0001493152-19-007143.txt : 20190515 0001493152-19-007143.hdr.sgml : 20190515 20190514180310 ACCESSION NUMBER: 0001493152-19-007143 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20190331 FILED AS OF DATE: 20190515 DATE AS OF CHANGE: 20190514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GSRX INDUSTRIES INC. CENTRAL INDEX KEY: 0001381240 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FOOD STORES [5400] IRS NUMBER: 141982491 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-141929 FILM NUMBER: 19824261 BUSINESS ADDRESS: STREET 1: BUILDING NO. 3, P.R. 696, INT. STREET 2: JOSE EFRON AVE. CITY: DORADO, STATE: PR ZIP: 00646 BUSINESS PHONE: (808) 214-8649 MAIL ADDRESS: STREET 1: BUILDING NO. 3, P.R. 696, INT. STREET 2: JOSE EFRON AVE. CITY: DORADO, STATE: PR ZIP: 00646 FORMER COMPANY: FORMER CONFORMED NAME: GREEN SPIRIT INDUSTRIES INC. DATE OF NAME CHANGE: 20170606 FORMER COMPANY: FORMER CONFORMED NAME: Cyberspace Vita, Inc. DATE OF NAME CHANGE: 20061116 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the Quarter ended March 31, 2019

 

Commission File Number: 333-141929

 

GSRX INDUSTRIES INC.

 

(Exact name of registrant as specified in its charter)

 

Nevada   14-1982491
(State of organization)   (I.R.S. Employer Identification No.)

 

Building No. 3, P.R. 606, int. Jose Efron Ave.

Dorado, Puerto Rico 00646

 

(Address of principal executive offices)

 

(214) 808-8649

 

Registrant’s telephone number, including area code

 

 

 

Former address if changed since last report

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). [X] Yes [  ] No

 

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.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
(Do not check if smaller reporting company) Emerging growth company [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 Act). [  ] Yes [X] No

 

As of May 15, 2019, the registrant had 59,086,236 shares of common stock, par value $0.001 per share, outstanding.

 

 

 

  
 

 

TABLE OF CONTENTS

 

  PART I - FINANCIAL INFORMATION  
     
ITEM 1. INTERIM FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS 19
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22
ITEM 4 CONTROLS AND PROCEDURES 23
     
  PART II - OTHER INFORMATION  
     
ITEM 1. LEGAL PROCEEDINGS 24
ITEM 1A. RISK FACTORS 24
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES 24
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 25
ITEM 4. MINE SAFETY DISCLOSURES 25
ITEM 5. OTHER INFORMATION 25
ITEM 6. EXHIBITS 25
     
SIGNATURES 26

 

2
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. INTERIM FINANCIAL STATEMENTS

 

GSRX Industries Inc.

Consolidated Balance Sheets

March 31, 2019 and December 31, 2018

 

   March 31, 2019   December 31, 2018 
   “Unaudited”     
Assets          
           
Current Assets          
Cash  $1,192,582   $1,313,645 
Cash, held in escrow   333,572    - 
Accounts Receivable   26,440    37,090 
Inventory   649,841    360,460 
Prepaid Inventory   338,280    514,515 
Prepaid Expenses   21,300    23,800 
Total Current Assets   2,562,015    2,249,510 
           
Fixed Assets          
Furniture, Fixtures and Equipment   509,645    464,832 
Building, Land and Leasehold Improvements   2,284,520    2,197,191 
Accumulated Depreciation   (152,613)   (108,421)
Total Net Fixed Assets   2,641,552    2,553,602 
           
Other Assets          
Licenses   812,300    812,300 
Deposits   545,121    399,551 
Patent Application Costs (Note 7)   1,943,934    1,808,388 
Investments, fair value   11,666,998    - 
Investments, cost method   70,000    - 
Right of Use (Note 2)   6,316,879    - 
Construction in Progress (Note 5)   880,033    777,294 
Total Other Assets   22,235,265    3,797,533 
           
Total Assets  $27,438,832   $8,600,645 
           
Liabilities and Stockholders’ Equity          
           
Current Liabilities          
Accounts Payable  $1,208,485   $721,939 
Accrued Expenses   25,441    1,463 
Lease Liability - current   1,188,821      
Advances Payable   1,100    1,100 
Total Current Liabilities   2,423,847    724,502 
           
Long Term Liabilities          
Lease Liability - non curent   5,238,108    - 
Total Long Term Liabilities   5,238,108    - 
           
Total Liabilities   7,661,955    724,502 
           
Commitments and Contingencies (Note 8)          
           
Stockholders’ Equity (Note 3)          
Preferred Stock, convertible, $.001 par value; 1,000 shares authorized; 1,000 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively   1    1 
Common Stock $.001 par value 100,000,000 authorized; 46,021,677 and 45,235,533 issued and outstanding; 13,064,559 and 799,770 authorized but not issued   59,087    46,036 
Additional paid-in capital   64,748,051    49,750,553 
Retained Deficit   (45,409,437)   (42,322,236)
Equity Attributable to GSRX Industries Inc.   19,295,702    7,474,354 
Non-Controlling Interest   379,175    401,789 
           
Total Stockholders’ Equity   19,776,877    7,876,143 
           
Total Liabilities and Stockholders’ Equity  $27,438,832   $8,600,645 

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

3
 

 

GSRX Industries Inc.

Consolidated Statements of Operations

For the Three Months Ended March 31, 2019 and 2018

 

   For the Three Months Ended 
   March 31, 2019   March 31, 2018 
   “Unaudited”   “Unaudited” 
Revenues          
Revenues  $2,866,079   $2,196 
Cost of Goods Sold   1,380,620    821 
Gross Profit   1,485,459    1,375 
           
Operating Expenses          
Consulting Fees   453,029    316,833 
General and Administrative   1,755,354    405,837 
Professional Fees   335,475    192,413 
Depreciation Expense   44,192    - 
Stock Based Compensation (Note 3)          
Consulting Fees   545,107    7,295,000 
Share Exchange and Ancillary Rights Agreement   1,166,700      
Director Fees   15,926    300,000 
Professional Fees   408,000    - 
Total Stock based compensation   2,135,733    7,595,000 
Total Operating Expenses   4,723,783    8,510,083 
Loss from Operations   (3,238,324)   (8,508,708)
           
Other Income (Expenses)          
Rent Income   25,756    - 
           
Total Other Income (Expenses)   25,756    - 
           
Loss From Operations Before          
Provision for Income Taxes   (3,212,568)   (8,508,708)
           
Provision for Income Taxes (Note 4)   -    - 
           
Net Loss   (3,212,568)   (8,508,708)
Net Loss Attributable to Non-Controlling Interest   (125,367)   (518)
Net Loss Attributable to GSRX Industries Inc.  $(3,087,201)  $(8,508,190)
           
Basic loss per share  $(0.07)  $(0.21)
           
Weighted average number of common shares outstanding   46,078,529    41,409,779 

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

4
 

 

GSRX Industries Inc.

Consolidated Statement of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2019 and 2018

 

   Shares   Preferred   Common   Additional       Non -     
  

Preferred

Stock

  

Common

Stock

  

Stock

Amount

  

Stock

Amount

  

Paid-in

Capital

  

Retained

Deficit

  

Controlling

Interest

   Total 
                                 
Balance as of December 31, 2017   1,000    40,895,037   $1   $40,895   $33,349,144   $(26,082,960)  $-   $7,307,080 
                                         
Issuance of Shares and Warrants for Cash   -    155,167    -    155    465,345    -    -    465,500 
                                         
Issuance of Shares for Services   -    210,000    -    210    1,207,290    -    -    1,207,500 
                                       - 
Shares Authorized for Services, Not Issued as of Statement Date        1,277,500         1,278    6,386,222    -    -    6,387,500 
                                         
Shares Issued for Purchase of Patents   -    200,000    -    200    949,800    -    -    950,000 
                                       - 
Recognition of Non-Controlling Interest Attributable to Spirulinex, LLC   -    -    -    -    (662,721)        662,721    - 
                                       - 
Capital Contributed by Non-Controlling Interests                       -         1,390    1,390 
                                       - 
Net Loss   -    -    -    -    -    (8,508,190)   (518)   (8,508,708)
                                         
Balance as of March 31, 2018   1,000    42,737,704   $1   $42,738   $41,695,080   $(34,591,150)  $663,593   $7,810,262 
                                         
Balance as of December 31, 2018   1,000    46,035,303   $1   $46,036   $49,750,553   $(42,322,236)  $401,789   $7,876,143 
                                         
Issuance of Shares and Warrants for Cash   -    621,600    -    622    776,378    -    -    777,000 
                                         
Shares issued in Share Exchange and Ancillary Agreement   -    11,666,998    -    11,667    12,822,031    -    -    12,833,698 
                                         
Shares Authorized for Services, Not Issued as of Statement Date   -    762,335    -    762    968,270    -    -    969,032 
                                         
Capital Contributed by Non-Controlling Interests                       430,819         102,753    533,572 
                                         
Net Loss   -    -    -    -    -    (3,087,201)   (125,367)   (3,212,568)
                                         
Balance as of March 31, 2019   1,000    59,086,236   $1   $59,087   $64,748,051   $(45,409,437)  $379,175   $19,776,877 

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

5
 

 

GSRX Industries Inc.

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2019 and 2018

 

   For the Three Months Ended March 31, 
   2019   2018 
   “Unaudited”   “Unaudited” 
Cash Flow from Operating Activities          
Net Loss  $(3,212,568)  $(8,508,708)
Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities          
Issuance of Common Stock for Services   2,135,733    7,595,000 
Depreciation Expense   44,192    - 
           
Changes in Operating Assets and Liabilities:          
Accounts Receivable   10,650    - 
Inventory   (289,381)   (45,108)
Prepaid Inventory   176,235    - 
Prepaid Expenses   2,500    (11,850)
Accounts Payable   486,650    (165,381)
Sales Tax Payable   -    253 
Accrued Expenses   23,978    - 
Advances Payable   -    - 
Lease liability - current   110,050    - 
Deposits   (145,570)   (1,200)
Net Cash Used in Operating Activities   (657,636)   (1,136,994)
           
Cash Flow from Investing Activities          
Escrow, asset purchases   -    (1,434,500)
Purchase of Fixed Assets   (132,142)   (85,024)
Patent Application Costs incurred   (135,546)   (400,000)
Investments, cost method   (70,000)   - 
Construction in Progress   (102,739)   (342,995)
Net Cash Used in Investing Activities   (440,427)   (2,262,519)
           
Cash Flow from Financing Activities          
Issuance of Common Stock for Cash   777,000    465,500 
Sale of Equity in Subsidiaries   430,819    - 
Cash Contributed by Non-controlling Interests   102,753    1,390 
Net Cash Provided by Financing Activities   1,310,572    466,890 
Net Increase (Decrease) in Cash   212,509    (2,932,623)
Cash at Beginning of Period   1,313,645    6,758,018 
Cash at End of Period  $1,526,154   $3,825,395 
           
Supplemental Disclosures of Cash Flow Information          
Cash paid during the period for:          
Interest  $-   $- 
Income Taxes  $-   $- 
           
Supplemental Disclosure of Non-cash Investing and Financing Activities          
Common stock issued for Patent Application Costs  $-   $950,000.00 
Common stock issued for Investments, fair value  $11,666,998   $- 
Reclassification of Construction in Progress to Fixed Assets  $-   $128,822 

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

6
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

1. Nature of Operations

 

GSRX Industries Inc. (“the Company”) is a Nevada corporation formed under the name Cyberspace Vita, Inc. (“Cyberspace”) on November 7, 2006. Cyberspace’s initial business plan was related to the online sale of vitamins and supplements. On May 11, 2017, the Company entered into a share exchange agreement (the “Exchange Agreement”) with Peter Zachariou, the majority shareholder of Cyberspace (the “Shareholder”), Project 1493, LLC, a limited liability company organized under the laws of the Commonwealth of Puerto Rico (“1493”), and Peach Management, LLC (“Peach”) the sole member of 1493 (the “Member”), pursuant to which the Member transferred all of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912 restricted shares of common stock of the Company (the “Exchange Shares”), warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share for a period of three (3) years from the date of issuance (the “Exchange Warrants”) and 1,000 shares of Series A Preferred Stock that grants the holders thereof fifty-one percent (51%) voting power (the “Preferred Shares” and together with the Exchange Shares, and the Exchange Warrants, the “Exchange Securities”). As a result of the Exchange Agreement, 1493 became a wholly-owned subsidiary of the Company, and the business of 1493 became the business of the Company. At the time of the Exchange Agreement, Cyberspace was not engaged in any business activity. The Company accounted for the acquisition of 1493 as a reverse merger and all prior periods presented are those of 1493.

 

Pure and Natural One-TN, LLC (“PaN One”) was organized under the laws of the State of Tennessee on February 5, 2019. PaN One was formed for the purpose of operating CBD retail operations in Tennessee. PaN One opened its first kiosk location in Governor’s Square Mall in Clarksville, Tennessee on February 9, 2019.

 

Green Room Palm Springs LLC (“GRPS”) was organized under the laws of the State of California on March 4, 2019. GRPS was formed for the purpose of operating a cannabis dispensary in Palm Springs, California.

 

The Company is in the business of acquiring, developing and operating medical cannabis dispensaries throughout Puerto Rico; cannabis related businesses in California and real estate leasing in Puerto Rico and California.

 

The Company entered into the Final Purchasing Agreements (“FPA”) with holders of licenses to operate medicinal cannabis dispensaries in Puerto Rico. Pursuant to the FPAs, the Company acquired all of the legal rights, permits, pre-qualification licenses, and leases for five (5) medicinal cannabis dispensaries. The pre-qualification licenses do not allow the holder to open a dispensary, but instead offers the opportunity to go through the qualifying steps in order to obtain the requisite operating permit necessary to open the dispensary. Such steps include proving financial viability, background checks, application of the final permit, proof of certificate of occupancy, employment of a security firm, installation of security cameras, and other similar compliance matters.

 

The Company operates six dispensaries as follows:

 

Location  State/Territory  Date Opened  Purchase Price 
Dorado  Puerto Rico  March 28, 2018  $ 100,000 
Fajardo  Puerto Rico  December 28, 2018  $100,000 
Carolina  Puerto Rico  June 1, 2018  $100,000 
Hato Rey  Puerto Rico  June 1, 2018  $128,000 
San Juan  Puerto Rico  October 2, 2018  $75,000 
Point Arena  California  April 2, 2018  $350,000 

 

The FPA’s have an indefinite life and are not being amortized.

 

7
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present fairly the consolidated financial position and results of its operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These consolidated financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2018 (including the notes thereto) set forth in Form 10-K filed with the Securities and Exchange Commission on April 16, 2019.

 

Principles of Consolidation

 

The consolidated financial statements through March 31, 2019 include the accounts of the Company and the following entities, all of which have fiscal year ends of December 31. (Note 1).

 

●  100% owned subsidiary, Project 1493, LLC;
  100% owned subsidiary, Andalucia 511, LLC;
51% majority owned subsidiary, Spirulinex, LLC;
55% majority owned subsidiary, Sunset Connect Oakland, LLC;
55% majority owned, Green Spirit Essentials, LLC;
100% owned subsidiary, Green Spirit Mendocino, LLC; and
100% owned subsidiary, 138 Main Street PA, LLC.
100% owned subsidiary, GSRX SUPES, LLC
100% owned subsidiary, Point Arena Supply Co., LLC
100% owned subsidiary, Ukiah Supply Company, LLC
100% owned subsidiary, Pure and Natural, LLC
98.5% owned subsidiary, Point Arena Manufacturing, LLC
99% owned subsidiary, Point Arena Distribution, LLC
51% majority owned subsidiary, Pure and Natural-Lakeway, LLC
51% majority owned subsidiary, Pure and Natural One-TN, LLC
98.5% owned subsidiary, Green Room Palm Springs, LLC

 

Use of Estimates and Assumptions

 

The preparation of the consolidated financial statements that are in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements.

