UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended: August 31, 2020

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ___________ to____________

Commission File Number: 333-213009

CANNABIS SUISSE CORP.

(Exact name of registrant as specified in its charter)

Lerzenstrasse 12, 8953 Dietikon, Switzerland

Phone: +15022082098

E-mail: manage@cannabissuisse.com

 (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:

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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes ⌧ No ☐

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 ☐   No ⌧

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated 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	☐
Non-accelerated filer	⌧	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 ☐ No ⌧

As of November 18, 2020 there were 34,500,000 shares outstanding of the registrant’s common stock.

 

 

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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.

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CANNABIS SUISSE CORP.

CONSOLIDATED BALANCE SHEETS

									August 31, 2020 (unaudited)		May 31, 2020
ASSETS
			Current Assets
					Cash and Cash Equivalents			$	-	$	5
					Accounts Receivable, net				24,153		76,848
					Related Party Receivable				1,618		10,040
					Inventory, net				36,397		58,061
						Prepaid Taxes			12,346		12,069
			Total Current Assets						74,514		157,023
			Property and Equipment, net						80,877		85,039
			Other Assets
					VAT Tax Receivable				4,316		1,810
						Operating lease right of use asset			126,881		139,653
			Total Other Assets						131,197		141,463
TOTAL ASSETS								$	286,588	$	383,525
LIABILITIES & STOCKHOLDERS’ DEFICIT
		Liabilities
				Current Liabilities
							Accounts Payable	$	123,451	$	108,973
							Accrued Expenses		22,602		18,478
							Accrued Wages		72,687		38,625
							Advances From Related Parties		418,992		415,470
							Advances From Customers		3,295		-
							Bank Indebtedness (Note 7)		66,227		45,212
							Lease Liabilities - Short-term		58,087		70,859
				Total Current Liabilities					765,341		697,617
				Non-Current Liabilities
							Long Term Loan		3,622		3,622
							Lease Liabilities - Long-term		68,794		68,794
				Total Non-Current Liabilities					72,416		72,416
		Total Liabilities							837,757		770,033
		Commitments and Contingencies (Note 6)
		Stockholders’ Deficit
				Common stock, par value $0.001; 250,000,000 shares authorized, 34,500,000 shares issued and outstanding					34,500		34,500
				Additional Paid-In-Capital					51,695		51,695
				Accumulated other comprehensive loss					(17,378)		(17,221)
				Accumulated Deficit					(619,986)		(455,482)
		Total Stockholders’ Deficit							(551,169)		(386,508)
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT								$	286,588	$	383,525

The accompanying notes are an integral part of these statements.

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CANNABIS SUISSE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

		For the three months ended August 31, 2020		For the three months ended August 31, 2019
REVENUES
Sales of cannabis	$	36,945	$	59,252
Sales of face masks/disinfectant		2,679		-
Total Revenues		39,624		59,252
Cost of goods sold		73,807		105,970
Gross (Loss) Profit		(34,183)		(46,718)
OPERATING EXPENSES
Professional fees		21,896		18,776
Depreciation		4,161		679
General and administrative expenses		104,264		62,117
TOTAL OPERATING EXPENSES		130,321		81,572
OPERATING LOSS		(164,504)		(128,290)
PROVISION FOR INCOME TAXES		-		-
NET LOSS	$	(164,504)	$	(128,290)
Other comprehensive (loss) income:
Foreign currency translation adjustment		(157)		-
COMPREHENSIVE LOSS	$	(164,661)	$	(128,290)
NET LOSS PER SHARE: BASIC AND DILUTED	$	(0.00)	$	(0.00)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED		34,500,000		34,500,000

The accompanying notes are an integral part of these statements.

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CANNABIS SUISSE CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

The accompanying notes are an integral part of these statements.

7

 

 

CANNABIS SUISSE CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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

Cannabis Suisse Corp. (“Company”) was incorporated in the State of Nevada on February 26, 2016 to start business operations concerned with production of paper made from elephant dung for making various stationery products and subsequent selling thereof.

On February 20, 2019, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State which changed the Company’s name from Geant Corp. to Cannabis Suisse Corp.

