Target Group Inc 10-Q for FY2021 Q3

Target Group Inc. (CBDY)

10-Q 2021-11-05 For: 2021-09-30

Added on April 06, 2026

About this 10-Q

Target Group Inc filed this 10-Q on November 5, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 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: $2.2M; compared with a net loss of $3.92M 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 September 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 September 30, 2021 (Unaudited) and December 31, 2020	F-1

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

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

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

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

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


		September 30,		December 31,
		2021		2020
		$		$
		(unaudited)
ASSETS
Current assets
Cash			45,179		172,597
Restricted cash			9,026		9,032
Accounts receivable, no allowance			2,068		2,068
Inventory	Note 3		99,000		99,000
Prepaid asset			44,347		46,775
Sales tax recoverable, net of allowance	Note 4		11,258		75,462
Receivable from joint venture	Note 6		284,777		271,184
Other receivable	Note 8		3,925		78,540
Total current assets			499,580		754,658
Long term assets
Fixed assets	Note 5		7,074,345		7,793,997
Investment in joint venture	Note 6		1,615,763		721,156
Goodwill	Note 7		3,664,030		3,666,364
Operating lease right-of-use assets	Note 9		88,378		100,548
Total long term assets			12,442,516		12,282,065
Total assets			12,942,096		13,036,723

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft			85,386		1,562
Accounts payable and accrued liabilities			2,063,548		1,809,120
Deferred revenue	Note 1		—		42,719
Settlement payable - Current portion	Note 1		40,000		90,000
Payable to related parties, net	Note 8		1,318,273		2,831,635
Operating lease liability - Current portion	Note 9		96,168		83,196
Convertible promissory notes, net	Note 10		480		3,128
Derivative liability	Note 10		10,518		12,068
Total current liabilities			3,614,373		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		9,140,573		7,103,325
Operating lease liability - Non-current portion	Note 9		1,547,210		1,622,366
Warrant liability	Note 11		744,802		2,948,024
Total long term liabilities			11,432,585		11,683,715
Total liabilities			15,046,958		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 September 30, 2021 and December 31, 2020	Note 11		100		100
Common stock, $0.0001 par value, 850,000,000 shares authorized, 616,668,856 common shares outstanding as at Septmeber 30, 2021 573,277,094 common shares outstanding as at December 31, 2020	Note 11		61,667		57,328
Stock subscription receivable	Note 11		—		—
Shares to be issued	Note 11		193,228		192,121
Additional paid-in capital			24,967,040		23,940,696
Accumulated deficit			(26,202,976)		(26,536,495)
Accumulated comprehensive loss			(1,123,921)		(1,174,969)
Total stockholders' deficiency			(2,104,862)		(3,521,219)
Total liabilities and stockholders' deficiency			12,942,096		13,035,924


		For the	For the	For the	For the
		three months ended	three months ended	nine months ended	nine months ended
		September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020
		$	$	$	$

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

OPERATING EXPENSES

Advisory and consultancy fee		6,453	6,933	15,068	69,582
Management services fee		72,562	69,710	226,359	216,798
Salaries and wages		(2,051)	40,290	(8,811)	183,644
Legal and professional fees		72,065	158,232	187,862	375,787
Advertising and promotion		—	—	—	299
Amortization and depreciation expense		240,983	19,861	731,126	62,656
Operating lease expense	Note 9	30,318	4,354	653	126,998
Office and general		7,084	5,370	(10,643)	88,898
Total operating expenses		427,414	304,750	1,141,614	1,124,662

OTHER EXPENSES (INCOME)

Change in fair value of derivative and warrant liability		(2,842,168)	(2,537,885)	(2,204,772)	(3,528,760)
Loss (gain) on settlement		—	5,665,569	(26,360)	3,267,111
Interest and bank charges		266,098	177,949	718,784	294,736
Exchange loss		(67,015)	16,158	24,910	118,977
Accretion expense		—	11,985	—	27,439
Other income		(4,694)	(3,258)	(14,021)	(3,436)
Allowance for sales tax recoverable		(23,223)	(5,921)	(21,725)	530
Share of loss from joint venture	Note 6	33,458	280,916	7,971	410,348
Debt issuance cost	Note 8	13,318	6,337	40,080	6,337

Total other (income) expenses		(2,624,226)	3,611,850	(1,475,133)	593,282
Net income (loss) before income taxes		2,196,812	(3,916,600)	333,519	(1,712,944)
Income taxes		—	—	—	—
Net income (loss)		2,196,812	(3,916,600)	333,519	(1,712,944)

Foreign currency translation adjustment		(64,772)	179,991	51,048	(389,946)
Comprehensive income (loss)		2,132,040	(3,736,609)	384,567	(2,102,890)

Earnings (loss) per share - basic and diluted		0.004	(0.007)	0.001	(0.003)
Weighted average shares - basic and diluted		616,668,856	567,782,589	588,351,180	564,728,798


							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, 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)

Shares issued as consideration for consideration of the intellectual property rights [Note 11]	—	—	—	—	15,624	280	—	—	—	—	280

Shares issued as consideration for private placement [Note 10 and 11]	—	—	—	—	—	—	—	—	—	—	—

