GPOX GPO Plus Inc (QB)

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

JULY 31, 2021

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

GPO Plus, Inc. (the “Company”) is a corporation originally established under the name of Koldeck, Inc. under the corporation laws in the State of Nevada on March 29, 2016. The Company’s activities are subject to significant risks and uncertainties including failure to secure additional funding to properly execute the Company’s business plan.

On April 2, 2018, the Company approved an agreement and plan of merger for the purposes of changing our corporate name from Koldeck Inc. to Global House Holdings Ltd. Pursuant to the agreement and plan of merger, our company merged with our wholly-owned subsidiary Global House Holdings Ltd., a Nevada corporation. Koldeck Inc. remained the surviving company of the merger, continuing under the name Global House Holdings Ltd. The name change, as well as a 20:1 forward stock split, was approved by FINRA and effective April 3, 2018.

On June 19, 2020, the Company approved an agreement and plan of merger for the purposes of changing our corporate name from Global House Holdings Ltd. to GPO Plus, Inc. Pursuant to the agreement and plan of merger, our company merged with our wholly-owned subsidiary GPO Plus, Inc., a Nevada corporation. Global House Holdings Ltd. remained the surviving company of the merger, continuing under the name GPO Plus, Inc. The name change, as well as a 12:1 reverse stock split, was approved by FINRA and effective August 20, 2020. The issued and outstanding shares and authorized capital have been restated retroactively in the financial statements.

Effective May 5, 2020, Brett H. Pojunis acquired 5,000,000 (post-split) of the issued and outstanding common shares of the Company from Jian Han Chen. As a result of the transaction, Mr. Pojunis had voting and dispositive control over 53.67% of our outstanding voting securities. The shares were acquired in a private transaction using Mr. Pojunis’ personal funds. Mr. Pojunis’s ownership has since been diluted to 29.04%, and Mr. Chen no longer holds any equity interest in the Company.

We are a start-up company engaged in the business of organizing, promoting, and operating industry-specific group purchase organizations (GPOs). A GPO is an entity created to leverage the purchasing power of a group of businesses (or individuals) to obtain discounts from vendors.

NOTE 2 – GOING CONCERN

The Company’s financial statements as of July 31, 2021 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company has incurred a cumulative net loss of $19,985,801. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended July 31, 2021 are not necessarily indicative of the results that may be expected for the year ending April 30, 2022. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2020 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended April 30, 2021 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on September 13, 2021.

Use of Estimates

Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

As of July 31, 2021 and April 30, 2021, the Company had cash and cash equivalents of $64,639 and $12,407, respectively.

Accounts Receivable

Accounts receivable are recorded in accordance with ASC 310, “Receivables.” Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company does not currently have any amount recorded as an allowance for doubtful accounts. Based on management’s estimate and based on all accounts being current, the Company has not deemed it necessary to reserve for doubtful accounts at this time.

As of July 31, 2021 and April 30, 2021, the Company had accounts receivable of $31,818 and $5,252, respectively.

Prepaid Expense

Prepaid expenses relate to security deposit for office premise and prepayment made for future services in advance that will be expensed over time as the benefit of the services is received in the future expected within one year.

Property, Plant and Equipment

Property and equipment are stated at cost. Depreciation is computed using 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.

The long-lived assets of the Company are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the three months ended July 31, 2021 and 2020, no impairment losses have been identified.

As of July 31, 2021 and April 30, 2021, Property, Plant and Equipment was $4,956 and $5,241, respectively. Depreciation of $285 and $0 was incurred during the three months ended July 31, 2021 and 2020.

Revenue Recognition

During the year ended April 30, 2021, the Company generated its first revenue since its establishment. The Company recognizes revenue from the sale of products in accordance with ASC 606, “Revenue Recognition” following the five steps procedure:

Step 1: Identify the contract(s) with customers

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to performance obligations

Step 5: Recognize revenue when the entity satisfies a performance obligation

The Company engages in the business of organizing, promoting, and operating industry-specific group purchase organizations (GPOs). A GPO is an entity created to leverage the purchasing power of a group of businesses (or individuals) to obtain discounts from vendors. The Company identifies underserved markets, segments and industries where there is little to no competition and develops specific GPOs around them. The Company develops industry specific GPO that leverage the aggregated purchasing power of its members. The GPOs use collective buying power to obtain and negotiate discounts on products and services from vendors. The discounted rates are then shared with its members saving them money and time by also improving supply chain efficiencies.

The main business segments are HealthGPO, a Group Purchasing Organization for the Healthcare industry, and cbdGPO, a Group Purchasing Organization for the Hemp industry. In addition, the Company offers professional services through GPOPRO Services.