Following the acquisition of Cannabis Suisse LLC (see Note 4), the Company has been engaged in the business of production of OTC (over-the-counter) products - for example CBD oils, as well as retail branded cigarettes, and other health related supplements.

On March 1, 2020, the management of the Company decided to cease operations involving elephant dung-made paper based in Sri Lanka and discontinue using the premises located at Kiranthidiya road 114, Beruwala, Sri Lanka, 12070.

Due to the COVID-19 pandemic, starting April 2020, the Company has been engaged in selling of face masks and disinfectants in order to extend the number of available products and provide the customers with an opportunity to comply with the safety measures.

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, 2020 are not necessarily indicative of the results to be expected for the year ending May 31, 2021.

 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, 2020.

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 wholly - owned subsidiary Cannabis Suisse LLC. 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 and $5 of cash and cash equivalents as of August 31, and May 31, 2020, 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. The allowance for doubtful accounts was $42,583 as of August 31, 2020 and $0 as of May 31, 2020.

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CANNABIS SUISSE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Inventories

Inventories are stated at the lower of cost or market. The Company had $36,967 and $58,061 in inventory as of August 31, 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 $5,936 in reserve for excess and obsolete inventory as of August 31, and May 31, 2020.

The Company had $0 and $9,408 of work in progress (WIP) inventory as of August 31, and May 31, 2020, respectively. Cannabis plants in the growth process are recognized as WIP inventory.

The following table sets out a breakdown of the inventory by classes as of August 31, 2020 and May 31, 2020:

		August 31, 2020		May 31, 2020
Raw materials	$	12,259	$	26,768
Finished goods		30,074		27,821
Work in Process inventory		-		9,408
Reserve for inventory		(5,936)		(5,936)
Total Inventory, net	$	36,397	$	58,061

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

Goodwill. Goodwill is not subject to amortization and is reviewed at least annually in the fourth quarter of each year. The impairment test consists of comparing a reporting unit’s fair value to its carrying value. A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred. Such indicators may include, among others: a significant decline in expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group. Companies have the option to evaluate goodwill impairment based upon qualitative factors similar to the indicators described above.  If it is determined that the estimated fair value of the reporting unit is more likely than not less than the carrying amount, including goodwill, a quantitative assessment is required. Otherwise, no further analysis is necessary.

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CANNABIS SUISSE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Impairment of Long-Lived Assets. We evaluate 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.

There was no impairment recognized during the three months ended August 31, 2020 and 2019.

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.

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 Financial Accounting Standards Board (FASB) 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.

 

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CANNABIS SUISSE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Sales Concentration

A significant portion of the Company’s revenue has been derived from three customers. For the three months ended August 31, 2020 and 2019, the three largest customers accounted for 92% and 35%, respectively, of the Company's total revenue.

Cost of Goods Sold

Cost of goods sold includes direct costs of selling items, direct labor cost, rent expense and electricity.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, The Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Adjustments have been made to the Consolidated Statements of Operations and Comprehensive Loss for the three months ended August 31, 2019, where approximately $86,000 of operating expenses were reclassified to cost of goods sold. These changes in classification do not affect previously reported net loss.

Basic Income (Loss) Per Share

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, 2020 and 2019, 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.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended August 31, 2020, 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, 2020. 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.

 

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CANNABIS SUISSE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

NOTE 4 - BUSINESS COMBINATION

On May 31, 2019, the President of the Company, Suneetha Nandana Silva Sudusinghe, on behalf of the Company, entered into a Stock Transfer Agreement with Cecillia Merige Jensen whereby the Company acquired through merger all of the issued and outstanding capital stock of Cannabis Suisse LLC, a Wyoming limited liability company (“Subsidiary”). In exchange, Ms. Jensen received 10,000,000 shares of common stock of the Company from Mr. Sudusinghe. Mr. Sudusinghe’s share ownership in the Company was reduced from 17,400,000 to 7,400,000 shares.

The Subsidiary owns all of the capital stock of Grow Factory GmbH, a limited liability company incorporated in Zurich, Switzerland on March 13, 2017. Its registered office space is located in Dietikon, Switzerland. Grow Factory is a fully licensed cannabis cultivation and distribution company in Switzerland for recreational tobacco products and medical CBD oils and commenced its operations in March 2018. 

