Item 1A. Risk Factors” and other sections of this report, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements. Our Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the United States Securities and Exchange Commission (the “SEC”) which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

Please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for an additional cautionary notice regarding forward-looking statements.

PART I

Item 1. Business

Overview

Victory Clean Energy, Inc. (“Victory”) 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. We believe the Company's innovative TrueGreen Hydrogen™ production solutions will provide clean, reliable, and cost-effective energy sources to a diverse range of clients. We believe TrueGreen Hydrogen™ positions the Company as a formidable force as a future the low-cost supplier in the Green Hydrogen sector, focusing on decarbonization in heavy transportation and industrial Hydrogen markets. Victory Clean Energy is dedicated to shaping a sustainable and cleaner future for industries and communities worldwide.

The newly combined company is expected to benefit from the synergies of both businesses, leveraging Victory's extensive experience in energy technology markets to commercially deploy H2EG’s competitive Green Hydrogen solutions, which we believe deliver clean, reliable Green Hydrogen at competitive price points. The combined company will target a broad range of potential clients in both commercial energy production markets and energy-intensive industries requiring clean, reliable, secure, and cost-effective energy sources.

From July 31, 2018 through January 1, 2024, we were an oilfield energy technology products company focused on improving well performance and extending the lifespan of the industry’s most sophisticated and expensive equipment.

On July 31, 2018, the Company entered into a stock purchase agreement to purchase 100% of the issued and outstanding common stock of Pro-Tech Hardbanding Services, Inc., (“Pro-Tech”), an Oklahoma corporation which is a hardbanding company servicing Oklahoma, Texas, Kansas, Arkansas, Louisiana, and New Mexico. The stock purchase agreement was included as Exhibit 10.1 on the Form 8-K filed by us on August 2, 2018.

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, we entered into an agreement with Flagstaff International, LLC under which Flagstaff committed to invest $4,000,000 in Victory in exchange for Victory Preferred Stock and the transfer to Pro-Tech Holdings of all equity interests held by Victory in Pro-Tech Hardbanding Services, Inc.

On January 1, 2024, Victory completed the sale of Pro-Tech to Flagstaff International, LLC, a Delaware limited liability company.

Our Products and Services

Green Hydrogen, which is hydrogen generated by renewable energy or from fossil-free, carbon negative power, is viewed as a critical enabler of the global transition to sustainable energy and net zero emissions economies. Hydrogen can be used as a fuel similar to natural gas, producing only heat and water vapor when it is burned but without the CO2 emissions associated with natural gas. It can be used as fuel in fuel cells to generate electricity and heat, in gas turbine generators to provide electricity to the power grid, as well as a replacement for gasoline in internal combustion engines. Historically, producing Green Hydrogen has been cost-prohibitive. We believe H2EG’s technology delivers Green Hydrogen at highly competitive prices.

Our Industry and Market

The global hydrogen generation market size was valued at USD 141.3 billion in 2022 and expected to hit USD 219.8 billion by 2030, poised to grow at a noteworthy compound annual growth rate (CAGR) of 5.42% from 2022 to 2030. U.S. hydrogen generation market size was estimated at USD 17.5 billion in 2022.

Hydrogen and hydrogen-related energy sources are viable substitution opportunities for traditional fossil fuels. Hydrogen has unique capabilities and significant potential in any low carbon energy future due to its energy content and environmentally friendly energy release characteristics. The global market for Hydrogen is driven by several factors including:

Growing interest in Fuel Cell Vehicles

Increasing Use in Power Generation

Advancements in Hydrogen Storage Technology

Increasing Government Support for Clean Energy

Emergence of Green Hydrogen Production Technologies

Overall Hydrogen market is currently dominated by Petroleum Refinery with Ammonia Production a close second and Methanol Production third. However, looking to future growth it is the Transportation and Power Generation markets that are expected to experience the most growth.

Regional Insights

Regionally, Asia Pacific is estimated to be the fastest growing market owing to the rising demand for hydrogen power generation in countries like China and India. China is putting significant investment in fuel cell development. This will drive down the costs for fuel cells and if either the technology or product makes it way to North America and Europe it will accelerate Hydrogen demand. Moreover, rising government initiatives in the nations like India, Japan, and Australia to promote clean and green energy is boosting the market growth.

