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.
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 nine months ended February 29, 2020
are not necessarily indicative of the results to be expected for
the year ending May 31, 2020.
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,
2019.
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 $7,855 and
$84,181 of cash and cash equivalents as of February 29, 2020, and
May 31, 2019, respectively.
Inventories
Inventories are stated at the
lower of cost or market. The Company had $18,494 and $76,329 in
inventory as of February 29, 2020, and May 31, 2019,
respectively.
Depreciation, Amortization,
and Capitalization
The Company records
depreciation and amortization when appropriate using the
straight-line balance method over the estimated useful life of the
assets. The Company estimates that the useful life of its equipment
is five years and industrial water filter is seven years.
Expenditures for maintenance and repairs are charged to expense as
incurred. Additions, major renewals and replacements that increase
the property's useful life are capitalized. Property sold or
retired, together with the related accumulated depreciation is
removed from the appropriated accounts and the resultant gain or
loss is included in net income.
9
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS UNAUDITED
Impairment
Potential impairments of
long-lived assets are reviewed when events or changes in
circumstances indicate a potential impairment may exist. In
accordance with Accounting Standards Codification (ASC) 360
Property, Plant and Equipment impairment is determined when
estimated future undiscounted cash flows associated with an asset
are less than the asset’s carrying value.
Fair Value of Financial
Instruments
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 cash
and the Company’s loan from shareholder 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 credit, 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 of 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.
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 February 29 and 28, 2020 and 2019, there were
no potentially dilutive debt or equity instruments issued or
outstanding.
10
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS UNAUDITED
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 year. 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 Stockholder’s Deficit.
Recent Accounting
Pronouncements
In February 2016, the FASB
issued ASU 2016-02 (Topic 842) Leases. Under this new guidance,
lessees (including lessees under leases classified as finance
leases, which are to be classified based on criteria similar to
that applicable to capital leases under current guidance, and
leases classified as operating leases) will recognize a
right-to-use asset and a lease liability on the balance sheet,
initially measured as the present value of lease payments under the
lease. Under current guidance, operating leases are not recognized
on the balance sheet. However, the new guidance permits companies
to make an accounting policy election not to apply the recognition
provisions of the new guidance to short term leases (leases with a
lease term of 12 months or less that do not include an option to
purchase the underlying asset that the lessee is reasonably certain
to exercise). If this election is made, lease payments under short
term leases will be recognized on a straight-line basis over the
lease term. The Company adopted the new guidance effective June 1,
2019, using a modified retrospective method, under which it will
record an immaterial cumulative adjustment to retained earnings
rather than retrospectively adjusting prior periods. The Company
also elected to adopt the policy not to apply the recognition
provisions to short term leases.
This application of the
modified retrospective method will result in a balance sheet
presentation that will not be comparable to the prior period in the
first year of adoption. The Company does not expect the new
standard to have a material impact on its results of operations or
cash flows.
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 February 29, 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.
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, Suneetha
Nandana Silva Sudusinghe, the president of the Company and on
behalf of the Company entered into a Stock Transfer Agreement with
Cecillia Merige Jensen whereby the Company acquired all of the
issued and outstanding capital stock of Cannabis Suisse LLC, a
Wyoming limited liability company (“Subsidiary”). In exchange, Ms.
Jensen has received 10,000,000 shares of common stock of the
Company valued at $50,000. Mr. Sudusinghe’s share ownership in the
Company was reduced from 17,400,000 to 7,400,000.
11
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS UNAUDITED
The Subsidiary owns all of
the capital stock of Grow Factory GmbH, a corporation incorporated
in Zurich, Switzerland on March 13, 2017. Its office 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 on March 2018.
Purchase Price Allocations
Presented below is a summary of the purchase
price allocations for the business combination:
|
|
|
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
|
|
83,253
|
Total
identifiable assets acquired
|
|
242,470
|
Liabilities assumed:
|
|
|
Accounts
Payable
|
|
47,109
|
Accrued
Liabilities
|
|
7,414
|
Advances
from Related Parties
|
|
203,622
|
Total
identifiable liabilities assumed
|
|
258,145
|
Net
identifiable assets acquired
|
|
(15,675)
|
Goodwill
|
|
65,675
|
Total
purchase price allocation
|
$
|
50,000
|
The Company assessed the fair
value of the various net liabilities assumed based on internal
documents. The $65,675 of goodwill currently recognized is
deductible for income tax purposes over the next 15 years. The
Company has not yet completed the initial accounting for the
transaction; therefore, the fair value is provisional pending
receipt of a final valuation.
