What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-31 compared with 2025-03-27 · 118 added, 222 removed, 734 unchanged (32% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

As of December 31, 2024, the Company generated revenue of $6,591,625 and had income of $160,504.

As of December 31, 2025, the Company generated revenue of $3,881,003 and had loss of $1,359,682.

As of December 31, 2025, the Company had a working capital deficit of $11,052,097 and an accumulated deficit of $32,306,526.

8 unchanged sentences

Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, income taxes, goodwill impairment/valuation, inventory valuation, current expected credit loss (CECL) model for accounts receivable, to have the greatest potential impact on our consolidated financial statements.

Therefore, we consider these to be our critical accounting policies and estimates.

For further information on all of our significant accounting policies, see Note 4, “Summary of Significant Accounting Policies,” to our consolidated financial statements included herein.

Inventory is stated at the lower of cost or net realizable value in accordance with US GAAP.

The determination of inventory cost involves significant estimates, primarily related to the cost per gram used to value inventory at the end of the reporting period.

Small changes in these underlying assumptions can materially affect the unit cost and, consequently, the total inventory balance reported in the financial statements.

Balance sheet as of December 31, 2025 and 2024

1 unchanged sentence

On December 31, 2025, we had cash of $100,410 (excluding restricted cash of $8,390) compared to $1,869,767 (excluding restricted cash of $7,992) as of December 31, 2024.

The increase is due to increase in addition loan provided by a related party.

The decrease is due to decrease in revenue and the settlement of loans.

The change in restricted cash is due to foreign exchange conversion of balances in Canadian Dollar into United States Dollar.

2 unchanged sentences

As of December 31, 2025, the companys allowance for doubtful accounts was $2,761.

The company recorded a bad debt expense of $2,630 for the year ended December 31, 2024 (December 31, 2023:

The company recorded a bad debt expense of $nil for the year ended December 31, 2025 (December 31, 2024:

As of December 31, 2025, the inventory in the amount of $1,669,053 (2024:

$1,215,928) consists of WIP and finished cannabis goods which is transferred from JVCo to Canary as a result of the Joint Venture Settlement Agreement, refer to Note 13 for additional details.

$882,279) consists of WIP and finished cannabis goods.

Prepaid asset

2 unchanged sentences

Sales tax recoverable and payable

As of December 31, 2024, the Company had $59,469 of gross sales tax recoverable compared to $nil as of December 31, 2023 while the Company had $nil of gross sales tax payable as of December 31, 2024 compared to $48,581 as of December 31,2023.

As of December 31, 2025, the Company had $67,256 of gross sales tax recoverable compared to $59,469 as of December 31, 2024 while the Company had $nil of gross sales tax payable as of December 31, 2025 compared to $nil as of December 31, 2024.

Recoverable is due to the sales tax paid by the Company on expenses incurred during the year which are recoverable from the government while payable is due to the sales tax received (after deducting sales tax paid on expenses incurred by the Company) during the year which are payable from the government due to sales conducted by the Joint Venture.

2 unchanged sentences

The Company had initiated construction on its leased 44,000 square foot cannabis cultivation facility in September of 2017.

On May 1, 2019, the Company completed the construction of its 44,000 square foot cannabis cultivation facility and on May 14, 2019, the Company had submitted a Site Evidence Package to Health Canada as part of the steps to obtain the license to cultivate cannabis at the Company’s facility.

On May 1, 2019, the Company completed the construction of its 44,000 square foot cannabis cultivation facility and on May 14, 2019, the Company submitted a Site Evidence Package to Health Canada as part of the steps to obtain the license to cultivate cannabis at the Company’s facility.

On October 8, 2019, the Company was granted licenses to cultivate, process and sell cannabis pursuant to the Cannabis Act (Bill C-45).

15 unchanged sentences

The Company generated revenue of $3,881,003 during the current year and $6,591,625 in the comparable year ended in 2024.

However, Canary generated revenues of $nil (though its investment in JVCo) during the current year ended (2023:

$791,285) and is represented as a share of income from joint venture on the audited consolidated statement of operations.

The revenue represents the sale of cannabis product, and the entire revenue was sold to seventeen customers (2024:

1 unchanged sentence

Our expenses are classified primarily into advisory and consultancy fees, management fees, salaries and wages, legal and professional fees, and depreciation expense.

The increase in operating expenses for the year ended December 31, 2024 compared to 2023 is due to increase in consulting expenses, management fees, office and general and depreciation and amortization expense.

The decrease in operating expenses for the year ended December 31, 2025 compared to 2024 is due to decrease in office and general, depreciation expense and operating lease expense.

