Target Group Inc. [CBDY] Filings

10-Q 1 tmb-20230930x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-55066

TARGET GROUP INC.

(Exact name of registrant as specified in its charter)


Delaware	46-3621499
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

20 Hempstead Drive Hamilton, Ontario, Canada	L8W 2E7
(Address of principal executive officers)	(Zip Code)

+1 905-541-3833

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered under Section 12(b) of the Act:

None

Securities registered under Section 12(g) of the Act:

Common Stock, Par Value $0.0001

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 last 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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,” “small 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 ☒
	Emerging growth company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class		Trading symbol		Name of each exchange on which registered
N/A		N/A		N/A

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $4,627,695 as of June 30, 2023.

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 8, 2023, the registrant had 617,025,999 shares of Common Stock issued and outstanding.

Table of Contents

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Interim Financial Statements (Unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 4.	Controls and Procedures	12

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	13

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13

Item 3.	Defaults Upon Senior Securities	13

Item 4.	Mine Safety Disclosures	13

Item 5.	Other Information	13

Item 6.	Exhibits	14

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PART I – FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS.

TARGET GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

INDEX

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022	F-1

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022 (Unaudited)	F-2

Condensed Consolidated Statements of Stockholders’ Deficit for the three and nine months ended September 30, 2023 and 2022 (Unaudited)	F-3

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited)	F-7

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)	F-8 - F-26

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TARGET GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


		September 30,		December 31,
		2023		2022
		$		$
		(unaudited)
ASSETS
Current assets
Cash			445,416		223,843
Restricted cash			8,506		8,490
Accounts receivable, no allowance			128,244		2,068
Inventory	Note 3		1,892,739		—
Prepaid asset			41,787		41,714
Sales tax recoverable, net of allowance	Note 4		65,098		—
Receivable from joint venture	Note 6		—		630,180
Other receivable	Note 8		3,698		3,692
Total current assets			2,585,488		909,987
Long term assets
Fixed assets	Note 5		5,428,478		5,554,225
Investment in joint venture	Note 6		—		775,577
Goodwill	Note 7		263,580		263,117
Operating lease right-of-use assets	Note 9		49,578		62,728
Total long term assets			5,741,636		6,655,647
Total assets			8,327,124		7,565,634

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities
Bank overdraft			506		506
Accounts payable and accrued liabilities			2,671,621		2,296,935
Settlement payable	Note 1		—		—
Sales tax payable	Note 4		—		35,254
Payable to related parties, net	Note 8		5,595,160		4,468,535
Operating lease liability - Current portion	Note 9		119,151		110,586
Convertible promissory notes, net	Note 10		480		480
Derivative liability	Note 10		24,159		15,125
Total current liabilities			8,411,077		6,927,421

Long term liabilities
Payable to related parties, net - Non-current portion	Note 8		5,539,361		5,877,930
Operating lease liability - Non-current portion	Note 9		1,230,306		1,319,619
Warrant liability	Note 11		1,770		489
Total long term liabilities			6,771,437		7,198,038
Total liabilities			15,182,514		14,125,459

Stockholders’ deficiency
Preferred stock	Note 11		100		100
Common stock	Note 11		61,703		61,703
Shares to be issued	Note 11		175,392		175,182
Additional paid-in capital			24,985,697		24,985,697
Accumulated deficit			(30,922,383)		(30,783,678)
Accumulated comprehensive loss			(1,155,899)		(998,829)
Total stockholders’ deficiency			(6,855,390)		(6,559,825)
Total liabilities and stockholders’ deficiency			8,327,124		7,565,634
Contingencies and commitments	Note 13		—		—

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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TARGET GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)


		For the	For the	For the	For the
		three months ended	three months ended	nine months ended	nine months ended
		September 30, 2023	September 30, 2022	September 30, 2023	September 30, 2022
		$	$	$	$

