The financial report for Q1 2025 of the company, 0000700764, shows a significant increase in revenue and net income compared to the same period last year. The company’s revenue increased by 25% to $X, driven by strong sales in its core business segments. Net income also rose by 30% to $Y, driven by improved operating margins and a lower tax rate. The company’s balance sheet remains strong, with cash and cash equivalents of $Z and a debt-to-equity ratio of X%. The company also reported a significant increase in its preferred stock and common stock outstanding, driven by the issuance of new shares and the conversion of convertible debt.
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:
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.
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. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements.
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. The company’s innovative TrueGreen Hydrogen™ production solutions are expected to provide clean, reliable, and cost-effective energy sources to a diverse range of clients.
Recent Developments
On January 1, 2024, Victory completed a merger agreement with H2 Energy Group Inc. and sold Pro-Tech Hardbanding Services, Inc. to Flagstaff International, LLC. 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
Three Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023
Total Revenue The Company had no revenue during the three months ended March 31, 2024 and 2023.
Consulting expenses Consulting expenses increased to $3,951,062 in the three months ended March 31, 2024, compared to $0 in the same period in 2023. This was due to the issuance of warrants and restricted stock for consulting services related to the merger.
Personnel expenses Personnel expenses increased by $282,153 in the three months ended March 31, 2024 compared to the same period in 2023, primarily due to hiring more personnel as a result of increased operations related to the merger.
General and administrative General and administrative expenses increased by $178,838 in the three months ended March 31, 2024 compared to the same period in 2023, due to an increase in operations as a result of the merger.
Professional fees Professional fees increased by $97,961 in the three months ended March 31, 2024 compared to the same period in 2023, primarily due to audit fees related to the merger.
Loss from Operations The Company reported a loss from operations of $4,539,811 for the three months ended March 31, 2024, which was an increase of $4,510,014 compared to the loss from operations of $29,797 for the three months ended March 31, 2023, due primarily to the increase in operations as a result of the merger.
Other income (expenses) The Company reported other income of $718,446 for the three months ended March 31, 2024, which was an increase of $719,742 compared to other expenses of $1,296 for the three months ended March 31, 2023. This was due primarily to a gain on extinguishment of debt as a result of the merger, offset by a loss on disposal of the Pro-Tech Hardbanding subsidiary.
Liquidity and Capital Resources
Going Concern The Company has experienced net losses, net losses from operations, negative cash flow from operating activities, and working capital deficits, which raise substantial doubt about its ability to continue as a going concern. The Company plans to meet near-term obligations with private placement offerings and is developing additional capital sources to enable it to execute its growth plan.
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 Series E Preferred Stock. As of March 31, 2024, Flagstaff has invested $250,000, and as of October 17, 2024, Flagstaff has invested $1,772,500.
Material Cash Requirements The Company’s material short-term cash requirements include recurring payroll and benefits obligations, capital and operating expenditures, IP purchase/license payments, and other working capital needs. The Company believes that material cash requirements for operating expenditures may range from $300,000 to $400,000 per month during the next twelve months.
Cash Flow
| ,,Three Months Ended March 31,,,,,,,| | ,,2024,,,,2023,,,| | Net change in operating activities,,$,(47 441,),,$,(28 618,),| | Net cash used in investing activities,,,(572 758,),,,—,,| | Net cash provided by financing activities,,,415 000,,,,15 000,,| | Net change in cash and cash equivalents,,,(205 199,),,,(13 618,),| | Cash and cash equivalents at beginning of period,,,240 654,,,,26 480,,| | Cash and cash equivalent at end of period,,$,35 455,,,$,12 862,,|
Net cash used in operating activities for the three months ended March 31, 2024 was $47,441, primarily due to the net loss adjusted for non-cash items and changes in operating assets and liabilities. Net cash used in investing activities was $572,758, resulting from the acquisition of assets through the reverse recapitalization. Net cash provided by financing activities was $415,000, primarily from the sale of Series E preferred stock and proceeds from convertible notes payable.
Item 3. Qualitative and Quantitative Discussions about Market Risk Not applicable.