608 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock.
Dividends. In addition to stock dividends and distributions for which adjustments are to be made pursuant to the Series E Certificate of Designation, holders of Series E Preferred Stock are entitled to receive when, as and if dividends are declared and paid on the Corporation’s Common Stock, an equivalent dividend on such Holders Preferred Stock (with the same dividend declaration date and payment date), calculated on an as-converted basis. Other than the foregoing, the Holders of Preferred Stock shall not be entitled to receive any dividends in respect of the Preferred Stock, unless and until specifically declared by the Board of Directors of the Corporation to be payable to the Holders of the Preferred Stock.
Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the Holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of shares of Common Stock or any other capital stock (other than Senior Preferred Stock) by reason of their ownership thereof, an amount equal to the stated value per share, plus any dividends declared but unpaid thereon, which amount shall be paid pari passu with all holders of the Corporation’s Senior Preferred Stock.
Voting Rights. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each Holder is entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such Holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Certificate of Designation, the Holders shall vote together with the holders of shares of Common Stock as a single class. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend the Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation senior to the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing. Conversion. Each Holder may, at its option, at any time and from time to time, elect to convert each share of Preferred Stock plus accrued, but unpaid dividends thereon, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Stated Value by the Conversion Price in effect on the Conversion Date. The “Conversion Price” shall initially be equal to $ 0.058999608. Such initial Conversion Price, and the rate at which shares of Preferred Stock plus accrued, but unpaid dividends thereon, may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
Other Rights. Holders of Series E Preferred Stock have no preemptive or subscription rights and there are no sinking fund provisions applicable to Series E Preferred Stock.
On January 1, 2024, the Company entered into an agreement with Flagstaff International, LLC under which Flagstaff committed to invest $4,000,000 in Victory in exchange for Shares of Victory Series E Preferred Stock. As of September 30, 2024, Flagstaff has invested $1,762,500 in exchange for shares which are categorized in shares to be issued.
Common Stock
As a result of the reverse merger, the equity structure has been recast in all comparative periods up to the Closing date to reflect the number of shares of the Company’s Common Stock (), $ par value per share, issued to H2EG shareholders in connection with the Reverse Recapitalization. As such, the shares and corresponding capital amounts and loss per share related to H2EG Common Stock prior to the Reverse Recapitalization have been retroactively recast.
On January 11, 2024, Victory amended its Articles of Incorporation to authorize common shares.
Shares to be Issued
As of September 30, 2024, the Company has recorded shares of Series E Preferred Stock in shares to be issued.
Common Stock Purchase Warrants
Warrant activity is summarized as follows:
The weighted average range of inputs to the Black-Scholes Model for the warrants issued during the nine months ended September 30, 2024 is as follows:
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 10. Commitments and Contingencies Legal
The Company is not currently involved with, and does not know of, any pending or threatening litigation against the Company.
Consulting Agreement
On November 1, 2023, the Company entered into a two-year agreement with a third party for consulting services. In connection with the agreement, the Company agreed to pay a monthly fee of $15,000. During the nine months ended September 30, 2024 and 2023, the Company recorded $135,000 and $0, respectively, related to these agreements. During the three months ended September 30, 2024 and 2023, the Company recorded $45,000 and $0, respectively, related to these agreements. As of September 30, 2024 and December 31, 2023, the balance accrued on these agreements was $10,000 and $0, respectively, and is included within accounts payable on the consolidated balance sheets.
Collaborative Arrangements
The Company has entered into collaborative arrangements with various parties for the cross promotion of technologies and services within certain geographical areas. These arrangements do not commit the Company or the counterpart to any financial obligation. If these arrangements result in a formal project, the Company and the counterparties will receive certain equity consideration in the project or be given first right of refusal to provide their products or services to the projects, as defined by the respective agreements. To date, these arrangements have not resulted in any formal projects.
Hydrogen Technology Agreement
The Company entered into a Hydrogen Technology Purchase Agreement with Intellectual Property License Agreement signed August 20, 2024, effective April 7, 2024, between Victory Clean Energy Inc. and Proton Power, Inc. The agreement is for the purchase of intellectual property rights to the production of hydrogen for a purchase price of $100,000,000 payable within five years from the effective date. Per the agreement, the Company has been granted an interim license to the intellectual property rights until the total purchase price has been paid. The Company shall pay to Proton Power, Inc. weekly payments totaling $86,000 until $25,000,000 has paid, provided that at the Company’s option, the Company may reduce the weekly amount to $50,000 from the effective date until November 15, 2024. The agreement can be terminated at any time by the Company with no further payment or obligation to Proton Power, Inc. The remaining $75,000,000 can be paid at or prior to the end of the five year term to complete the purchase. As of September 30, 2024, the Company has paid $1,015,000 in payments. The Company has license expense totaling $415,000 and $1,015,000 for the three and nine months ended September 30, 2024. |
Disposition of Subsidiary |
9 Months Ended |
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Sep. 30, 2024 | |
| Disposition Of Subsidiary | |
| Disposition of Subsidiary | 11. Disposition of Subsidiary
On January 1, 2024, the Company entered into an agreement with Flagstaff International, LLC under which Flagstaff committed to invest $4,000,000 in Victory in exchange for Victory Preferred Stock and the transfer to Pro-Tech Holdings of all equity interests held by Victory in Pro-Tech Hardbanding Services, Inc.
