Target Group Inc 10-Q for FY2022 Q2

Target Group Inc. (CBDY)

10-Q 2022-08-08 For: 2022-06-30

Added on April 06, 2026

About this 10-Q

Target Group Inc filed this 10-Q on August 8, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, 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: $247.6K; down 70.1% from net income of $827.02K a year earlier
Diluted EPS: $0.00; up 87.5% 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, 2022

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	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, 2022 (Unaudited) and December 31, 2021	F-1

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30,2022 and 2021 (Unaudited)	F-2

Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30,2022 and 2021 (Unaudited)	F-4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30,2022 and 2021 (Unaudited)	F-1

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)	F-2 - F-23


		June 30,		December 31,
		2022		2021
		$		$
		(unaudited)
ASSETS
Current assets
Cash			114,208		113,079
Restricted cash			8,924		9,072
Accounts receivable, no allowance			2,068		2,068
Inventory	Note 3		99,000		99,000
Prepaid asset			43,844		44,567
Sales tax recoverable, net of allowance	Note 4		35,410		21,637
Receivable from joint venture	Note 6		444,234		290,855
Other receivable	Note 8		3,880		3,944
Total current assets			751,568		584,222
Long term assets
Fixed assets	Note 5		6,284,226		6,841,770
Investment in joint venture	Note 6		665,540		1,870,123
Goodwill	Note 7		3,622,484		3,682,236
Operating lease right-of-use assets	Note 9		74,752		84,618
Total long term assets			10,647,002		12,478,747
Total assets			11,398,570		13,062,969

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities
Bank overdraft			82,549		506
Accounts payable and accrued liabilities			1,678,180		2,885,909
Settlement payable	Note 1		—		10,000
Sales tax payable	Note 4		—		—
Payable to related parties, net	Note 8		2,533,481		1,037,104
Operating lease liability - Current portion	Note 9		109,551		101,356
Convertible promissory notes, net	Note 10		480		480
Derivative liability	Note 10		12,421		7,902
Total current liabilities			4,416,662		4,043,257

Long term liabilities
Payable to related parties, net - Non-current portion	Note 8		8,016,930		9,621,696
Operating lease liability - Non-current portion	Note 9		1,445,503		1,528,033
Warrant liability	Note 11		764		22,095
Total long term liabilities			9,463,197		11,171,824
Total liabilities			13,879,859		15,215,081

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, 2022 and December 31, 2021	Note 11		100		100
Common stock, $0.0001 par value, 850,000,000 shares authorized, 617,025,999 common shares outstanding as at June 30, 2022 and December 31, 2021	Note 11		61,703		61,703
Shares to be issued	Note 11		174,989		174,722
Additional paid-in capital			24,985,697		24,985,697
Accumulated deficit			(26,575,713)		(26,263,614)
Accumulated comprehensive loss			(1,128,065)		(1,110,720)
Total stockholders’ deficiency			(2,481,289)		(2,152,112)
Total liabilities and stockholders’ deficiency			11,398,570		13,062,969


		For the	For the	For the	For the
		three months ended	three months ended	six months ended	six months ended
		June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021
		$	$	$	$

REVENUE		—	—	—	—

OPERATING EXPENSES

Advisory and consultancy fee		7,454	6,709	18,693	8,615
Management services fee		55,631	75,854	83,516	153,797
Salaries and wages		(8,056)	(11,429)	9,775	(6,760)
Legal and professional fees		105,647	69,373	172,591	115,797
Depreciation expense		225,335	248,348	452,959	490,143
Operating lease expense	Note 9	(10,378)	(16,620)	(33,905)	(29,665)
Office and general		(89,143)	547	(68,946)	(17,727)
Total operating expenses		286,490	372,782	634,683	714,200

OTHER EXPENSES (INCOME)

Change in fair value of derivative and warrant liability		834	(1,453,938)	(16,812)	637,396
(Gain) loss on settlement		—	(11,141)	—	(26,360)
Interest and bank charges		272,373	231,689	561,061	452,686
Exchange loss		(76,027)	64,545	(41,993)	91,925
Other income		(637,591)	(4,760)	(697,776)	(9,327)
Allowance for sales tax recoverable		(1,750)	(2,916)	(2,259)	1,498
Share of (income) loss from joint venture	Note 6	(104,923)	(36,787)	(151,048)	(25,487)
Debt issuance cost	Note 8	12,994	13,511	26,243	26,762

Total other (income) expenses		(534,090)	(1,199,797)	(322,584)	1,149,093
Net income (loss) before income taxes		247,600	827,015	(312,099)	(1,863,293)
Income taxes		—	—	—	—
Net income (loss)		247,600	827,015	(312,099)	(1,863,293)

Foreign currency translation adjustment		(27,220)	79,680	(17,345)	115,820
Comprehensive income (loss)		220,380	906,695	(329,444)	(1,747,473)

Earning (loss) per share - basic		0.0004	0.0014	(0.0005)	(0.0032)
Weighted average shares - basic		617,025,999	573,452,193	617,025,999	573,366,589
Earning (loss) per share - diluted		0.0003	0.00016	(0.0004)	(0.0032)
Weighted average shares - diluted		773,218,857	573,452,193	773,218,857	573,366,589


