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 September 30, ~~2019~~2020

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~~5477 ~~No.~~Nittany 3,Valley ~~P.R. 606, int. Jose Efron Ave.~~Drive

~~Dorado,~~Mill ~~Puerto~~Hall, ~~Rico~~Pennsylvania ~~00646~~17751

(Address of principal executive offices)

(214) 808-8649

Registrant’s telephone number, including area code

Former address if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

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 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 ~~November~~February 1912, ~~2019~~2021, the registrant had 8081,~~853~~799,~~142~~286 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	2319
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2725
ITEM 4	CONTROLS AND PROCEDURES	2725
	PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	2826
ITEM 1A.	RISK FACTORS	2826
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES	2826
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	2827
ITEM 4.	MINE SAFETY DISCLOSURES	2927
ITEM 5.	OTHER INFORMATION	2927
ITEM 6.	EXHIBITS	2927
SIGNATURES		3028

PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS

GSRX Industries Inc.

Consolidated Balance Sheets

September 30, ~~2019~~2020 and December 31, ~~2018~~2019

	September 30, 2019			December 31, 2018
	September 30, 2020			December 31, 2019
	“Unaudited”
Assets
Current Assets
Cash	$	~~581,569~~-		$	175,~~313,645~~704
Cash, held in escrow		528,570			-
Cash, held in escrow (Note 9)		528,570			528,570
Accounts Receivable		749,~~889~~810			3721,~~090~~146
Inventory		~~434~~611,~~282~~887			~~360~~442,~~460~~316
Prepaid Inventory		~~356,868~~-			~~514~~371,~~515~~263
Prepaid Expenses		21,300			23,800
Total Current Assets		1,150,267			1,438,999
Total Current Assets		1,997,478			2,249,510
Fixed Assets
Furniture, Fixtures and Equipment		~~555~~388,~~281~~750			~~464~~406,~~832~~729
Building, Land and Leasehold Improvements		2992,~~179,621~~007			21,~~197~~009,~~191~~505
Accumulated Depreciation		(~~263~~409,~~396~~865	)		(~~108~~264,~~421~~583	)
Total Net Fixed Assets		2970,~~471,506~~892			21,~~553~~151,~~602~~651
Other Assets
Advance to Parent and Affiliate, net of reserve		-			1,170,386
Licenses		812,300			812,300
Deposits		~~276~~244,~~960~~164			~~399~~275,~~551~~810
Patent Application Costs (Note 7)		1,943,934			1,808,388
Investments, fair value (Note 2)		258,132			232,247
Investments, fair value (Note 2)		4,422,522			-
Investments, cost method (Note 2)		70,000			70,000
Investments, cost method (Note 2)		70,000			-
Right of Use (Note 2)		1,553,155			2,155,738
Right of Use (Note 2)		2,421,372			-
Construction in Progress (Note 5)		526,582			739,473
Construction in Progress (Note 5)		682,274			777,294
Total Other Assets		3,464,333			5,455,954
Total Other Assets		10,629,362			3,797,533
Total Assets	$	5,585,492		$	8,046,604
Total Assets	$	15,098,346		$	8,600,645
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable	$	~~732~~1,~~072~~432,547		$	~~721~~876,~~939~~227
Accrued Expenses		~~110~~136,~~010~~766			1362,~~463~~903
Lease Liability - current (Note 2)		~~459~~343,~~053~~743			-594,936
Advances Payable		1,100			1,100
Total Current Liabilities		1,913,056			1,834,066
Total Current Liabilities		1,302,235			724,502
Long Term Liabilities
Lease Liability - non curent (Note 2)		2,258,129			-
Lease Liability - non current (Note 2)		1,089,945			1,751,237
Total Long Term Liabilities		21,~~258~~089,~~129~~945			-1,751,237
Total Liabilities		3,~~560~~003,~~364~~001			~~724~~3,~~502~~585,303
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 September 30, 2019 and December 31, 2018, respectively		1			1
Preferred Stock, convertible, $.001 par value; 1,000 shares authorized; 1,000 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		1			1
Common Stock $.001 par value 100,000,000 authorized; 80,853,142 and 45,235,533 issued and outstanding; 0 and 799,770 authorized but not issued as of September 30, 2019 and December 31, 2018, respectively		80,854			46,036
Common Stock $.001 par value 100,000,000 authorized; 81,799,286 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		81,800			81,800
Additional paid-in capital		83,~~073~~111,~~624~~254			4983,~~750~~111,~~553~~254
Retained Deficit		(7180,~~618~~265,~~632~~868	)		(4278,~~322~~579,~~236~~239	)
Equity Attributable to GSRX Industries Inc.		112,~~535~~927,~~847~~187			74,~~474~~613,~~354~~816
Non-Controlling Interest		2(344,~~135~~696	)		~~401~~(152,~~789~~515	)
Total Stockholders’ Equity		112,~~537~~582,~~982~~491			74,~~876~~461,~~143~~301
Total Liabilities and Stockholders’ Equity	$	155,~~098~~585,~~346~~492		$	8,~~600~~046,~~645~~604

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

GSRX Industries Inc.

Consolidated Statements of Operations

For the ~~Nine~~Six Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
	“Unaudited”			“Unaudited”			“Unaudited”			“Unaudited”
Revenues
Revenues	$	2,~~757~~745,~~158~~958		$	~~664~~2,~~400~~757,158		$	98,~~062~~186,~~462~~907		$	19,~~020~~062,~~026~~462
Cost of Goods Sold		1,~~431~~240,~~656~~586			~~409~~1,~~348~~431,656			4,~~910~~064,~~120~~517			~~610~~4,~~526~~910,120
Gross Profit		1,~~325~~505,~~502~~372			~~255~~1,~~052~~325,502			4,~~152~~122,~~342~~390			~~409~~4,~~500~~152,342
Operating Expenses
Consulting Fees		~~458~~238,~~233~~973			~~282~~458,~~673~~233			1733,~~324,969~~237			~~957~~1,~~496~~324,969
General and Administrative		13,~~414~~112,~~838~~438			1,~~274~~414,~~138~~838			4,~~648~~507,~~194~~854			24,~~818~~648,~~371~~194
Abandonment of Option to Purchase Building		-			-			~~200,000~~-			-200,000
Write of leasehold improvements and rent deposits		-			-			654,426			-
Impairment of leasehold improvements and rent deposits		-			-			-			654,426
Professional Fees		155,375			370,533			703,408			697,410
Impairment of fixed assets and construction in progress		300,631			-			388,874			-
Depreciation Expense		56,977			47,865			158,146			70,826
Professional Fees		60,374			155,375			266,668			703,408
Depreciation Expense		59,143			56,977			155,451			158,146
Stock Based Compensation (Note 3)
Consulting Fees		~~16,547,800~~-			~~222~~16,~~847~~547,800			~~17,182,907~~			917,~~673~~182,~~347~~907
Share Exchange and Ancillary Rights Agreement		-			-			~~1,166,700~~			-1,166,700
Director Fees		~~47,000~~-			-47,000			~~77,087~~			~~300~~77,~~000~~087
Professional Fees		~~282,000~~-			-282,000			~~690,000~~			-690,000
Total Stock based compensation		~~16,876,800~~-			~~222~~16,~~847~~876,800			~~19,116,694~~			919,~~973~~116,~~347~~694
Total Operating Expenses		183,~~962~~771,~~223~~559			218,~~198~~962,~~056~~223			266,~~805~~052,~~837~~084			1426,~~517~~805,~~450~~837,
Loss from Operations		(172,~~636~~266,~~721~~187	)		(117,~~943~~636,~~004~~721	)		(221,~~653~~929,~~495~~694	)		(1422,~~107~~653,~~950~~495	)
Other Income (Expenses)
Rent Income		~~31,500~~-			4231,~~028~~500			~~88,756~~			5088,~~613~~756
Unrealized loss on investments		(6,442,370	)		-			(7,244,476	)		-
Option Fee					-			25,000
Total Other Income (Expenses)		(6,410,870	)		42,028			(7,155,720	)		50,613
Unrealized gain on investments		(128,337	)		(6,442,370	)		25,885			(7,244,476	)
Loss From Operations Before Provision for Income Taxes		(24,047,591	)		(1,900,976	)		(29,809,215	)		(14,057,337	)
Total Other Income (Expenses)		(128,337	)		(6,410,870	)		50,885			(7,155,720	)
Loss From Operations Before Provision for Income Taxes		(2,394,524	)		(24,047,591	)		(1,878,809	)		(29,809,215	)
Provision for Income Taxes (Note 4)		-			-			-			-
Net Loss		(242,~~047~~394,~~591~~524	)		(124,~~900~~047,~~976~~591	)		(291,~~809~~878,~~215~~809	)		(1429,~~057~~809,~~337~~215	)
Net Loss Attributable to Non-Controlling Interest		(34155,~~001~~744	)		(~~245~~34,~~231~~001	)		(~~512~~192,~~819~~182	)		(~~409~~512,~~701~~819	)
Net Loss Attributable to GSRX Industries Inc.	$	(242,~~013~~238,~~590~~780	)	$	(124,~~655~~013,~~745~~590	)	$	(291,~~296~~686,~~396~~627	)	$	(1329,~~647~~296,~~636~~396	)
Basic loss per share	$	(0.33	)	$	(0.04	)	$	(0.49	)	$	(0.32	)
Basic and diluted loss per share	$	(0.03	)	$	(0.33	)	$	(0.02	)	$	(0.49	)
Weighted average number of common shares outstanding		73,793,792			42,991,326			59,764,667			44,456,536
Weighted average number of common shares outstanding – basic and diluted		81,799,286			73,793,792			81,799,286			59,764,667