On January 1, 2024, Victory completed the sale of Pro-Tech to Flagstaff International, LLC, a Delaware limited liability company. As result of the sale, the Company recorded $328,794 as a loss on disposition of Pro-Tech.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2024 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 12. Subsequent Events
Flagstaff Agreement
As of November 14, Flagstaff has invested $1,772,500 under the Series E Preferred Stock Agreement with Flagstaff.
Convertible Note
In October of 2024, the Company issued promissory note to one holder totaling $200,000. The note have an interest rate of 15%. The note can be converted at a fixed rate of $0.061 per share. The note also includes a warrant feature providing 2.25 warrants per principal dollar exercisable at $0.061 expiring 5 years from issuance.
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Organization and Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization and Nature of Operations | Organization and Nature of Operations
Victory Clean Energy, Inc., formerly Victory Oilfield Tech, Inc. (“Victory”), a Nevada corporation, has historically operated as an oilfield technology products company offering patented oil and gas drilling products. On July 31, 2018, Victory entered into an agreement to acquire Pro-Tech Hardbanding Services, Inc., an Oklahoma corporation (“Pro-Tech”), which provides various hardbanding solutions to oilfield operators for drill pipe, weight pipe, tubing and drill collars.
On January 1, 2024, Victory completed a merger agreement with H2 Energy Group Inc., a Delaware corporation (“H2EG”) (the “Merger”). As a result of the Merger, a change in control of Victory occurred, and H2EG became a wholly owned subsidiary of Victory. On January 1, 2024, Victory completed the sale of Pro-Tech to Flagstaff International, LLC, a Delaware limited liability company. On January 11, 2024, Victory amended its Articles of Incorporation to authorize common shares and change its name to Victory Clean Energy, Inc.
H2EG uses scalable and modular technology to produce low-cost hydrogen-rich syngas from renewable woody biomass. The Company plans to construct a renewable hydrogen production facility and install four hydrogen refueling stations in California.
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| Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Victory and H2EG, its wholly owned subsidiary, for all periods presented. All significant intercompany transactions and accounts between Victory and H2EG (together, the “Company”) have been eliminated.
The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any future periods.
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all adjustments, consisting of normal and recurring accruals considered necessary for a fair presentation, have been included.
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| Going Concern | Going Concern
Historically the Company has experienced, and continues to experience, net losses, net losses from operations, negative cash flow from operating activities, and working capital deficits. The Company has incurred an accumulated deficit of $(7,788,159) through September 30, 2024, and has a working capital deficit of $(1,519,153) at September 30, 2024. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of the consolidated financial statements. The consolidated financial statements do not reflect any adjustments that might result if the Company was unable to continue as a going concern.
The Company anticipates that operating losses will continue in the near term as its management continues its efforts to raise additional capital and pursue the development and implementation of clean, sustainable low-cost energy solutions with applications across various industries, including transportation, power generation, and industrial processes. Based upon anticipated new sources of capital, and cash flow from operations, it believes it will have enough capital to cover expenses through at least the next twelve months. The Company will continue to monitor liquidity carefully, and in the event it does not have enough capital to cover expenses, the Company will make the necessary and appropriate reductions in spending to remain cash flow positive. While management believes its plans, including the Merger, help mitigate the substantial doubt that they are a going concern, there is no guarantee that the Company’s plans will be successful or if they are, will fully alleviate the conditions that raise substantial doubt that the Company is a going concern.
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| Use of Estimates | Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used primarily when accounting for depreciation and amortization expense, various common stock, warrants and option transactions, evaluation of intangible assets, and loss contingencies.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. The Company had no cash equivalents at September 30, 2024 and December 31, 2023.
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in certificates of deposit, deposit accounts or treasury bills. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity.
