Target Group Inc 10-Q for FY2021 Q2

Target Group Inc. (CBDY)

10-Q 2021-08-06 For: 2021-06-30

Added on April 06, 2026

About this 10-Q

Target Group Inc filed this 10-Q on August 6, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $0; compared with $0 a year earlier
Net income: $827.02K; compared with a net loss of $601.37K a year earlier

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

For the quarterly period ended June 30, 2021

or

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


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)


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ⌧	Smaller reporting company ⌧
	Emerging growth company ⌧


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


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	15

Item 4.	Controls and Procedures	15

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	16

Item 4.	Mine Safety Disclosures	16

Item 5.	Other Information	16

Item 6.	Exhibits	17

Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020	F-1

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and 2020 (Unaudited)	F-2

Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended June 30, 2021 and 2020 (Unaudited)	F-4

Condensed Consolidated Statements of Stockholders’ Deficit for the six months ended June 30, 2021 and 2020 (Unaudited)	F-4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (Unaudited)	F-5

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)	F-6 - F-29


		June 30,		December 31,
		2021		2020
		$		$
		(unaudited)
ASSETS
Current assets
Cash			87,363		172,597
Restricted cash			9,278		9,032
Accounts receivable, no allowance			2,068		2,068
Inventory	Note 3		99,000		99,000
Prepaid asset			45,584		46,775
Sales tax recoverable, net of allowance	Note 4		84,202		75,462
Receivable from joint venture	Note 6		287,954		271,184
Other receivable	Note 8		4,034		78,540
Total current assets			619,483		754,658
Long term assets
Fixed assets	Note 5		7,515,625		7,793,997
Investment in joint venture	Note 6		1,585,112		721,156
Goodwill	Note 7		3,766,263		3,666,364
Operating lease right-of-use assets	Note 9		95,062		100,548
Total long term assets			12,962,062		12,282,065
Total assets			13,581,545		13,036,723

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft			1,687		1,562
Accounts payable and accrued liabilities			2,002,359		1,809,120
Deferred revenue	Note 1		—		42,719
Settlement payable - Current portion	Note 1		60,000		90,000
Payable to related parties, net	Note 8		2,184,444		2,831,635
Operating lease liability - Current portion	Note 9		94,215		83,196
Convertible promissory notes, net	Note 10		480		3,128
Derivative liability	Note 10		11,133		12,068
Total current liabilities			4,354,318		4,873,428

Long term liabilities
Settlement payable - Non-current portion	Note 1		—		10,000
Payable to related parties, net - Non-current portion	Note 8		8,261,279		7,103,325
Operating lease liability - Non-current portion	Note 9		1,616,777		1,622,366
Warrant liability	Note 11		3,586,353		2,948,024
Total long term liabilities			13,464,409		11,683,715
Total liabilities			17,818,727		16,557,143

Contingencies and commitments	Note 13		—		—

Stockholders' deficiency
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; 1,000,000 shares issued and outstanding as at June 30, 2021 and December 31, 2020	Note 11		100		100
Common stock, $0.0001 par value, 850,000,000 shares authorized, 617,668,857 common shares outstanding as at June 30, 2021 573,277,094 common shares outstanding as at December 31, 2020	Note 11		61,767		57,328
Stock subscription receivable	Note 11		(23,697)		—
Shares to be issued	Note 11		192,948		192,121
Additional paid-in capital			24,990,637		23,940,696
Accumulated deficit			(28,399,788)		(26,536,495)
Accumulated comprehensive loss			(1,059,149)		(1,174,969)
Total stockholders' deficiency			(4,237,182)		(3,521,219)
Total liabilities and stockholders' deficiency			13,581,545		13,035,924


		For the	For the	For the	For the
		three months ended	three months ended	six months ended	six months ended
		June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
		$	$	$	$

REVENUE		—	—	—	30,000
COST OF GOOD SOLD		—	—	—	(25,000)
Gross profit		—	—	—	5,000

OPERATING EXPENSES

Advisory and consultancy fee		6,709	18,380	8,615	62,649
Management services fee		75,854	63,849	153,797	147,088
Salaries and wages		(11,429)	4,574	(6,760)	143,354
Legal and professional fees		69,373	93,555	115,797	217,555
Advertising and promotion		—	—	—	299
Amortization and depreciation expense		248,348	20,806	490,143	42,795
Operating lease expense	Note 9	(16,620)	8,549	(29,665)	122,644
Office and general		547	24,670	(17,727)	83,528
Total operating expenses		372,782	234,383	714,200	819,912