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

GSRX Industries Inc.

Consolidated Statement of Changes in Stockholders’ Equity

For the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

	Shares				Preferred		Common		Additional						Non -
	Preferred		Common		Stock		Stock		Paid-in			Retained			Controlling
	Stock		Stock		Amount		Amount		Capital			Deficit			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
Balance as of December 31, 2018		1,000		46,035,303	$	1	$	46,036	$	49,750,533		$	(42,322,236	)	$	401,789		$	7,876,143
Issuance of Shares and Warrants for Cash		-		155,167		-		155		465,345			-			-			465,500
Issuance of Shares for Cash		-		1,964,104		-		1,965		4,352,299			-			-			4,354,264
																			-
Issuance of Shares for Services		-		2,021,225		-		2,021		10,017,855			-			-			10,019,876
																			-
Shares Authorized for Services, Not Issued as of Statement Date				799,770				800		1,278,831			-			-			1,279,631
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		-		-		-		-		-			-			350,900			350,900
																			-
Net Loss		-		-		-		-		-			(16,239,276	)		(611,832	)		(16,851,108	)
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		-		1,433,600		-		1,434		1,181,566			-			-			1,183,000
Issuance of Shares for Services		-		21,717,241		-		21,717		16,731,476			-			-			16,753,193
Issuance of Shares for Cash, Not Issued as of Statement Date		-		-		-		-		-			-			-			-
Issuance of Shares for Cash, Not issued as of Statement Date		-		-		-							-			-			-
Shares issued in Share Exchange and Ancillary Agreement		-		11,666,998		-		11,667		12,822,031			-			-			12,833,698
																			-
Reduction of warrant exercise price		-		-		-		-		1,196,800			-			-			1,196,800
Shares issued in Share Exchange and Ancillary Agreement				11,666,998				11,667		12,822,031			-			-			12,833,698
Capital Contributed by Non-Controlling Interests		-		-		-		-		1,391,198			-			113,165			1,504,363
Reduction of warrant exercise price		-		-		-				1,196,800			-			-			1,196,800
										-						-
Capital Contributed by Non-Controlling Interests		-		-		-		-		1,391,198			-			59,287			1,504,363
Net Loss		-		-		-		-		-			(29,296,396	)		(512,819	)		(29,809,215	)
Balance as of September 30, 2019		1,000		80,853,142	$	1	$	80,854	$	83,073,624		$	(71,618,632	)	$	2,135		$	11,537,982
Balance as of December 31, 2019		1,000		81,799,286	$	1	$	81,800	$	83,111,254		$	(78,579,239	)	$	(152,515	)	$	4,461,301
Net Loss		-		-		-		-		-			(1,686,629	)		(192,181	)		(1,878,810	)
Balance as of September 30, 2020		1,000		81,799,286	$	1	$	81,800	$	83,111,254		$	(80,265,868	)	$	(344,696	)	$	2,582,491

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

GSRX Industries Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

	For the Nine Months Ended September 30,
	2019			2018
	2020			2019
	“Unaudited”			“Unaudited”
Cash Flow from Operating Activities
Net Loss	$	(291,~~809~~878,~~215~~809	)	$	(1429,~~057~~809,~~337~~215	)
Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities
Issuance of Common Stock for Services		~~17,919,894~~-			917,~~973~~919,~~347~~894
Reduction of warrant exercise price		~~1,196,800~~-			-1,196,800
Depreciation Expense		~~158~~155,~~146~~451			70158,~~826~~146
Abandonment of Option to Purchase Building		~~200,000~~-			-200,000
Write of leasehold improvements and rent deposits		654,426			-
Impairment of leasehold improvements and rent deposits		273,327			654,426
Unrealized loss on investments		7,244,476			-
Reserve for collection of Advance to Parent and Affiliate		1,798,580			-
Amortization of right of use asset		(309,902	)		295,810
Unrealized (gain) loss on investments		(25,885	)		7,244,476
Changes in Operating Assets and Liabilities:
Accounts Receivable		~~(37~~11,~~799~~336	)		(~~105~~37,~~333~~799	)
Inventory		(73169,~~822~~571	)		(~~839~~73,~~807~~822	)
Prepaid Inventory		~~157~~371,~~647~~263			-157,647
Prepaid Expenses		~~2,500~~-			(32,~~862~~500	)
Accounts Payable		10556,~~132~~320			~~283~~10,~~535~~132
Accrued Expenses		~~108~~(226,~~547~~137	)		36108,~~961~~547
Lease liability - current		295,810			-
Net Cash Provided by (Used in) Operating Activities		555,973			(1,972,458	)
Net Cash Used in Operating Activities		(1,972,458	)		(4,641,670	)
Cash Flow from Investing Activities
Deposit		~~(284,909~~-	)		(~~299~~284,~~080~~909	)
Purchase of Fixed Assets		~~(72,879~~-	)		(272,~~252,044~~879	)
Licenses		-			(309,300	)
Advance to Parent and Affiliate		(1,055,798	)		-
Patent Application Costs incurred		(135,546	)		(632,368	)
Proceeds from Advance to Parent and Affiliate		427,604			-
Investments, cost method		(70,000	)		-
Patent Application Costs incurred		-			(135,546	)
Construction in Progress		(355,077	)		(353,076	)
Investments, cost method					(70,000	)
Net Cash Used in Investing Activities		(918,411	)		(3,845,868	)
Construction in Progress		(3,483	)		(355,077	)
Net Cash Used in Investing Activities		(631,677	)		(918,411	)
Cash Flow from Financing Activities
Issuance of Common Stock for Cash		~~1,183,000~~-			41,~~799~~183,~~764~~000
Advances Payable		-			100
Cash Contributed by Non-controlling Interests		-			1,504,363
Cash Contributed by Non-controlling Interests		1,504,363			1,390
Net Cash Provided by Financing Activities		-			2,687,363
Net Cash Provided by Financing Activities		2,687,363			4,801,254
Net Increase (Decrease) in Cash		(75,704	)		(203,506	)
Net Decrease in Cash		(203,506	)		(3,686,284	)
Cash at Beginning of Period		604,274			1,313,645
Cash at Beginning of Period		1,313,645			6,758,018
Cash at End of Period	$	528,570		$	1,110,139
Cash at End of Period	$	1,110,139		$	3,071,734
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
Common stock issued for Investments, fair value	$	11,666,998		$	-

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

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, ~~2019~~ 2020

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~~The ~~initial business plan was related to the online sale of vitamins and supplements. On May 11, 2017, the~~ Company ~~entered~~changed ~~into~~its aname ~~share~~from ~~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~~Green ~~the~~Spirit ~~Member~~Industries ~~transferred~~Inc. ~~all~~on ofMay ~~the outstanding membership interests of 1493 to the Company in exchange for 16~~18,~~690,912~~ ~~restricted~~2017. ~~shares~~The ~~of common stock of the~~ Company ~~(the “Exchange Shares”),~~ ~~warrants~~changed toits ~~purchase~~name ~~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~~Green ~~date~~Spirit ofIndustries 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”)Inc. Asto aGSRX ~~result~~Industries ~~of the Exchange Agreement, 1493 became a wholly-owned subsidiary of the Company, and the business of 1493 became the business of the Company~~Inc. Aton ~~the~~June ~~time of the Exchange Agreement~~22, ~~Cyberspace~~ ~~was not engaged in any business activity~~2018. ~~The Company accounted for the acquisition of 1493 as a reverse merger and all prior periods presented are those of 1493.~~

The Company is in the business of ~~acquiring, developing and~~ operating medical cannabis dispensaries ~~throughout~~in Puerto Rico; and cannabis related businesses in California. Effective ~~and~~November ~~real~~24, ~~estate~~2020 ~~leasing~~the Company sold all of its dispensaries in Puerto Rico ~~and~~(Note ~~California~~9).