Expenses for the year ended December 31, 2025 primarily represented consulting fees of $171,237 (2024:

1 unchanged sentence

$476,994), legal and professional charges of $202,010 (2024:

$212,427) comprising legal, review, accounting and Edgar agent fee, travel expenses of $7,302 (2023:

$218,801) comprising legal, review, accounting and Edgar agent fee, travel expenses of $nil (2024:

$7,302), operating lease expenses of $193,947 (2024:

6 unchanged sentences

(5) no impairment of goodwill related to Canary’s acquisition and (6) significant decrease in exchange income during the year due to unfavorable exchange rate.

Other income and expenses comprised, change in fair value of derivative and warranty liability amounting to positive $374 (2023:

positive $7,238), gain on settlement of debt amounting to $36,511 (2023:

Loss on settlement of debt $1,571,742), interest and bank charges amounting to $1,153,574, (2023:

$1,410,974), exchange gain of $172,564 (2023:

loss of $51,811) other income of $nil (2023:

$16,782), interest income in the amount of $30,821 (2023:

$nil), impairment of goodwill in the amount of $nil (2023:

$nil) and share of income from joint venture of $nil (2023:

Other income and expenses comprised, change in fair value of derivative and warranty liability amounting to negative $140 (2024:

positive $374), gain on settlement of debt amounting to $nil (2024:

Gain on settlement of debt $36,511), interest and bank charges amounting to $1,044,219, (2024:

$1,153,574), exchange loss of $98,569 (2024:

income of $172,564), interest income in the amount of $34,062 (2024:

$30,821), impairment of goodwill in the amount of $nil (2024:

$nil), recovery of sales tax recoverable $653 (2024:

$6,089), and debt issuance cost $29,744 (2024:

Liquidity and Capital Resources

2 unchanged sentences

The Company is actively seeking various financing operations to meet the working capital requirements.

The Company anticipated that its future operations will generate positive cash flows starting in 2024 and it has generated $2,162,684 cash from operations for the year ended December 31, 2024.

The Company anticipated that its future operations will generate positive cash flows starting in 2026.

Statement of Cash Flow – For the years ended December 31, 2025 and 2024:

Operating activities

Operating activities provided cash of $2,162,684 compared to the cash used of $589,612 during the prior year.

This is due to managements efficient use of cash and the company has started to generate revenues.

Operating activities used cash of $842,425 compared to the cash provided of $2,162,684 during the prior year.

This is due to change in accounts receivable, accounts payable and accrued liabilities and inventory.

Investing activities

Investing activities used cash of $178,978 compared to cash provided of $416,932 during the prior year.

This was because the company have not received any proceeds from joint venture as it was terminated.

Investing activities provided cash of $81,379 compared to cash used of $178,978 during the prior year.

This was because the company have received the proceeds back from convertible note.

Financing activities

12 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Target Group, Inc.

and Subsidiaries

To the Board of Directors and Stockholders of Target Group Inc.

Opinion on the Financial Statements

28 unchanged sentences

Description of the Critical Audit Matter

As discussed in Notes 4 and 8 to the financial statements, company’s inventory consists of raw materials, finished goods and work-in-process.

Accumulated costs include direct and indirect labor, materials, utilities, facilities costs, quality and testing costs, production related depreciation and other overhead costs.

The valuation of inventory costs involves significant complexity and judgment in applying the relevant accounting standards when auditing management’s estimates and conclusions with regard to inventory balances.

As discussed in Notes 4 and 8 to the financial statements, the Company’s inventory consists of finished goods and work-in-process.

The Company utilizes an average cost methodology which relies on assumptions related to yield estimates, as well accumulated costs including direct labor and materials, and an allocation of indirect labor, material, and overhead costs.

The valuation of inventory involves significant complexity and judgment in applying the relevant accounting standards when auditing management’s estimates and conclusions with regard to inventory balances.

How the Critical Audit Matter Was Addressed in the Audit

26 unchanged sentences

Deferred revenue

Sales tax payable

Payable to related parties, net

16 unchanged sentences

Accumulated comprehensive loss

( 1,088,288 )

Total stockholders’ deficiency

23 unchanged sentences

Gain on settlement

( 1,571,742 )

Interest and bank charges

Exchange (income) loss

Exchange loss (income)

Interest income

Recovery of sales tax recoverable

Share of income from joint venture

Debt issuance cost

Total other expense (income)

Net income (loss) before income taxes

Net income (loss)

Total other expense

Net (loss) income before income taxes

( 1,359,682 )

Net (loss) income

( 1,359,682 )

Foreign currency translation adjustment

Comprehensive income (loss)

