The accompanying notes are an integral part if the unaudited condensed consolidated financial statements
The accompanying notes are an integral part if the unaudited condensed consolidated financial statements
The accompanying notes are an integral part if the unaudited condensed consolidated financial statements
Notes
to Unaudited Condensed Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021 and 2020
NOTE
1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies
Description
of Business
Imperalis
Holding Corp. (the “Company” or “IMHC”), a Nevada corporation formed on April
5, 2005, is a Holding company headquartered in
Sheridan, Wyoming. The Company seeks to acquire businesses with high growth potential in diverse industries to multiply rates of return
through synergism and consolidating management and accounting information systems.
With
the acquisition of CannaCure, as discussed below, the Company is currently developing a lineup of personal care products containing Cannabidiol
(CBD). The Company offers CBD-based lotions and oils to the consumer markets. the products are all-natural, cruelty-free
products that aim to provide an alternative to synthetic personal care products.
Recapitalization
and Reorganization
On
April 29, 2019, we closed a Share Exchange Agreement (the “Agreement”) with CannaCure Sciences, Inc., a Wyoming corporation
(“CannaCure”). Under the Agreement, we acquired all of the issued and outstanding capital stock of CannaCure in exchange
for issuance to the former shareholders of CannaCure, on a pro rata basis, of 60,000,000
shares of newly issued common stock. Our President,
CEO, and majority shareholder, Vincent Andreula, is also the President of CannaCure and was a 50% shareholder of CannaCure prior to the
acquisition. The acquisition of CannaCure was not accounted for under the acquisition method of accounting in accordance with ASC Topic
805, Business Combinations. The transaction was accounted for as common control transaction due to the related party and common control
relationships held between Mr. Andreula, the Company and CannaCure. The assets and liabilities of CannaCure transferred over to the Company
at their historical values which were insignificant.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial
statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the
“SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included
in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not
include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited
financial statements for the year ended December 31, 2020 included with our Form 10-12G filed with the SEC on April 13, 2021.
In
the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of
financial statements for the interim period have been included.
Basis
of Consolidation
The
consolidated financial statements include 100% of the assets, liabilities, revenues, expenses, and cash flows of the Imperalis Holding
Corp., CannaCure Sciences Inc., The Crypto Currency Mining Company and Dollar Shots Club, Inc. The operations of The Crypto Currency
Mining Company and Dollar Shots Club, Inc. are currently dormant. All intercompany accounts and transactions have been eliminated in
consolidation. The results of subsidiaries acquired during the respective periods are included in the consolidated statements of operations
from the effective date of the acquisition.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and footnotes thereto. Actual results could differ from those estimates. Significant
estimates inherent in the preparation of the accompanying consolidated financial statements include accounting for depreciation and amortization,
intangible assets, business combinations, equity transactions, and contingencies.
Cash
The
Company considers all highly liquid accounts with an original maturity date of three months or less to be cash equivalents. The Company
maintains bank accounts in US banks which, at times, may exceed federally insured limits. The Company has not experienced any losses
on such accounts and believes it is not exposed to any significant risk on bank deposit accounts.
Net
Income (Loss) per Share
In accordance
with ASC 260, Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by
the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share
except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding
if the potential common stock had been issued and if the additional shares of common stock were dilutive. The Company has 18,527,800
and 16,750,000
of potential common stock equivalents outstanding during the periods ended September 30,
2021 and 2020 related to convertible notes payable and accrued interest, respectively.
Stock-Based
Compensation
The
Company accounts for stock-based transactions in which the Company receives services from employees, directors or others in exchange
for equity instruments based on the fair value of the award at the grant date in accordance with ASC 718 – Compensation-Stock Compensation.
Income
Taxes
The
Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under
the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation is computed on the straight-line method. The depreciation and amortization methods are
designed to amortize the cost of the assets over their estimated useful lives, in years, of the respective assets as follows:
Maintenance
and repairs are charged to expense as incurred. Improvements of a major nature are capitalized. At the time of retirement or other disposition
of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected
in income.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes
revenue from the sale of its Retail products by applying the following steps: (1) identify the contract with a customer; (2) identify
the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance
obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Through
CannaCure, we are developing a lineup of personal care products containing Cannabidiol (CBD). We currently offer CBD-based lotions and
oils to the consumer markets. Our products are all-natural, cruelty-free products that aim to provide an alternative to synthetic personal
care products.