 

8
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

Cash and Cash Equivalents

 

The Company considers all cash on hand, cash in banks and all highly liquid debt instruments purchased with a maturity of three months at purchase or less to be cash and cash equivalents. At times, cash and cash equivalent balances at a limited number of banks and financial institutions may exceed insurable amounts. At March 31, 2019, the Company had $0 in excess of FDIC depository insurance coverage. The Company believes it mitigates its risks by depositing cash or investing in cash equivalents in major financial institutions.

 

Cash held in escrow, in the name of the Company, is held by Gunnison Bank (“Gunnison”). The escrow account was established to hold the deposits from the sale of equity in subsidiaries and hold funds for businesses under subscription agreements. There are no restrictions on the funds held by Gunnison on the Company’s behalf.

 

Investments, fair value

 

On March 30, 2019, the Company entered into a Share Exchange Agreement (the “Share Agreement”) and an Ancillary Rights Agreement (the “Ancillary Agreement”) with Chemesis International Inc., a British Columbian Corporation (“CADMF”). In the Share Agreement, the Company received 7,291,874 restricted shares of common stock of CADMF. Fair value of the investment as of March 31, 2019 was $11,666,998. CADMF is quoted on the OTC market and closed on Friday, March 29, 2019 at $1.60 per share.

 

Investments, cost method

 

Pure and Natural, LLC made a $50,000 investment on January 4, 2019 for a 10% equity and profits interest in The Zen Stop, LLC. The Zen Stop is a mobile wellness business called “Zen Stop.” The investment is carried at the cost basis as it is a private company and fair value cannot be readily determined.

 

Pure and Natural, LLC purchased 25,167 membership units in Buzznog, LLC for $20,000 on March 6, 2019. The investment is carried at the cost basis as it is a private company and fair value cannot be readily determined.

 

Revenue Recognition

 

In accordance with the new guidance, the Company recognizes revenue at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods or services to its customers. The Company’s policy is to record revenue when control of the goods transfers to the customer.

 

In limited instances when products are sold under consignment arrangements, the Company does not recognize revenue until control over such products has transferred to the end consumer.

 

The Company incurs costs associated with product distribution, such as freight and handling costs. The Company has elected to treat these costs as fulfillment activities and recognizes these costs at the same time that it recognizes the underlying product revenue. As this policy election is in line with the Company’s previous accounting practices, the treatment of shipping and handling activities under Topic 606 did not have any impact on the Company’s results of operations, financial condition and/or financial statement disclosures.

 

9
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

The following table presents the Company’s revenues disaggregated by type and by state/territory:

 

   For the Three Months Ended March 31, 
   2019   2018 
Revenues by Type          
Wholesale  $5,798   $- 
Retail   2,860,281    2,196 
Total  $2,866,079   $2,196 

 

   For the Three Months Ended March 31, 
   2019   2018 
Revenues by State/Territory          
California  $121,896   $- 
Tennessee   10,312   $- 
Texas   29,190    - 
Puerto Rico   2,704,681    2,196 
Total  $2,866,079   $2,196 

 

Accounts Receivable

 

The Company carries its accounts receivable at their estimated realizable amounts and periodically evaluates the credit condition of its customers. The allowance for uncollectible accounts receivable is based on the Company’s historical bad debt experience and on management’s evaluation of collectability of the individual outstanding balances. As of March 31, 2019, the Company had not identified any uncollectible accounts.

 

Inventory

 

The Company’s inventory is stated at the lower of cost or market. Inventory consists of cannabis products, such as flower, edibles, creams, oils and cannabis accessories such as pipes, bowls and cartridges; and CBD products, such as soft gels, tinctures, balms, pain cream and vape pens.

 

Inventory is comprised of the following items:

 

   As of
March 31, 2019
   As of
December 31, 2018
 
Finished goods – flower  $501,589   $137,592
Finished goods – cannabis products   354,386    191,468 
Finished goods – CBD products   132,146    31,400 
Total  $649,841   $360,460 

 

As of March 31, 2019, the Company had paid for inventory which had not been delivered in the amount of $338,280.

 

Fixed Assets

 

Fixed assets are recorded at cost and are depreciated using the straight-line method over estimated useful lives as follows:

 

Type of Asset   Estimated Life
Furniture, Fixtures and Equipment   5 – 10 years
Building and Leasehold improvements   5 - 25 years

 

10
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

Intangible Costs

 

The Company has incurred costs related to Patent Application Costs during the year ended December 31, 2018 and quarter ended March 31, 2019, consisting of $1,943,934 of legal fees. The patent applications will continue to be filed over the next several quarters. As the patents have not been issued as of March 31, 2019, no amortization has been applied against the patent costs. If the patents are approved, the Company will amortize the patent application costs over their useful lives. If the patents are not approved, the patent application costs will be expensed and charged to operations. (Note 7).

 

Share based Compensation

 

Compensation cost relating to share-based payment transactions (including the cost of all employee stock options) is required to be recognized in the consolidated financial statements and covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. That cost is measured based on the estimated fair value of the equity or liability instruments issued. (See Note 3).

 

Fair Value of Financial Instruments

 

The carrying value of the Company’s current liabilities approximates fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion the Company is not exposed, except for cash balances in excess of the FDIC depository insurance coverage, to significant interest, currency or credit risks arising from these financial instruments.

 

Income Taxes

 

The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company was organized under the laws of Nevada and therefore will be taxed at statutory U.S. federal corporate income tax rates.

 

Basic Earnings per Share

 

The Company computes net loss per share in accordance with FASB ASC 260 “Earnings per Share”, which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.

 

Basic net loss per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding. Potentially dilutive securities have been excluded from the Company’s earnings per share calculation due to the effect of being anti-dilutive. The total number of potentially dilutive securities which have been excluded is 6,995,796. (Note 3).

 

11
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

 

Recent Accounting Pronouncements

 

As of March 31, 2019 and through May 15, 2019, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or future operating results. The Company will monitor these emerging issues to assess any potential future impact on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. On January 1, 2019, we adopted this standard on our consolidated financial statements. The Company recognized the Right of Use asset in the amount of $6,316,879 and Lease Liability – current of $1,188,821 and Lease Liability – non-current of $5,238,108 as of March 31, 2019. During the period ended March 31, 2019, the Company recognized an additional $110,050 of rental expense charged to operations due to the adoption of the standard.

 

3. Equity

 

The following table illustrates the common stock transactions for the quarter ended March 31, 2019:

 

Category  Common Shares 
Cash, common shares   621,600 
      
Services, authorized but not issued   762,335 
Share Exchange and Ancillary Rights Agreement   11,666,998 
Total   13,050,933 

 

During the quarter ended March 31, 2019, consultants received 414,478 shares of common stock for legal, professional, consulting and advisory services provided to the Company with a fair market value of $1,724,733.

 

During the quarter ended March 31, 2019, the Company authorized the issuance of 15,000 shares of common stock to Dorado Consulting, LLC (Note 6) for services rendered to the Company with a fair market value of $16,500.

 

During the quarter ended March 31, 2019, the Company authorized the issuance of 315,000 shares of common stock to Thomas Gingerich, Chief Financial Officer (Note 6), for services rendered to the Company with a fair market value of $394,500.

 

12
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

Series A Preferred Stock

 

The holder of Series A Preferred Stock shall have full voting rights and shall vote together as a single class with the holders of the Company’s common stock. The holder of Series A Preferred Stock is entitled to fifty-one percent (51%) of the total votes on all matters brought before shareholders of the Company, regardless of the actual number of shares of Series A Preferred Stock then outstanding. In addition, the Company is prohibited from issuing any other class of preferred stock without first obtaining the prior approval of the holders of Series A Preferred Stock. All Series A Preferred stock issued and outstanding is held by Peach Management, LLC, a related party.

 

Blank Check Preferred Stock

 

The board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action by the common stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

 

Warrants

 

As of March 31, 2019, the Company had outstanding warrants to purchase 6,995,796 shares of common stock (the “Warrants”). Each Warrant represents the right to purchase one share of common stock at various exercise prices per share for a period of two (2) or three (3) years from the date of issuance.

 

   Warrants Issued   Exercise Price   Expiration Date 
May 11, 2017   6,038,462   $.50    May 11, 2020 
February 23, 2018   232,334   $6.00    February 23, 2021 
October 5, 2018   517,800   $2.50    October 5, 2020 
March 8, 2019   207,200   $1.75    March 7, 2021 
Total   6,995,796           

 

The Company may issue warrants to non-employees in capital raising transactions or for services. In accordance with guidance in ASC Topic 718, the cost of warrants issued to non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. No warrants were issued for compensation during the period ended March 31, 2019.

 

All of the outstanding warrants granted were fully vested on the grant date.

 

January 2019 Stock Offering

 

In January and February 2019, the Company entered into a subscription agreement (the “January Agreement”) with selected accredited investors. Pursuant to the terms of the January Agreement, the Company offered up to $1,500,000 in units (each, a “Unit” and collectively, the “Units”) at a purchase price of $1.25 per Unit (the “January Offering”). Each Unit consisted of (i) one (1) share of the Company’s common stock, par value $0.001 per share (the “Shares”); and (ii) warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Warrants”). The number of shares underlying each Warrant was equal to 33% of the number of Shares subscribed for by such Investor. The Warrants are exercisable at any time on or after the date of issuance for a period of two (2) years at an exercise price per share equal to $1.75. In the January Offering, the Company sold an aggregate of 621,600 Units, resulting in total gross proceeds of $777,000. As a result, the Company issued to the investors a total of 621,600 Shares and 207,200 Warrants. The January Offering closed on March 6, 2019.

 

13
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

 

Sale of Equity in Subsidiaries

 

On March 29, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

 

Subsidiary  % Sold   Amount Received 
Point Arena Manufacturing, LLC   1.5%  $125,001 
Point Arena Distribution, LLC   1.0%   50,000 
Green Room Palm Springs, LLC   1.5%   158,571 
Total       $333,572 

 

As a result of the transaction, the Company reported $328,819 as additional paid in capital and $4,753 as included in non-controlling interest.

 

On February 19, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

 

Subsidiary  % Sold   Amount Received 
Pure and Natural-Lakeway, LLC   49%  $120,000 
Pure and Natural TN One, LLC   49%   80,000 
           
Total       $200,000 

 

As a result of the transaction, the Company reported $102,000 as additional paid in capital and $98,000 as included in non-controlling interest.

 

Share Exchange and Ancillary Rights Agreements – Chemesis International Inc.

 

On March 30, 2019, the Company entered into a Share Exchange Agreement (the “Share Agreement”) and an Ancillary Rights Agreement (the “Ancillary Agreement”) with Chemesis International Inc., a British Columbian Corporation (“CADMF”). In the Share Agreement, the Company received 7,291,874 restricted shares of common stock of CADMF and CADMF received 11,666,998 restricted shares of the Company’s common stock. The closing date of the transaction was March 30, 2019. The exchange allows a mutual leak out. Beginning six months after the closing date, the Company shall be able to sell up to 1,215,313 of the CADMF shares and CADMF shall be able to sell 1,944,500 of the Company’s shares every six months, subject to compliance with any applicable securities laws and stock exchange rules.

 

The Ancillary Rights Agreement (“Agreement”) contains the following representations:

 

  1) CADMF will be entitled to nominate and have one member to the Company’s Board of Directors, as long as CADMF holds 10% or more of the Company’s issued and outstanding common shares. Likewise, the Company will be entitled to nominate and have one member on the CADMF Board of Directors, as long as the Company holds 5% or more of the issued and outstanding common shares.
  2) If the Company proposes to issue shares to raise capital, CADMF has a participation right to subscribe for and purchase such number of shares to maintain its equity ownership percentage of the Company.
  3) The Company will provide CADMF with the first right of refusal to produce any requested cannabis or hemp-based CBD products if CADMF has production facilities in the jurisdiction the Company has the request (i.e. California or Puerto Rico). CADMF has ten days to respond to the request of product. After that, the Company can request product from a third party.
  4) The Agreement may be terminated by written agreement of the Company and CADMF or if CADMF ownership percentage decreases below 5% of the issued and outstanding shares of the Company.

 

Non-Controlling Interest

 

The following schedule discloses the effects of changes in the Company’s ownership interest in its subsidiaries on the Company’s equity:

 

   For the Quarter Ended 
   March 31, 2019 
Net loss attributable to GSRX Industries Inc.  $(3,087,201)
Net Loss Attributable to Non-Controlling Interests   (125,367)
Change from net loss attributable to GSRX Industries Inc. and transfers to Non-Controlling Interest  $(3,212,568)

 

14
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

 

4. Income Taxes

 

Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

5. Construction in progress

 

Construction in progress includes direct and indirect expenditures for the construction and expansion of the Company’s facilities and is stated at its acquisition cost. Independent contractors perform substantially all of the construction and expansion efforts of our facility.

 

Construction in progress includes construction progress payments, engineering costs, equipment not placed in service and other costs directly related to the construction of the facilities. Expenditures are capitalized during the construction period and construction in progress is transferred to the relevant class of property, plant and equipment when the assets are available for use, at which point the depreciation of the asset commences.

 

6. Related Party Transactions

 

The Company entered into executive consulting agreements with its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) effective as of January 1, 2018. Pursuant to the agreement with the CEO, the Company agreed to pay to the CEO a monthly fee of $20,000, plus expenses for his services and duties customarily performed by and customary to the role of CEO. Pursuant to the agreement with the CFO, the Company agreed to pay to the CFO a monthly fee of $17,500, plus expenses for his services and duties customarily performed by and customary to the role of CFO. On April 1, 2019, the Company entered into an amended and restated executive consulting agreement with the CFO. Pursuant to the agreement, the Company agreed to pay the CFO compensation as follows: (i) a monthly cash fee of $10,000, payable in accordance with the Company’s standard payroll practices; and (ii) 75,000 restricted shares of the Company’s common stock, par value $0.001 per share, payable quarterly, effective immediately.

 

During the quarter ended March 31, 2019, the CEO and CFO were paid $70,000 and $61,250, respectively.

 

On July 24, 2018, the Company entered into an amended and restated consulting agreement with Peach Management, LLC, an entity controlled by Mr. Christian Briggs, Chairman of the Board of Directors (the “Consultant”). Pursuant to the agreement, the Consultant provides certain consulting services relating to the execution of the Company’s business plan as more fully described in the agreement (the “Consulting Services”). On November 28, 2018, the agreement was assigned to Dorado Consulting, LLC, an entity controlled by Mr. Christian Briggs. On April 1, 2019, the Company entered into an amended and restated executive consulting agreement with the Dorado Consulting, LLC. In consideration of the Consulting Services, the Company agreed to pay to the Consultant compensation as follows: (i) a monthly cash fee of $10,000, payable in accordance with the Company’s standard payroll practices; and (ii) 150,000 restricted shares of the Company’s common stock, par value $0.001 per share, payable quarterly, effective immediately. During the quarter ended March 31, 2019, Dorado was paid $46,000.

 

15
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

 

On April 9, 2018 the Company entered into a consulting agreement with GP Consulting, LLC, an entity owned by Gabrielle Pinto, daughter of Christian Briggs. GP Consulting, LLC, through its employee Gustavo Pinto, serves as the VP of Operations – Puerto Rico (“VP Ops”). Pursuant to the agreement, the Company agreed to pay to the VP Ops a monthly fee of $15,000, plus expenses for services and duties customarily performed by and customary to the role of VP Ops.

 

7. Patent Application Costs and Intangible Assets

 

The Company has applied for patents which it believes are a new, original and ornamental design for Oral Consumable Flakes. The patents use the methods of preparing solulizable, encapsulated plant-based compositions.

 

During the quarter ended March 31, 2019, the Company paid $135,546 in legal and associated costs for the multiple patent applications.

 

As the patents have not been issued as of March 31, 2019, no amortization has been applied against the patent costs. If the patents are approved, the Company will amortize the patent application costs over their useful lives. If the patents are not approved, the patent application costs will be expensed and charged against income.

 

8. Commitments and Contingencies

 

Lease Commitments

 

The Company leases various facilities under operating leases which expire at various dates through June 2028. Under the terms of the operating lease agreements, the Company is responsible for certain insurance, taxes and common area maintenance expenses. As of January 1, 2019 the Company adopted ASC 842 requiring lessees to record assets and liabilities on the balance sheet. The Company records rent expense on a straight-line basis over the terms of the underlying leases. Lease expense for the quarters ended March 31, 2019 and 2018 was $437,973 and $51,860, respectively.