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.

Liquidity, Financial Condition and Management Plan

Our consolidated financial statements contemplate that we will continue as a going concern and do not contain any adjustments that might result if we were unable to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and implement our business plan. If we are unable to achieve or sustain profitability or to secure additional funds from our Parent, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our stockholders losing their entire investment. There is no guarantee that we will become profitable or secure additional funds from our parent. We are also planning on funding through private placements and continuing initiatives to raise capital to meet future working capital requirements.

Historically, the Company had net losses and negative cash flows from operations. The Company continues to experience liquidity constraints due to the continuing losses.

7We believe our existing and available capital resources will be sufficient to satisfy our funding requirements through the second quarter of 2021. 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.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

We have secured additional funding from our parent company, Chemesis, until we are able to raise revenues to a point of positive cash flow, which is anticipated in 2020. We believe our existing and available capital resources will be sufficient to satisfy our funding requirements through the fourth quarter of 2020. 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.

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~~2019 (including the notes thereto) set forth in Form 10-K filed with the Securities and Exchange Commission on ~~April~~June 1611, ~~2019~~2020.

Principles of Consolidation

The consolidated financial statements through September 30, ~~2019~~2020 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
●	94% owned subsidiary, Point Arena Manufacturing, LLC
●	100% 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
●	95% owned subsidiary, Green Room Palm Springs, LLC

All intercompany transactions have been eliminated in the consolidated financial statements.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

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 September 30, ~~2019~~2020 the Company had $0278,570 in excess of FDIC depository insurance coverage. ~~The~~In the Company’s ~~believes~~Puerto itRico ~~mitigates~~operations, ~~its~~the ~~risks~~Company byholds ~~depositing~~ cash orfrom ~~investing~~sales in multiple safes. The cash is ~~equivalents~~used into ~~major~~pay ~~financial~~vendors and certain taxes required to be paid with cash. The Company deposits cash into bank from safes when vendors ~~institutions~~require payment by check. As of September 30, 2020, the Company held approximately $68,000 in safes.

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 pre-split, restricted shares of common stock of CADMF initial fair value. On December 20, 2019 CADMF completed a reverse 1:10 stock split, reducing the shares held to 729,187. Fair value of the investment as of September 30, ~~2019~~2020 was $4258,~~422,522~~132. CADMF is quoted on the ~~OTC~~OTCQB market and closed on ~~Monday~~Wednesday, September 30, ~~2019~~2020 at $0.~~6065~~354 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 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 determined.

Revenue Recognition

InThe ~~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.

9The 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.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

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 September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	2020		2019		2020		2019
Revenues by Type
Wholesale	$	~~852~~1,373	$	~~9,029~~852	$	512,~~180~~191	$	~~107~~51,~~281~~180
Retail		2,~~756~~744,~~306~~585		~~655~~2,~~371~~756,306		98,~~011~~184,~~282~~716		~~912~~9,~~745~~011,282
Total	$	2,~~757~~745,~~158~~958	$	~~664~~2,~~400~~757,158	$	98,~~062~~186,~~462~~907	$	19,~~020~~062,~~026~~462

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
	2020		2019		2020		2019
Revenues by State/Territory
California	$	~~175~~110,~~810~~064	$	~~136~~175,~~457~~810	$	~~409~~303,~~803~~163	$	~~356~~409,~~918~~803
Tennessee		~~12,814~~-	$	-12,814		3810,~~479~~113		-38,479
Texas		21,~~648~~373		-2,648		904,~~915~~795		-90,915
Puerto Rico		2,~~565~~634,~~886~~521		~~527~~2,~~943~~565,886		87,~~523~~868,~~265~~836		~~663~~8,~~108~~523,265
Total	$	2,~~757~~745,~~158~~958	$	~~664~~2,~~400~~757,158	$	98,~~062~~186,~~462~~907	$	19,~~020~~062,~~026~~462

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 September 30, ~~2019~~2020, the Company had not identified any uncollectible accounts.

Advance to Parent and Affiliate

On October 11, 2019 the Company sold real estate in Puerto Rico, resulting in net proceeds of $920, 402. The Company advanced the proceeds to its parent, Chemesis in exchange for a note due January 31, 2020, bearing an interest of at Prime plus 1.0% per month. Through May 6, 2020 Chemesis repaid $650,000 on the loan. On May 6, 2020 the Company amended the loan agreement with Chemesis to repay $100,000 of the loan by May 30, 2020 and the balance paid in full by November 6, 2020. As of the date of this report, Chemesis did not make the loan payment of $100,000 due on May 30, 2020 or the balance in full due by November 6, 2020, but had repaid an additional $77,604 of the advance by September 30, 2020. The Company has placed a Reserve for Collection of the Advance to Parent and Affiliate for the outstanding balance of $192,798 as of September 30, 2020. The current balance due on the note as of the date of this report is $228,798.

As of September 30, 2020, the Company advanced $1,605,782 to Natural Ventures Puerto Rico, LLC (“NVPR”), a subsidiary of Chemesis as an informal, unsecured, due upon demand advance. The Company has placed a Reserve for Collection of the Advance to Parent and Affiliate for the outstanding balance of $1,605,782 as of September 30, 2020. The current balance of the advance due as of the date of this report is $1,663,707.

Inventory

The Company’s inventory is stated at the lower of cost or market, determined by the first-in, first-out (“FIFO”) method. Inventory consists of cannabis products, such as flower, edibles, creams, oils and cannabis accessories 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		As of
	September 30, 2019		December 31, 2018
	September 30,		December 31,
Finished goods – flower	$	49,668	$	137,592
	2020		2019
Finished goods – cannabis products		270,748		191,468
Finished goods – flower	$	128,103	$	135,074
Finished goods – CBD products		113,866		31,400
Finished goods – cannabis products		405,167		195,311
Total	$	434,282	$	360,460
Finished goods – CBD products		78,617		111,931
Total	$	611,887	$	442,316

As of September 30, 2019, the Company had paid for inventory which had not been delivered in the amount of $356,868.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

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~~10

The Company has incurred costs related to Patent Application Costs during the year ended December 31, 2018 and quarter ended September 30, 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 September 30, 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.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

Basic Earnings per Share

The Company computes net income (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 income (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~~exercise price being ~~anti-dilutive~~significantly higher than current market price of the Company’s shares. The total number of potentially dilutive securities which have been excluded is 6,995,~~796~~334. (Note 3).

Recent Accounting Pronouncements

As of ~~September~~June 30, ~~2019~~2020 and through ~~November~~February 2012, ~~2019,~~2021 there were several new accounting pronouncements issued by the Financial ~~Accounting~~ 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~~ 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. During the nine months ended September 30, 2019, the Company recognized an additional $295,810 of rental expense charged to operations due to the adoption of the standard.11

3. Equity

The following table illustrates the common stock transactions for the nine months ended September 30, 2019:

Category	Common Shares
Cash, common shares		1,433,600
Services, common shares		21,717,241
Shares issued in Share Exchange and Ancillary Agreement		11,666,998
Total		34,817,839

During the nine months ended September 30, 2019, issued 1,433,600 shares of the Company’s .001 par value common stock, resulting in net proceeds of $1,183,000.

During the nine months ended September 30, 2019, consultants received 21,717,241 shares of common stock for legal, professional, consulting and advisory services provided for the Company with a fair market value of $16,753,194.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

During the nine months ended September 30, 2019, the Company entered into a Share Exchange Agreement and an Ancillary Rights Agreement with Chemesis International Inc. In the Share Agreement, the Company issued 11,666,998 restricted shares of the Company’s common stock.

During the nine months ended September 30, 2019, the Company authorized the issuance of 12,915,000 shares of common stock to Dorado Consulting, LLC, a related party (Note 6) for services rendered to the Company with a fair market value of $9,710,500.

During the nine months ended September 30, 2019, the Company authorized the issuance of 3,000,000 shares of common stock to Leslie Ball, Chief Executive Officer (Note 6), for services rendered to the Company with a fair market value of $2,269,000.

During the nine months ended September 30, 2019, the Company authorized the issuance of 3,315,000 shares of common stock to Thomas Gingerich, Chief Financial Officer (Note 6), for services rendered to the Company with a fair market value of $2,663,500.

Acceleration of Shares due to Change of Control

On July 31, 2019, the Board of Directors elected to effectuate Section 9 of Consulting Agreements to accelerate 14 quarters of bonus shares due to change of control. A total of 19,900,000 shares were issued at a fair market value of $14,925,000. The shares are included in the amounts in the preceding paragraph. Shares issued are as follow:

Dorado Consulting, LLC, a related party			12,800,000
Les Ball			2,900,000
Tom Gingerich			2,900,000
GP Consulting, LLC			600,000
John Grainer			700,000

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~~Chemesis ~~Management~~International, ~~LLC~~Inc., athe ~~related~~Parent ~~party~~company.

Blank Check Preferred Stock

The board of directors ~~will~~is 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.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

Warrants

As of September 30, ~~2019~~2020, 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~~334

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 September 30, ~~2019~~2020.

Warrant Modification

On July 31, 2019 the Board of Directors approved the reduction of exercise price of certain warrants from $.50 to $.005 in order to maintain certain officers and directors. As a result of the reduced exercise price, the Company recognized an additional $1,196,800 of compensation expense.

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.

Private Placements

On June 25, 2019, the Company conducted a private placement, pursuant to which it sold 400,000 shares of Common Stock, at a purchase price of $0.50 per share, to an investor, resulting in net proceeds to the Company of $200,000. The shares were issued pursuant to Regulation D under the Securities Act of 1933, as amended (the “Act”).

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

On July 18, 2019, the Company conducted a private placement, pursuant to which it sold 412,000 shares of Common Stock, at a purchase price of $0.50 per share, to an investor, resulting in net proceeds to the Company of $206,000. The shares were issued pursuant to Regulation D under the Securities Act of 1933, as amended (the “Act”).

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 April 29, 2019, the investor transferred his partial interest from Point Arena Distribution, LLC to Green Room Palm Springs, LLC. The investor also contributed the unit price difference of $2,857.

On June 10, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

Subsidiary	% Sold			Amount Received
Point Arena Manufacturing, LLC		2.5	%	$	208,435
Green Room Palm Springs, LLC		2.0	%		211,428
Total				$	419,863

As a result of the transaction, the Company reported $411,465 as additional paid in capital and $8,398 as included in non-controlling interest.

During the three months ended September 30, 2019 the Company sold partial interests in its wholly owned subsidiaries to an investor as follows:

Subsidiary	% Sold			Amount Received
Point Arena Manufacturing, LLC		2.5	%	$	208,335
Green Room Palm Springs, LLC		1.0	%		105,714
Total				$	314,049

As a result of the transaction, the Company reported $296,263 as additional paid in capital and $17,786 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 receives 7,291,874 restricted shares of common stock of CADMF and CADMF receives 11,666,998 restricted shares of the Company’s common stock. 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.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

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.

The Company recognized no compensation attributable to the Ancillary Rights Agreement during the period ended September 30, 2019.

Share Exchange Agreement

Effective August 28, 2019, eight shareholders of the Company into a Share Exchange Agreement with Chemesis International, Inc. (“Chemesis”), pursuant to which the shareholders exchanged 42,534,454 common shares and 1,000 preferred shares of GSRX for 14,880,705 shares of Chemesis. As a result of the exchange Chemesis owned 54,151,035 shares or 67.03% 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 Nine Months Ended
	September 30, 2019
	September 30, 2020
Net loss attributable to GSRX Industries Inc.	$	(281,~~099~~686,~~596~~627	)
Net Loss Attributable to Non-Controlling Interests		(~~512~~192,~~819~~182	)
Change from net loss attributable to GSRX Industries Inc. and transfers to Non-Controlling Interest	$	(281,~~612~~878,~~415~~809	)

1612

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 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~~Final inPurchasing ~~progress~~Agreements

~~Construction~~The inCompany ~~progress~~entered ~~includes~~into ~~direct~~the ~~and~~Final ~~indirect~~Purchasing ~~expenditures~~Agreements ~~for~~(“FPA”) with holders of licenses to operate medicinal cannabis dispensaries in Puerto Rico. Pursuant to the ~~construction~~FPAs, ~~and~~the ~~expansion~~Company acquired all of the ~~Company’s~~legal rights, ~~facilities~~permits, pre-qualification licenses, and leases for five (5) medicinal cannabis dispensaries. The pre-qualification licenses isdo ~~stated~~not atallow ~~its~~the ~~acquisition~~holder ~~cost~~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. ~~Independent~~Such ~~contractors~~steps ~~perform~~include ~~substantially~~proving ~~all~~financial viability, background checks, application of the ~~construction~~final ~~and~~permit, ~~expansion~~proof ~~efforts~~ of ~~our~~certificate ~~facility~~of occupancy, employment of a security firm, installation of security cameras, and other similar compliance matters.

~~Construction~~The inCompany ~~progress~~operates ~~includes~~six ~~construction~~dispensaries ~~progress~~as 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.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.

6. Related Party Transactions

The Company entered into executive consulting agreements with its ~~Chief~~Interim ~~Executive~~President ~~Officer (“CEO”)~~ and Chief ~~Financial~~ Executive Officer (“~~CFO~~CEO”) effective as of ~~January~~March 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~~2020,~~000~~ ~~restricted~~replacing ~~shares~~Les ~~of the Company’s common stock, par value $0~~Ball.~~001 per share, payable quarterly, effective immediately.~~

~~Effective July 1, 2019, the Company entered into an amended and restated executive consulting agreement with the CEO.~~ Pursuant to the agreement, the Company agreed to pay the ~~Executive~~CEO ~~Chairman~~ compensation as follows: (i) a monthly cash fee of $~~0 – $15~~25,000,; ~~based on~~and ~~the~~(ii) ~~Company’s~~a monthly bonus ~~revenues,~~equal ~~payable~~to in1% ~~accordance~~of ~~with~~total ~~the~~gross ~~Company’s~~sales ~~standard~~based ~~payroll~~on ~~practices;~~all ~~and~~revenues ~~(ii)~~in ~~200,000 restricted~~excess ~~shares~~ of ~~the~~$1,000,000; ~~Company’s~~and ~~common~~(iii) ~~stock,~~a ~~par~~signing ~~value~~bonus ~~$0.001~~of ~~per share~~$25,000 ~~payable~~upon execution ~~quarterly,~~of ~~effective~~the ~~immediately,~~agreement; and (~~iii~~iv) anissued ~~acceleration~~$100,000 of 14stock ~~quarters~~based ofcompensation ~~the~~upon ~~quarterly~~execution ~~shares~~of ~~upon~~the aagreement. ~~change~~As of ~~control~~the inreport date, the ~~Company~~stock has not been issued.

Effective July 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~~compensate the ~~Executive~~CFO ~~Chairman compensation as follows: (i)~~ a monthly ~~cash~~ fee of $~~0 – $~~15,000~~, based on the Company’s monthly revenues, payable in accordance with the Company’s standard payroll practices; and (ii) 200,000 restricted shares of the Company’s common stock, par value $0~~.~~001 per share, payable quarterly, effective immediately and (iii) an acceleration of 14 quarters of the quarterly shares upon a change of control in the Company.~~

17For the nine months ended September 30, 2020, the he former CEO was paid $50,000, the new Interim President and CEO was paid $184,238 and CFO was paid $142,500.

~~GSRX Industries Inc.~~13

~~Notes~~On toMarch ~~Consolidated~~11, ~~Financial~~2020 ~~Statements~~Mr. Christian Briggs, Les Ball and Steve Farkas were replaced on the Board of Directors by Troy Nihart and Jeff Rogers. Mr. Briggs had served as Chairman, and was replaced by Mr. Nihart.

~~September~~During the nine months ended September 30, ~~2019~~2020, Mr. Briggs was paid $28,000 as compensation.