During the three months ended July 31, 2021, the Company recognized $367,250 of revenues related to merchandise and product sales, and $2,308 of revenues related to shipping recovered on merchandise sales. In regard to the sales that occurred during the three months ended July 31, 2021, there are no unfulfilled obligations related to the merchandise and product sales.

HealthGPO works with companies that have well priced high-quality products and services with advantageous terms. The Company’s primary offerings are volume supply acquisitions, access to quality personal protective equipment (PPE), essential necessities and medical equipment from non-traditional, yet fully accredited suppliers. Additionally, the Company identify “best of breed” products that have a unique value proposition and become distributors with some form of exclusivity and/or favorable terms. HealthGPO is developing a b2b healthcare portal to offer medical products to everyday business. Technology will continue to play an important role in exceeding our stated goals.

HealthGPO also addresses the needs of individual consumers who want access to products at a good price that is typically only available to healthcare professionals. The Company intend on developing a b2c (business to consumer) portal to sell healthcare and wellness products directly to consumers.

In accordance with ASC 606, revenues are recognized when:

During the three months ended July 31, 2021 and 2020, the Company recognized revenue of $369,558 and $6,338, respectively, incurred cost of revenue of $282,106 and $0, respectively, and generated gross profit of $87,452 and $6,338, respectively.

Financial Instruments

The carrying values of our financial instruments including cash and cash equivalent, accounts receivable, loan receivable and accounts payable and accrued liabilities, accrued interest and convertible notes approximate their fair value due to the short maturities of these financial instruments.

Related Party Balances and Transactions

The Company follows FASB ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transaction. (Note 5)

Convertible Financial Instruments

The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP.

When the Company has historically determined that the embedded conversion options should not be bifurcated from their host instruments, discounts have been recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the instrument. During the three months ended July 31, 2021, the Company has chosen to early adopt of ASU2020-06 and did not record a beneficial conversion feature (“BCF”) discount on the issuance of convertible notes with the conversion rate below the Company’s market stock price on the date of note issuance.

Share-Based Compensation

The Company accounts for share-based compensation under the fair value method in accordance with ASC 718, “Compensation – Stock Compensation,” which requires all such compensation to employees and non-employees to be calculated based on its fair value of the equity instrument at the grant date and recognized in the earnings over the requisite service or vesting period.

During the three months ended July 31, 2021 and 2020, the Company recorded $19,014,235 and $0 stock-based compensation, respectively. The stock-based compensation incurred from common stock awarded to consultants and executives was reported under professional fees in the statements of operation. Of this amount, $3,524,790 in stock awards had not been issued at July 31, 2021, and is included in Stock Payable on the balance sheet.

Basic and Diluted Loss per Share

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period.

For the three months ended July 31, 2021, Series A preferred stock, warrants and common stock payable were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive. 

The Company had 1,000,000 shares of Series A Preferred Stock issued and outstanding at July 31, 2021, that are convertible into shares of common stock at a one-for-one rate. These if-converted common shares have been excluded from the computation of loss per share, as their inclusion would be anti-dilutive due to the Company’s losses. (Note 4)

During the three months ended July 31, 2021, the Company issued a convertible note of $280,000 to a non-affiliate for proceeds of $250,000. The Company issued 280,000 three-year warrants to purchase the Company’s common stock at an exercise price of $1.25 per share. (Note 6)

New Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a CCF and (2) convertible instruments with a beneficial conversion feature (“BCF”). With the adoption of ASU2020-06, entities will not separately present in equity an embedded conversion feature these debts. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has chosen to early adopt this standard on its three months ended July 31, 2021 financial statements and did not record BCF on the issuance of convertible notes with conversion rate below the Company’s market stock price on the date of note issuance.

In November 2019, the FASB issued ASU No. 2019-08, Compensation-Stock Compensation and Revenue from Contracts with Customers; Codification Improvements- Share-Based Consideration Payable to a Customer. ASU 2019-08 is effective for reporting periods beginning after December 15, 2019. ASU 2019-08 requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Top 718, Compensation – Stock Compensation. As a result, the amount recorded as a reduction in revenue would be measured based on the grant-date fair value of the share-based payment. Measuring and classifying share-based payments to customers under Top 718 provide fewer measurement dates for the instruments, fewer instances of classifying the instruments as liabilities; and more consistent accounting with share-based payments made to other nonemployees. The impact of this new standard on the Company’s financial statements has not been material.

In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our financial statements.