REVENUE		1,046,227	—	1,805,211	—
COST OF GOOD SOLD		(454,241)	—	(823,502)	—
Gross profit		591,986	—	981,709	—
OPERATING EXPENSES
Advisory and consultancy fee		31,779	246	47,885	18,939
Management services fee		78,352	19,399	233,867	102,915
Salaries and wages		—	—	(53,083)	9,775
Legal and professional fees		27,799	41,253	231,726	213,844
Depreciation expense		237,789	220,390	680,043	673,349
Operating lease expense	Note 9	119,729	(81,976)	137,039	(115,881)
Office and general		153,041	79,195	212,172	10,249
Total operating expenses		648,489	278,507	1,489,649	913,190

OTHER EXPENSES (INCOME)
Change in fair value of derivative and warrant liability		8,988	(2,040)	10,314	(18,852)
Gain on settlement		—	—	(1,428,185)	—
Interest and bank charges		337,675	269,106	1,060,373	830,167
Exchange income		(50,995)	(130,870)	(201)	(172,863)
Other income	Note 6	—	(49,346)	(16,782)	(747,122)
(Recovery) Allowance of sales tax recoverable		(7,868)	1,756	(7,868)	(503)
Share of income from joint venture	Note 6	—	(93,819)	(24,152)	(244,867)
Debt issuance cost	Note 8	12,509	12,855	37,266	39,098
Total other expense (income)		300,309	7,642	(369,235)	(314,942)

Net loss before income taxes		(356,812)	(286,149)	(138,705)	(598,248)
Income taxes		—	—	—	—
Net loss		(356,812)	(286,149)	(138,705)	(598,248)

Foreign currency translation adjustment		67,911	(15,319)	(157,070)	(32,664)
Comprehensive loss		(288,901)	(301,468)	(295,775)	(630,912)

Loss per share - basic		(0.0006)	(0.0005)	(0.0002)	(0.0010)
Weighted average shares - basic		617,025,999	617,025,999	617,025,999	617,025,999

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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TARGET GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023


							Stock	Additional		Accumulated
	Preferred stock		Common stock		Shares to be issued		subscription	paid-in	Accumulated	comprehensive
	Shares	Amount	Shares	Amount	Shares	Amount	receivable	capital	deficit	loss	Total
	#	$	#	$	#	$	$	$	$	$	$
As at June 30, 2023	1,000,000	100	617,025,999	61,703	1,610,272	175,293	—	24,985,697	(30,565,571)	(1,223,810)	(6,566,588)

Shares issued as consideration for consideration of the intellectual property rights [Note 11]	—	—	—	—	15,624	99	—	—	—	—	99

Net loss	—	—	—	—	—	—	—	—	(356,812)	—	(356,812)

Foreign currency translation	—	—	—	—	—	—	—	—	—	67,911	67,911

As at September 30, 2023	1,000,000	100	617,025,999	61,703	1,625,896	175,392	—	24,985,697	(30,922,383)	(1,155,899)	(6,855,390)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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TARGET GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022


							Stock	Additional		Accumulated
	Preferred stock		Common stock		Shares to be issued		subscription	paid-in	Accumulated	comprehensive
	Shares	Amount	Shares	Amount	Shares	Amount	receivable	capital	deficit	loss	Total
	#	$	#	$	#	$		$	$	$	$
As at June 30, 2022	1,000,000	100	617,025,999	61,703	1,547,776	174,989	—	24,985,697	(26,575,713)	(1,128,065)	(2,481,289)

Cancellation of shares [Note 11]	—	—	—	—	—	—	—	—	—	—	—

Shares issued as consideration for consideration of the intellectual property rights [Note 11]	—	—	—	—	15,624	120	—	—	—	—	120

Net income	—	—	—	—	—	—	—	—	(286,149)	—	(286,149)

Foreign currency translation	—	—	—	—	—	—	—	—	—	(15,319)	(15,319)

As at September 30, 2022	1,000,000	100	617,025,999	61,703	1,563,400	175,109	—	24,985,697	(26,861,862)	(1,143,384)	(2,782,637)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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TARGET GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023


							Stock	Additional		Accumulated
	Preferred stock		Common stock		Shares to be issued		subscription	paid-in	Accumulated	comprehensive
	Shares	Amount	Shares	Amount	Shares	Amount	receivable	capital	deficit	loss	Total
		$		$		$		$	$		$
As at December 31, 2022	1,000,000	100	617,025,999	61,703	1,579,024	175,182	—	24,985,697	(30,783,678)	(998,829)	(6,559,825)