~~During~~On April 9, 2018 the ~~nine~~Company ~~months~~entered ~~ended~~into ~~September~~a 30consulting agreement with GP Consulting, ~~2019~~LLC, an entity owned by Gabrielle Pinto, daughter of Christian Briggs. GP Consulting, LLC, through its employee Gustavo Pinto, serves as the ~~CEO~~VP ~~and~~of ~~CFO~~Operations ~~were~~– ~~paid~~Puerto ~~$190~~Rico (“VP Ops”). Pursuant to the agreement,~~000~~ Gustavo Pinto, and the Company agreed to pay to the VP Ops a monthly fee of $~~121~~15,~~250~~000, ~~respectively~~plus expenses for services and duties customarily performed by and customary to the role of VP Ops.

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.

Effective July 1, 2019, the Company entered into an amended and restated executive consulting agreement with the Executive Chairman. Pursuant to the agreement, the Company agreed to pay the Executive Chairman compensation as follows: (i) a monthly cash fee of $0 – $15,000, based on the Company’s monthly revenues, payable in accordance with the Company’s standard payroll practices; and (ii) 700,000 restricted shares of the Company’s common stock, par value $0.001 per share, payable quarterly, effective immediately and (iii) an acceleration of 14 quarters of the quarterly shares upon a change of control in the Company.

During the nine months ended September 30, 2019, Dorado was paid $66,000.

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, Gustavo Pinto, , 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.

Effective July 1, 2019, the Company entered into an amended and restated executive consulting agreement with the GP Consulting. Pursuant to the agreement, the Company agreed to pay the Executive Chairman compensation as follows: (i) a monthly cash fee of $15,000, payable in accordance with the Company’s standard payroll practices; and (ii) 50,000 restricted shares of the Company’s common stock, par value $0.001 per share, payable quarterly, effective immediately.

~~During~~For the nine months ended September 30, ~~2019~~2020, GP Consulting was paid $~~120~~105,~~330~~000. Mr. Pinto resigned on June 1, 2020.

~~Natural~~On ~~Ventures~~February ~~Puerto~~28, ~~Rico~~2019 the Company, athrough its wholly owned subsidiary, ofentered ~~Chemesis~~into a long term supply agreement (“Supply Agreement”) Natural Ventures PR, ~~has~~LLC ~~been~~(“Supplier”). ~~advanced~~Pursuant ~~$356~~to the terms of the Supply Agreement,~~868~~ ~~for~~the ~~future~~Supplier agreed to supply a maximum of 300 pounds of medicinal cannabis raw materials and manufactured products to bethe ~~delivered~~Company. The Supply Agreement has a term of ten years. Either party may terminate the Supply Agreement with a written thirty (30) day notice.

18During the nine months ended September 30, 2020 the Company purchased $1,047,128 of product from Natural Ventures Puerto Rico, LLC. As of September 30, 2020 the Company owed NVPR $528,959 for products purchased which is included in accounts payable on the accompanying consolidated balance sheet.

~~GSRX~~On ~~Industries~~October ~~Inc~~11, 2019 the Company sold real estate in Puerto Rico, resulting in net proceeds of $920,402. The proceeds were sent directly to its parent, Chemesis in exchange for a note dated October 11, 2019 and due January 31, 2020, bearing an interest of at Prime plus 1.0% per month. Through May 6, 2020 Chemesis repaid $650,000 on the loan. On May 6, 2020 the Company amended the loan agreement with Chemesis to repay $100,000 of the loan by May 30, 2020 and the balance paid in full by November 6, 2020. As of the date of this report, Chemesis did not make the loan payment of $100,000 due on May 30, 2020 or paid the balance in full by November 6, 2020, but had repaid an additional $77,604 of the advance by September 30, 2020. The Company has placed a Reserve for Collection of the Advance to Parent and Affiliate for the outstanding balance of $192,798 as of September 30, 2020. The current balance due on the note as of the date of this report is $228,798.

~~Notes~~As of September 30, 2020, the Company advanced $1,605,782 to ~~Consolidated~~Natural ~~Financial~~Ventures ~~Statements~~Puerto Rico, LLC, a subsidiary of Chemesis as an informal, unsecured, due upon demand advance. The Company has placed a Reserve for Collection of the Advance to Parent and Affiliate for the outstanding balance of $1,605,782 as of September 30, 2020. The current balance of the advance due is $1,663,707.

~~September 30, 2019~~14

7.Option ~~Patent~~to ~~Application~~Sell ~~Costs~~Interest ~~and~~in ~~Intangible~~Project ~~Assets~~1493, LLC

~~The~~On ~~Company~~May ~~has~~7, ~~applied~~2020, ~~for~~GSRX ~~patents~~Industries ~~which~~Inc. it(the ~~believes~~“Corporation” ~~are~~or “GSRX”) entered into an option agreement (the “Option Agreement”) with a ~~new,~~royalty ~~original~~right ~~and~~with ~~ornamental~~Natural ~~design~~Ventures ~~for~~PR, ~~Oral~~LLC ~~Consumable~~(“NVPR”) ~~Flakes.~~allowing ~~The~~NVPR ~~patents~~to acquire ~~use~~100% of the ~~methods~~issued and outstanding membership interest of ~~preparing~~GSRX’s ~~solulizable~~wholly-owned subsidiary, ~~encapsulated~~Project ~~plant-based~~1493, ~~compositions~~LLC (the “1493 Membership Interest”). Project 1493, LLC holds all of GSRX’s currently operating and issued Puerto Rican dispensaries and cannabis licenses.

~~During~~Chemesis ~~the~~International ~~nine~~Inc. ~~months~~(“Chemesis”) ~~ended~~owns ~~September~~an ~~30,~~80% ~~2019,~~interest ~~the~~in ~~Company~~NVPR ~~did not incur any legal~~ and ~~associated~~is ~~costs~~also ~~for~~GSRX’s ~~the~~largest ~~multiple patent applications~~shareholder.

AsThe ~~the~~right ~~patents have not been issued as~~ of ~~September~~NVPR ~~30,~~to ~~2019,~~exercise nothe ~~amortization~~option ~~has~~and ~~been~~acquire ~~applied~~the ~~against~~1493 ~~the~~Membership ~~patent~~Interest ~~costs.~~is Ifconditional ~~the~~upon ~~patents are~~NVPR ~~approved~~performing, ~~the~~or ~~Company~~causing to ~~will~~be ~~amortize~~performed ~~the~~by ~~patent~~its ~~application~~parent ~~costs~~company ~~over~~Chemesis, ~~their~~the ~~useful~~following ~~lives.~~milestones If (the ~~patents~~“Milestones”) ~~are~~within ~~not~~the ~~approved,~~applicable ~~the~~timelines ~~patent~~set ~~application~~forth ~~costs will be expensed and charged against income.~~below:

8.(a) ~~Commitments~~paying US$25,000 to GSRX (the “Initial Cash Payment”), and ~~Contingencies~~(ii) waiving the 36-month leak-out in respect of the 729,187 common shares of Chemesis currently held by GSRX, which Milestones were completed concurrently with the execution and delivery of the Option Agreement (such date, the “Effective Date”);

(b) issuing to GSRX 5,190,000 common shares in the capital of Chemesis (the “Chemesis Shares”) within 10 months after the Effective Date. The Chemesis Shares will be subject to a 36-month leak-out schedule; and

Immediately upon NVPR completing, or causing Chemesis to complete, as the case may be, each of the aforementioned Milestones within the respective timelines set out above, NVPR will be deemed to have acquired all of the 1493 Membership Interest (“Exercise of the Option”).

Upon Exercise of the Option, NVPR and GSRX shall enter into a royalty agreement (the “Royalty Agreement”), the form of which was negotiated concurrent with the Option Agreement, pursuant to which NVPR shall grant to GSRX a revenues interest royalty and the right to receive payments in respect thereof equal to five percent (5%) of the revenues realized by NVPR from the operations of Project 1493, LLC in Puerto Rico for a period of five years.

Prior to the Exercise of the Option, either NVPR or GSRX may terminate the Option Agreement upon delivering notice to the other of its intention to terminate. If GSRX elects to terminate, then NVPR will not acquire the 1493 Membership Interest and GSRX must, as a condition precedent to such election: (i) return all cash payments it received under the terms of the Option Agreement; (ii) return the Chemesis Shares (if any) it received under the terms of the Option Agreement; and (iii) pay to Chemesis a break fee of US$100,000. If NVPR elects to terminate, then NVPR will not acquire the 1493 Membership Interest and GSRX will be entitled to keep the Initial Cash Payment. Subject to termination of the Option Agreement as described above, the term of the Option is 15 months after the Effective Date.

