| Organization and Summary of Significant Accounting Policies | Note 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. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements
include the accounts of Victory and Pro-Tech, its wholly owned subsidiary, for all periods presented. All significant intercompany transactions
and accounts between Victory and Pro-Tech (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 $ (99,776,605 (4,217,011 The Company anticipates that operating losses will
continue in the near term as our 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, we believe we will have enough capital to cover expenses through at least the next twelve months. We will continue
to monitor liquidity carefully, and in the event we do not have enough capital to cover expenses, we will make the necessary and appropriate
reductions in spending to remain cash flow positive. While management believes our plans, including the Merger, 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 The Company plans to raise up to $4,000,000 within
sixteen (16) months after the of the merger through a preferred equity financing (“Preferred Financing”). 67,796 67,796,610 Discontinued Operations A component of an entity that is disposed of by sale
or abandonment is reported as discontinued operations if the transaction represents a strategic shift that will have a major effect on
an entity's operations and financial results. The results of discontinued operations are aggregated and presented separately in the Consolidated
Statement of Operations. Assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities
of discontinued operations in the Consolidated Balance Sheet, including the comparative prior year period. Pro-Tech’s cash flows
are reflected as cash flows from discontinued operations within the Company’s Consolidated Statements of Cash Flows for each period
presented. Amounts presented in discontinued operations have
been derived from our consolidated financial statements and accounting records using the historical basis of assets, liabilities, and
historical results of Pro-Tech. The discontinued operations exclude general corporate allocations. Use of Estimates The preparation of our 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 Fair Value Financial Accounting Standard Board, or FASB, Accounting
Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures 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). Receivables are carried at amounts that approximate
fair value. Receivables are recognized net of an allowance for doubtful accounts receivable. The allowance for doubtful accounts reflects
the current estimate of credit losses expected to be incurred over the life of the financial asset, based on historical experience current
conditions and reasonable forecasts of future economic conditions. Accounts receivable are written down or off when a portion or all of
such account receivable is determined to be uncollectible. At December 31, 2023 and 2022, the carrying value
of the Company’s financial instruments such as accounts receivable and 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. Revenue Recognition The Company recognizes revenue as it satisfies contractual
performance obligations by transferring promised goods or services to the customers. The amount of revenue recognized reflects the consideration
the Company expects to be entitled to in exchange for those promised goods or services A good or service is transferred to a customer
when, or as, the customer obtains control of that good or service. The Company historically has had one revenue stream,
which relates to the provision of hardbanding services by its subsidiary Pro-Tech. All performance obligations of the Company’s
contracts with customers are satisfied over the duration of the contract as customer-owned equipment is serviced and then made available
for immediate use as completed during the service period. The Company has reviewed its contracts with Pro-Tech customers and determined
that due to their short-term nature, with durations of several days of service at the customer’s location, it is only those contracts
that occur near the end of a financial reporting period that will potentially require allocation to ensure revenue is recognized in the
proper period. The Company has reviewed all such transactions and recorded revenue accordingly. For the twelve months ended December 31, 2023 and
2022, the Company recognized revenue of $ 1,643,721 1,624,635 Segment
and Geographic Information and Revenue Disaggregation Because the Company’s contracts have an expected
duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about
its remaining performance obligations. Concentration of Credit Risk, Accounts Receivable
and Allowance for Doubtful Accounts Financial instruments that potentially subject the
Company to concentrations of credit risk primarily consist of cash and cash equivalents placed with high credit quality institutions and
accounts receivable due from Pro-Tech’s customers. Management evaluates the collectability of accounts receivable based on a combination
of factors. If management becomes aware of a customer’s inability to meet its financial obligations after a sale has occurred, the
Company records an allowance to reduce the net receivable to the amount that it reasonably believes to be collectable from the customer.
Accounts receivable are written off at the point they are considered uncollectible. An allowance of $ 0 As of December 31, 2023 and 2022, two and three
customers comprised 70 78.2 70 52.7 Inventory The Company’s inventory balances are stated
at the lower of cost or net realizable value on a first-in, first-out basis. Inventory consists of products purchased by Pro-Tech
for use in the process of providing hardbanding services. No impairment losses on inventory were recorded for the twelve months ended
December 31, 2023 and 2022. Inventories are valued at the lower of cost or net
realizable value with cost being determined on the weighted average cost method. Elements of cost in inventories include raw materials
and direct labor. Supplies are valued at the lower of cost or net realizable value: cost is generally determined by the first-in, first-out
cost method. Inventories deemed to have costs greater than their respective market values are reduced to net realizable value with a loss
recorded in income in the period recognized. Property, Plant and Equipment Property, Plant and Equipment is stated at cost. Maintenance
and repairs are charged to expense as incurred and the costs of additions and betterments that increase the useful lives of the assets
are capitalized. When property, plant and equipment is disposed of, the cost and related accumulated depreciation are removed from the
consolidated balance sheets and any gain or loss is included in Other income/(expense) in the consolidated statements of operations. Depreciation is computed using the straight-line method
over the estimated useful lives of the related assets, as follows:
Schedule of estimated useful lives of the related assets
Asset category Useful Life
Welding equipment, Trucks, Machinery and equipment 5
Office equipment 5 7
Computer hardware and software 7 See Note 4, Property, Plant and Equipment Goodwill and Other Intangible Assets Finite-lived intangible assets are recorded at cost,
net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is provided over
their estimated useful lives on a straight-line basis or the pattern in which economic benefits are consumed, if reliably determinable.
The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Business Combinations Business combinations are accounted for using the
acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their respective
fair values as of the acquisition date in the Company’s consolidated financial statements. The excess of the fair value of consideration
transferred over the fair value of the net assets acquired is recorded as goodwill. 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, which in the case of third party
suppliers is the shorter of the period over which services are to be received or the vesting period, and for employees, directors, officers
and affiliates is typically the vesting period. Share-based compensation is included in general and administrative expenses in the consolidated
statements of operations. See Note 9, Stock Options Income Taxes The Company accounts for income taxes in accordance
with ASC 740, Income Taxes, Earnings per Share Basic earnings per share are computed using the weighted
average number of common shares outstanding at December 31, 2023 and 2022, respectively. The weighted average number of common shares
outstanding was 28,129,338 28,037,713 The following table outlines outstanding common stock
shares and common stock equivalents:
Schedule of outstanding common stock shares and common stock equivalents
Years
Ended
2023 2022
Common Stock Shares Outstanding 28,591,593 28,037,713
Common Stock Equivalents Outstanding
Warrants 291 2,257,294
Stock Options 211,186 211,186
Total Common Stock Equivalents Outstanding 211,477 2,468,480 In May 2021, the FASB issued ASU 2021-04, Earnings
Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and
Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications
or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how
an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call
option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument.
An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged
warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises
four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt
modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities
for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance
provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company adopted ASU
2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any impact on the Company’s consolidated financial statement
presentation or disclosures. |
