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 and Six Months Ended June 30, 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 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, 2021 included with our Form 10-K filed with the SEC on April 7, 2022.
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 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.
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, 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 U.S. 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 had
20,991,730 and 18,143,200 of potential common stock equivalents outstanding as of June 30, 2022 and 2021, respectively, related to convertible
notes payable and accrued interest.
Stock-Based Compensation
The Company accounts for stock-based transactions
in which the Company receives services from employees, non-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
(“ASC 740”), 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 six months
ended June 30, 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 June 30, 2022 represented
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 June 30, 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 an aggregate of 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, the Company 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 4 – Going Concern
The accompanying condensed 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 condensed 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 – Accounts Payable – Related
Party
IMHC is a wholly owned subsidiary of BitNile,
Inc and BitNile, Inc is a wholly owned subsidiary of BitNile Holdings, Inc. During the six months period ended June 30, 2022, BitNile
Holdings, Inc. made vendor payments on behalf of IMHC amounting to $14,777.
During the six months ending June 30, 2021, the
Company made stockholder repayments of $7,056. As of December 31, 2021, the balance due to the Company’s officers was $nil.
These loans were unsecured, non-interest bearing and due on demand.
Note 6 – 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. 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 a 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.
During the six months period ended June 30, 2022
and 2021, interest expense – related party amounted to $5,076 and $nil, respectively. At both June 30, 2022 and December 31, 2021,
the total outstanding principal balance on the convertible notes payable – related party was $101,529. As of June 30, 2022 and December
31, 2021, the convertible notes payable – related party had accrued interest of $5,528 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 (8%) per annum, and was 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 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 was amortized through the original maturity date.
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
accrued until repayment or conversion of the convertible 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 settled 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 accrued
until conversion of the convertible 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 an aggregate of 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
accrued until repayment or conversion of the 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 settled on December 7, 2021.
During the six month period ended June 30, 2022
and 2021, interest expense amounted to $2,754 and $5,060, respectively. During the six month period ended June 30, 2022 and 2021, amortization
of debt discount amounted to $2,917 and $20,625, respectively. As of June 30, 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 $nil and
$2,917, respectively. As of June 30, 2022 and December 31, 2021, the convertible notes payable had accrued interest of $6,430 and $3,676,
respectively.
Note 7 – Subsequent Events
In accordance with ASC 855, Subsequent Events,
the Company has analyzed its operations subsequent to June 30, 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.