7. Commitments and Contingencies

Lease Commitments

The Company leases various facilities under operating leases which expire at various dates through ~~June~~July 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~~three ~~quarters~~months ~~ended~~ September 30, ~~2019~~2020 and ~~2018~~2019 was $~~180~~112,~~316~~140 and $~~327~~180,~~786~~316, respectively.

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

2019	$	570,074
Years Endied
2020	$	~~670~~506,~~116~~118
2021		~~658~~434,~~028~~217
2022		~~615~~334,~~313~~529
2023		~~444~~240,~~917~~909
Thereafter		516,436
2024		172,528
Total	$	3,474,884
Thereafter		310,144
Total	$	1,998,445

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. On May 21, 2019 the Company elected to forego the purchase of the building. The Company notified the Option holder of the decision, and released the $200,000 funds held in escrow to the Option holder and terminated the agreement to purchase the building.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 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 September 30, ~~2019and~~2020 ~~November~~and 19February __, ~~2019~~2021 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 aan ~~provisional~~annual license which expires April 4, ~~2020~~2021. The ~~provisional~~ license was issued by the Bureau of Cannabis Control (“BCC”) ~~while~~on ~~the~~April ~~annual~~29, ~~application is pending final approval~~2020. Point Arena Manufacturing, LLC (“PAM”) holds a Non-Volatile Type 6 Manufacturing license was issued a ~~provisional~~ license on ~~April~~May 2415, ~~2019~~2020 and expires on May 15, ~~2020~~2021. Point Arena Distribution, LLC holds a Distribution Type 11 provisional license issued by the BCC which expires on June 27, ~~2020~~ 2021.

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.

8. Legal Proceedings

On December 30, 2020, the Company was provided a cease and desist letter objecting to the claim that the sale of the Project 1493, LLC assets to Puerto Rico Industrial Commercial Holdings Biotech Corp. had been completed. The Company’s lawyers are considering the merits of the foregoing claim.

Litigation

On July 14, 2020 notice was served to Pure and Natural One-TN, LLC, Pure and Natural Lakeway, LLC and Thomas Gingerich as defendants in a lawsuit filed by Southwest Legend Investments LLC, a member of the two companies. As of the date of this report, the defendants have supplied requested information to the plaintiff’s attorney. Plaintiff is seeking damages in excess of $200,000 but less than $1,000,000.

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~~was be $7,364 per month ~~with~~and ana ~~escalation~~security deposit of $~~1/per~~7,364. ~~square~~The ~~foot~~lease ~~for~~was ~~the~~terminated ~~remaining~~with ~~four~~the ~~years.~~landlord ~~The~~on ~~lease~~July ~~also~~10, ~~states~~2020. aUnder ~~security~~provisions ~~deposit~~ of ~~$7,364~~the ~~and~~mutual ~~for~~settlement ~~additional~~and ~~rent~~release ofagreement ~~$1,403~~with ~~per~~the ~~month~~landlord ~~for~~to ~~common~~terminate ~~area~~the ~~maintenance~~lease, ~~expenses.~~the ~~The~~Company ~~lease~~paid ~~has~~$54,000 ~~one~~and ~~five-year~~forfeited ~~renewal~~the ~~option~~security deposit.

~~Sponsorship~~9. ~~Agreement~~Subsequent ~~– BYB Extreme Fighting Series LLC~~Events

OnGreen ~~February~~Room ~~20,~~Palm ~~2019~~Springs ~~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.~~

InOn ~~consideration~~October of16, 2020 the ~~sponsorship~~Company sold its 95% interest in Green Room Palm Springs, ~~Pure~~LLC ~~paid~~for $30400,000 onto ~~February~~Seneca 20Capital Partners, ~~2019~~LP, effectively owned by Christian Briggs, former Executive Chairman of the Board.. ~~The~~Included ~~Company~~in ~~will~~the ~~also~~sale ~~issue~~was ~~$25,000~~the transfer of ~~its~~the ~~restricted~~escrow ~~common~~account ~~stock~~which ~~per~~held ~~event~~investor funds. ~~BYB~~The ~~commits~~minority toinvestors ~~purchase~~agreed ~~$25~~with the sale,~~000~~ ~~worth~~transfer of ~~Pure~~interest ~~products~~and nothe ~~less~~transfer ~~than~~of 45their escrow ~~days before each sponsored event~~account.

20Asset Purchase Agreement to Sell Assets of Project 1493, LLC

On November 23, 2020, the Company received a payment of $1,500,000 (the “Payment”) from Puerto Rico Industrial Commercial Holdings Biotech Corp. (“PRICH”) in connection with the purchase to acquire 100% of the assets of GSRX’s wholly-owned ~~Industries~~subsidiary, ~~Inc~~Project 1493, LLC (the “1493 Membership Interest”). Project 1493, LLC holds all of GSRX’s currently operating and issued Puerto Rican dispensaries and cannabis licenses. The payment was not subject to any escrow or release conditions. As of the date of this report, the two parties continue negotiations of the terms of the sale. Please see Note 8 for further information.

~~Notes to Consolidated Financial Statements~~17

~~September~~Under 30Regulation S-X, ~~2019~~Article 11, Section 3120, pro forma financial information is required if a disposition either by sale, abandonment or distribution to shareholders has occurred or is probable, and is not fully reflected in the historical financial statements. As such, the Company reports the following represents the financial information with and without Project 1493 Membership’s operating income and expenses:

~~Endorsement~~Regulation ~~Licensing and Co~~S-~~Branding~~X, ~~Agreement~~Article –11, ~~Matt~~Section ~~Sorum~~3120

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.

	For the Nine Months Ended
	September 30, 2020
	Statement of Operations
	As Presented "Consolidated"			"Project 1493, LLC"		"All Other Companies"
	"Unaudited"			"Unaudited"		"Unaudited"
Revenues
Revenues	$	8,186,907		$	7,868,836	$	318,071
Cost of Goods Sold		4,064,517			3,873,498		191,019
Gross Profit		4,122,390			3,995,338		127,052

Operating Expenses
Consulting Fees		733,237			322,474		410,763
General and Administrative		2,902,072			2,104,240		797,832
Impairment of fixed assets and construction in progress		388,874			65,235		323,639
Professional Fees		266,668			130,273		136,395
Depreciation Expense		155,451			140,534		14,917
Total Operating Expenses		4,446,302			2,762,756		1,683,546
Income (Loss) from Operations		(323,912	)		1,232,582		(1,556,494	)

Other Income (Expenses)
Option fee		25,000			-		25,000
Unrealized gain on investments		25,885			-		25,885

Total Other Income (Expenses)		50,885			-		50,885

Income (Loss) From Operations Before
Provision for Income Taxes		(273,027	)		1,232,582		(1,505,609	)

Provision for Income Taxes (Note 4)		-			-		-

Net Income (Loss)		(273,027	)		1,232,582		(1,505,609	)

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.18

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 renewing 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.

GSRX Industries Inc.

Notes to Consolidated Financial Statements

September 30, 2019

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. MH terminated the engagement with the Company on October 16, 2019.

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.

Effective July 1, 2019, the Company entered into an amended and restated executive consulting agreement with the Grainer. Pursuant to the agreement, the Company agreed to pay the Executive Chairman compensation as follows: (i) a monthly cash fee of $10,000, payable in accordance with the Company’s standard payroll practices; and (ii) 50,000 restricted shares of the Company’s common stock, par value $0.001 per share, payable quarterly, effective immediately.

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~~2019, the Company changed its name from “Green Spirit Industries Inc.” to “GSRX Industries Inc.”

Effective August 28, 2019, eight shareholders of the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Chemesis International, Inc. (“Chemesis”), pursuant to which the shareholders exchanged 42,534,454 common shares and 1,000 shares of preferred stock of the Company for 14,880,705 shares of Chemesis. As a result and as of the date hereof, Chemesis owns 54,151,035 common shares or 67.03% of the Company.

2319

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~~2021, at which point we anticipate nearing or reaching cash-flow breakeven. See “Liquidity and Capital Resources.”.

A novel strain of coronavirus (“COVID-19”) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations, workforce and markets served, including a significant reduction in the demand for petroleum-based products. The market for the Company’s cannabis operations began being adversely impacted by the effects of COVID-19 in March of 2020 when circumstances surrounding, and responses to, the pandemic, including stay-at-home orders, began to materialize in North America. However, the full extent of the COVID-19 outbreak and changes in cannabis and the impact on the Company’s operations is uncertain. A prolonged disruption could have a material adverse impact on the financial results and business operations of the Company.

