Target Group Inc 10-Q for FY2023 Q2

Target Group Inc. (CBDY)

10-Q 2023-08-09 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Target Group Inc filed this 10-Q on August 9, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $758.98K
Net income: $963.82K; up 289.3% from net income of $247.6K a year earlier
Diluted EPS: $0.00; up 233.3% from $0.00 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, 2023

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	14

Item 4.	Controls and Procedures	14

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 3.	Defaults Upon Senior Securities	15

Item 4.	Mine Safety Disclosures	15

Item 5.	Other Information	15

Item 6.	Exhibits	16

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

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

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

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

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)	F-8 - F-28


		June 30,		December 31,
		2023		2022
		$		$
		(unaudited)
ASSETS
Current assets
Cash			1,047,833		223,843
Restricted cash			8,686		8,490
Accounts receivable, no allowance			2,068		2,068
Inventory	Note 3		1,814,902		—
Prepaid asset			42,674		41,714
Sales tax recoverable, net of allowance	Note 4		1,034		—
Receivable from joint venture	Note 6		—		630,180
Other receivable	Note 8		3,777		3,692
Total current assets			2,920,974		909,987
Long term assets
Fixed assets	Note 5		5,773,235		5,554,225
Investment in joint venture	Note 6		—		775,577
Goodwill	Note 7		269,175		263,117
Operating lease right-of-use assets	Note 9		55,237		62,728
Total long term assets			6,097,647		6,655,647
Total assets			9,018,621		7,565,634

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities
Bank overdraft			506		506
Accounts payable and accrued liabilities			2,823,400		2,296,935
Settlement payable	Note 1		—		—
Sales tax payable	Note 4		—		35,254
Payable to related parties, net	Note 8		5,061,467		4,468,535
Operating lease liability - Current portion	Note 9		118,047		110,586
Convertible promissory notes, net	Note 10		480		480
Derivative liability	Note 10		16,318		15,125
Total current liabilities			8,020,218		6,927,421

Long term liabilities
Payable to related parties, net - Non-current portion	Note 8		6,275,163		5,877,930
Operating lease liability - Non-current portion	Note 9		1,288,897		1,319,619
Warrant liability	Note 11		931		489
Total long term liabilities			7,564,991		7,198,038
Total liabilities			15,585,209		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		175,293		175,182
Additional paid-in capital			24,985,697		24,985,697
Accumulated deficit			(30,565,571)		(30,783,678)
Accumulated comprehensive loss			(1,223,810)		(998,829)
Total stockholders’ deficiency			(6,566,588)		(6,559,825)
Total liabilities and stockholders’ deficiency			9,018,621		7,565,634
Contingencies and commitments	Note 13		—		—


		For the	For the	For the	For the
		three months ended	three months ended	six months ended	six months ended
		June 30, 2023	June 30, 2022	June 30, 2023	June 30, 2022
		$	$	$	$

REVENUE		758,984	—	758,984	—
COST OF GOOD SOLD		(369,261)	—	(369,261)	—
Gross profit		389,723	—	389,723	—
OPERATING EXPENSES
Advisory and consultancy fee		15,883	7,454	16,106	18,693
Management services fee		77,191	55,631	155,515	83,516
Salaries and wages		(53,083)	(8,056)	(53,083)	9,775
Legal and professional fees		145,987	105,647	203,927	172,591
Depreciation expense		229,568	225,335	442,254	452,959
Operating lease expense	Note 9	28,400	(10,378)	17,310	(33,905)
Office and general		56,502	(89,143)	59,131	(68,946)
Total operating expenses		500,448	286,490	841,160	634,683

OTHER EXPENSES (INCOME)
Change in fair value of derivative and warrant liability		4,301	834	1,326	(16,812)
Gain on settlement		(1,428,185)	—	(1,428,185)	—
Interest and bank charges		369,092	272,373	722,698	561,061
Exchange loss (income)		48,519	(76,027)	50,794	(41,993)
Other income	Note 6	(12,507)	(637,591)	(16,782)	(697,776)
Recovery of sales tax recoverable		—	(1,750)	—	(2,259)
Share of (income) loss from joint venture	Note 6	(68,115)	(104,923)	(24,152)	(151,048)
Debt issuance cost	Note 8	12,354	12,994	24,757	26,243
Total other expense (income)		(1,074,541)	(534,090)	(669,544)	(322,584)

Net income (loss) before income taxes		963,816	247,600	218,107	(312,099)
Income taxes		—	—	—	—
Net income (loss)		963,816	247,600	218,107	(312,099)

Foreign currency translation adjustment		(222,962)	(27,220)	(224,981)	(17,345)
Comprehensive income (loss)		740,854	220,380	(6,874)	(329,444)

Earnings (loss) per share - basic		0.0016	0.0004	0.0004	(0.0005)
Weighted average shares - basic		617,025,999	617,025,999	617,025,999	617,025,999
Earnings (loss) per share - diluted		0.0010	0.0003	(0.0000)	(0.0004)
Weighted average shares - diluted		727,426,007	773,218,857	727,426,007	773,218,857


							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, 2023	1,000,000	100	617,025,999	61,703	1,594,648	175,245	—	24,985,697	(31,529,387)	(1,000,848)	(7,307,490)

Shares issued as consideration for consideration of the intellectual property rights [Note 11]	—	—	—	—	15,624	48	—	—	—	—	48

Net loss	—	—	—	—	—	—	—	—	963,816	—	963,816

Foreign currency translation	—	—	—	—	—	—	—	—	—	(222,962)	(222,962)

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)


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	1,452,252	770,161	43,553	6,851,094	9,117,060
Accumulated depreciation	(481,941)	(747,730)	(43,490)	(2,070,664)	(3,343,825)
	970,311	22,431	63	4,780,430	5,773,235