Management has considered all other recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 4 – CAPITAL STOCK

Share Capital

On June 19, 2020, the Company announced a reverse stock split of the issued and authorized shares of common stock on the basis of 1 new share for 12 old shares. The reverse stock split has been reviewed by the Financial Industry Regulatory Authority (“FINRA”) and has been approved with an effective date of August 20, 2020. Our issued and outstanding capital decreased from 111,800,000 shares of common stock to 9,316,674 shares of common stock. The reverse stock split also resulted in the decrease of the authorized capital from 1,500,000,000 shares of common stock to 125,000,000 shares of common stock. The issued and outstanding shares and authorized capital have been restated retroactively in the financial statements.

On November 20, 2020, the Company filed amended and restated article of incorporation, resulting in increasing the authorized share capital from 125,000,000 shares to 200,000,000 shares and par value from $0.001 per share to $0.0001 per share consisting of the following: 

On January 21, 2021, the Company filed amended certification of stock designation after issuance of class/series for designating 1,000,000 shares of blank check preferred stock as Series A Preferred Stock.

Ordinary Common Stock

On May 21, 2021, the Company issued restricted stock awards for 1,959,642 shares of ordinary common stock to consultants and executives for services under the 2020 Incentive Plan valued at $2,939,463, of which 418,000 shares were issued to an executive of the Company. Restricted stock awards were issued to certain consultants and executives as consideration for services rendered. The restricted stock units were vested immediately on the date of grant. (Note 5)

On May 21, 2021, the Company issued 7,200,000 shares of common stock to consultants and executives for services valued at $10,800,000, of which 1,400,000 shares were issued to an executive of the Company. (Note 5)

As of July 31, 2021 and April 30, 2021, the issued and outstanding ordinary common stock was 18,826,316 and 9,666,674, respectively.

Founders’ Class A Common Stock and Founders Series A Non-Voting Redeemable Preferred Stock

During the year ended April 30, 2021, the Company issued common and preferred stock units comprising of 115,000 shares of founder’s class A common stock and 28,750 shares of founder’s series A non-voting redeemable preferred stock to non-affiliates for total consideration of $287,500.

The founder’s series A non-voting redeemable preferred stock has a redemption value of $15 per share and is contingently redeemable at the holder’s option, and as a result was classified as mezzanine equity in the Company’s balance sheet. The redemption value of $224,905 was determined to be its fair market value.

As of July 31, 2021 and April 30, 2021, the Company had 115,000 shares of founder’s class A common stock issued and outstanding and 28,750 shares of founder’s series A non-voting redeemable preferred stock issued and outstanding.

Series A Convertible Preferred Stock

The Company has designated 1,000,000 shares of series A convertible preferred stock. The series A convertible preferred stock may convert into common stock at a rate equal to one share of common stock for each share of series A convertible preferred stock. Each Series A convertible preferred shareholder is entitled to vote, on one hundred (100) votes for each share held of record on matters submitted to a vote of holders of the Company’s ordinary Common Stock.

On January 21, 2021, the Company issued 500,000 shares of series A convertible preferred stock to the CEO of the Company at $0.0001 per share for consideration of $50. (Note 5)

On January 21, 2021, the Company issued 500,000 shares of series A convertible preferred stock to an executive of the Company at $0.0001 per shares for consideration of $50. (Note 5)

As of July 31, 2021 and April 30, 2021, the Company had 1,000,000 shares of series A convertible preferred stock issued and outstanding.

Series A Non-Voting Redeemable Preferred Stock

On May 21, 2021, the Company issued 175,000 series A non-voting redeemable preferred shares to an executive of the Company at $10 stated value per share and for cash consideration of $17.50. (Note 5)

The series A non-voting redeemable preferred stock has a redemption value of $10 per share and is contingently redeemable at the holder’s option, and as a result was classified as mezzanine equity in the Company’s balance sheet. The redemption value of $1,750,000 was determined to be its fair market value.

As of July 31, 2021 and April 30, 2021, the Company had 175,000 shares and 0 shares of series A non-voting redeemable preferred stock issued and outstanding, respectively.

Warrants

During the three months ended July 31, 2021, in conjunction with the issuance of a convertible note on June 16, 2021, the Company issued 280,000 stock purchase warrants, exercisable for three years from issuance at exercise price of $1.25 per share. (Note 6)

The below table summarizes the activity of warrants exercisable for shares of common stock during the three months ended July 31, 2021:

The fair value of each warrant on the date of grant is estimated using the Black-Scholes option valuation model. The following weighted-average assumptions were used for warrants granted during the three months ended July 31, 2021:

The following table summarizes information relating to outstanding and exercisable warrants as of July 31, 2021:

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at July 31, 2021 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). As of July 31, 2021, the aggregate intrinsic value of warrants outstanding was approximately $210,000 based on the closing market price of $2.00 on July 31, 2021.

As of July 31, 2021, the Company valued the fair value on the 280,000 units of common stock purchase warrants granted at $560,000 based on Black-Scholes option valuation model. The relative fair value of the warrants of $166,667 was allocated to the debt discount of the convertible note amortized over the nine-month term of the note.