Green hydrogen projection is expected to be orders of magnitude growth over traditional grey hydrogen. This will be driven by hydrogen price, fuel cell prices, and storage improvements. Management expects that Green Hydrogen will have a growth rate an order of magnitude versus Blue – while Grey Hydrogen will decline in use as Blue and Grey reach price parity with Grey.

The two primary methods used to generate Green Hydrogen are Electrolysis and Pyrolysis. Electrolysis involves sending a current of electricity through water that then separate the H2 molecule and a diatomic oxygen molecule (i.e., “O2”). This electricity can come from the local electrical grid, a solar array, or a wind turbine.

The two major challenges to Electrolysis are where the electricity comes from and the availability of water to “split” since it is a consumable in the process. Electrolysis is energy intensive, requiring 54 kWh per H2 kg. In turn, electrolysis requires 10 liters (i.e., 2.3 gallons) of water per H2 kg. This is a 9 to 1 ratio between water required and hydrogen generated on a kg basis.

Importantly, if the electrolysis electricity comes from the local or regional grid there is also substantial greenhouse gas produced. In California, the major utility company Pacific Gas & Electric uses the value of 0.879 lbs. CO2 per kWh of delivered electricity.

Pyrolysis involves heating biomass – in the forms of forest waste, agricultural refuse, municipal solid waste, or energy grass – to a high temperate in an anerobic (i.e., “oxygen free”) environment that gasifies the biomass producing a hydrogen-rich syngas.

Challenges to Pyrolysis are generating and maintaining the high temperature required and biomass availability. Temperatures typically use for this thermochemical material separation are in the range of 800 to 1,100 C. Biomass can be in the form of forest waste, agricultural refuse, municipal solid waste, or specially grown energy grass.

Key comparison of Electrolysis vs Pyrolysis generally focuses on where the energy source is coming from for the former. If the local grid – with ever-increasing electrical prices per H2 kg – is used, then the Green Hydrogen produced is expensive and will only rise. Solar and Wind are renewable energy sources that dramatically reduce the price of the generated H2, but they are faced with the challenge of continuous availability – i.e., “the Sun doesn’t always shine, and the Wind doesn’t always blow”).

Opportunity - Problems

Green Hydrogen solves a myriad of problems the energy world is facing today, including:

Climate change mitigation: Green Hydrogen is considered a clean fuel because when it is combusted or used in fuel cells, the only byproduct is water vapor. It does not release greenhouse gases or contribute to climate change directly. By using Green Hydrogen as a substitute for fossil fuels in various sectors such as transportation and industry, it can help reduce carbon emissions and mitigate climate change.

Decarbonization of hard-to-abate sectors: Some sectors, such as heavy industry, aviation, and shipping, have limited options for reducing their carbon emissions using existing technologies. Green Hydrogen can provide a solution as it can be used as a feedstock or fuel in these sectors. By replacing fossil fuels with Green Hydrogen, these industries can transition to cleaner and more sustainable energy sources.

Energy storage and grid flexibility: Green Hydrogen can serve as a means of energy storage and grid flexibility, addressing the intermittent nature of renewable energy sources such as solar and wind power. Excess electricity generated from renewables can be used to produce hydrogen through electrolysis, storing the energy in the form of hydrogen. The stored hydrogen can then be converted back into electricity or used as a fuel when renewable energy generation is low or demand is high, thereby providing a reliable and flexible energy supply.

Energy independence and security: Hydrogen can be produced from diverse primary sources, including solar, wind, hydro, and biomass. By utilizing locally available renewable energy resources, countries can reduce their dependence on imported fossil fuels and enhance energy security. This can contribute to a more resilient and sustainable energy system.

Air pollution reduction: Green Hydrogen does not produce pollutants such as nitrogen oxides (NOx) and particulate matter during combustion. By replacing fossil fuels in transportation, heating, and industrial processes, Green Hydrogen can help reduce local air pollution, improving air quality and public health.

Technological advancements and economic opportunities: The development and widespread use of Green Hydrogen fuel can drive technological advancements and innovation. It can create economic opportunities, promote job growth in sectors such as renewable energy, electrolyzer manufacturing, and hydrogen infrastructure development. The scaling up of Green Hydrogen production can also lead to cost reductions, making it more economically competitive over time.