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| Fair Value | Fair Value
Financial Accounting Standard Board, or FASB, Accounting Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, established a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring fair value. This framework defined three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three broad levels of inputs defined by FASB ASC Topic 820 hierarchy are as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Leve1 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Leve1 2 input must be observable for substantially the full term of the asset or liability; and
Leve1 3 - unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).
At September 30, 2024 and December 31, 2023, the carrying value of the Company’s financial instruments such as accounts payables approximated their fair values based on the short-term nature of these instruments. The carrying value of short-term notes and advances approximated their fair values because the underlying interest rates approximated market rates at the balance sheet dates.
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| Website Development Costs | Website Development Costs
The Company capitalizes costs related to the development of their website in accordance with ASC 350- 50, Website Development Costs. The Company amortizes website development costs on a straight-line basis over the estimated life of the site, which is 36 months. Amortization begins at the completion of the website. During the year ended December 31, 2021, the Company capitalized $7,492 for such costs. The website was placed in service in January 2022. During the first 10 months of 2022 additional costs of $6,660 were capitalized and website improvements were placed in service on November 1, 2022. No costs were capitalized during the nine months ended September 30, 2024. Amortization expense for the for the nine months ended September 30, 2024 and 2023 was $3,538. Amortization expense for the for the three months ended September 30, 2024 and 2023 was $1,179.
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
Long-lived assets are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The impairment testing involves comparing the carrying amount to the forecasted undiscounted future cash flows generated by that asset. In the event the carrying value of the assets exceeds the undiscounted future cash flows generated by that asset and the carrying value is not considered recoverable, impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow method. An impairment loss would be recognized in net income (loss) in the period that the impairment occurs.
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| Revenue Recognition | Revenue Recognition
The Company will recognize revenue in accordance with ASC 606 Revenue from Contracts with Customers. The Company will determine revenue recognition through the following steps:
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. No revenue has been generated to date.
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| Share-Based Compensation |
The Company from time to time may issue stock options, warrants and restricted stock as compensation to employees, directors, officers and affiliates, as well as to acquire goods or services from third parties. In all cases, the Company calculates share-based compensation using the Black-Scholes option pricing model and expenses awards based on fair value at the grant date on a straight-line basis over the requisite service period. In the case of third-party suppliers, the service period is the shorter of the period over which services are to be received or the vesting period. For employees, directors, officers and affiliates, the service period is typically the vesting period. During the nine months ended September 30, 2024 and 2023, the Company recorded $ and $ in share-based compensation expense, respectively. There was share-based compensation expense recorded for the three months ended September 30, 2024 and 2023. Share-based compensation is included in the consolidated statements of operations under consulting expenses. See Note 8 Stockholders’ Equity, for further information.
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| Income Taxes | Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred tax assets, if any, include tax loss and credit carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
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| Earnings per Share |
Basic earnings (loss) per share are calculated by dividing the Company’s net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share are based on the weighted average number of shares of common stock outstanding during the period plus potentially dilutive shares of common stock outstanding during the period such as options, warrants and convertible securities. Given the historical and projected future losses of the Company, all potentially dilutive common stock equivalents are considered anti-dilutive. The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:
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| Recently Adopted Accounting Standards | Recently Adopted Accounting Standards
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, and has since issued various amendments including ASU No. 2018-19, ASU No. 2019-04, and ASU No. 2019-05. The guidance and related amendments modify the accounting for credit losses for most financial assets and require the use of an expected loss model, replacing the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The Company adopted ASU-2016-13 effective January 1, 2023. The adoption of ASU 2016-13 had no material impact on the Company’s consolidated financial statements.