Pro Forma Disclosures
The following unaudited pro
forma financial results reflects the historical operating results
of the Company, including the unaudited pro forma results of Grow
Factory for the nine months ended February 28, 2019, respectively,
as if this business combination had occurred as of June 1, 2018 The
pro forma financial information set forth below reflects
adjustments to the historical data of the Company to give effect to
each of these acquisitions and the related equity issuances as if
each had occurred on June 1, 2018 The pro forma information
presented below does not purport to represent what the actual
results of operations would have been for the periods indicated,
nor does it purport to represent the Company's future results of
operations. The following table summarizes on an unaudited pro
forma basis the Company's results of operations for the nine months
ended February 28, 2019:
12
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS UNAUDITED
The calculations of pro forma
net revenue and pro forma net loss give effect to the business
combination for the period from June 1, 2018 until the respective
closing dates for (i) the historical net revenue and net income
(loss), as applicable, of the acquired businesses, and (ii)
incremental depreciation and amortization for the business
combination based on the fair value of property, equipment and
identifiable intangible assets acquired and the related estimated
useful lives.
NOTE 5 – PROPERTY AND
EQUIPMENT
|
|
|
|
|
|
|
February 29, 2020
|
|
May 31, 2019
|
Equipment
|
$
|
73,006
|
$
|
58,778
|
Furniture and fixtures
|
|
33,598
|
|
31,881
|
Office machines, IT equipment
|
|
2,066
|
|
9,044
|
Leasehold Improvements
|
|
8,354
|
|
8,354
|
Depreciation
|
|
(33,790)
|
|
(15,019)
|
Net property and equipment
|
$
|
83,234
|
$
|
93,038
|
For the nine months ended
February 29 and 28, 2020 and 2019 the Company recognized
depreciation expense in the amount of $12,484 and $4,823,
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 rent expense for each of the nine months
ended February 29 and 28, 2020, and 2019 was $1,240 and $1,080. The
Company has decided to discontinue using the mentioned office space
since 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 nine months ended February 29, 2020 was $54,550.
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 approximately
$195,394 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 as of February 29, 2020,
discounted at the incremental borrowing rate. A single lease cost
is recognized over the lease term on a generally straight-line
basis. All cash payments of operating lease cost are classified
within operating activities in the statement of cash flows.
As of February 29, 2020, and
May 31, 2019, the right-of use asset and lease liabilities are as
follows:
|
|
|
|
|
|
|
February 29, 2020
|
|
May 31, 2019
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Right-of-use asset – operating leases
|
$
|
153,640
|
|
$
|
-
|
|
|
|
|
|
|
Lease
Liabilities - Short-term
|
$
|
67,131
|
|
$
|
-
|
Lease
Liabilities - Long-term
|
|
86,509
|
|
|
-
|
Total
Lease Liabilities
|
$
|
153,640
|
|
$
|
-
|
13
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS UNAUDITED
Lease cost and other
information
|
|
|
|
|
|
|
Nine months ended
|
|
February 29, 2020
|
|
February 28, 2019
|
|
(unaudited)
|
|
(audited)
|
|
|
|
|
|
|
Operating lease cost
|
$
|
60,868
|
|
$
|
52,660
|
Weighted average remaining lease term - Operating leases
(years)
|
|
2.5
|
|
|
-
|
Weighted average discount rate
|
|
3%
|
|
|
-
|
Required future principal
payments under the Company’s lease obligation are set for
below:
Year ending May 31
|
|
|
2020 (remaining three months)
|
$
|
20,964
|
2021
|
|
79,752
|
2022
|
|
79,752
|
Total
|
$
|
180,468
|
NOTE 7 – 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 February 29, 2020, and May 31,
2019, the Company has drawn $54,708 and $54,500, 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 has decided
to discontinue using the mentioned office space since March 1,
2020.
The Company’s subsidiary
received $380,308 and $203,622 as advances from related parties as
of February 29, 2020, and May 31, 2019, respectively. The advances
are interest-free and due on demand.
NOTE 8 – COMMON STOCK
On January 23, 2019, the
Company effected a forward split of the outstanding common stock on
a one (1) for twenty (20) basis. All share figures have been
retroactively restated to reflect the stock split.
On February 20, 2019, the
Company filed a Certificate of Amendment to its Articles of
Incorporation with the Nevada Secretary of State which increased
the Company’s authorized shares of common stock from 75,000,000 to
250,000,000.
Also, during the year ended
May 31, 2019, the Company had 32,600,000 shares of common stock
returned. On March 8, 2019, a total of 22,600,000 shares related to
the cancellation of restricted shares to reduce the director’s
percentage of shares. On May 31, 2019, 10,000,000 shares were
returned to be issued for the acquisition of Cannabis Suisse
LLC.
14
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS UNAUDITED
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.
On December 22, 2017, Tax
Cuts and Jobs Act (H.R. 1) (the “Act”) was signed into law in the
United States. The Act includes a number of changes in
existing tax law impacting businesses including, among other
things, a permanent reduction in the corporate income tax rate from
34% to 21%. The rate reduction would take effect on January 1,
2018
The Company has no tax
position at February 29, 2020 for which the ultimate deductibility
is highly certain but for which there is uncertainty about the
timing of such deductibility. The Company does not recognize
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 February 29, 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
February 29, 2020 was $84,717. The net change in valuation
allowance during the nine months ended February 29, 2020 was
$70,803. 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 February 29, 2020 and May 31, 2019. 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 $403,412 at
February 29, 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 February 29, 2020 and May 31,
2019, are as follows:
|
|
|
|
|
|
|
February 29, 2020
|
|
May 31, 2019
|
Net operating loss carryforward
|
$
|
(403,412)
|
$
|
(66,254)
|
Effective tax rate
|
|
21 %
|
|
21 %
|
Deferred tax asset
|
|
84,717
|
|
13,914
|
Less: Valuation allowance
|
|
(84,717)
|
|
(13,914)
|
Net deferred asset
|
$
|
-
|
$
|
-
|
15
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS UNAUDITED
The change in the valuation
allowance during the nine months ended February 29, 2020 and May
31, 2019, was $70,803 and $4,774, respectively.
|
|
|
|
|
|
|
February 29, 2020
|
|
May 31, 2019
|
Federal income tax benefit attributed to:
|
|
|
|
|
Net operating loss from continuing
operations
|
$
|
84,717
|
$
|
13,914
|
Valuation allowance
|
|
(84,717)
|
|
(13,914)
|
Net benefit
|
$
|
-
|
$
|
-
|
NOTE 10 – SUBSEQUENT
EVENTS
In accordance with SFAS 165
(ASC 855), Subsequent Events the Company has analyzed its
operations subsequent to February 29, 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.
16
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 the production of paper made from elephant dung (poo)
for making different stationery products and distribution thereof
primarily 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 which changed the
Company’s name from Geant Corp. to Cannabis Suisse Corp.
Following the acquisition of
Cannabis Suisse LLC, as discussed below, we have been engaged in
the business of production of OTC (over-the-counter) products - for
example 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. Our
telephone number is +15022082098.
The Board of Directors
considers the said premises appropriate for the new business
direction the Company has been following.
Stock Transfer Agreement
On May 31, 2019, Suneetha
Nandana Silva Sudusinghe, the president of the Company and on
behalf of the Company entered into a Stock Transfer Agreement with
Cecillia Merige Jensen whereby the Company has 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 has received 10,000,000 shares of common stock
of the Company from Mr. Sudusinghe. Mr. Sudusinghe’s share
ownership in the Company has been reduced from 17,400,000 to
7,400,000. Immediately prior to the above transaction, the Company
had 34,500,000 shares of common stock issued and outstanding and
immediately after the above transaction, the Company has 34,500,000
shares of common stock issued and outstanding.
17
The Subsidiary owns all of
the capital stock of Grow Factory GmbH, a corporation incorporated
in Zurich, Switzerland (“Grow Factory”) on March 13, 2017. Its
office is located on Lerzenstrasse 12, 8953 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.
Product Overview
The main business of the
Company is cannabis cultivation and distribution. Switzerland has
the highest allowed legislative THC content in Europe (1%) for
sales of cannabis products in retail outlets (without medical
receipt). This makes Switzerland an ideal geographic location to
manufacture cannabis products, with an intent 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. This
allows for 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 is
streamed online on the website https://www.cannabissuisse.com
(https://www.cannabissuisse.com/)
At the moment, Grow Factory
has already launched the first distribution of 4 gr. and 12 gr.
flowerhead packages under the brand name Alpine Cannabis. The
Company intends to produce 10,000 packages in total. They are
distributed to 40 CBD sales places in Switzerland and various tank
stations on the border between Italy and Switzerland. Two different
forms of packaging were designed: a 12 gr box costs 44 CHF and a 4
gr box costs 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 dedicated
for selling in tank stations on the border between Switzerland and
Italy.
The new line of products is
Alpine Cannabis CBD Pure Base that is 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; USP/food grade ingredients;
tamper-proof and childproof package; diacetyl free and
quality-controlled production.
The new product contains 100%
of PG and various levels of CBD, such as 100mg, 300mg, 500mg per 10
mL bottle, and 200mg, 500mg, 1000mg per 30 mL bottle. The prices
range from ˆ19.00 for Alpine Cannabis CBD PURE BASE 100 mg 10 ml to
ˆ89.00 for Alpine Cannabis CBD PURE BASE 1000 mg 30 ml.
Market background
In 2017, the Swiss
legislation referring to production and sale of cannabis was
changed, and thereby increased and legalized the level of THC to 1%
for commercial cannabis production and sale. The new legislation
gives companies the right (with proper authorization and licenses)
to cultivate cannabis plants and distribute cannabis within in
Switzerland.
In February 2017, the Swiss
health authorities established the legality of cannabis by
indicating that "low-THC cannabis" would be taxed the same way
tobacco is taxed, with a similar health warning. This type of
cannabis is distributed under different brands.
Sales of OTC cannabis
cigarettes picked up pace in Bern and Zürich in the beginning of
2017, as more people started to use the product.
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Sales have increased
radically, and the expectation is that the 2019 turnover from
cannabis will be more than 500 million CHF (approximately 500
million USD) in Switzerland alone.
Despite the increase in
retailers, supply is lower than demand. Current providers could
produce only approximately ¼ of the total Swiss market's demand in
2018.
Swiss supermarket Coop
Cooperative was the world’s first major chain to sell cannabis
cigarettes that contain less than 1% THC in 2017, in its 700 stores
across the country. In 2018, Lidl and other retailers joined
in.
In August 2018, Forbes
magazine listed Switzerland as the third most overlooked marijuana
market in the world.
Competition
We acknowledge the market of
CBD-related items is rather competitive. There are several
companies that offer comparative items and we will have to compete
with them. We see the main competitive advantage of our competitors
is the established customer base and marketing outlets. Howbeit, we
arrange on a wholesale exchange, for the most part, so we will have
capacity to offer our item 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.
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 intend to use such
marketing strategies such as web advertisements, direct mailing,
and phone calls to acquire potential customers. We intend to
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. We will utilize numerous Internet showcasing
instruments to direct activity to our site and distinguish
potential clients.
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
future plans of development.
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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
decided to discontinue using the mentioned office space since March
1, 2020.
On September 28, 2016 the
Company executed a Rent office agreement, beginning on January 1,
2017, terminated on January 01, 2018 and was extended through
December 31, 2019. These premises will be used as representative
office for the customers. The rent payment is $120 per month. For
the nine months ended February 29, 2020, we have $1,240 of rent
expense. This Rent office agreement has been terminated since March
1, 2020.
On April 18, 2017, the
Company signed a Rent office agreement, beginning on June 1, 2017
and 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.