Earnings (loss) per share - basic

Weighted average shares - basic

Comprehensive (loss) income

( 1,555,319 )

loss per share - basic and diluted

Weighted average shares - basic and diluted

Earnings (loss) per share - diluted

10 unchanged sentences

( 1,359,682 )

Foreign currency translation

5 unchanged sentences

( 1,088,288 )

Shares issued for consideration of the intellectual property rights [Note 12]

( 6,972,697 )

Foreign currency translation

2 unchanged sentences

( 6,507,629 )

( 6,972,697 )

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

4 unchanged sentences

OPERATING ACTIVITIES

Net income (loss) for the year

Net (loss) income for the year

( 1,359,682 )

Adjustment for non-cash items

1 unchanged sentence

Gain on settlement

( 1,571,742 )

Shares and warrants issued/to be issued for services

Recovery of sales tax recoverable

1 unchanged sentence

Operating lease expense

Investment income from joint venture

Debt issuance cost

1 unchanged sentence

Change in accounts receivable - net of allowance

( 1,008,903 )

Change in other assets

5 unchanged sentences

Change in deferred revenue

Net cash provided (used) from operating activities

Net cash (used) provided from operating activities

INVESTING ACTIVITIES

Amounts invested on fixed assets

Net proceeds from joint venture

Advancement on convertible note

Recoverable expense

Net cash (used) provided by investing activities

Net cash provided (used) by investing activities

FINANCING ACTIVITIES

Proceeds from loans from related parties

Settlement of related party loan

Net cash (used) provided by financing activities

Net change in cash and restricted cash during the period

( 1,064,814 )

Net cash (used) by financing activities

( 1,064,814 )

Net change in cash and restricted cash during the year

( 1,825,860 )

Effect of foreign currency translation

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Cash and restricted cash, beginning of year

Cash and restricted cash, end of year

NON-CASH INVESTING AND FINANCING ACTIVITIES

20 unchanged sentences

$ 6,591,625 ).

As of the date of this report, the Company and its subsidiaries do not have any operations, employees or corporate offices based in United States.

Joint Venture Agreement Termination;

6 unchanged sentences

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.

During the term of the Joint Venture, the Company accounted for the transactions 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.

11 unchanged sentences

Going Concern

The Company has earned significant revenue during the year ended December 31, 2024.

The Company has earned revenue during the year ended December 31, 2025.

The Company had a working capital deficit of $ 11,052,097 and an accumulated deficit of $ 32,306,526 as of December 31, 2025.

19 unchanged sentences

The company records the allowance based on past history and if there are doubts on the recoverability.

As of December 31, 2024, the Company has recorded an allowance for those balances which it expects to be not recoverable.

On December 31, 2025 amounts due from two customers totaled approximately 45 % and 21 % of accounts receivable.

24 unchanged sentences

Identifiable intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for impairment whenever facts and circumstances indicate that their carrying values may not be fully recoverable.

The Company evaluates the recoverability of the infinite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.

The recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate.

If such a review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.

The Company evaluates indefinite-lived intangible assets for impairment in accordance with ASC 350.

A qualitative assessment is first performed to determine whether it is more likely than not that the asset’s fair value is less than its carrying amount.

If this assessment

indicates potential impairment, a quantitative test is performed by comparing the asset’s carrying amount to the estimated future undiscounted cash flows.

If the carrying amount exceeds the expected cash flows, an impairment loss is recognized for the amount by which the carrying value exceeds fair value.

Revenue Recognition

4 unchanged sentences

Control of the finished products is transferred upon shipment to, or receipt at, our customers’ locations, as determined by the specific terms of the contract.

Once control is transferred to the customer, we have completed our performance obligation, and revenue is recognized.

Once control is transferred to the customers, and the performance obligation is completed, revenue is recognized.

Payment for the Company’s products is generally due upon delivery or as specified in the contract with the customer.

Amounts received in advance of product delivery, including customer prepayments or deposits, are recorded as deferred revenue.

Deferred revenue is classified as a liability until the Company satisfies its performance obligations by delivering the related products to the customer.

The Company generated revenue of $ 3,881,003 during the year ended December 31, 2025, and $ 6,591,625 in 2024.

There is one customers whose revenue is more than 32% of the total revenue.

In addition, Canary generated revenue of $ nil (though its investment in JVCo) during the year ended December 31, 2024 (2023:

$ 791,285 ) and is represented as a share of income (losses) from joint venture on the consolidated statement of operations.

The revenue was concentrated to seventeen customers (2024:

twenty one ).

The revenue represents the sale of cannabis products.