 

Aggregate future lease liability payments under ASC 842 are as follows:

 

2019  $1,446,390 
2020   1,590,836 
2021   1,619,580 
2022   1,618,849 
2023   784,137 
Thereafter   516,436 
Total  $7,576,228 

 

Option to Purchase Building

 

On May 14, 2018 and November 20, 2018, Andalucia 511, LLC, through its parent company, Project 1493, LLC remitted $50,000 payments for the purpose of extending the option to purchase a building located at 1022 Ashford Avenue in Santuree, Puerto Rico. The option gives the Company an exclusive ninety day option to purchase the building for $1,150,000, which can be executed by written consent, specifying the closing date. The Company will also pay $6,000 rent for the duration of the option agreement. On March 27, 2019 a $100,000 payment was made to extend the option to May 31, 2019. The Company will also pay $10,000 rent for April and May, 2019.

 

Risk of Prosecution for Cannabis-Related Companies

 

A company that is connected to the marijuana industry must be aware that cannabis-related companies may be at risk of federal, and perhaps state, criminal prosecution. The Department of Treasury recently issued guidance noting: “The Controlled Substances Act” (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense cannabis. Many states impose and enforce similar prohibitions. As of March 31, 2019 and May 15, 2019, the Company has not been notified of any pending investigations regarding its planned business activities, and is not currently involved in any such investigations with any regulators.

 

California Operating Licenses

 

Effective January 1, 2018 the State of California allowed for adult use cannabis sales. California’s cannabis licensing system is being implemented in two phases. First, beginning on January 1, 2018, the State began issuing temporary licenses. On January 1, 2019 the State ceased issuing temporary licenses and began transitioning 2018 qualifying temporary licenses to provisional and annual license status.

 

Green Spirit Mendocino, LLC holds a provisional license which expires April 4, 2020. The provisional license was issued by the Bureau of Cannabis Control (“BCC”) while the annual application is pending final approval. Point Arena Manufacturing, LLC (“PAM”) which holds a Non-Volatile Type 6 Manufacturing license was issued a provisional license on April 24, 2019. . Point Arena Distribution, LLC holds a Distribution Type 11 license issued by the BCC which expires on July 8, 2019.

 

Although the possession, cultivation and distribution of cannabis for medical and adult use is permitted in California, cannabis is a Schedule-I controlled substance and its use remains a violation of federal law. Since federal law criminalizing the use of cannabis preempts state laws that legalize its use, strict enforcement of federal law regarding cannabis would likely result in our inability to proceed with our business plan, especially in respect of our cannabis cultivation, production and dispensaries. In addition, our assets, including real property, cash, equipment and other goods, could be subject to asset forfeiture because cannabis is still federally illegal.

 

16
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

 

Nashville Lease – Pure and Natural, LLC

 

On February 8, 2019, Pure and Natural, LLC entered into an operating lease for a 2,525 square foot CBD retail store at 2306 West End Avenue, Nashville, Tennessee for five years beginning February 1, 2019 and ending January 31, 2024. The initial lease obligation will be $7,364 per month with an escalation of $1/per square foot for the remaining four years. The lease also states a security deposit of $7,364 and for additional rent of $1,403 per month for common area maintenance expenses. The lease has one five-year renewal option.

 

Sponsorship Agreement – BYB Extreme Fighting Series LLC

 

On February 20, 2019 Pure and Natural, LLC (“Pure”) and BYB Extreme Fighting Series, LLC (“BYB”) entered into a Sponsorship Agreement (“Agreement”) to sponsor three events of the BYB EXTREME Series.

 

In consideration of the sponsorship, Pure paid $30,000 on February 20, 2019. The Company will also issue $25,000 of its restricted common stock per event. BYB commits to purchase $25,000 worth of Pure products no less than 45 days before each sponsored event.

 

Endorsement Licensing and Co-Branding Agreement – Matt Sorum

 

On February 27, 2019, Pure and Natural, LLC (“Pure”) and Matt Sorum (“Sorum”) entered into an Endorsement Licensing and Co-Branding Agreement (“Agreement”), to develop, market, promote and sell a unique Matt Sorum Product Line (“Licensed Products”) for dietary supplements derived from hemp containing 0% THC. The Agreement is for an initial three year term, beginning February 27, 2019 and ending February 26, 2022. The Agreement may be extended with the same terms unless either party provides a 60 day notice prior to the initial term.

 

Sorum will be compensated (i) a royalty of 20% of Net Gross Margin of the Licensed Products; (ii) 20% of the Net Gross Margin of any Products sold in connection with any commercial made by Sorum; and (iii) 30% of Net Gross Margin of Licensed Products. The Company further agrees to issue Matt Sorum certain shares of common stock as further consideration under this Agreement. The Company agrees to issue Matt Sorum 2,000 shares of its restricted common stock for each $1,000,000 in gross revenue derived directly from the sale of Licensed Products up to a maximum of 100,000 shares during the Term of this Agreement (the “Compensation Shares”). The Compensation Shares shall be issued at the end of each year of this Agreement.

 

Point Arena Manufacturing and Distribution Lease

 

On February 27, 2019, Point Arena Manufacturing, LLC and Point Arena Distribution, LLC (“Lessees”) entered into an operating lease for a 600 square foot building at 165 Main Street, Point Arena, California for five years beginning March 1, 2019 and ending February 28, 2024, for the purpose of manufacturing and distribution of cannabis products. The initial lease obligation will be $3,000 per month, the first year rent of $36,000 due within 10 days of signing the lease. This payment has not been made as the building has not been made ready. The rent will escalate 2.5% for the remaining four years of the base term. The lease has one five-year renewal option.

 

17
 

 

GSRX Industries Inc.

Notes to Consolidated Financial Statements

March 31, 2019

 

 

 

Preferred Partner and Advertising Agreement – Buzznog, LLC

 

On March 4, 2019, Pure and Natural, LLC (“Pure”) and Buzznog, LLC entered into a Preferred Partner and Advertising Agreement (“Agreement”) allowing Pure to sell cannibidiol products on Buzznog’s website, mobile applications and platforms. Pure will pay Buzznog 20% of the gross profit margin on all products sold using Buzznog’s sites. The Agreement has a term of three years from the moment of its coming into effect. If neither party announces termination of the Agreement at least thirty (90) days before its stated expiration, the Agreement shall automatically extend for a period of one year, and renewal until such time as either party provides notice of termination in accordance with the terms and conditions of the Agreement.

 

Palm Springs Lease – Green Room Palm Springs, LLC

 

On March 6, 2019, the Company entered into an operating lease for a 4,500 square foot cannabis retail store at 2155 N. Palm Canyon Drive, Palm Springs, California for five years and six months beginning March 1, 2019 and ending August 31, 2024. The initial lease obligation will be $6,000 per month for nine months; $10,000 for months ten through fifteen; and a 3% escalation of the monthly lease for the remainder of the base lease. The Company paid a security deposit of $20,000 upon signing the lease.

 

Consulting agreements

 

On March 3, 2019, the Company entered into an engagement letter agreement with MH Legal Services, LLC (“MH”). In connection with the engagement, the Company will pay MH compensation for in-house legal services as follows: (i) a monthly fee of Twelve thousand five hundred dollars ($12,500); and (ii) and a one-time issuance of 150,000 shares of the Company’s restricted common stock, par value $0.001 per share, due within thirty days of signing the engagement letter.

 

On March 29, 2019, the Company entered into a consulting agreement with John Grainer (“Grainer”). In connection with the agreement, the Company will pay Grainer compensation for management, development and operation services as follows: (i) a monthly fee of Fifteen thousand dollars ($15,000); and (ii) the Company will issue to Grainer two hundred thousand (200,000) restricted common shares, par value $0.001 per share. One hundred thousand shares (100,000) will be issued promptly upon execution of the consulting agreement. The remaining 100,000 shares shall accrue on a quarterly basis over a two (2) year period (12,500 per quarter), commencing on the effective date of this Agreement and except for a change in control of GSRX, subsequent share distribution is subject to your continued engagement. If this engagement is terminated prior to the accrual of any quarterly basis share accrual, you shall not be entitled to receive the unaccrued shares.

 

18
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

 

Overview

 

This Management’s Discussion and Analysis or Plan of Operations includes a number of forward-looking statements that reflect Management’s current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

 

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for our products, and competition.

 

Unless the context indicates or suggests otherwise, references to “we,” “our,” “us,” the “Company,” or “GSRX” refer to GSRX Industries Inc., a Nevada corporation, individually, or as the context requires, collectively with its consolidated subsidiaries.

 

GSRX Industries Inc. was incorporated in Nevada under the name “Cyberspace Vita, Inc.” on November 7, 2006. The Company’s original business plan was to create and conduct an online business for the sale of vitamins and supplements; however, Cyberspace never generated any meaningful revenues. On May 5, 2008, Cyberspace discontinued its prior business and changed its business plan.

 

Following discontinuation of its initial business plan, the Company’s business plan was to seek, investigate, and, if warranted, acquire one or more properties or businesses, and to pursue other related activities intended to enhance stockholder value. The acquisition of a business opportunity may be made by purchase, merger, exchange of stock, or otherwise, and may encompass assets or a business entity, such as a corporation, joint venture, or partnership.

 

On May 11, 2017, the Company entered into an Exchange Agreement with Project 1493, and the sole member of 1493, pursuant to which the member transferred all of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912 of its restricted shares of common stock and warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share.

 

As a result of the Exchange Agreement, 1493 became a wholly-owned subsidiary of the Company, and the business of 1493 became the business of the Company. The Company, together with its wholly-owned subsidiary, is in the business of acquiring, developing and operating medical cannabis dispensaries in Puerto Rico.

 

On May 12, 2017, the Company changed its name from “Cyberspace Vita, Inc.” to “Green Spirit Industries Inc.” On June 22, 2018, the Company changed its name from “Green Spirit Industries Inc.” to “GSRX Industries Inc.”

 

19
 

 

As of the date of this Report, we have financed operations through a combination of equity financings including net proceeds from the private placements of stock. Although it is difficult to predict our liquidity requirements, based upon our current operating plan, as of the date of this Report, we believe we will have sufficient cash to meet our projected operating requirements until the end of 2019, at which point we anticipate nearing or reaching cash-flow breakeven. See “Liquidity and Capital Resources.”

 

RESULTS OF OPERATIONS

 

Three Months Ended March 31, 2019 and March 31, 2018

 

The following table summarizes the results of our operations during the three months ended March 31, 2019 and 2018, respectively, and provides information regarding the dollar and percentage increase or (decrease) from the current three-month period to the prior three-month period:

 

Line Item  3/31/2019 (unaudited)   3/31/2018 (unaudited)   Increase (Decrease)   Percentage
Increase
(Decrease)
 
Revenues   2,866,079    2,196    2,863,883    1,306.00%
Cost of Goods Sold   1,380,620    821    1,379,799    1,681.00%
Operating expenses   4,723,783    8,510,083    (3,786,300)   44.44%
Net loss   (3,087,201)   (8,508,190)   5,420,989    63.71%
Loss per share of common stock  $(0.07)  $(0.21)  $.14    67%

 

We recorded a net loss of $3,087,201 for the three months ended March 31, 2019.

 

Revenue. Total revenue for the three months ended March 31, 2019 and 2018 was $2,866,079 and $2,196, respectively. The increase of $2,863,883, or 1306.00%, was due to the revenues generated by operations of the five (5) Green Spirit RX dispensaries in Puerto Rico, and The Green Room dispensary, CBD sales from Pure and Natural and retail sales from the Pure and Natural One kiosk.during the third quarter.

 

Cost of Goods Sold. Total cost of revenue for the three months ended March 2019 and 2018 was $1,380,620 and $821, respectively. The increase of $1,379,799, or 1,681%, was due to an increase in inventory purchases of cannabis products, including flowers, cream, oils and edibles, and cannabis-related accessories, including cartridges and pipes, related to the retail operations of the six dispensaries and CBD products purchased during the first quarter.

 

Total Operating Expenses Selling, general, administrative and operating expenses for the three months ended March 31, 2019 and 2018 was $4,723,783 and $8,510,083, respectively. The decrease of $3,786,300, or 44.44%, was primarily due to an increase in operating expenses of the four dispensaries, labor, taxes, store supplies, marketing and security expenses, professional fees, consulting fees which was offset by, and the significant reduction of stock-based compensation.

 

Net Loss. Net loss for the three months ended March 31, 2019 and 2018 was $3,087,201 and $8,508,190, respectively. The decrease of $5,420,989, or 63.71%, was primarily due to an increase in revenues and decrease of stock-based compensation.and offset by increases in cost of goods sold, operating expenses related to retail operations of the five dispensaries. and professional fees.

 

Off Balance Sheet Arrangements

 

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that are material to an investor in our securities.

 

20
 

 

Seasonality

 

Our operating results were not affected by seasonality.

 

Inflation

 

Our business and operating results are not affected in any material way by inflation.

 

Critical Accounting Policies

 

The Securities and Exchange Commission issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The nature of our business generally does not call for the preparation or use of estimates. Due to the fact that the Company does not have any operating business, we do not believe that we have any such critical accounting policies.

 

21
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

We have never reported net income. We incurred net losses for the three months ended March 31, 2019 and 2018 of $3,087,201 and $8,508,190, respectively and have an accumulated deficit of $45,409,437 as of March 31, 2019.

 

As of March 31, 2019, the Company had $1,526,154 cash on hand as compared to $1,313,645 as of December 31, 2018. For the three months ended March 31, 2019, the Company reported loss from operations of $3,087,201 and net cash increase of $212,509.

 

Sources of Liquidity

 

We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. Since May 2017, we have raised capital through private sales of our securities. Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no guarantee that we will be able to generate sufficient revenue and/or raise capital to support our operations.

 

During the three months ended March 31, 2019, we financed our operations through the remaining proceeds from various private placement offerings conducted by the Company during 2018 and March 2019. During the first quarter of 2019, the Company financed its operations from the remaining proceeds from the Company’s April offering, which closed in June 2018 and resulted in total gross proceeds of $2,584,765 and from our June offering which closed during September 2018 and resulted in total gross proceeds of $475,000 and our March 2019 offering which resulted in total gross proceeds of $777,000 to finance our operations.

 

We anticipate requiring additional capital for the continued development and implementation of our business plan, including the remaining build-out of our facilities in California, completing construction on our dispensaries in Puerto Rico, and working capital for our retail dispensary operations.

 

We will be required to raise additional cash through public or private financing, additional collaborative relationships or other arrangements until we are able to raise revenues to a point of positive cash flow. We believe our existing and available capital resources will be sufficient to satisfy our funding requirements through the fourth quarter of 2019. However, we continue to evaluate various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans for real estate purchases and selling common stock. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support our operations, or if we are able to raise capital, that it will be available to us on acceptable terms, on an acceptable schedule, or at all.

 

The issuance of additional securities may result in a significant dilution in the equity interests of our current stockholders. Obtaining loans, assuming these loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available for use when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.

 

Operating Cash Flows. Net cash used in operating activities for the three months ended March 31, 2019 was $657,636 which was due to the net loss from operations, net of common stock issued for services, the increase of inventory, accounts payable, accrued expenses, advances payable, lease liability and deposits offset by the decrease in accounts receivable, prepaid inventory and prepaid expenses.

 

Investing Cash Flows. Net cash used in investing activities for the three months ended March 31,2019 was $440,427, which was due to purchase of leasehold improvements and equipment; legal fees on patent application costs; investments in closely held businesses and construction on facilities still not put into service.

 

Financing Cash Flows. Net cash provided by financing activities for the three months ended March 31, 2019 was $1,310,572, which was due to our March 2019 capital raises, investment in California subsidiaries and contributions by non-controlling interests.

