Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO Framework or COSO). Based on this evaluation, management has concluded that our internal control over financial reporting was not effective as of December 31, 2021. Management identified segregation of duties & maintenance of current accounting records as material weaknesses in internal control over financial reporting.
Management is in the continuous process of improving the internal control over financial reporting by engaging a Certified Public Accountant as a consultant to mitigate some of the identified weaknesses. The Company is still in its development stage and intends on bringing in necessary resources to address the weaknesses once full operations have commenced. Management concludes that internal control over financial reporting is ineffective on December 31, 2021.
Management’s Report of Internal Control over Financial Reporting
Our management carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, our chief executive officer and chief financial officer each concluded that as of the Evaluation Date, our disclosure controls and procedures are ineffective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting during its fourth fiscal quarter that have materially affected or are reasonably likely to materially affect, its internal control over financial reporting.
Item 9B. Other information
Not applicable.
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PART III
Item 10. Directors, Executive Officers, and Corporate Governance;
The Directors and Officers of the Company are as follows:
NAME
AGE
POSITIONS AND OFFICES HELD
Anthony Zarcone
48
Chief Executive Officer and Director
Barry Alan Katzman
62
Director
Saul Niddam
65
Director
Frank Monte
63
Director
Management of Target Group Inc.
Set forth below are the names of the directors and officers of the Company, all positions and offices with the Company held, the period during which they have served as such, and the business experience during at least the last five years:
Anthony Zarcone
Anthony Zarcone serves as the Chief Executive Officer and as a director of the Company. He is an entrepreneur, property manager and co-founder of a food retail/wholesale business in southern Ontario, Canada.
Barry Alan Katzman
Barry Alan Katzman serves as a director of the Company. Mr. Katzman was the President and CEO of Tidal Health Solutions, a licensed premium medical cannabis company based in New Brunswick, Canada specializing in hospital-grade medical cannabis.
Saul Niddam
Saul Niddam serves as a director of the Company. He is the President of Norlandam Marketing Inc., a sales and marketing agency catering to national brands across North America. Mr. Niddam is also the Chief Executive Officer of the Company’s subsidiary, CannaKorp Inc.
Frank Monte
Frank Monte serves as a director of the Company. He is the principal owner and managing director of Brands Gone Wild of Brampton, Ontario, Canada which operates retail outlets through Canada.
Term of Office
Our director is appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. Our officers, if any, are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. We have not compensated our directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay directors’ fees and reimburse Directors for expenses related to their activities.
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None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
Audit Committee
At the present time, we do not have a standing audit committee of the Board of Directors. Management has determined not to establish an audit committee at present because of our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the Board of Directors or employed as an officer based on management’s belief that the cost of obtaining the services of a person who meets the criteria for a financial expert under Item 401(e) of Regulation S-B is beyond its limited financial resources and the financial skills of such an expert are simply not required or necessary for us to maintain effective internal controls and procedures for financial reporting in light of the limited scope and simplicity of accounting issues raised in its consolidated financial statements at this stage of its development. We have not formed a Compensation Committee, Nominating and Corporate Governance Committee or any other Board Committee as of the filing of this Annual Report.
Certain Legal Proceedings
No director, nominee for director, or executive officer of the Company has appeared as a party in any legal proceeding material to an evaluation of his ability or integrity during the past five years.
Compliance with Section 16(a) of the Exchange Act
Our common stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, (“Exchange Act”). Our officers, directors and persons who beneficially hold more than 10% of our issued and outstanding equity securities are required to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Except as noted below, as of the date of this report, all persons required to file a report pursuant to Section 16 of the Exchange have filed the required reports.
Delinquent Section 16(a) Reports
There are no delinquent Section 16 (a) reports by those persons required to file under Section 16 of the Securities Exchange Act of 1934, as amended.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics (“Code”) that applies to our officers, directors and employees including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. A copy of the Code will be provided to any person upon request, without charge. A request for a copy of the Code should be addressed in writing to the Company at 35 Second Avenue West, Simcoe, Ontario, Canada N3Y 4L5.