Since the customers have received the product and there are no further obligations as per the agreement, revenue was recognized.

Refer to Note 13 for additional details.

Foreign Currency Translation

12 unchanged sentences

The Company places its cash with high-quality banking institutions.

The Company has cash balances in excess of the Federal Deposit Insurance Corporation limit as of December 31, 2024 whereas cash balances were not in excess of FDIC limit as of December 31, 2023.

The Company does no t have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December 31, 2025 and December 31, 2024.

Under ASC 740, “Income Taxes,” deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

11 unchanged sentences

Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Year ended December 31,

Net (loss) income

( 1,359,682 )

Net (loss) income used in EPS calculation

( 1,359,682 )

Share information:

Basic weighted average shares

Diluted weighted average shares

For the year ended December 31, 2025, basic and diluted EPS are same due to net loss result.

For the year ended December 31, 2024, basic and diluted EPS are different due to income.

For the year ended December 31, 2023, basic and diluted EPS are the same due to net loss result.

Convertible Notes Payable and Derivative Instruments

31 unchanged sentences

The derivative liabilities of the promissory convertible notes are valued Level 3, refer to Note 18 for further details.

Equity Method Investments

The Company uses the equity method of accounting for investments when the Company has the ability to significantly influence, but not control, the operations or financial activities of the investee.

As part of this evaluation, the Company considers the participating and protective rights in the venture as well as its legal form.

The Company records the equity method investments at cost and subsequently adjust their carrying amount each period for the Company’s share of the earnings or losses of the investee and other adjustments required by the equity method of accounting.

Distributions received from the equity method investments are recorded as reductions in the carrying value of such investments and are classified on the consolidated statements of cash flows pursuant to the cumulative earnings approach.

Under this approach, distributions received are considered returns on investment and are classified as cash inflows from operating activities unless the cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed the cumulative equity in earnings recognized from the investment.

When such an excess occurs, the current period distributions up to this excess are considered returns of investment and are classified as cash inflows from investing activities.

The Company monitors equity method investments for impairment and records reductions in their carrying values if the carrying amount of an investment exceeds its fair value.

An impairment charge is recorded when such impairment is deemed to be other than temporary.

To determine whether an impairment is other-than-temporary, we consider our ability and intent to hold the investment until the carrying amount is fully recovered.

Circumstances that indicate an impairment may have occurred include factors such as decreases in quoted market prices or declines in the operations of the investee.

The evaluation of an investment for potential impairment requires us to exercise significant judgment and to make certain assumptions.

The use of different judgments and assumptions could result in different conclusions.

The Company has not recorded any impairment losses related to our equity method investments during the year ended December 31, 2024 or in December 31, 2023.

Segment Reporting

The Company operates as a single operating segment in accordance with FASB ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

All financial information is presented on a consolidated basis and reviewed by Chief Executive Officer as the Chief Operating Decision Maker (CODM).

The CODM uses consolidated net loss, as presented in the consolidated statement of operations, to assess segment performance and allocate resources.

The following table presents the Company’s revenue by geographic region:

United Kingdom

The Company’s net (loss) income for the year ended is summarized in the table below.

December 31, 2025

December 31, 2024

Net (loss) income

( 1,359,682 )

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.

ASU 2023-07, Segment Reporting (Topic 280)

In November 2023, the FASB issued ASU No 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements.

The Company’s is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

ASU 2016-13 Current Expected Credit Loss (ASC326)

In December 2021, the FASB issued an update to ASU No.

2016-13 the Current Expected Credit Losses (CECL) standard (ASC 326), which is designed to provide greater transparency and understanding of credit risk by incorporating estimated, forward-looking data when measuring lifetime Estimated Credit Losses (ECL) and requires enhanced financial statement disclosures.

This guidance was adopted on January 1, 2023, and as a result allowance of $ 2,630 and $ 54,909 was recorded during the year ended December 31, 2024 and 2023 respectively.

ASU 2023-09, Income Taxes (Topic 740)

The FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures in December 2023 which amended income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid (“ASU 2023-09”).

The amendments in ASU 2023-09 are effective for public business entities for fiscal years beginning after December 15, 2025 and may be applied prospectively for interim reporting periods.

The Company has adopted as of the first quarter of 2025 ASU No.

2023-09, which had no impact on its consolidated financial position or results of operations and statement disclosures.

Convertible Note Receivable

1 unchanged sentence

The loan bears interest at 59.99 % per annum and has a six month term.

On November 20, 2024, the Company issued further $ 41,700 in loan receivable to Alma Cannabis PTY LTD.

As of December 31, 2024, the loan receivable was $ 139,000 .