	Preferred stock		Common stock		Shares to be issued		Stock	Additional	Accumulated	Accumulated
	Shares	Amount	Shares	Amount	Shares	Amount	subscription	paid-in	deficit	comprehensive	Total
							receivable	capital		loss
	#	$	#	$	#	$	$	$	$	$	$
As at March 31, 2022	1,000,000	100	617,025,999	61,703	1,532,152	174,875	—	24,985,697	(26,823,313)	(1,100,845)	(2,701,783)

Shares issued as consideration for consideration of the intellectual property rights [Note 11]	—	—	—	—	15,624	114	—	—	—	—	114

Net income	—	—	—	—	—	—	—	—	247,600	—	247,600

Foreign currency translation	—	—	—	—	—	—	—	—	—	(27,220)	(27,220)

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)


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	748,810	771,952	43,615	7,044,629	8,609,006
Accumulated depreciation	(191,550)	(737,533)	(42,770)	(1,352,927)	(2,324,780)
	557,260	34,419	845	5,691,702	6,284,226


Six months ended June 30,	2022		2021
	CAD	USD	CAD	USD
Sales	2,681,955	2,109,626	892,601	716,000
Cost of goods sold	1,332,020	1,047,767	417,338	334,768
Gross profit	1,349,935	1,061,859	475,263	381,232
Operation expenses	965,882	759,763	411,717	330,259
Net income	384,053	302,096	63,546	50,973

Eligible recoverable expenses	2,475,041	1,920,632	1,499,038	1,209,424
Recoverable amount	2,475,041	1,920,632	1,499,038	1,209,424
Income on equity	192,026	151,048	31,773	25,487


As of	June 30, 2022		December 31, 2021
	CAD	USD	CAD	USD
Assets	7,806,750	6,058,038	4,830,446	3,897,204
Liabilities	8,612,786	6,683,522	6,020,535	4,857,368
Equity	(806,036)	(625,484)	(1,190,089)	(960,164)


		$
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


2022	$	934,275
2023		2,131,468
2024		2,761,119
2025		2,261,019
2026		—
Total		8,087,881
Current portion		(2,006,283)
Non-current portion	$	6,081,598


	Tranche 1		Tranche 2		Total
	CAD	USD	CAD	USD	CAD	USD
Maximum loan	1,043,593	809,828	1,592,787	1,236,003	2,636,380	2,045,831
Outstanding loan	1,043,593	809,828	1,592,787	1,236,003	2,636,380	2,045,831
Interest rate	16.00%		43.26%


2022	$	171,879
2023		343,378
2024		339,154
2025		342,545
Thereafter		1,524,786
Total lease payments		2,721,742
Less imputed interest		(1,166,688)
Present value of lease liabilities		1,555,054
Current portion		(109,551)
Non-current portion	$	1,445,503


	Derivative				Derivative
	liability as at	Conversions / Redemption	Change due		liability as at
	December 31,	during the	to	Fair value	June 30,
	2021	period	Issuances	adjustment	2022
	$	$	$	$	$
Note D	772	—	—	410	1,182
Note F	5,230	—	—	3,014	8,244
Note G	1,900	—	—	1,095	2,995
	7,902	—	—	4,519	12,421


	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	156,240		2,364	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.
	1,547,776	$	174,989


	As at	As at
	June 30,	March 31,
	2022	2022
Forfeiture rate	0%	0%
Stock price	$0.008	$0.009
Exercise price	$0.050 to $0.300	$0.023 to $0.250
Volatility	192% to 306%	192% to 306%
Risk free interest rate	2.92%	2.28%
Expected life (years)	0 to 1.94	0 to 1.93
Expected dividend rate	0%	0%


	During quarter	During quarter
	ended	ended
	June 30, 2022	March 31, 2022
Forfeiture rate	0%	0%
Stock price	$0.005 to $0.010	$0.008 to $0.013
Exercise price	$0.300	$0.250
Volatility	299%	306%
Risk free interest rate	2.50% to 2.73%	0.88% to 1.50%
Expected life (years)	2	2
Expected dividend rate	0%	0%
Fair value of warrants	$306	$430


			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,	2022	2021
	2022	2021	(years)	(years)
Private placements	45,792,850	339,561,664	0.01 to 0.98	0.02 to 1.47
Serious Seeds	400,008	616,675	0.19 to 1.93	0.01 to 1.93
CLI	10,000,000	10,000,000	3.12	3.62
Total	56,192,858	350,178,339


		$
Warrant liability as at December 31, 2021		22,095
Warrant liability for new issuance		736
Change in fair value		(22,067)
Warrant liability as at June 30, 2022		764


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

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 8, 2022	By:	/s/ Anthony Zarcone
		Chief Executive Officer, and Director

Dated: August 8, 2022	By:	/s/ Barry Alan Katzman
		Director

Dated: August 8, 2022	By:	/s/ Saul Niddam
		Director

Dated: August 8, 2022	By:	/s/ Frank Monte
		Director

Dated: August 8, 2022	/s/ Anthony Zarcone
	Chief Executive Officer

Dated: August 8, 2022	/s/ Anthony Zarcone
	Principal Financial Officer