| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”)
for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by
U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s
annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments,
which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative
of the results to be expected for the year ending December 31, 2021 or any other interim period or for any other future year. These unaudited
condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements
and the notes thereto for the year ended December 31, 2020, included in the Company’s 2020 Annual Report on Form 10-K filed with
the SEC. The balance sheet as of December 30, 2020 has been derived from audited financial statements at that date but does not include
all of the information required by U.S. GAAP for complete financial statements. On
October 6, 2020, the Company effectuated a one-for-twenty (1:20) reverse split 25,000,000 100,000,000 Use
of Estimates The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions. Reclassification Certain
prior period amounts have been reclassified to conform to current period presentation specifically as it relates to the reclassification
of assets, liabilities, operating results, cash flows and the accumulated comprehensive loss as a result of the Company’s disposition
of interests in our PVBJ and Pride subsidiaries. VISION HYDROGEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 (UNAUDITED) Accounts
Receivable Accounts
receivable are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. The
allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in the
construction industry, and the financial stability of its customers. Accounts are written off as uncollectible after collection efforts
have failed. In addition, the Company does not generally charge interest on past-due accounts or require collateral. As of June 30, 2021
and December 31, 2020, there was no Goodwill
and Finite-Lived Intangible Assets Goodwill
represents the excess of the aggregate of the following (1) consideration transferred, (2) the fair value of any non-controlling interest
in the acquiree, and (3) if the business combination is achieved in stages, the acquisition-date fair value of our previously held equity
interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Identifiable intangible assets consist primarily of customer lists and relationships, non-compete agreements and technology-based intangibles
and other contractual agreements. The Company amortizes finite lived identifiable intangible assets over five 0 The
Company uses the acquisition method of accounting for all business combinations and does not amortize goodwill. Goodwill is tested for
possible impairment annually during the fourth quarter of each fiscal year or more frequently if events or changes in circumstances indicate
that the asset might be impaired. The Company has the option to perform a qualitative assessment to determine if an impairment is more
likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of
a reporting unit is less than its carrying amount, the Company would not need to perform the two-step impairment test for that reporting
unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, then the first
step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its
carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying amount, its goodwill is not
impaired, and the second step of the impairment test is not necessary. If the carrying amount of the reporting unit exceeds its estimated
fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares
the implied fair value of the reporting unit goodwill with its carrying amount to measure the amount of impairment, if any. The implied
fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying
amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal
to that excess. As
of June 30, 2021, the Company had no goodwill and has included the write-off of goodwill in the calculation of the loss on disposal of
PVBJ for the three and six months ended June 30, 2020. (See Note 12 “Discontinued Operations”). Comprehensive
Loss Comprehensive
loss consists of two components, net loss and other comprehensive loss. The Company’s other comprehensive loss is comprised of
foreign currency translation adjustments. The balance of accumulated other comprehensive loss is zero as of June 30, 2021 and December 31, 2020
due to the disposition of Pride on May 18, 2020. Comprehensive loss is included in discontinued operations on the statement of operations
for the three and six months ended June 30, 2020. The
functional and reporting currency of the Company is the United States Dollar (“U.S. Dollar”). For
the three and six months ended June 30, 2021, the Company recorded no 13,100 VISION HYDROGEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 (UNAUDITED) Investments The
Company follows Accounting Standards Codification (“ASC”) 321-10-35-2 “Equity Securities without Readily Determinable
Fair Values”, to account for its ownership interest in non-controlled entities. Under this guidance, equity securities that do
not have readily determinable fair values (i.e., non-marketable equity securities and do not qualify for the practical expedient to determine
the fair value at net asset value (“NAV”)) are not required to be accounted for under the equity method and carried at cost
(i.e., cost method investments) less accumulated impairment. Investments of this nature are initially recorded at cost. Income is recorded
for dividends received that are distributed from net accumulated earnings of the non-controlled entity subsequent to the date of investment.
Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded
as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that
is other than temporary has occurred. Revenue
Recognition The
Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 606 – Revenue from Contracts (“ASC 606”). Under
ASC 606 requirements, the Company recognizes revenue from the installation or construction of projects and service or short-term projects
over time using the cost-based input method. The Company accounts for a contract when: (i) it has approval and commitment from both parties,
(ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v)
collectability of consideration is probable. The Company considers the start of a project to be when the above criteria have been met
and the Company either has written authorization from the customer to proceed or an executed contract. A detailed breakdown of the five-step
process is as follows: Identify
the Contract with a Customer The
Company used to receive almost all of its contracts from only two sources, referrals, or government bids. In a referral, a client that
the Company has an ongoing business relationship with refers the Company to perform services. In a government bid, the Company applies
to perform services for public projects. The contracts have a pattern of being stand-alone contracts. Identify
the Performance Obligations in the Contract The
performance obligation of the Company is to perform a contractually agreed upon task for the customer. If the contract is stated to provide
only contractual services, then the services are considered the only performance obligation. If the contractual services include design
and or engineering in addition to the contract, it is considered a single performance obligation. Determine
the Transaction Price The
nature of the industry involves a number of uncertainties that can affect the current state of the contract. Variable considerations
are the estimates made due to a contract modification in the contractual service. Change orders, claims, extras, or back charges are
common in contractual services activity as a form of variable consideration. If there is going to be a contract modification, judgment
by management will need to be made to determine if the variable consideration is enforceable. The following factors are considered in
determining if the variable consideration is enforceable:
1. The
customer’s written approval of the scope of the change order;
2. Current
contract language that indicates clear and enforceable entitlement relating to the change
order;
3. Separate
documentation for the change order costs that are identifiable and reasonable; and
4. The
Company’s favorable experience in negotiating change orders, especially as it relates
to the specific type of contract and change order being evaluated Once
the Company receives a contract, it generates a budget of projected costs for the contract based on the contract price. If the scope
of the contract during the contractual period needs to be modified, the Company typically files a change order. The Company does not
continue to perform services until the change modification is agreed upon with documentation by both the Company and the customer. There
are few times that claims, extras, or back charges are included in the contract. VISION HYDROGEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 (UNAUDITED) Allocate
the Transaction Price to the Performance Obligations in the Contract If
there are multiple performance obligations to the contract, the costs must be allocated appropriately and consistently to each performance
obligation. In the Company’s experience, usually only one performance obligation is stated per contract. If there are multiple
services provided for one customer, the Company has a policy of splitting out the services over multiple contracts. Recognize
Revenue When (or As) the Entity Satisfies a Performance Obligations The
Company uses the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. The
input method involves measuring the resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used relative
to the total expected inputs to the satisfaction of the performance obligation. Costs incurred prior to actual contract (i.e. design,
engineering, procurement of material, etc.) should not be recognized as the client does not have control of the good/service provided.
When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs,
the Company records the entire estimated loss in the period the loss becomes known. Project contracts typically provide for a schedule
of billings or invoices to the customer based on the Company’s job to date percentage of completion of specific tasks inherent
in the fulfillment of its performance obligation(s). The schedules for such billings usually do not precisely match the schedule on which
costs are incurred. As a result, contract revenue recognized in the statement of operations can and usually does differ from amounts
that can be billed or invoiced to the customer at any point during the contract. Amounts by which cumulative contract revenue recognized
on a contract as of a given date exceed cumulative billings and unbilled receivables to the customer under the contract are reflected
as a current asset in the Company’s balance sheet under the captions “Costs and estimated earnings in excess of billings”
and “Unbilled accounts receivable.” Amounts by which cumulative billings to the customer under a contract as of a given date
exceed cumulative contract revenue recognized on the contract are reflected as a current liability in the Company’s balance sheet
under the caption “Billings in excess of costs and estimated earnings.” Cash
and Cash Equivalents Cash
and cash equivalents include cash in bank and money market funds as well as other highly liquid investments with an original maturity
of three months or less. The Company had no Stock-Based
Compensation The
Company recognizes expense for its stock-based compensation based on the fair value of the awards at the time they are granted. We estimate
the value of stock option awards on the date of grant using the Black-Scholes model. The determination of the fair value of stock-based
payment awards on the date of grant is affected by our stock price as well as assumptions regarding a number of complex and subjective
variables. These variables include our expected stock price volatility over the term of the awards, expected term, risk-free interest
rate and expected dividends. The impact of forfeitures are recorded in the period in which they occur. There were re no outstanding awards
as of June 30, 2021. Fair
Value of Financial Instruments The
carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the
balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets,
financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with
other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed. The Company
classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
☐ Level 1—quoted prices
in active markets for identical assets and liabilities;
☐ Level 2—observable
market-based inputs or unobservable inputs that are corroborated by market data; and
☐ Level
3—significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions. There
were no fair value measurements as of June 30, 2021 or December 31, 2020. VISION HYDROGEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 (UNAUDITED) Net
Income (Loss) Per Common Share The
Company computes basic net income (loss) per share by dividing net income (loss) per share available to common stockholders by the weighted
average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings
per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities
into common stock using the “if converted” method as applicable. The computation of diluted loss per share excludes dilutive
securities because their inclusion would be anti-dilutive. There were no |