As of December 31, 2024, the loan interest receivable was $ 29,334 .

During the year ended December 31, 2025, the Company received all of the outstanding principal and interest amount.

Accounts Receivable

1 unchanged sentence

As of December 31, 2025, the companys allowance for doubtful accounts was $ 2,761 .

The company recorded a bad debt expense of $ 2,630 for the year ended December 31, 2024 (December 31, 2023:

The company recorded a bad debt expense of $nil for the year ended December 31, 2025 (December 31, 2024:

As of December 31, 2025, the inventory in the amount of $ 1,669,053 (2024:

$ 1,215,928 ) consists of WIP and finished cannabis goods which is transferred from JVCo to Canary as a result of the Joint Venture Settlement Agreement, refer to Note 13 for additional details.

$ 882,279 ) consists of WIP and finished cannabis goods.

December 31, 2025

6 unchanged sentences

Sales Tax Recoverable

As of December 31, 2024, the Company had $ 59,469 of gross sales tax recoverable compared to $ nil as of December 31, 2023 while the Company had $ nil of gross sales tax payable as of December 31, 2024.

As of December 31, 2025, the Company had $ 67,256 of gross sales tax recoverable compared to $ 59,469 as of December 31, 2024 while the Company had $ nil of gross sales tax payable as of December 31, 2025.

The Company has recorded $ 6,750 of allowance as of December 31, 2025 (December 31, 2024:

Intangible Assets

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 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, both companies reached a settlement agreement to settle the breaches of the contract on July 27, 2020 (“Effective Date”).

As per the settlement agreement, the License Agreement has been terminated and the Company does 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 which commenced in April 2021 to cGreen.

This resulted in a gain on settlement of $ 1,704,860 .

As at December 31, 2024, there was no outstanding balance, the balance has been paid in full and the claim is closed during the quarter ended March 31, 2022.

The Company’s subsidiary, Canary, initiated construction on its leased 44,000 square foot cannabis cultivation facility in September of 2017.

6 unchanged sentences

JVCo has recorded a depreciation expense of $ 88,938 during the year ended December 31, 2025 (2024:

The Company’s other subsidiary, CannaKorp, has been utilizing its assets throughout the year and accordingly, has recorded depreciation expense of $ 111 during the year ended December 31, 2024 (2023:

The Company’s other subsidiary, CannaKorp, has been utilizing its assets throughout the year and accordingly, has recorded depreciation expense of $ nil during the year ended December 31, 2025 (2024:

Below is a breakdown of the consolidated fixed asset, category wise:

2 unchanged sentences

( 5,451,756 )

Joint Venture

Historical information

Effective May 14, 2020, Canary entered into the Joint Venture explained in Note 1.

Under the Joint Venture, JVCo was permitted to use the rooms, of Canary’s licensed cannabis cultivation facilities located in Simcoe, Ontario, Canada (“Licensed Site Portion”) to operate and manage the Licensed Site Portion for the cultivation and process of cannabis pursuant to Canary’s license issued by Health Canada.

During the term of the Joint Venture, JVCo was responsible for the administration, operation and management of the Licensed Site Portion and all proceeds from the sale of the cannabis and related cannabis products cultivated therein will be payable to the JVCo.

Canary, Thrive Cannabis, and JVCo entered into a Unanimous Shareholder Agreement dated May 14, 2020, governing the management and administration of the business of JVCo.

During the year ended December 31, 2024, the Joint Venture partners, Canary and Thrive Cannabis entered into an agreement.

Pursuant to this agreement the Company received a total of $ 1,552,080 (CAD 2,125,482 ) of which $ 1,002,758 (CAD 1,373,218 ) were reduced from investment in Joint Venture as these represented recovery of investment and $ 549,322 (CAD 752,264 ) were classified as other income representing recovery of interest expense charged on shareholder loan, which was primarily provided to support Joint Venture operations.

Also refer to shareholder loan in Note 16.

As per the Joint Venture, Canary provided the JVCo with a Hard Cost Loan with the maximum amount of $ 834,000 (CAD 1,200,000 ).

This loan bore an interest rate of 7 % per annum, matured in 12 months from the effective date, and was secured against the personal property of the JVCo and Thrive had guaranteed one-half ( 1/2 ) of the outstanding balance of the loan.

As of April 27, 2023, the loan advanced amounts to $ 232,825 (CAD 335,000 ) and interest income charged in the amount of $ 5,630 (CAD 7,710 ) is included in other income on the unaudited condensed consolidated interim statement of operations and comprehensive loss and interest receivable in the amount of $ 45,099 (CAD 64,890 ) was included in receivable from joint venture on the unaudited condensed consolidated interim

balance sheet.

After April 27, 2023, as mentioned above and further discussed below, JVCo become a subsidiary of the company as result the above loan and interest receivable were eliminated upon consolidation.

The Company recorded JVCo’s results through April 27, 2023 using the equity method and below is the table which summarizes the activity of the period (through April 27, 2023):

January 1 to April 27, 2023

Cost of goods sold

Operation expenses

Eligible recoverable expenses

Recoverable amount

Income on equity

Termination of joint venture agreement during quarter ended June 30, 2023

On April 27, 2023, Canary and Thrive Cannabis entered into a Release and Settlement Agreement (“Settlement Agreement”) in which Thrive Cannabis has transferred its shares in the capital of JVCo and rights of assets held by JVCo.

Pursuant to the above Settlement Agreement, Thrive Cannabis 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.

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.

Consolidation of JVCo into Canary

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 result’s of operations of the JVCo and eliminated any intercompany transactions and balances between the Company (Target and Canary) and JVCo.

As a consequence of the above Settlement Agreement and after obtaining 100 % shares of the JVCo, the Company acquired the following assets:

Investment in JV

Receivable from JV

Payable to JV

Cash received from Thrive

Assets acquired:

Accounts receivable

Net gain as per reconciliation

As of April 27, 2023, the Company had a carrying value of the investment in Joint Venture and receivable from Joint Venture on the consolidated balance sheets amounting to $ 1,023,608 and $ 706,598 , respectively.

Pursuant to the above Settlement Agreement, the Company received $ 776,382 against these balances.

Accordingly, the remaining balance of $ 953,824 was compared to the fair value of the net assets acquired and this resulted in net recognition of $ 1,571,742 as a non-operating gain reported in the Consolidated Statement of Operations as net gain from termination of the Joint Venture.

Business Acquisition

23 unchanged sentences

● Expected dividend rate of 0 %

During the year ended December 31, 2024, the Company has identified no circumstances which would call for further evaluation of goodwill impairment related to Canary (December 31, 2023:

the Company identified no circumstances that would call for an evaluation of goodwill impairment).

During the year ended December 31, 2025, the Company has identified no circumstances which would call for further evaluation of goodwill impairment related to Canary (December 31, 2024 the Company has identified no circumstances which would call for further evaluation of goodwill impairment related to Canary).

Only change in goodwill from 2023 to 2025 is due to exchange rate fluctuations.

8 unchanged sentences

If the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an impairment loss in the amount of the excess is recognized and charged to the statement of operations.

No impairment was recorded during the year ended December 31, 2025.

Accounts Payable and Accrued Liabilities

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During the year ended December 31, 2025, the Company expensed $ 405,316 (December 31, 2024:

$ 312,969 ) in management service fee for services provided by the current key officers of the company.

$ 476,994 ) in management service fee for services provided by the Vice president $ 182,128 , Controller $ 111,594 and the CEO $ 111,594 of the company.

The breakdown of the related party balance as of December 31, 2025, in the amount of $ 10,361,576 (December 31, 2024:

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This debt issuance cost will be amortized over the term of the debt on a straight-line basis.

As at December 31, 2024, the balance is $ 28,887 of which $ 28,887 is current while $ nil is non-current.

As at December 31, 2025, the balance is $ nil .

Shareholder loan

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Interest expense charged for the twelve months ended December 31, 2025, in the amount of $ 659,022 (CAD 920,905 ) is included in interest and bank charges on the consolidated statement of operations and comprehensive loss and accrued interest in the amount of $ 338,707 (CAD 464,237 ) is included in accounts payable and accrued liabilities on the consolidated balance sheet.

A Tenth Amending Agreement to the shareholder loan, previously filed as Exhibit 10.36, was executed on August 16, 2024, by and between Jerry Zarcone, the Company and its subsidiaries (“ Tenth Amendment ”), which extends the term of each of the First, Second, Third, Fourth, and Fifth Tranche, to a maturity date of May 31, 2025, or such earlier date as demanded by Mr.

A Eleventh Amending Agreement to the shareholder loan, previously filed as Exhibit 10.37, was executed on August 11, 2025, by and between Jerry Zarcone, the Company and its subsidiaries (“ Eleventh Amendment ”), which extends the term of each of the First, Second, Third, Fourth, and Fifth Tranche, to a maturity date of August 31, 2026, or such earlier date as demanded by Mr.

Outstanding management service fee

1 unchanged sentence

Balances outstanding related to subsidiaries

During the year ended December 31, 2019, the Company settled with the loan holders provided to the Company’s subsidiary, CannaKorp.The total amount subject to settlement was $ 817,876 which includes accrued interest and accrued payroll.