 

Material Capital Expenditure Commitments

 

The Company has upcoming capital commitments:

 

Remaining construction of three remaining dispensaries in Puerto Rico  $600,000 
Purchase of building in Puerto Rico  $1,000,000 
Purchase of equipment, furniture and fixtures and finish out of Palm Springs dispensary  $2,000,000 
Purchase of equipment in Point Arena  $500,000 

 

The capital committed is for construction of existing leased units in Puerto Rico, which are currently in different phases of construction. The Company estimates construction be completed by December 31, 2019. However, no assurance can be given. In May, 2018, the Company signed an option purchase agreement to acquire a building for a potential dispensary location in Condado, San Juan, Puerto Rico. The Company anticipates to execute the option and subsequently close on the purchase of the building on May 31, 2019. However, no assurance can be given that the Company will exercise its option, or that the purchase of the building will be completed. The Company plans to use current funds to complete construction of its dispensary locations in Puerto Rico. The Company estimates construction of Palm Springs dispensary to be completed in the fourth quarter 2019. However, no assurance can be given. The Company estimates purchase of equipment and beginning of operations of manufacturing in Point Arena to begin in the third quarter 2019. However, no assurance can be given. The Company has capital raises open for the Palm Springs dispensary and Point Arena manufacturing operation. To date, approximately $333,000 has been raised.

 

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a “ smaller reporting company” as defined by item of regular 8-K, the Company is not required to provide information required by this item.

 

22
 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2019. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are not designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes.

 

Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Securities Exchange Act) that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

23
 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no legal proceedings which are pending or have been threatened against us or any of our officers, directors or control persons of which management is aware.

 

ITEM 1A. RISK FACTORS.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

 

During the quarter ended March 31, 2019, the Company issued an aggregate of 621,600 shares of Common Stock and 207,200 two year warrants to purchase common stock to a group of investors who purchased in the Company’s private placement. The shares and warrants were issued pursuant to Regulation D under the Securities Act of 1933, as amended (the “Act”).

 

During the quarter ended March 31, 2019, the Company issued 17,857 shares of common stock to BYB Extreme Fighting Series LLC pursuant to their sponsorship agreement. The shares were issued pursuant to the 4A(2) exemption under the Act.

 

During the quarter ended March 31, 2019, the Company also authorized the issuance of an aggregate of 744,508 shares of common stock to employees and consultants although the shares were not issued until April 2019. The shares were issued pursuant to the 4A(2) exemption under the Act.

 

During the quarter ended March 31, 2019, the Company authorized the issuance of 11,666,998 shares of common stock to Chemesis International pursuant to the share exchange. The shares were not issued until April 2019. The shares were issued pursuant to the 4(A)(2) exemption under the Act.

 

24
 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
     
31.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   XBRL Instance Document
101 SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101 LAB   XBRL Extension Labels Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document

 

* The certification attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

25
 

 

SIGNATURES

 

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

  GSRX INDUSTRIES INC.
     
Date: May 15, 2019 By: /s/ Leslie Ball
    Leslie Ball
    Chief Executive Officer

 

26
 

 

EX-31.1 2 ex31-1.htm

 

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

I, Leslie Ball, certify that:

 

  1. I have reviewed this Form 10-Q for the period ended March 31, 2019 of Green Spirit Industries Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  e. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  f. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 15, 2019

 

/s/ Leslie Ball  
Leslie Ball  
Principal Executive Officer  

 

 

 

 

EX-31.2 3 ex31-2.htm

 

EXHIBIT 31.2

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

I, Thomas Gingerich, certify that:

 

  1. I have reviewed this Form 10-Q for the period ended March 31, 2019 of Green Spirit Industries Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  e. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  f. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 15, 2019

 

/s/ Thomas Gingerich  
Thomas Gingerich  
Principal Financial Officer  

 

 

 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of Green Spirit Industries Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

IN WITNESS WHEREOF, each of the undersigned has executed this statement this 15th day of May, 2019.

 

  /s/ Leslie Ball
  Leslie Ball
  Chief Executive Officer
   
  /s/ Thomas Gingerich
  Thomas Gingerich
  Chief Financial Officer

 

A signed original of this written statement required by Section 906 has been provided to GSRX INDUSTRIES INC. and will be retained by GSRX INDUSTRIES INC. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

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Net Loss Attributable to Non-Controlling Interests Change from net loss attributable to GSRX Industries Inc. and transfers to Non-Controlling Interest Compensation paid Number of restricted shares issued Proceeds from related party Patent cost Lease expense Purchase the building Payment for rent Payment to extend the option Option extended date Number of square foot Initial lease obligation Escalation amount per square foot for remianing four years Security deposit Additional rent per month for common area maintenance expenses Lease renewal term Sponsorship consideration Restricted shares of common stock, value Commitment to purchase products Agreement term Compensation description Gross revenue Lease rent expense Additional rent percentage Escalation monthly lease percentage for remainder of base lease 2019 2020 2021 2022 2023 Thereafter Total Accrue On Quarterly Basis [Member] Additional rent per month for common area maintenance expenses. Additional rent percentage. Agreemnet term. Alexander Zhilenkov [Member] Allee Picatccio [Member] Amended and Restated Executive Consulting Agreements [Member] Andalucia 511, LLC [Member] Andalucia [Member] April and May 2019 [Member] Asset Purchase Agreement [Member] BYB Extreme Fighting Series LLC [Member] Bayamon [Member] Beginning Six Months After Closing Date [Member] Blank Check [Member] Buzznog, LLC [Member] Capital Contributed by Non-Controlling Interests. Carolina [Member] Cash, held in escrow. Cash paid during the period for [Abstract] Chemesis International Inc [Member] Commitment to purchase products. Common Shares [Member] Compensation description. Consultant [Member] Consulting Agreement [Member] Consulting Agreements [Member] Consulting fees. Consulting Fees. Date opened. Debt Exchange Agreement [Member] Dispensarios 420, LLC [Member] Dorado [Member] Dr. Harlan Ribnik [Member] Dr. Ribnik [Member] Endorsement Licensing and Co-Branding Agreement [Member] Escalation amount per sauare foot for remianing four years. Escalation monthly lease percentage for remainder of base lease. Executive Consulting Agreements [Member] Executives and Consultants [Member] Fajardo [Member] Final Purchasing Agreement [Member] Finished goods - CBD products [Member] Finished goods - cannabis products [Member] Finished goods - flower [Member] For Nine Months [Member] Fountainhead Capital Management Limited [Member] 420 [Member] Furniture, Fixtures and Equipment [Member] GP Consulting, LLC [Member] GSRX SUPES, LLC [Member] Governor's Square Mall Lease [Member] Green Room [Member] Green Room Palm Springs, LLC [Member] Green Spirit Essentials, LLC [Member] Green Spirit Mendocino, LLC [Member] Guaynabo [Member] Gustavo Pinto [Member] Hato Rey [Member] Increase decrease in prepaid inventory. Isla Verde [Member] Issuance of exchange warrants term. Issued Promptly Upon Execution [Member] January Agreement [Member] Jennifer McClain [Member] John Grainer [Member] Jolene Enns [Member] Lakeway Lease [Member] Leslie Ball [Member] Liquid debt instruments, maturity period. Long Term Supply Agreement [Member] 138 Main Street PA, LLC [Member] Mark Young [Member] Matt Sorum [Member] Michael Dillingham [Member] Months Fifteen through Twenty-Seven [Member] Months Ten Through Fifteen [Member] Months Twenty-Eight through Eighty-Six [Member] Mr. Farkas [Member] Mr. Jeffery Jump [Member] Mr. Juan Bauza Salas [Member] Mr. Jump [Member] Mr. Luis Toledo-Bayouth [Member] Mr. Salas [Member] Mr. Steve Farkas [Member] Mr. Toledo-Bayouth [Member] Nashville Lease [Member] Non-cash: Shares issued for patent application costs. Number of preferred stock shares grants during period. Number of shares authorized but not issued. Number of square foot. Number of warrants issued. Option Agreement [Member] Option extended date. Palm Springs Lease [Member] Payment to extend the option. Peach Management, LLC [Member] Per Quarter [Member] Point Arena Distribution, LLC [Member] Point Arena Manufacturing and Distribution Lease [Member] Point Arena Manufacturing, LLC [Member] Point Arena Supply Co., LLC [Member] Preferred Partner and Advertising Agreement [Member] Preferred Shares [Member] Preferred stock, voting percentage. Prepaid inventory. Prepaid inventory current. Professional fees. Project 1493, LLC [Member] Pure and Natural, LLC [Member] Pure and Natural-Lakeway, LLC [Member] Pure and Natural One-TN, LLC [Member] Ryan Moser [Member] San Juan (Andalucia) [Member] San Juan [Member] Sara Moody [Member] Schedule of Effects of Changes in Ownership Interest [Table Text Block] Schedule of Fixed Assets Estimated Useful Lives [Table Text Block] Services, authorized but not issued. Share Exchange Agreement [Member] Share Exchange and Ancillary Rights Agreements [Member] Shares authorized for services, not issued as of statement date. Shares authorized for services, not issued as of statement date, shares. So-Cal MM Patients Association, LLC [Member] Spirulinex, LLC [Member] Sponsorship Agreement [Member] Sponsorship consideration. Subscription Agreement [Member] Sunset Connect [Member] Sunset Connect Oakland, LLC [Member] The Zen Stop Contribution Agreement [Member] The Zen Stop ("Purchaser") [Member] Thomas Gingerich [Member] Through Month Fourteen [Member] Ukiah Supply Company, LLC [Member] Warrant term. Whole Sale [Member] Director Fees. Share Exchange and Ancillary Rights Agreement. Shares issued in Share Exchange and Ancillary Agreement. Shares issued in Share Exchange and Ancillary Agreement, shares. Reclassification of Construction in Progress to Fixed Assets. Investments, cost method. Common stock issued for Investments, fair value. Point Arena [Member] The Zen Stop, LLC [Member] Adoption Leases (Topic 842) [Member] Dorado Consulting, LLC [Member] Subscription Agreement and Ancillary Rights Agreement [Member] Issued and outstanding transaction description. Ancillary Rights Agreement [Member] Board of Directors [Member] Consultants [Member] Number of membership units purchased. Percentage of equity interest sold. Subsidiary. Amount included in non-controlling interest. Investments, fair value [Policy Text Block] Number of membership units purchased, value. Number of common shares received. Pure and Natural TN One, LLC [Member] Investor One [Member] Investor Two [Member] PreferredPartnerAndAdvertisingAgreementMember Assets, Current Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Property, Plant and Equipment, Net Assets, Noncurrent Assets [Default Label] Liabilities, Current Liabilities, Noncurrent Liabilities Stockholders' Equity Attributable to Parent Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest Liabilities and Equity ConsultingFee ProfessionalFee Share-based Payment Arrangement, Noncash Expense Operating Expenses [Default Label] Operating Income (Loss) Nonoperating Income (Expense) Shares, Outstanding Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories IncreaseDecreaseInPrepaidInventory Increase (Decrease) in Prepaid Expense Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Other Accounts Payable Increase (Decrease) in Deposits Net Cash Provided by (Used in) Operating Activities Payments to Acquire Other Property, Plant, and Equipment Payments to Acquire Property, Plant, and Equipment PaymentsfFromInvestmentsCostMethod Payments for Construction in Process Net Cash Provided by (Used in) Investing Activities Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Cash and Cash Equivalents, at Carrying Value Income Tax Disclosure [Text Block] Accounts Receivable [Policy Text Block] Inventory, Policy [Policy Text Block] Property, Plant and Equipment, Policy [Policy Text Block] Income Tax, Policy [Policy Text Block] Operating Leases, Future Minimum Payments Receivable EX-101.PRE 10 gsrx-20190331_pre.xml XBRL PRESENTATION FILE XML 11 R1.htm IDEA: XBRL DOCUMENT v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 15, 2019
Document And Entity Information    
Entity Registrant Name GSRX INDUSTRIES INC.  
Entity Central Index Key 0001381240  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Common Stock, Shares Outstanding   59,086,236
Trading Symbol GSRX  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2019  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Balance Sheets - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Current Assets    
Cash $ 1,192,582 $ 1,313,645
Cash, held in escrow 333,572
Accounts Receivable 26,440 37,090
Inventory 649,841 360,460
Prepaid Inventory 338,280 514,515
Prepaid Expenses 21,300 23,800
Total Current Assets 2,562,015 2,249,510
Fixed Assets    
Furniture, Fixtures and Equipment 509,645 464,832
Building, Land and Leasehold Improvements 2,284,520 2,197,191
Accumulated Depreciation (152,613) (108,421)
Total Net Fixed Assets 2,641,552 2,553,602
Other Assets    
Licenses 812,300 812,300
Deposits 545,121 399,551
Patent Application Costs (Note 7) 1,943,934 1,808,388
Investments, fair value 11,666,998
Investments, cost method 70,000
Right of Use (Note 2) 6,316,879
Construction in Progress (Note 5) 880,033 777,294
Total Other Assets 22,235,265 3,797,533
Total Assets 27,438,832 8,600,645
Current Liabilities    
Accounts Payable 1,208,485 721,939
Accrued Expenses 25,441 1,463
Lease Liability - current 1,188,821
Advances Payable 1,100 1,100
Total Current Liabilities 2,423,847 724,502
Long Term Liabilities    
Lease Liability - non curent 5,238,108
Total Long Term Liabilities 5,238,108
Total Liabilities 7,661,955 724,502
Commitments and Contingencies (Note 8)
Stockholders' Equity (Note 3)    
Preferred Stock, convertible, $.001 par value; 1,000 shares authorized; 1,000 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively 1 1
Common Stock $.001 par value 100,000,000 authorized; 46,021,677 and 45,235,533 issued and outstanding; 13,064,559 and 799,770 authorized but not issued 59,087 46,036
Additional paid-in capital 64,748,051 49,750,553
Retained Deficit (45,409,437) (42,322,236)
Equity Attributable to GSRX Industries Inc. 19,295,702 7,474,354
Non-Controlling Interest 379,175 401,789
Total Stockholders' Equity 19,776,877 7,876,143
Total Liabilities and Stockholders' Equity $ 27,438,832 $ 8,600,645
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 1,000 1,000
Preferred stock, shares issued 1,000 1,000
Preferred stock, shares outstanding 1,000 1,000
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 46,021,677 45,235,533
Common stock, shares outstanding 46,021,677 45,235,533
Number of shares authorized but not issued 13,064,559 799,770
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Revenues    
Revenues $ 2,866,079 $ 2,196
Cost of Goods Sold 1,380,620 821
Gross Profit 1,485,459 1,375
Operating Expenses    
Consulting Fees 453,029 316,833
General and Administrative 1,755,354 405,837
Professional Fees 335,475 192,413
Depreciation Expense 44,192
Stock Based Compensation (Note 3)    
Consulting Fees 545,107 7,295,000
Share Exchange and Ancillary Rights Agreement 1,166,700  
Director Fees 15,926 300,000
Professional Fees 408,000
Total Stock based compensation 2,135,733 7,595,000
Total Operating Expenses 4,723,783 8,510,083
Loss from Operations (3,238,324) (8,508,708)
Other Income (Expenses)    
Rent Income 25,756
Total Other Income (Expenses) 25,756
Loss From Operations Before Provision for Income Taxes (3,212,568) (8,508,708)
Provision for Income Taxes (Note 4)
Net Loss (3,212,568) (8,508,708)
Net Loss Attributable to Non-Controlling Interest (125,367) (518)
Net Loss Attributable to GSRX Industries Inc. $ (3,087,201) $ (8,508,190)
Basic loss per share $ (0.07) $ (0.21)
Weighted average number of common shares outstanding 46,078,529 41,409,779
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Deficit [Member]
Non-Controlling Interest [Member]
Total
Balance at Dec. 31, 2017 $ 1 $ 40,895 $ 33,349,144 $ (26,082,960) $ 7,307,080
Balance, shares at Dec. 31, 2017 1,000 40,895,037        
Issuance of Shares and Warrants for Cash $ 155 465,345 465,500
Issuance of Shares and Warrants for Cash, shares 155,167        
Issuance of Shares for Services $ 210 1,207,290 1,207,500
Issuance of Shares for Services, shares 210,000        
Shares Authorized for Services, Not Issued as of Statement Date $ 1,278 6,386,222 6,387,500
Shares Authorized for Services, Not Issued as of Statement Date, shares 1,277,500        
Shares Issued for Purchase of Patents $ 200 949,800 950,000
Shares Issued for Purchase of Patents, shares 200,000        
Recognition of Non-Controlling Interest Attributable to Spirulinex, LLC (662,721) 662,721
Capital Contributed by Non-Controlling Interests 1,390 1,390
Net Loss (8,508,190) (518) (8,508,708)
Balance at Mar. 31, 2018 $ 1 $ 42,738 41,695,080 (34,591,150) 663,593 7,810,262
Balance, shares at Mar. 31, 2018 1,000 42,737,704        
Balance at Dec. 31, 2018 $ 1 $ 46,036 49,750,553 (42,322,236) 401,789 7,876,143
Balance, shares at Dec. 31, 2018 1,000 46,035,303        
Issuance of Shares and Warrants for Cash $ 622 776,378 777,000
Issuance of Shares and Warrants for Cash, shares 621,600        
Shares Authorized for Services, Not Issued as of Statement Date $ 762 968,270 969,032
Shares Authorized for Services, Not Issued as of Statement Date, shares 762,335        
Shares Issued for Purchase of Patents          
Recognition of Non-Controlling Interest Attributable to Spirulinex, LLC          
Capital Contributed by Non-Controlling Interests 430,819 102,753 533,572
Shares issued in Share Exchange and Ancillary Agreement $ 11,667 12,822,031 12,833,698
Shares issued in Share Exchange and Ancillary Agreement, shares 11,666,998        
Net Loss (3,087,201) (125,367) (3,212,568)
Balance at Mar. 31, 2019 $ 1 $ 59,087 $ 64,748,051 $ (45,409,437) $ 379,175 $ 19,776,877
Balance, shares at Mar. 31, 2019 1,000 59,086,236        
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Cash Flow from Operating Activities    
Net Loss $ (3,212,568) $ (8,508,708)
Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities    
Issuance of Common Stock for Services 2,135,733 7,595,000
Depreciation Expense 44,192
Changes in Operating Assets and Liabilities:    
Accounts Receivable 10,650
Inventory (289,381) (45,108)
Prepaid Inventory 176,235
Prepaid Expenses 2,500 (11,850)
Accounts Payable 486,650 (165,381)
Sales Tax Payable 253
Accrued Expenses 23,978
Advances Payable
Lease liability - current 110,050
Deposits (145,570) (1,200)
Net Cash Used in Operating Activities (657,636) (1,136,994)
Cash Flow from Investing Activities    
Escrow, asset purchases (1,434,500)
Purchase of Fixed Assets (132,142) (85,024)
Patent Application Costs incurred (135,546) (400,000)
Investments, cost method (70,000)
Construction in Progress (102,739) (342,995)
Net Cash Used in Investing Activities (440,427) (2,262,519)
Cash Flow from Financing Activities    
Issuance of Common Stock for Cash 777,000 465,500
Sale of Equity in Subsidiaries 430,819
Cash Contributed by Non-controlling Interests 102,753 1,390
Net Cash Provided by Financing Activities 1,310,572 466,890
Net Increase (Decrease) in Cash 212,509 (2,932,623)
Cash at Beginning of Period 1,313,645 6,758,018
Cash at End of Period 1,526,154 3,825,395
Cash paid during the period for:    
Interest
Income Taxes
Supplemental Disclosure of Non-cash Investing and Financing Activities    
Common stock issued for Patent Application Costs 950,000
Common stock issued for Investments, fair value 11,666,998
Reclassification of Construction in Progress to Fixed Assets $ 128,822
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.19.1
Nature of Operations
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations

1. Nature of Operations

 

GSRX Industries Inc. (“the Company”) is a Nevada corporation formed under the name Cyberspace Vita, Inc. (“Cyberspace”) on November 7, 2006. Cyberspace’s initial business plan was related to the online sale of vitamins and supplements. On May 11, 2017, the Company entered into a share exchange agreement (the “Exchange Agreement”) with Peter Zachariou, the majority shareholder of Cyberspace (the “Shareholder”), Project 1493, LLC, a limited liability company organized under the laws of the Commonwealth of Puerto Rico (“1493”), and Peach Management, LLC (“Peach”) the sole member of 1493 (the “Member”), pursuant to which the Member transferred all of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912 restricted shares of common stock of the Company (the “Exchange Shares”), warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share for a period of three (3) years from the date of issuance (the “Exchange Warrants”) and 1,000 shares of Series A Preferred Stock that grants the holders thereof fifty-one percent (51%) voting power (the “Preferred Shares” and together with the Exchange Shares, and the Exchange Warrants, the “Exchange Securities”). As a result of the Exchange Agreement, 1493 became a wholly-owned subsidiary of the Company, and the business of 1493 became the business of the Company. At the time of the Exchange Agreement, Cyberspace was not engaged in any business activity. The Company accounted for the acquisition of 1493 as a reverse merger and all prior periods presented are those of 1493.

 

Pure and Natural One-TN, LLC (“PaN One”) was organized under the laws of the State of Tennessee on February 5, 2019. PaN One was formed for the purpose of operating CBD retail operations in Tennessee. PaN One opened its first kiosk location in Governor’s Square Mall in Clarksville, Tennessee on February 9, 2019.

 

Green Room Palm Springs LLC (“GRPS”) was organized under the laws of the State of California on March 4, 2019. GRPS was formed for the purpose of operating a cannabis dispensary in Palm Springs, California.

 

The Company is in the business of acquiring, developing and operating medical cannabis dispensaries throughout Puerto Rico; cannabis related businesses in California and real estate leasing in Puerto Rico and California.

 

The Company entered into the Final Purchasing Agreements (“FPA”) with holders of licenses to operate medicinal cannabis dispensaries in Puerto Rico. Pursuant to the FPAs, the Company acquired all of the legal rights, permits, pre-qualification licenses, and leases for five (5) medicinal cannabis dispensaries. The pre-qualification licenses do not allow the holder to open a dispensary, but instead offers the opportunity to go through the qualifying steps in order to obtain the requisite operating permit necessary to open the dispensary. Such steps include proving financial viability, background checks, application of the final permit, proof of certificate of occupancy, employment of a security firm, installation of security cameras, and other similar compliance matters.

 

The Company operates six dispensaries as follows:

 

Location   State/Territory   Date Opened   Purchase Price  
Dorado   Puerto Rico   March 28, 2018   $  100,000  
Fajardo   Puerto Rico   December 28, 2018   $ 100,000  
Carolina   Puerto Rico   June 1, 2018   $ 100,000  
Hato Rey   Puerto Rico   June 1, 2018   $ 128,000  
San Juan   Puerto Rico   October 2, 2018   $ 75,000  
Point Arena   California   April 2, 2018   $ 350,000  

 

The FPA’s have an indefinite life and are not being amortized.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.19.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present fairly the consolidated financial position and results of its operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These consolidated financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2018 (including the notes thereto) set forth in Form 10-K filed with the Securities and Exchange Commission on April 16, 2019.

 

Principles of Consolidation

 

The consolidated financial statements through March 31, 2019 include the accounts of the Company and the following entities, all of which have fiscal year ends of December 31. (Note 1).

 

●  100% owned subsidiary, Project 1493, LLC;
●  100% owned subsidiary, Andalucia 511, LLC;
51% majority owned subsidiary, Spirulinex, LLC;
55% majority owned subsidiary, Sunset Connect Oakland, LLC;
55% majority owned, Green Spirit Essentials, LLC;
100% owned subsidiary, Green Spirit Mendocino, LLC; and
100% owned subsidiary, 138 Main Street PA, LLC.
100% owned subsidiary, GSRX SUPES, LLC
100% owned subsidiary, Point Arena Supply Co., LLC
100% owned subsidiary, Ukiah Supply Company, LLC
100% owned subsidiary, Pure and Natural, LLC
98.5% owned subsidiary, Point Arena Manufacturing, LLC
99% owned subsidiary, Point Arena Distribution, LLC
51% majority owned subsidiary, Pure and Natural-Lakeway, LLC
51% majority owned subsidiary, Pure and Natural One-TN, LLC
98.5% owned subsidiary, Green Room Palm Springs, LLC

 

Use of Estimates and Assumptions

 

The preparation of the consolidated financial statements that are in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements.

 

Cash and Cash Equivalents

 

The Company considers all cash on hand, cash in banks and all highly liquid debt instruments purchased with a maturity of three months at purchase or less to be cash and cash equivalents. At times, cash and cash equivalent balances at a limited number of banks and financial institutions may exceed insurable amounts. At March 31, 2019, the Company had $0 in excess of FDIC depository insurance coverage. The Company believes it mitigates its risks by depositing cash or investing in cash equivalents in major financial institutions.

 

Cash held in escrow, in the name of the Company, is held by Gunnison Bank (“Gunnison”). The escrow account was established to hold the deposits from the sale of equity in subsidiaries and hold funds for businesses under subscription agreements. There are no restrictions on the funds held by Gunnison on the Company’s behalf.

 

Investments, fair value

 

On March 30, 2019, the Company entered into a Share Exchange Agreement (the “Share Agreement”) and an Ancillary Rights Agreement (the “Ancillary Agreement”) with Chemesis International Inc., a British Columbian Corporation (“CADMF”). In the Share Agreement, the Company received 7,291,874 restricted shares of common stock of CADMF. Fair value of the investment as of March 31, 2019 was $11,666,998. CADMF is quoted on the OTC market and closed on Friday, March 29, 2019 at $1.60 per share.

 

Investments, cost method

 

Pure and Natural, LLC made a $50,000 investment on January 4, 2019 for a 10% equity and profits interest in The Zen Stop, LLC. The Zen Stop is a mobile wellness business called “Zen Stop.” The investment is carried at the cost basis as it is a private company and fair value cannot be readily determined.

 

Pure and Natural, LLC purchased 25,167 membership units in Buzznog, LLC for $20,000 on March 6, 2019. The investment is carried at the cost basis as it is a private company and fair value cannot be readily determined.

 

Revenue Recognition

 

In accordance with the new guidance, the Company recognizes revenue at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods or services to its customers. The Company’s policy is to record revenue when control of the goods transfers to the customer.

 

In limited instances when products are sold under consignment arrangements, the Company does not recognize revenue until control over such products has transferred to the end consumer.

 

The Company incurs costs associated with product distribution, such as freight and handling costs. The Company has elected to treat these costs as fulfillment activities and recognizes these costs at the same time that it recognizes the underlying product revenue. As this policy election is in line with the Company’s previous accounting practices, the treatment of shipping and handling activities under Topic 606 did not have any impact on the Company’s results of operations, financial condition and/or financial statement disclosures.

 

The following table presents the Company’s revenues disaggregated by type and by state/territory:

 

    For the Three Months Ended March 31,  
    2019     2018  
Revenues by Type                
Wholesale   $ 5,798     $ -  
Retail     2,860,281       2,196  
Total   $ 2,866,079     $ 2,196  

 

    For the Three Months Ended March 31,  
    2019     2018  
Revenues by State/Territory                
California   $ 121,896     $ -  
Tennessee     10,312     $ -  
Texas     29,190       -  
Puerto Rico     2,704,681       2,196  
Total   $ 2,866,079     $ 2,196  

 

Accounts Receivable

 

The Company carries its accounts receivable at their estimated realizable amounts and periodically evaluates the credit condition of its customers. The allowance for uncollectible accounts receivable is based on the Company’s historical bad debt experience and on management’s evaluation of collectability of the individual outstanding balances. As of March 31, 2019, the Company had not identified any uncollectible accounts.

 

Inventory

 

The Company’s inventory is stated at the lower of cost or market. Inventory consists of cannabis products, such as flower, edibles, creams, oils and cannabis accessories such as pipes, bowls and cartridges; and CBD products, such as soft gels, tinctures, balms, pain cream and vape pens.

 

Inventory is comprised of the following items:

 

    As of
March 31, 2019
    As of
December 31, 2018
 
Finished goods – flower   $ 501,589     $ 137,592  
Finished goods – cannabis products     354,386       191,468  
Finished goods – CBD products     132,146       31,400  
Total   $ 649,841     $ 360,460  

 

As of March 31, 2019, the Company had paid for inventory which had not been delivered in the amount of $338,280.

 

Fixed Assets

 

Fixed assets are recorded at cost and are depreciated using the straight-line method over estimated useful lives as follows:

 

Type of Asset   Estimated Life
Furniture, Fixtures and Equipment   5 – 10 years
Building and Leasehold improvements   5 - 25 years

 

Intangible Costs

 

The Company has incurred costs related to Patent Application Costs during the year ended December 31, 2018 and quarter ended March 31, 2019, consisting of $1,943,934 of legal fees. The patent applications will continue to be filed over the next several quarters. As the patents have not been issued as of March 31, 2019, no amortization has been applied against the patent costs. If the patents are approved, the Company will amortize the patent application costs over their useful lives. If the patents are not approved, the patent application costs will be expensed and charged to operations. (Note 7).

 

Share based Compensation

 

Compensation cost relating to share-based payment transactions (including the cost of all employee stock options) is required to be recognized in the consolidated financial statements and covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. That cost is measured based on the estimated fair value of the equity or liability instruments issued. (See Note 3).

 

Fair Value of Financial Instruments

 

The carrying value of the Company’s current liabilities approximates fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion the Company is not exposed, except for cash balances in excess of the FDIC depository insurance coverage, to significant interest, currency or credit risks arising from these financial instruments.

 

Income Taxes

 

The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company was organized under the laws of Nevada and therefore will be taxed at statutory U.S. federal corporate income tax rates.

 

Basic Earnings per Share

 

The Company computes net loss per share in accordance with FASB ASC 260 “Earnings per Share”, which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.

 

Basic net loss per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding. Potentially dilutive securities have been excluded from the Company’s earnings per share calculation due to the effect of being anti-dilutive. The total number of potentially dilutive securities which have been excluded is 6,995,796. (Note 3).

 

Recent Accounting Pronouncements

 

As of March 31, 2019 and through May 15, 2019, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or future operating results. The Company will monitor these emerging issues to assess any potential future impact on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. On January 1, 2019, we adopted this standard on our consolidated financial statements. The Company recognized the Right of Use asset in the amount of $6,316,879 and Lease Liability – current of $1,188,821 and Lease Liability – non-current of $5,238,108 as of March 31, 2019. During the period ended March 31, 2019, the Company recognized an additional $110,050 of rental expense charged to operations due to the adoption of the standard.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.19.1
Equity
3 Months Ended
Mar. 31, 2019
Stockholders' Equity Note [Abstract]  
Equity

3. Equity

 

The following table illustrates the common stock transactions for the quarter ended March 31, 2019:

 

Category   Common Shares  
Cash, common shares     621,600  
         
Services, authorized but not issued     762,335  
Share Exchange and Ancillary Rights Agreement     11,666,998  
Total     13,050,933  

 

During the quarter ended March 31, 2019, consultants received 414,478 shares of common stock for legal, professional, consulting and advisory services provided to the Company with a fair market value of $1,724,733.

 

During the quarter ended March 31, 2019, the Company authorized the issuance of 15,000 shares of common stock to Dorado Consulting, LLC (Note 6) for services rendered to the Company with a fair market value of $16,500.

 

During the quarter ended March 31, 2019, the Company authorized the issuance of 315,000 shares of common stock to Thomas Gingerich, Chief Financial Officer (Note 6), for services rendered to the Company with a fair market value of $394,500.

 

Series A Preferred Stock

 

The holder of Series A Preferred Stock shall have full voting rights and shall vote together as a single class with the holders of the Company’s common stock. The holder of Series A Preferred Stock is entitled to fifty-one percent (51%) of the total votes on all matters brought before shareholders of the Company, regardless of the actual number of shares of Series A Preferred Stock then outstanding. In addition, the Company is prohibited from issuing any other class of preferred stock without first obtaining the prior approval of the holders of Series A Preferred Stock. All Series A Preferred stock issued and outstanding is held by Peach Management, LLC, a related party.

 

Blank Check Preferred Stock

 

The board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action by the common stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

 

Warrants

 

As of March 31, 2019, the Company had outstanding warrants to purchase 6,995,796 shares of common stock (the “Warrants”). Each Warrant represents the right to purchase one share of common stock at various exercise prices per share for a period of two (2) or three (3) years from the date of issuance.