OTHER (INCOME) EXPENSES

Change in fair value of derivative and warrant liability		(1,453,938)	2,464,450	637,396	(990,875)
Gain on settlement		(11,141)	(2,398,458)	(26,360)	(2,398,458)
Interest and bank charges		231,689	80,538	452,686	116,787
Exchange loss		64,545	84,120	91,925	102,819
Accretion expense		—	3,254	—	15,454
Other income		(4,760)	(178)	(9,327)	(178)
Allowance for sales tax recoverable		(2,916)	3,827	1,498	6,451
Share of (income) loss from joint venture	Note 6	(36,787)	129,432	(25,487)	129,432
Debt issuance cost	Note 8	13,511	—	26,762	—

Total other (income) expenses		(1,199,797)	366,985	1,149,093	(3,018,568)
Net income (loss) before income taxes		827,015	(601,368)	(1,863,293)	2,203,656
Income taxes		—	—	—	—
Net income (loss)		827,015	(601,368)	(1,863,293)	2,203,656

Foreign currency translation adjustment		79,680	469,583	115,820	(569,937)
Comprehensive income (loss)		906,695	(131,785)	(1,747,473)	1,633,719

Earnings (loss) per share - basic and diluted		0.001	(0.001)	(0.003)	0.004
Weighted average shares - basic and diluted		573,452,193	560,424,290	573,366,589	563,201,487


							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 March 31, 2021	1,000,000	100	573,452,193	57,345	40,010,125	1,097,458	—	23,943,555	(29,226,803)	(1,138,829)	(5,267,174)

Shares issued as consideration for consideration of the intellectual property rights [Note 11]	—	—	—	—	15,624	323	—	—	—	—	323

Shares issued as consideration for private placement [Note 10 and 11]	—	—	44,216,664	4,422	(39,183,327)	(928,530)	—	1,047,082	—	—	122,974

Cancellation of shares [Note 10 and 11]	—	—	—	—	1,000,001	23,697	(23,697)	—	—	—	—

Net income	—	—	—	—	—	—	—	—	827,015	—	827,015

Foreign currency translation	—	—	—	—	—	—	—	—	—	79,680	79,680

As at June 30, 2021	1,000,000	100	617,668,857	61,767	1,842,423	192,948	(23,697)	24,990,637	(28,399,788)	(1,059,149)	(4,237,182)


Furniture & office equipment	Straight-line	7 years
Machinery & equipment	Straight-line	3-5 years
Software	Straight-line	3 years
Leasehold improvements	Straight-line	Lease period


	Furniture &	Machinery &		Leasehold
	fixture	Equipment	Software	improvements	Total
	$	$	$	$	$
Cost	778,255	773,831	43,707	7,340,371	8,936,164
Accumulated depreciation	(88,197)	(686,663)	(42,023)	(603,656)	(1,420,539)
	690,058	87,168	1,684	6,736,715	7,515,625


Six months ended June 30	2021		2020
	CAD	USD	CAD	USD
Sales	892,601	716,000	—	—
Cost of goods sold	417,338	334,767	—	—
Gross profit	475,264	381,233	—	—
Operation expenses	411,717	330,259	353,106	259,109
Net income (loss)	63,547	50,974	(353,106)	(259,109)

Eligible recoverable expenses	1,499,038	1,209,424	331,401	243,182
Recoverable amount	1,499,038	1,209,424	317,863	233,248
Income (loss) on equity	31,773	25,487	(176,553)	(129,432)


As of June 30,	2021		2020
	CAD	USD	CAD	USD
Assets	3,201,401	2,582,891	—	—
Liabilities	3,654,389	2,948,361	353,106	259,109
Equity	(452,988)	(365,470)	(353,106)	(259,109)


		Allocation of
		Purchase Price
		$
Cash		18,961
Accounts Receivable		2,068
Inventory		326,595
Prepaid and other receivables		89,585
Property and equipment, net		88,129
Total assets		525,338

Accounts payable		(1,365,790)
Accrued expenses and other current liabilities		(286,435)
Deferred revenue		(128,158)
Payable to related parties		(753,738)
Total liabilities		(2,534,121)
Net liabilities		(2,008,783)
Goodwill		6,071,627
Total net assets acquired		4,062,844


		$
Number of Common Stock		30,407,712
Market price on the date of issuance		0.108
Fair value of Common Stock		3,284,033


		$
Number of warrants		7,211,213
Fair value price per warrant		0.108
Fair value of warrant		778,811

Fair value of Common Stock		3,284,033
Fair value of warrant		778,811
Purchase consideration		4,062,844


		$
Number of Common Stock		25,500,000
Market price on the date of issuance		0.067
Fair value of Common Stock		1,695,750


		$
Number of warrants		25,000,000
Fair value price per warrant		0.065
Fair value of warrant		1,623,092

