Attached files
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8-K/A - FORM 8-K/A - Target Group Inc. | tm2012755-1_8ka.htm |
EX-99.2 - EXHIBIT 99.2 - Target Group Inc. | tm2012755d1_ex99-2.htm |
EX-23.1 - EXHIBIT 23.1 - Target Group Inc. | tm2012755d1_ex23-1.htm |
Exhibit 99.3
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of the consolidated company would be had the Acquisition Transaction occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The unaudited consolidated financial statements do not reflect any cost savings or synergies that the management of Target Group Inc. and CannaKorp Inc. could have achieved if they were together through this period.
The unaudited pro forma consolidated statements of operations for the years presented give effect to the Acquisition Transaction as if they had been consummated, beginning of the earliest period presented. The unaudited pro forma balance sheets give effect to the Acquisition Transaction as if they had occurred on the dates of those balance sheets.
The effects of the Acquisition Transaction have been prepared using the assumptions and adjustments described in the accompanying notes.
We describe the assumptions underlying the pro forma adjustments in the accompanying notes, which should also be read in conjunction with these unaudited pro forma financial statements. Please read this information in conjunction with:
· | The audited financial statements of CannaKorp Inc. for the years ended December 31, 2018 and 2017. |
· | The audited financial statements of Target Group Inc. (Formerly known as Chess Supersite Corporation) for the years ended December 31, 2018 and 2017 included in its Annual Report on Form 10-K filed on April 01, 2019. |
The unaudited pro forma consolidated financial statements should be read in conjunction with the information contained in the Current Report on Form 8-K.
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Unaudited Pro Forma Condensed Consolidated Financial Statements
Pro forma Condensed Consolidated Balance Sheets as of December 31, 2018. | Page 3 |
Pro forma Condensed Combined Statements of Operations for the year ended December 31, 2018. | Page 4 |
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements. | Pages 5 & 6 |
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Target Group Inc. (Formerly known as Chess Supersite Corporation)
and
CannaKorp Inc.
Pro Forma Condensed Consolidated Balance Sheet
as of December 31, 2018
(Unaudited)
Target Group Inc. | CannaKorp Inc | Proforma | Pro Forma | |||||||||||||||||
December 31, 2018 | December 31, 2018 | Note | Adjustments | Combined | ||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash | 303,438 | 5,915 | — | 309,353 | ||||||||||||||||
Accounts receivable, no allowance | — | 2,068 | — | 2,068 | ||||||||||||||||
Inventory | — | 326,594 | — | 326,594 | ||||||||||||||||
Prepaid asset | 35,145 | 100,632 | — | 135,777 | ||||||||||||||||
Sales tax recoverable, net of allowance | 220,525 | — | — | 220,525 | ||||||||||||||||
559,108 | 435,209 | — | 994,317 | |||||||||||||||||
Long term assets | ||||||||||||||||||||
Furniture and equipment | 856 | 201,414 | — | 202,270 | ||||||||||||||||
Capital Work in progress | 2,595,022 | — | — | 2,595,022 | ||||||||||||||||
Goodwill | 3,594,195 | — | (b) | 5,932,543 | 9,526,738 | |||||||||||||||
Other assets | 31,496 | — | — | 31,496 | ||||||||||||||||
Total long term assets | 6,221,569 | 201,414 | 5,932,543 | 12,355,526 | ||||||||||||||||
Total assets | 6,780,677 | 636,623 | 5,932,543 | 13,349,843 | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | 1,739,765 | 1,593,634 | — | 3,333,399 | ||||||||||||||||
Payable to related parties | 403,620 | 634,530 | — | 1,038,150 | ||||||||||||||||
Shareholder advances | 209,046 | — | — | 209,046 | ||||||||||||||||
Convertible Promissory notes, net | 221,639 | — | — | 221,639 | ||||||||||||||||
Derivative liability | 862,483 | — | — | 862,483 | ||||||||||||||||
Deferred revenue | — | 128,158 | — | 128,158 | ||||||||||||||||
Total current liabilities | 3,436,553 | 2,356,322 | — | 5,792,875 | ||||||||||||||||
Payable to related parties | — | 150,000 | — | 150,000 | ||||||||||||||||
Total liabilities | 3,436,553 | 2,506,322 | — | 5,942,875 | ||||||||||||||||
Contingencies and commitments | — | — | — | — | ||||||||||||||||
Stockholders' deficit | ||||||||||||||||||||
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; 1,000,000 shares issued and outstanding as at December 31, 2018 | 100 | — | — | 100 | ||||||||||||||||
Common stock, $0.0001 par value, 850,000,000 shares authorized, 93,624,289 common shares outstanding as at December 31, 2018 | 9,362 | — | (b) | 3,041 | 12,403 | |||||||||||||||
Preferred stock, , $0.001 par value, 21,968,117 shares authorized; 12,634,085 shares issued and outstanding as at December 31, 2018 | — | 12,634 | (a) | (12,634 | ) | — | ||||||||||||||
Common stock, $0.001 par value, 72,601,692 shares authorized, 19,197,965 common shares outstanding as at December 31, 2018 | — | 19,199 | (19,199 | ) | — | |||||||||||||||
Stock subscription receivable | (220,319 | ) | — | (a) | — | (220,319 | ) | |||||||||||||
Shares to be issued | 1,359,349 | — | — | 1,359,349 | ||||||||||||||||
Additional paid-in capital | 11,346,467 | 8,118,762 | (a) | (8,118,762 | ) | 15,406,270 | ||||||||||||||
(b) | 3,280,992 | |||||||||||||||||||
(b) | 778,811 | |||||||||||||||||||
Accumulated deficit | (9,094,954 | ) | (9,992,888 | ) | (a) | 9,992,888 | (9,094,954 | ) | ||||||||||||
Accumulated other comprehensive income | (55,881 | ) | (27,406 | ) | (a) | 27,406 | (55,881 | ) | ||||||||||||
Total stockholders' deficit | 3,344,124 | (1,869,699 | ) | 5,932,543 | 7,406,968 | |||||||||||||||
Total liabilities and stockholders' deficit | 6,780,677 | 636,623 | 5,932,543 | 13,349,843 |
See accompanying notes to these unaudited
pro forma condensed consolidated financial statements
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Target Group Inc. (Formerly known as Chess Supersite Corporation)
and
CannaKorp Inc.
Pro Forma Condensed Consolidated Statement of operations
For the year ended December 31, 2018
(Unaudited)
Target Group Inc. | CannaKorp Inc | |||||||||||||||||||
Year ended | Year ended | Proforma | Pro Forma | |||||||||||||||||
December 31, 2018 | December 31, 2018 | Note | Adjustments | Combined | ||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
REVENUE | 263 | 59,906 | — | 60,169 | ||||||||||||||||
COST OF GOOD SOLD | — | 69,162 | — | 69,162 | ||||||||||||||||
GROSS PROFIT (LOSS) | 263 | (9,256 | ) | — | (8,993 | ) | ||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Advisory and consultancy fee | 77,159 | — | — | 77,159 | ||||||||||||||||
Management services fee | 362,500 | — | — | 362,500 | ||||||||||||||||
Salaries and wages | 332,337 | 713,450 | — | 1,045,787 | ||||||||||||||||
Legal and professional fees | 314,428 | 1,004,385 | — | 1,318,813 | ||||||||||||||||
Software development expense | 32,246 | 78,058 | — | 110,304 | ||||||||||||||||
Website development and marketing expenses | 91,852 | 179,073 | — | 270,925 | ||||||||||||||||
Rent and Utilities | 36,072 | — | — | 36,072 | ||||||||||||||||
Travel expenses | — | 62,160 | — | 62,160 | ||||||||||||||||
Office and general | 34,440 | 255,266 | — | 289,706 | ||||||||||||||||
Stock based compensation | — | 138,010 | — | 138,010 | ||||||||||||||||
Depreciation expense | — | 190,470 | — | 190,470 | ||||||||||||||||
Total operating expenses | 1,281,034 | 2,620,872 | — | 3,573,426 | ||||||||||||||||
OTHER INCOME AND EXPENSES | ||||||||||||||||||||
Change in fair value of derivative liability | 323,946 | — | — | 323,946 | ||||||||||||||||
Loss on forgiveness / settlement of debt | 39,118 | — | — | 39,118 | ||||||||||||||||
Interest and bank charges | 81,847 | 92,904 | — | 174,751 | ||||||||||||||||
Exchange loss | 33,546 | — | — | 33,546 | ||||||||||||||||
Day one interest expense | 62,288 | — | — | 62,288 | ||||||||||||||||
Accretion expense | 2,923 | — | — | 2,923 | ||||||||||||||||
Allowance for sales tax recoverable | 75,902 | — | — | 75,902 | ||||||||||||||||
Impairment of inventory | — | 14,700 | — | 14,700 | ||||||||||||||||
Total other expenses | 619,570 | 107,604 | — | 727,174 | ||||||||||||||||
Net loss before income taxes | (1,900,341 | ) | (2,737,732 | ) | — | (4,240,431 | ) | |||||||||||||
Income taxes | — | — | — | — | ||||||||||||||||
Net loss | (1,900,341 | ) | (2,737,732 | ) | — | (4,638,073 | ) | |||||||||||||
Foreign currency translation adjustment | (55,881 | ) | (25,206 | ) | — | (81,087) | ||||||||||||||
Comprehensive loss | (1,956,222 | ) | (2,762,938 | ) | — | (4,719,160) |
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Target Group Inc. (Formerly known as Chess Supersite Corporation)
and
CannaKorp Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Information
Note 1. Description of the Proposed Transaction
Effective January 25, 2019, the CannaKorp Inc. (“CannaKorp”) entered into an Agreement and Plan of Share Exchange (“Exchange Agreement”) with Target Group Inc., a Delaware corporation (“Target”). Company had previously entered into a Letter of Intent with Target dated November 30, 2018 which was disclosed in Target’s report on Form 8-K filed December 4, 2018. The Exchange Agreement is the definitive agreement based on the general terms and conditions contained in the Letter of Intent.
The Exchange Agreement provided that, subject to its terms and conditions, Target will issue to the CannaKorp’s shareholders an aggregate of 30,000,000 shares of the Target’s common stock, based on a price per share of $0.10, in exchange for 100% of the issued and outstanding common stock of the CannaKorp held by the CannaKorp’s shareholders. In addition, Target will issue Common Stock Purchase Warrants (“Warrants”) in exchange for all outstanding and promised the CannaKorp’s stock options. The Warrants will grant the holders thereof the right to purchase up to approximately 7,200,000 shares of the Target common stock. Target will also assume all outstanding liabilities of the CannaKorp.
Under the terms of the Exchange Agreement, Target is not obligated to consummate the share exchange unless the CannaKorp shareholders have tendered to Target not less than 90% of the outstanding CannaKorp capital stock. Upon the closing of the Exchange Agreement, the CannaKorp will continue its business operations as a subsidiary of the Target.
The transaction was closed effective March 1, 2019.
Note 2. Basis of Presentation
Target and CannaKorp Inc. report on a calendar year basis and are utilizing financial statements as of December 31, 2018 for these pro forma condensed consolidated financial statements.
The unaudited pro forma financial statements are based on the historical financial statements of Target and CannaKorp Inc. after giving effect to the share exchange transaction. The Management has used the assumptions and adjustments described in the accompanying note 3 to the unaudited pro forma consolidated financial statements.
The Acquisition Transaction will be accounted for using the acquisition method in accordance with the Financial Accounting Standards Board (ASC Topic 805, “Business Combinations”).
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Target Group Inc. (Formerly known as Chess Supersite Corporation)
and
CannaKorp Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Information
Note 3. Pro Forma Adjustments
The unaudited pro forma consolidated financial statements give effect to the following adjustments:
a. | Adjustments to eliminate CannaKorp’s share capital and accumulated losses. |
b. | Issuance of an aggregate of approximately 30,000,000 shares of Target’s common stock to the CannaKorp’s shareholders, par value $0.001, in exchange for 100% of equity interests of CannaKorp held by the CannaKorp shareholders in accordance with the Exchange Agreement. |
In addition of the common stock, issuance of a pro rata Common Stock Purchase Warrants purchasing an aggregate of 7,200,000 shares of Target’s Common Stock at a price per share of $0.13 and $0.15 for a period of two years following the issuance date of the Warrants.
Immediately following the closing of the Exchange Agreement, the authorized capital of the Target consists of 850,000,000 Shares of common stock, par value US$0.0001 per share of which 124,032,001 Common Shares are issued and outstanding, and 20,000,000 shares of preferred stock, par value US$0.0001 per share of which 1,000,000 shares are issued and outstanding.
c. | As explained in Note 2, the financial position and the results of operations of Target and CannaKorp have been consolidated in accordance with the guidance provided under ASC 805-50 relating to combination of entities. |
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