 

    Warrants Issued     Exercise Price     Expiration Date  
May 11, 2017     6,038,462     $ .50       May 11, 2020  
February 23, 2018     232,334     $ 6.00       February 23, 2021  
October 5, 2018     517,800     $ 2.50       October 5, 2020  
March 8, 2019     207,200     $ 1.75       March 7, 2021  
Total     6,995,796                  

 

The Company may issue warrants to non-employees in capital raising transactions or for services. In accordance with guidance in ASC Topic 718, the cost of warrants issued to non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. No warrants were issued for compensation during the period ended March 31, 2019.

 

All of the outstanding warrants granted were fully vested on the grant date.

 

January 2019 Stock Offering

 

In January and February 2019, the Company entered into a subscription agreement (the “January Agreement”) with selected accredited investors. Pursuant to the terms of the January Agreement, the Company offered up to $1,500,000 in units (each, a “Unit” and collectively, the “Units”) at a purchase price of $1.25 per Unit (the “January Offering”). Each Unit consisted of (i) one (1) share of the Company’s common stock, par value $0.001 per share (the “Shares”); and (ii) warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Warrants”). The number of shares underlying each Warrant was equal to 33% of the number of Shares subscribed for by such Investor. The Warrants are exercisable at any time on or after the date of issuance for a period of two (2) years at an exercise price per share equal to $1.75. In the January Offering, the Company sold an aggregate of 621,600 Units, resulting in total gross proceeds of $777,000. As a result, the Company issued to the investors a total of 621,600 Shares and 207,200 Warrants. The January Offering closed on March 6, 2019.

 

Sale of Equity in Subsidiaries

 

On March 29, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

 

Subsidiary   % Sold     Amount Received  
Point Arena Manufacturing, LLC     1.5 %   $ 125,001  
Point Arena Distribution, LLC     1.0 %     50,000  
Green Room Palm Springs, LLC     1.5 %     158,571  
Total           $ 333,572  

 

As a result of the transaction, the Company reported $328,819 as additional paid in capital and $4,753 as included in non-controlling interest.

 

On February 19, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

 

Subsidiary   % Sold     Amount Received  
Pure and Natural-Lakeway, LLC     49 %   $ 120,000  
Pure and Natural TN One, LLC     49 %     80,000  
                 
Total           $ 200,000  

 

As a result of the transaction, the Company reported $102,000 as additional paid in capital and $98,000 as included in non-controlling interest.

 

Share Exchange and Ancillary Rights Agreements – Chemesis International Inc.

 

On March 30, 2019, the Company entered into a Share Exchange Agreement (the “Share Agreement”) and an Ancillary Rights Agreement (the “Ancillary Agreement”) with Chemesis International Inc., a British Columbian Corporation (“CADMF”). In the Share Agreement, the Company received 7,291,874 restricted shares of common stock of CADMF and CADMF received 11,666,998 restricted shares of the Company’s common stock. The closing date of the transaction was March 30, 2019. The exchange allows a mutual leak out. Beginning six months after the closing date, the Company shall be able to sell up to 1,215,313 of the CADMF shares and CADMF shall be able to sell 1,944,500 of the Company’s shares every six months, subject to compliance with any applicable securities laws and stock exchange rules.

 

The Ancillary Rights Agreement (“Agreement”) contains the following representations:

 

  1) CADMF will be entitled to nominate and have one member to the Company’s Board of Directors, as long as CADMF holds 10% or more of the Company’s issued and outstanding common shares. Likewise, the Company will be entitled to nominate and have one member on the CADMF Board of Directors, as long as the Company holds 5% or more of the issued and outstanding common shares.
  2) If the Company proposes to issue shares to raise capital, CADMF has a participation right to subscribe for and purchase such number of shares to maintain its equity ownership percentage of the Company.
  3) The Company will provide CADMF with the first right of refusal to produce any requested cannabis or hemp-based CBD products if CADMF has production facilities in the jurisdiction the Company has the request (i.e. California or Puerto Rico). CADMF has ten days to respond to the request of product. After that, the Company can request product from a third party.
  4) The Agreement may be terminated by written agreement of the Company and CADMF or if CADMF ownership percentage decreases below 5% of the issued and outstanding shares of the Company.

 

Non-Controlling Interest

 

The following schedule discloses the effects of changes in the Company’s ownership interest in its subsidiaries on the Company’s equity:

 

    For the Quarter Ended  
    March 31, 2019  
Net loss attributable to GSRX Industries Inc.   $ (3,087,201 )
Net Loss Attributable to Non-Controlling Interests     (125,367 )
Change from net loss attributable to GSRX Industries Inc. and transfers to Non-Controlling Interest   $ (3,212,568 )

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.19.1
Income Taxes
3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

4. Income Taxes

 

Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.19.1
Construction in Progress
3 Months Ended
Mar. 31, 2019
Fixed Assets  
Construction in Progress

5. Construction in progress

 

Construction in progress includes direct and indirect expenditures for the construction and expansion of the Company’s facilities and is stated at its acquisition cost. Independent contractors perform substantially all of the construction and expansion efforts of our facility.

 

Construction in progress includes construction progress payments, engineering costs, equipment not placed in service and other costs directly related to the construction of the facilities. Expenditures are capitalized during the construction period and construction in progress is transferred to the relevant class of property, plant and equipment when the assets are available for use, at which point the depreciation of the asset commences.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.19.1
Related Party Transactions
3 Months Ended
Mar. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions

6. Related Party Transactions

 

The Company entered into executive consulting agreements with its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) effective as of January 1, 2018. Pursuant to the agreement with the CEO, the Company agreed to pay to the CEO a monthly fee of $20,000, plus expenses for his services and duties customarily performed by and customary to the role of CEO. Pursuant to the agreement with the CFO, the Company agreed to pay to the CFO a monthly fee of $17,500, plus expenses for his services and duties customarily performed by and customary to the role of CFO. On April 1, 2019, the Company entered into an amended and restated executive consulting agreement with the CFO. Pursuant to the agreement, the Company agreed to pay the CFO compensation as follows: (i) a monthly cash fee of $10,000, payable in accordance with the Company’s standard payroll practices; and (ii) 75,000 restricted shares of the Company’s common stock, par value $0.001 per share, payable quarterly, effective immediately.

 

During the quarter ended March 31, 2019, the CEO and CFO were paid $70,000 and $61,250, respectively.

 

On July 24, 2018, the Company entered into an amended and restated consulting agreement with Peach Management, LLC, an entity controlled by Mr. Christian Briggs, Chairman of the Board of Directors (the “Consultant”). Pursuant to the agreement, the Consultant provides certain consulting services relating to the execution of the Company’s business plan as more fully described in the agreement (the “Consulting Services”). On November 28, 2018, the agreement was assigned to Dorado Consulting, LLC, an entity controlled by Mr. Christian Briggs. On April 1, 2019, the Company entered into an amended and restated executive consulting agreement with the Dorado Consulting, LLC. In consideration of the Consulting Services, the Company agreed to pay to the Consultant compensation as follows: (i) a monthly cash fee of $10,000, payable in accordance with the Company’s standard payroll practices; and (ii) 150,000 restricted shares of the Company’s common stock, par value $0.001 per share, payable quarterly, effective immediately. During the quarter ended March 31, 2019, Dorado was paid $46,000.

 

On April 9, 2018 the Company entered into a consulting agreement with GP Consulting, LLC, an entity owned by Gabrielle Pinto, daughter of Christian Briggs. GP Consulting, LLC, through its employee Gustavo Pinto, serves as the VP of Operations – Puerto Rico (“VP Ops”). Pursuant to the agreement, the Company agreed to pay to the VP Ops a monthly fee of $15,000, plus expenses for services and duties customarily performed by and customary to the role of VP Ops.

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.19.1
Patent Application Costs and Intangible Assets
3 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Patent Application Costs and Intangible Assets

7. Patent Application Costs and Intangible Assets

 

The Company has applied for patents which it believes are a new, original and ornamental design for Oral Consumable Flakes. The patents use the methods of preparing solulizable, encapsulated plant-based compositions.

 

During the quarter ended March 31, 2019, the Company paid $135,546 in legal and associated costs for the multiple patent applications.

 

As the patents have not been issued as of March 31, 2019, no amortization has been applied against the patent costs. If the patents are approved, the Company will amortize the patent application costs over their useful lives. If the patents are not approved, the patent application costs will be expensed and charged against income.

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.19.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. Commitments and Contingencies

 

Lease Commitments

 

The Company leases various facilities under operating leases which expire at various dates through June 2028. Under the terms of the operating lease agreements, the Company is responsible for certain insurance, taxes and common area maintenance expenses. As of January 1, 2019 the Company adopted ASC 842 requiring lessees to record assets and liabilities on the balance sheet. The Company records rent expense on a straight-line basis over the terms of the underlying leases. Lease expense for the quarters ended March 31, 2019 and 2018 was $437,973 and $51,860, respectively.

 

Aggregate future lease liability payments under ASC 842 are as follows:

 

2019   $ 1,446,390  
2020     1,590,836  
2021     1,619,580  
2022     1,618,849  
2023     784,137  
Thereafter     516,436  
Total   $ 7,576,228  

 

Option to Purchase Building

 

On May 14, 2018 and November 20, 2018, Andalucia 511, LLC, through its parent company, Project 1493, LLC remitted $50,000 payments for the purpose of extending the option to purchase a building located at 1022 Ashford Avenue in Santuree, Puerto Rico. The option gives the Company an exclusive ninety day option to purchase the building for $1,150,000, which can be executed by written consent, specifying the closing date. The Company will also pay $6,000 rent for the duration of the option agreement. On March 27, 2019 a $100,000 payment was made to extend the option to May 31, 2019. The Company will also pay $10,000 rent for April and May, 2019.

 

Risk of Prosecution for Cannabis-Related Companies

 

A company that is connected to the marijuana industry must be aware that cannabis-related companies may be at risk of federal, and perhaps state, criminal prosecution. The Department of Treasury recently issued guidance noting: “The Controlled Substances Act” (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense cannabis. Many states impose and enforce similar prohibitions. As of March 31, 2019 and May 15, 2019, the Company has not been notified of any pending investigations regarding its planned business activities, and is not currently involved in any such investigations with any regulators.

 

California Operating Licenses

 

Effective January 1, 2018 the State of California allowed for adult use cannabis sales. California’s cannabis licensing system is being implemented in two phases. First, beginning on January 1, 2018, the State began issuing temporary licenses. On January 1, 2019 the State ceased issuing temporary licenses and began transitioning 2018 qualifying temporary licenses to provisional and annual license status.

 

Green Spirit Mendocino, LLC holds a provisional license which expires April 4, 2020. The provisional license was issued by the Bureau of Cannabis Control (“BCC”) while the annual application is pending final approval. Point Arena Manufacturing, LLC (“PAM”) which holds a Non-Volatile Type 6 Manufacturing license was issued a provisional license on April 24, 2019. . Point Arena Distribution, LLC holds a Distribution Type 11 license issued by the BCC which expires on July 8, 2019.

 

Although the possession, cultivation and distribution of cannabis for medical and adult use is permitted in California, cannabis is a Schedule-I controlled substance and its use remains a violation of federal law. Since federal law criminalizing the use of cannabis preempts state laws that legalize its use, strict enforcement of federal law regarding cannabis would likely result in our inability to proceed with our business plan, especially in respect of our cannabis cultivation, production and dispensaries. In addition, our assets, including real property, cash, equipment and other goods, could be subject to asset forfeiture because cannabis is still federally illegal.

 

Nashville Lease – Pure and Natural, LLC

 

On February 8, 2019, Pure and Natural, LLC entered into an operating lease for a 2,525 square foot CBD retail store at 2306 West End Avenue, Nashville, Tennessee for five years beginning February 1, 2019 and ending January 31, 2024. The initial lease obligation will be $7,364 per month with an escalation of $1/per square foot for the remaining four years. The lease also states a security deposit of $7,364 and for additional rent of $1,403 per month for common area maintenance expenses. The lease has one five-year renewal option.

 

Sponsorship Agreement – BYB Extreme Fighting Series LLC

 

On February 20, 2019 Pure and Natural, LLC (“Pure”) and BYB Extreme Fighting Series, LLC (“BYB”) entered into a Sponsorship Agreement (“Agreement”) to sponsor three events of the BYB EXTREME Series.

 

In consideration of the sponsorship, Pure paid $30,000 on February 20, 2019. The Company will also issue $25,000 of its restricted common stock per event. BYB commits to purchase $25,000 worth of Pure products no less than 45 days before each sponsored event.

 

Endorsement Licensing and Co-Branding Agreement – Matt Sorum

 

On February 27, 2019, Pure and Natural, LLC (“Pure”) and Matt Sorum (“Sorum”) entered into an Endorsement Licensing and Co-Branding Agreement (“Agreement”), to develop, market, promote and sell a unique Matt Sorum Product Line (“Licensed Products”) for dietary supplements derived from hemp containing 0% THC. The Agreement is for an initial three year term, beginning February 27, 2019 and ending February 26, 2022. The Agreement may be extended with the same terms unless either party provides a 60 day notice prior to the initial term.

 

Sorum will be compensated (i) a royalty of 20% of Net Gross Margin of the Licensed Products; (ii) 20% of the Net Gross Margin of any Products sold in connection with any commercial made by Sorum; and (iii) 30% of Net Gross Margin of Licensed Products. The Company further agrees to issue Matt Sorum certain shares of common stock as further consideration under this Agreement. The Company agrees to issue Matt Sorum 2,000 shares of its restricted common stock for each $1,000,000 in gross revenue derived directly from the sale of Licensed Products up to a maximum of 100,000 shares during the Term of this Agreement (the “Compensation Shares”). The Compensation Shares shall be issued at the end of each year of this Agreement.

 

Point Arena Manufacturing and Distribution Lease

 

On February 27, 2019, Point Arena Manufacturing, LLC and Point Arena Distribution, LLC (“Lessees”) entered into an operating lease for a 600 square foot building at 165 Main Street, Point Arena, California for five years beginning March 1, 2019 and ending February 28, 2024, for the purpose of manufacturing and distribution of cannabis products. The initial lease obligation will be $3,000 per month, the first year rent of $36,000 due within 10 days of signing the lease. This payment has not been made as the building has not been made ready. The rent will escalate 2.5% for the remaining four years of the base term. The lease has one five-year renewal option.

 

Preferred Partner and Advertising Agreement – Buzznog, LLC

 

On March 4, 2019, Pure and Natural, LLC (“Pure”) and Buzznog, LLC entered into a Preferred Partner and Advertising Agreement (“Agreement”) allowing Pure to sell cannibidiol products on Buzznog’s website, mobile applications and platforms. Pure will pay Buzznog 20% of the gross profit margin on all products sold using Buzznog’s sites. The Agreement has a term of three years from the moment of its coming into effect. If neither party announces termination of the Agreement at least thirty (90) days before its stated expiration, the Agreement shall automatically extend for a period of one year, and renewal until such time as either party provides notice of termination in accordance with the terms and conditions of the Agreement.

 

Palm Springs Lease – Green Room Palm Springs, LLC

 

On March 6, 2019, the Company entered into an operating lease for a 4,500 square foot cannabis retail store at 2155 N. Palm Canyon Drive, Palm Springs, California for five years and six months beginning March 1, 2019 and ending August 31, 2024. The initial lease obligation will be $6,000 per month for nine months; $10,000 for months ten through fifteen; and a 3% escalation of the monthly lease for the remainder of the base lease. The Company paid a security deposit of $20,000 upon signing the lease.

 

Consulting agreements

 

On March 3, 2019, the Company entered into an engagement letter agreement with MH Legal Services, LLC (“MH”). In connection with the engagement, the Company will pay MH compensation for in-house legal services as follows: (i) a monthly fee of Twelve thousand five hundred dollars ($12,500); and (ii) and a one-time issuance of 150,000 shares of the Company’s restricted common stock, par value $0.001 per share, due within thirty days of signing the engagement letter.

