What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-17 compared with 2022-03-18 · 177 added, 315 removed, 894 unchanged (35% of the section changed)

3 unchanged sentences

The Company’s independent auditors have issued a report raising substantial doubt about the Company’s ability to continue as a going concern.

At present, the Company has begun its operations at its Simcoe Facility cultivating Premium Cannabis and started generating revenue within the Canadian wholesale cannabis market.

At present, the Company is running its operations at its Simcoe Facility cultivating Premium Cannabis and started generating revenue (though its investment in JVCo) within the Canadian wholesale cannabis market.

However, the continuation of the Company as a going concern is dependent upon these operations successfully generating cashflow for the Company, financial support from its stockholders, its ability to obtain necessary equity financing to continue operations and/or to successfully locate and negotiate with a business entity for the combination of the target company with the Company.

2 unchanged sentences

On December 31, 2022, we had cash of $223,843 (excluding restricted cash of $8,490) compared to $113,079 (excluding restricted cash of $9,072) as of December 31, 2021.

The decrease is due to investment in the joint venture which reflects payments of salaries, rent, and other operating expenses of our subsidiary, Canary, and payment towards outstanding payables during the period offset by proceeds from private placement during the current year ended.

The increase is due to increased cash being provided by investment in the joint venture which reflects net recovery of payments of salaries, rent, and other operating expenses of our subsidiary, Canary, and additional loan provided by a related party offset by payments of a loan to a different related party.

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

Prepaid asset

1 unchanged sentence

The balance represents the security deposit for the leased land for the facility to produce Medical Marijuana.

Sales tax recoverable

As of December 31, 2021, the Company had $22,146 of gross sales tax recoverable compared to $95,386 as of December 31, 2020.

This is due to the sales tax paid on expenses incurred during the year which are recoverable from the government.

The Company has recorded an allowance in the amount of $509 (2020:

$19,924) stemming from potentially uncollectible balances within the outstanding sales tax recoverable amount.

Goodwill and intangible assets

Sales tax recoverable and payable

As of December 31, 2022, the Company had $nil of gross sales tax recoverable compared to $22,146 as of December 31, 2021 while the Company had $35,254 of gross sales tax payable as of December 31, 2022.

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.

Sales tax recoverable allowance on December 31, 2022 is $nil (December 31, 2021:

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of our subsidiaries at the date of acquisition.

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

Since then, extensive demolition and structural upgrades have been carried out at the site.

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.

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

1 unchanged sentence

Accounts payable and accrued liabilities

Accounts payable amounting to $2,296,935 as of December 31, 2022, primarily represents consulting and construction services related to fixed asset additions amounting to $154,811, interest on promissory notes and loans amounting to $739,130, outstanding and accrued professional fees amounting to $906,596.

Accounts payable amounting to $2,885,909 as of December 31, 2021, primarily represents customer advance for sales amounting to $394,400, consulting and construction services related to fixed asset additions amounting to $163,101, interest on promissory notes and loans amounting to $952,376, outstanding and accrued professional fees amounting to $973,017.

Accounts payable amounting to $1,809,120 as of December 31, 2020, primarily represents consulting and construction services related to capital work in progress amounting to 141,935, interest on promissory notes and loans amounting to $403,865, and outstanding plus accrued professional fees of $1,002,098.

Payable to related parties

4 unchanged sentences

Interest amounting to $37 was accrued for the year ended December 31, 2022 (2021:

The principal amount outstanding as of December 31, 2021 and 2020 was $480 and $3,128, respectively.

As of December 31, 2021 and 2020, the entire balance was current.

During the year ended December 31, 2021, the Company converted the outstanding principal balance of Note K.

The principal amount outstanding as of December 31, 2022 and 2021 was $480.

At both reporting dates, the entire balance was current.

All notes maturing prior to the date of this report are outstanding.

1 unchanged sentence

Revenues for the years ended December 31, 2022 and 2021

The Company did not generate revenue during the current year ended as compared to $30,000 revenue during the comparable period ended in 2020.

The revenue represented the sale of Wisp™ vaporizer and pod units.

The Company did not generate revenue during the current or the comparable year ended in 2021.

However, Canary generated revenues of $3,916,539 (though its investment in JVCo) during the current year ended (2021:

$2,198,592) 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 ten customers (2020:

The revenue represents the sale of cannabis product, and the entire revenue was sold to thirteen customers (2021:

Expenses for the years ended December 31, 2022 and 2021

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

The decrease in operating expenses for the year ended December 31, 2021 compared to 2020 is due to a lower level of activity compared to prior year, the management’s continuous efforts to control and reduce expenses, and Canary’s investment in the joint venture which is incurring the operation expenses of Canary.

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

The decrease in operating expenses for the year ended December 31, 2022 compared to 2021 is due to decrease in consulting expenses, management fees and depreciation and amortization expense.