During the year ended December 31, 2019, the Company settled with the loan holders provided to the Company’s subsidiary, CannaKorp.

The total amount subject to settlement was $ 817,876 which includes accrued interest and accrued payroll.

The company settled by paying $ 954,374 as consideration of cash, 920,240 shares (recorded in shares to be issued) and warrants of 920,240 shares with an exercise price of $ 0.15 per share.

49 unchanged sentences

Gross rent and utilities expenses

Recoverable expenses from JVCo related to rent and utilities

As explained in Note 13, the agreement with JVCo is terminated so there is no recoverable expenses from JVCo related to rent and utilities.

The agreement with JVCo is terminated so there is no recoverable expenses from JVCo related to rent and utilities.

Convertible Promissory Notes

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As of December 31, 2025, convertible notes, warrants and preferred stock outstanding could be converted into 36,361,915 (December 31, 2024:

31,857,771 ), 10,200,004 (December 31, 2023:

46,957,062 ), nil (December 31, 2024:

10,200,004 ) and 100,000,000 (December 31, 2024:

17 unchanged sentences

The Company may issue additional shares of common stock which could dilute its current shareholder’s share value.

During the year ended December 31, 2024, there were no issuance of shares as the agreement was expired.

During the quarter ended March 31, 2023, the Company issued 15,624 shares of common stock to be issued as consideration of the intellectual property rights granted by Smit to the Company’s subsidiary, Canary.

These were recorded at a fair value of $ 63 , based on the market price of the Company’s stock on the date of the agreement.

These are currently recorded under shares to be issued and will be allocated between common stock and additional paid-in capital once the shares are issued.

During the quarter ended June 30, 2023, the Company issued 15,624 shares of common stock to be issued as consideration of the intellectual property rights granted by the President of Serious Seeds, Smit, to the Company’s subsidiary, Canary.

These were recorded at a fair value of $ 48 , based on the market price of the Company’s stock on the date of the agreement.

These are currently recorded under shares to be issued and will be allocated between common stock and additional paid-in capital once the shares are issued.

During the quarter ended September 30, 2023, the Company issued 15,624 shares of common stock to be issued as consideration of the intellectual property rights granted by the President of Serious Seeds, Simon Smit (“Smit”), to the Company’s subsidiary, Canary.

These were recorded at a fair value of $ 99 , based on the market price of the Company’s stock on the date of the agreement.

These are currently recorded under shares to be issued and will be allocated between common stock and additional paid-in capital once the shares are issued.

During the quarter ended December 31, 2023, the Company issued 15,624 shares of common stock to be issued as consideration of the intellectual property rights granted by the President of Serious Seeds, Simon Smit (“Smit”), to the Company’s subsidiary, Canary.

These were recorded at a fair value of $ 47 , based on the market price of the Company’s stock on the date of the agreement.

These are currently recorded under shares to be issued and will be allocated between common stock and additional paid-in capital once the shares are issued.

Shares to be issued include the following:

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The fair value is based on the market price of the Company’s stock on the date of issue as per the agreement.

As further explained in Note 19, the warrants (with an exercise price in United States Dollar) were re-classified as a liability as of December 31, 2019, and therefore have been revalued on each quarter end.

The warrants (with an exercise price in United States Dollar) were re-classified as a liability as of December 31, 2019, and therefore have been revalued on each quarter end.

The fair value of the warrants was measured on reporting dates using the Black-Scholes option pricing model using the following assumptions:

2 unchanged sentences

Exercise price

$ 0.300 to $ 0.350

358 % to 438 %

Risk free interest rate

66 unchanged sentences

Warrants as at December 31, 2023

( 43,749,997 )

Warrants as at December 31, 2024

( 10,200,004 )

Warrants as at December 31, 2025

10 unchanged sentences

During the year ended December 31, 2019, a terminated employee of Canary has filed a lawsuit against the Company amounting to approximately $ 1,529,414 (CAD 2,100,000 ) in Ontario, Canada.

Currently, the Company is defending its position and believes that the

ultimate decision will be in favor of the Company.

Currently, the Company is defending its position and believes that the ultimate decision will be in favor of the Company.

Due to the uncertainty of timing and the amount of estimated future cash flows, if any, relating to this claim, no provision has been recognized.

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Due to the uncertainty of timing and the amount of estimated future cash flows, if any, relating to this claim, no further amount has been recognized.

A claim for damages of $ 1,294,649 (CAD 1,862,805 ) was lodged against Company and its directors by the former Chief Financial Officer of the Company for wrongful dismissal.