 

On March 29, 2019, the Company entered into a consulting agreement with John Grainer (“Grainer”). In connection with the agreement, the Company will pay Grainer compensation for management, development and operation services as follows: (i) a monthly fee of Fifteen thousand dollars ($15,000); and (ii) the Company will issue to Grainer two hundred thousand (200,000) restricted common shares, par value $0.001 per share. One hundred thousand shares (100,000) will be issued promptly upon execution of the consulting agreement. The remaining 100,000 shares shall accrue on a quarterly basis over a two (2) year period (12,500 per quarter), commencing on the effective date of this Agreement and except for a change in control of GSRX, subsequent share distribution is subject to your continued engagement. If this engagement is terminated prior to the accrual of any quarterly basis share accrual, you shall not be entitled to receive the unaccrued shares.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.19.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present fairly the consolidated financial position and results of its operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These consolidated financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2018 (including the notes thereto) set forth in Form 10-K filed with the Securities and Exchange Commission on April 16, 2019.

Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements through March 31, 2019 include the accounts of the Company and the following entities, all of which have fiscal year ends of December 31. (Note 1).

 

●  100% owned subsidiary, Project 1493, LLC;
●  100% owned subsidiary, Andalucia 511, LLC;
51% majority owned subsidiary, Spirulinex, LLC;
55% majority owned subsidiary, Sunset Connect Oakland, LLC;
55% majority owned, Green Spirit Essentials, LLC;
100% owned subsidiary, Green Spirit Mendocino, LLC; and
100% owned subsidiary, 138 Main Street PA, LLC.
100% owned subsidiary, GSRX SUPES, LLC
100% owned subsidiary, Point Arena Supply Co., LLC
100% owned subsidiary, Ukiah Supply Company, LLC
100% owned subsidiary, Pure and Natural, LLC
98.5% owned subsidiary, Point Arena Manufacturing, LLC
99% owned subsidiary, Point Arena Distribution, LLC
51% majority owned subsidiary, Pure and Natural-Lakeway, LLC
51% majority owned subsidiary, Pure and Natural One-TN, LLC
98.5% owned subsidiary, Green Room Palm Springs, LLC

Use of Estimates and Assumptions

Use of Estimates and Assumptions

 

The preparation of the consolidated financial statements that are in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements.

Cash and Cash Equivalents

Cash and Cash Equivalents

 

The Company considers all cash on hand, cash in banks and all highly liquid debt instruments purchased with a maturity of three months at purchase or less to be cash and cash equivalents. At times, cash and cash equivalent balances at a limited number of banks and financial institutions may exceed insurable amounts. At March 31, 2019, the Company had $0 in excess of FDIC depository insurance coverage. The Company believes it mitigates its risks by depositing cash or investing in cash equivalents in major financial institutions.

 

Cash held in escrow, in the name of the Company, is held by Gunnison Bank (“Gunnison”). The escrow account was established to hold the deposits from the sale of equity in subsidiaries and hold funds for businesses under subscription agreements. There are no restrictions on the funds held by Gunnison on the Company’s behalf.

Investments, Fair Value

Investments, fair value

 

On March 30, 2019, the Company entered into a Share Exchange Agreement (the “Share Agreement”) and an Ancillary Rights Agreement (the “Ancillary Agreement”) with Chemesis International Inc., a British Columbian Corporation (“CADMF”). In the Share Agreement, the Company received 7,291,874 restricted shares of common stock of CADMF. Fair value of the investment as of March 31, 2019 was $11,666,998. CADMF is quoted on the OTC market and closed on Friday, March 29, 2019 at $1.60 per share.

Investments, Cost Method

Investments, cost method

 

Pure and Natural, LLC made a $50,000 investment on January 4, 2019 for a 10% equity and profits interest in The Zen Stop, LLC. The Zen Stop is a mobile wellness business called “Zen Stop.” The investment is carried at the cost basis as it is a private company and fair value cannot be readily determined.

 

Pure and Natural, LLC purchased 25,167 membership units in Buzznog, LLC for $20,000 on March 6, 2019. The investment is carried at the cost basis as it is a private company and fair value cannot be readily determined.

Revenue Recognition

Revenue Recognition

 

In accordance with the new guidance, the Company recognizes revenue at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods or services to its customers. The Company’s policy is to record revenue when control of the goods transfers to the customer.

 

In limited instances when products are sold under consignment arrangements, the Company does not recognize revenue until control over such products has transferred to the end consumer.

 

The Company incurs costs associated with product distribution, such as freight and handling costs. The Company has elected to treat these costs as fulfillment activities and recognizes these costs at the same time that it recognizes the underlying product revenue. As this policy election is in line with the Company’s previous accounting practices, the treatment of shipping and handling activities under Topic 606 did not have any impact on the Company’s results of operations, financial condition and/or financial statement disclosures.

 

The following table presents the Company’s revenues disaggregated by type and by state/territory:

 

    For the Three Months Ended March 31,  
    2019     2018  
Revenues by Type                
Wholesale   $ 5,798     $ -  
Retail     2,860,281       2,196  
Total   $ 2,866,079     $ 2,196  

 

    For the Three Months Ended March 31,  
    2019     2018  
Revenues by State/Territory                
California   $ 121,896     $ -  
Tennessee     10,312     $ -  
Texas     29,190       -  
Puerto Rico     2,704,681       2,196  
Total   $ 2,866,079     $ 2,196  

Accounts Receivable

Accounts Receivable

 

The Company carries its accounts receivable at their estimated realizable amounts and periodically evaluates the credit condition of its customers. The allowance for uncollectible accounts receivable is based on the Company’s historical bad debt experience and on management’s evaluation of collectability of the individual outstanding balances. As of March 31, 2019, the Company had not identified any uncollectible accounts.

Inventory

Inventory

 

The Company’s inventory is stated at the lower of cost or market. Inventory consists of cannabis products, such as flower, edibles, creams, oils and cannabis accessories such as pipes, bowls and cartridges; and CBD products, such as soft gels, tinctures, balms, pain cream and vape pens.

 

Inventory is comprised of the following items:

 

    As of
March 31, 2019
    As of
December 31, 2018
 
Finished goods – flower   $ 501,589     $ 137,592  
Finished goods – cannabis products     354,386       191,468  
Finished goods – CBD products     132,146       31,400  
Total   $ 649,841     $ 360,460  

 

As of March 31, 2019, the Company had paid for inventory which had not been delivered in the amount of $338,280.

Fixed Assets

Fixed Assets

 

Fixed assets are recorded at cost and are depreciated using the straight-line method over estimated useful lives as follows:

 

Type of Asset   Estimated Life
Furniture, Fixtures and Equipment   5 – 10 years
Building and Leasehold improvements   5 - 25 years

Intangible Costs

Intangible Costs

 

The Company has incurred costs related to Patent Application Costs during the year ended December 31, 2018 and quarter ended March 31, 2019, consisting of $1,943,934 of legal fees. The patent applications will continue to be filed over the next several quarters. As the patents have not been issued as of March 31, 2019, no amortization has been applied against the patent costs. If the patents are approved, the Company will amortize the patent application costs over their useful lives. If the patents are not approved, the patent application costs will be expensed and charged to operations. (Note 7).

Share Based Compensation

Share based Compensation

 

Compensation cost relating to share-based payment transactions (including the cost of all employee stock options) is required to be recognized in the consolidated financial statements and covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. That cost is measured based on the estimated fair value of the equity or liability instruments issued. (See Note 3).

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The carrying value of the Company’s current liabilities approximates fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion the Company is not exposed, except for cash balances in excess of the FDIC depository insurance coverage, to significant interest, currency or credit risks arising from these financial instruments.

Income Taxes

Income Taxes

 

The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company was organized under the laws of Nevada and therefore will be taxed at statutory U.S. federal corporate income tax rates.

Basic Earnings Per Share

Basic Earnings per Share

 

The Company computes net loss per share in accordance with FASB ASC 260 “Earnings per Share”, which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.

 

Basic net loss per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding. Potentially dilutive securities have been excluded from the Company’s earnings per share calculation due to the effect of being anti-dilutive. The total number of potentially dilutive securities which have been excluded is 6,995,796. (Note 3).

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

As of March 31, 2019 and through May 15, 2019, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or future operating results. The Company will monitor these emerging issues to assess any potential future impact on its financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. On January 1, 2019, we adopted this standard on our consolidated financial statements. The Company recognized the Right of Use asset in the amount of $6,316,879 and Lease Liability – current of $1,188,821 and Lease Liability – non-current of $5,238,108 as of March 31, 2019. During the period ended March 31, 2019, the Company recognized an additional $110,050 of rental expense charged to operations due to the adoption of the standard.

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.19.1
Nature of Operations (Tables)
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Purchase Price FPA

The Company operates six dispensaries as follows:

 

Location   State/Territory   Date Opened   Purchase Price  
Dorado   Puerto Rico   March 28, 2018   $  100,000  
Fajardo   Puerto Rico   December 28, 2018   $ 100,000  
Carolina   Puerto Rico   June 1, 2018   $ 100,000  
Hato Rey   Puerto Rico   June 1, 2018   $ 128,000  
San Juan   Puerto Rico   October 2, 2018   $ 75,000  
Point Arena   California   April 2, 2018   $ 350,000  

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.19.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Schedule of Revenues Disaggregated by Type and by State/Territory

The following table presents the Company’s revenues disaggregated by type and by state/territory:

 

    For the Three Months Ended March 31,  
    2019     2018  
Revenues by Type                
Wholesale   $ 5,798     $ -  
Retail     2,860,281       2,196  
Total   $ 2,866,079     $ 2,196  

 

    For the Three Months Ended March 31,  
    2019     2018  
Revenues by State/Territory                
California   $ 121,896     $ -  
Tennessee     10,312     $ -  
Texas     29,190       -  
Puerto Rico     2,704,681       2,196  
Total   $ 2,866,079     $ 2,196  

Schedule of Inventory

Inventory is comprised of the following items:

 

    As of
March 31, 2019
    As of
December 31, 2018
 
Finished goods – flower   $ 501,589     $ 137,592  
Finished goods – cannabis products     354,386       191,468  
Finished goods – CBD products     132,146       31,400  
Total   $ 649,841     $ 360,460  

Schedule of Fixed Assets Estimated Useful Lives

Fixed assets are recorded at cost and are depreciated using the straight-line method over estimated useful lives as follows:

 

Type of Asset   Estimated Life
Furniture, Fixtures and Equipment   5 – 10 years
Building and Leasehold improvements   5 - 25 years

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.19.1
Equity (Tables)
3 Months Ended
Mar. 31, 2019
Stockholders' Equity Note [Abstract]  
Schedule of Common Stock Transactions

The following table illustrates the common stock transactions for the the quarter ended March 31, 2019:

 

Category   Common Shares  
Cash, common shares     621,600  
         
Services, authorized but not issued     762,335  
Share Exchange and Ancillary Rights Agreement     11,666,998  
Total     13,050,933  

Schedule of Issuance of Warrants

    Warrants Issued     Exercise Price     Expiration Date  
May 11, 2017     6,038,462     $ .50       May 11, 2020  
February 23, 2018     232,334     $ 6.00       February 23, 2021  
October 5, 2018     517,800     $ 2.50       October 5, 2020  
March 8, 2019     207,200     $ 1.75       March 7, 2021  
Total     6,995,796                  

Schedule of Sale of Equity in Subsidiaries

On March 29, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

 

Subsidiary   % Sold     Amount Received  
Point Arena Manufacturing, LLC     1.5 %   $ 125,001  
Point Arena Distribution, LLC     1.0 %     50,000  
Green Room Palm Springs, LLC     1.5 %     158,571  
Total           $ 333,572  

 

As a result of the transaction, the Company reported $328,819 as additional paid in capital and $4,753 as included in non-controlling interest.

 

On February 19, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

 

Subsidiary   % Sold     Amount Received  
Pure and Natural-Lakeway, LLC     49 %   $ 120,000  
Pure and Natural TN One, LLC     49 %     80,000  
                 
Total           $ 200,000  

Schedule of Effects of Changes in Ownership Interest

The following schedule discloses the effects of changes in the Company’s ownership interest in its subsidiaries on the Company’s equity:

 

    For the Quarter Ended  
    March 31, 2019  
Net loss attributable to GSRX Industries Inc.   $ (3,087,201 )
Net Loss Attributable to Non-Controlling Interests     (125,367 )
Change from net loss attributable to GSRX Industries Inc. and transfers to Non-Controlling Interest   $ (3,212,568 )

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.19.1
Commitments and Contingencies (Tables)
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Aggregate Future Minimum Rental Payments Under Operating Lease

Aggregate future lease liability payments under ASC 842 are as follows:

 

2019   $ 1,446,390  
2020     1,590,836  
2021     1,619,580  
2022     1,618,849  
2023     784,137  
Thereafter     516,436  
Total   $ 7,576,228  