Expenses for the year ended December 31, 2022 primarily represented consulting fees of $18,926 (2021:

1 unchanged sentence

$149,819), legal and professional charges of $243,670 (2021:

$477,539) comprising legal, review, accounting and Edgar agent fee, amortization and depreciation expense amounting to $971,524 (2020:

Changes in other income and expenses were due to the revaluation of the warrant and convertible debt liabilities on each quarter-end, loans charging interest expense for the full period compared to a partial period in the comparable period and started to earning net income from the joint venture, as a result, the share of loss has reduced.

$232,151) comprising legal, review, accounting and Edgar agent fee, depreciation expense amounting to $885,229 (2021:

Changes in other income and expenses were due to:

(1) the revaluation of the warrant and convertible debt liabilities on each quarter-end which reduced significantly in magnitude since a significant number of warrants expired during the current year ended;

(2) increase in the principal balance of higher interest rate bearing loans led to increased interest expense;

(3) started to earning net income from the joint venture, as a result, the share of income has increased significantly;

(4) the recovery of interest expense charged on shareholder loan from JVCo operations caused a significant increase in other income;

(5) impairment of goodwill related to Canary’s acquisition and (6) significant increase in exchange income during the year due to favorable exchange rate.

Other income and expenses comprised, change in fair value of derivative and warranty liability amounting to positive $14,383 (2021:

positive $3,228,622), (gain) loss on settlement of debt amounting to $(26,049) (2020:

positive $2,930,894), (gain) loss on settlement of debt amounting to $nil (2021:

$(26,049)), interest and bank charges amounting to $1,121,595 (2021:

$514,028), accretion expenses of $nil (2020:

$27,704) related to promissory notes and share of loss from joint venture of $272,995 (2020:

In addition, impairment of goodwill in the amount of $nil (2020:

$985,634), exchange income of $126,314 (2021:

loss of $73,163) other income of $811,464 (2021:

30,769), impairment of inventory in the amount of $99,000 (2021:

$nil), impairment of goodwill in the amount of $3,315,749 (2021:

$nil) and share of income from joint venture of $354,736 (2021:

loss of $272,995).

Liquidity and Capital Resources

7 unchanged sentences

Statement of Cash Flow – For the years ended December 31, 2022 and 2021:

Net cash used in operating activities

Operating activities provided cash of $100,118 compared to the usage of cash of $1,433,169 during the prior year.

This improvement is due to the management’s efficient use of cash and Canary starting to generate sales through the JVCo compared to the prior year.

Net cash used in investing activities

Investing activities used cash of $1,405,966 compared to $976,355 during the prior year.

The current period cash utilization represents improvements to Canary’s facility to increase its efficiency and increase cannabis production, and investment made in the JVCo by way of paying operating expenses such as salaries, rent, utilities, etc., which will be reimbursed by the JVCo in the future.

Net cash from financing activities

Operating activities

Operating activities used cash of $1,014,828 compared to the provided cash of $100,118 during the prior year.

This is primarily due to the payments of a number of outstanding balances in accounts payable and accrued liabilities.

Investing activities

Investing activities provided cash of $1,015,040 compared to usage of $1,405,966 during the prior year.

The current period cash generation represents the recovery of investment and increased revenue generated by the JVCo offset by improvements to Canary’s facility to increase its efficiency and increase cannabis production, and investment made in the JVCo by way of paying operating expenses such as salaries, rent, utilities, etc., which will be reimbursed by the JVCo in the future.

The switch from using cash to providing cash is due to the JVCo starting to generate sales leading to reduced funding towards JVCo.

Financing activities

Financing activities provided cash of $122,674 compared to $1,251,489 for the corresponding period of the prior year.

During the current period, cash was primarily provided by private placements offset by settlement payments to one party while in the prior period, loans were received from multiple related parties offset by a number of settlements payments to multiple parties.

During the current period, cash was provided by a loan advance from a related party offset by payment to another related party while in the prior period, cash was primarily provided by proceeds from private placements.

Consolidated Financial Statements and Supplementary Data

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Target Group, Inc.

(“the Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements).

( “ the Company ” ) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, consolidated statements of stockholders ’ deficit, and consolidated statements of cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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As discussed in Note 3 to the financial statements, the Company has an accumulated deficit, net losses, and negative cash flows from operations.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

These factors, among others, raise substantial doubt about the Company ’ s ability to continue as a going concern.

Management ’ s plans in regard to these matters are also described in Note 3.

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These financial statements are the responsibility of the Company ’ s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

Our responsibility is to express an opinion on the Company ’ s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company ’ s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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As discussed in Note 12 to the consolidated financial statements, goodwill is tested for impairment annually, or more frequently if impairment indicators arise.

During the year ended December 31, 2021, the Company recorded no impairment charge.

During the year ended December 31, 2022, an Impairment loss was recorded in the amount equal to the excess amount over goodwill carrying value.

Auditing management's goodwill impairment test was complex and highly judgmental due to the significant estimation required to determine the fair value of the goodwill and underlying business unit.

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TARGET GROUP INC.

