Stockholders’ Equity

9 Months Ended

Sep. 30, 2024

9. Stockholders’ Equity

Preferred Stock

The Company has 10,000,000 shares of Preferred Stock authorized with a par value of $.001.

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 20,000 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 8,333 shares into 3,961,539 shares of common stock. As of September 30, 2024, there are no 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 67,797, 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 $0.001 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 67,797 Shares of Victory Series E Preferred Stock. As of September 30, 2024, Flagstaff has invested $1,762,500 in exchange for 29,877 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 (418,822,708), $0.001 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 2,000,000,000 common shares.

Shares to be Issued

As of September 30, 2024, the Company has recorded 29,877 shares of Series E Preferred Stock in shares to be issued.

Common Stock Purchase Warrants

Warrant activity is summarized as follows:

Schedule of warrant activity
				Weighted		Weighted
				Average		Average
		Shares		Exercise Price		Remaining Term
	Warrants outstanding January 1, 2024
	Issued		102,659,990	$	0.059		3.79 Years
	Exercised		—		—		—
	Expired		—		—		—
	Warrants outstanding at September 30, 2024		102,659,990	$	0.059		3.05 Years
	Warrants exercisable at September 30, 2024		102,659,990	$	0.059		3.05 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:

Schedule of warrants issued
Stock Price	$	0.059
Exercise Price	$	0.059 – 0.061
Dividend yield		0	%
Expected volatility		74.17 - 74.52	%
Risk-Free interest rate		34.43 - 3.93	%
Expected life (in years)		4 - 5

- Definition

The entire disclosure for equity.

+ References

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+ Details

VICTORY CLEAN ENERGY, INC. 10-Q