Target Group Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations As of December 31, 2023, the Company generated revenue of $3,720,169 and had no income or cash flows from operations since inception. As of December 31, 2023, the Company had a working capital deficit of $11,495,043 and an accumulated deficit of $31,107,348. 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 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. Balance sheet as of December 31, 2023 and 2022 Cash and restricted cash On December 31, 2023, we had cash of $736,323 (excluding restricted cash of $8,696) compared to $223,843 (excluding restricted cash of $8,490) as of December 31, 2022. The increase is due to increase in addition loan provided by a related party. The change in restricted cash is due to foreign exchange conversion of balances in Canadian Dollar into United States Dollar. Accounts Receivable Accounts receivable are recorded at the net value of the face amount less an allowance for doubtful accounts. As of December 31, 2023, the companys allowance for doubtful accounts was $53,813. The company recorded a bad debt expense of $53,812 for the year ended December 31, 2023 whereas no bad debt expense was recorded in the year ended December 31, 2022. Inventory As of December 31, 2023, the inventory in the amount of $1,215,928 (2022: $nil) 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 12 for additional details. Prepaid asset As of December 31, 2023, we had prepaid expenses of $42,720 compared to $41,714 as of December 31, 2022. The balance represents the security deposit for the leased land for the facility to produce Medical Marijuana. 16 Table of Contents Sales tax recoverable and payable As of December 31, 2023, the Company had $nil of gross sales tax recoverable compared to $nil as of December 31, 2022 while the Company had $48,581 of gross sales tax payable as of December 31, 2023 compared to $35,254 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, 2023 is $nil (December 31, 2022: $nil). Goodwill 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. Fixed assets 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). On June 4, 2021, Canary received its Sales License amendment from Health Canada. Accounts payable and accrued liabilities Accounts payable amounting to $2,945,568 as of December 31, 2023, primarily represents consulting and construction services related to fixed asset additions amounting to $126,059, interest on promissory notes and loans amounting to $1,628,007, outstanding and accrued professional fees amounting to $945,615. 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. Payable to related parties As of December 31, 2023, we had $11,415,557 of the amount payable to related parties as compared to $10,346,465 as of December 31, 2022. The balance primarily represents loans provided by the Company’s shareholders and a related party, CLI, management services fee outstanding to the managers of the company, and outstanding amount of $65,000 to be paid to a former shareholder of CannaKorp as part of the settlement agreement. For additional detail, refer to Note 15 in consolidated financial statements. Convertible promissory notes payable Interest amounting to $39 was accrued for the year ended December 31, 2023 (2022: $37). The principal amount outstanding as of December 31, 2023 and 2022 was $480. At both reporting dates, the entire balance was current. All notes maturing prior to the date of this report are outstanding. 17 Table of Contents Income statement for the years ended December 31, 2023 and 2022 Revenues for the years ended December 31, 2023 and 2022 The Company generated revenue of $3,720,169 during the current year and $nil in the comparable year ended in 2022. However, Canary generated revenues of $791,285 (though its investment in JVCo) during the current year ended (2022: $3,916,539) 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 twenty one customers (2022: thirteen). Expenses for the years ended December 31, 2023 and 2022 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, 2023 compared to 2022 is due to increase in consulting expenses, management fees, office and general and depreciation and amortization expense. Expenses for the year ended December 31, 2023 primarily represented consulting fees of $147,787 (2022: $18,926), management fees of $312,969 (2022: $143,677), legal and professional charges of $212,427 (2022: $243,670) comprising legal, review, accounting and Edgar agent fee, travel expenses of $706 (2022: $nil), operating lease expenses of $190,185 (2022: ($74,059)) office and general of $410,576 (2022: $22,071) and depreciation expense amounting to $811,649 (2022: $885,229). 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) & (4) net income from the joint venture is only for two quarters as the agreement with JV is terminated, as a result, the share of income and other income has decreased significantly; (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 $7,238 (2022: positive $14,383), (gain) loss on settlement of debt amounting to $1,571,742 (2022: $nil), interest and bank charges amounting to $1,429,215 (2022: $1,121,595), exchange loss of $51,811 (2022: income of $126,314) other income of $16,782 (2022: 811,464), impairment of inventory in the amount of $nil (2022: $99,000), impairment of goodwill in the amount of $nil (2022: $3,315,749) and share of income from joint venture of $24,152 (2022: $354,736). Liquidity and Capital Resources As of December 31, 2023, the Company had a working capital deficit of $11,495,043 and an accumulated deficit of $31,107,348 (2022: Working capital deficit of $6,358,008 and an accumulated deficit of $30,783,678). The Company is actively seeking various financing operations to meet the working capital requirements. We have relied on equity financing and personal funds for our operations. The proceeds may not be sufficient to effectively develop our business to the fullest extent to allow us to maximize our revenue potential, in which case, we will need additional capital. We will need capital to allow us to invest in development. The Company anticipates that its future operations will generate positive cash flows starting in 2024 provided that it is successful in obtaining additional financing in the foreseeable future. Statement of Cash Flow – For the years ended December 31, 2023 and 2022: Operating activities Operating activities used cash of $589,612 compared to the cash used of $1,014,828 during the prior year. This is due to managements efficient use of cash and the company has started to generate revenues. 18 Table of Contents Investing activities Investing activities provided cash of $416,932 compared to cash provided of $1,015,040 during the prior year. The cash generation represents the recovery of investment by JVCo. The JVCo was part of the company for only two quarters of 2023 so the recovery represents only for the two quarters. Financing activities Financing activities provided cash of $666,900 compared to $122,674 for the corresponding period of the prior year. During the current period, cash was provided by a loan advance from a related party. ​ ​ ​ 19 Table of Contents Item 8. Consolidated Financial Statements and Supplementary Data TARGET GROUP INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022 ​ Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID #5525) ​ ​ CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Consolidated Balance Sheets ​ F-4 ​ Consolidated Statements of Operations and Comprehensive Loss ​ F-5 ​ Consolidated Statements of changes in Stockholders’ Equity ​ F-6 ​ Consolidated Statements of Cash Flows ​ F-7 ​ Notes to the Consolidated Financial Statements ​ F-8 – F-29 ​ ​ ​ ​ F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Target Group, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Target Group, Inc. and Subsidiaries ( “ the Company ” ) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders ’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, 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, 2023 and 2022 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has an accumulated deficit, net losses, and a working capital deficit. 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. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion 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 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 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 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 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 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 The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Inventory F-2 Table of Contents Description of the Critical Audit Matter As discussed in Note 4 to the financial statements, company ’ s inventory consists of raw materials, finished goods and work-in-process. 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. How the Critical Audit Matter Was Addressed in the Audit Our principal audit procedures to evaluate management ’ s calculation of capitalized inventory costs included, among other procedures, the following: ● We evaluated the appropriateness and consistency of management's methods and assumptions used in the identification, recognition, and measurement of inventory costs. ● We tested the completeness and accuracy of inputs entered into the Company ’ s overhead calculations and performed recalculations of allocation methods utilized. Fruci & Associates II, PLLC – PCAOB ID #0 5525 We have served as the Company ’ s auditor since 2017. ​ Spokane, Washington March 20, 2024 ​ F-3 Table of Contents TARGET GROUP INC. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ ​ ​ 2023 ​ 2022 ​ ​ ​ $ $ ASSETS ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ Cash ​ ​ ​ 736,323 ​ 223,843 Restricted cash ​ ​ ​ 8,696 ​ 8,490 Accounts receivable, net of allowance ​ Note 6 ​ 1,031,530 ​ 2,068 Inventory ​ Note 7 ​ 1,215,928 ​ — Prepaid asset ​ Note 8 ​ 42,720 ​ 41,714 Other assets ​ ​ ​ 55,268 ​ — Receivable from joint venture ​ Note 12 ​ — ​ 630,180 Other receivable ​ Note 15 ​ 3,781 ​ 3,692 Total current assets ​ ​ ​ 3,094,246 ​ 909,987 Long term assets ​ ​ ​ ​ ​ ​ Fixed assets ​ Note 11 ​ 5,430,260 ​ 5,554,225 Investment in joint venture ​ Note 12 ​ — ​ 775,577 Goodwill ​ Note 13 ​ 269,460 ​ 263,117 Operating lease right-of-use assets ​ Note 16 ​ 46,936 ​ 62,728 Total long term assets ​ ​ ​ 5,746,656 ​ 6,655,647 Total assets ​ ​ ​ 8,840,902 ​ 7,565,634 LIABILITIES AND STOCKHOLDERS’ DEFICIENCY ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ Bank overdraft ​ ​ ​ 506 ​ 506 Accounts payable and accrued liabilities ​ Note 14 ​ 2,945,568 ​ 2,296,935 Deferred revenue ​ Note 4 ​ 43,098 ​ — Sales tax payable ​ Note 9 ​ 48,581 ​ 35,254 Payable to related parties, net ​ Note 15 ​ 11,415,557 ​ 4,468,535 Operating lease liability - Current portion ​ Note 16 ​ 127,478 ​ 110,586 Convertible promissory notes, net ​ Note 17 ​ 480 ​ 480 Derivative liability ​ Note 17 ​ 8,021 ​ 15,125 Total current liabilities ​ ​ ​ 14,589,289 ​ 6,927,421 Long term liabilities ​ ​ ​ ​ ​ ​ Payable to related parties, net - Non-current portion ​ Note 15 ​ — ​ 5,877,930 Operating lease liability - Non-current portion ​ Note 16 ​ 1,223,955 ​ 1,319,619 Warrant liability ​ Note 18 ​ 355 ​ 489 Total long term liabilities ​ ​ ​ 1,224,310 ​ 7,198,038 Total liabilities ​ ​ ​ 15,813,599 ​ 14,125,459 Stockholders’ deficiency ​ ​ ​ ​ Preferred stock ​ Note 18 ​ 100 ​ 100 Common stock ​ Note 18 ​ 61,703 ​ 61,703 Shares to be issued ​ Note 18 ​ 175,439 ​ 175,182 Additional paid-in capital ​ ​ ​ 24,985,697 ​ 24,985,697 Accumulated deficit ​ ​ ​ ( 31,107,348 ) ​ ( 30,783,678 ) Accumulated comprehensive loss ​ ​ ​ ( 1,088,288 ) ​ ( 998,829 ) Total stockholders’ deficiency ​ ​ ​ ( 6,972,697 ) ​ ( 6,559,825 ) Total liabilities and stockholders’ deficiency ​ ​ ​ 8,840,902 ​ 7,565,634 Contingencies and commitments ​ Note 19 ​ — ​ — ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-4 Table of Contents TARGET GROUP INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the For the ​ ​ ​ ​ Year ended ​ Year ended ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ $ ​ $ REVENUE ​ ​ 3,720,169 — COST OF GOOD SOLD ​ ​ ​ ( 2,065,149 ) ​ — Gross profit ​ ​ ​ 1,655,020 ​ — OPERATING EXPENSES ​ ​ ​ ​ Advisory and consultancy fee ​ ​ 147,787 18,926 Management services fee ​ ​ 312,969 143,677 Legal and professional fees ​ ​ 212,427 243,670 Depreciation expense ​ ​ ​ 811,649 ​ 885,229 Operating lease expense ​ Note 16 ​ 190,185 ​ ( 74,059 ) Office and general ​ ​ 410,576 22,071 Travel & Entertainment ​ ​ ​ 706 ​ — Total operating expenses ​ ​ 2,086,299 1,239,514 OTHER EXPENSES (INCOME) ​ ​ ​ ​ Change in fair value of derivative and warrant liability ​ ​ ( 7,238 ) ( 14,383 ) Gain on settlement ​ ​ ​ ( 1,571,742 ) ​ — Interest and bank charges ​ ​ 1,410,974 1,121,595 Exchange income ​ ​ 51,811 ( 126,314 ) Other income ​ Note 12 ​ ( 16,782 ) ​ ( 811,464 ) (Recovery) Allowance of sales tax recoverable ​ ​ — ( 496 ) Impairment of inventory [Note 8] ​ ​ ​ — ​ 99,000 Impairment of goodwill ​ Note 13 ​ — ​ 3,315,749 Share of income from joint venture ​ Note 12 ​ ( 24,152 ) ​ ( 354,736 ) Debt issuance cost ​ Note 15 ​ 49,520 ​ 51,599 Total other expense (income) ​ ​ ( 107,609 ) 3,280,550 ​ ​ ​ ​ ​ ​ ​ Net loss before income taxes ​ ​ ( 323,670 ) ( 4,520,064 ) Income taxes ​ ​ — — Net loss ​ ​ ( 323,670 ) ( 4,520,064 ) ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment ​ ​ ( 89,459 ) 111,891 Comprehensive loss ​ ​ ( 413,129 ) ( 4,408,173 ) ​ ​ ​ ​ ​ ​ ​ Loss per share - basic and diluted ​ ​ ( 0.0005 ) ( 0.0073 ) Weighted average shares - basic and diluted ​ ​ 617,025,999 617,025,999 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-5 Table of Contents TARGET GROUP INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock Additional ​ Accumulated ​ Preferred stock ​ Common stock ​ Shares to be issued ​ subscription ​ paid-in ​ Accumulated ​ comprehensive ​ ​ Shares Amount Shares Amount Shares Amount receivable capital ​ deficit loss Total ​ ​ # ​ $ ​ # ​ $ ​ # ​ $ ​ $ ​ $ ​ $ ​ $ ​ $ As at December 31, 2022 ​ 1,000,000 ​ 100 ​ 617,025,999 ​ 61,703 ​ 1,579,024 ​ 175,182 ​ — ​ 24,985,697 ​ ( 30,783,678 ) ​ ( 998,829 ) ​ ( 6,559,825 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued as consideration for consideration of the intellectual property rights [Note 11] ​ — ​ — ​ — ​ — ​ 62,496 ​ 257 ​ — ​ — ​ — ​ — ​ 257 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ ( 323,670 ) ​ — ​ ( 323,670 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ ( 89,459 ) ​ ( 89,459 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at December 31, 2023 ​ 1,000,000 ​ 100 ​ 617,025,999 ​ 61,703 ​ 1,641,520 ​ 175,439 ​ — ​ 24,985,697 ​ ( 31,107,348 ) ​ ( 1,088,288 ) ​ ( 6,972,697 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at December 31, 2021 ​ 1,000,000 ​ 100 ​ 617,025,999 ​ 61,703 ​ 1,516,528 ​ 174,722 ​ — ​ 24,985,697 ​ ( 26,263,614 ) ​ ( 1,110,720 ) ​ ( 2,152,112 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cancellation of shares [Note 11] ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued as consideration for consideration of the intellectual property rights [Note 11] ​ — ​ — ​ — ​ — ​ 62,496 ​ 460 ​ — ​ — ​ — ​ — ​ 460 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ ( 4,520,064 ) ​ — ​ ( 4,520,064 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ 111,891 ​ 111,891 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at December 31, 2022 ​ 1,000,000 ​ 100 ​ 617,025,999 ​ 61,703 ​ 1,579,024 ​ 175,182 ​ — ​ 24,985,697 ​ ( 30,783,678 ) ​ ( 998,829 ) ​ ( 6,559,825 ) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-6 Table of Contents TARGET GROUP INC. CONSOLIDATED STATEMENT OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ For the For the ​ ​ year ended ​ year ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ $ ​ $ OPERATING ACTIVITIES ​ ​ ​ ​ Net (loss) for the period ​ ( 323,670 ) ( 4,520,064 ) Adjustment for non-cash items ​ ​ ​ Change in fair value of derivative and warrant liability ​ ( 7,238 ) ( 14,383 ) Gain on settlement ​ ( 1,571,742 ) ​ — Shares and warrants issued/to be issued for services ​ 821 1,660 Allowance (recovery) of sales tax recoverable ​ — ( 496 ) Depreciation expense ​ 811,649 ​ 885,229 Operating lease expense ​ 233,859 ​ 258,916 Investment (income) loss from joint venture ​ ( 24,152 ) ​ ( 354,736 ) Debt issuance cost ​ 49,520 ​ 51,599 Impairment of inventory ​ — ​ 99,000 Impairment of goodwill ​ — ​ 3,315,749 Changes in operating assets and liabilities: ​ Change in accounts receivable - net of allowance ​ ( 1,008,903 ) ​ — Change in other assets ​ ( 54,164 ) — Change in inventory ​ 588,896 — Change in sales tax recoverable ​ 12,227 ​ 58,310 Change in accounts payable and accrued liabilities ​ 981,699 ( 466,139 ) Change in operating lease liability, net ​ ( 320,651 ) ​ ( 329,473 ) Change in deferred revenue ​ 42,237 ​ — Net cash used in operating activities ​ ( 589,612 ) ( 1,014,828 ) INVESTING ACTIVITIES ​ Amounts invested on fixed assets ​ ( 22,086 ) ​ ( 314 ) Net proceeds from joint venture ​ 439,018 ​ 1,015,354 Net cash provided by investing activities ​ 416,932 1,015,040 FINANCING ACTIVITIES ​ Proceeds from loans from related parties ​ 666,900 ​ 269,150 Settlement of related party loan ​ — ​ ( 136,476 ) Payment for settlement payable ​ — ​ ( 10,000 ) Net cash provided (used) by financing activities ​ 666,900 122,674 Net change in cash and restricted cash during the period ​ 494,220 122,886 Effect of foreign currency translation ​ 18,466 ( 12,704 ) Cash and restricted cash, beginning of period ​ 232,333 122,151 Cash and restricted cash, end of period ​ 745,019 232,333 NON-CASH INVESTING AND FINANCING ACTIVITIES ​ Shares issued on conversion of debt ​ — — Shares issued as consideration for services ​ 460 280 SUPPLEMENTARY CASH FLOW INFORMATION ​ ​ ​ ​ Cash paid for interest ​ 877,193 2,132,332 Cash paid for taxes ​ — — ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-7 Table of Contents TARGET GROUP INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS THEN ENDED DECEMBER 31, 2023 AND 2022 1. Nature of Operations Target Group Inc. (“Target Group” or the “Company”) was incorporated under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company is a diversified, vertically integrated, progressive company with a focus nationally and internationally . The Company wholly owns and operates Canary Rx Inc, a Canadian licensed producer (“Canary”), regulated under The Cannabis Act (Bill C-45). Canary, operates a 44,000 square foot facility located in Norfolk County, Ontario. The Company has an ongoing strategic partnership with Dutch breeder, Serious Seeds B.V. (“Serious Seeds”), to cultivate exclusive, world-class proprietary genetics. The Company has structured multiple international production and distribution platforms and continues to expand its global footprint, focused on building an iconic brand portfolio with cutting-edge intellectual property in both the medical and recreational cannabis markets. The Company is committed to building industry-leading companies that transform the perception of cannabis and responsibly elevate the overall patient and consumer experience. The Company’s core business is producing, manufacturing, distributing, and selling of cannabis products, as further described in Item 1. As of the current year to date period end, Company has produced and sold cannabis products of $ 3,762,406 (Period ended December 31, 2022: $nil). Joint Venture Agreement Termination; Consolidation of JVCo with Canary 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 herein as “Thrive Cannabis”) and 2755757 Ontario Inc., a corporation organized under the laws of the Province of Ontario, Canada (referred to herein as “JVCo”). Canary and Thrive each held 50% of the voting equity interest in JVCo. The term of the Joint Venture was five (5) years from its effective date of May 14, 2020. On April 27, 2023, Canary and Thrive Cannabis entered into a Release and Settlement Agreement (“Settlement Agreement”) in which Thrive Cannabis transferred its shares in the capital of JVCo and rights of assets held by JVCo, 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. 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 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. 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. Serious Seeds Agreement Effective December 6, 2018, the Company and Canary entered into the Serious Agreement described in Item 1. CL Investors Debt Purchase and Assignment Agreement ​ Effective June 15, 2020, the Company, entered into the Debt Agreement CL Investors Inc. (“CLI”), described in Item 1. ​ F-8 Table of Contents 2. Basis of Presentation and Consolidation The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such consolidated financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. 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 subsidiaries, Visava and CannaKorp, and BlueSky Logistics, LLC. Significant intercompany accounts and transactions have been eliminated upon consolidation. ​ 3. Going Concern The Company has earned minimal revenue since inception and has sustained operating losses during the year ended December 31, 2023. The Company had a working capital deficit of $ 11,495,043 and an accumulated deficit of $ 31,107,348 as of December 31, 2023. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its members or other sources, as may be required. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations, sale of its equity or issuance of debt. However, the Company currently has no commitments from any third parties for the purchase of its equity. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations. ​ 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash Cash and cash equivalents include cash on hand and deposits at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company did not have cash equivalents as of December 31, 2023 and 2022. Restricted cash represents deposits made to the Company’s bank as a requirement to use the bank’s credit card which is not available for immediate or general business use. F-9 Table of Contents Accounts receivable Account receivable consists of amounts due to the Company from customers as a result of the Company’s normal business activities. Account receivable is reported on the balance sheets net of an estimated allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on historical experience, assessment of specific risk, review of outstanding invoices, and various assumptions and estimates that are believed to be reasonable under the circumstances, and recognizes the provision as a component of selling, general and administrative expenses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible. The company records the allowance based on past history and if there are doubts on the recoverability. As of December 31, 2023, the Company has recorded an allowance for those balances which it expects to be not recoverable. On December 31, 2023 amounts due from two customers totaled approximately 59 % and 70 % of accounts receivable. Inventory Inventory is stated at the lower of cost or net realizable value, cost being determined on a weighted average cost basis, and market being determined as the lower of cost or net realizable value. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to the cost of revenue and establish a new cost basis for the inventory. The cost is determined on the basis of the average cost. Overhead costs are also allocated to inventory including salaries and utilities. Fixed Assets Fixed assets are reported at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of assets, commencing when the assets become available for productive use, based on the following estimated useful lives: Depreciation is calculated using the following terms and methods: ​ ​ ​ ​ ​ ​ Furniture & office equipment Straight-line 7 years Machinery & equipment Straight-line 3 - 5 years Software Straight-line 3 years Leasehold improvements Straight-line Lease period ​ An item of equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from the derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the profit or loss in the period the asset is derecognized. The assets’ residual values, useful lives and methods of depreciation are reviewed at each reporting date, and adjusted prospectively, if appropriate. Shipping and Handling Cost Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of goods sold. Shipping and handling for inventory, if any, are included as a component of inventory on the consolidated balance sheets, and in cost of goods sold in the consolidated statements of operations when the product is sold. Goodwill and Intangible Assets Goodwill and other identifiable intangible assets with indefinite lives that are not being amortized, such as trade names, are tested at least annually for impairment and are written down if impaired. 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. F-10 Table of Contents 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. Revenue Recognition The Company adopted ASC 606 effective January 1, 2019, using the modified retrospective method after electing to delay the adoption of the accounting standard as the Company qualified as an “emerging growth company”. Since the Company did not have any contracts as of the effective day, therefore, there was no material impact on the consolidated financial statements upon adoption of the new standard. Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our performance obligation generally consists of the promise to sell our finished products to our customers, wholesalers, distributors or retailers. 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. The Company generated revenue of $ 3,720,169 during the year ended December 31, 2023, and S nil in 2022. There are three of the customers whose revenue is more than 10% of the total revenue. In addition, Canary generated revenue of $ 791,285 (though its investment in JVCo) during the year ended December 31, 2023 (2022: $ 3,916,539 ) and is represented as a share of income (losses) from joint venture on the consolidated statement of operations. The revenue was concentrated to twenty one customers (2022: thirteen ). 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 12 for additional details. Foreign Currency Translation The functional currency of the Company’s Canadian-based subsidiary is the Canadian dollar, and the US-based parent is the U.S. dollar. 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. 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. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from the translation of these foreign currency transactions are included in net income (loss) for the year. In translating the consolidated financial statements of the Company and its Canadian subsidiaries from their functional currency into the Company’s reporting currency of United States dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in cumulative other comprehensive income (loss) in stockholders’ equity. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. Concentration of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. 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, 2023 whereas cash balances were not in excess of FDIC limit as of December 31, 2022. Income Taxes 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that F-11 Table of Contents some or all of the deferred tax assets will not be realized. As of December 31, 2023 there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration. Operating Leases The Company leases office space and the production facility under operating lease agreements. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term. Earnings (Loss) Per Common Share FASB ASC 260, Earnings Per Share provides for calculations of “basic” and “diluted” earnings per share. Basic earnings (loss) per common share excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per common share reflect the potential dilution of securities that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. For the year ended December 31, 2023, basic and diluted EPS are the same due to net loss result. For the year ended December 31, 2022, basic and diluted EPS are the same due to net loss result. Convertible Notes Payable and Derivative Instruments In accordance with ASU 2017-11, warrants with a down round feature are treated as equity, with no adjustment for changes in fair value at each reporting period. The Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. 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. 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. Debt discounts under these arrangements are amortized over the term of the related debt. Stock Based Compensation The Company accounts for stock-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period. The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services. Marketing Expenses Marketing, advertising and promotion expenditures are expensed in the annual period in which the expenditure is incurred. F-12 Table of Contents Impairment of Long-Lived Assets In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on the appraised value of the assets or the anticipated cash flows from the use of the asset or asset group, discounted at a rate commensurate with the risk involved. Fair Value of Financial Instruments The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the consolidated financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: ● Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. ● Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. ● Level 3 inputs are unobservable inputs for the asset or liability. The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments. The estimated fair value of cash, accounts payable, and accrued liabilities approximate their carrying values due to the short-term maturity of these instruments. The derivative liabilities of the promissory convertible notes are valued Level 3, refer to Note 17 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. F-13 Table of Contents 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, 2023 or in December 31, 2022. ​ 5. 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 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 $ 54,909 was recorded. ​ ​ 6. Accounts Receivable Accounts receivable are recorded at the net value of the face amount less an allowance for doubtful accounts. As of December 31, 2023, the companys allowance for doubtful accounts was $ 54,909 . The company recorded a bad debt expense of $ 53,813 for the year ended December 31, 2023 whereas no bad debt expense was recorded in the year ended December 31, 2022. ​ 7. Inventory As of December 31, 2023, the inventory in the amount of $ 1,215,928 (2022: $ nil ) 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 12 for additional details. ​ ​ ​ ​ ​ For the ​ ​ Year ended ​ ​ December 31,2023 Product ​ $ Finished goods 784,354 WIP (Flowers and plants) 431,574 ​ 1,215,928 ​ ​ 8. Prepaid Asset As of December 31, 2023, the Company had prepaid expenses of $ 42,720 compared to $ 41,714 as of December 31, 2022. 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. ​ 9. Sales Tax Recoverable As of December 31, 2023, the Company had $ nil of gross sales tax recoverable compared to $ nil as of December 31, 2022 while the Company had $ 48,581 of gross sales tax payable as of December 31, 2023. F-14 Table of Contents 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. ​ The Company has recorded $ nil of allowance as of December 31, 2023 (December 31, 2022: $ nil ). ​ 10. 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, 2023, there was no outstanding balance, the balance has been paid in full and the claim is closed during the quarter ended March 31, 2022. ​ 11. Fixed Assets The Company’s subsidiary, Canary, 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. On October 8, 2019, the Company was granted licenses to cultivate, process and sell cannabis pursuant to the Cannabis Act (Bill C-45). Canary currently operates as a licensed producer/wholesaler of craft cannabis in Ontario and has since been granted its sales amendment from Health Canada to sell directly to provincial retail boards for consumer products. Canary has recorded a depreciation expense of $ 811,649 during the year ended December 31, 2023 (2022: $ 884,252 ). The Company’s other subsidiary, CannaKorp, has been utilizing its assets throughout the year and accordingly, has recorded depreciation expense of $ 491 during the year ended December 31, 2023 (2022: $ 977 ). ​ Below is a breakdown of the consolidated fixed asset, category wise: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Furniture & Machinery & ​ Leasehold ​ ​ ​ fixture ​ Equipment ​ Software ​ improvements ​ Total ​ ​ $ ​ $ ​ $ ​ $ $ Cost 1,453,783 770,218 43,555 6,886,818 ​ 9,154,374 Accumulated depreciation ( 581,301 ) ( 753,151 ) ( 43,555 ) ( 2,346,107 ) ​ ( 3,724,114 ) ​ 872,482 17,067 — 4,540,711 ​ 5,430,260 ​ ​ F-15 Table of Contents 12. 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, 2023, the Joint Venture partners, Canary and Thrive Cannabis entered into an agreement. Pursuant to this agreement the Company received a total of $ 1,574,982 (CAD 2,125,482 ) of which $ 1,017,555 (CAD 1,373,218 ) were reduced from investment in Joint Venture as these represented recovery of investment and $ 557,428 (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 15. As per the Joint Venture, Canary provided the JVCo with a Hard Cost Loan with the maximum amount of $ 907,320 (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 $ 253,294 (CAD 335,000 ) and interest income charged for the nine months ended in the amount of $ 17,376 (CAD 23,450 ) is included in other income on the unaudited condensed consolidated interim statement of operations and comprehensive loss and interest receivable in the amount of $ 60,965 (CAD 80,630 ) 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ended January 1 to April 27, 2023 2022 ​ CAD USD CAD USD Sales 1,068,799 791,285 5,093,028 3,916,539 Cost of goods sold 620,344 459,271 2,635,640 2,026,807 Gross profit 448,455 332,014 2,457,388 1,889,732 Operation expenses 383,358 283,819 1,534,800 1,180,261 Net income 65,097 48,195 922,588 709,471 ​ ​ ​ ​ ​ ​ ​ ​ ​ Eligible recoverable expenses 1,437,054 1,060,833 4,870,924 3,596,203 Recoverable amount 1,437,054 1,060,833 4,870,924 3,596,203 Income on equity 32,549 24,152 461,294 354,735 ​ 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. F-16 Table of Contents 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. 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. 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: ​ ​ ​ ​ ​ ​ USD Investment in JV ​ 1,023,608 ​ Receivable from JV ​ 698,645 ​ Payable to JV ​ ( 129,185 ) ​ ​ ​ 1,593,068 ​ ​ ​ ​ ​ Cash received from Thrive ​ 776,382 ​ Net amount ​ 816,686 ​ ​ ​ ​ ​ Assets acquired: ​ ​ ​ Accounts receivable ​ 163,244 ​ Inventory ​ 1,690,368 ​ Fixed asset ​ 534,816 ​ ​ ​ 2,388,428 ​ ​ ​ ​ ​ Net gain as per reconciliation ​ 1,571,742 ​ ​ 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. ​ 13. Goodwill Business Acquisition ASC Topic 805, “Business Combinations” requires that all business combinations be accounted for using the acquisition method and that certain identifiable intangible assets acquired in a business combination be recognized as assets apart from goodwill. ASC Topic 350, “Intangibles-Goodwill and Other” (“ASC 350”) requires goodwill and other identifiable intangible assets with indefinite useful lives not be amortized, such as trade names, but instead tested at least annually for impairment (which the Company tests each year end, absent any impairment indicators) and be written down if impaired. ASC 350 requires that goodwill be allocated to its respective reporting unit and that identifiable intangible assets with finite lives be amortized over their useful lives. Visava/Canary On June 27, 2018, the Company entered into the Visava Exchange Agreement described in Item 1. F-17 Table of Contents This acquisition was accounted for using the acquisition method of accounting. 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 ​ 25,500,000 Market price on the date of issuance ​ 0.067 Fair value of Common Stock ​ 1,695,750 ​ ​ ​ ​ ​ ​ ​ $ Number of warrants ​ 25,000,000 Fair value price per warrant ​ 0.065 Fair value of warrant ​ 1,623,092 ​ ​ ​ Fair value of Common Stock ​ 1,695,750 Fair value of warrant ​ 1,623,092 Purchase consideration ​ 3,318,842 ​ The fair value of these warrants was measured at the date of acquisition using the Black-Scholes option pricing model using the following assumptions: ● Forfeiture rate of 0 % ; ● Stock price of $ 0.067 per share; ● Exercise price of $ 0.10 per share ● Volatility at 329 % ● Risk free interest rate of 2.66 % ; ● Expected life of 2 years; and ● Expected dividend rate of 0 % During the year ended December 31, 2023, the Company has identified no circumstances which would call for further evaluation of goodwill impairment related to Canary (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 ). Only change in goodwill from 2022 to 2023 is due to exchange rate fluctuations. During the year ended, December 31, 2023, all of the warrants expired, none were exercised. Goodwill 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. If the fair value exceeds the carrying amount, no further work is required, and no impairment loss is recognized. If the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is potentially impaired and step two of the goodwill impairment test would need to be performed to measure the amount of an impairment loss, if any. In the second step, the impairment is computed by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of the goodwill. 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. ​ F-18 Table of Contents 14. Accounts Payable and Accrued Liabilities Accounts payable amounting to $ 2,945,568 as of December 31, 2023, primarily represents consulting and construction services related to fixed asset additions amounting to $ 126,059 , interest on promissory notes and loans amounting to $ 1,628,007 , outstanding and accrued professional fees amounting to $ 945,615 . ​ 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 . ​ 15. Related Party Transactions and Balances During the year ended December 31, 2023, the Company expensed $ 312,969 (December 31, 2022: $ 143,677 ) in management service fee for services provided by the current key officers of the company. The breakdown of the related party balance as of December 31, 2023, in the amount of $ 11,415,557 (December 31, 2022: $ 10,346,465 ) is below: Debt purchase by CL Investors Inc. On June 15, 2020, the Company and its subsidiaries, entered into a Debt Agreement with CLI explained in Note 1. The Canary Debt, Term, repayment schedule, security and options are set forth in Note 1.As of December 31, 2023, $ 3,781 (CAD $ 5,000 ) is still outstanding from CLI. Interest expense charged for the year ended in the amount of $ 373,283 (CAD $ 503,756 ) is included in interest and bank charges on the unaudited condensed consolidated interim statement of operations and comprehensive loss and accrued interest in the amount of $ 621,682 (CAD 822,222 ) is included in accounts payable and accrued liabilities on the unaudited condensed consolidated interim balance sheet. The repayment schedule of the minimum principal payments is shown below: ​ ​ ​ ​ ​ 2024 $ 3,446,680 2025 ​ ​ 4,433,794 Total ​ ​ 7,880,474 Current portion ​ ​ ( 7,880,474 ) Non-current portion ​ $ — ​ During the year ended December 31, 2023, the Company could not make repayments of certain debt owed to a related party in accordance with the agreed repayment schedule, and is therefore in breach of the loan agreement as at year end. Consequently, the Company has reclassified the entire outstanding balance of the loan to current liabilities. At this stage the Company is under discussions to formalize the arrangements with the lender to revise the terms of the loans. The Debt Agreement Amendment and CLI Warrants are explained in Note 1. Refer to Note 12 for additional details on the CLI Warrants. The combined impact of both transactions resulted in a debt issuance cost of $ 251,518 . This debt issuance cost will be amortized over the term of the debt on a straight-line basis. As at December 31, 2023, the balance is $ 82,159 of which $ 50,733 is current while $ 31,426 is non-current. F-19 Table of Contents Shareholder loan One of the Company’s shareholders provided a loan to the Company. The loan is secured by all assets owned by the Company and its subsidiaries including leasehold improvements and matures on June 30, 2024, and therefore is presented as non-current. The loan was provided in five tranches and the latest amendment increased the maximum loan amount by $ 665,640 (CAD 900,000 ) while the rest of terms remained unchanged. The specific details of each tranche of the loan are shown below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate ​ Maximum loan ​ Outstanding loan ​ ​ CAD USD CAD USD Tranche 1 16.00 % 1,043,593 789,061 1,043,593 789,061 Tranche 2 43.26 % 1,592,787 1,204,306 1,592,787 1,204,306 Tranche 3 43.26 % 250,000 ​ 189,025 250,000 ​ 189,025 Tranche 4 ​ 43.26 % 500,000 ​ 378,050 ​ 500,000 ​ 378,050 Tranche 5 ​ 43.26 % 500,000 ​ 378,050 ​ 400,000 ​ 302,440 Total ​ ​ ​ 3,886,380 ​ 2,938,492 ​ 3,786,380 ​ 2,862,882 ​ Interest expense charged for the twelve months ended December 31, 2023, in the amount of $ 991,091 (CAD 1,337,504 ) is included in interest and bank charges on the consolidated statement of operations and comprehensive loss and accrued interest in the amount of $ 996,565 (CAD 1,265,164 ) is included in accounts payable and accrued liabilities on the consolidated balance sheet. A Ninth Amending Agreement to the shareholder loan, previously filed as Exhibit 10.35, was executed on November 7, 2023, by and between Jerry Zarcone, the Company and its subsidiaries (“ Ninth Amendment ”), which extends the term of each of the First, Second, Third, Fourth, and Fifth Tranche, to a maturity date of June 30, 2024, or such earlier date as demanded by Mr. Zarcone. Outstanding management service fee The balance owing to key officers of the Company is $ 689,360 (December 31, 2022: $ 585,261 ). 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. 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. This resulted in a settlement loss of $ 136,498 . These warrants expired during the year ended December 31, 2021. Of the total settlement amount, as of December 31, 2023 and December 31, 2022, $ 65,000 was outstanding to be paid. This amount includes late payment penalties of $ 25,000 . During the year ended December 31, 2023, all of the warrants expired, none were exercised. Balances outstanding related to directors During the year ended December 31, 2023, 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, 2023 is $ 25,632 and is included in accounts payable and accrued liabilities. The Company subleases its principal executive office premise from Norlandam Marketing Inc., a company owned by one of the directors. During the quarter ended March 31, 2021, the premises were subleased to a third party that makes rent payments directly to Norlandam Marketing Inc. The balance outstanding as of December 31, 2023 is $ nil . ​ F-20 Table of Contents 16. Operating Lease Right-Of-Use Assets and Lease Liability ​ The Company adopted ASC 842 as of January 1, 2019, using a modified retrospective approach and applying the standard’s transition provisions at January 1, 2020, the effective date. The Company made an accounting policy election to exclude from balance sheet reporting those leases with initial terms of 12 months or less. The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components is recognized when the obligation is probable. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at the adoption date in determining the present value of lease payments. The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met. The Company does not own any real property. It currently leases two office/facility spaces. For accounting purposes, this lease is treated as an operating lease. Upon adoption of ASC 842, the Company recognized $ 1,707,434 (CAD $ 2,258,212 ) of right-to-use assets as operating leases and operating lease obligations. The right-to-use asset was reduced by $ 1,580,189 (CAD 2,089,921 ) due to recognition of the prior deferred rent liability which was eliminated upon adoption of ASC 842. Details of these leases are detailed below: 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. 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 $ 26,464 (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. Effective May 1, 2020, due to the implementation of the new lease, $ 747,248 (CAD 988,293 ) was forgiven by the landlord and one vendor. These leases will expire between 2023 and 2030. The weighted average discount rate used for these leases was 16 % (average borrowing rate of the Company). As of December 31, 2023 the weighted average remaining lease term was 6.33 years. Maturities of lease liabilities were: ​ ​ ​ ​ ​ 2024 $ 330,456 2025 ​ ​ 333,761 2026 ​ ​ 337,098 2027 ​ ​ 340,469 Thereafter ​ ​ 808,116 Total lease payments ​ ​ 2,149,900 Less imputed interest ​ ​ ( 798,467 ) Present value of lease liabilities ​ ​ 1,351,433 Current portion ​ ​ ( 127,478 ) Non-current portion ​ $ 1,223,955 ​ F-21 Table of Contents Below is the reconciliation of the net operating lease presented on the consolidated statement of operations: ​ ​ ​ ​ ​ ​ ​ ​ For the ​ For the ​ ​ Year ended ​ Year ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ $ $ Gross operating lease expense 233,859 ​ 258,916 Gross rent and utilities expenses 241,110 ​ 594,498 Recoverable expenses from JVCo related to rent and utilities ( 284,784 ) ​ ( 927,473 ) ​ 190,185 ​ ( 74,059 ) ​ As explained in Note 12, the JVCo reimburses a certain percentage of gross expenses incurred by Canary which includes rent and utilities. Due to this unique circumstance and since operating lease expenses are related to rent expenses, the Company has decided to group the operating lease expenses, all lease related expenses and the recoverable amount from JVCo to show a net operating lease expense. At the year ended December 31, 2023 the recoverable amount is through April 27, 2023. ​ 17. Convertible Promissory Notes Interest amounting to $ 39 was accrued for the year ended December 31, 2023 (December 31, 2022: $ 37 ). Principal amount outstanding as of December 31, 2023 and December 31, 2022 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, 2023, there were no conversion of principal balance of convertible promissory notes (2022: $ 2,648 ), respectively. The Company recorded and fair valued the derivative liability as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative Conversions / ​ ​ Derivative ​ ​ liability as at ​ Redemption ​ ​ ​ ​ ​ liability as at ​ ​ December 31, ​ during the ​ Change due to ​ Fair value ​ December 31, ​ ​ 2022 ​ period ​ Issuances ​ adjustment ​ 2023 ​ ​ $ ​ $ ​ $ ​ $ ​ $ Note D 1,446 — — ( 605 ) 841 Note F 10,034 — — ( 4,766 ) 5,268 Note G 3,645 — — ( 1,733 ) 1,912 ​ 15,125 — — ( 7,104 ) 8,021 ​ Key assumptions used for the valuation of convertible notes The derivative element of the convertible notes was fair valued using the multinomial lattice model. Following assumptions were used to fair value these notes as of December 31, 2023: ● Projected annual volatility of 205 % to 523 % ; ● Risk free interest rate of 4.40 % to 5.20 % ; ● Stock price of $ 0.002 to 0.008 ; ● Liquidity term of 0.25 to 0.75 years; ● Dividend yield of 0 % ; and ● Exercise price in the range between $ 0.0010 to $ 0.0151 . ​ F-22 Table of Contents 18. Stockholders’ Deficiency Preferred Stock ● Par value: $ 0.0001 ● Authorized: 20,000,000 ● Issued: 1,000,000 shares were outstanding as of December 31, 2023 and 2022 Common Stock ● Par value: $ 0.0001 ● Authorized: 850,000,000 ● Issued: 617,025,999 shares are outstanding as at December 31, 2023 and 2022 As of December 31, 2023, convertible notes, warrants and preferred stock outstanding could be converted into 31,857,771 (December 31, 2022: 17,258,122 ), 10,400,008 (December 31, 2022: 53,950,001 ) and 100,000,000 (December 31, 2022: 100,000,000 ) shares of common stock, respectively. Preferred Stock Shares of preferred stock may be issued from time to time in one or more series as may be determined by the board of directors. The board of directors may fix the designation, powers, preferences, and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote or action by the stockholders of the Company, except that no holder of preferred stock shall have pre-emptive rights. Any shares of preferred stock so issued would typically have priority over the common stock concerning dividend or liquidation rights. The board of directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock unless otherwise required by law. Series A Preferred Stock (“Series A Stock”) Dividends shall be declared and set aside for any shares of Series A Stock in the same manner and amount as for the Common Stock. Series A Stock, as a class, shall have voting rights equal to a multiple of 2X the number of shares of Common Stock issued and outstanding that are entitled to vote on any matter requiring shareholder approval. 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 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. Common Stock Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. 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 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. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. The Company may issue additional shares of common stock which could dilute its current shareholder’s share value. F-23 Table of Contents 2023 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. 2022 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. 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, 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 $ 114 , 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, 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 $ 120 , 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, 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 $ 73 , 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. F-24 Table of Contents Shares to be issued include the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares Amount Description Services 115,000 ​ $ 73,000 80,000 shares of common stock to be issued as compensation to advisers and consultants. These were recorded at fair value of $ 52,000 , based on the market price of the Company’s stock on the date of issue. 35,000 to be issued as settlement of the amount due for website development services amounting to $ 247,306 . The fair value of the shares on the date of settlement was $ 21,000 , resulting in a gain on settlement amounting to $ 226,306 during the year ended December 31, 2017. Private placements 346,296 ​ $ 18,787 Consideration for private placements with the fair value based on cash proceeds received. Proper allocation between common stock and additional paid-in capital of the amount received will be completed in the period when the shares are issued. Settlement of loans of CannaKorp 930,240 ​ $ 80,838 Refer to Note 15 for details. Agreement with Serious Seeds 249,984 ​ ​ 2,814 As consideration for intellectual property rights granted by Smit. The fair value is based on the market price of the Company’s stock on the date of issue as per the agreement. ​ 1,641,520 ​ $ 175,439 ​ ​ ​ Warrants As further explained in Note 18, 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: 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at As at As at As at ​ ​ December 31, ​ September 30, ​ June 30, ​ March 31, ​ 2023 2023 2023 2023 Forfeiture rate ​ 0 % ​ 0 % ​ 0 % ​ 0 % Stock price ​ $ 0.002 ​ $ 0.008 ​ $ 0.006 ​ $ 0.003 Exercise price ​ $ 0.300 to $ 0.350 ​ $ 0.250 to $ 0.350 ​ $ 0.250 to $ 0.300 ​ $ 0.250 to $ 0.300 Volatility ​ 358 % to 438 % ​ 365 % to 422 % ​ 273 % to 342 % ​ 244 % to 305 % Risk free interest rate ​ 4.79 % ​ 5.46 % ​ 5.40 % ​ 4.64 % Expected life (years) ​ 0.02 to 1.93 ​ 0.02 to 1.68 ​ 0.02 to 1.68 ​ 0.02 to 1.93 Expected dividend rate ​ 0 % ​ 0 % ​ 0 % ​ 0 % ​ F-25 Table of Contents 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As at As at As at As at ​ ​ December 31, ​ September 30, ​ June 30, ​ March 31, ​ ​ 2022 ​ 2022 ​ 2022 ​ 2022 Forfeiture rate 0 % ​ 0 % ​ 0 % ​ 0 % Stock price ​ $ 0.004 ​ $ 0.005 ​ $ 0.008 ​ $ 0.009 Exercise price ​ $ 0.200 to $ 0.300 ​ $ 0.200 to $ 0.300 ​ $ 0.050 to $ 0.300 ​ $ 0.023 to $ 0.250 Volatility ​ 253 % to 312 % ​ 214 % to 279 % ​ 192 % to 306 % ​ 192 % to 306 % Risk free interest rate ​ 4.73 % ​ 4.05 % ​ 2.92 % ​ 2.28 % Expected life (years) ​ 0.02 to 1.93 ​ 0 to 1.94 ​ 0 to 1.94 ​ 0 to 1.93 Expected dividend rate ​ 0 % ​ 0 % ​ 0 % ​ 0 % ​ The fair value of the warrants issued during the year issued was measured at the date of acquisition using the Black-Scholes option pricing model using the following assumptions: ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ During quarter During quarter During quarter During quarter ​ ​ ended ​ ended ​ ended ​ ended ​ December 31, 2023 ​ September 30, 2023 ​ June 30, 2023 ​ March 31, 2023 Forfeiture rate 0 % ​ 0 % ​ 0 % ​ 0 % Stock price ​ $ 0.002 to $ 0.004 ​ $ 0.004 to $ 0.009 ​ $ 0.003 to $ 0.003 ​ $ 0.003 to $ 0.005 Exercise price ​ $ 0.350 ​ $ 0.350 ​ $ 0.350 ​ $ 0.300 Volatility ​ 438 % ​ 399 % ​ 342 % ​ 305 % Risk free interest rate ​ 4.60 % to 5.08 % ​ 4.78 % to 5.01 % ​ 3.82 % to 4.51 % ​ 4.24 % to 4.89 % Expected life (years) ​ 2 ​ 2 ​ 2 ​ 2 Expected dividend rate ​ 0 % ​ 0 % ​ 0 % ​ 0 % Fair value of warrants ​ $ 158 ​ $ 313 ​ $ 138 ​ $ 160 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ During quarter ​ During quarter ​ During quarter ​ During quarter ​ ​ ended ​ ended ​ ended ​ ended ​ ​ December 31, ​ September 30, ​ June 30, ​ March 31, ​ 2022 2022 2022 2022 Forfeiture rate 0 % ​ 0 % ​ 0 % ​ 0 % Stock price $ 0.004 to $ 0.006 ​ $ 0.007 to $ 0.008 ​ $ 0.005 to $ 0.010 ​ $ 0.008 to $ 0.013 Exercise price $ 0.300 ​ $ 0.300 ​ $ 0.300 ​ $ 0.250 Volatility 279 % ​ 279 % ​ 299 % ​ 306 % Risk free interest rate 4.23 % to 4.66 % ​ 2.97 % to 3.50 % ​ 2.50 % to 2.73 % ​ 0.88 % to 1.50 % Expected life (years) 2 ​ 2 ​ 2 ​ 2 Expected dividend rate 0 % ​ 0 % ​ 0 % ​ 0 % Fair value of warrants $ 176 $ 288 ​ $ 306 ​ $ 430 ​ Breakdown of warrants outstanding as of December 31, 2023 and 2022 are detailed below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining Remaining ​ ​ Warrants ​ Warrants ​ contractual life term ​ contractual life term ​ ​ outstanding as at ​ outstanding as at ​ as at ​ as at ​ ​ December 31, ​ December 31, ​ December 31, ​ December 31, ​ ​ 2023 ​ 2022 ​ 2023 (years) ​ 2022 (years) Private placements — 43,549,993 N/A 0.11 to 0.47 Serious Seeds 400,008 400,008 0.02 to 1.93 0.02 to 1.93 CLI 10,000,000 10,000,000 1.62 2.62 Total 10,400,008 53,950,001 ​ F-26 Table of Contents Movement of the warrants is detailed below: ​ ​ ​ ​ Warrants as at December 31, 2021 350,178,339 Issued 200,004 Expired ( 296,428,342 ) Warrants as at December 31, 2022 53,950,001 Issued 200,004 Expired ( 43,749,997 ) Warrants as at December 31, 2023 10,400,008 ​ Movement of the warrant liability is detailed below: ​ ​ ​ ​ Warrant liability as at December 31, 2021 22,095 Warrant liability for new issuance ​ 1,221 Change in fair value ​ ( 22,827 ) Warrant liability as at December 31, 2022 ​ 489 Warrant liability for new issuance ​ 769 Change in fair value ​ ( 903 ) Warrant liability as at December 31, 2023 ​ 355 ​ ​ 19. Contingencies and Commitments Contingencies During the year ended December 31, 2019, a terminated employee of Canary has filed a lawsuit against the Company amounting to approximately $ 1,587,810 (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. 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. ​ A complaint for damages of $ 150,000 was lodged against CannaKorp by the former Chief Financial Officer of CannaKorp for outstanding professional fees. No claim has been registered. 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, 2023, $ 188,865 has been recorded in CannaKorp’s payable based on past accruals and outstanding invoices. 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 $ 1,408,467 (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, 2023, $ 10,720 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 $ 98,881 (CAD 130,778 ) was lodged against Canary by a vendor for breach of contract. 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, 2023, $ 101,996 (CAD 138,150 ) has been recorded in the Canary’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. 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. F-27 Table of Contents 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, 2023 and December 31, 2022, the pandemic and its lasting impacts did not have a material impact on the Company’s operations. As of December 31, 2023 and December 31, 2022, 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. Commitments 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. All of the warrants must be exercised on or before the two ( 2 ) year anniversary date of each of the warrant issuance dates. As of December 31, 2023, none of the above shares have been issued. In consideration of the Company’s appointment as Serious’ exclusive distributor in Canada, the Company will pay Serious certain royalties as follows: ​ ​ ​ ​ 1 st year: 2.00 % of gross sales 2 nd year: 2.25 % of gross sales 3 rd year: 2.50 % of gross sales 4 th year: 2.75 % of gross sales 5 th and following years: 3.00 % of gross sales ​ ​ 20. Income Taxes Income taxes The provision for income taxes is calculated at a US corporate tax rate of approximately 21 % (2022: 21 %) as follows: ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ $ ​ $ Expected income tax (expense) recovery from net (income) loss ​ 67,971 ​ 949,213 Tax effect of expenses not deductible for income tax: ​ ​ ​ ​ Annual effect of book/tax differences ​ 331,532 ​ 3,099 Change in the valuation allowance ​ ( 399,503 ) ​ ( 952,312 ) ​ ​ — ​ — ​ F-28 Table of Contents Deferred tax assets Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax assets consist of the following components as of December 31: ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ $ ​ $ Tax effect of NOL Carryover ​ 5,419,579 ​ 5,020,076 Less valuation allowance ​ ( 5,419,579 ) ​ ( 5,020,076 ) ​ ​ — ​ — ​ As of December 31, 2023, the Company performed a comprehensive analysis of its tax estimates and comparative figures accordingly, which had no net impact on deferred tax recorded. The Company had net operating loss carry forwards of approximately $ 25,807,517 (2022: $ 23,905,124 ) that may be offset against future taxable income from the year by 2042 . No tax benefit has been reported as of December 31, 2023, consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. The Company is taxed in the United States at the Federal level. All tax years since inception are open to examination because no tax returns have been filed. ​ 21. Subsequent Events The Company’s management has evaluated subsequent events up to March 20, 2024, the date the consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has no subsequent event to report. ​ ​ F-29 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure for the period covered by this report. ​