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

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Total long term assets

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities

1 unchanged sentence

Accounts payable and accrued liabilities

Deferred revenue

Settlement payable - Current portion

Settlement payable

Sales tax payable

Payable to related parties, net

4 unchanged sentences

Long term liabilities

Settlement payable - Non-current portion

Payable to related parties, net - Non-current portion

3 unchanged sentences

Total liabilities

Contingencies and commitments

Stockholders ‘ deficiency

Preferred stock, $ 0.0001 par value, 20,000,000 shares authorized;

1,000,000 shares issued and outstanding as at December 31, 2021 and 2020

Common stock, $ 0.0001 par value, 850,000,000 shares authorized, 617,025,999 common shares outstanding as at December 31, 2021 573,277,094 common shares outstanding as at December 31, 2020

Preferred stock

Shares to be issued

5 unchanged sentences

( 1,110,720 )

( 1,174,969 )

Total stockholders' deficiency

2 unchanged sentences

Total liabilities and stockholders' deficiency

Contingencies and commitments

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

3 unchanged sentences

December 31, 2021

COST OF GOOD SOLD

OPERATING EXPENSES

3 unchanged sentences

Legal and professional fees

Advertising and promotion

Amortization and depreciation expense

Depreciation expense

Operating lease expense

4 unchanged sentences

( 2,930,894 )

( 3,228,622 )

(Gain) loss on settlement

Gain on settlement

Interest and bank charges

Exchange loss

Accretion expense

Allowance for sales tax recoverable

Exchange (income) loss

Recovery of sales tax recoverable

Impairment of inventory [Note 8]

Impairment of goodwill

Share of loss from joint venture

Share of (income) loss from joint venture

Debt issuance cost

Total other (income) expenses

Total other expense (income)

( 1,622,576 )

Net income (loss) before income taxes

Net (loss) income before income taxes

( 4,520,064 )

Net income (loss)

Net (loss) income

( 4,520,064 )

Foreign currency translation adjustment

Comprehensive income (loss)

Comprehensive (loss) income

( 4,408,173 )

Earnings (loss) per share - basic and diluted

(Loss) earnings per share - basic and diluted

Weighted average shares - basic and diluted

9 unchanged sentences

( 2,152,112 )

Shares issued on conversion of convertible promissory notes [Note 11]

Shares issued as consideration for consideration of the intellectual property rights [Note 17]

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

( 4,520,064 )

Cancellation of shares [Note 10 and 11]

( 4,520,064 )

Change due to extinguishment of derivative liability on debt conversion

Foreign currency translation

2 unchanged sentences

( 6,559,825 )

( 2,152,112 )

As at December 31, 2019 (Reported)

( 19,462,624 )

Reclassification of warrant liability [Note 14]

As at December 31, 2020

( 26,536,495 )

( 1,174,969 )

As at December 31, 2019 (Restated)

( 3,521,219 )

1 unchanged sentence

( 1,000,001 )

Shares issued as consideration for consideration of the intellectual property rights [Note 11]

Execution of the settlement agreement [Note 11]

( 3,500,000 )

Shares issued as consideration for consideration of the intellectual property rights

Shares issued on conversion of convertible promissory notes [Note 11]

Shares and warrants issued pursuant to debt purchase and assignment agreement [Note 11]

Correction to the number of shares to be issued for past private placements [Note 11]

Extinguishment of derivative liability upon conversion of notes

Shares issued for prior private placements

( 44,573,807 )

( 1,070,197 )

Private placement held during the period

Foreign currency translation

9 unchanged sentences

OPERATING ACTIVITIES

Net income (loss) for the year

Net (loss) income for the year

( 4,520,064 )

2 unchanged sentences

( 2,930,894 )

( 3,228,622 )

(Gain) loss on settlement

Accretion expense

Gain on settlement

Shares and warrants issued/to be issued for services

Allowance for sales tax recoverable

Amortization and depreciation expense t

Recovery of sales tax recoverable

Depreciation expense

Operating lease expense

Investment loss from joint venture

Investment (income) loss from joint venture

Debt issuance cost

Impairment of inventory

Impairment of goodwill

Changes in operating assets and liabilities:

Change in inventory

Change in prepaid asset

3 unchanged sentences

Change in operating lease liability, net

Net cash used in operating activities

Net cash (used in) provided by operating activities

( 1,014,828 )

1 unchanged sentence

Amounts invested on fixed assets

Investment in joint venture

Proceeds from (investment in) joint venture

( 1,417,842 )

Net cash used in investing activities

Net cash provided by (used in) investing activities

( 1,405,966 )

FINANCING ACTIVITIES

(Repayment) of bank overdraft facility

Utilization of bank overdraft facility

Proceeds from loans from related parties

Loan to joint venture

Settlement of promissory notes

Settlement of related party loan

Proceeds from private placements

Payment for settlement payable

Settlement of related party loan

Net cash provided by financing activities

Net (decrease) increase in cash and restricted cash during the year

Net increase (decrease) in cash and restricted cash during the year

Effect of foreign currency translation

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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 commencing in April 2021 to cGreen resulting in a gain on settlement in the amount of $ 1,704,860 .

As of December 31, 2021, the outstanding balance is $ 10,000 of which $ 10,000 (December 31, 2020:

$ 90,000 ) is current and $nil (December 31, 2020:

$ 10,000 ) is non-current.

Nabis Holding Sales Agreement

Effective September 17, 2019, CannaKorp entered into a Purchase, Licensing and Distribution Agreement (“Agreement”) with Nabis Arizona Property LLC of Scottsdale, Arizona (“Nabis”) concerning the distribution of CannaKorp’s Wisp ™ Vaporizer and Wisp™ Pods in Arizona.

The term of the Agreement was three ( 3 ) years with automatic renewals for additional one-year periods unless the Agreement is terminated pursuant to its terms.

Nabis was required to pay CannaKorp $ 45,000 for the equipment needed to manufacture the WISP(TM) Pods, of which $ 4,500 would be paid within three ( 3 ) calendar days of Nabis obtaining regulatory approval of its vertically integrated license and the balance of $ 40,500 within 180 days of the effective date of the Agreement.

Under the Agreement, Nabis was licensed to manufacture the WISP™ Pods and to sell the WISP™ Pods in conjunction with the sale of the WISP™ Vaporizer .

Nabis was required to meet minimum quarterly orders of two hundred ( 200 ) WISP™ Vaporizers and five thousand ( 5,000 ) WISP™ Pods cartridges .

Nabis was licensed to sell the WISP™ Vaporizer and the WISP™ Pods to end users in Arizona, excluding Amazon, eBay, Walmart or other multistate/national brick and mortar or online sales.

CannaKorp had granted Nabis a right of first refusal to obtain an exclusive license in Michigan and Washington for the same rights granted to Nabis in Arizona.

During the year ended December 31, 2020, the equipment to Nabis has been shipped and the Company has provided Nabis an additional 360 days before invoicing Nabis for the equipment.

Once the additional period had passed, the Company would invoice Nabis.

Additionally, in the first quarter of the Nabis agreement minimum quantities were shipped and invoiced (200 Wisp Units and 5000 Pod Assemblies to enable Nabis to manufacture 5000 complete Wisp Pods) for online and retail distribution in the Arizona Market.

Due to financial strain and difficulties during the pandemic, Nabis was forced to restructure its company in its entirety.

This caused strain on the financial position of Nabis and affected its ability to fulfill its commitments in the agreement signed with CannaKorp.

At this time, the partnership has since been terminated and all of CannaKorp’s CannaMatic machinery has now been sent back to CannaKorp.

As of the date of this report, the Company (i.e.

Target Group Inc.

and its subsidiaries) does not have any operations, employees or corporate offices based in United States.

As at December 31, 2022, there was no outstanding balance, the balance has been paid in full and the claim is closed during the quarter ended March 31, 2022 (December 31, 2021:

Joint Venture Agreement

Effective May 14, 2020, Canary entered into a Joint Venture Agreement (“Joint Venture”) with 9258159 Canada Inc., a corporation organized under the laws of the Province of Ontario, Canada (referred to as “Thrive”) and 2755757 Ontario Inc., a corporation organized

under the laws of the Province of Ontario, Canada (referred to as “JVCo”).

Canary and Thrive each hold 50% of the voting equity interest in JVCo.

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and secured by (i) a general security interest in the assets of the Company, Canary, Visava and CannaKorp Inc., respectively;

pledge by the Company of all of the issued and outstanding common stock of Canary, Visava and CannaKorp Inc.

and (ii) a pledge by the Company of all of the issued and outstanding common stock of Canary, Visava and CannaKorp Inc.

held by the Company.

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These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects and have been consistently applied in preparing the accompanying consolidated financial statements.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Visava Inc.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Visava Inc.

and CannaKorp, Inc.

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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.

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.

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

The Company did not generate any revenue during the year ended December 31, 2021, as compared to $ 30,000 revenue during the comparable period ended in 2020.

The revenue represented the sale of Wisp™ vaporizer and pod units.

Since the customer had received the units and there are no further obligations as per the agreement, revenue was recognized.

The Company did not generate any revenue during the year ended December 31, 2022, and 2021.

In addition, Canary generated revenue of $ 3,916,539 (though its investment in JVCo) during the year ended December 31, 2022 (2021:

$ 2,198,592 ) and is represented as a share of income (losses) from joint venture on the consolidated statement of operations.

The revenue was concentrated to ten customers (2020:

The revenue was concentrated to thirteen customers (2021:

The revenue represents the sale of cannabis products.

1 unchanged sentence

Refer to Note 11 for additional details.

Deferred revenue is due to a shipment sent to one of the Company's distributors.

However, since control has not been transferred and the performance obligation has not been completed, revenue has not been recognized and proceeds received are classified as deferred revenue.

During the year ended December 31, 2021, the Company was able to settle the payment for $ 27,500 leading to a gain of $ 15,219 and resulting in reducing deferred revenue to zero .

FOREIGN CURRENCY TRANSLATION

1 unchanged sentence

In addition, effective April 1, 2019, the Company changed its functional currency from United States Dollar to Canadian Dollar thereby having an impact on additional paid-in capital and accumulated comprehensive income (loss).

The presentation currency of the Company has remained unchanged at United States Dollar.

The presentation currency of the Company

has remained unchanged at United States Dollar.

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.

22 unchanged sentences

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

During the year ended December 31, 2021, diluted EPS excludes the change due in fair value of derivative value and gain on settlement of debt which is causing the operating loss to turn into a net income, resulting in the basic and diluted EPS being the same for this period.

Convertible promissory notes, warrants and preferred stock as of December 31, 2021, are likely to be converted into shares of common stock, however, due to losses (after adjusting for change due in fair value of derivative value and gain on settlement of debt), their effect would be anti-dilutive.

Refer to Note 17 for additional details.

For the year ended December 31, 2022, basic and diluted EPS are the same due to net loss result.

For the year ended December 31, 2021, diluted EPS excludes the change due in fair value of derivative value and gain on settlement of debt which is causing the operating loss to turn into a net income, resulting in the basic and diluted EPS being the same for this period.

CONVERTIBLE NOTES PAYABLE AND DERIVATIVE INSTRUMENTS

3 unchanged sentences

ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40.

The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features.

The Company accounts for convertible notes

deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features.

Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements.

The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (for “emerging growth company” beginning after December 15, 2020).

The Company has adopted this standard effective from January 1, 2021, and the adoption of this standard did not have any significant impact on the consolidated financial statements.

The FASB recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

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The Company will be evaluating the impact this standard will have on the Company’s consolidated financial statements.

As of December 31, 2021, the inventory in the amount of $ 99,000 (2020:

As of December 31, 2022, the inventory in the amount of $ nil (2021:

$ 99,000 ) consists of finished goods and is held at a third-party location.

In addition, the inventory in the amount of $ 99,000 (2020:

$ 99,000 ) is secured against the loan provided by a related party and the Company's shareholder.

Refer to Note 14 for further details.

During the year ended December 31, 2022, the Company recorded a write-down of inventory to its net realizable value, in the amount of $ 99,000 due to decrease in inventory value and recorded an impairment in the amount of $ 99,000 due to obsolete inventory.

PREPAID ASSET

1 unchanged sentence

The balance represents the security deposit for the leased land of the subsidiary’s facility.

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

SALES TAX RECOVERABLE

As of December 31, 2021, the Company had $ 22,146 of gross sales tax recoverable compared to $ 95,386 as of December 31, 2020.

This is due to the sales tax paid on expenses incurred during the year which are recoverable from the government.

The Company has recorded an allowance in the amount of $ 509 (2020:

$ 19,924 ) stemming from the potentially uncollectible balances within the outstanding sales tax recoverable amount.

As of December 31, 2022, the Company had $ nil of gross sales tax recoverable compared to $ 22,146 as of December 31, 2021 while the Company had $ 35,254 of gross sales tax payable as of December 31, 2022.

The Company has recorded $ nil of allowance as of December 31, 2022 (December 31, 2021:

INTANGIBLE ASSETS

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

As of December 31, 2021, the outstanding balance is $ 10,000 of which $ 10,000 (December 31, 2020:

$ 90,000 ) is current and $nil (December 31, 2020:

$ 10,000 ) is non-current.

As at December 31, 2022, there was no outstanding balance, the balance has been paid in full and the claim is closed during the quarter ended March 31, 2022 (December 31, 2021:

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

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Canary has recorded a depreciation expense of $ 884,252 during the year ended December 31, 2022 (2021:

Since the facility was not operating during the first nine months of the fiscal year ended December 31, 2020, the depreciation expense was significantly higher for the current fiscal year ended.

The Company’s other subsidiary, CannaKorp, has been utilizing its assets throughout the year and accordingly, has recorded depreciation expense of $ 977 during the year ended December 31, 2022 (2021:

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( 1,655,629 )

( 2,673,679 )

JOINT VENTURE

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In addition, 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, 2022, the joint venture partners, Canary and Thrive Cannabis entered into an agreement.

Pursuant to this agreement the Company received a total of $ 1,634,496 (CAD 2,125,482 ) of which $ 1,056,005 (CAD 1,373,218 ) were reduced from investment in joint venture as these represented recovery of investment and $ 578,491 (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 14.

As per the Joint Venture, Canary will provide the JVCo with a Hard Cost Loan with the maximum amount of $ 885,960 (CAD 1,200,000 ).

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Operation expenses

Net income (loss)

Eligible recoverable expenses

Recoverable amount

Loss on equity

Due to reimbursement of an office and general expense during the current quarter ended which had been expensed in the books of Canary in the prior period, therefore, leading to a credit (negative) expense on the consolidated statement of operations and comprehensive loss.

During the year ended December 31, 2021, revenue was sold to ten customers (2020:

Income (loss) on equity

During the year ended December 31, 2022, revenue was sold to thirteen customers (2021:

The JVCo shall make payments out of the revenues, net of applicable taxes and expenses (“Net Income”), in accordance with the following order of priority:

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Below is the position of the JVCo as at:

As of December 31,

December 31, 2022

December 31, 2021

( 1,190,089 )

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Due to the publicly traded nature of the Company’s shares of the common stock, the equity issuance of the shares was considered to be a more reliable measurement of the fair market value of the transaction compared to having a separate valuation of the net assets.

During the year ended, December 31, 2021, all of the warrants expired, none were exercised.

This acquisition was accounted for using the acquisition method of accounting.

The fair value of assets, liabilities and intangible assets and the purchase price allocation as of March 1, 2019, was as follows:

Allocation of

Purchase Price

Accounts Receivable

Prepaid and other receivables

Property and equipment, net

Accounts payable

( 1,365,790 )

Accrued expenses and other current liabilities

Deferred revenue

Payable to related parties

Total liabilities

( 2,534,121 )

Net liabilities

( 2,008,783 )

Total net assets acquired

The purchase consideration of 30,407,412 shares and 7,211,213 warrants of the Company’s common stock was valued as detailed below:

As of March 1, 2019, the fair value of the net liabilities was $ 2,534,121 and the purchase consideration was fair valued as $ 4,062,844 , shown below, leading to a goodwill allocation of $ 6,071,627 .

The purchase consideration of 30,407,412 shares and 7,211,213 warrants of the Company’s common stock are valued as detailed below:

Number of Common Stock

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● Expected dividend rate of 0 %

During the quarter ended December 31, 2019, the goodwill was revaluated after the completion of CannaKorp’s audit of the year ended December 31, 2018.

During the year ended December 31, 2019, the goodwill was revaluated after the completion of CannaKorp’s audit of the year ended December 31, 2018.

This resulted in changing the balance on the acquisition date, March 1, 2019, thereby increasing the goodwill by $ 369,315 to $ 6,071,627 .

Additionally, the Company identified circumstances which would call for an evaluation of goodwill impairment and therefore impaired $ 1,485,925 reducing the goodwill related to the CannaKorp to $ 4,585,702 .

During the year ended, December 31, 2020, the Company identified circumstances which would call for an evaluation of goodwill impairment and therefore impaired the remaining balance of goodwill related to the CannaKorp to $nil.

Refer to Note 17 for details on warrants.

However, during the same year the Company identified circumstances that would call for an evaluation of goodwill impairment and therefore impaired $ 1,485,925 reducing the goodwill related to the CannaKorp to $ 4,585,702 .

Further, during the year ended December 31, 2020, the Company identified circumstances that would call for an evaluation of goodwill impairment and therefore impaired the remaining balance of goodwill related to the CannaKorp to $ nil .

During the year ended December 31, 2021, all of the warrants expired, none were exercised.

Visava Inc./Canary Rx Inc.

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This acquisition was accounted for using the acquisition method of accounting.

The fair value of assets, liabilities and intangible assets and the purchase price allocation as of August 2, 2018, was as follows:

Allocation of

Purchase Price

Prepaid and other receivables

Sales tax recoverable

Furniture and equipment

Capital work in progress

Bank overdraft

Accounts payable

( 1,158,164 )

Payable to related parties

Total liabilities

( 1,323,654 )

Net liabilities

Total net assets acquired

As of August 2, 2018, the fair value of the net liabilities was $ 275,353 and the purchase consideration was fair valued as $ 3,318,842 , shown below, leading to a goodwill allocation of $ 3,594,195 .

Number of Common Stock

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● Expected dividend rate of 0 %

Refer to Note 17 for details on warrants.

During the year ended December 31, 2021 and 2020, the Company has identified no circumstances which would call for further evaluation of goodwill impairment related to Canary.

During the year ended December 31, 2022, the Company identified circumstances that would call for an evaluation of goodwill impairment and therefore impaired $ 3,315,749 reducing the goodwill related to the Canary to $ 263,117 (December 31, 2021:

the Company has identified no circumstances which would call for further evaluation of goodwill impairment related to Canary).

During the year ended, December 31, 2022, all of the warrants expired, none were exercised.

The Company tests for impairment of goodwill at the reporting unit level.

In assessing whether goodwill is impaired, the Company utilizes the two-step process as prescribed by ASC 350.

The first step of this test compares the fair value of the reporting unit, determined

based upon discounted estimated future cash flows, to the carrying amount, including goodwill.

The first step of this test compares the fair value of the reporting unit, determined based upon discounted estimated future cash flows, to the carrying amount, including goodwill.

If the fair value exceeds the carrying amount, no further work is required, and no impairment loss is recognized.

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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable amounting to $ 2,296,935 as of December 31, 2022, primarily represents consulting and construction services related to fixed asset additions amounting to $ 154,811 , interest on promissory notes and loans amounting to $ 739,130 , outstanding and accrued professional fees amounting to $ 906,596 .

Accounts payable amounting to $ 2,885,909 as of December 31, 2021, primarily represents customer advance for sales amounting to $ 394,400 , consulting and construction services related to fixed asset additions amounting to $ 163,101 , interest on promissory notes and loans amounting to $ 952,376 , outstanding and accrued professional fees amounting to $ 973,017 .

Accounts payable amounting to $ 1,809,120 as of December 31, 2020, primarily represents consulting and construction services related to capital work in progress amounting to 141,935 , interest on promissory notes and loans amounting to $ 403,865 , and outstanding plus accrued professional fees of $ 1,002,098 .

RELATED PARTY TRANSACTIONS AND BALANCES

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Current portion

( 1,736,964 )

Non-current portion

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The loan is secured by all assets owned by the Company and its subsidiaries including leasehold improvements and matures on June 1, 2023, and therefore is presented as non-current.

The loan was provided in two tranches and the latest amendment allowed to convert accrued interest of $ 110,032 (CAD 136,380 ) into principal and increase the maximum loan the Company could borrow.

The loan was provided in three tranches and the latest amendment increased the maximum loan amount by $ 258,405 (CAD 350,000 ) while the rest of terms remained unchanged.

The specific details of each tranche of the loan are shown below:

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Interest expense charged for the twelve months ended December 31, 2022, in the amount of $ 645,340 (CAD 874,089 ) is included in interest and bank charges on the consolidated statement of operations and comprehensive loss and accrued interest in the amount of $ 436,226 (CAD 590,852 ) is included in accounts payable and accrued liabilities on the consolidated balance sheet

Shareholder promissory note

Effective April 20, 2020, the Company issued its promissory note (“Note”) to one of the Company’s shareholders 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 .

Outstanding management service fee

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Balances outstanding related to subsidiaries

On February 22, 2020, Randal MacLeod, who is a shareholder in the Company and former President of the subsidiary, Visava terminated his employment agreement and during the year ended December 31, 2021, $nil (December 31, 2020:

$ 54,307 ) was paid as remuneration for management services included in salaries and wages.

As of December 31, 2021, the balance owing is $nil (December 31, 2020:

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

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During the year ended December 31, 2022, all of the warrants expired, none were exercised.

During the year ended December 31, 2021, the Company has purchased $nil of consulting services from GTA Angel Group which is partially owned by the Company’s CEO’s brother.

Balances outstanding related to directors

During the year ended December 31, 2022, the Company has purchased $ nil of consulting services from GTA Angel Group which is owned by the Company’s CEO’s brother.

The balance outstanding as of December 31, 2022 is $ 25,028 and is included in accounts payable and accrued liabilities.

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During the year ended December 31, 2021, the Company subleased its executive premises to a third party that makes rent payments directly to the landlord.

However, if the sub-lessee cancels its sub-lease agreement with the landlord during the Company's lease term

with the landlord (ending on August 30, 2023), the Company will be responsible for making rent payments for the period from the date of cancellation by the sub-lessee to August 30, 2023.

However, if the sub-lessee cancels its sub-lease agreement with the landlord during the Company's lease term with the landlord (ending on August 30, 2023), the Company will be responsible for making rent payments for the period from the date of cancellation by the sub-lessee to August 30, 2023.

The Company’s subsidiary, Canary, is a party to a 10-year lease agreement (initiated in July 2014) with respect to its facility to produce Craft Cannabis at Scale.

The lease agreement was amended effective January 1, 2020, where the amended 10-year term starts on May 1, 2020 and provides the Company with an option to extend for three (3) additional terms of ten (10) years.

Additionally, effective January 1, 2020, the amended agreement increased the minimum rent to $ 27,608 (CAD 35,000 ) plus applicable taxes per month and on each anniversary date, commencing from January 1, 2021, the minimum rent will increase by 1.00 %.

Additionally, effective January 1, 2020, the amended agreement increased the minimum rent to $ 25,841 (CAD 35,000 ) plus applicable taxes per month and on

each anniversary date, commencing from January 1, 2021, the minimum rent will increase by 1.00 %.

Furthermore, only the current 10-year term has been factored into the calculation of the lease liability.

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Maturities of lease liabilities were:

Total lease payment

Total lease payments

Less imputed interest

( 1,311,873 )

Present value of lease liabilities

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CONVERTIBLE PROMISSORY NOTES

Below lists the convertible promissory notes the Company has issued:

Convertible promissory note issued on October 18, 2019, amounting to $ 168,300 (Note R).

The key terms/features of the convertible note are as follows:

The maturity date of the Note was April 18, 2021 .

Interest on the unpaid principal balance of this Note accrued at the rate of 12 % per annum.

In the event the Noteholder exercised the right of conversion, the conversion price would be equal to 75 % of the lowest closing bid price of the Company's common stock for the fifteen (15) trading days prior to the date of conversion.

The Company was not obligated to accept any conversion request before six months from the date of the note.

Conversion was limited to the holder beneficially holding not more than 4.99 % of the Company's then issued and outstanding common stock after the conversion.

During the quarter ended June 30, 2020, the Company settled the outstanding balance of Note R in full with a cash payment and recorded a loss of $ 43,156 as settlement of debt in the consolidated statement of operations.

The loss is due to the prepayment penalty as per the note agreement.

Convertible Redeemable note issued on November 28, 2017, amounting to $ 33,000 (Note K).

The key terms/features of the convertible note are as follows:

The maturity date of the Note was March 10, 2019 .

Interest on the unpaid principal balance of this Note shall accrue at the rate of 12 % per annum.

In the event, the Noteholder exercises the right of conversion, the conversion price will be equal to 58 % of the lowest closing bid price of the Company’s common stock for the twenty (15) trading days prior to the date of conversion.