Period ended	January 1 to April 27, 2023		Six months ended June 30, 2022
	CAD	USD	CAD	USD
Sales	1,068,799	791,285	2,681,955	2,109,626
Cost of goods sold	620,344	459,271	1,332,020	1,047,767
Gross profit	448,455	332,014	1,349,935	1,061,859
Operation expenses	383,358	283,819	965,882	759,763
Net income (loss)	65,097	48,195	384,053	302,096

Eligible recoverable expenses	1,437,054	1,060,833	2,475,041	1,920,632
Recoverable amount	1,437,054	1,060,833	2,475,041	1,920,632
Income (loss) on equity	32,549	24,098	192,026	151,048


		Fair value
		$
Assets acquired:
Inventory		1,690,368
Fixed assets		534,816
		2,225,184


		$
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


2023	$	552,583
2024		3,613,227
2025		3,706,326
Total		7,872,136
Current portion		(1,540,099)
Non-current portion	$	6,332,037


	Interest rate		Maximum loan		Outstanding loan
			CAD	USD	CAD	USD
Tranche 1	16.00	%	1,043,593	788,226	1,043,593	788,226
Tranche 2	43.26	%	1,592,787	1,203,032	1,592,787	1,203,032
Tranche 3	43.26	%	250,000	188,825	250,000	188,825
Tranche 4	43.26	%	500,000	377,650	500,000	377,650
Tranche 5	43.26	%	500,000	377,650	400,000	302,120
Total			3,886,380	2,935,383	3,786,380	2,859,853


2023	$	165,264
2024		330,107
2025		333,408
2026		336,742
Thereafter		1,147,370
Total lease payments		2,312,891
Less imputed interest		(905,947)
Present value of lease liabilities		1,406,944
Current portion		(118,047)
Non-current portion	$	1,288,897


	Derivative				Derivative
	liability as at	Conversions / Redemption			liability as at
	December 31,	during the	Change due to	Fair value	June 30,
	2022	period	Issuances	adjustment	2023
	$	$	$	$	$
Note D	1,446	—	—	134	1,580
Note F	10,034	—	—	777	10,811
Note G	3,645	—	—	282	3,927
	15,125	—	—	1,193	16,318


	Shares	Amount		Description
				80,000 shares of common stock to be issued as compensation to advisers and consultants. These were recorded at 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	346,296	$	18,787	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 14 for details.
Agreement with Serious Seeds	218,736		2,668	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.
	1,610,272	$	175,293


	As at	As at
	June 30, 2023	March 31, 2023
Forfeiture rate	0%	0%
Stock price	$0.006	$0.003
Exercise price	$0.250 to $0.300	$0.250 to $0.300
Volatility	273% to 342%	244% to 305%
Risk free interest rate	5.40%	4.64%
Expected life (years)	0.02 to 1.68	0.02 to 1.93
Expected dividend rate	0%	0%


	During quarter	During quarter
	ended	ended
	June 30, 2023	March 31, 2023
Forfeiture rate	0%	0%
Stock price	$0.003 to $0.003	$0.003 to $0.005
Exercise price	$0.350	$0.300
Volatility	342%	305%
Risk free interest rate	3.82% to 4.51%	4.24% to 4.89%
Expected life (years)	2	2
Expected dividend rate	0%	0%
Fair value of warrants	$138	$160


			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,	2023	2022
	2023	2022	(years)	(years)
Private placements	—	43,549,993	N/A	0.11 to 0.47
Serious Seeds	400,008	400,008	0.02 to 1.93	0.02 to 1.93
CLI	10,000,000	10,000,000	2.12	2.62
Total	10,400,008	53,950,001


Warrant liability as at December 31, 2022		489
Warrant liability for new issuance		298
Change in fair value		144
Warrant liability as at June 30, 2023		931


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


		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	10-K	3(i)(a)	09/18/22

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

10.10	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

10.29	Fourth Amending Agreement dated June 12, 2021	10-Q	10.29	11/7/22

10.30	Fifth Amending Agreement dated February 16, 2022	10-Q	10.30	11/7/22

10.31	Sixth Amending Agreement dated October 18, 2022	10-Q	10.31	11/7/22

10.32	Seventh Amending Agreement dated February 16, 2023	10-Q	10.32	5/8/23

10.33	Eighth Amending Agreement dated March 28, 2023	10-Q	10.33	5/8/23

10.34*	Seventh Amending Agreement dated February 16, 2023 (corrected)

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.

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

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101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104		Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

	TARGET GROUP INC.

Dated: August 9, 2023	By:	/s/ Anthony Zarcone
		Chief Executive Officer, and Director

Dated: August 9, 2023	By:	/s/ Barry Alan Katzman
		Director

Dated: August 9, 2023	By:	/s/ Saul Niddam
		Director

SIGNED IN THE PRESENCE OF	)
	)
	)
	)
Witness	)	JERRY ZARCONE

		TARGET GROUP INC.
		Per:


		Name: Saul Niddam
		Position: Director


		Name: Frank Monte
		Position: Director


		Name: Anthony Zarcone
		Position: Director


		Name: Barry Katzman
		Position: Director
		We have authority to bind the Corporation

		CANARY RX INC.
		Per:


		Name: Anthony Zarcone
		Position: President & CEO
		I have authority to bind the Corporation

		VISAVA INC.
		Per:


		Name: Anthony Zarcone
		Position: President & CEO
		I have authority to bind the Corporation

	CANNAKORP INC.
	Per:


	Name: Saul Niddam
	Position: CEO
	I have authority to bind the Corporation

Dated: August 9, 2023	/s/ Anthony Zarcone
	Chief Executive Officer

Dated: August 9, 2023	/s/ Anthony Zarcone
	Principal Financial Officer