Reverse Merger and Reverse Recapitalization

6 Months Ended

Jun. 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 418,822,708 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 $3,868,726 VPEG Note at the Effective Time in exchange for 50,961,957 shares of common stock. In addition, holders of $1,087,000 in convertible notes payable converted the notes into 18,423,728 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:

Schedule of reverse recapitalization
	Number of
	shares
Common Stock outstanding at January 1, 2024 prior to Merger		28,591,593
Convertible notes ($4,966,345) converted into common stock		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

VICTORY CLEAN ENERGY, INC. 10-Q