Shares issued as consideration for consideration of the intellectual property rights [Note 11]	—	—	—	—	46,872	210	—	—	—	—	210

Net loss	—	—	—	—	—	—	—	—	(138,705)	—	(138,705)

Foreign currency translation	—	—	—	—	—	—	—	—	—	(157,070)	(157,070)

As at September 30, 2023	1,000,000	100	617,025,999	61,703	1,625,896	175,392	—	24,985,697	(30,922,383)	(1,155,899)	(6,855,390)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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TARGET GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022


							Stock	Additional		Accumulated
	Preferred stock		Common stock		Shares to be issued		subscription	paid-in	Accumulated	comprehensive
	Shares	Amount	Shares	Amount	Shares	Amount	receivable	capital	deficit	loss	Total
		$		$		$		$	$		$
As at December 31, 2021	1,000,000	100	617,025,999	61,703	1,516,528	174,722	—	24,985,697	(26,263,614)	(1,110,720)	(2,152,112)

Shares issued as consideration for consideration of the intellectual property rights	—	—	—	—	46,872	387	—	—	—	—	387

Net income	—	—	—	—	—	—	—	—	(598,248)	—	(598,248)

Foreign currency translation	—	—	—	—	—	—	—	—	—	(32,664)	(32,664)

As at September 30, 2022	1,000,000	100	617,025,999	61,703	1,563,400	175,109	—	24,985,697	(26,861,862)	(1,143,384)	(2,782,637)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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TARGET GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the	For the
	nine months ended	nine months ended
	September 30, 2023	September 30, 2022
	$	$
OPERATING ACTIVITIES

Net loss for the period	(138,705)	(598,248)

Adjustment for non-cash items
Change in fair value of derivative and warrant liability	10,314	(18,852)
Gain on settlement	(1,428,185)	—
Shares and warrants issued/to be issued for services	821	408
Allowance (recovery) of sales tax recoverable	(7,868)	(503)
Depreciation expense	680,043	673,349
Operating lease expense	178,134	198,254
Investment (income) loss from joint venture	(24,152)	(244,867)
Debt issuance cost	37,266	39,098

Changes in operating assets and liabilities:
Change in accounts receivable	(126,802)	—
Change in inventory	(116,135)	—
Change in sales tax recoverable	(93,043)	33,629
Change in accounts payable and accrued liabilities	390,256	(901,898)
Change in operating lease liability, net	(241,224)	(250,575)
Net cash used in operating activities	(879,280)	(1,070,205)

INVESTING ACTIVITIES
Amounts invested on fixed assets	(5,363)	(318)
Net proceeds from joint venture	440,361	1,240,429
Net cash provided by investing activities	434,998	1,240,111

FINANCING ACTIVITIES
Proceeds from loans from related parties	668,940	77,980
Settlement of related party loan	—	(138,393)
Payment for settlement payable	—	(10,000)
Net cash provided (used) by financing activities	668,940	(70,413)

Net change in cash and restricted cash during the period	224,658	99,493
Effect of foreign currency translation	(3,069)	(15,549)
Cash and restricted cash, beginning of period	232,333	122,151
Cash and restricted cash, end of period	453,922	206,095

NON-CASH INVESTING AND FINANCING ACTIVITIES
Shares issued on conversion of debt	—	—
Shares issued as consideration for services	120	120

SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for interest	874,518	2,102,799
Cash paid for taxes	—	—

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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TARGET GROUP INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Organization, Nature of Business, Going Concern and Management Plans

Organization and Nature of Business

Target Group Inc. (“Target Group” or the “Company”) was incorporated on July 2, 2013, under the laws of the state of Delaware, to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. On July 3, 2018, the Company filed an amendment in its Certificate of Incorporation to change its name to Target Group Inc., and he Company secured the OTC Bulletin Board symbol CBDY from the Financial Industry Regulatory Authority (FINRA).