NOTE 5 – RELATED PARTY TRANSACTIONS

Loan Receivable

On June 16, 2021, the Company signed an agreement with a related party that is an affiliate of the Company's CEO for a loan of $21,310. The loan is non-interest bearing and has a one-year term. During the three months ended July 31, 2021, the Company has made $12,500 loan payment and will make $8,810 loan payment in August 2021. As of July 31, 2021, the loan receivable was $12,500.

CEO

On January 21, 2021, the Company issued 500,000 shares of series A convertible preferred stock to the CEO of the Company at $0.0001 per share for consideration of $50.

During the three months ended July 31, 2021, the Company incurred management fees of $8,720 to the CEO of the Company.

Executive

On January 21, 2021, the Company issued 500,000 shares of series A convertible preferred stock to the executive of the Company at $0.0001 per share for consideration of $50.

On May 21, 2021, the Company issued restricted stock awards for 418,000 shares of ordinary common stock to the executive under the 2020 Incentive Plan valued at $627,000 for services. 

On May 21, 2021, the Company issued 1,400,000 shares of common stock to the executive valued at $2,100,000 for services.

On May 21, 2021, the Company issued 175,000 series A non-voting redeemable preferred shares to the executive of the Company at $10 stated value per share and for cash consideration of $18.

On June 16, 2021, the Company issued a $280,000 Original Issue Discounted Convertible Promissory Note for a purchase price of $250,000, convertible at $1.00 per share. The note has a payment term of nine months and bears interest at 9% per annum. Additionally, the Company issued to the investor 280,000 three-year warrants to purchase the Company’s common stock at an exercise price of $1.25 per share. (Note 4)

On June 16, 2021, the Company recorded total debt discount of $196,667 comprising original issue discount of $30,000 and discount from warrants of $166,667. During the three months ended July 31, 2021, the Company recorded amortization of debt discount of $36,925 reporting under interest expense in the statements of operations.

During the three months ended July 31, 2021, the Company recorded interest expense of $3,107. As of July 31, 2021, the accrued interest payable was $3,107.

As of July 31, 2021, the convertible note payable was $120,258, net of note discount of $159,742.

On January 1, 2021, the Company signed consulting service agreements with two independent contractors. Pursuant to the agreements, the Company issued 250,000 shares of ordinary common stock at market stock price of $0.95 per share to the consultants for service at $237,500. In six months from the date of the agreement, the Company is committed to issue another 250,000 shares of ordinary common stock to the consultants. As of July 31, 2021, the Company has not issued these shares to the consultants but will issue the shares to the consultants subsequent to July 31, 2021. On July 1, 2021, the Company recorded stock payable for 250,000 shares valued at $375,000 for services.

On June 14, 2021, the Company has received $210 cash consideration for the issuance of 2,100,000 shares of ordinary common stock to a consultant for services in pursuant to an agreement signed on May 25, 2021. On June 14, 2021, the Company recorded stock payable for services valued at $3,150,000.

On August 5, 2020, theCompany entered into a lease agreement for an office premise at 3571 E. Sunset Road Las Vegas Nevada under a term of 6 months commencing on August 10, 2020 at the cost of $4,750 per month, consisting of $2,000 payable in common shares of the Company and $2,750 payable in cash. (Note 8) During the three months ended July 31 2021 and 2020, the Company recorded stock payable of $6,000 and $0, respectively. As of July 31, 2021 and April 30, 2021, stock payable on lease was $24,000 and $18,000, respectively.

As of July 31, 2021 and April 30, 2021, total stock payable was $3,549,000 and $18,000, respectively.

NOTE 8 – COMMITTMENTS AND CONTINGENCIES

The Company’s principal business and corporate address is 3571 E. Sunset Road, Suite 300, Las Vegas, NV 89120. This office is currently leased for a term of 6 months at the cost of $4,500 per month, consisting of $2,000 payable in common shares of the Company (calculated based on a 10% discount to fair market value at the time of payment) and $2,500 payable in cash. The Company may extend this lease on a month-to-month basis following expiration of the initial term.

The Company also maintains a sales office at 3375 Shoal Line Blvd., Hernando Beach, Florida 34607. This office is leased for a term of 12 months expiring on April 30, 2022 at the cost of $1,857.50 per month.

The leases are exempt from the provisions of ASC 842, Leases, due to the short-terms of their durations.

NOTE 9 – RISKS AND UNCERTAINTIES

In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. Due to the outbreak and spread of COVID-19, the Company’s management and advisors responsible for financial reporting have experienced administrative delays, include travel restrictions and reduced work hours. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at July 31, 2021. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained.