CSUI 10-Q
Cannabis Suisse Corp. (CSUI)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM
For
the quarter ended:
OR
For the transition period from __________ to __________
Commission File
Number:
(Exact name of registrant as specified in its charter)
|
(State or Other Jurisdiction of Incorporation or Organization) |
2600 (Primary Standard Industrial Classification Code Number) |
I.R.S. Employer Identification Number |
Phone: (
E-mail:
(Address, including zip code, and telephone number,
Including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | CSUI | OTC Markets |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an acceleated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “emerging growth company” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated Filer | [ ] | Accelerated Filer | [ ] |
| [X] | Smaller reporting company | [ | |
| (Do not check if a smaller reporting company) | Emerging growth company | [ | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ( )
As of October 20, 2021, there were shares outstanding of the registrant’s common stock.
2
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TABLE OF CONTENTS
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| Page | ||
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PART I |
FINANCIAL INFORMATION: | |
| Item 1. | Financial Statements | 4 |
| Consolidated Balance Sheets as of August 31, 2021 (unaudited) and May 31, 2021 | 5 | |
| Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three months ended August 31, 2021 and 2020 |
6 | |
| Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three months ended August 31, 2021 and 2020 | 7 | |
| Consolidated Statements of Cash Flows (unaudited) for the three months ended August 31, 2021 and 2020 | 8 | |
| Notes to the Consolidated Financial Statements (unaudited) | 9 | |
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21 |
| Item 4. | Controls and Procedures | 21 |
| PART II | OTHER INFORMATION: | |
| Item 1. | Legal Proceedings | 22 |
| Item 1A | Risk Factors | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosure | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 23 |
| Signatures | 23 |
3
PART I FINANCIAL INFORMATION
Item 1. Financial statements
The accompanying interim consolidated financial statements of Cannabis Suisse Corp. (the “Company”) should be read in conjunction with the 10-K that was filed with the United States Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, since they are interim statements, the accompanying consolidated financial statements do not include all the information and notes required by GAAP for complete financial statement presentation. In the opinion of management, the interim financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
In the opinion of management, the consolidated financial statements contain all material adjustments, consisting only of normal adjustments considered necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
4
CANNABIS SUISSE CORP.
CONSOLIDATED BALANCE SHEETS
|
August 31, 2021 (Unaudited) |
May 31, 2021 | |||
| ASSETS | ||||
| Current Assets | ||||
| Inventory, net | $ | $ | ||
| Prepaid Expenses | ||||
| Total Current Assets | ||||
| Property and Equipment, net | ||||
| TOTAL ASSETS | $ | $ | ||
| LIABILITIES & STOCKHOLDERS’ DEFICIT | ||||
| Liabilities | ||||
| Current Liabilities | ||||
| Accounts Payable | $ | $ | ||
| Accrued Wages | ||||
| Advances From Related Parties | ||||
| Convertible Notes Payable, net of debt discount | ||||
| Derivative Liability | ||||
| Total Current Liabilities | ||||
| Total Liabilities | ||||
| Commitments and Contingencies | ||||
| Stockholders’ Deficit | ||||
| Preferred stock, par value $; shares authorized, and shares issued and outstanding as of August 31, 2021 and May 31, 2021, respectively | ||||
| Common stock, par value $; shares authorized, and shares issued and outstanding as of August 31, 2021 and May 31, 2021, respectively | ||||
| Additional Paid-In-Capital | ||||
| Accumulated Deficit | ( |
( | ||
| Total Stockholders’ Deficit | ( |
( | ||
| TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT | $ | $ |
The accompanying notes are an integral part of these statements.
5
CANNABIS SUISSE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
| For the three months ended August 31, 2021 | For the three months ended August 31, 2020 | |||
| REVENUES | ||||
| Sales of goods from principal activity | $ | $ | ||
| Sales of goods from secondary activity | ||||
| Total Revenues | ||||
| Cost of goods sold | ||||
| Gross (Loss) Profit | ( | |||
| OPERATING EXPENSES | ||||
| General and administrative expenses | ||||
| Professional fees | ||||
| Depreciation | ||||
| TOTAL OPERATING EXPENSES | ||||
| OPERATING LOSS | ( |
( | ||
| Interest expense, net | ( |
|||
| Change in fair value of derivative liability | ||||
| Net loss on extinguishment of debt | ( |
|||
| LOSS BEFORE INCOME TAXES | ( |
( | ||
| PROVISION FOR INCOME TAXES | ||||
| NET LOSS | $ | ( |
$ | ( |
| Other comprehensive (loss) income: | ||||
| Foreign currency translation adjustment | ( | |||
| COMPREHENSIVE LOSS | $ | ( |
$ | ( |
| NET LOSS PER SHARE: BASIC AND DILUTED | $ | ( |
$ | ( |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED |
The accompanying notes are an integral part of these statements.
6
CANNABIS SUISSE CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (UNAUDITED)
| Common Stock | Preferred Stock | Additional Paid-In-Capital | Accumulated other comprehensive loss | Accumulated Deficit |
Total Stockholders’ Deficit | |||||
| Shares | Amount | Shares | Amount | |||||||
|
Balance, May 31, 2020 |
$ 34,500 | $ - | $ - | $ |
$ ( |
$ ( |
$ ( | |||
| Foreign currency translation adjustment | - | - | ( |
( | ||||||
| Net loss | - | - | ( |
( | ||||||
|
Balance, August 31, 2020 |
$ 34,500 | $ - | $ - | $ |
$ ( |
$ ( |
$ ( | |||
|
|
||||||||||
|
Balance, May 31, 2021 |
$ 34,500 | $ - | $ - | $ |
$ - | $ ( |
$ ( | |||
| Conversion of Notes Payable into Common Shares | 1,034 | - | ||||||||
| Conversion of Common Shares into Preferred Shares | (5,000) | 5,000 | ||||||||
| Net loss | - | - | ( |
( | ||||||
|
Balance, August 31, 2021 |
$ 30,534 | $ 5,000,000 | $ 5,000 | $ |
$ - | $( |
$ ( | |||
The accompanying notes are an integral part of these statements.
7
CANNABIS SUISSE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Three months ended August 31, 2021 | Three months ended August 31, 2020 | ||||
| OPERATING ACTIVITIES | |||||
| Net loss | $ | ( |
$ | ( | |
| Adjustments to reconcile net loss to net cash provided by operations: | |||||
| Depreciation | |||||
| Provision for Doubtful Accounts | - | ||||
| Amortization of Debt Discount | - | ||||
| Loss on Extinguishment of Debt | |||||
| Change in Fair Value of Derivative Liability | ( |
- | |||
| Changes in assets and liabilities: | |||||
| Accounts receivable | - | ||||
| VAT tax receivable | - | ( | |||
| Inventory | - | ||||
| Prepaid expenses | - | ( | |||
| Accounts payable | |||||
| Accrued expenses | - | ||||
| Accrued wages | |||||
| Advances From Customers | - | ||||
| Net cash used in Operating Activities | ( |
( | |||
| FINANCING ACTIVITIES | |||||
| Advances from related parties | |||||
| Bank indebtedness | - | ||||
| Net cash provided by Financing Activities | | ||||
| Effect of exchange rate on cash | - | ( | |||
| Net cash increase (decrease) for period | - | ( | |||
| Cash at beginning of period | - | ||||
| Cash at end of period | $ | $ | |||
| SUPPLEMENTAL | |||||
| Cash paid for taxes | $ | $ | |||
| Cash paid for interest | $ | $ | |||
The accompanying notes are an integral part of these statements.
8
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
The Company is engaged in the business of production of OTC (over-the-counter) products - for example CBD oils, retail branded cigarettes and also some health-related supplements.
NOTE 2 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
The financial information furnished herein reflects all adjustments, consisting of normal recurring items that, in the opinion of management, are necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods. The results of operations for the three months ended August 31, 2021 are not necessarily indicative of the results to be expected for the year ending May 31, 2022.
The information included in this Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended May 31, 2021.
Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, (GAAP). The Company’s year-end is May 31. The consolidated financial statements include the accounts of the Company and its former wholly-owned subsidiary, Cannabis Suisse LLC, through the date of disposal (see Note 4). All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company had $0 of cash and cash equivalents as of August 31, 2021 and May 31, 2021, respectively.
Accounts Receivable
The Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience.
Inventories
Inventories are stated at the lower of cost or market. The Company had $1,734 in inventory as of August 31, 2021 and May 31, 2020, respectively. The Company also determines a reserve for excess and obsolete inventory based on historical usage, and projecting the year in which inventory will be consumed into a finished product. The valuation of inventories requires management to make significant assumptions, including the assessment of market value by inventory category considering historical usage, future usage and market demand for their products, and qualitative judgments related to discontinued, slow moving and obsolete inventories. The Company had $0 in reserve for excess and obsolete inventory as of August 31, 2021 and May 31, 2021, respectively.
9
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Property and equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation is provided over the assets’ estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as follows:
Equipment, Furniture and fixtures 5-10 years
Office machines, IT equipment 5-10 years
Leasehold Improvements 2-5 years
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations and comprehensive loss. The cost of maintenance and repairs is charged to the consolidated statements of operations and comprehensive loss as incurred, whereas significant renewals and betterments are capitalized.
Impairment
The Company evaluates the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our evaluation is based on an assessment of potential indicators of impairment, such as an adverse change in the business climate that could affect the value of an asset, current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of an asset, and a current expectation that, more likely than not, an asset will be disposed of before the end of its previously estimated useful life. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
During the three months ended August 31, 2021 and 2020, the Company recognized an impairment of intangibles in the amount of $0, respectively.
Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) 820 Fair Value Measurements and Disclosures establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
| Level 1: | defined as observable inputs such as quoted prices in active markets; |
| Level 2: | defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
| Level 3: | defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying value of the Company’s cash, other current assets, accounts payable, accrued expenses and advances from related parties approximates its fair value due to their short-term maturity. The Company has derivatives that are measured at level 3. The derivatives may require appropriate valuation adjustments that a market participant would require to arrive at fair value.
10
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Derivatives
Derivative instruments are recognized in the Consolidated Financial Statements at fair value. Where the Company has entered into master netting agreements with counterparties, the derivative positions are netted by counterparties and are reported accordingly in other assets or other liabilities. Changes in the fair value of derivative instruments are recognized in earnings each period, unless the derivative is designated and qualifies as a cash flow or net investment hedge.
Income Taxes
The Company accounts for its income taxes in accordance with ASC 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and carry forwards. 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Update (ASU) 2014-09, “Revenue from contracts with customers” (Topic 606). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the considerations that the Company expects to receive in exchange for those goods.
The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probably that the entity will collect the consideration it is entitled in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
Cost of Goods Sold
Cost of goods sold includes direct costs of selling items, direct labor cost, rent expense and electricity.
The Company computes income (loss) per share in accordance with ASC 260 Earnings per Share. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of August 31 and May 31, 2021, there were no potentially dilutive debt or equity instruments issued or outstanding.
Foreign Currency Translation
Assets and liabilities of the Company’s Swiss subsidiary are translated from Swiss francs to United States dollars at exchange rates in effect at the balance sheet date. Income and expenses are translated at average exchange rates during the period. The translation adjustments for the reporting period are included in the Company’s consolidated statements of operations and comprehensive loss, and the cumulative effect of these adjustments are reported in the Company’s consolidated balance sheets as accumulated other comprehensive loss within stockholders’ deficit.
11
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Recent Accounting Pronouncements
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended August 31, 2021 that are of significance or potential significance to the Company.
NOTE 3 – GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. However, the Company had limited revenues and recurring losses as of August 31, 2021. The Company has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it will be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
The impact of the COVID-19 pandemic has had, and is expected to continue to have, an adverse effect on our business and our financial results. COVID-19 pandemic has negatively affected global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets. The pandemic had and will continue to have an adverse effect on our business and financial performance. The extent of the impact of the COVID-19, including the Company’s ability to execute its business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are uncertain and cannot be predicted. The COVID-19 pandemic could also adversely affect its liquidity and ability to access the capital markets. Uncertainty regarding the duration of the COVID-19 pandemic may adversely impact its ability to raise additional capital, or require additional capital.
NOTE 4 - BUSINESS COMBINATION
On November 23, 2020, Cannabis Suisse Corp. (the “Transferor”), entered into an Asset Transfer Agreement with Cecillia Merige Jensen (the “Transferee”) and Cannabis Suisse LLC. In accordance with the terms of the Agreement, the Transferor transferred to the Transferee all its right, title and interest to one hundred percent (100%) of Cannabis Suisse LLC, including all its right, title and interest to one hundred percent (100%) of Grow Factory GmbH and the Transferee transferred and assigned to the Transferor 10,000,000 restricted shares of Cannabis Suisse Corp., free and clear of any and all liens and encumbrances. The above-mentioned Asset Transfer Agreement hereby revokes the effect of the Stock Transfer Agreement entered into with Cecillia Jensen on May 31, 2019, and the 10,000,000 shares were returned to the President of the Company to reinstate his ownership percentage pre-acquisition.
| Disposal of Assets: | ||
| Related Party Receivable | $ | 1,618 |
| Inventory | 29,902 | |
| Prepaid Taxes | 12,346 | |
| Property and Equipment | 71,006 | |
| VAT Tax Receivable | 4,316 | |
| Operating lease right of use asset | 126,881 | |
| Total Assets Transferred | $ | 246,069 |
12
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 – PROPERTY AND EQUIPMENT
Property and Equipment :
| August 31, 2021 | May 31, 2021 | |||
| Equipment | $ | $ | ||
| Leasehold Improvements | ||||
| Accumulated depreciation | ( |
( | ||
| Net property and equipment | $ | $ | ||
For the three months ended August 31, 2021 and 2020 the Company recognized depreciation expense in the amount of $582 and $4,161, respectively.
NOTE 6 – RELATED/THIRD PARTY TRANSACTIONS
The Company’s President has agreed to provide interest free advances, due on demand, to the Company up to $100,000. As of August 31 and May 31, 2021, Suneetha Nandana Silva Sudusinghe advanced to the Company $11,834 and $0, respectively.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
On December 1, 2020, Suneetha Nandana Silva Sudusinghe assigned SAPA Investments, LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows SAPA Investments, LLC to convert the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30 days.
The original loan to Cannabis Suisse Corp. from Mr. Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On December 4, 2020 Suneetha Nandana Silva Sudusinghe assigned SAPA Group, LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows SAPA Group, LLC to convert the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30 days.
The original loan to Cannabis Suisse Corp. from Mr. Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On December 7, 2020 Suneetha Nandana Silva Sudusinghe assigned GSS Group LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows GSS Group LLC to convert the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30 days.
The original loan to Cannabis Suisse Corp. from Mr. Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On December 10, 2020 Suneetha Nandana Silva Sudusinghe assigned Noi Tech LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Noi Tech LLC to convert the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30 days.
The original loan to Cannabis Suisse Corp. from Mr. Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
13
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On April 1, 2021 Suneetha Nandana Silva Sudusinghe assigned Serhii Cherniienko $60,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Serhii Cherniienko to convert the loan to common stock at a fixed price of $0.01 per share. Beneficial conversion feature was $60,000 and debt discount amortization was $19,672.
The original loan to Cannabis Suisse Corp. from Mr. Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On April 15, 2021 Suneetha Nandana Silva Sudusinghe assigned Noi Tech LLC $30,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Noi Tech LLC to convert the loan to common stock at a fixed price of $0.01 per share. Beneficial conversion feature was $30,000 and debt discount amortization was $7,541.
The original loan to Cannabis Suisse Corp. from Mr. Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
The Company’s convertible promissory notes gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of August 31, 2021 and the amounts that were reflected in income related to derivatives for the period ended:
| August 31, 2021 | ||||||||
| The financings giving rise to derivative financial instruments | Indexed Shares |
Fair Values |
||||||
| Embedded derivatives | 750,115 | $ | 13,079 | |||||
| Total | 750,115 | $ | 13,079 | |||||
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended August 31, 2021:
| The financings giving rise to derivative financial instruments and the gain (loss) effects: | For the Three Months Ended | ||
| August 31, 2021 | |||
| Embedded derivatives | $ | 445 | |
| Total | $ | 445 | |
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. The Company has selected the Monte Carlo Simulation Model valuation technique to fair value the embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulation Model technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators. For instruments in which the time to expiration has expired, the Company has utilized the intrinsic value as the fair value. The intrinsic value is the difference between the quoted market price on the valuation date and the applicable conversion price.
14
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Significant inputs and results arising from the Monte Carlo Simulation process are as follows for the embedded derivatives that have been bifurcated from the convertible notes and classified in liabilities:
| December 1, 2020 | |||
| Quoted market price on valuation date | $0.0615 | ||
| Effective contractual conversion rates | $0.044 | ||
| Contractual term to maturity | 0.25 years | ||
| Market volatility: | |||
| Volatility | 299.09% - 479.35% | ||
| Risk-adjusted interest rate | 0.13% |
| December 4, 2020 | |||
| Quoted market price on valuation date | $0.0722 | ||
| Effective contractual conversion rates | $0.056 | ||
| Contractual term to maturity | 0.25 years | ||
| Market volatility: | |||
| Volatility | 239.43% - 391.85% | ||
| Risk-adjusted interest rate | 0.13% |
| December 7, 2020 | |||
| Quoted market price on valuation date | $0.06 | ||
| Effective contractual conversion rates | $0.0455 | ||
| Contractual term to maturity | 0.25 years | ||
| Market volatility: | |||
| Volatility | 281.02% - 381.87% | ||
| Risk-adjusted interest rate | 0.12% |
| December 10, 2020 | |||
| Quoted market price on valuation date | $0.0551 | ||
| Effective contractual conversion rates | $0.0419 | ||
| Contractual term to maturity | 0.25 years | ||
| Market volatility: | |||
| Volatility | 196.85% - 382.99% | ||
| Risk-adjusted interest rate | 0.12% |
15
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table reflects the issuances of embedded derivatives and changes in fair value inputs and assumptions related to the embedded derivatives as of August 31, 2021 and May 31, 2021.
| Period Ended | Period Ended | |||||
| August 31, 2021 | May 31, 2021 | |||||
| Balances at beginning of period | $ | 25,227 | $ | - | ||
| Issuances: | ||||||
| Embedded derivatives | - | 33,131 | ||||
| Conversions | (11,703) | |||||
| Changes in fair value inputs and assumptions reflected in income | (445) | (7,904) | ||||
| Balances at end of period | $ | 13,079 | $ | 25,227 | ||
NOTE 8 – REPORTABLE SEGMENTS
The Company follows segment reporting in accordance with ASC Topic 280, Segment Reporting. As a result of the business combination with Cannabis Suisse LLC in May 2019, the Company has changed its operating segments to consist of the Cannabis Suisse LLC segment and the Cannabis Suisse Corp segment. After the Cannabis Suisse LLC business combination, the Company's CEO began assessing performance and allocating resources based on the financial information of these two reporting segments.
The Cannabis Suisse LLC segment is involved in cannabis cultivation and distribution in Switzerland of recreational tobacco products and medical CBD oils. On November 23, 2020, Cannabis Suisse LLC and Cannabis Suisse Corp canceled their acquisition by Asset Transfer Agreement.
Cannabis Suisse Corp is engaged in the development of its business activities by conquering the USA market of CBD products since November 2020.
Net revenue by reporting segment for the three months ended August 31, 2021 and 2020, is as follows:
|
For the three months ended August 31, 2021 |
For the three months ended August 31, 2020 | |||
| Cannabis Suisse Corp | $ | - | $ | - |
| Cannabis Suisse LLC | - | 39,624 | ||
| Total Revenue | $ | - | $ | 39,624 |
Gross profit by reporting segment for the three months ended August 31, 2021 and 2020, is as follows:
|
For the three months ended August 31, 2021 |
For the three months ended August 31, 2020 | |||
| Cannabis Suisse Corp | $ | - | $ | - |
| Cannabis Suisse LLC | - | (34,183) | ||
| Total Gross (Loss) Profit | $ | - | $ | (34,183) |
Assets by reporting segment as of August 31 and May 31, 2021, is as follows:
| August 31, 2021 |
May 31, 2021 | |||
| Cannabis Suisse Corp | $ | 23,985 | $ | 6,567 |
| Cannabis Suisse LLC | - | - | ||
| Total Assets | $ | 23,985 | $ | 6,567 |
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NOTE 9 – STOCKHOLDERS’ EQUITY
On March 17, 2021, the Board of Directors, along with the majority stockholder, resolved that the 5,000,000 preferred shares with voting rights of 1 to 10 shall be issued to Suneetha Nandana Silva Sudusinghe in exchange for 5,000,000 common shares that Suneetha Nandana Silva Sudusinghe owned previously.
NOTE 10 – INCOME TAXES
The Company adopted the provisions of uncertain tax positions as addressed in ASC 740-10-65-1. As a result of the implementation of ASC 740-10-65-1, the Company recognized no increase in the liability for unrecognized tax benefits.
The Company has no tax position at August 31, 2021 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at August 31, 2021. The Company’s utilization of any net operating loss carryforward may be unlikely as a result of its intended activities.
The valuation allowance at August 31, 2021 was $210,945. The net change in valuation allowance for the years ended August 31 and May 31, 2021 was $26,326 and $88,068, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.
Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of August 31 and May 31, 2021. All tax years since inception remains open for examination only by taxing authorities of US Federal and state of Nevada.
The Company has a net operating loss carryforward for tax purposes totaling $1,004,501 at August 31, 2021, expiring through fiscal year 2036. There is a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally greater than a 50% change in ownership).
The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the new statutory rate of 21% to the income tax amount recorded as of August 31, 2021 and May 31, 2021 are as follows:
| August 31, 2021 | May 31, 2021 | |||
| Net operating loss carryforward | $ | ( |
$ | ( |
| Effective tax rate | 21 % | 21 % | ||
| Deferred tax asset | ||||
| Less: Valuation allowance | ( |
( | ||
| Net deferred asset | $ | $ |
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CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The change in the valuation allowance during the years ended August 31 and May 31, 2021 was $26,326 and $88,068, respectively:
| August 31, 2021 | May 31, 2021 | |||
| Federal income tax benefit attributed to: | ||||
| Net operating loss from continuing operations | $ | $ | ||
| Valuation allowance | ( |
( | ||
| Net benefit | $ | $ |
NOTE 11 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855), Subsequent Events the Company has analyzed its operations subsequent to August 31, 2021 to the date these consolidated financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these consolidated financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This quarterly report and other reports filed by Cannabis Suisse Corp. (Formerly Geant Corp.) (“we,” “us,” “our,” or the “Company”), from time to time contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates.
In General
Cannabis Suisse Corp. utilizes Swiss4Life as its retail brand for online selling. At this stage, Cannabis Suisse Corp. offers the following products:
| 1) | Flavored Broad-Spectrum CBD Oils. The products come in one fluid ounce (30ml) bottles available in two flavors: Crème de Menthe and Cherry Vanilla. Available CBD concentrations are 1500 mg, 2500 mg and 3500 mg. |
| 2) | CBD Isolate Tinctures with no THC. The products come in one fluid ounce (30ml) bottles with 1000 mg CBD concentrations per bottle and 33.33 mg CBD per serving. CBD Tinctures are designed to therapeutic effects. |
Cannabis Suisse Corp. has initiated development of a new IT product called Cannabis Life. It is a mobile application based on an AI-chatbot that will have access to the most up-to-date information and find out data about companies and brands that sell seeds, cannabis types, etc.
Cannabis Life is an innovative way of searching and learning any cannabis related data. Using the most relevant sources of today, the app will keep its users up with the trends and tendencies of the cannabis industry. Communicating with the chatbot will be as smooth as it would be with a real human being thus giving users additional immersion into the learning process.
Research and Development Expenditures
We have not incurred any research expenditures since our incorporation.
Bankruptcy or Similar Proceedings
There has been no bankruptcy, receivership or similar proceeding.
Employees; Identification of Certain Significant Employees
Other than our officers and directors, we currently do not have any employees.
Results of Operations for the three months ended August 31, 2021 and 2020:
Revenue and Cost of Goods Sold
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For the three months ended August 31, 2020, the Company generated total revenue of $39,624 from selling products to the customer. The cost of goods sold for the three months ended August 31, 2020 was $73,807.
For the three months ended August 31, 2021, the Company has not generated any revenue.
The decrease in revenues and cost of goods sold is a result of the separation of Cannabis Suisse LLC in November 2020.
Operating expenses
Total operating expenses for the three months ended August 31, 2020, were $130,321. The operating expenses for the three months ended August 31, 2020, included professional fees of $21,896; depreciation expense of $4,161; and general and administrative expenses of $104,264.
Total operating expenses for the three months ended August 31, 2021 were $51,914. The operating expenses for the three months ended August 31, 2021, included professional fees of $14,250; depreciation expense of $582; and general and administrative expenses of $37,082.
The decrease in operating expenses is related to the decrease of general and administrative expenses due to the separation of Cannabis Suisse LLC in November 2020.
Changes in Fair Value of Derivatives
The changes in fair value of derivatives for the years ended August 31, 2021 and 2020, was $446 and $0, respectively.
Other expenses
Total other expenses for the three months ended August 31, 2021 and 2020, were $78,179 and $0. The other expenses for the three months ended August 31, 2021, included interest expense of $45,246 ($0 as of August 31, 2020) and net loss on extinguishment of debt of $32,933 ($0 as of August 31, 2020).
Net Loss
The net loss for the three months ended August 31, 2021 and 2020, was $129,647 and $164,661, respectively.
Comprehensive Loss
The comprehensive loss for the three months ended August 31, 2021 and 2020 was $0 and $157, respectively.
Liquidity and Capital Resources and Cash Requirements
As of August 31, 2021, the Company had cash of $0. Furthermore, the Company had a working capital deficit of $252,506.
During the three months ended August 31, 2021 and 2020, the Company used $11,834 and $32,804 of cash in operating activities respectively. The change in cash used in operating activities is related to the decrease in net income, depreciation, accounts receivable, accrued wages, and advances from customers and the reduction in accounts payable, accrued expenses, and VAT tax receivable.
During the three months ended August 31, 2021 and 2020, the Company had $0 of cash in investing activities.
During the three months ended August 31, 2021 and 2020, the Company was provided $11,834 and $32,959 of cash in financing activities respectively, which came from advances from related, convertible debt, bank indebtedness and issue of shares.
In its audited consolidated financial statements as of May 31, 2021, the Company was issued a “going concern” opinion, meaning that there is substantial doubt we can continue as an on-going business for the next twelve months unless we obtain additional capital. Our only sources for cash at this time are investments by others, selling our products and loans from our director. We must raise cash to implement our plan and stay in business.
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Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company’s success over the next year and in future years. Additionally, the Company will have to meet all the financial disclosure and reporting requirements associated with being a public reporting company. The Company’s management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement is business plan and impede the speed of its operations.
Limited operating history; need for additional capital
There is no historical financial information about us upon which to base an evaluation of our performance. We are in a start-up stage of operations and have generated limited revenues since inception. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Related Party Transactions
There are two signed loan agreements between Cannabis Suisse Corp. and the President/CEO and a Director of the Company, Suneetha Nandana Silva Sudusinghe. The CEO agreed to loan the Loan Amount to the Company in the event of not raising a sufficient amount of funds from the offering in accordance to the Form S-1 registration statement of the Company; the director agreed to loan the Loan Amount to the Company on demand of the Company; the Company will conduct the repayments of all amounts of the Director’s loan accordingly to the sequence of loans; the director will be repaid from revenues of the Company, when it starts to earn significant revenues; advanced Loan funds are non-interest bearing, secured and payable upon demand.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on our financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates. Our financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
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We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of August 31, 2021. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of August 31, 2021, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
| 1. | We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities. |
| 2. | We did not maintain appropriate cash controls – As of August 31, 2021, the Company has not maintained sufficient internal controls over financial reporting for cash, including failure to segregate cash handling and accounting functions. |
| 3. | We did not implement appropriate information technology controls – As of August 31, 2021, the Company retains copies of all financial data and material agreements; however, there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors. |
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of August 31, 2021, based on criteria established in Internal Control- Integrated Framework issued by COSO-2013.
Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting occurred during our third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
| Item 1. | Legal Proceedings |
We know of no legal proceedings to which we are a party or to which any of our property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against us.
| Item 1A. | Risk Factors |
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
| Item 2. | Unregistered Sales Of Equity Securities And Use Of Proceeds |
None.
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| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosure |
Not applicable to our Company.
| Item 5. | Other Information |
There is no other information required to be disclosed under this item which was not previously disclosed.
| Item 6. | Exhibits |
The following exhibits are included as part of this report by reference:
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on October 20, 2021.
| CANNABIS SUISSE CORP. | |||
| By: | /s/ | Suneetha Nandana Silva Sudusinghe | |
| Name: | Suneetha Nandana Silva Sudusinghe | ||
| Title: | President, Treasurer, Secretary and Director | ||
| (Principal Executive, Financial and Accounting Officer) | |||
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