While Green Hydrogen holds significant promise, it's important to address challenges such as cost, infrastructure development, and large-scale production to fully realize its potential as a sustainable energy solution.

Opportunity – Solutions

The solution to decarbonizing the world economy lies in fuels that meet the following criteria:

Fossil-free

Economically sustainable

Perpetually renewable

Modular and support of distributed or stand-alone energy architectures

For all the reasons previously mentioned and more, Green Hydrogen represent a mandatory energy source for any future global decarbonizing energy portfolio.

Opportunity - Value Proposition

H2EG has significant value to its Customers – independent of the Hydrogen segment they operate in.

This value proposition includes:

Delivered Price – H2EG patented biomass-based, fossil-free pyrolysis process produces gaseous Green Hydrogen at a significantly lower cost than the alternative Green Hydrogen electrolysis process. H2EG Green Hydrogen cost is expected to be lower than what is produced through Electrolysis. U.S. Department of Energy estimates that Solar Photovoltaic based Electrolysis Hydrogen production costs approximately $6.09/kg – though some producers claim significantly lower numbers. U.S. Office of Energy Efficiency & Renewable Energy estimates that wind-to-hydrogen costs $3.74 a kilogram to $5.86 a kilogram unsubsidized

Reliability and Availability – though solar-based electrolysis Green Hydrogen has been decreasing the biggest advantages that H2EG – as a baseload solution – still enjoys: Reliability – biomass-based pyrolysis is not dependent on the variability of sun – e.g., rain, clouds, and inclement weather in general. Availability - biomass-based pyrolysis is not dependent on the 16+ hours when the sun doesn’t shine, it is 24 x 7 baseload energy

Location Flexibility and Footprint – since the H2EG process is delivered via modular and scalable facilities it can meet the ultimate objective of any renewable energy source and that is to “produce as close to consumption as possible.” Further, these microgrids can operate alone or be connected to create a highly resilient distributed electrical system.

Technical Efficiency - the H2EG process makes more efficient use of Biomass with over 12% of bone-dry biomass converted to Hydrogen.

Biomass Supply – Biomass has greater availability around the world then sun or wind and can be grown and delivered close to the consumption location. Biomass – in the form of forest waste, agricultural waste, municipal solid waste, or energy crops - represents a perpetually available energy source. In addition, if energy crops are grown for Green Hydrogen production, they represent a carbon negative element to the process by absorbing over 13 tons of CO2 per acre per year.

Life-Cycle Environmental Impact – the core of the H2EG process involves reactors made from stainless steel that can be reused after its estimated 20-year lifetime. As the solar farms of the 80’s and 90’s reaches their end of life there is a valid concern of what will happen to the photovoltaic panels? The answer for most is the landfill – reversing much of the reduced pollution they were part of during their active life. The International Renewable Energy Agency (“IRENA”) estimated that in 2016 there was about 250,000 metric tonnes of solar panel waste. IRENA further projected that by 2050 this number could reach 78 million metric tonnes.

Biomass-based High-Temperature Fast Pyrolysist has significant advantages over other methods of decarbonizing our global economy via Green Hydrogen.

Situation - Customers

Customers for Green Hydrogen can vary across different sectors and industries. Though H2EG is specifically targeting Heavy Truck Transportation in California as first project, here are some potential Customer segments for Green Hydrogen:

Transportation: Customers in the transportation sector can include vehicle manufacturers, fleet operators, and transportation companies. Green Hydrogen can be used as a fuel for fuel cell electric vehicles (FCEVs) and hydrogen-powered vehicles, such as cars, buses, trucks, and trains.

Industry and Manufacturing: Industrial customers may include companies in sectors such as steel, cement, chemicals, and refining. Green Hydrogen can be used as a feedstock or fuel in industrial processes, replacing fossil fuels. It can also be utilized for hydrogenation processes in industries like food processing, pharmaceuticals, and electronics manufacturing.

Power Generation and Grid Balancing: Utilities and power companies can be customers for Green Hydrogen. Hydrogen can be used in fuel cells to generate electricity, providing a clean and efficient power generation option. It can also be stored and used for grid balancing, helping to manage intermittent renewable energy sources and ensure grid stability.

