TOGI 10-Q
TurnOnGreen, Inc. (TOGI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended:
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| ( | ||
| (Address of principal executive offices) | (Zip Code) | (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| o Large accelerated Filer | o Accelerated Filer | |
| x |
||
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock as of August 1, 2022.
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 11 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 |
| Item 4. | Controls and Procedures | 15 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 16 |
| Item 1A. | Risk Factors | 16 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 16 |
| Item 3. | Defaults Upon Senior Securities | 16 |
| Item 4. | Mine Safety Disclosures | 16 |
| Item 5. | Other Information | 16 |
| Item 6. | Exhibits | 16 |
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Imperalis Holding Corp.
Condensed Consolidated Balance Sheets
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Cash and cash equivalents held in Trust Account | ||||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders' deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Accrued interest | ||||||||
| Accrued interest - related party | ||||||||
| Convertible notes payable, net | ||||||||
| Total current liabilities | ||||||||
| Convertible notes payable, net - related party | $ | $ | ||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' deficit: | ||||||||
Preferred E Stock, par value $ a share; shares authorized: shares issued and outstanding | ||||||||
Common Stock, par value $ a share;
shares | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 3 |
Imperalis Holding Corp
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months ended June 30, | Six Months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Rent | ||||||||||||||||
| General and administration | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Owner’s compensation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operations loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense - related party | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share-basis and diluted | $ | $ | $ | $ | ||||||||||||
Weighted average shares outstanding basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 4 |
Imperalis Holding Corp.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
(Unaudited)
| Common Stock | ||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Deficit | ||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss for period | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss for period | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Stock | ||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Deficit | ||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Common stock issued for conversion of convertible note and accrued interest | ||||||||||||||||||||
| Beneficial conversion feature | - | |||||||||||||||||||
| Net loss for period | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock issued for services | ||||||||||||||||||||
| Net loss for period | - | $ | ( | ) | $ | ( | ) | |||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 5 |
Imperalis Holding Corp.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Common stock issued for services | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Increase in other receivables | ( | ) | ||||||
| Increase in accrued interest - related party | ||||||||
| Increase in accrued interest | ||||||||
| Increase in accounts payable - related party | ||||||||
| Decrease in accounts payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Repayment on stockholder loan | ( | ) | ||||||
| Net cash provided by financing activities: | ||||||||
| - | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
Common stock issued for conversion of convertible note payable and accrued interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 6 |
Imperalis Holding Corp.
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
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.
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 and of potential common stock equivalents outstanding as of June 30, 2022 and 2021, respectively, related to convertible notes payable and accrued interest.
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.
| 7 |
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
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 $
Note 3 – Equity
Preferred Stock
The Company has authorized
the issuance of up to shares of $ 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 $ per share, and has a dividend rate of
Common Stock
On January 13, 2021
and February 22, 2021, the Company issued an aggregate of
shares of common stock upon conversion of an outstanding convertible note with a principal balance of $
On April 1, 2021, the
Company issued 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 $
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.
| 8 |
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 $
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 $
During the six months period ended June 30, 2022
and 2021, interest expense – related party amounted to $
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.
| 9 |
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.
| 10 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Plan of Operations
The Company has no operations from a continuing business other than the expenditures related to running the Company and has no revenue from continuing operations as of the date of this Quarterly Report.
