What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-27 compared with 2024-03-20 · 109 added, 105 removed, 847 unchanged (20% of the section changed)

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

As of December 31, 2024, the Company had a working capital deficit of $9,994,548 and an accumulated deficit of $30,946,844.

2 unchanged sentences

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.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures.

We evaluate our estimates and assumptions on an ongoing basis.

Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

Our actual results could differ from these estimates.

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

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

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

Balance sheet as of December 31, 2024 and 2023

6 unchanged sentences

As of December 31, 2024, the companys allowance for doubtful accounts was $2,630.

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.

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

As of December 31, 2024, the inventory in the amount of $882,279 (2023:

$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.

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

Prepaid asset

2 unchanged sentences

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.

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

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:

Sales tax recoverable allowance on December 31, 2024 is $5,795 (December 31, 2023:

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.

17 unchanged sentences

Revenues for the years ended December 31, 2024 and 2023

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:

The Company generated revenue of $6,591,625 during the current year and $3,720,169 in the comparable year ended in 2023.

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

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

The revenue represents the sale of cannabis product, and the entire revenue was sold to twenty one customers (2022:

The revenue represents the sale of cannabis product, and the entire revenue was sold to seventeen customers (2023:

Expenses for the years ended December 31, 2024 and 2023

5 unchanged sentences

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

$nil), operating lease expenses of $190,185 (2022:

$706), operating lease expenses of $217,422 (2023:

$190,185) office and general of $515,570 (2023:

6 unchanged sentences

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

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:

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

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

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

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

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

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

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

Liquidity and Capital Resources

2 unchanged sentences

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.

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

Statement of Cash Flow – For the years ended December 31, 2024 and 2023:

Operating activities

Operating activities used cash of $589,612 compared to the cash used of $1,014,828 during the prior year.

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

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

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.

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

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

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.

Financing activities used cash of $730,225 compared to $666,900 for the corresponding period of the prior year.

This is due to the settlement of related party loan.

Consolidated Financial Statements and Supplementary Data

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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).

(“the Company”) as of December 31, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

1 unchanged sentence

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.

As discussed in Note 3 to the financial statements, the Company has an accumulated deficit and a working capital deficit.

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

21 unchanged sentences

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.

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

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

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

14 unchanged sentences

Prepaid asset

Receivable from joint venture

Convertible note receivable

Interest receivable

Sales tax recoverable, net of allowance

Other receivable

1 unchanged sentence

Long term assets

Investment in joint venture

Operating lease right-of-use assets

12 unchanged sentences

Long term liabilities

Payable to related parties, net - Non-current portion

Operating lease liability - Non-current portion

23 unchanged sentences

( 2,866,401 )

( 2,065,149 )

OPERATING EXPENSES

5 unchanged sentences

Office and general

Travel & Entertainment

Travel expenses

Total operating expenses

4 unchanged sentences

Interest and bank charges

Exchange income

(Recovery) Allowance of sales tax recoverable

Impairment of inventory [Note 8]

Impairment of goodwill

Exchange (income) loss

Interest income

Recovery of sales tax recoverable

Share of income from joint venture

1 unchanged sentence

Total other expense (income)

Net loss before income taxes

( 4,520,064 )

Net income (loss) before income taxes

Net income (loss)

Foreign currency translation adjustment

Comprehensive loss

( 4,408,173 )

Loss per share - basic and diluted

Weighted average shares - basic and diluted

Comprehensive income (loss)

Earnings (loss) per share - basic

Weighted average shares - basic

Earnings (loss) per share - diluted

Weighted average shares - diluted

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

7 unchanged sentences

( 1,088,288 )

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

( 6,972,697 )

Foreign currency translation

2 unchanged sentences

( 6,507,629 )

( 6,972,697 )

As at December 31, 2022

1 unchanged sentence

( 6,559,825 )

( 2,152,112 )

Cancellation of shares [Note 11]

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

( 4,520,064 )

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

Foreign currency translation

2 unchanged sentences

( 1,088,288 )

( 6,972,697 )

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

4 unchanged sentences

OPERATING ACTIVITIES

Net (loss) for the period

( 4,520,064 )

Net income (loss) for the year

Adjustment for non-cash items

3 unchanged sentences

Shares and warrants issued/to be issued for services

Allowance (recovery) of sales tax recoverable

Recovery of sales tax recoverable

Depreciation expense

Operating lease expense

Investment (income) loss from joint venture

Investment income from joint venture

Debt issuance cost

Impairment of inventory

Impairment of goodwill

Changes in operating assets and liabilities:

6 unchanged sentences

Change in operating lease liability, net

Changes in interest receivable

Change in deferred revenue

Net cash used in operating activities

( 1,014,828 )

Net cash provided (used) from operating activities

INVESTING ACTIVITIES

1 unchanged sentence

Net proceeds from joint venture

Net cash provided by investing activities

Advancement on convertible note

Recoverable expense

Net cash (used) provided by investing activities

FINANCING ACTIVITIES

1 unchanged sentence

Settlement of related party loan

Payment for settlement payable

Net cash provided (used) by financing activities

Net cash (used) provided by financing activities

Net change in cash and restricted cash during the period

3 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES

Shares issued on conversion of debt

Shares issued as consideration for services

18 unchanged sentences

As of the current year to date period end, Company has produced and sold cannabis products of $ 6,591,625 (Period ended December 31, 2023:

$ 3,720,169 ).