Item 11. Executive Compensation
The Company has not to the date paid any compensation to any officer or director. The Company intends to pay annual salaries to all its officers and will pay an annual stipend to its directors when, and if, it completes a primary public offering for the sale of securities and/or the Company reaches profitability, experiences positive cash flow and/or obtains additional funding. At such time, the Company anticipates offering cash and non-cash compensation to officers and directors. In addition, although not presently offered, the Company anticipates that its officers and directors will be provided with a group health, vision, and dental insurance program at subsidized rates, or at the sole expense of the Company, as may be determined on a case-by-case basis by the Company in its sole discretion.
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Directors Compensation
Fees Earned
Non-equity
Change in
or Paid in
Stock
Option
Incentive Plan
Pension
All Other
Name
Cash
Awards
Awards
Compensation
Value
Compensation
Total
Anthony Zarcone
$106,225 (CAD 135,000)
─
─
─
─
─
$106,225 (CAD 135,000)
Barry Alan Katzman
─
─
─
─
─
─
─
Saul Niddam
─
─
─
─
─
─
─
Frank Monte
─
─
─
─
─
─
─
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information as of March 18, 2022, regarding the beneficial ownership of our Common Stock by (i) our named executive officer, (ii) each of our directors, and (iii) each person we know to beneficially own more than 5% of our outstanding Common Stock. All shares of our Common Stock shown in the table reflect sole voting and investment power.
Percent of
Common shares
Common shares
beneficially owned
Name and Address of Beneficial Owner
Position
beneficially owned
(1)
Anthony Zarcone 35 Second Avenue West, Simcoe, Ontario, Canada N3Y 4L5
Chief Executive Officer and Director
10,259,300
(2)
1.66
%
Barry Alan Katzman 35 Second Avenue West, Simcoe, Ontario, Canada N3Y 4L5
Director
─
*
Saul Niddam 35 Second Avenue West, Simcoe, Ontario, Canada N3Y 4L5
Director
1,666,687
*
Frank Monte 35 Second Avenue West, Simcoe, Ontario, Canada N3Y 4L5
Director
─
*
Oakland Family Trust 3448 Lakeshore Road, Burlington, Ontario, Canada L7N 1B3
50,129,355
8.12
%
Total owned by officers and directors
11,925,987
1.93
%
* indicates less than 1%.
(1)
Based on 617,025,999 shares outstanding as of the date of this Report.
(2)
9,259,300 shares are held by The PJB Trust of which Anthony Zarcone is the Trustee.
Item 13. Certain Relationships and Related Transactions and Director Independence
Director Independence
Of our current directors, only Frank Monte is considered an “independent director” because he is not an executive officer of the Company or any of its subsidiaries. Barry Katzman is not considered independent because he is chairman of the Joint Venture (JVCo)’s board where Canary holds 50% of the voting equity interest in JVCo. Saul Niddam is not considered independent because he is the sole executive officer and director of CannaKorp. Inc., the Company’s wholly-owned subsidiary. In determining whether a director is “independent” the Company follows the criteria established by NASDAQ.
Certain Relationships and Related Transactions
Effective December 20, 2019, Jerry Zarcone, the brother of Anthony Zarcone, the Chief Executive Officer (CEO) and a director of the Company, entered into a loan agreement with the Company pursuant to which Jerry Zarcone agreed to loan the Company up to $2,000,696 (CAD 2,536,380) for working capital purposes. The loan was provided in two tranches with one bearing an annual interest rate of 16% while the other bearing an annual interest rate of 43.26%. The loan is secured by all assets owned by the Company and its
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subsidiaries including leasehold improvements and matures on June 1, 2023. Additional detail is provided in Note 14. The full text of the loan agreement is included in this report as Exhibit 10.20, 10.21, 10.22 and 10.23.
Effective April 20, 2020, the Company issued its promissory note (“Note”) to one of the Company’s shareholders, Frank Zarcone, in the principal amount of $236,993. The Note contained an original issue discount of $15,300 resulting in net proceeds to the Company of $221,693. The Note carried interest at the rate of 12% per annum and the note matured on April 20, 2021. During the quarter ended, September 30, 2020, the Company paid the outstanding balance and accrued interest in full, in the amount of $251,213. The full text of the loan agreement is included in this report as Exhibit 10.24.