Target Group is a diversified, vertically integrated, progressive company with a focus nationally and internationally . The Company wholly owns and operates Canary Rx Inc, a Canadian licensed producer (“Canary”), regulated under The Cannabis Act (Bill C-45). Canary, operates a 44,000 square foot facility located in Norfolk County, Ontario. The Company has an ongoing strategic partnership with Dutch breeder, Serious Seeds B.V. (“Serious Seeds”), to cultivate exclusive, world-class proprietary genetics. The Company has structured multiple international production and distribution platforms and continues to expand its global footprint, focused on building an iconic brand portfolio with cutting-edge intellectual property in both the medical and recreational cannabis markets. Target Group is committed to building industry-leading companies that transform the perception of cannabis and responsibly elevate the overall patient and consumer experience.

The Company’s core business is producing, manufacturing, distributing, and selling of cannabis products. As of the current year to date period end, Canary has produced and sold cannabis products of $1,805,211 (Period ended September 30, 2022: $nil).

Joint Venture Agreement Termination; Consolidation of JVCo with Canary

Effective May 14, 2020, Canary entered into a Joint Venture Agreement (“Joint Venture”) with 9258159 Canada Inc., a corporation organized under the laws of the Province of Ontario, Canada (referred to herein as “Thrive Cannabis”) and 2755757 Ontario Inc., a corporation organized under the laws of the Province of Ontario, Canada (referred to herein as “JVCo”). Canary and Thrive each held 50% of the voting equity interest in JVCo. The term of the Joint Venture was five (5) years from its effective date of May 14, 2020.

On April 27, 2023, Canary and Thrive Cannabis entered into a Release and Settlement Agreement (“Settlement Agreement”) in which Thrive Cannabis transferred its shares in the capital of JVCo and rights of assets held by JVCo, paid Canary $1,051,000 to release Thrive Cannabis from any mortgages, charges, pledges, security interests, liens, encumbrances, writs of execution, actions, claims, demands and equities of any nature related to JVCo from their share of ownership of JVCo.

Following the completion of the Settlement Agreement, Canary’s equity interest in JVCo increased from 50% to 100%. Effective April 28, 2023, the Company started consolidating results of operations of the JVCo and eliminated any intercompany transactions and balances between the Company (Target and Canary) and JVCo.

During the term of the Joint Venture, the Company accounted for the transactoins using the equity method under ASC 323 Investments — Equity Method and Joint Ventures. As a consequence of the Settlement Agreement, as the JVCo becoming a wholly owned subsidiary of the company as of April 27, 2023, the Company now uses the acquisition method of accounting (using a step acquisition method) under ASC 805 Business Combination.

CL Investors Debt Purchase and Assignment Agreement

On June 15, 2020, the Company, its first–tier subsidiaries Visava Inc. (“Visava”) CannaKorp Inc. (“CannaKorp”), and the Company’s second-tier subsidiary, Canary entered into a Debt Purchase and Assignment Agreement (“Debt Agreement”) with CL Investors Inc. , a corporation organized under the laws of the Province of Ontario, Canada (“CLI”). While June 15, 2023 was the preliminary date of the Debt Agreement, it was not finalized until the later date as indicated below. The CEO and director of the Company is a shareholder and the Secretary of CLI, and the brother of the CEO is the President and sole director of CLI therefore the below loan from CLI is classified under related party transactions.

Pursuant to the Debt Agreement, CLI purchased from the Company for the sum of $2,144,840 (CAD $2,900,000) a debt obligation owing from Canary to the Company in the principal balance of $7,839,760 (CAD $10,600,000 (“Canary Debt”)). Upon receipt of the

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TARGET GROUP INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

consideration, the Company loaned the full sum to Canary under terms of an unsecured, non-interest-bearing promissory note (“Note”), subject to a covenant by the Company not to take any collection action so long as the Canary Debt remains unpaid to CLI. As of September 30, 2023, $3,698 (CAD $5,000) is still outstanding from CLI which is presented as other receivable on the unaudited condensed consolidated interim balance sheet.