Energy Storage: Customers in the energy storage sector can include grid operators, renewable energy developers, and energy storage companies. Green Hydrogen can be produced during periods of excess renewable energy generation and stored for later use. It can serve as a long-duration energy storage solution, providing a means to store and release energy when needed.

Heat and Building Sector: Green Hydrogen can be used for heating applications in residential, commercial, and industrial buildings. Customers in this sector may include building developers, heating equipment manufacturers, and district heating operators. Hydrogen can be used as a low-carbon alternative for heating and can be combined with fuel cells for combined heat and power (CHP) applications.

Energy Export: Countries or regions with abundant renewable energy resources can produce Green Hydrogen and export it to regions with limited renewable energy potential. This can be done through hydrogen pipelines, liquefied hydrogen transport, or shipping. Customers can include energy importers, countries aiming to diversify their energy sources, and hydrogen importers.

Research and Development: Academic institutions, research organizations, and technology developers can be customers for Green Hydrogen in terms of conducting research, developing new technologies, and advancing the knowledge and understanding of hydrogen-related applications.

It's important to note that the development and adoption of the Green Hydrogen marketplace is still in progress, and the specific customer landscape will likely evolve as the industry matures and more applications for Green Hydrogen emerge.

Specific Green Hydrogen Customers H2EG is seeking currently include:

Heavy Transport OEMS – heavy transport OEMs since in some cases they are “guaranteeing” hydrogen availability as part of the sale to their Customers.

Heavy Transport Companies – virtually every trucking company is looking for ways to reduce GHG by transitioning to renewable energy – and this is Hydrogen. First project is California for reasons mentioned prior. Simply put, there is no other Heavy Transport fuel option to Green Hydrogen to meet newly enacted regulations. Heavy Transport OEMs recognize this reality, and all have a priority focus on meeting the newly emerging demand for Green Hydrogen in California.

Strategic implications

Green Hydrogen is viewed as an increasingly important decarbonizing energy source.

Customers are across a broad range of markets, and all find it appealing though some – like Heavy Transport – have been faced with Green Hydrogen as a “must have” versus a “nice to have.”

Our Competitors

Green Hydrogen competes with various energy sources and technologies that aim to address similar energy and sustainability challenges. Here are some of the indirect and direct competitors or alternative options to Green Hydrogen:

Fossil Fuels: Conventional fossil fuels like coal, oil, and natural gas are the dominant sources of energy globally. They provide a well-established and relatively inexpensive energy source, although they have significant environmental drawbacks due to greenhouse gas emissions and air pollution.

Renewable Energy Sources: Renewable energy sources such as solar power, wind power, and hydropower compete with Green Hydrogen as alternative clean energy options. These sources generate electricity directly and can be more efficient in certain applications, particularly in regions with abundant renewable resources.

Alternative Hydrogen Sources: Blue Hydrogen is seen by some as carbon neutral because of the sequestration. However, recent legislation has gone against viewing Blue Hydrogen as a true renewable energy source.

Battery Electric Vehicles (BEVs): Battery electric vehicles, powered by rechargeable batteries, compete with hydrogen fuel cell electric vehicles (FCEVs) in the transportation sector. BEVs have gained significant market share, and advancements in battery technology have improved their range and charging infrastructure.

Biofuels: Biofuels, such as biodiesel and bioethanol, are produced from renewable organic materials such as agricultural crops and waste biomass. They are used as alternatives to fossil fuels in transportation and can compete with Green Hydrogen, especially in sectors like aviation and shipping.

Direct Electrification: In some applications, direct electrification may be a competing option to Green Hydrogen. Instead of converting electricity into hydrogen, it can be used directly for various applications, such as electric heating, electric vehicles, and electric industrial processes.

Energy Storage Technologies: Various energy storage technologies, such as lithium-ion batteries, pumped hydro storage, and advanced flow batteries, can compete with hydrogen as means of storing and releasing renewable energy. These technologies offer different storage capacities, efficiencies, and applications.

Other Low-Carbon Technologies: Low-carbon technologies like carbon capture and storage (CCS) and carbon capture, utilization, and storage (CCUS) aim to reduce greenhouse gas emissions from fossil fuel-based energy sources. These technologies can be seen as competitors to Green Hydrogen, particularly in sectors where CCS/CCUS can be integrated.