The
Company receives orders for its retail products directly from its customers. The retail products are all-natural skin care, hair care
and wellness products. We have multiple body butters including body butters for eczema, hair regrowth oils for men and women and multiple
body scrubs with various salts, sugars, oils and butters. Revenues are recognized based
on the agreed upon sales or transaction price with the customer when control of the promised goods are transferred to the customer. The
transfer of goods to the customer and satisfaction of the Company’s performance obligation will occur either at the time when products
are shipped or when the products arrive and are received by the customer. No discounts were offered by the Company. The Company does
not provide an estimate for returns as there is no anticipation for any returns in the normal course of business.
Impairment
of Long-lived Assets
The
Company analyzes its long-lived assets for potential impairment. Impairment losses are recorded on long-lived assets when indicators
of impairment are present and undiscounted cash flows estimated to be held and used are adjusted to their estimated fair value, less
estimated selling expenses. During the nine months ended September 30, 2021 and 2020, the Company recognized no
impairment of fixed assets and intangibles.
New
Accounting Pronouncements
Certain
new accounting pronouncements that have been issued are not expected to have a material effect on the Company’s financial statements.
Inventory
Inventory
is valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Inventory on the balance sheet consists
of various CBD oils, body scrubs and packaging.
NOTE
2 – Equity
Preferred
Stock
The
Company has authorized the issuance of up to 20,000
shares of $0.001
par value Series E Preferred Stock. The Series
E Preferred Stock is preferred as to dividends and liquidation over common stock, has a liquidation value of $1,000
per share, and has a dividend rate of 12%
of liquidation value per year. As of September
30, 2021 and December 31, 2020, there are no
Series E Preferred Stock issued or outstanding.
Common
Stock
On
January 13, 2021 and February 22, 2021, the Company issued a total 9,284,445
shares of common stock upon conversion of an
outstanding convertible note with a principal balance of $40,000
and $6,422
of accrued interest. The Company did not engage
in any general solicitation or advertising in connection with the issuance of the note, and the noteholder was an accredited investor
within the meaning of Rule 501. The issuance of these shares was exempt from registration pursuant to Rule 506 under Regulation D.
On
April 1, 2021, the Company issued 50,000
shares of common stock as payment for professional
services rendered. Based upon the fair value of the shares issued, we recorded a general and administration expense of $550.
The Company did not engage in any general solicitation or advertising in connection with the issuance of these shares. The issuance of
these shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
NOTE
3 – Going Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company
has incurred recurring net losses, has negative working capital and operations have not provided cash flows. Additionally, the Company
does not currently have sufficient revenue producing operations to cover its operating expenses and meet its current obligations. In
view of these matters, there is substantial doubt about the Company’s ability to continue as a going concern. The Company intends
to finance its future development activities and its working capital needs largely through the sale of equity securities with some additional
funding from other sources, including term notes until such time as funds provided by operations are sufficient to fund working capital
requirements. The consolidated financial statements of the Company do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable
to continue as a going concern.
NOTE
4 – Related Party Transactions
During the nine
months ended September 30, 2020, the Company’s officer, Vincent Andreula, loaned to the Company $34,000
and $14,289
was repaid. The $34,000
was used to pay and settle $44,000
of outstanding notes payable with non-related parties (see Note 5) and the $10,000
was settled with the note holder and recorded as a gain on settlement of debt.
During
the nine months ending September 30, 2021, the Company
made repayments of $5,048.
As of September 30, 2021 and December 31, 2020, the balance due to the Company’s officers was $9,737
and $14,785,
respectively. These loans are unsecured, non-interest bearing and due on demand.
NOTE
5 – Notes Payable and Convertible Notes Payable
Notes
Payable
On
August 29, 2018, the Company received $4,500
loan from Wexford Industries, Ltd. The loan had
a one
year term and an interest rate of 8%
per annum. The Note was retired on June
11, 2020 as part of the settlement discussed below.
On
October 1, 2018, the Company received $15,000
loan from Wexford Industries, Ltd. The loan had
a one
year term and an interest rate of 8%
per annum. The Note was retired on June
11, 2020 as part of the settlement discussed below.