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.19.1
Nature of Operations (Details Narrative) - $ / shares
May 11, 2017
Mar. 08, 2019
Oct. 05, 2018
Feb. 23, 2018
Exercise price of warrant $ 0.50 $ 1.75 $ 2.50 $ 6.00
Series A Preferred Stock [Member]        
Number of preferred stock shares grants during period 1,000      
Share Exchange Agreement [Member]        
Number of exchange for restricted shares of common stock 16,690,912      
Maximum number of warrants to purchase of common stock shares 3,000,000      
Exercise price of warrant $ 0.50      
Issuance of exchange warrants term 3 years      
Voting percentage 51.00%      
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.19.1
Nature of Operations - Schedule of Purchase Price FPA (Details)
3 Months Ended
Mar. 31, 2019
USD ($)
Dorado [Member]  
State/Territory Puerto Rico
Date Opened March 28, 2018
Purchase Price $ 100,000
Fajardo [Member]  
State/Territory Puerto Rico
Date Opened December 28, 2018
Purchase Price $ 100,000
Carolina [Member]  
State/Territory Puerto Rico
Date Opened June 1, 2018
Purchase Price $ 100,000
Hato Rey [Member]  
State/Territory Puerto Rico
Date Opened June 1, 2018
Purchase Price $ 128,000
San Juan [Member]  
State/Territory Puerto Rico
Date Opened October 2, 2018
Purchase Price $ 75,000
Point Arena [Member]  
State/Territory California
Date Opened April 2, 2018
Purchase Price $ 350,000
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.19.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2019
Dec. 31, 2018
Jan. 04, 2019
Liquid debt instruments, maturity period 3 months    
Excess of FDIC depository insurance coverage $ 0    
Number of common shares received 7,291,874    
Investment $ 11,666,998  
Quoted price per share $ 1.60    
Number of membership units purchased 25,167    
Number of membership units purchased, value $ 20,000    
Prepaid inventory 338,280    
Legal fees $ 1,943,934 1,943,934  
Potentially dilutive securities 6,995,796    
Right of use asset $ 6,316,879  
Lease liability - current 1,188,821  
Lease liability - non-current 5,238,108  
Adoption Leases (Topic 842) [Member]      
Right of use asset 6,316,879    
Lease liability - current 1,188,821    
Lease liability - non-current 5,238,108    
Rental expense $ 110,050    
Project 1493, LLC [Member]      
Ownership percentage 100.00%    
Andalucia 511, LLC [Member]      
Ownership percentage 100.00%    
Spirulinex, LLC [Member]      
Ownership percentage 51.00%    
Sunset Connect Oakland, LLC [Member]      
Ownership percentage 55.00%    
Green Spirit Essentials, LLC [Member]      
Ownership percentage 55.00%    
Green Spirit Mendocino, LLC [Member]      
Ownership percentage 100.00%    
138 Main Street PA, LLC [Member]      
Ownership percentage 100.00%    
GSRX SUPES, LLC [Member]      
Ownership percentage 100.00%    
Point Arena Supply Co., LLC [Member]      
Ownership percentage 100.00%    
Ukiah Supply Company, LLC [Member]      
Ownership percentage 100.00%    
Pure and Natural, LLC [Member]      
Ownership percentage 100.00%    
Investment     $ 50,000
Point Arena Manufacturing, LLC [Member]      
Ownership percentage 98.50%    
Point Arena Distribution, LLC [Member]      
Ownership percentage 99.00%    
Pure and Natural-Lakeway, LLC [Member]      
Ownership percentage 51.00%    
Pure and Natural One-TN, LLC [Member]      
Ownership percentage 51.00%    
Green Room Palm Springs, LLC [Member]      
Ownership percentage 98.50%    
The Zen Stop, LLC [Member]      
Ownership percentage     10.00%
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.19.1
Summary of Significant Accounting Policies - Schedule of Revenues Disaggregated by Type and by State/Territory (Details) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Revenue $ 2,866,079 $ 2,196
California [Member]    
Revenue 121,896
Tennessee [Member]    
Revenue 10,312
Texas [Member]    
Revenue 29,190
Puerto Rico [Member]    
Revenue 2,704,681 2,196
Whole Sale [Member]    
Revenue 5,798
Retail [Member]    
Revenue $ 2,860,281 $ 2,196
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.19.1
Summary of Significant Accounting Policies - Schedule of Inventory (Details) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Total Inventory $ 649,841 $ 360,460
Finished Goods - Flower [Member]    
Total Inventory 501,589 137,592
Finished Goods - Cannabis Products [Member]    
Total Inventory 354,386 191,468
Finished Goods - CBD Products [Member]    
Total Inventory $ 132,146 $ 31,400
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.19.1
Summary of Significant Accounting Policies - Schedule of Fixed Assets Estimated Useful Lives (Details)
3 Months Ended
Mar. 31, 2019
Furniture, Fixtures and Equipment [Member] | Minimum [Member]  
Fixed Assets Estimated Useful Lives 5 years
Furniture, Fixtures and Equipment [Member] | Maximum [Member]  
Fixed Assets Estimated Useful Lives 10 years
Building and Leasehold Improvements [Member] | Minimum [Member]  
Fixed Assets Estimated Useful Lives 5 years
Building and Leasehold Improvements [Member] | Maximum [Member]  
Fixed Assets Estimated Useful Lives 25 years
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.19.1
Equity (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Mar. 30, 2019
Mar. 29, 2019
Feb. 19, 2019
Feb. 28, 2019
Jan. 31, 2019
Mar. 31, 2019
Mar. 31, 2018
Mar. 08, 2019
Dec. 31, 2018
Oct. 05, 2018
Feb. 23, 2018
May 11, 2017
Stock issued during period shares, issued for services, value             $ 1,207,500          
Outstanding warrants to purchase           6,995,796   207,200   517,800 232,334 6,038,462
Common stock, par value           $ 0.001     $ 0.001      
Additional paid in capital           $ 533,572 $ 1,390          
Subscription Agreement [Member]                        
Outstanding warrants to purchase       1 1              
Shares issued price per share       $ 1.25 $ 1.25              
Common stock, par value       $ 0.001 $ 0.001              
Number of stock sold         621,600              
Total gross proceeds of shares issued         $ 777,000              
Subscription Agreement and Ancillary Rights Agreement [Member]                        
Restricted shares of common stock 11,666,998                      
Ancillary Rights Agreement [Member]                        
Issued and outstanding transaction description The Agreement may be terminated by written agreement of the Company and CADMF or if CADMF ownership percentage decreases below 5% of the issued and outstanding shares of the Company.                      
Maximum [Member] | Subscription Agreement [Member]                        
Number of common stock shares issued       1,500,000 1,500,000              
Warrants [Member] | Subscription Agreement [Member]                        
Warrant term       2 years 2 years              
Shares issued price per share       $ 1.75 $ 1.75              
Common stock, par value       $ 0.001 $ 0.001              
Equity ownership interest rate       33.00% 33.00%              
Warrants [Member] | Minimum [Member]                        
Warrant term           2 years            
Warrants [Member] | Maximum [Member]                        
Warrant term           3 years            
Series A Preferred Stock [Member]                        
Preferred stock, voting percentage           51.00%            
Consultants [Member]                        
Stock issued during period shares, issued for services           414,478            
Stock issued during period shares, issued for services, value           $ 1,724,733            
Thomas Gingerich [Member]                        
Stock issued during period shares, issued for services           315,000            
Stock issued during period shares, issued for services, value           $ 394,500            
Investor [Member] | Subscription Agreement [Member]                        
Number of common stock shares issued         621,600              
Investor [Member] | Warrants [Member] | Subscription Agreement [Member]                        
Number of warrants issued         207,200              
Investor One [Member]                        
Additional paid in capital   $ 328,819                    
Amount included in non-controlling interest   $ 4,753                    
Investor Two [Member]                        
Additional paid in capital     $ 102,000                  
Amount included in non-controlling interest     $ 98,000                  
Board of Directors [Member] | Ancillary Rights Agreement [Member]                        
Issued and outstanding transaction description CADMF will be entitled to nominate and have one member to the Company's Board of Directors, as long as CADMF holds 10% or more of the Company's issued and outstanding common shares. Likewise, the Company will be entitled to nominate and have one member on the CADMF Board of Directors, as long as the Company holds 5% or more of the issued and outstanding common shares.                      
Dorado Consulting, LLC [Member]                        
Stock issued during period shares, issued for services           15,000            
Stock issued during period shares, issued for services, value           $ 16,500            
Chemesis International Inc [Member] | Subscription Agreement and Ancillary Rights Agreement [Member]                        
Number of stock sold 1,944,500                      
Restricted shares of common stock 7,291,874                      
Chemesis International Inc [Member] | Maximum [Member] | Subscription Agreement and Ancillary Rights Agreement [Member]                        
Number of stock sold 1,215,313                      
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.19.1
Equity - Schedule of Common Stock Transactions (Details) - Common Shares [Member]
3 Months Ended
Mar. 31, 2019
shares
Cash, common shares 621,600
Services, authorized but not issued 762,335
Share Exchange and Ancillary Rights Agreement 11,666,998
Total 13,050,933
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.19.1
Equity - Schedule of Issuance of Warrants (Details) - $ / shares
Mar. 31, 2019
Mar. 08, 2019
Oct. 05, 2018
Feb. 23, 2018
May 11, 2017
Stockholders' Equity Note [Abstract]          
Warrants Issued 6,995,796 207,200 517,800 232,334 6,038,462
Warrant Exercise Price   $ 1.75 $ 2.50 $ 6.00 $ 0.50
Warrant Expiration Date   Mar. 07, 2021 Oct. 05, 2020 Feb. 23, 2021 May 11, 2020
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.19.1
Equity - Schedule of Sale of Equity in Subsidiaries (Details) - USD ($)
Mar. 29, 2019
Feb. 19, 2019
Amount Received $ 333,572 $ 200,000
Point Arena Manufacturing, LLC [Member]    
Subsidiary Point Arena Manufacturing, LLC  
Percentage of equity interest sold 1.50%  
Amount Received $ 125,001  
Point Arena Distribution, LLC [Member]    
Subsidiary Point Arena Distribution, LLC  
Percentage of equity interest sold 1.00%  
Amount Received $ 50,000  
Green Room Palm Springs, LLC [Member]    
Subsidiary Green Room Palm Springs, LLC  
Percentage of equity interest sold 1.50%  
Amount Received $ 158,571  
Pure and Natural-Lakeway, LLC [Member]    
Subsidiary   Pure and Natural-Lakeway, LLC
Percentage of equity interest sold   49.00%
Amount Received   $ 120,000
Pure and Natural TN One, LLC [Member]    
Subsidiary   Pure and Natural TN One, LLC
Percentage of equity interest sold   49.00%
Amount Received   $ 80,000
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.19.1
Equity - Schedule of Effects of Changes in Ownership Interest (Details) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Stockholders' Equity Note [Abstract]    
Net loss attributable to GSRX Industries Inc. $ (3,087,201) $ (8,508,190)
Net Loss Attributable to Non-Controlling Interests (125,367) $ (518)
Change from net loss attributable to GSRX Industries Inc. and transfers to Non-Controlling Interest $ (3,212,568)  
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.19.1
Related Party Transactions (Details Narrative) - USD ($)
3 Months Ended
Apr. 01, 2019
Apr. 09, 2018
Jan. 02, 2018
Mar. 31, 2019
Dec. 31, 2018
Common stock, par value       $ 0.001 $ 0.001
Chief Executive Officer [Member]          
Compensation paid       $ 70,000  
Chief Financial Officer [Member]          
Compensation paid       61,250  
Executive Consulting Agreements [Member] | Chief Executive Officer [Member]          
Compensation paid     $ 20,000    
Executive Consulting Agreements [Member] | Chief Financial Officer [Member]          
Compensation paid     $ 17,500    
Amended and Restated Executive Consulting Agreements [Member] | Dorado Consulting, LLC [Member]          
Compensation paid $ 10,000        
Amended and Restated Executive Consulting Agreements [Member] | Restricted Shares [Member] | Dorado Consulting, LLC [Member]          
Number of restricted shares issued 150,000        
Common stock, par value $ 0.001        
Amended and Restated Executive Consulting Agreements [Member] | Chief Financial Officer [Member]          
Compensation paid $ 10,000        
Amended and Restated Executive Consulting Agreements [Member] | Chief Financial Officer [Member] | Restricted Shares [Member]          
Number of restricted shares issued 75,000        
Common stock, par value $ 0.001        
Consulting Agreement [Member] | Dorado Consulting, LLC [Member]          
Proceeds from related party       $ 46,000  
Consulting Agreement [Member] | GP Consulting, LLC [Member]          
Compensation paid   $ 15,000      
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.19.1
Patent Application Costs and Intangible Assets (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Patent cost $ 135,546 $ 400,000
Spirulinex, LLC [Member]    
Patent cost $ 135,546  
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.19.1
Commitments and Contingencies (Details Narrative)
3 Months Ended
Mar. 29, 2019
USD ($)
$ / shares
shares
Mar. 27, 2019
USD ($)
Mar. 03, 2019
USD ($)
$ / shares
shares
Feb. 27, 2019
USD ($)
ft²
shares
Feb. 20, 2019
USD ($)
Feb. 08, 2019
USD ($)
ft²
Nov. 20, 2018
USD ($)
May 14, 2018
USD ($)
Mar. 31, 2019
USD ($)
Mar. 31, 2018
USD ($)
Mar. 06, 2019
USD ($)
ft²
Lease expense                 $ 437,973 $ 51,860  
Purchase the building             $ 1,150,000 $ 1,150,000      
Gross revenue                 1,485,459 1,375  
Consulting Fees                 545,107 $ 7,295,000  
Endorsement Licensing and Co-Branding Agreement [Member] | Matt Sorum [Member]                      
Agreement term       The Agreement is for an initial three year term, beginning February 27, 2019 and ending February 26, 2022. The Agreement may be extended with the same terms unless either party provides a 60 day notice prior to the initial term.              
Compensation description       Sorum will be compensated (i) a royalty of 20% of Net Gross Margin of the Licensed Products; (ii) 20% of the Net Gross Margin of any Products sold in connection with any commercial made by Sorum; and (iii) 30% of Net Gross Margin of Licensed Products. The Company further agrees to issue Matt Sorum certain shares of common stock as further consideration under this Agreement. The Company agrees to issue Matt Sorum 2,000 shares of its restricted common stock for each $1,000,000 in gross revenue derived directly from the sale of Licensed Products up to a maximum of 100,000 shares during the Term of this Agreement (the "Compensation Shares"). The Compensation Shares shall be issued at the end of each year of this Agreement.              
Restricted shares of common stock | shares       2,000              
Gross revenue       $ 1,000,000              
Endorsement Licensing and Co-Branding Agreement [Member] | Matt Sorum [Member] | Maximum [Member]                      
Restricted shares of common stock | shares       100,000              
Point Arena Manufacturing and Distribution Lease [Member]                      
Number of square foot | ft²       600              
Initial lease obligation       $ 3,000              
Lease renewal term       5 years              
Agreement term       On February 27, 2019, Point Arena Manufacturing, LLC and Point Arena Distribution, LLC ("Lessees") entered into an operating lease for a 600 square foot building at 165 Main Street, Point Arena, California for five years beginning March 1, 2019 and ending February 28, 2024, for the purpose of manufacturing and distribution of cannabis products.              
Lease rent expense       $ 36,000              
Additional rent percentage       2.50%              
Consulting Agreements [Member]                      
Compensation description     In connection with the engagement, the Company will pay MH compensation for in-house legal services as follows: (i) a monthly fee of Twelve thousand five hundred dollars ($12,500); and (ii) and a one-time issuance of 150,000 shares of the Company's restricted common stock, par value $0.001 per share, due within thirty days of signing the engagement letter.                
Restricted shares of common stock | shares     150,000                
Consulting Fees     $ 12,500                
Shares issued price per share | $ / shares     $ 0.001                
Consulting Agreements [Member] | John Grainer [Member]                      
Compensation description In connection with the agreement, the Company will pay Grainer compensation for management, development and operation services as follows: (i) a monthly fee of Fifteen thousand dollars ($15,000); and (ii) the Company will issue to Grainer two hundred thousand (200,000) restricted common shares, par value $0.001 per share. One hundred thousand shares (100,000) will be issued promptly upon execution of the consulting agreement. The remaining 100,000 shares shall accrue on a quarterly basis over a two (2) year period (12,500 per quarter), commencing on the effective date of this Agreement and except for a change in control of GSRX, subsequent share distribution is subject to your continued engagement. If this engagement is terminated prior to the accrual of any quarterly basis share accrual, you shall not be entitled to receive the unaccrued shares.                    
Restricted shares of common stock | shares 200,000                    
Consulting Fees $ 15,000                    
Shares issued price per share | $ / shares $ 0.001                    
Consulting Agreements [Member] | John Grainer [Member] | Issued Promptly Upon Execution [Member]                      
Restricted shares of common stock | shares 100,000                    
Consulting Agreements [Member] | John Grainer [Member] | Accrue On Quarterly Basis [Member]                      
Restricted shares of common stock | shares 100,000                    
Consulting Agreements [Member] | John Grainer [Member] | Per Quarter [Member]                      
Restricted shares of common stock | shares 12,500                    
Project 1493, LLC [Member]                      
Purchase the building             $ 50,000 50,000      
Project 1493, LLC [Member] | Option Agreement [Member]                      
Payment for rent               $ 6,000      
Payment to extend the option   $ 100,000                  
Option extended date   May 31, 2019                  
Project 1493, LLC [Member] | Option Agreement [Member] | April and May 2019 [Member]                      
Payment for rent                 $ 10,000    
Pure and Natural, LLC [Member] | Nashville Lease [Member]                      
Number of square foot | ft²           2,525          
Initial lease obligation           $ 7,364          
Escalation amount per square foot for remianing four years           1          
Security deposit           7,364          
Additional rent per month for common area maintenance expenses           $ 1,403          
Lease renewal term           5 years          
BYB Extreme Fighting Series LLC [Member] | Sponsorship Agreement [Member]                      
Sponsorship consideration         $ 30,000            
Restricted shares of common stock, value         25,000            
Commitment to purchase products         $ 25,000            
Buzznog, LLC [Member] | Point Arena Manufacturing and Distribution Lease [Member]                      
Agreement term       On March 4, 2019 Pure and Natural, LLC ("Pure") and Buzznog, LLC entered into a Preferred Partner and Advertising Agreement ("Agreement") allowing Pure to sell cannibidiol products on Buzznog's website, mobile applications and platforms. Pure will pay Buzznog 20% of the gross profit margin on all products sold using Buzznog's sites. The Agreement has a term of three years from the moment of its coming into effect. If neither party announces termination of the Agreement at least thirty (90) days before its stated expiration, the Agreement shall automatically extend for a period of one year, and renewing until such time as either party provides notice of termination in accordance with the terms and conditions of the Agreement.              
Green Room Palm Springs, LLC [Member] | Palm Springs Lease [Member]                      
Number of square foot | ft²                     4,500
Security deposit                     $ 20,000
Escalation monthly lease percentage for remainder of base lease                     3.00%
Green Room Palm Springs, LLC [Member] | Palm Springs Lease [Member] | For Nine Months [Member]                      
Initial lease obligation                     $ 6,000
Green Room Palm Springs, LLC [Member] | Palm Springs Lease [Member] | Months Ten Through Fifteen [Member]                      
Initial lease obligation                     $ 10,000
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.19.1
Commitments and Contingencies - Schedule of Aggregate Future Minimum Rental Payments Under Operating Lease (Details)
Mar. 31, 2019
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2019 $ 1,446,390
2020 1,590,836
2021 1,619,580
2022 1,618,849
2023 784,137
Thereafter 516,436
Total $ 7,576,228
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