On March 20, 2022, BitNile Holdings, Inc. (NYSE American: NILE), a diversified holding company (“BitNile”) and its subsidiary TurnOnGreen, Inc., an electronic vehicle (“EV”) charging and power solutions company (“TurnOnGreen”), entered into a securities purchase agreement (the “SPA”) with Imperalis, whereby TurnOnGreen will, upon closing, become a subsidiary of Imperalis (the “Acquisition”). Upon completion of the Acquisition, which is contingent upon the completion of an audit of TurnOnGreen and each party’s satisfaction or waiver of certain customary closing conditions set forth in the SPA, Imperalis will change its name to TurnOnGreen and, through an upstream merger whereby the current TurnOnGreen shall cease to exist, have two operating subsidiaries, TOG Technologies Inc. and Digital Power Corporation. Promptly following the closing of the Acquisition, Imperalis will dissolve its three dormant subsidiaries. Subsequent to the Acquisition, should it close, BitNile will assist TurnOnGreen in pursuing an uplisting to the Nasdaq Capital Market, subject to Nasdaq’s seasoning rules and other criteria for listing. BitNile anticipates that stockholders of BitNile will in due course receive a dividend of securities of TurnOnGreen. BitNile expects to distribute to BitNile stockholders approximately 140 million of its common shares and an equal number of warrants to purchase such shares of TurnOnGreen at the time of the record date to be set therefor, subject to regulatory approval and compliance with US federal securities laws. Upon the closing of the Acquisition, TurnOnGreen will continue to be led by its Chief Executive Officer, Amos Kohn and its Chief Revenue Officer, Marcus Charuvastra.
Management intends, should the Acquisition not close, to explore and identify business opportunities within the U.S., including a potential acquisition of an operating entity through a reverse merger, asset purchase, or similar transaction. Our Chief Executive Officer has a degree of experience in business consulting and reverse mergers, though no assurances can be given that he can identify and implement a viable business strategy or that any such strategy will result in revenues or profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies.
We do not currently engage in any business activities that provide revenue or cash flow. During the next 12-month period we anticipate incurring costs in connection with the Acquisition or, should the Acquisition not be consummated, in investigating, evaluating, negotiating and consummating the potential acquisition of a suitable target company, as well as filing all requisite Securities and Exchange Commission (“SEC") reports.
Given our limited capital resources, we may consider an acquisition of an entity that has recently commenced operations, is a developing company or is otherwise in need of additional funds for the development of new products or services or expansion into new markets, or is an established business experiencing financial or operating difficulties and is in need of additional capital. Alternatively, a transaction may involve the acquisition of, or merger with, an entity that desires access to the U.S. capital markets.
Any target business that is selected may be financially unstable or in the early stages of development. In such event, we expect to be subject to numerous risks inherent in the business and operations of a financially unstable or early-stage entity. In addition, we may effect an acquisition with an entity in an industry characterized by a high level of risk or in which our management has limited experience, and, though our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.
Our management anticipates that we will likely only be able to effect one acquisition due to our limited capital. This lack of diversification will likely pose a substantial risk in investing in the Company for the indefinite future because it will not permit us to offset potential losses from one venture or operating territory against gains from another. The risks we face will likely be heightened to the extent we acquire a business operating in a single industry or geographical region.
| 11 |
Based upon our current operations, we do not have sufficient working capital to fund our operations over the next 12 months. If we are able to close a reverse merger, it is likely we will need capital as a condition of closing that acquisition. Because of the uncertainties, we cannot be certain as to how much capital we need to raise or the type of securities we will be required to issue. In connection with a reverse merger, we will be required to issue a controlling block of our securities to the target’s stockholders which will be very dilutive. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences, or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
We anticipate that we will incur operating losses in the next 12 months, principally costs related to operating any target company that we may acquire and filing reports with the SEC. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks for us include, but are not limited to, an evolving and unpredictable business model, recognition of revenue sources, and the management of growth. To address these risks, we must, among other things, develop, implement, and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain, and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition, and results of operations.
Results of Operations
For the Three Months Ended June 30, 2022 and 2021
| June 30, 2022 | June 30, 2021 | Movement ($) | Movement (%) | |||||||||||||
| Revenues | - | - | - | - | ||||||||||||
| Cost of sales | - | - | - | - | ||||||||||||
| Gross profit | - | - | - | - | ||||||||||||
| Operating expenses | ||||||||||||||||
| Rent | - | 1,428 | (1,428 | ) | (100 | %) | ||||||||||
| General and administration | 7,677 | 13,994 | (6,317 | ) | (45 | %) | ||||||||||
| Depreciation | - | - | - | - | ||||||||||||
| Owner’s compensation | - | - | - | - | ||||||||||||
| Total operating expenses | 7,677 | 15,422 | (7,745 | ) | (50 | %) | ||||||||||
| Net loss from operations | (7,677 | ) | (15,422 | ) | 7,745 | (50 | %) | |||||||||
| Interest income | - | - | - | - | ||||||||||||
| Amortization of debt discount | - | (11,250 | ) | 11,250 | (100 | %) | ||||||||||
| Interest expense - related party | (2,538 | ) | - | (2,538 | ) | - | ||||||||||
| Interest expense | (1,125 | ) | (1,180 | ) | 755 | (40 | %) | |||||||||
| Net loss before taxes | (11,340 | ) | (28,552 | ) | 17,212 | (60 | %) | |||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net loss | (11,340 | ) | (28,552 | ) | 17,212 | (60 | %) | |||||||||
Revenue and Gross Profit
We had no revenue or gross profit during the three months ended June 30, 2022 and 2021.