It's worth noting that these alternatives and competitors may vary in their suitability and competitiveness depending on specific applications, geographical location, infrastructure availability, policy support, and other factors. The energy landscape is evolving rapidly, and different solutions may be more suitable for different contexts and sectors.

At this point, H2EG views Electrolysis-based Green Hydrogen as the primary direct competitor. Several competitors have been identified based on core hydrogen-production technology:

Electrolysis process

Plug Power

ITM Power

NEL Hydrogen

Nedstack

Accelera (Cummins)

Pyrolysis process

Raven

Mote

Monolith

Our Growth Strategies

Fossil-free, carbon negative green energy is critical to an environmentally friendly future. Green Hydrogen will play a critical, if not the most important role in a Green Energy future.

H2 Energy Group mission is to provide the lowest cost Green Hydrogen in the marketplace. Our pyrolysis-based Green Hydrogen will be economically sustainable, perpetually renewable, and increasingly reliable. It will be delivered via modular and scalable solutions supporting both stand-alone and distributed energy architectures.

The Company strategy is based on the following marketplace assumptions:

Green Hydrogen is a critical part of any future Green Energy portfolio and is on the verge of significant growth. Biomass-based Green Hydrogen offers benefits over current methods of Green Hydrogen production that have limitations in base load, electricity requirements, and water consumption.

H2EG Green Hydrogen process is uniquely competitive in its combination of:

Economic Sustainability – Lowest cost defensible Green Hydrogen cost structure

Biomass Supply Chain – based on multiple environmentally friendly perpetual energy sources

Modularity and Flexibility – allows for distributed reliability and scalability

Baseload Power – not subject to wind or solar vagaries, operates 24 x 7

Technical Advantage – production cost 3x less than grid-based electrolysis. H2EG pyrolysis process is proprietary

Self-Powered Solution – operates independent of grid in distributed or stand-alone modes

Negative Carbon Index – qualify for all subsidies although subsidies/tax credits are not required for cost competitiveness.

Initial focus is Green Hydrogen fuel for Heavy Transport in the State of California.

This heavy transport focus represents the best initial opportunity for the following reasons:

The State of California has mandated the elimination of diesel-powered Heavy Transport (i.e., Class 6-8) by 2035 with projections of 100,000 in 2030 and 300,000 in 2035. This is driven by the significant emissions generated by diesel trucks. Note, each Heavy Truck will use approximately 60 kgs of hydrogen per day.

Consider the amount of CO2 generated by diesel Heavy Transport along the 1,250 miles (~2,000 km) of Interstate I-5 from Carlsbad, CA to Everett, WA

The 1,250 miles of I-5 Corridor (i.e., with 550 miles traversing through urban areas) experiences average daily traffic of 71,000 vehicles with a maximum of 300,000. Of this, truck transportation is 10,000 trucks/day with a maximum exceeding 35,000.

If only concentrate on the 10,000 trucks per day with an average of 500 miles driven per day, then there are 5,000,000 truck-miles driven along the I-5 Corridor every day.

According to the Environmental Defense Fund transportation trucks emit 161.8 grams of CO2 per ton-mile.

Given this factor, and assuming only a 75% average load of freight trucks along the I-5 Corridor then the amount of CO2 emitted daily is over 40 million pounds! This represents over 7.3 million tons of CO2 per year - just along the Interstate I-5 Corridor!

Specific to H2EG initial market – California Hydrogen-Based FCEV Heavy Truck – it is expected that this market will grow exponentially based heavily on California restrictions on diesel engine heavy trucks. California expects to have 100,000 FCEV heavy trucks by 2030. This equates to an annual market size of over 2.2 billion kgs or 2.5 million English tons of hydrogen in California alone

While representing only two percent of vehicles on California roads, the hundreds of thousands of trucks that sustain the California economy generate more than three percent of its particulate emissions, nine percent of the State’s greenhouse gas emissions, and 32 percent of its nitrogen oxides.

EV technology has been determined to be ineffective as a power system for Heavy Transport because of:

Long fueling times - using an AC On-board charger (43 kW) it requires around ten hours to charge the battery from empty to full. Using a DC charger (max 250 kW) this can be reduced to just two hours - though there are efforts underway to reduce this to 30 minutes. Still, when Heavy Transport makes money by time this is a significant disadvantage.

