The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31, 2022
and 2021
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 at 11411 Southern Highlands Pkwy,
Suite 240, Las Vegas, NV 89141. 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.
The Company also holds three subsidiaries whose
operations are currently dormant, CannaCure Sciences, Inc., a Wyoming corporation, The Crypto Currency Mining Company, a Wyoming corporation,
and Dollar Shots Club, Inc., a Nevada corporation.
Basis of Consolidation
The consolidated financial statements include
100% of the assets, liabilities, revenues, expenses, and cash flows of Imperalis Holding Corp., CannaCure Sciences Inc., The Crypto Currency
Mining Company and Dollar Shots Club, Inc. The operations of CannaCure Sciences Inc., 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 Accounting Standards Codification
(“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
20,512,908 and 17,767,200 of potential common stock equivalents outstanding during the periods
ended March 31, 2022 and 2021 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.
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 three
months ended March 31, 2022 and 2021, 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.
Note 2 – Other Receivable
Other receivable of $11,150 at March 31, 2022 represents amounts due
from Vincent Andreula, the former chief executive officer of the Company in accordance with the sales purchase agreement.
Note 3 – 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 March 31, 2022 and December 31, 2021, there were 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.
Note 4 – 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 any 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 5 – Convertible Notes Payable
Convertible Notes Payable – Related Party
Digital Power Lending, LLC (“DPL”)
is a wholly owned subsidiary of Ault Alliance, Inc. Ault Alliance. Inc and the Company are subsidiaries of BitNile Holdings, Inc and Darren
Magot who serves as the chief executive officer of the Company is also the chief executive officer of Ault Alliance, Inc. As a result,
DPL is deemed a related party.
On December 15, 2021, the Company entered into
an exchange agreement with DPL, pursuant to which the Company issued the convertible
note to DPL, in the principal amount of $101,529, in exchange for the promissory notes issued to DPL in the aggregate principal
amount of $100,000, which promissory notes had accrued interest of $1,529 as of the closing date. The convertible note accrues interest
at 10% per annum, is due on December 15, 2023, and the principal, together with any accrued but unpaid interest on the amount of principal,
is convertible into shares of the Company’s common stock at DPL’s option at a conversion price of $0.01 per share.
As of March 31, 2022 and December 31, 2021, the
total outstanding principal balance on the convertible notes payable – related party was $101,529 and nil, respectively. As of March
31, 2022 and December 31, 2021, the convertible notes payable – related party had accrued interest of $2,989 and $451, respectively.
Convertible Notes Payable
On
February 3, 2021 and January 14, 2021, the Company received $25,000
and $20,000,
respectively, of financing from Opportunity Fund, LLC under a Convertible Promissory
Note (the “Note”). The Note allows for advances up to maximum amount of $75,000,
bears interest at eight percent (10%) per annum, and is due one
year from the date of issue. An Amendment to the Note dated May 11, 2022 but effective as of January
14, 2022 extended the maturity to January 14, 2024. 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 our
common stock. The convertible note payable resulted in a beneficial conversion feature
of $45,000
which was recorded as a debt discount. The discount was amortized through the original maturity
dates.
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 was amortized through the maturity date. This note was convertible to common stock
at a price of $0.005 per share. The note matured on October 18, 2020 and was retired on December 7, 2021.
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. 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 principal recorded as a debt discount. The discount was amortized through the maturity date. 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 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 was 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 was amortized
through the maturity date. The note matured on May 22, 2020 and was retired on December 7, 2021.
During the three months period ended March 31,
2022 and 2021, amortization of debt discount amounted to $2,917
and $9,375, respectively.
As of March 31, 2022 and December 31, 2021, the total outstanding principal balance on the convertible notes payable was $45,000
and $42,083, respectively and the remaining unamortized
debt discount was $2,917 and nil,
respectively. As of March 31, 2022 and December 31, 2021, the convertible notes payable had accrued interest of $4,576
and $3,676, respectively.
Note 6 – Subsequent Events
In accordance with ASC 855, Subsequent Events,
the Company has analyzed its operations subsequent to March 31, 2022 to the date these financial statements were issued and has determined
that it does not have any material subsequent events to disclose in these financial statements.