Operating Expenses
During the three months ended June 30, 2022, we had $7,677 in operating expenses consisting of legal fees, filing fees and accounting fees of $2,980, $2,947 and $1,750, respectively. By comparison, during the three months ended June 30, 2021, we had $15,422 in operating expenses consisting of general and administrative of $13,444, rent in the amount of $1,428 and stock-based compensation of $550.
| 12 |
During the three months ended June 30, 2022, amortization of debt discount on convertible note payable decreased by $11,250, or 100%, because there was no amortization in the current period relative to a full three month amortization in the prior period.
Interest expense – related party consisted of interest expense on convertible note payable. Increase in interest expense by $2,538, or 100%, is mainly attributed to convertible note payable financing issued in December 2021.
Interest expense consisted of interest expense on note payable and convertible note payable. Decrease in interest expense by $755, or 40%, was mainly attributed to settlement of note payable and convertible notes payable that matured during 2021.
Net Loss
We realized a net loss of $11,340 for the three months ended June 30, 2022, compared to a net loss of $28,552 for the three months ended June 30, 2021, representing a decrease in net loss of $17,212, or 60%.
For the Six Months Ended June 30, 2022 and 2021
| June 30, 2022 | June 30, 2021 | Movement ($) | Movement (%) | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Cost of sales | - | - | - | - | ||||||||||||
| Gross profit | - | - | - | - | ||||||||||||
| Operating expenses | ||||||||||||||||
| Rent | - | 2,856 | (2,856 | ) | (100 | %) | ||||||||||
| General and administration | 17,322 | 35,548 | (18,227 | ) | (51 | %) | ||||||||||
| Depreciation | - | 575 | (575 | ) | 100 | % | ||||||||||
| Owner’s compensation | - | 25,000 | (25,000 | ) | 100 | % | ||||||||||
| Total operating expenses | 17,322 | 63,979 | (46,658 | ) | (73 | %) | ||||||||||
| Net loss from operations | (17,322 | ) | (63,979 | ) | 46,658 | (73 | %) | |||||||||
| Interest income | - | 2 | (2 | ) | (100 | %) | ||||||||||
| Amortization of debt discount | (2,917 | ) | (20,625 | ) | 17,708 | (86 | %) | |||||||||
| Interest expense - related party | (5,076 | ) | - | (5,076 | ) | (100 | %) | |||||||||
| Interest expense | (2,754 | ) | (5,060 | ) | 2,306 | (46 | %) | |||||||||
| Net loss before taxes | (28,069 | ) | (89,662 | ) | 61,593 | (69 | %) | |||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net loss | $ | (28,069 | ) | $ | (89,662 | ) | $ | 61,593 | (69 | %) | ||||||
Revenue and Gross Profit
We had no revenue or gross profit during the three and six months ended June 30, 2022 and 2021.
Operating Expenses
For the six months ended June 30, 2022, general and administration expenses consisted of accounting fees, legal fees and filing fees of $7,250, $5,860, and $4,212, respectively. These costs were mainly incurred in connection with debt financing and SEC related filings. For the six months ended June 30, 2021, general and administration expenses consisted mainly of accounting fees, legal fees and utilities of $7,250, $24,615 and $3,108, respectively. The legal fees were mainly incurred in connection with debt financing
Owner’s compensation incurred during the six months ended June 30, 2021 represented a one-time payment of $25,000 to our former chief executive officer for services rendered.