Fair value of Common Stock		1,695,750
Fair value of warrant		1,623,092
Purchase consideration		3,318,842


2021	$	1,054,814
2022		1,862,616
2023		2,309,618
2024		2,148,631
2025		1,176,401
Total		8,552,080
Current portion		(1,845,411)
Non-current portion	$	6,706,669


	Tranche 1		Tranche 2		Total
	CAD	USD	CAD	USD	CAD	USD
Maximum loan	1,043,593	841,971	1,356,407	1,094,349	2,400,000	1,936,320
Outstanding loan	1,043,593	841,971	1,092,787	881,661	2,136,380	1,723,632
Interest rate	16.00%		43.26%


2021	$	176,855
2022		357,312
2023		357,007
2024		352,615
Thereafter		1,941,447
Total lease payments		3,185,236
Less imputed interest		(1,474,244)
Present value of lease liabilities		1,710,992
Current portion		(94,215)
Non-current portion	$	1,616,777


	Derivative				Derivative
	liability as at	Conversions / Redemption			liability as at
	December 31,	during the	Change due to	Fair value	June 30,
	2020	period	Issuances	adjustment	2021
	$	$	$	$	$
Note D	1,066	—	—	(34)	1,032
Note F	7,864	—	—	(454)	7,410
Note G	2,857	—	—	(166)	2,691
Note K	281	(227)	—	(54)	—
	12,068	(227)	—	(708)	11,133


	Shares	Amount		Description
				80,000 shares of common stock to be issued as compensation to advisers and consultants. These were recorded at a fair value of $52,000, based on the market price of the Company’s stock on the date of issue.
Services	115,000	$	73,000	35,000 to be issued as settlement of the amount due for website development services amounting to $247,306. The fair value of the shares on the date of settlement was $21,000, resulting in a gain on settlement amounting to $226,306 during the year ended December 31, 2017.
Private placements	703,439	$	37,480	Consideration for private placements with the fair value based on cash proceeds received. Proper allocation between common stock and additional paid-in capital of the amount received will be completed in the period when the shares are issued.
Settlement of CannaKorp's loans	930,240	$	80,838	Refer to Note 8 for details.
Agreement with Serious Seeds	78,120	$	1,307	As consideration for intellectual property rights granted by Smit. The fair value is based on the market price of the Company’s stock on the date of issue as per the agreement.
	1,842,423	$	192,948


	As at	As at
	June 30, 2021	March 31, 2021
Forfeiture rate	0%	0%
Stock price	$0.024	$0.025
Exercise price	$0.023 to $0.250	$0.023 to $0.250
Volatility	216% to 304%	236% to 306%
Risk free interest rate	0.25%	0.16% to 2.48%
Expected life (years)	0.21 to 1.93	0.01 to 1.93
Expected dividend rate	0%	0%


	During quarter	During quarter
	ended	ended
	June 30,	March 31,
	2021	2021
Forfeiture rate	0%	0%
Stock price	$0.017 to $0.029	$0.011 to $0.067
Exercise price	$0.025 to $0.061	$0.025 to $0.059
Volatility	304%	306%
Risk free interest rate	0.14% to 0.27%	0.09% to 0.14%
Expected life (years)	2	2
Expected dividend rate	0%	0%
Fair value of warrants	$114,211	$2,152,191


			Remaining	Remaining
			contractual life	contractual life
	Warrants	Warrants	term as at	term as at
	outstanding as at	outstanding as at	June 30,	December 31,
	June 30,	December 31,	2021	2020
	2021	2020	(years)	(years)
Acquisition of CannaKorp	—	7,211,213	N/A	0.16
Private placements	376,950,552	346,233,258	0.21 to 1.98	0.15 to 1.62
Settlement of CannaKorp loans	—	930,240	N/A	0.24
Serious Seeds	516,673	416,671	0.52 to 1.93	1.01 to 1.26
CLI	10,000,000	10,100,002	4.12	4.62
Total	387,467,225	364,891,384


1^st year:		2.00% of gross sales
2^nd year:		2.25% of gross sales
3^rd year:		2.50% of gross sales
4^th year:		2.75% of gross sales
5^th and following years:		3.00% of gross sales


	Balance as
	previously		Restated
	reported	Adjustments	balance
	$	$	$
Warrant liability	—	6,146,116	6,146,116
Total liability	6,529,359	6,146,116	12,675,475

Additional paid-in capital	29,846,004	(6,146,116)	23,699,888
Total equity	9,935,137	(6,146,116)	3,789,021


		Incorporated by Reference
Exhibit No.	Description	Form	Exhibit	Filing Date
2.1	Asset Acquisition Agreement	8-K	2.1	12/11/14