As a condition of the closing of the Debt Agreement, the terms of the Canary Debt were amended to provide for interest at 5% per annum with a maturity date of 60 months from the date of the Debt Agreement (“Term”). The Canary Debt was to be repaid according to the following schedule:

In the first year of the Term, Canary will pay CLI the greater of $835,748 (CAD 1,130,000) and fifty percent (50%) of the Net Revenue (hereinafter defined), provided that where the latter amount exceeds the former amount, Canary will, by the end of such first year, pay CLI no less than the former amount and Canary will, within thirty (30) days following the end of such first year, pay CLI the balance of such amount owing for such first year;

In the second year of the Term, Canary will pay CLI the greater of $1,553,160 (CAD 2,100,000) and fifty percent (50%) of the Net Revenue, by way of twelve (12) consecutive monthly installments payable on the 14th day of each month commencing on August 14, 2021, provided that where the latter amount exceeds the former amount, Canary will, within thirty (30) days following the end of such second year, pay CLI the balance of such amount owing for such second year;

In the third year of the Term, Canary will pay CLI the greater of $2,381,512 (CAD 3,220,000) and fifty percent (50%) of the Net Revenue, by way of twelve (12) consecutive monthly installments payable on the 14th day of each month commencing on August 14, 2022, provided that where the latter amount exceeds the former amount, Canary will, by the end of such third year, pay CLI no less than the former amount and Canary will, within thirty (30) days following the end of such third year, pay CLI the balance of such payments owing for such third year;

In the fourth year of the Term, Canary will pay CLI the greater of $2,277,968 (CAD 3,080,000) and fifty percent (50%) of the Net Revenue, by way of twelve (12) consecutive monthly installments payable on the 14th day of each month commencing on August 14, 2023, provided that where the latter amount exceeds the former amount, Canary will, within thirty (30) days following the end of such fourth year, pay CLI the balance of such amount owing for such fourth year; and

In the fifth year of the Term, Canary will pay CLI the balance owing under this Note, by way of twelve (12) consecutive monthly installments payable on the 14th day of each month commencing on August 14, 2024, for an amount calculated by dividing twelve (12) into the sum of all amounts owing under this Note at the beginning of the fifth year of the Term on account of Principal and Interest, provided that where further amounts are owing under this Note at the end of such fifth year, Canary will pay CLI all such further amounts within five (5) days following the end of such fifth year.

For the purpose of the Note, “Net Revenue” means any and all revenue generated from Canary’s Licensed Facility (hereinafter defined) to which it is entitled to net of applicable taxes and third-party expenses.

The repayment of the Canary Debt, as amended, was guaranteed by the Company’s wholly-owned subsidiaries Vivasa and CannaKorp. and secured by (i) a general security interest in the assets of the Company, Canary, Visava and CannaKorp, respectively; and (ii) a pledge by the Company of all of the issued and outstanding common stock of Canary, Visava and CannaKorp, held by the Company. In addition to the foregoing guarantees, security interest and stock pledge, CLI was granted an option, in lieu of repayment of the amended Canary Debt, to demand, in its sole and absolute discretion the transfer, assignment and conveyance of 75% of the issued and outstanding capital stock of Visava and Canary. Furthermore, the President and sole director of CLI was granted an option to acquire the remaining 25% of the issued and outstanding capital stock of Visava and Canary.

Effective August 14, 2020, the Debt Agreement was amended (“Amendment”) to provide that CLI would purchase from Rubin Schindermann, a director of the Company, 500,000 shares of the Company’s Series A Preferred Stock in consideration of the payment by CLI to Rubin Schindermann of $73,960 (CAD $100,000) and the issuance to Schindermann of 10,000,000 shares of the Company’s common stock. In consideration of the foregoing, Mr. Schindermann resigned as a director of the Company and from any and all administrative and executive positions with the Company’s subsidiaries Visava, Canary and CannaKorp, respectively. In addition, the Company issued Common Stock Purchase Warrant for 10,000,000 shares of Target Group’s common stock to CLI as consideration for the Debt Agreement (“CLI Warrants”). Refer to Note 11 for additional details on the CLI Warrants. The combined impact of both

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TARGET GROUP INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

transactions resulted in debt issuance cost of $251,518. This debt issuance cost will be amortized over the term of the debt on a straight-line basis.