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Organization and Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of anti dilutive shares |
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Reverse Merger and Reverse Recapitalization (Tables) |
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| Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | ||||||||||||||||||||||||||||||||||||
| Schedule of reverse recapitalization |
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Intangible Assets (Tables) |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of intangible assets and related accumulated amortization |
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Loan from shareholders (Tables) |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accrued and other short-term liabilities |
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Stockholders’ Equity (Tables) |
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| Schedule of warrant activity |
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| Schedule of warrants issued |
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Organization and Summary of Significant Accounting Policies (Details) - shares |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2024 |
Sep. 30, 2023 |
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Sep. 30, 2023 |
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| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | 105,119,006 | 0 | 105,119,006 | 0 |
| Warrant [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | 102,659,990 | 0 | 102,659,990 | 0 |
| Convertible Notes Payable [Member] | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
| Antidilutive shares | 2,459,016 | 0 | 2,459,016 | 0 |
Organization and Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Nov. 01, 2022 |
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
Jan. 11, 2024 |
Dec. 31, 2023 |
Dec. 31, 2021 |
|
| Accounting Policies [Abstract] | ||||||||
| Common stock, shares authorized | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 | ||||
| Accumulated deficit | $ (7,788,159) | $ (7,788,159) | $ (1,699,602) | |||||
| Working capital deficit | (1,519,153) | (1,519,153) | ||||||
| Cash equivalents | 0 | 0 | $ 0 | |||||
| Capitalized costs | $ 7,492 | |||||||
| Additional costs capitalized and website improvements | $ 6,660 | 0 | ||||||
| Amortization expense | 1,179 | $ 1,179 | 3,538 | $ 3,538 | ||||
| Share-based compensation expense | $ 0 | $ 0 | $ 3,662,104 | $ 0 | ||||
Reverse Merger and Reverse Recapitalization (Details) - H2 Energy Group Inc [Member] |
Jan. 02, 2024
shares
|
|---|---|
| Business Acquisition [Line Items] | |
| Common Stock outstanding | 28,591,593 |
| Convertible notes converted into common stock, shares | 69,385,685 |
| Common stock issuable to H2EG holders | 418,822,708 |
| Total shares of Common Stock as of close of Reverse Recapitalization | 516,799,986 |
Reverse Merger and Reverse Recapitalization (Details Narrative) - H2 Energy Group Inc [Member] |
Jan. 02, 2024
USD ($)
shares
|
|---|---|
| Business Acquisition [Line Items] | |
| Issuance of shares under acquisition | shares | 418,822,708 |
| Ownership percentage | 81.00% |
| Convertible notes converted into common stock, value | $ | $ 4,966,345 |
| Visionary Private Equity Group I, LP [Member] | |
| Business Acquisition [Line Items] | |
| Number of notes converted into shares, value | $ | $ 3,006,756 |
| Number of notes converted into shares, shares | shares | 50,961,957 |
| Convertible notes payable converted into shares, value | $ | $ 1,087,000 |
| Convertible notes payable converted into shares, shares | shares | 18,423,728 |
Intangible Assets (Details) - USD ($) |
Sep. 30, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Website | $ 14,152 | $ 14,152 |
| Accumulated amortization | (11,123) | (7,585) |
| Other intangible assets, net | $ 3,029 | $ 6,567 |
Intangible Assets (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization expense | $ 1,179 | $ 1,179 | $ 3,538 | $ 3,538 |
Related party transactions (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2024 |
Dec. 31, 2023 |
|
| License Agreement [Member] | ||
| Offsetting Assets [Line Items] | ||
| Due to related party | $ 250,000 | $ 250,000 |
Loan from affiliate (Details Narrative) - USD ($) |
Nov. 13, 2023 |
Sep. 30, 2024 |
Dec. 31, 2023 |
|---|---|---|---|
| Principal amount | $ 0 | $ 968,000 | |
| H2 Energy Group Inc [Member] | |||
| Principal amount | $ 968,000 | ||
| Coupon rate | 5.00% |
Notes payable (Details Narrative) |
Sep. 16, 2024
USD ($)
|
|---|---|
| Debt Disclosure [Abstract] | |
| Issued note payable in amount | $ 50,000 |
| Matures date | Dec. 31, 2024 |
| Coupon rate | 7.00% |
Convertible notes payable (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 10, 2024 |
Sep. 30, 2024 |
|
| Debt Instrument [Line Items] | ||
| Warrants issued | $ 14,180 | |
| Convertible Promissory Notes [Member] | Note Holder [Member] | ||
| Debt Instrument [Line Items] | ||
| Face value | $ 200,000 | |
| Interest rate | 12.00% | |
| Converted fixed rate | $ 0.061 | |
| Warrants | 2.25 | |