2.1.1	Agreement and Plan of Share Exchange dated June 27, 2018 with Visava Inc.	8-K	2.1	07/03/18

2.1.2	Agreement and Plan of Share Exchange dated January 25, 2019 with CannaKorp Inc. and David Manly, as Stockholder Representative	8-K	2.1	01/29/19

3(i)(a)	Articles of Incorporation	10-12G	3.1	09/30/13

3(i)(a)	Amended Articles of Incorporation	8-K	05/13/14

3(i)(a)	Certificate of Amendment	8-K	3(i)	10/20/16

3(i)(a)	Certificate of Amendment	8-K	3(i)	04/12/17

3(i)(a)	Certificate of Amendment	8-K	3(i)	07/03/17

3(i)(a)	Certificate of Amendment	8-K	3(i)	11/01/17

3(i)(a)	Certificate of Amendment	8-K	3(i)	09/25/18

3.2	Bylaws	10-12G	3.2	09/30/13

4.1	Description of Capital Stock	10-K	4.1	04/14/20

10.1	Form of Securities Purchase Agreement-Blackbridge Capital Growth Fund, LLC	10-K	10.1	03/31/17

10.2	Form of Convertible Promissory Note	10-K	10.2	03/31/17

10.3	Form of Convertible Promissory Note	10-K	10.3	03/31/17

10.4	Form of Convertible Promissory Note	10-K	10.4	03/31/17

10.5	Form of Securities Purchase Agreement-Crown Bridge Partners, LLC	10-K	10.5	03/31/17

10.6	Form of Convertible Promissory Note	10-K	10.6	03/31/17

10.7	Form of Convertible Promissory Note	8-K	03/07/16

10.8	Non-Negotiable Promissory Note	8-K	03/07/16

10.9	Securities Purchase Agreement	8-K	03/07/16

10.10	Securities Purchase Agreement-Power Up Lending Group Ltd.	10-K	10.10	03/28/18

10.11	Convertible Promissory Note-Power-Up Lending Group Ltd.	10-K	10.11	03/28/18

10.12	Securities Purchase Agreement-Power Up Lending Group Ltd.	10-K	10.12	03/28/18

10.13	Convertible Promissory Note-Power-Up Lending Group Ltd.	10-K	10.13	03/28/18

10.14	Securities Purchase Agreement-Power Up Lending Group Ltd. dated December 24, 2018	10-K	10.14	04/01/19


10.15	Convertible Promissory Note-Power-Up Lending Group Ltd. dated December 24, 2018	10-K	10.15	04/01/19

10.16	Distribution, Collaboration and Licensing Agreement dated December 6, 2018 between Target Group Inc, Canary Rx Inc., Serious Seeds B.V. and Simon Smit	10-K	10.16	04/01/19

10.17	Licensed Producer/Licensed Processor Sales Agency Agreement dated December 13, 2018 with Cannavolve Inc.	10-K	10.17	04/01/19

10.18	Exclusive License Agreement dated August 8, 2019 with cGreen Inc.	8-K	2.1	08/13/19

10.19	Purchase, Licensing and Purchase Agreement dated September 17, 2019 between CannaKorp, Inc. and Nabis Arizona LLC	8-K	10.1	09/19/19

10.20	Loan Agreement dated December 20, 2019 with Jerry Zarcone	10-K	10.20	04/14/20

10.21	First Amending Agreement dated March 11, 2020 with Jerry Zarcone	10-Q	10.21	06/05/20

10.22	Second Amending Agreement dated April 30, 2020 with Jerry Zarcone	10-Q	10.22	08/10/20

10.23	Third Amending Agreement dated May 15, 2020 with Jerry Zarcone	10-Q	10.23	08/10/20

10.24	Promissory Note Between Target Group Inc. and Frank Zarcone	10-Q	10.24	08/10/20

10.25	Joint Venture Agreement between Canary Rx Inc. and 9258159 Canada, Inc. dated May 14, 2020	10-Q	10.25	08/10/20

10.26	Debt Purchase and Assignment Agreement dated June 15, 2020	8-K	10.1(i)	08/18/20

10.27	Amendment dated August 14, 2020 to Debt Purchase and Assignment Agreement	8-K	10.1(ii)	08/18/20

10.28*	Amendment dated May 12, 2021 to Debt Purchase and Assignment Agreement

31.1*	Certification of Principal 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 Principal 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 Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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	TARGET GROUP INC.

Dated: August 6, 2021	By:	/s/ Anthony Zarcone
		Chief Executive Officer, and Director

Dated: August 6, 2021	By:	/s/ Barry Alan Katzman
		Director

Dated: August 6, 2021	By:	/s/ Saul Niddam
		Director

Dated: August 6, 2021	By:	/s/ Frank Monte
		Director