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.
Results of Operations for the
three and nine months ended February 29 and 28, 2020 and 2019:
Revenue
For the three and nine months
ended February 28, 2019, the Company has not generated any
revenue.
For the three months ended
February 29, 2020, the Company generated total revenue of $57,531
from selling products to the customer. The cost of goods sold for
the three months ended February 29, 2020 was $16,990, which
represent the cost of raw materials.
For the nine months ended
February 29, 2020, the Company generated total revenue of $163,973
from selling products to the customer. The cost of goods sold for
the nine months ended February 29, 2020 was $58,564, which
represent the cost of raw materials.
Operating expenses
The increase in operating
expenses is a result of the Cannabis Suisse LLC Acquisition in
2019.
Total operating expenses for
the three months ended February 28, 2019, were $5,340. The
operating expenses for the three months ended February 28, 2019,
included professional fees of $3,604; depreciation expense of
$1,376; and general and administrative expenses of $360.
Total operating expenses for
the three months ended February 29, 2020, were $105,743. The
operating expenses for the three months ended February 29, 2020,
included professional fees of $29,880; depreciation expense of
$4,161; and general and administrative expenses of $71,702.
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Total operating expenses for
the nine months ended February 28, 2019, were $17,648. The
operating expenses for the nine months ended February 28, 2019,
included professional fees of $11,745; depreciation expense of
$4,823; and general and administrative expenses of $1,080.
Total operating expenses for
the nine months ended February 29, 2020, were $442,565. The
operating expenses for the nine months ended February 29, 2020,
included professional fees of $76,235; depreciation expense of
$12,484; and general and administrative expenses of $353,846.
Net Loss
The net loss for the three
months ended February 29 and 28, 2020 and 2019 was $65,202 and
$5,340 respectively.
The net loss for the nine
months ended February 29 and 28, 2020 and 2019 was $337,156 and
$17,648 respectively.
Liquidity and Capital
Resources and Cash Requirements
As of February 29, 2020, the
Company had cash of $7,855. Furthermore, the Company had a working
capital deficit of $549,861.
During the nine months ended
February 29 and 28, 2020 and 2019 the Company used $241,265 and
$12,825 of cash in operating activities respectively. This increase
is generally related to increase in inventory; prepaid expenses;
accounts payable; accrued liabilities and decrease in net loss;
accounts receivable.
During the nine months ended
February 29 and 28, 2020 and 2019 the Company did not have cash in
investing activities.
During the nine months ended
February 29 and 28, 2020 and 2019 the Company was provided $176,894
and $12,825 of cash in financing activities respectively, which
came from advances from related parties.
In its audited consolidated
financial statements as of May 31, 2019, 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 in this offering, 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.
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.
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Related Party
Transactions
There are two signed loan
agreements between Cannabis Suisse Corp. and the President and CEO
of the Company Suneetha Nandana Silva Sudusinghe. The CEO has
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
agrees to loan the Loan Amount to the Company on demand of the
Company; the Company will conduct the repayments of all amount of
Director’s loan accordingly to the sequence of loans; 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 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 February 29, 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.
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 February 29, 2020 using the criteria
established in “Internal Control - Integrated Framework” issued by
the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO - 2013").
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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 February 29, 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
February 29, 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 February 29, 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 February 29, 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.
PART II. OTHER
INFORMATION
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Item 1.
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LEGAL PROCEEDINGS
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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.
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.
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Item 2.
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UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
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None.
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Item 3.
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DEFAULTS UPON SENIOR
SECURITIES
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None.
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Item 4.
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MINE SAFETY DISCLOSURE
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Not applicable to our
Company.
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Item 5.
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OTHER INFORMATION
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There is no other information
required to be disclosed under this item which was not previously
disclosed.
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 in Dietikon, Switzerland on
June 3, 2020.
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CANNABIS SUISSE CORP.
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By:
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/s/
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Suneetha Nandana Silva Sudusinghe
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Name:
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Suneetha Nandana Silva Sudusinghe
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Title:
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President, Treasurer, Secretary and Director
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(Principal Executive, Financial and Accounting Officer)
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