On January 21, 2021 the Board of Directors approved a rebranding of the GSRX corporate identity, the opening of a new business vertical in the restaurant industry focusing on the growing opportunities in underserved markets and the relocation of its corporate headquarters to Pennsylvania. The rebranding of the GSRX corporate identity is part of the Company’s ongoing strategy to evolve its business and create a foundation for new opportunities, entering the restaurant industry in underserved rural markets with a beginning focus on delivery, drive-up, and curbside provisions. The Company believes there is a demand for these services due to the disruptive Covid-19 pandemic in rural markets. The Company will begin making the transition from the cannabis and CBD business model to the new concept.

RESULTS OF OPERATIONS

Three Months Ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019

The following table summarizes the results of our operations during the three months ended September 30, ~~2019~~2020 and ~~2018~~2019, 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	9/30/~~2019~~2020 (unaudited)			9/30/~~2018~~2019 (unaudited)			Increase (Decrease)			Percentage Increase (Decrease)
Revenues		2,~~757~~745,~~158~~958			~~664~~2,~~400~~757,158			2(11,~~092,758~~200	)		~~314~~0.9841	%
Cost of Goods Sold		1,~~431~~240,~~656~~586			~~409~~1,~~348~~431,656			1(191,~~022,308~~070	)		~~249~~(13.7435	)%
Operating expenses		173,~~765~~771,~~423~~559			218,~~198~~962,~~056~~223			(15,~~567~~190,~~367~~664			~~708~~(75.2317	)%
Net loss		(222,~~816~~238,~~790~~780	)		(124,~~655~~013,~~745~~599	)		(21,~~161~~774,~~045~~819	)		~~1278.03.~~89,72	%
Loss per share of common stock	$	(0.3103	)	$	(0.0431	)	$	(.2728	)		~~(675~~90.0030	)%

We recorded a net loss of $222,~~816~~238,~~790~~780 for the three months ended September 30, ~~2019~~2020.

Revenue. Total revenue for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019 was $2,~~757~~745,~~158~~958 and $~~664~~2,~~400~~757,158, respectively. The ~~increase of~~decrease of $211,~~092~~200,~~758,~~ or ~~314~~0.9841%, was due to the ~~revenues~~incredible ~~generated~~performance by ~~operations~~our ofstore ~~the~~staff ~~five~~to ~~(5)~~continue ~~Green~~selling ~~Spirit~~through RXthe ~~dispensaries~~pandemic ~~in Puerto~~during ~~Rico,~~the ~~and~~third quarter. The ~~Green~~Company ~~Room~~implemented ~~dispensary,~~curbside ~~CBD~~service ~~sales from Pure~~ and ~~Natural~~other ~~and~~techniques ~~retail~~such ~~sales~~as ~~from~~new ~~the~~daily ~~Pure~~specials and ~~Natural~~social ~~One~~media ~~kiosk~~to continue producing revenues during the ~~third~~difficult ~~quarter~~time.

Cost of Goods Sold. Total cost of revenue for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019 was $1,~~431~~240,~~656~~586 and $~~409~~1,~~348~~431,656, respectively. The ~~increase~~decrease of $1191,~~022~~070,~~308,~~ or ~~249~~13.7435%, was largely due to annew ~~increase~~management intechniques ~~inventory~~and ~~purchases~~methods of ~~cannabis~~purchasing ~~products, including~~inventory ~~flowers,~~during ~~cream,~~the ~~oils~~third ~~and~~quarter. ~~edibles,~~The ~~and~~inventory ~~cannabis-related~~cost ~~accessories,~~savings ~~including~~was ~~cartridges~~crucial ~~and~~during ~~pipes,~~the ~~related~~third toquarter ~~the~~with ~~retail~~new ~~operations of~~sales techniques during the pandemic. ~~six~~Management ~~dispensaries~~sought ~~and~~out ~~CBD~~new products, ~~purchased~~new ~~during~~vendors ~~the~~and ~~third~~cost ~~quarter~~controls ~~necessary~~to ~~for~~reduce ~~the~~inventory ~~increase in revenues~~costs.

Total Operating Expenses Selling, general, administrative and operating expenses for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019 was $173,~~765~~771,~~423~~559 and $218,~~198~~962,~~056~~223, respectively. The ~~increase~~decrease of $15,~~567~~190,~~367~~664, or ~~708~~75.2317%, was primarily due to a significant ~~increase~~decrease of the stock-based compensation; and andecrease ~~increase~~ in all operating ~~expenses~~expense categories of ~~the~~fees ~~six~~paid ~~dispensaries,~~to consultants and professionals, labor, taxes, store supplies, marketing and security expenses. The Company wrote off impaired assets and deposits on closed stores of $300,631 ~~professional~~and ~~fees~~recorded a Reserve for Collection of the Advance to Parent and ~~consulting~~Affiliate ~~fees~~of $1,798,580.

Net Loss. Net loss for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019 was $222,~~816~~238,~~790~~780 and $124,~~655~~013,~~745~~590, respectively. The ~~increase~~decrease of $21,~~161~~774,~~045,~~819 or ~~1278~~89.0372%, was primarily due to ana ~~increase~~decrease ~~in revenues offset by the increase~~ of stock-based compensation of $16, 989,244, increases in ~~cost~~gross profit, ofand ~~goods~~decreases ~~sold,~~of all operating expenses related to retail operations of the six dispensaries and CBD location.

~~Nine Months Ended September 30, 2019 and September 30, 2018~~21

WeNine ~~recorded~~Months aEnded ~~net~~September ~~loss of $28~~30,~~099,596~~ ~~for~~2020 ~~the~~and ~~nine months ended~~ September 30, 2019.

~~Revenue.~~The ~~Total~~following ~~revenue~~table ~~for~~summarizes the results of our operations during the nine months ended September 30, ~~2019~~2020 and ~~2018 was $9~~2019,~~062,462~~ respectively, and ~~$1,020,026,~~provides ~~respectively.~~information ~~The~~regarding ~~increase of~~the ~~$8,042,436,~~dollar orand ~~788.45%,~~percentage ~~was~~increase ~~primarily~~or ~~due~~(decrease) tofrom ~~operations~~the ~~increasing~~current ~~from~~three-month ~~four~~period to ~~six retail dispensaries, website and retail~~the ~~sales~~prior ofthree-month ~~CBD products.~~period:

Cost of Goods Sold. Total cost of revenue for the nine months ended September 30, 2019 and 2018 was $4,910,120 and $610,526, respectively. The increase of $4,299,594 or 704.45%, was due to operations increasing from four to six retail dispensaries, website and retail sales of CBD products.

Line Item	9/30/2020 (unaudited)			9/30/2019 (unaudited)			Increase (Decrease)			Percentage Increase (Decrease)
Revenues		8,186,907			9,062,462			(875,555	)		9.66	%
Cost of Goods Sold		4,064,517			4,910,120			(845,603	)		(17,22	)%
Operating expenses		6,052,084			26,805,837			(20753,753	)		(77.428	)%
Net loss		(1,686,627	)		(29,296,396	)		27,609,769			94.24	%
Loss per share of common stock	$	(.02	)	$	(0.49	)	$	.47			95.92	%

24We recorded a net loss of $1,686,627 for the nine months ended September 30, 2020.

~~Total~~Revenue. ~~Operating~~Total ~~Costs.~~revenue ~~Selling, general, administrative and operating expenses~~ for the nine months ended September 30, ~~2019~~ 2020 and ~~2018~~2019 was $258,~~609~~186,~~037~~907 and $149,~~517~~062,~~450~~462, respectively. The ~~increase~~ decrease of $11875,~~091~~555,~~587,~~ or 769.4066%, was primarily due to ~~significant increase~~the inCOVID-19 ~~stock~~pandemic. ~~based~~The ~~compensation~~stores ~~paid~~had to ~~officers,~~implement ~~directors~~curbside ~~and~~service, ~~consultants~~touchless ~~for services rendered~~ service and ~~increase~~other insales ~~overhead expenses~~techniques ~~incurred~~ to ~~operate~~continue ~~the~~services ~~business~~during asthe ~~additional locations opened~~pandemic.