Inaccessability – no grid connection in rural areas

Battery weight – typical Class 8 EV Heavy Truck requires over 4 tons of batteries – significantly more than the current Diesel engine. This reduces carrying capacity and increases freight costs

Consequently, Fuel Cell Electric Vehicles (“FCEV” or “Hydrogen Trucks”) represent the one of the viable alternatives for transforming Heavy Transport to carbon-neutral/negative status

Business Model

The Company currently focuses on partnerships where the Partner provides funding and local relationships while H2EG provides an integrated suite of technologies and operational expertise. This is conducted under a Net Income Share (i.e., royalties) entitling H2EG to a percentage of the Net Income of the operating entity.

This current Business Model is open to evolution as opportunities present themselves. The advantage of this model – currently – is the following:

Allows for different type of operating models – not constrained by a single approach – allowing growth flexibility.

Allows headquarter personnel to deal with multiple projects leveraging expertise bandwidth.

OPEX at project level allows each project to be evaluated on its own merit and reduces risk at holding level.

Provides for high profit margins at corporate level.

Facilitates global growth by dealing with country-specific.

Governmental Regulation

Our business is impacted by federal, state and local laws and other regulations relating to the energy sector.

In addition, our customers are impacted by laws and regulations relating to energy sector. These regulations are subject to change, and new regulations may curtail or eliminate our customers’ activities in certain areas where we currently operate. We cannot determine the extent to which new legislation may impact our customers’ activity levels, and ultimately, the demand for our services.

Government initiatives can stimulate demand by setting hydrogen consumption targets in various industries or implementing hydrogen-friendly regulations (e.g., mandates for hydrogen use in specific sectors). Mandates such as California banning diesel internal combustion engines (“ICE”) after 2035 are accelerating this demand.

Our Company and our products are subject to various federal, provincial, state and local laws and regulations relating to, among other things, land use, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of pollutants into the atmosphere. Emissions of SOx and NOx from our power plants are substantially lower than conventional combustion-based generating stations and are far below existing and proposed regulatory limits. The primary emissions from our power plants, assuming no cogeneration application, are humid flue gas that is discharged at temperatures of 700-800° F, water that is discharged at temperatures of 10-20° F above ambient air temperatures, and CO2 in per-kW hour amounts that are, due to the high efficiency of fuel cells, significantly less than conventional fossil fuel central generation power plants. Depending on the jurisdiction, whether our plants require water discharge permits is dependent upon whether the discharge is directed to a storm drain or wastewater system.

Various states and municipalities in the U.S. have adopted programs for which our products qualify, including programs supporting self-generation, clean air power generation, combined heat and power applications, carbon reduction, grid resiliency/microgrids, energy storage and utility ownership of fuel cell projects.

At the federal level, the passage of the Bipartisan Infrastructure Bill of 2021 and the Inflation Reduction Act of 2022 are expected to have a major impact on the US hydrogen market. The Bipartisan Infrastructure Bill allocated over $8 billion for hydrogen-related activity and research, including a hydrogen “HUBs” initiative to be administered by the DOE. In October 2023, the Biden-Harris administration announced that seven Hydrogen Hub projects were selected for award negotiations with the potential to receive up to an aggregate of $7 billion of funding.

The Inflation Reduction Act, or “IRA,” was signed into law in August 2022, marking a major investment by the U.S. federal government into a broad spectrum of renewable energy technologies by recasting existing investment and production tax credits and creating new credits for zero-emission technology. The IRA extended the existing Internal Revenue Code (“IRC”) Section 48 investment tax credit, through 2024 and introduces new prevailing wage conditions required to be eligible for the full credit value. We believe our Company could benefit from changes to the production tax credit pursuant to the new investment tax credit pursuant to IRC Section 48E for zero emission energy property, which will succeed the existing Section 48 investment tax credit, and the IRC Section 45V production tax credit for hydrogen. This new production credit offers up to $3.00 per kilogram of hydrogen produced if the hydrogen is considered zero carbon and if the hydrogen generation project conforms with prevailing wage and apprenticeship requirements. We expect that this incentive for zero carbon will result in increased demand for commercial solutions to hydrogen production technology, such as our True Green Hydrogen. Based on the current guidance made available by the IRS and U.S. Treasury Department, we believe that our Company is well positioned to take advantage of these provisions.