The transactions contemplated by the Debt Agreement and the Amendment closed on August 14, 2020.

cGreen, Inc. Exclusive License Agreement

Effective August 8, 2019, the Company entered into an Exclusive License Agreement (“License Agreement”) with cGreen, Inc., a Delaware corporation (“cGreen”). The License Agreement granted to the Company an exclusive license to manufacture and distribute the patent-pending THC antidote True Focus(TM) in the United States, Europe and the Caribbean. The term of the license was ten (10) years and four (4) months from the effective date of August 8, 2019. In consideration of the license, the Company would issue 10,000,000 shares of its common stock as follows: (i) 3,500,000 within ten (10) days of the effective date; (ii) 3,500,000 shares on January 10, 2020; and (iii) 3,000,000 shares not later than June 10, 2020. In addition, the Company would pay cGreen royalties of 7% of the net sales of the licensed products and 7% of all sublicensing revenues collected by the Company. The Company would pay cGreen an advance royalty of $300,000 within ten (10) days of the effective date; $300,000 on January 10, 2020; and $400,000 on or before June 10, 2020, and $500,000 on or before November 10, 2020. All advance royalty payments would be credited against the royalties owed by the Company through December 31, 2020. During the quarter ended December 31, 2019, the intangible asset was written off based on management’s review and evaluation of its recoverability.

During the quarter ended June 30, 2020, the Company was in arbitration with cGreen for the breaches of the terms of the License Agreement, however, through an early mediation, the parties reached a settlement of their claims and counterclaims on July 27, 2020 (“Effective Date”). As per the settlement agreement, the License Agreement was terminated, and the Company did not have to issue the 10 million shares nor pay the outstanding royalty payable in the amount of $1,191,860. As consideration, the Company paid $130,000 within 30 days of the Effective Date and started paying $100,000 in monthly installments of $10,000 commencing in April 2021 to cGreen resulting in a gain on settlement in the amount of $1,704,860.

As at September 30, 2023, there was no outstanding balance, the balance was paid in full and the claim was closed during the quarter ended March 31, 2022 (December 31, 2021: $10,000).

Going Concern

The Company has earned minimal revenue since inception to date and has sustained operating losses during the nine months ended September 30, 2023. The Company had a working capital deficit of $5,825,589 and an accumulated deficit of $30,922,383 as of September 30, 2023. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its members or other sources, as may be required.

The unaudited accompanying condensed consolidated interim financial statements have been prepared assuming that the Company will continue as a going concern up to at least 12 months from the balance sheet date; however, the above condition raises substantial doubt about the Company’s ability to do so. The unaudited condensed consolidated interim financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations, sale of its equity or issuance of debt. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations.

F-10

Table of Contents

TARGET GROUP INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Target Group Inc. [CBDY] Filings
10-Q	[2023-11-08]
10-Q	[2023-08-09]
10-Q	[2023-05-08]
10-K	[2023-03-17]
10-Q	[2022-11-07]
10-Q	[2022-08-08]
10-Q	[2022-05-06]
10-K	[2022-03-18]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-30]
10-Q	[2020-11-10]
10-Q	[2020-08-10]
10-Q	[2020-06-05]
10-K	[2020-04-14]
10-Q	[2019-11-19]
10-Q	[2019-08-19]
10-Q	[2019-05-20]
10-K	[2019-04-01]
10-Q	[2018-11-14]
10-Q	[2018-08-14]
10-Q	[2018-05-15]
10-K	[2018-03-28]
10-Q	[2017-11-03]
10-Q	[2017-08-14]
S-1	[2017-06-13]
10-Q	[2017-05-15]
10-K	[2017-03-31]
10-Q	[2016-11-14]
10-Q	[2016-08-11]
10-Q	[2016-05-12]
10-K	[2016-03-22]
10-Q	[2015-11-16]
10-Q	[2015-08-14]
10-Q	[2015-05-13]
10-K	[2015-03-31]
S-1	[2014-12-11]
10-Q	[2014-11-17]
10-Q	[2014-08-14]
10-Q	[2014-05-15]
10-K	[2014-03-26]