On June 15, 2020, the Company, and its subsidiaries, entered into a Debt Purchase and Assignment Agreement (“Agreement”) with CL Investors Inc. (“CLI). June 15th was the preliminary date of the agreement, and the agreement was not finalized until the later date as indicated below. The CEO of the Company is a director of the Company, the Secretary of CLI, a shareholder of CLI and the brother of the CEO is the President and sole director of CLI therefore the loan from CLI is classified under related party transactions.
Pursuant to the Agreement, CLI purchased from the Company for the sum of $2,287,520, (CAD 2,900,000) a debt obligation owing from Canary to the Company in the principal balance of $8,361,280 (CAD 10,600,000 (“Canary Debt”)). Upon receipt of the consideration, the Company loaned the full sum to Canary under terms of an unsecured, non-interest-bearing promissory note, subject to a covenant by the Company not to take any collection action so long as the Canary Debt remains unpaid to CLI.
The Canary debt owed to CLI from Canary bears an interest rate of 5% per annum and matures on August 14, 2025. The repayment of the debt is guaranteed by the Company and its subsidiaries plus secured by a general security interest in the assets of the Company and its subsidiaries and a pledge by the Company of all of the issued and outstanding common stock of Canary, Visava and CannaKorp Inc. held by the Company. In addition to the above, CLI has been granted an option, in lieu of repayment of the amended Canary Debt, to demand, in its sole and absolute discretion the transfer, assignment and conveyance of 75% of the issued and outstanding capital stock of Visava and Canary. Furthermore, the President and sole director of CLI has been granted an option to acquire the remaining 25% of the issued and outstanding capital stock of Visava and Canary.
Effective August 14, 2020, the Agreement was amended (“Amendment”) to provide that CLI will purchase from Rubin Schindermann, a director of the Company, 500,000 shares of the Company’s Series A Preferred Stock in consideration of the payment by CLI to Rubin Schindermann of $78,880 (CAD 100,000) and the issuance to Mr. Schindermann of 10,000,000 shares of the Company’s common stock. In consideration of the foregoing, Mr., Schindermann resigned as a director of the Company and from any and all administrative and executive positions with the Company’s subsidiaries. In addition, the Company issued Common Stock Purchase Warrant for 10,000,000 shares of Target common stock to CLI as consideration for the Agreement. The full text of the loan agreement is included in this report as Exhibit 10.26 and 10.27.
Item 14. Principal Accounting Fees and Services.
Our auditor, Fruci & Associates II, PLLC , is the registered independent accounting firm.
Audit Fees
We were billed $53,250 and $53,250 for years ended December 31, 2021 and 2020 respectively for professional services rendered for the audit of our consolidated financial statements.
Audit Related Fees
There were no other audit related fees for years ended December 31, 2021 and 2020.
Tax Fees
There were no tax fees for years ended December 31, 2021 and 2020.
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All Other Fees
There were no other fees for years ended December 31, 2021 and 2020.
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as part of this Annual Report on Form 10-K
(a) Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Financial Statements for the years ended December 31, 2021 and 2020
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations and Comprehensive Loss
F-5
Consolidated Statement of Stockholders’ Equity
F-6
Consolidated Statements of Cash Flows
F-7
Notes to Consolidated Financial Statements
F-8
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(b) Exhibits
EXHIBIT INDEX
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
09/13/13
3(i)(a)
Amended Articles of Incorporation*
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
09/13/13
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
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Table of Contents
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
10.285
05/07/21
31.1*
Certification of Principal Executive Officer and 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*
101.SCH
XBRL Taxonomy Extension Schema*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase*
101.DEF
XBRL Taxonomy Extension Definition Linkbase*
101.LAB
XBRL Taxonomy Extension Label Linkbase*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase*
104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
* Filed herewith
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 18, 2022
TARGET GROUP INC.
By:
/s/ Anthony Zarcone
Anthony Zarcone
Chief Executive Officer, Principal Financial Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
Chief Executive Officer and
/s/ Anthony Zarcone
Director
March 18, 2022
Anthony Zarcone
/s/ Barry Alan Katzman
Director
March 18, 2022
Barry Alan Katzman
/s/ Saul Niddam
Director
March 18, 2022
Saul Niddam
/s/ Frank Monte
Director
March 18, 2022
Frank Monte
29
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.