Assets acquired:
Cash and Cash Equivalents	$	70,854
Accounts Receivable		2,528
Inventory		75,000
VAT Tax Receivable		368
Prepaid Expenses		10,467
Property and Equipment		85,050
Total identifiable assets acquired		244,267
Liabilities assumed:
Accounts Payable		(21,143)
Accrued Liabilities		(7,414)
Advances from Related Parties		(203,622)
Total identifiable liabilities assumed		(232,179)
Net identifiable assets acquired		12,088
Intangible Asset		37,912
Total purchase price allocation	$	50,000

 

The purchase price allocation was preliminary at May 31, 2019.  During the year ended May 31, 2020, the Company completed a third-party valuation and finalized the assets acquired and liabilities assumed. The final amounts allocated to assets acquired and liabilities assumed resulted in a decrease in intangibles from May 31, 2019 in the amount of approximately $28,000.

The Company tested intangibles for impairment as of May 31, 2020 and it was determined that the impairment loss was $37,912.

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CANNABIS SUISSE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 – PROPERTY AND EQUIPMENT

		August 31, 2020		May 31, 2020
Equipment	$	70,998	$	70,998
Furniture and fixtures		42,684		42,684
Office machines, IT equipment		1,992		1,992
Leasehold Improvements		8,354		8,354
Accumulated depreciation		(43,151)		(38,989)
Net property and equipment	$	80,877	$	85,039

For the three months ended August 31, 2020 and 2019 the Company recognized depreciation expense in the amount of $4,161 and $679, respectively.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

In 2016, the Company signed a rental agreement for office space in Sri Lanka which terminated on February 29, 2020. This premise was used as a representative office for the customers. The Company discontinued using the mentioned office space on March 1, 2020.

In 2017, the Company’s Subsidiary signed a rental agreement for office space in Switzerland which will terminate on May 31, 2022. The rent expense for the three months ended August 31, 2020 and 2019 was $19,940.

The Company implemented a new accounting policy according to the ASC 842, Leases, on June 1, 2019 on a modified retrospective basis and did not restate comparative periods. Under the new policy, the Company recognized a $214,153 lease liability as well as right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. Lease liabilities are measured at present value of the sum of remaining rental payments, discounted at the incremental borrowing rate. A single lease cost is recognized over the lease term on a straight-line basis. All cash payments of operating lease cost are classified within operating activities in the consolidated statements of cash flows.

 

As of August 31, 2020, and May 31, 2020, the right-of use asset and lease liabilities are as follows:

	August 31, 2020			May 31, 2020
		(unaudited)
Right-of-use asset – operating leases	$	126,881		$	139,653
Lease Liabilities - Short-term	$	58,087		$	70,859
Lease Liabilities - Long-term		68,794			68,794
Total Lease Liabilities	$	126,881		$	139,653

Lease cost and other information

	Three months ended
	August 31, 2020			August 31, 2019
	(unaudited)			(unaudited)
Operating lease cost	$	19,940		$	20,300
Weighted average remaining lease term - Operating leases (years)		1.75			2.75
Weighted average discount rate		3%			3%

 

 

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CANNABIS SUISSE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Required future principal payments under the Company’s lease obligation are set for below:

Year ending May 31

2021 (remaining nine months)	$	59,814
2022		79,752
Total	$	139,566

NOTE 7 - BANK INDEBTEDNESS

On March 26, 2020, due to COVID-19 the Company's Subsidiary, Cannabis Suisse LLC, entered into a loan agreement with a bank for CHF60,000. The loan carries an interest rate of 0.5% per year. The term of the loan is 5 years. The state acts as the guarantor for this loan. Accrued interest on this loan was $0 as of August 31, and May 31, 2020.

NOTE 8 – RELATED PARTY TRANSACTIONS

The Company’s president has verbally agreed to provide interest free advances, due on demand, to the Company up to $100,000. As of August 31, and May 31, 2020, the Company has drawn $65,570 and $56,323, respectively, of advances. In addition, the Company’s president has agreed to provide production space in Sri Lanka at no charge for the production of goods through December 2020. The Company discontinued using the mentioned office space on March 1, 2020.