~~Net~~Cost ~~Loss~~of Goods Sold. ~~Net~~Total ~~Loss~~cost of revenue for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 was $284,~~099~~064,~~596~~517 and $134,~~647~~910,~~636~~120, respectively. The ~~increase~~ decrease of $14845,~~451,960,~~603 or ~~105~~17.8922%, was ~~primarily~~largely due to ~~stock~~new ~~based~~management ~~compensation~~techniques ~~paid~~and tomethods ~~officers,~~of ~~directors~~purchasing ~~and consultants~~inventory. ~~for~~The ~~services~~inventory ~~rendered~~cost savings was crucial during the second and ~~overhead~~third ~~expenses~~quarters ~~incurred~~with tonew ~~operate~~sales techniques during the ~~business~~pandemic. asManagement sought ~~additional~~out ~~locations~~new ~~opened~~products, new vendors and cost controls to reduce inventory costs.

Total Operating Costs. Selling, general, administrative and operating expenses for the nine months ended September 30, 2020 and 2019 was $6,052,084 and $26,805,837, respectively. The decrease of $20,753,753, or 77.42, was primarily due to significant decreases in stock based compensation paid to officers, directors and consultants for services rendered of $19,116,694; and decreases in overhead expenses, consulting fees, professional fees offset by the Reserve for Collection of Advance to Parent and Affiliate of $1,798,580 and increase to incurred to operate the business as additional locations opened.

Net (Loss. Net Loss for the nine months ended September 30, 2020 and 2019 was $1,686,627 and $29,296,396, respectively. The increase of $27,609,769, or 95.92%, was primarily due to significant decreases in stock based compensation paid to officers, directors and consultants for services rendered of $19,116,694; and decreases in overhead expenses, consulting fees, and professional fees offset by and increase incurred to operate the business as additional locations opened.

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.

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.

2523

LIQUIDITY AND CAPITAL RESOURCES

We ~~have never~~ reported net income in the first of second quarters of 2020, the first profits reported since beginning operations. We incurred net ~~losses~~(loss for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 of $281,~~099~~686,~~596~~627 and $1329,~~647~~296,~~636~~396, respectively, and have an accumulated deficit of $7080,~~421~~265,~~832~~868 as of September 30, ~~2019~~2020.

As of September 30, ~~2019~~2020, the Company had $1528,~~110,139~~570 cash on hand as compared to $1604,~~313,645~~274 as of December 31, ~~2018~~2019. For the nine months ended September 30, ~~2019~~2020, the Company reported loss from operations of $281,~~099~~686,~~596~~627 and net cash decrease of $~~203~~167,~~506~~845.

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 and joint ventures. No cash was raised during the first nine months of 2020. 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~~We ~~the~~will ~~nine~~be ~~months~~required ~~ended~~to ~~September~~raise ~~30,~~additional ~~2019,~~cash wethrough ~~financed~~public ~~our~~or ~~operations~~private ~~through~~financing, ~~the~~additional ~~remaining~~collaborative ~~proceeds~~relationships ~~from~~or ~~various private placement~~other ~~offerings~~arrangements ~~conducted~~until bywe ~~the~~are ~~Company~~able ~~during~~to ~~2018~~raise ~~and~~revenues ~~the~~to ~~first,~~a ~~second~~point ~~and~~of ~~third~~positive ~~quarters~~cash ~~of 2019~~flow. OnWe ~~March~~believe 8,our ~~2019,~~existing ~~the~~and ~~Company~~available capital ~~conducted~~resources awill ~~private~~be ~~placement,~~sufficient ~~pursuant~~ to ~~which~~satisfy ~~sold~~our ~~621,600~~funding ~~shares~~requirements ofthrough the ~~Company’s~~fourth ~~common~~quarter ~~stock~~of at2021. aHowever, ~~purchase~~we ~~price~~continue ofto evaluate ~~$1.25~~various ~~per~~options ~~share,~~to ~~resulting~~further inreduce ~~net~~our ~~proceeds~~cash requirements to ~~the~~operate ~~Company~~at ofa ~~$777,000.~~reduced ~~On June 4~~rate, ~~2019,~~as ~~the~~well ~~Company~~as ~~conducted~~options ato ~~private~~raise ~~placement~~additional funds, ~~pursuant~~including toobtaining ~~which~~loans itfor ~~sold~~real ~~400,000~~estate ~~shares~~purchases ofand ~~the~~selling ~~Company’s~~ common stock. atThere ~~purchase~~is ~~price~~no ofguarantee ~~$0.50~~that ~~per~~we ~~share,~~will ~~resulting~~be ~~in net~~able ~~proceeds~~ to ~~the~~generate enough ~~Company~~revenue ofand/or ~~$200,000.~~raise Oncapital ~~July~~to 5,support ~~2019~~our operations, ~~the~~or ~~Company~~if ~~conducted~~we aare ~~private~~able ~~placement, pursuant~~ to ~~which~~raise ~~it sold 412~~capital,~~000~~ ~~shares~~that ofit ~~the~~will ~~Company’s~~be ~~common~~available ~~stock~~to us aton ~~purchase~~acceptable ~~price~~terms, ofon ~~$0.50~~an ~~per~~acceptable ~~share~~schedule, ~~resulting~~or inat ~~net proceeds to the Company of $206,000~~all.

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 nine months ended September 30, ~~2019~~2020 was $1167,~~972,458~~845 which was due to the ~~net~~increase ~~loss~~in ~~from~~accounts ~~operations,~~receivable ~~net of common stock issued for services~~ and ~~unrealized~~prepaid ~~loss on investments, abandonment of option to purchase a building and write off of leasehold improvements and rent deposits~~inventory; ~~and the decrease of accounts receivable and inventory. The loss was~~ offset by the increase in ~~prepaid~~ inventory,. ~~prepaid~~Cash ~~expenses,~~was ~~accounts~~increased ~~payable,~~by ~~accrued expenses~~accounts payable and ~~current~~offset ~~portion~~by ofdecrease ~~lease~~in ~~liability~~accrued expenses.

Investing Cash Flows. Net cash used in investing activities for the nine months ended September 30, ~~2019~~2020 was $~~918~~631,~~411~~677, which was due to ~~increase~~net ofadvance ~~deposits,~~to ~~purchase~~the ofparent ~~leasehold~~and ~~improvements~~affiliate and ~~equipment;~~small ~~legal~~increase ~~fees~~to onconstruction ~~patent application costs; investments~~ in ~~closely held businesses and construction on facilities still not put into service~~progress.

Financing Cash Flows. ~~Net~~There ~~cash~~were ~~provided~~no by financing activities ~~for~~during the nine months ended September 30,. ~~2019 was $2,687,363, which was due to our March, June and July 2019 capital raises, sale of equity investments in California subsidiaries and contributions by non-controlling interests~~2020.

Material Capital Expenditure Commitments

The Company has no upcoming capital commitments:.

Remaining construction of three remaining dispensaries in Puerto Rico	$	600,000
Purchase of equipment, furniture and fixtures and finish out of Palm Springs dispensary	$	600,000
Purchase of equipment in Point Arena	$	80,000

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 to be completed by March 31, 2020. However, no assurance can be given. 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 second quarter 2020. 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 fourth quarter 2019. However, no assurance can be given. The Company has capital raises open for the Palm Springs dispensary and Point Arena manufacturing operation. As of September 30, 2019, approximately $1,070,341 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.

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.

2725

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~There~~On ~~are~~July no14, ~~legal~~2020 ~~proceedings~~notice ~~which~~was ~~are~~served ~~pending~~to orPure ~~have~~and ~~been~~Natural ~~threatened~~One-TN, ~~against~~LLC, usPure orand ~~any~~Natural ofLakeway, ~~our~~LLC ~~officers,~~and ~~directors~~Thomas orGingerich ~~control~~as ~~persons~~defendants in a lawsuit filed by Southwest Legend Investments LLC, a member of ~~which~~the ~~management~~two companies. As of the date of this report, the defendants have supplied requested information to the plaintiff’s attorney. Plaintiff is ~~aware~~seeking damages in excess of $200,000 but less than $1,000,000.

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 September 30, ~~2019~~2020, ~~the~~there Company conducted a private placement, pursuant to which it sold 412,000 shares of Common Stock, at a purchase price of $0.50 per share, to an investor, resulting in net proceeds to the Company of $206,000. The shares were ~~issued~~no ~~pursuant~~unregistered tosales ~~Regulation D under the Securities Act~~ of ~~1933,~~equity ~~as amended (the “Act”)~~securities.

2826

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.

2927

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: November 19, 2019	By:	/s/ Leslie Ball
Date: February 16, 2021	By:	/s/ Troy Nihart
		Leslie Ball
		Troy Nihart
		Chief Executive Officer
		Interim Chief Executive Officer and President

3028

Filing Compare · GSRX INDUSTRIES INC.