Cancellation of shares [Note 10 and 11]	—	—	(1,000,001)	(100)	—	—	23,697	(23,597)	—	—	—

Net income	—	—	—	—	—	—	—	—	2,196,812	—	2,196,812

Foreign currency translation	—	—	—	—	—	—	—	—	—	(64,772)	(64,772)

As at September 30, 2021	1,000,000	100	616,668,856	61,667	1,858,047	193,228	—	24,967,040	(26,202,976)	(1,123,921)	(2,104,862)


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	757,319	772,270	43,642	7,141,122	8,714,353
Accumulated depreciation	(112,885)	(701,811)	(42,199)	(783,113)	(1,640,008)
	644,434	70,459	1,443	6,358,009	7,074,345


Nine months ended September 30	2021		2020
	CAD	USD	CAD	USD
Sales	1,838,754	1,469,900	—	—
Cost of goods sold	1,199,941	959,232	—	—
Gross profit	638,813	510,668	—	—
Operation expenses	658,756	526,610	1,110,428	832,488
Net income (loss)	(19,943)	(15,942)	(1,110,428)	(832,488)

Eligible recoverable expenses	2,236,728	1,755,608	798,133	598,360
Recoverable amount	2,236,728	1,755,608	771,058	578,062
Income (loss) on equity	(9,971)	(7,971)	555,214	416,244


As of September 30,	2021		2020
	CAD	USD	CAD	USD
Assets	3,976,534	3,121,182	—	—
Liabilities	4,488,011	3,522,640	1,110,428	832,488
Equity	(511,477)	(401,458)	(1,110,428)	(832,488)


		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	$	—
2022		1,446,507
2023		2,174,709
2024		2,647,714
2025		2,051,010
Total		8,319,940
Current portion		(926,349)
Non-current portion	$	7,393,591


	Tranche 1		Tranche 2		Total
	CAD	USD	CAD	USD	CAD	USD
Maximum loan	1,043,593	819,116	1,492,787	1,171,689	2,536,380	1,990,805
Outstanding loan	1,043,593	819,116	1,392,787	1,093,199	2,436,380	1,912,315
Interest rate	16.00%		43.26%


2021	$	86,049
2022		347,613
2023		347,316
2024		343,043
Thereafter		1,888,747
Total lease payments		3,012,768
Less imputed interest		(1,369,390)
Present value of lease liabilities		1,643,378
Current portion		(96,168)
Non-current portion	$	1,547,210


	Derivative				Derivative
	liability as at	Conversions / Redemption			liability as at
	December 31,	during the	Change due to	Fair value	September 30,
	2020	period	Issuances	adjustment	2021
	$	$	$	$	$
Note D	1,066	—	—	(77)	989
Note F	7,864	—	—	(874)	6,990
Note G	2,857	—	—	(318)	2,539
Note K	281	(227)	—	(54)	—
	12,068	(227)	—	(1,323)	10,518


	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 loans of CannaKorp	930,240	$	80,838	Refer to Note 8 for details.
Agreement with Serious Seeds	109,368		1,910	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.
	1,858,047	$	193,228


	As at	As at	As at
	September 30, 2021	June 30, 2021	March 31, 2021
Forfeiture rate	0%	0%	0%
Stock price	$0.016	$0.024	$0.025
Exercise price	$0.023 to $0.250	$0.023 to $0.250	$0.023 to $0.250
Volatility	179% to 302%	216% to 304%	236% to 306%
Risk free interest rate	0.28%	0.25%	0.16% to 2.48%
Expected life (years)	0.23 to 1.93	0.21 to 1.93	0.01 to 1.93
Expected dividend rate	0%	0%	0%


	During quarter	During quarter	During quarter
	ended	ended	ended
	September 30,	June 30,	March 31,
	2021	2021	2021
Forfeiture rate	0%	0%	0%
Stock price	$0.015 to $0.022	$0.017 to $0.029	$0.011 to $0.067
Exercise price	$0.250	$0.025 to $0.061	$0.025 to $0.059
Volatility	302%	304%	306%
Risk free interest rate	0.21% to 0.22%	0.14% to 0.27%	0.09% to 0.14%
Expected life (years)	2	2	2
Expected dividend rate	0%	0%	0%
Fair value of warrants	$807	$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	September 30,	December 31,
	September 30,	December 31,	2021	2020
	2021	2020	(years)	(years)
Acquisition of CannaKorp	—	7,211,213	N/A	0.16
Private placements	376,783,885	346,233,258	0.23 to 1.72	0.15 to 1.62
Settlement of CannaKorp loans	—	930,240	N/A	0.24
Serious Seeds	566,674	416,671	0.27 to 1.93	1.01 to 1.26
CLI	10,000,000	10,100,002	3.87	4.62
Total	387,350,559	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	10-Q	10.28	05/7/21

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: November 5, 2021	By:	/s/ Anthony Zarcone
		Chief Executive Officer, and Director

Dated: November 5, 2021	By:	/s/ Barry Alan Katzman
		Director

Dated: November 5, 2021	By:	/s/ Saul Niddam
		Director

Dated: November 5, 2021	By:	/s/ Frank Monte
		Director