The Company received $353,422 and $359,147 as advances from the Company’s secretary, Cecillia Jensen, as of August 31, and May 31, 2020, respectively. The advances are interest-free and due on demand.

During October 2017 — December 2017 the Company received a long-term loan from a related party totaling $3,622. As of August 31 and May 30, 2020 the balance outstanding was $3,622. This loan is interest-free.

The Company's cash in the amount of $1,618 and $10,040 as of August 31, and May 31, 2020, respectively, was held by the Company's Secretary. The balance is included in related party receivable on the consolidated balance sheets.

NOTE 9 – 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, 2020 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, 2020. The Company’s utilization of any net operating loss carry forward may be unlikely as a result of its intended activities.

 

The valuation allowance at August 31, 2020 was $130,197. The net change in valuation allowance during the three months ended August 31, 2020 and 2019 was $34,546 and $26,940, 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, 2020 and May 31, 2020. All tax years since inception remains open for examination only by taxing authorities of US Federal and state of Nevada.

15

CANNABIS SUISSE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company has a net operating loss carryforward for tax purposes totaling $619,986 at August 31, 2020, 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, and May 31, 2020, are as follows:

		August 31, 2020		May 31, 2020
Net operating loss carryforward	$	(619,986)	$	(455,482)
Effective tax rate		21 %		21 %
Deferred tax asset		130,197		95,651
Less: Valuation allowance		(130,197)		(95,651)
Net deferred asset	$	-	$	-

		August 31, 2020		May 31, 2020
Federal income tax benefit attributed to:
Net operating loss from continuing operations	$	130,197	$	95,651
Valuation allowance		(130,197)		(95,651)
Net benefit	$	-	$	-

 

 

NOTE 10 - CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company did not have cash in excess of FDIC insured limit as of August 31, and May 31, 2020.

NOTE 11 – SUBSEQUENT EVENTS

In accordance with ASC 855, Subsequent Events the Company has analyzed its operations subsequent to August 31, 2020 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

We were incorporated in the State of Nevada on February 26, 2016. Our initial business direction was production of paper made from elephant dung for making different stationery products and distributing them mainly in Sri Lanka. The Company ceased the mentioned operations on March 1, 2020.

On February 20, 2019, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State for changing the Company’s name from ‘Geant Corp.’ to ‘Cannabis Suisse Corp.’

Following the acquisition of Cannabis Suisse LLC, we have been engaged in the business of production of OTC (over-the-counter) products - for example Cannabidiol (CBD) oils, as well as retail branded cannabis cigarettes, and other health related supplements.

We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings.

Our business office is located at Lerzenstrasse 12, 8953 Dietikon, Switzerland. The Board of Directors considers the said premises appropriate for the business direction the Company is following. Our telephone number is +15022082098.

Product Overview

The main business of the Company is cultivation and distribution of cannabis and the related products. Switzerland has the highest allowed legislative Tetrahydrocannabinol (THC) content in Europe (1%) for sales of cannabis products in retail outlets (without medical receipt). This condition makes Switzerland a perfect geographic location for manufacturing cannabis products and intending to scale the business into worldwide distribution.

Various diluted sequences of THC/CBD ratio can be produced to match legislation and regulation on individual markets with other permitted levels of THC. It enables worldwide production of OTC (over-the-counter) products - for example CBD oils, as well as retail branded cannabis cigarettes, and other health related supplements.  

The growing process has been streamed online on the website https://www.cannabissuisse.com since June 25, 2019.

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Grow Factory is distributing 4 gr. and 12 gr. flowerhead packages under the brand name of Alpine Cannabis. They are distributed to 40 CBD sales places in Switzerland and various tank stations on the border between Italy and Switzerland. There are two different forms of packaging: a 12-gr box for the price of 44 CHF and a 4-gr box for the price of 22 CHF. A 12-gr box is specially made for about 40 special CBD stores in Switzerland, where the product is scheduled to come into immediately after production. A 4-gr box is meant for selling in tank stations on the border between Switzerland and Italy.

Another line of products is Alpine Cannabis CBD Pure Base being an e-liquid base for electronic cigarettes. It provides a boost of CBD to any favorite e-liquids and is available with various degrees of CBD strengths. Alpine Cannabis CBD Pure Base provides: certified CBD concentration in 10 ml bottles; guaranteed absence of THC & totally nicotine-free e-liquid base; no alcohol and no animal extracts; U.S. pharmacopeia/food grade ingredients; tamper-proof and childproof package; diacetyl free and quality-controlled production. The product contains 100% of propylene glycol and various levels of CBD, such as 100mg, 300mg and 500mg per 10 ml bottle, and 200mg, 500mg and 1000mg per 30 ml bottle. The prices range from ˆ19.00 for Alpine Cannabis CBD PURE BASE 100 mg 10 ml bottles to ˆ89.00 for Alpine Cannabis CBD PURE BASE 1000 mg 30 ml bottles.

The Company is also engaged in production of pre-rolled cannabis joints based on the V1 Cannabis Strain. They are wrapped in premium quality paper from RAW (rolling papers) brand and are made only of quality fresh buds (no leaves) cultivated with non-pesticide fertilizers and biological control agents. The new product line of handmade pre-rolled CBD joints contains no additives. They are free from pesticides, fungicides, heavy metals or nicotine. Cannabis Suisse is the first company in Switzerland to offer this uniquely blended fusion of organic cones with optimally boosted CBD content. The THC level is naturally kept under 1%. CBD flower pre-rolled joints are an all-natural alternative to CBD oil products. They offer pain-relieving, calming, and anti-inflammatory properties.

Market background

In August 2018, Forbes magazine listed Switzerland as the third most overlooked marijuana market in the world.

Cannabis users from California, Colorado, Arizona, Oregon, and Washington spent around $36 million in pre-rolled joints only in May of 2019 according to the report introduced by BDS Analytics. (https://bdsa.com/wp-content/uploads/2019/07/CPI-Template-May.pdf) Apart from that, at the end of 2019, the Swiss government finally removed the 25% tobacco tax which was a significant event for the country. In five years from now, Europe is expected to become the largest legal cannabis market in the world. In 2019, the industry there has grown more than in the last six years together.

Some European countries like Germany, Denmark, Malta, Greece, and Italy discussed the possibility of creating a completely regulated cannabis market by 2028. Furthermore, Luxe  mbourg intends to introduce a regulated market for adult use of cannabis by 2023.

The research conducted by the Brightfield Group, and based on impending regulatory changes in EU, indicates that the European CBD market is expected to be worth $1.7 billion by 2023. The cannabis market in general is also set to experience rapid growth, from $318 million in 2018 to nearly $8 billion by 2023.

Competition

We acknowledge the market of CBD-related items is rather competitive. There are several companies that offer comparative items and we have to compete with them. We see the main competitive advantage of our competitors is the established customer base and marketing outlets. Nevertheless, we arrange on a wholesale exchange, for the most part, so we have capacity to offer our items for extensive organizations in huge amounts. Therefore, we believe our item is more extensive, the quality is better, and our ways to deal with business are more flexible.

The Swiss market has a few big competitors now, the rest are small farms with under 1,000 plants in production and mostly outdoor. The big farms have more than 20,000 plants in indoor growing and from 10 to 50 Acres of outdoor growing. With the indoor growing, it is very difficult to get good quality harvest, so a lot of small farms were closed in 2018 as it was difficult to make a profit with farms of 1,000 -3,000 plants.

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Grow Factory has growers with many years of indoor growing experience. This results in the Company making about 20-grams of high-quality flower heads per plant over an 8-week period. It is quite difficult to find a landlord in Switzerland for indoor grow who accepts CBD production. Currently Grow Factory rents the territory of 400 m2. It is not enough for the further development so the Company needs an approval for the new 4000 m2 place which is planned to be available soon.

The prices on weed have been decreasing in Switzerland, so in order to get a part of the market, Grow Factory has to reduce the price and produce more hemp. A 12 gr flowerhead box generally costs 50 CF, so Grow Factory will sell 1 gr more than their competitors do for 50 CF and we believe the product is of a much higher quality. We believe Grow Factory will get a huge part of the CBD market when it is known by the customers. A 4 gr flowerhead box costs 22 CF. Competitors sell 3 or 3.5 gr boxes at the same price.  Sales price for Grow Factory products will not increase a lot. It is more important for the Company to get well-known and branded in Switzerland.

Marketing

We use marketing strategies such as web advertisements, press releases, direct mailing, and phone calls to acquire potential customers. We attract traffic to our website by a variety of online marketing tactics, such as registering with top search engines, using selected key words and meta-tags, and utilizing link and banner exchange options.

The website related to cannabis cultivation is https://www.cannabissuisse.com. The growing process is streamed online on this website. Also, it includes the information about the main Company’s products, our team and our plans for further development.

We will intend to continue our marketing efforts during the life of our operations. There is no guarantee that we will be able to attract and more importantly retain enough customers to justify our expenditures. If we are unable to generate a significant amount of revenue and to successfully protect ourselves against those risks, then it would materially affect our financial condition and our business could be harmed.

Description of property

Our chief executive officer, Suneetha Nandana Silva Sudusinghe, has agreed to provide us his own premises at no charge. He will not take any fee for these premises. This premise is used for production of the goods. The Company has discontinued using the mentioned office space on March 1, 2020.

On September 28, 2016 the Company executed a Rent office agreement, beginning on January 1, 2017, terminated on January 1, 2018 which was extended through December 31, 2019. These premises will be used as representative office for the customers. The rent payment is $120 per month. This Rent office agreement was terminated on March 1, 2020.

On April 18, 2017, the Company signed a Rent office agreement, beginning on June 1, 2017 which will terminate on May 31, 2022. These premises will be used as a representative office for the customers of Grow Factory GmbH. The rent payment is $6,646 per month. For the three months ended August 31, 2020, we have $19,940 of rent expense.

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.

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Results of Operations for the three months ended August 31, 2020 and 2019:

Revenue Cost of Goods Sold

For the three months ended August 31, 2019, the Company generated total revenue of $59,252 from selling products to the customer. The cost of goods sold for the three months ended August 31, 2019 was $105,970, which represent the cost of raw materials.

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.

The change in Company revenues is related to the reduction in output for the three months ended August 31, 2020 compared to the output for the three months ended August 31, 2019. In regard to the COVID-19 outbreak, the Management did not expect an increase in sales and thereby reduced the plantation.

Operating expenses

Total operating expenses for the three months ended August 31, 2019, were $81,572. The operating expenses for the three months ended August 31, 2019, included professional fees of $18,776; depreciation expense of $679; and general and administrative expenses of $62,117.

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.

The change in operating expenses is related to the reduction of growing plants.

Net Loss

The net loss for the three months ended August 31, 2020 and 2019 was $164,504 and $128,290, respectively.

Liquidity and Capital Resources and Cash Requirements

As of August 31, 2020, the Company had cash of $0. Furthermore, the Company had a working capital deficit of $690,827.

During the three months ended August 31, 2020 and 2019 the Company used $32,804 and $105,374 of cash in operating activities respectively. The change in cash used in operating activities is related to the increase 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, 2020 and 2019 the Company did not have cash in investing activities.

During the three months ended August 31, 2020 and 2019 the Company was provided $32,959 and $88,396 of cash in financing activities respectively, which came from advances from related parties and bank indebtedness.

In its audited consolidated financial statements as of May 31, 2020, 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.

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 publicly 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.

 

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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 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. As discussed in Note 8 to the consolidated financial statements, the Company's cash was held by the Company's Secretary, Cecillia Jensen.

Critical Accounting Policies

 

The preparation of financial statements in 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.

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, 2020. 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.

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Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of August 31, 2020 using the criteria established in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO - 2013").

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, 2020, 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, 2020, 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, 2020, 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, 2020 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.

 

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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.

 

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:

Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1		Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

 

 

 

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 in Dietikon, Switzerland on November 19, 2020.

 

 

 

 

 

 

 

 

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