During the six months ended June 30, 2022, amortization of debt discount on convertible note payable decreased by $17,708, or 86%, because of partial amortization in the current period relative to a full six month amortization in the prior period.
Interest expense – related party consisted of interest expense on convertible note payable. Increase in interest expense by $5,076, or 100%, was mainly attributed to convertible note payable financing issued in December 2021.
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Interest expense consisted of interest expense on note payable and convertible note payable. Decrease in interest expense by $2,306, or 46%, was mainly attributed to settlement of note payable and convertible notes payable that matured during 2021.
Net Loss
We realized a net loss of $28,069 for the six months ended June 30, 2022, compared to a net loss of $89,662 for the six months ended June 30, 2021, representing a decrease in net loss of $61,593, or 69%.
Liquidity and Capital Resources
As of June 30, 2022, we had $3,859 in our operating bank accounts. To date, our liquidity has been satisfied through proceeds received from issuance of note payables, convertible note payables and shareholder loans. Control of our company was sold on December 16, 2021 to an activist investor who has a strong track record of raising public and private debt. Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of an acquisition or one year from this filing. Over this time period, we will be using our cash for paying existing accounts payable, identifying and evaluating prospective target companies, performing due diligence on prospective target companies, paying for travel expenditures, selecting the target company to merge with or acquire, and structuring, negotiating and consummating the acquisition of the target company.
Critical Accounting Estimates
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The accounting principles we use require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and amounts of income and expenses during the reporting periods presented. We believe in the quality and reasonableness of our critical accounting policies; however, materially different amounts may be reported under different conditions or using assumptions different from those that we have applied. The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain valuation allowances for deferred tax assets. The application of each of these critical accounting policies and estimates is discussed In Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, from which there have been no material changes.
Recently Issued Accounting Pronouncements
Our management has considered all recent accounting pronouncements issued since the last audit of our financial statements. Our management believes that these recent pronouncements will not have a material effect on our financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Because we are a smaller reporting company, this section is not applicable.
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ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Our principal executive officer and principal financial officer, with the assistance of other members of the Company’s management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon our evaluation, each of our principal executive officer and principal financial officer has concluded that the Company’s internal control over financial reporting was not effective as of the end of the period covered by this Quarterly Report on Form 10-Q due to the material weaknesses as described herein.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (United States) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weaknesses:
| 1. | We do not have sufficient resources in our accounting function, which restricts our ability to perform sufficient reviews and approval of manual journal entries posted to the general ledger and to consistently execute review procedures over general ledger account reconciliations, financial statement preparation and accounting for non-routine transactions; and |
| 2. | Our primary user access controls (i.e., provisioning, de-provisioning, privileged access and user access reviews) to ensure appropriate authorization and segregation of duties that would adequately restrict user and privileged access to the financially relevant systems and data to appropriate personnel were not designed and/or implemented effectively. We did not design and/or implement sufficient controls for program change management to certain financially relevant systems affecting our processes. |
Planned Remediation
We are implementing measures designed to improve our internal control over financial reporting to remediate material weaknesses, including the following:
| · | Formalizing our internal control documentation and strengthening supervisory reviews by our management; and |
| · | When there are business operations and cash to justify the additional expenses, adding additional accounting personnel and segregating duties amongst accounting personnel. |
Management continues to work to improve its controls related to our material weaknesses, specifically relating to user access and change management surrounding our information technology systems and applications. Management will continue to implement measures to remediate material weaknesses, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) enhancing design and documentation related to both user access and change management processes and control activities; and (ii) developing and communicating additional policies and procedures to govern the area of information technology change management.
We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Despite the existence of these material weaknesses, we believe that the condensed consolidated financial statements included in the period covered by this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.
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Changes in Internal Control over Financial Reporting
Except as detailed above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
ITEM 1A. RISK FACTORS.
Because we are a smaller reporting company, this section is not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES OR USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
*Filed herewith.
** This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 1, 2022
| IMPERALIS HOLDING CORP. | |
| By: /s/ Darren Magot | |
| Darren Magot | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| By: /s/ David J. Katzoff | |
| David J. Katzoff | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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