The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
Notes to Unaudited Condensed
Consolidated Financial Statements
Three
and Six Months Ended June 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 18,143,200
and 16,750,000
of potential common stock equivalents outstanding as of June 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 six months ended June 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.
Reclassification
Certain
account balances from prior periods have been reclassified in these financial statements to conform to current period classifications.
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 June 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 six months ended June 30, 2020, the Company’s officer, Vincent Andreula, loaned to the Company $34,000
and $9,121 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 forgiven by the note holder and recorded as a gain on forgiveness
of debt.
During the six months ending June 30, 2021, the Company made repayments
of $7,056. As
of June 30, 2021 and December 31, 2020, the balance due to the Company’s officers was $7,729 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. were settled and paid in full in exchange for a
single payment of $34,000.
As of June 30, 2021
and December 31, 2020, the outstanding principal balance 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 six months ended June 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 six months ended June 30, 2021 and 2020, amortization expense of $20,625
and $37,333 was
amortized to interest expense, respectively. As of June 30, 2021 the total outstanding principal balance on the convertible notes
payable was $83,000 and
the remaining unamortized debt discount was $24,375.
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 June 30, 2021 and December 31, 2020, the convertible notes payable had accrued interest of $7,716 and $9,078,
respectively.
NOTE
6 – Subsequent Events
In accordance
with ASC 855, “Subsequent Events,” the Company has analyzed its operations subsequent to June 30, 2021 through the date when
financial statements were issued, and has there are no significant subsequent events that require disclosure.