Joint Venture Agreement Termination;

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Going Concern

The Company has earned minimal revenue since inception and has sustained operating losses during the year ended December 31, 2023.

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

The Company had a working capital deficit of $ 9,994,548 and an accumulated deficit of $ 30,946,844 as of December 31, 2024.

56 unchanged sentences

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:

The Company generated revenue of $ 6,591,625 during the year ended December 31, 2024, and $ 3,720,169 in 2023.

There is one customers whose revenue is more than 10% of the total revenue.

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

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

The revenue was concentrated to twenty one customers (2022:

The revenue was concentrated to seventeen customers (2023:

twenty one ).

The revenue represents the sale of cannabis products.

18 unchanged sentences

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

some or all of the deferred tax assets will not be realized.

Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.

As of December 31, 2024 there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.

8 unchanged sentences

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, 2024, basic and diluted EPS are different due to income.

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

48 unchanged sentences

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

ASU 2023-07, Segment Reporting (Topic 280)

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

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

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

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

Early adoption is permitted.

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

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

ASU 2016-13 Current Expected Credit Loss (ASC326)

1 unchanged sentence

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.

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

Convertible Note Receivable

On August 9, 2024, the Company signed an agreement with Alma Cannabis PTY LTD for a loan receivable amount of up to $ 97,300 .

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

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

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

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

Accounts Receivable

1 unchanged sentence

As of December 31, 2024, the companys allowance for doubtful accounts was $ 2,630 .

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.

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

As of December 31, 2024, the inventory in the amount of $ 882,279 (2023:

$ 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.

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

December 31, 2024

6 unchanged sentences

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.

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

The Company has recorded $ nil of allowance as of December 31, 2023 (December 31, 2022:

The Company has recorded $ 5,795 of allowance as of December 31, 2024 (December 31, 2023:

Intangible Assets

23 unchanged sentences

Canary has recorded a depreciation expense of $ 825,317 during the year ended December 31, 2024 (2023:

Target has recorded a depreciation expense of $ 33 during the year ended December 31, 2024 (2023:

JVCo has recorded a depreciation expense of $ 90,752 during the year ended December 31, 2024 (2023:

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

14 unchanged sentences

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.

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

balance sheet.

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

51 unchanged sentences

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

the Company identified 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 ).

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

Only change in goodwill from 2023 to 2024 is due to exchange rate fluctuations.

2 unchanged sentences

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

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

The first step of this test is qualitative analysis in which it compares the fair value of the reporting unit, to the carrying amount, including goodwill.

In this step company assesses the likelihood of impairment by examining factors such as continued revenue growth, favorable regulatory developments, and market growth trends, overall financial performance of the Company.

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.

If the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is potentially impaired then step two that is quantitative analysis 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.

23 unchanged sentences

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.

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

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 is secured by all assets owned by the Company and its subsidiaries including leasehold improvements and matures on May 31, 2025, and therefore is presented as current.

The loan was provided in five tranches and the latest amendment increased the maximum loan amount by $ 625,500 (CAD 900,000 ) while the rest of terms remained unchanged.

3 unchanged sentences

Interest expense charged for the twelve months ended December 31, 2024, in the amount of $ 753,067 (CAD 1,031,281 ) is included in interest and bank charges on the consolidated statement of operations and comprehensive loss and accrued interest in the amount of $ 716,741 (CAD 1,031,282 ) 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.

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

Outstanding management service fee

42 unchanged sentences

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:

10 unchanged sentences

Recoverable expenses from JVCo related to rent and utilities

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.

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

Convertible Promissory Notes

5 unchanged sentences

During the year ended December 31, 2024, there were no conversion of principal balance of convertible promissory notes (2023:

$ 2,648 ), respectively.

$ nil ), respectively.

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

39 unchanged sentences

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

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

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

10 unchanged sentences

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 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.

Shares to be issued include the following:

94 unchanged sentences

Warrants as at December 31, 2023

( 43,749,997 )

Warrants as at December 31, 2024

10 unchanged sentences

During the year ended December 31, 2019, a terminated employee of Canary has filed a lawsuit against the Company amounting to approximately $ 1,459,500 (CAD 2,100,000 ) in Ontario, Canada.

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

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

ultimate decision will be in favor of the Company.

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

26 unchanged sentences

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

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

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

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

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

As of December 31, 2024, 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:

In consideration of the Company’s appointment as Serious’ exclusive distributor in Canada, the Company agreed to pay Serious certain royalties as mentioned below, but none of the royalties have been paid.

2.00 % of gross sales

31 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis