NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
Organization, Nature of
Business, Going Concern and Management Plans
|
Organization and Nature of Business
Target Group Inc. (formerly known as Chess
Supersite Corporation) (“Target Group” or “the Company”) was incorporated on July 2, 2013 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’s current business comprises the operation of an extensive Chess gaming website. This comprehensive user friendly
web site www.chessstars.com, is currently offering a state-of-the-art playing zone, broadcasts of the major tournaments, intuitive
mega database, chess skilled contests and much more.
In May, 2014, the Company effected a change
in control by the redemption of the stock held by its original shareholders, the issuance of shares of its common stock to new
shareholders, the resignation of its original officers and directors and the appointment of new officers and directors.
On July 6, 2015, the Company filed its
form S-1/A, to amend its form S-1 previously filed on January 26, 2015 and December 11, 2014. The prospectus relates to the offer
and sale of 1,500,000 shares of common stock (the “Shares”) of the Company, $0.0001 par value per share, offered by
the holders thereof (the “Selling Shareholder Shares”), who are deemed to be statutory underwriters. The selling shareholders
will offer their shares at a price of $0.50 per share, until the Company’s common stock is listed on a national securities
exchange or is quoted on the OTC Bulletin Board (or a successor); after which, the selling shareholders may sell their shares at
prevailing market or privately negotiated prices, including (without limitation) in one or more transactions that may take place
by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale.
On July 13, 2015, the Company received
a notice of effectiveness from the SEC for the registration of its shares.
On July 3, 2018, the Company filed an amendment
in its Articles of association to change its name to Target Group Inc. The Company was able to secure an OTC Bulletin Board symbol
CBDY
from Financial Industry Regulatory Authority (FINRA).
On June 27, 2018, the Company entered into
an Agreement and Plan of Share Exchange (“Exchange Agreement”) with Visava Inc., a private Ontario, Canada corporation
(“Visava”). Visava owns 100% of Canary Rx Inc., a Canadian corporation that holds a leasehold interest in a parcel
of property located in Ontario’s Garden Norfolk County for the production of cannabis.
The Exchange Agreement provides that, subject
to its terms and conditions, the Company issued to the Visava shareholders an aggregate of 25,500,000 shares of the Company’s
Common Stock in exchange for all of the issued and outstanding common stock held by the Visava shareholders. In addition of its
Common Stock, the Company issued to the Visava shareholders, prorata Common Stock Purchase Warrants purchasing an aggregate of
25,000,000 shares of the Company’s Common Stock at a price per share of $0.10 for a period of two years following the issuance
date of the Warrants. Upon the closing of the Exchange Agreement, the Visava shareholders held approximately 46.27% of the issued
and outstanding Common Stock of the Company and Visava will continue its business operations as a wholly-owned subsidiary of the
Company. The transaction was closed effective August 2, 2018.
Going Concern and Management Plans
The Company has not yet generated significant
revenue since inception to date and has sustained operating losses during the three and nine months ended September 30, 2018. The
Company had working capital deficit of $3,367,175 and an accumulated deficit of $9,649,509 as of September 30, 2018. 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 unaudited condensed consolidated interim
financial statements have been prepared assuming that the Company will continue as a going concern up-to at least 12 months from
the balance sheet date; however, the above condition raises substantial doubt about the Company’s ability to do so. The condensed
consolidated unaudited 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 or from the sale of its
equity. 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.
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
2.
|
Summary of Significant
Accounting Policies
|
Basis of Presentation
The unaudited condensed consolidated interim
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”) for interim financial information and the rules and regulations of the SEC and are expressed in US dollars.
Accordingly, the unaudited condensed consolidated interim financial statements do not include all information and footnotes required
by US GAAP for complete annual financial statements. The unaudited condensed consolidated interim financial statements reflect
all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating
results are not necessarily indicative of results that may be expected for the year ending December 31, 2018 or for any other interim
period. The unaudited condensed consolidated interim financial statements should be read in conjunction with the audited financial
statements of the Company and the notes thereto as of and for the year ended December 31, 2017.
The condensed consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary, Visava Inc. Significant intercompany accounts and transactions
have been eliminated.
Reclassification of comparative figures
Certain of the prior period figures have
been reclassified to align with Management’s current view of the Company’s operations.
Use of Estimates
The preparation of the unaudited condensed
consolidated interim financial statements in conformity with US 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 unaudited
condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates
may include those pertaining to accruals. Actual results could materially differ from those estimates.
Revenue recognition
In accordance with ASC 605, revenue is
recognized when persuasive evidence of an arrangement exists, services have been performed, the amount is fixed and determinable,
and collection is reasonably assured.
On May 28, 2014, the FASB and IASB issued
ASC 606,
Revenue From Contracts With Customers,
under which an entity is to recognize revenues to depict the transfer of
promised goods or services to a customer in an amount that reflects the consideration to which the entity expects to be entitled
to in exchange for those goods or services. For public entities, the effective date is annual reporting periods (including interim
reporting periods within those periods) beginning after December 15, 2017.
The Company qualifies as an “emerging
growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage
of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. As an emerging growth company, management can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. The management has elected to take advantage of the benefits of this extended transition
period.
Recently Issued Accounting Standards
The Company evaluated all recent accounting
pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial
position, results of operations or cash flows of the Company.
In June 2018, the FASB issued Accounting
Standards Update (ASU) No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update expand
the scope of ACS 718,
Compensation-Stock Compensation
, to include share-based payment transactions for acquiring goods and
services from nonemployees to supersede the guidance in ASC 505-50, Equity-Based Payments to Non-Employees, which previously included
the accounting for nonemployee awards.
The amendments are effective for public
business entities for fiscal years beginning after December 15, 2018, including interim periods.
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
Related Party Transactions
and Balances
|
During the nine months ended September
30, 2018, $225,000 (September 30, 2017: $225,000) was recorded as management services fee payable to Rubin Schindermann and Alexander
Starr, who are shareholders and officers in the Company. The amount is included in the related party balance as at September
30, 2018.
During the year ended December 31, 2017,
Eric Schindermann, who is the son of Rubin Schindermann, became a lender to the Company by way of assignment of an existing promissory
note liability of the Company amounting to $18,000. 465,728 shares of the Company’s common stock were issued to Eric Schindermann
subsequent to the year end, on partial conversion of the debt amounting to $3,805. Amounting outstanding to Eric under promissory
notes is $14,195 as at September 30, 2018.
Shareholder advances represent
expenses paid by the owners from personal funds. The amount is non-interest bearing, unsecured and due on demand. The amount of
advance as at September 30, 2018 and December 31, 2017 was $270,576 and $304,322, respectively. The amounts repaid during the nine
months ended September 30, 2018 and 2017 were $188,290 and $nil, respectively.
|
4.1
|
Capital work in progress
|
The Company initiated construction
on its 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. Construction remains on schedule for completion in mid-January 2019. As at September
30, 2017, the Company has capitalized $1,208,315 in payments to multiple vendors for the construction of the facility.
|
5.
|
Goodwill and Intangible
Assets
|
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.
On June 27, 2018, the Company entered into
an Agreement and Plan of Share Exchange (“Exchange Agreement”) with Visava Inc., a private Ontario, Canada corporation
(“Visava”). Visava owns 100% of Canary Rx Inc., a Canadian corporation that holds a leasehold interest in a parcel
of property located in Ontario’s Garden Norfolk County for the production of cannabis.
Pursuant to the Agreement, the Company
acquired 100% of the issued and outstanding shares of Visava Inc. in exchange for the issuance of 25,500,000 shares of the Company’s
Common Stock and will issue to the Visava shareholders, prorata Common Stock Purchase Warrants purchasing an aggregate of 25,000,000
shares of the Company’s Common Stock at a price per share of $0.10 for a period of two years following the issuance date
of the Warrants. As a result of this transaction, Visava Inc. became a wholly owned subsidiary of the Company and the former shareholders
of Visava Inc. owned approximately 46.27% of the Company’s shares of Common Stock. The transaction was closed effective August
2, 2018.
This acquisition was accounted for using
the acquisition method of accounting. The fair value of assets, liabilities and intangible assets and the purchase price allocation
as of August 2, 2018 was as follows:
|
|
Allocation of
Purchase Price
|
|
|
|
$
|
|
Prepaid and other receivables
|
|
|
15,368
|
|
Sales tax recoverable
|
|
|
133,614
|
|
Furniture and equipment
|
|
|
897
|
|
Capital work in progress
|
|
|
898,422
|
|
Total assets
|
|
|
1,048,301
|
|
|
|
|
|
|
Bank overdraft
|
|
|
(63,693
|
)
|
Accounts payable
|
|
|
(1,158,164
|
)
|
Payable to related parties
|
|
|
(101,797
|
)
|
Total liabilities
|
|
|
(1,323,654
|
)
|
Net liabilities
|
|
|
(275,353
|
)
|
Goodwill
|
|
|
3,594,195
|
|
Total net assets acquired
|
|
|
3,318,842
|
|
The purchase consideration of
25,500,000 shares and 25,000,000 warrants of the Company’s common stock valued as detailed below:
|
|
$
|
|
Number of Common Stock
|
|
|
25,500,000
|
|
Market price on the date of issuance
|
|
|
0.0665
|
|
Fair value of Common Stock
|
|
|
1,695,750
|
|
|
|
$
|
|
Number of warrants
|
|
|
25,000,000
|
|
Fair value price per warrant
|
|
|
0.0649
|
|
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:
|
·
|
Stock price of $0.067 per share;
|
|
·
|
Exercise price of $0.10 per share
|
|
·
|
Risk free interest rate of 2.66%;
|
|
·
|
Expected life of 2 years; and
|
|
·
|
Expected dividend rate of 0%
|
As at September 30, 2018, there were 25,000,000
warrants outstanding, fully vested and with a remaining contractual life term of 1.84 years.
Goodwill
The Company tests for impairment of goodwill
at the reporting unit level. In assessing whether goodwill is impaired, the Company utilize 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 statement of operations.
|
6.
|
Convertible Promissory
Notes
|
During the nine months ended
September 30, 2018, the Company issued convertible promissory notes, details of which are as follows:
Convertible promissory note
issued on September 5, 2018, amounting to $103,000 (Note N).
Consistent with previous accounting treatment of similar financial instruments,
no derivative liability is recognized for Note N as at September 30, 2018 due to the six month conversion clause as explained
below.
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note is December 5, 2019.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 12% per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 61% of the average of the three (3) lowest trading price of the Company’s common stock for the fifteen (15) trading days prior to the date of conversion.
|
|
4.
|
The Company shall not be obligated to accept any conversion request before six months from the date of the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Convertible promissory note issued on August
9, 2018, amounting to $65,000 (Note M).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note is September 9, 2019.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 10% per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 52% of the lowest closing bid price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.
|
|
4.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Convertible promissory note issued on January
16, 2018, amounting to $28,000 (Note L).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note is October 30, 2018.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 12 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 58% of the lowest closing bid price of the Company’s common stock for the fifteen (15) trading days prior to the date of conversion.
|
|
4.
|
The Company shall not be obligated to accept any conversion request before six months from the date of the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
During the year ended December
31, 2017, the Company issued convertible promissory notes, details of which are as follows:
Convertible promissory note issued on November
28, 2017, amounting to $33,000 (Note K).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note is March 10, 2019.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 12 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 58% of the lowest closing bid price of the Company’s common stock for the twenty (15) trading days prior to the date of conversion.
|
|
4.
|
The Company shall not be obligated to accept any conversion request before six months from the date of the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Convertible promissory note issued
on May 5, 2017 amounting to $23,000 (Note J).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the note was August 20, 2018
|
|
2.
|
Interest on the unpaid principal balance of this note shall accrue at the rate of 12% per annum.
|
|
3.
|
In the event the Note holder exercised the right of conversion, the conversion price was equal to 58% of the average of the three (3) lowest closing bid price of the Company’s common stock for the fifteen (15) trading days prior to the date of conversion.
|
|
4.
|
The Company was not be obligated to accept any conversion request before six months from the date of the note.
|
|
5.
|
Conversion was limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Convertible promissory note issued
on January 31, 2017 amounting to $33,000 (Note I).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the note is November 5, 2018.
|
|
2.
|
Interest on the unpaid principal balance of this note shall accrue at the rate of 12% per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 58% of the average of the three (3) lowest closing bid price of the Company’s common stock for the fifteen (15) trading days prior to the date of conversion.
|
|
4.
|
The Company shall not be obligated to accept any conversion request before six months from the date of the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
During the year ended December 31, 2016,
the Company issued convertible promissory notes, details of which are as follows:
Convertible Redeemable note issued
on October 18, 2016, amounting to $140,000 (Note H), representing commitment fee owed by the Company pursuant to Securities Purchase
Agreement entered into by the Company dated October 18, 2016. The commitment fee was considered a prepaid asset. During the year
ended December 31, 2017, the pending S1 registration statement was withdrawn, removing the benefit associated with the prepaid
asset. The amount was therefore written off as commitment fee in the statement of operations.
During the period ended March
31, 2018, the Company obtained forgiveness of the liability and the interest associated with the note payable and recorded $153,471
as forgiveness of debt in the condensed consolidated statement of operations.
The key terms/features of the
convertible note are as follows:
|
1.
|
The maturity date of the Note was July 18, 2017.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 7 % per annum.
|
|
3.
|
In the event the Note holder exercised the right of conversion, the conversion price would be equal to 80% of the lowest trading price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.
|
|
4.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests on the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 9.99% of the Company’s then issued and outstanding common stock after the conversion.
|
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Convertible Redeemable notes issued on
October 18, 2016, amounting to $100,000 and $25,000 (Notes F and G).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note was July 18, 2017.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 7 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 57.5% of the lowest trading price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.
|
|
4.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests on the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 9.99% of the Company’s then issued and outstanding common stock after the conversion.
|
During the six months ended June
30, 2018, the Company entered into a Debt Exchange Agreement with the holder of the convertible note F and G. The outstanding principal
amounts of the notes were extinguished and settled by issuance of 2,500,000 common shares of the Company. The Company recorded
a loss of $267,522 as a result of this settlement.
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Convertible promissory note issued on May
13, 2016, amounting to $75,000 (Note D).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the note is January 13, 2019.
|
|
2.
|
Interest on the unpaid principal balance of this note shall accrue at the rate of 8 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 52% of the lowest closing bid price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.
|
|
4.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests on the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Convertible promissory notes issued on
March 1, 2016 amounting to $150,000 each to two investors (Notes B and C).
The key terms/features of the convertible
notes are as follows:
|
1.
|
The Holders have the right from six months after the date of issuance, and until any time until the Notes are fully paid, to convert any outstanding and unpaid principal portion of the Notes, into fully paid and non–assessable shares of Common Stock (par value $.0001).
|
|
2.
|
The Notes are convertible at a fixed conversion price of 45% of the lowest trading price of the Common Stock as reported on the OTC Pink maintained by the OTC Markets Group, Inc. upon which the Company’s shares are currently quoted, for the four (4) prior trading days including the day upon which a Notice of Conversion is received by the Company.
|
|
3.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of twenty-four (24 %) per annum.
|
|
4.
|
Beneficial ownership is limited to 4.99%.
|
|
5.
|
The Notes may be prepaid in whole or in part, at any time during the period beginning on the issue date and ending on the maturity date September 1, 2018, beginning at 100% of the outstanding principal, accrued interest and certain other amounts that may be due and owing under the Notes.
|
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Convertible Redeemable note issued on May
19, 2016, amounting to $75,000 (Note A).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note was November 18, 2018.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 8 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 52% of the lowest closing bid price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.
|
|
4.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests on the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Interest amounting to $49,764 was accrued
for the period ended September 30, 2018 (2017: $79,758).
All notes maturing prior to the date of
this report are outstanding.
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Derivative liability
During the nine months ended September
30, 2018, holders of convertible promissory notes converted principal amounting to $142,088. The Company recorded and fair valued
the derivative liability as follows:
|
|
Derivative
liability as at
December 31,
2017
|
|
|
Conversions
during the
period
|
|
|
Fair value
adjustment
|
|
|
Derivative
liability as at
September 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note A
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Note B and C
|
|
|
534,214
|
|
|
|
(172,060
|
)
|
|
|
598,991
|
|
|
|
961,145
|
|
Note D
|
|
|
87,821
|
|
|
|
(111,205
|
)
|
|
|
134,372
|
|
|
|
110,988
|
|
Note F
|
|
|
98,276
|
|
|
|
(3,377
|
)
|
|
|
(35,206
|
)
|
|
|
59,693
|
|
Note G
|
|
|
21,096
|
|
|
|
—
|
|
|
|
586
|
|
|
|
21,682
|
|
Note H
|
|
|
143,985
|
|
|
|
—
|
|
|
|
(143,985
|
)
|
|
|
—
|
|
Note I
|
|
|
39,048
|
|
|
|
—
|
|
|
|
104,274
|
|
|
|
143,322
|
|
Note J
|
|
|
27,396
|
|
|
|
(103,881
|
)
|
|
|
76,485
|
|
|
|
—
|
|
Note K
|
|
|
—
|
|
|
|
(232,111
|
)
|
|
|
271,552
|
|
|
|
39,441
|
|
Note L
|
|
|
—
|
|
|
|
(56,266
|
)
|
|
|
63,036
|
|
|
|
6,770
|
|
Note M
|
|
|
—
|
|
|
|
—
|
|
|
|
554,366
|
|
|
|
554,366
|
|
Note N
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
951,836
|
|
|
|
(678,900
|
)
|
|
|
1,624,471
|
|
|
|
1,897,407
|
|
Key assumptions used for the valuation
of convertible notes
Derivative element of the convertible notes
was fair valued using Black Scholes Model. Following assumptions were used to fair value these notes as at September 30,
2018:
|
·
|
Liquidity term of 0.08 to 1.18 years;
|
|
·
|
Projected annual volatility of 329.25%;
|
|
·
|
Risk free interest rate of 5.52%;
|
|
·
|
Stock price of $0.1020; and
|
|
·
|
Exercise price of $0.0117 to $0.0286.
|
On July 3, 2017, the Company filed an amended
Certificate of Incorporation in Delaware to increase its authorized common stock to 20,000,000,000 shares. The Company’s
authorized preferred stock remained at 20,000,000 shares. 1,000,000 shares of Preferred Stock having a par value of $0.0001 per
share shall be designated as 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 Company, as authorized by its Board
of Directors and stockholders, has approved a Reverse Split whereby record owners of the Company’s Common Stock as of the
Effective Date, shall, after the Effective Date, own one share of Common Stock for every one thousand (1,000) held as of the Effective
Date. As a result, an aggregate of $387,978 was reclassified from common stock to additional paid in capital. The Effective Date of this amendment was November 1, 2017.
Effective September 25, 2018, the Company
filed an amended Certificate of Incorporation in Delaware to decrease its authorized common stock to 850,000,000 shares. The Company’s
authorized preferred stock remained at 20,000,000 shares.
Capitalization
The Company is authorized to issue 850,000,000
shares of common stock, par value $0.0001, of which 62,051,342 shares are outstanding as at September 30, 2018 (at December 31,
2017: 14,973,819 shares of common stock issued and outstanding). The Company is also authorized to issue 20,000,000 shares of preferred
stock, par value $0.0001, of which 1,000,000 shares were outstanding as at September 30, 2018.
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.
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Subject to preferences that may be applicable
to any outstanding shares of preferred stock, the holders of common stock are entitled to share ratably in dividends, if any, as
may be declared from time to time by the board of directors in its discretion from funds legally available therefor.
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.
During the quarter ended March 31, 2017,
the Company issued 4,000 shares of common stock to individuals as consideration for advisory and consultancy services amounting
to $36,000 which were recorded at fair value.
During the quarter ended March 31, 2017,
the Company issued 13,917 shares of common stock to individuals on conversion of convertible promissory notes amounting to $26,126,
respectively.
During the quarter ended March 31, 2017,
the Company issued 20,000 shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle outstanding
management fee in the amount of $50,000 each, which were recorded at fair value.
During the quarter ended June 30, 2017,
the Company issued 234,458 shares of common stock to individuals on conversion of convertible promissory notes amounting to $181,530.
During the quarter ended June 30, 2017,
the Company issued 40,000 shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle outstanding
management fee in the amount of $108,000 each, which were recorded at fair value.
During the quarter ended September 30,
2017, the Company issued 675,627 shares of common stock to individuals on conversion of convertible promissory notes amounting
to $51,729. Of these shares, the Company issued 533,348,384 shares at $30,779 and as a result of the contractual conversion price
adjustments, these shares were issued below par value, with the offsetting balance recorded as a reduction in additional paid-in
capital in the amount of $22,556 during the three months ended September 30, 2017.
During the quarter ended September 30,
2017, the Company issued 1,400,000 shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle
outstanding management fee in the amount of $140,000 each, which were recorded at fair value.
During the quarter ended December 31, 2017,
the Company issued 5,000,000 shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle outstanding
management fee in the amount of $50,000 each, which were recorded at fair value.
During the year ended December 31, 2017,
533,348 shares of common stock were issued at a fair value which was lower than the par value of the shares. This resulted in a
reduction in additional paid in capital amounting to $22,556.
During the quarter ended March 31, 2018,
the Company issued 5,529,412 shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle outstanding
management fee recorded at fair value of $84,000, of which $9,000 had previously been recorded in Accounts Payable.
During the quarter ended March 31, 2018,
the Company issued 5,156,932 shares of common stock to individuals on conversion of convertible promissory notes amounting to $21,518
and 300,000 shares were issued as consideration for consulting services amounting to $3,600.
During the quarter ended June 30, 2018,
the Company issued 3,140,506 shares of common stock to individuals on conversion of convertible promissory notes amounting to $47,826
and 500,000 shares were issued as consideration for consulting services amounting to $22,500.
During the quarter ended June 30, 2018,
the Company issued 2,500,000 shares of common stock to the note holder for settlement of debt. See Note 5 for detail.
During the quarter ended September 30,
2018, the Company issued 5,301,990 shares of common stock to individuals on conversion of convertible promissory notes amounting
to $87,942.
During the quarter ended September 30,
2018, the Company issued 24,648,683 shares of common stock to shareholders of Visava Inc. as per the Exchange Agreement mentioned
in Note 5. The remaining shares of 851,317 are included in shares to be issued.
TARGET GROUP INC. (formerly known as Chess Supersite Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Shares to be issued include the following:
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 shares to be issued as settlement
of 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 gain on settlement amounting to $226,306 recorded as net gain on settlement of liability in the statement
of operations for the year ended December 31, 2017.
851,317 shares of common stock to be issued
to the remaining Visava Inc.’s shareholders as per the Exchange Agreement mention in Note 5.
19,338,807 shares of common stock to be
issued as consideration for private placements. These were recorded at fair value of $1,266,282, based on the cash proceeds received
by the Company. As consideration for the private placement, the Company also agreed to issue warrants to purchase 19,338,807 shares
of common stock. Proper allocation between common stock and additional paid in capital of the amount received will be completed
in the period when the shares and warrants are issued.
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 with respect to 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 or otherwise.
|
8.
|
Earnings (loss) Per
Share
|
FASB ASC 260, Earnings Per Share provides
for calculations of “basic” and “diluted” earnings per share. Basic earnings per share includes no 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 per share reflect the potential dilution of securities that could share in the earnings of an
entity similar to fully diluted earnings per share. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
As at September 30, 2018, holders of convertible
promissory notes may be issued 20,918,854 shares assuming a conversion prices ranging from $0.0117 to $0.0286 per share.
|
9.
|
Contingencies and commitments
|
The Company is party to a website and software
development services agreement under which the Company is to arrange weekly payments amounting to $1,250 as consideration for such
services, which are indefinite.
The Company is a party to a 10-year lease agreement (initiated on July 2014) with respect to its facility
to produce Medical Marijuana. Total rent for the building is $1,931 plus applicable taxes per month until the notification of the
right to build under their application for approval as licensed producer under the Marijuana for Medical Purpose Regulation. Subject
to the notification, the rent increase to $7,725 plus applicable taxes per month. Future minimum rent payments are as follows:
|
|
$
|
|
2018
|
|
|
5,793
|
|
2019
|
|
|
23,172
|
|
2020
|
|
|
23,172
|
|
2021
|
|
|
23,172
|
|
2022 and onwards
|
|
|
57,930
|
|
|
|
|
133,239
|
|
The Company’s management has evaluated
subsequent events up to November 14, 2018, the date the financial statements were issued, pursuant to the requirements of ASC 855
and has determined the following material subsequent events:
During October 2018, the Company issued
the remaining 851,317 shares of common stock to be issued to the Visava Inc.’s shareholders as disclosed in Note 7.
During October 2018, the Company issued
1,250,000 shares of common stock pursuant to conversion notices received from one of the holders of the convertible promissory
notes.
During October 2018, the Company sold 336,686
shares of common stock to two investors through a private placement at a price of $0.10 per common stock and received gross proceeds
of $33,668. As of the November 14, 2018, these shares have not been issued.
As disclosed in Note 7, during October
2018, the Company issued 12,285,600 shares pursuant to private placement funds received during the quarter ended September 30,
2018.