Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q, 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.

Recent Events and Developments

On March 20, 2022, we entered into a Securities Purchase Agreement (the "Agreement") with TurnOnGreen, Inc., a Nevada corporation ("TOGI"), a then wholly-owned subsidiary of BitNile Holdings, Inc. ("BitNile", or the "Parent"). Pursuant to the Agreement, at the Closing, which occurred on September 6, 2022 (the "Closing Date"), the Parent delivered to us all of the outstanding shares of common stock of TOGI held by the Parent, and in consideration for the issuance by IMHC to the Parent (the "Acquisition") of an aggregate of 25,000 newly designated shares of Series A Preferred Stock (the "Series A Preferred Stock"), with each such share having a stated value of $1,000. The Series A Preferred Stock has an aggregate liquidation preference of $25 million, is convertible into shares of our common stock at the Parent's option, is redeemable by the Parent, and entitles the Parent to vote with the common stock on an as-converted basis. Immediately following the Acquisition, TOGI became our wholly-owned subsidiary, and subsequent thereto, TOGI was merged with and into our company, pursuant to which TOGI ceased to exist.





Impact of Inflation

We believe that inflation has not had a material impact on our results of operations for the years ended December 31, 2021 and 2020. During fiscal year 2022, we expect the impact of inflation on the company's business will be significant due to increases for materials and services throughout fiscal year 2022. The company believes this may continue to impact expenses in fiscal 2023 and future years. In an effort to mitigate various inflationary pressures, we intend to increase the price of hardware, software and services to our distributors and end-users commensurate with our cost of revenue. In our TOG business, we will also seek to take advantage of federal, state, municipal and utility rebate programs to offset certain inflationary pressures. Additionally, we plan on offering our employees and consultants a variety of remote work options and video conferencing tools to offset inflationary increases in fuel and travel costs.





Plan of Operations

We are an emerging electric vehicle ("EV") electrification infrastructure solutions and premium custom power products company, through our wholly owned subsidiaries Digital Power Corporation ('DPC") and TOG Technologies Inc. ("TOGT"), design, develop, manufacture and sell highly engineered, feature-rich, high-grade-power conversion and power system solutions to diverse industries and markets including e-Mobility, medical, military, telecommunications, and industrial as well as design and provide a line of advanced EV charging solutions. Through DPC, we provide solutions which leverage a combination of low leakage power emissions, very high-power density with power efficiency, flexible design leveraging customized firmware and short time to market. Our designed and manufactured, highly engineered, precision power conversion and control solutions serve mission-critical applications and processes. Through TOGT, we market and sell a line of scalable EV residential, commercial and ultra-fast charging products and comprehensive charging management software and network services. The business represents a natural outgrowth from our proprietary core power technologies to optimizing the design and performance of EV charging solutions.

Our strategy is to be the supplier of choice across numerous markets that require high-quality power system solutions where custom design, superior product, high quality, time to market and competitive prices are critical to business success. We believe that we provide advanced custom product design services to deliver high-grade products that reach a high level of efficiency and density and can meet rigorous environmental requirements. Our customers benefit from a direct relationship with us that supports all their needs for designing and manufacturing power solutions and products. By implementing our proprietary core technology, including process implementation in integrated circuits, we can provide cost reductions to our customers by replacing their existing power sources with our custom design cost-effective products.





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Results of Operations

For the Three Months Ended September 30, 2022 and 2021:





                                      2022            2021          Change ($)       Change (%)
Revenue                            $ 1,827,000     $ 1,095,000     $    732,000                67 %
Cost of revenue                        931,000         807,000          124,000                15 %
Gross profit                           896,000         288,000          608,000               211 %
Operating expenses:
Research and development                71,000          72,000           (1,000 )              (1 %)
General and administrative             756,000         530,000          226,000                43 %
Selling and marketing                  542,000         176,000          366,000               208 %
Depreciation                            10,000           6,000            4,000                67 %
Total operating expenses             1,379,000         784,000          595,000                76 %
Operating loss                        (483,000 )      (496,000 )
Other expense:
Interest                                (3,000 )             -            3,000               100 %
Total other expense                     (3,000 )             -            3,000               100 %
Net loss                              (486,000 )      (496,000 )
Preferred dividends                   (139,000 )             -
Net loss available to common
stockholders                       $  (625,000 )   $  (496,000 )




Revenue and Gross Profit

During the three month period ended September 30, 2022, we had increased revenues of $732,000 and increased gross profits of $608,000 compared to the three month period ended September 30, 2021, primarily due to our increased sales in 2022 to our defense customers, driving increased production and deliveries in the current three month period coupled with reduced sales to our low margin customers. In addition, there was a shift in major customers; a large low margin customer was replaced with a high margin customer.

Net Loss and Operating Expenses

During the three months ended September 30, 2022, our net loss decreased $10,000 from the three month period ended September 30, 2021, due to increased revenue of $732,000 partially offset by increased operating expenses, which primarily consisted of marketing, rent, legal and audit fees that increased by $258,000, $211,000 and $69,000, respectively, coupled with the inclusion of IMHC operating expenses of $25,000 in 2022, all driven by increasing our sponsoring efforts, and the Acquisition completed in the third quarter of 2022.

Net Loss Available to Common Stockholders

During the three month period ended September 30, 2022, IMHC was combined with certain entities under the common control of our Parent. As part of this transaction, we issued preferred stock that accrues a dividend, which has resulted in an increase in the net loss available to common stockholders of $139,000.

For the Nine Months Ended September 30, 2022 and 2021





                                       2022            2021         Change ($)       Change (%)
Revenue                            $  4,018,000     $ 4,308,000     $  (290,000 )              (7 %)
Cost of revenue                       2,269,000       2,644,000        (375,000 )             (14 %)
Gross profit                          1,749,000       1,664,000          85,000                 5 %
Operating expenses:
Research and development                581,000         368,000         213,000                58 %
General and administration            2,346,000       1,438,000         908,000                63 %
Selling and marketing                 1,202,000         600,000         602,000               100 %
Depreciation                             40,000          18,000          22,000               110 %
Total operating expenses              4,169,000       2,424,000       1,745,000                72 %
Operating loss                       (2,420,000 )      (760,000 )
Other expense:
Interest                                 (3,000 )             -           3,000               100 %
Total other expense                      (3,000 )             -           3,000               100 %
Net loss                             (2,423,000 )      (760,000 )
Preferred dividends                    (139,000 )             -
Net loss available to common
stockholders                       $ (2,562,000 )   $  (760,000 )




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Revenue and Gross Profit

During the nine month period ended September 30, 2022, we had decreased revenues of $290,000 compared to the nine month period ended September 30, 2021, primarily due to certain customers delaying or stalling projects previously awarded and commenced during the nine month period ended September 30, 2021 coupled with reduced sales to our low margin customers. In addition, there was a shift in major customers; a large low margin customer was replaced with a high margin customer.





Operating Expenses

For the nine month period ended September 30, 2021, our operating expenses increased by approximately $1,744,000, compared to the nine month period ended September 30, 2021. The change was primarily due to rent, marketing, licensing fees, payroll fees, and IMHC operating expenses being included in the 2022 results, increasing by $770,000, $300,000, $279,000 $260,000 and $25,000, respectfully. These increases were driven by new sales office and facility rents, sponsoring efforts, product safety certification fees related to EV chargers, payroll, taxes and benefits related to new hires and the Acquisition completed in the third quarter of 2022.

Net Loss Available to Common Stockholders

During the nine month period ended September 30, 2021, IMHC was combined with certain entities under the common control of our Parent. As part of this transaction, we issued preferred stock that accrues a dividend, which has resulted in an increase in the net loss available to common stockholders of $139,000.





Liquidity and Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring net losses and operations have not provided cash flows. In view of these matters, there is substantial doubt about our 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. As of September 30, 2022, the Company had cash and cash equivalents of $0.1 million and working capital of $2.7 million





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 of inventories, valuation of long-lived assets, intangible assets, and valuation allowances for deferred tax assets. The application of each of these critical accounting policies and estimates is discussed in the Management's Discussion and Analysis of Financial Condition and Results of TOGI, of IMHC's Current Report on Form 8-K relating to the Acquisition filed with the SEC on September 6, 2022.

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 significant effect on our financial statements.

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