Environmental Matters

Our operations, and those of our customers, will be subject to extensive laws, regulations and treaties relating to air and water quality, generation, storage and handling of hazardous materials, and emission and discharge of materials into the environment. We believe we are in substantial compliance with all regulations affecting our business. Historically, our expenditures in furtherance of our compliance with these laws, regulations and treaties have not been material, and we do not expect the cost of compliance to be material in the future.

Employees

We have six full-time employees as of May 15, 2024. We believe that our relationships with our employees are satisfactory, and we enjoy low turnover. We support diversity in our workforce and are committed to safety in the workplace and compliance with applicable regulatory and legal requirements. We utilize the services of independent contractors to perform various daily operational and administrative duties.

Seasonal Trends

We have not experienced and do not expect to experience seasonal trends in future business operations.

Our Corporate History

Our Company was organized under the laws of the State of Nevada on January 7, 1982 under the name All Things Inc. On March 21, 1985, our Company’s name was changed to New Environmental Technologies Corporation. On April 28, 2003, our Company’s name was changed to Victory Capital Holdings Corporation. On May 3, 2006, our Company’s name was changed to Victory Energy Corporation. On May 29, 2018, our Company’s name was changed to Victory Oilfield Tech, Inc. On January 11, 2024 our name was changed to Victory Clean Energy Inc.

From inception until 2004, we had no material business operations. In 2004, we began the search for the acquisition of assets, property or businesses that could benefit our Company and its stockholders. In 2005, management determined that we should focus on projects in the oil and gas industry.

In January 2008, we and Navitus Energy Group (“Navitus”) established Aurora Energy Partners (“Aurora”). Prior to the Divesture of Aurora described below we were the managing partner of Aurora and held a 50% partnership interest in Aurora. All of our oil and natural gas operations were conducted through Aurora.

On August 21, 2017, we entered into the Divestiture Agreement with Navitus, and on September 14, 2017, we entered into Amendment No. 1 to the Divestiture Agreement. Pursuant to the Divestiture Agreement, as amended, we agreed to divest and transfer our 50% ownership interest in Aurora to Navitus, which owned the remaining 50% interest.

On July 31, 2018, the Company entered into a stock purchase agreement to purchase 100% of the issued and outstanding common stock of Pro-Tech Hardbanding Services, Inc., (“Pro-Tech”), an Oklahoma corporation which is a hardbanding company servicing Oklahoma, Texas, Kansas, Arkansas, Louisiana, and New Mexico.

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, we entered into an agreement with Flagstaff International, LLC under which Flagstaff will commit to invest $4,000,000 in Victory in exchange for Victory Preferred Stock and the transfer to Pro-Tech Holdings of all equity interests held by Victory in Pro-Tech Hardbanding Services, Inc.

On January 1, 2024, Victory completed the sale of Pro-Tech to Flagstaff International, LLC, a Delaware limited liability company.

Item 1A. Risk Factors

No disclosure required

Item 1B. Unresolved Staff Comments

Not applicable.

Item 1C. Cybersecurity

Cybersecurity Risk Management and Strategy

We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.

Our cybersecurity risk management program is aligned to the Company's business strategy. It shares common methodologies, reporting channels and governance processes that apply to the other areas of enterprise risk, including legal, compliance, strategic, operational, and financial risk. Key elements of our cybersecurity risk management program include:

● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology environment;

● a security team principally responsible for managing our cybersecurity risk assessment processes and our response to cybersecurity incidents;

● the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security procedures;

● training and awareness programs for team members that include periodic and ongoing assessments to drive adoption and awareness of cybersecurity processes and procedures;

● a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and

● a third-party risk management process for service providers, suppliers, and vendors.

In the last three fiscal years, the Company has not experienced any material cybersecurity incidents.

Cybersecurity Governance

The Board regularly receives reports from our executive officers and third parties on cybersecurity matters. In addition, the Board receives reports addressing cybersecurity as part of our overall enterprise risk management program and to the extent cybersecurity matters are addressed in regular business updates.

Management is responsible for developing cybersecurity programs, including as may be required by applicable law or regulation. These individuals’ expertise in IT and cybersecurity generally has been gained from a combination of education, including relevant degrees and/or certifications, and prior work experience. They are informed by their respective cybersecurity teams and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents as part of the cybersecurity programs described above.