In June 2018, an amendment to the note was executed whereby the conversion price was fixed at $ 0.0151 per share.

As the maturity date has passed, the Company is now obligated to accept all conversion requests on the note.

Conversion is limited to the holder beneficially holding not more than 4.99 % of the Company’s then issued and outstanding common stock after the conversion.

During the year ended December 31, 2021, the Company converted the outstanding principal balance of Note K in full.

Convertible promissory note issued on January 31, 2017, amounting to $ 33,000 (Note I).

The key terms/features of the convertible note are as follows:

The maturity date of the note was November 5, 2017

Interest on the unpaid principal balance of this note accrued at the rate of 12 % per annum.

In the event the Noteholder exercised the right of conversion, the conversion price would be equal to 58 % of the average of the three (3) lowest closing bid price of the Company’s common stock for the fifteen (15) trading days prior to the date of conversion.

As the maturity date has passed, the Company is now obligated to accept all conversion requests on the note.

Conversion was limited to the holder beneficially holding not more than 4.99 % of the Company’s then issued and outstanding common stock after the conversion.

The Company converted the outstanding principal and accrued interest balance of Note I during the quarter ended June 30, 2020.

Convertible promissory note issued on May 13, 2016, amounting to $ 75,000 (Note D).

The key terms/features of the convertible note are as follows:

The maturity date of the note was May 13, 2017 .

Interest on the unpaid principal balance of this note accrues at the rate of 8 % per annum.

In the event, the Noteholder exercises the right of conversion, the conversion price will be equal to 52 % of the lowest closing bid price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.

As the maturity date has passed, the Company is now obligated to accept all conversion requests on the note.

Conversion is limited to the holder beneficially holding not more than 4.99 % of the Company’s then issued and outstanding common stock after the conversion.

Interest amounting to $ 109 was accrued for the year ended December 31, 2021 (2020:

The principal amount outstanding as of December 31, 2021 and 2020 was $ 480 and $ 3,128 , respectively.

As of December 31, 2021 and 2020, the entire balance was current.

Interest amounting to $ 37 was accrued for the year ended December 31, 2022 (December 31, 2021:

Principal amount outstanding as of December 31, 2022 and December 31, 2021 was $ 480 .

At both reporting dates, the entire balance was current.

All notes maturing prior to the date of this report are outstanding.

Derivative liability

During the year ended December 31, 2021, holders of convertible promissory notes converted principal and interest amounting to $ 2,648 and $nil, (2020:

$ 29,060 and $ 11,710 ), respectively.

During the year ended December 31, 2022, there were no conversion of principal balance of convertible promissory notes (2021:

$ 2,648 ), respectively.

The Company recorded and fair valued the derivative liability as follows:

6 unchanged sentences

Following assumptions were used to fair value these notes as of December 31, 2022:

● Projected annual volatility of 196.4 % ;

● Risk free interest rate of 0.41 % ;

● Stock price of $ 0.009 ;

● Liquidity term of 0.25 years;

● Projected annual volatility of 163 % to 334 % ;

● Risk free interest rate of 1.42 % to 4.38 % ;

● Stock price of $ 0.004 to 0.009 ;

● Liquidity term of 0.25 to 1 years;

● Dividend yield of 0 % ;

3 unchanged sentences

1,000,000 shares were outstanding as of December 31, 2022 and 2021

617,025,999 shares are outstanding as at December 31, 2021 (December 31, 2020:

573,277,094 )

617,025,999 shares are outstanding as at December 31, 2022 and 2021

As of December 31, 2022, convertible notes, warrants and preferred stock outstanding could be converted into 17,258,122 (December 31, 2021:

2 unchanged sentences

100,000,000 ) shares of common stock, respectively.

These together will exceed the authorized common share limit;

however, the majority of the warrants are unlikely to be exercised due to the depressed share price.

Preferred Stock

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The Series A Stockholders shall not vote as a separate class but shall vote together with the common stock on all matters, including any amendment to increase or decrease the authorized capital stock.

Upon the voluntary or involuntary dissolution, liquidation or winding up of the corporation, the assets of the Company available for distribution to its shareholders shall be distributed to the holders of common stock and the holders of the Series A Stock ratably without any preference to the holders of the Series A Stock.

Upon the voluntary or involuntary dissolution, liquidation or winding up of the corporation, the assets of the Company available for distribution to its shareholders shall be distributed to the holders of common stock and the holders of the Series A Stock ratable without any preference to the holders of the Series A Stock.

Shares of Series A Stock can be converted at any time into fully paid and nonassessable shares of Common Stock at the rate of One Hundred ( 100 ) shares of Common Stock for each One ( 1 ) share of Series A Stock.

1 unchanged sentence

Holders of common stock do not have cumulative voting rights.

Subject to preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available therefore.

Subject to preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to share ratable in dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available therefore.

Holders of common stock have no pre-emptive rights to purchase the Company’s common stock.

1 unchanged sentence

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

During the quarter ended March 31, 2022, 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 $ 153 , based on the market price of the Company’s stock on the date of the agreement.