| Warrants exercisable price | $ 0.061 | |
| Maturity term | 5 years |
Loan from shareholders (Details) - Loan From Shareholders [Member] - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2024 |
Dec. 31, 2023 |
|
| Short-Term Debt [Line Items] | ||
| Loan from shareholders | $ 125,830 | $ 145,830 |
| Note 1 [Member] | ||
| Short-Term Debt [Line Items] | ||
| Loan from shareholders | $ 125,830 | 125,830 |
| Short term debt terms | 10 Months | |
| Interest rate | 5.00% | |
| Note 2 [Member] | ||
| Short-Term Debt [Line Items] | ||
| Loan from shareholders | $ 0 | $ 20,000 |
| Short term debt terms | 10 Months | |
| Interest rate | 5.00% |
Loan from shareholders (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
Dec. 31, 2023 |
|
| Short-Term Debt [Line Items] | |||||
| Interest expense | $ 1,583 | $ 1,930 | $ 3,164 | $ 4,798 | |
| Loan From Shareholders [Member] | |||||
| Short-Term Debt [Line Items] | |||||
| Total principal due amount | 125,830 | 125,830 | $ 145,830 | ||
| Interest accrued | 11,782 | 11,782 | 7,190 | ||
| Default loans amount | $ 100,000 | $ 100,000 | $ 100,000 | ||
Stockholders' Equity (Details) - Warrants [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2024
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Shares, Issued | shares | 102,659,990 |
| Weighted average exercise price, Issued | $ / shares | $ 0.059 |
| Weighted average remaining term | 3 years 9 months 14 days |
| Shares, Exercised | shares | 0 |
| Weighted average exercise price, Exercised | $ / shares | $ 0 |
| Shares, Expired | shares | 0 |
| Weighted average exercise price, Expired | $ / shares | $ 0 |
| Shares warrants outstanding, Ending balance | shares | 102,659,990 |
| Weighted average exercise price warrants outstanding, Ending balance | $ / shares | $ 0.059 |
| Weighted average remaining term warrants outstanding | 3 years 18 days |
| Shares, Warrants exercisable | shares | 102,659,990 |
| Weighted average exercise price, Warrants exercisable | $ / shares | $ 0.059 |
| Weighted average remaining term, Warrants exercisable | 3 years 18 days |
Stockholders' Equity (Details 1) |
9 Months Ended |
|---|---|
|
Sep. 30, 2024
$ / shares
| |
| Stock Price | $ 0.059 |
| Dividend yield | 0.00% |
| Minimum [Member] | |
| Exercise Price | $ 0.059 |
| Expected volatility | 74.17% |
| Risk-Free interest rate | 34.43% |
| Expected life (in years) | 4 years |
| Maximum [Member] | |
| Exercise Price | $ 0.061 |
| Expected volatility | 74.52% |
| Risk-Free interest rate | 3.93% |
| Expected life (in years) | 5 years |
Commitments and Contingencies (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Apr. 07, 2024 |
Nov. 01, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
Dec. 31, 2023 |
|
| Offsetting Assets [Line Items] | |||||||
| Consulting agreement compensation | $ 45,000 | $ 0 | $ 135,000 | $ 0 | |||
| Paid in payments | 1,015,000 | ||||||
| Total license expense | 415,000 | 1,015,000 | |||||
| Consulting Agreement [Member] | |||||||
| Offsetting Assets [Line Items] | |||||||
| Monthly fee | $ 15,000 | ||||||
| Accrued balance | $ 10,000 | $ 10,000 | $ 0 | ||||
| Hydrogen Technology Agreement [Member] | |||||||
| Offsetting Assets [Line Items] | |||||||
| Purchase of intellectual property | $ 100,000,000 | ||||||
| Agreement, description | Per the agreement, the Company has been granted an interim license to the intellectual property rights until the total purchase price has been paid. The Company shall pay to Proton Power, Inc. weekly payments totaling $86,000 until $25,000,000 has paid, provided that at the Company’s option, the Company may reduce the weekly amount to $50,000 from the effective date until November 15, 2024. The agreement can be terminated at any time by the Company with no further payment or obligation to Proton Power, Inc. The remaining $75,000,000 can be paid at or prior to the end of the five year term to complete the purchase. | ||||||
Disposition of Subsidiary (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Jan. 02, 2024 |
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Loss on disposition | $ 0 | $ 0 | $ (328,794) | $ 0 | |
| Pro Tech Hardbanding Services Inc [Member] | |||||
| Commit to invest in equity | $ 4,000,000 | ||||
| Loss on disposition | $ 328,794 | ||||
Subsequent Events (Details Narrative) - USD ($) |
1 Months Ended | ||
|---|---|---|---|
Oct. 31, 2024 |
Nov. 14, 2024 |
Sep. 30, 2024 |
|
| Subsequent Event [Line Items] | |||
| Flagstaff invested amount | $ 1,762,500 | ||
| Subsequent Event [Member] | Convertible Promissory Notes [Member] | |||
| Subsequent Event [Line Items] | |||
| Principle amount | $ 200,000 | ||
| Converted fixed rate | $ 0.061 | ||
| Warrants | 2.25 | ||
| Warrants exercisable price | $ 0.061 | ||
| Expiring term | 5 years | ||
| Subsequent Event [Member] | Convertible Promissory Notes 1 [Member] | |||
| Subsequent Event [Line Items] | |||
| Interest rate | 15.00% | ||
| Series E Preferred Stock [Member] | Flagstaff Agreement [Member] | Subsequent Event [Member] | |||
| Subsequent Event [Line Items] | |||
| Flagstaff invested amount | $ 1,772,500 |