On
October 2, 2018, the Company received $2,500
loan from Wexford Industries, Ltd. The loan had
a one
year term and an interest rate of 8%
per annum. The Note was retired on June
11, 2020 as part of the settlement discussed below.
On
October 12, 2018, the Company received $10,000
loan from Blackridge Holdings, Inc. The loan
had a one
year term and an interest rate of 8%
per annum. The Note was retired on June
11, 2020 as part of the settlement discussed below.
On
November 20, 2018, the Company received $12,000
loan from Wexford Industries, Ltd. The loan had
a one
year term and an interest rate of 8%
per annum. The Note was retired on June
11, 2020 as part of the settlement discussed below.
On
June 11, 2020, each of the outstanding loans due to Wexford Industries, Ltd. and Blackridge Holdings, Inc. totaling $44,000 were settled
and paid in full in exchange for a single payment of $34,000,
resulting in a gain on settlement of debt of $10,000.
On August 18,
2021, the Company received an $34,000
loan from Digital Power Lending, LLC. The loan has a 3
month term and interest at a rate of 10%
per annum.
As of September
30, 2021, the outstanding principal balance and accrued interest on the above mentioned notes payable was $20,000
and $246,
respectively. As of December 31, 2020 the outstanding principal and accrued interest on the above mentioned notes payable was $0
and $0,
respectively.
Convertible
Notes Payable
On
May 22, 2019, the Company received a $20,000
loan from Intermarket Associates, LLC. The Loan
had a one
year term and interest at a rate of 10%
per annum. Principal and interest payments will
accrue until conversion of Promissory Note. This note is convertible to common stock at a price of $0.005
per share. The convertible note payable resulted
in a beneficial conversion feature of $20,000
which was recorded as a debt discount. The discount
is being amortized through the maturity dates. The note matured on May
22, 2020 and is currently in default.
On
July 5, 2019, the Company received a $40,000
loan from GCEF Opportunity Fund, LLC. The Loan
had a one
year term and interest at a rate of 10%
per annum. Principal and interest payments will
accrue until conversion of Promissory Note. The convertible note payable resulted in a beneficial conversion feature of $40,000
which was recorded as a debt discount. The discount
is being amortized through the maturity dates. On January 13, 2021 and February 22, 2021, this note and $6,422
of accrued interest were converted into a total
9,284,445
shares of common stock (see Note 2).
On
October 18, 2019, the Company received an $18,000
loan from Intermarket Associates, LLC. The Loan
had a one
year term and interest at a rate of 10%
per annum. Principal and interest payments will
accrue until conversion of Promissory Note. The convertible note payable resulted in a beneficial conversion feature of $18,000
which was recorded as a debt discount. The discount
is being amortized through the maturity dates. This note is convertible to common stock at a price of $0.005
per share. The note matured on October
18, 2020 and is currently in default.
During
the nine months ended September 30, 2021, the Company received $45,000
of financing from an investor under a Convertible
Promissory Note (the “Note”). The Note allows for advances up to maximum amount of $75,000,
bears interest at eight percent (8%)
per annum, and is due one
year from the date of issue. The
Note is convertible at a conversion price of $0.005
per
share, with conversions limited such that no conversions will be allowed to the extent that, following such conversion, the noteholder
would become the beneficial owner of more than 9.99% of the Company’s common stock.
The convertible note payable resulted in a beneficial conversion feature of $45,000
which was recorded as a debt discount. The discount
is being amortized through the maturity dates.
During the nine
months ended September 30, 2021 and 2020, amortization expense of $31,875
and $41,833
was amortized to interest expense, respectively. As of September 30, 2021 the total outstanding
principal balance on the convertible notes payable was $83,000
and the remaining unamortized debt discount was $13,125.
As of December 31, 2020, the total outstanding principal balance on the convertible notes payable was $78,000
and the remaining unamortized debt discount was $0.
As of September 30, 2021 and December 31, 2020, the convertible notes payable had accrued interest of $9,355
and $9,078,
respectively.
NOTE
6 – Subsequent Events
In
accordance with ASC 855, “Subsequent Events,” the Company has analyzed its operations subsequent to September 30, 2021 through
the date when financial statements were issued, and has there are no significant subsequent events that require disclosure.