The management is of the view that no material losses will arise in respect of the legal claim at the date of these consolidated financial statements.

As of December 31, 2024, $ 10,212 has been recorded in Target’s payable based on past accruals.

Due to the uncertainty of timing and the amount of estimated future cash flows, if any, relating to this claim, no further amount has been recognized.

During the year ended December 31, 2020, a claim for damages of $ 95,245 (CAD 130,778 ) was lodged against Canary by a vendor for breach of contract.

2 unchanged sentences

Due to the uncertainty of timing and the amount of estimated future cash flows, if any, relating to this claim, no further amount has been recognized.

As explained in Note 1, on July 27, 2020 (“Effective Date”), the Company entered into a settlement agreement with cGreen, Inc., a Delaware corporation (“cGreen”).

As consideration, the Company paid $ 130,000 within 30 days of the Effective Date and paid $ 100,000 in monthly installments of $ 10,000 commenced in April 2021 to cGreen.

During the quarter ended March 31, 2022, the outstanding balance has been paid in full and the claim is closed.

Covid-19 Pandemic

On March 11, 2020, the World Health Organization declared the ongoing coronavirus (“COVID-19”) outbreak as a global health emergency.

This resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including the closure of certain non-essential businesses.

Despite the WHO’s declaration, on or about May 5, 2023, of the end of the COVID-19 global pandemic, the lasting impacts of COVID-19 on the United States, Canada, and the broader global economy, including supply chain disruption, may have a significant continuing negative effect on the Company and may materially impact the Company in the future.

During the year ended December 31, 2024 and December 31, 2023, the pandemic and its lasting impacts did not have a material impact on the Company’s operations.

As of December 31, 2024 and December 31, 2023, the Company did not observe any material impairment of its assets or a significant change in the fair value of assets due to the COVID-19 pandemic or its lasting impacts.

The Company has taken, and will again, as necessary, continue to take, steps to minimize the potential impact of the pandemic and its lasting impacts, including safety measures with respect to personal protective equipment, the reduction in travel and the implementation of a virtual office including regular video conference meetings and participation in virtual customer meetings and other virtual events.

It is not possible to predict the lasting impacts that COVID-19 will have on the Company’s business, balance sheet and operating results in the future.

In addition, it is possible that estimates in the Company’s Financial statements will change in the near term as a result of the lasting impacts of COVID-19, and the effect of any such changes could be material, which could result in, among other things, impairment of long-lived assets including goodwill.

The Company is closely monitoring the lasting impacts of the pandemic on all aspects of its business.

As per the Distribution, Collaboration and Licensing Agreement (“ Serious Agreement ”) entered with Serious Seeds, effective December 6, 2018, the Company would issue to Serious Seeds each month 5,208 shares of common stock, beginning on the thirteen (13th) months following the effective date of the Serious Agreement and continuing through the sixtieth (60th) month of the initial term.

Furthermore, Serious Seeds would be issued warrants in each of the foregoing months to purchase 16,667 shares of Target common stock at varying

exercise prices ranging from $ 0.20 to $ 0.35 per share.

Furthermore, Serious Seeds would be issued warrants in each of the foregoing months to purchase 16,667 shares of Target common stock at varying exercise prices ranging from $ 0.20 to $ 0.35 per share.

All of the warrants must be exercised on or before the two ( 2 ) year anniversary date of each of the warrant issuance dates.

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3.00 % of gross sales

The provision for income taxes is calculated at a US corporate tax rate of approximately 21 % (2023:

21 %) as follows:

Expected income tax (expense) recovery from net (income) loss

Tax effect of expenses not deductible for income tax:

Annual effect of book/tax differences

Change in the valuation allowance

The Company’s income taxes is calculated at a US corporate tax rate of approximately 21 % (2024:

Deferred tax assets

14 unchanged sentences

All tax years since inception are open to examination because no tax returns have been filed.

Reconciliation between the statutory rate and the effective tax rate is as follows for the years ended December 31, 2025 and 2024:

Statutory tax rate

Change in valuation allowance

Effective tax rate

Subsequent Events

The Company’s management has evaluated subsequent events up to March 27, 2025, the date the consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has no subsequent event to report.

The Company’s management has evaluated subsequent events up to March 31, 2026, the date the consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the below material subsequent event to report:

The Company entered into a Twelfth Amending Agreement with the Lender mentioned in note 14 pursuant to which the Lender agreed to lend the Company an additional $ 240,768 (CAD 330,000 ).

The new loan carries interest at the rate of 3.0146 % per month.

The remaining terms and conditions of the Original Loan remain in full force and effect.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis