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 consolidated 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.
The accompanying notes are an integral part of these
statements.
The accompanying notes are an integral part of these
statements.
The accompanying notes are an integral part of these
statements.
The accompanying notes are an integral part of these
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
The Company is engaged in the business of production
of OTC (over-the-counter) products - for example CBD oils, retail branded cigarettes and also some health-related supplements. We use
various distribution channels for various types of customers. The Company’s products can be sold to both corporate customers and
individual clients.
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 28, 2022 are not necessarily indicative of the results to be expected for the year ending May 31, 2022.
The information included in this Form 10-Q should
be read in conjunction with the Company's Annual Report on Form 10-K for the year ended May 31, 2021.
Basis of presentation and consolidation
The accompanying consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America, (GAAP). The Company’s
year-end is May 31. The consolidated financial statements include the accounts of the Company and its former wholly-owned subsidiary,
Cannabis Suisse LLC, through the date of disposal (see Note 4). All significant inter-company accounts and transactions have been eliminated
in consolidation.
Use of Estimates
The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers
all highly liquid
investments
with the original
maturities of
three months
or less to be cash
equivalents.
The Company had $0 of cash and cash equivalents as of February 28, 2022 and May 31, 2021, respectively.
Accounts Receivable
The Company records accounts receivable at the time
products and services are delivered. An allowance for losses is established through a provision for losses charged to expenses. Receivables
are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount
that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability
of the accounts and prior loss experience.
Inventories
Inventories are stated at the lower of cost or market.
The Company had $0 and $1,734 in inventory as of February 28, 2022 and May 31, 2021, respectively. The Company also determines a reserve
for excess and obsolete inventory based on historical usage, and projecting the year in which inventory will be consumed into a finished
product. The valuation of inventories requires management to make significant assumptions, including the assessment of market value by
inventory category considering historical usage, future usage and market demand for their products, and qualitative judgments related
to discontinued, slow moving and obsolete inventories. The Company had $0 in reserve for excess and obsolete inventory as of February
28, 2022 and May 31, 2021, respectively.
9
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Property and equipment
Property and equipment are carried at cost less accumulated
depreciation. Depreciation is provided over the assets’ estimated useful lives, using the straight-line method. Estimated useful
lives of the plant and equipment are as follows:
Equipment, Furniture and fixtures 5-10 years
Office machines, IT equipment 5-10 years
Leasehold Improvements 2-5 years
The cost and related accumulated depreciation of assets
sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations
and comprehensive loss. The cost of maintenance and repairs is charged to the consolidated statements of operations and comprehensive
loss as incurred, whereas significant renewals and betterments are capitalized.
Impairment
The Company evaluates the impairment of long-lived
assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our evaluation is based on
an assessment of potential indicators of impairment, such as an adverse change in the business climate that could affect the value of
an asset, current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of an asset,
and a current expectation that, more likely than not, an asset will be disposed of before the end of its previously estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
During the nine months ended February 28, 2022 and
2021, the Company recognized an impairment of intangibles in the amount of $0, respectively.
Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) 820
Fair Value Measurements and Disclosures establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring
fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are
observable in the market.
These tiers include:
| Level 1: |
defined as observable inputs such as quoted prices in active markets; |
| Level 2: |
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
| Level 3: |
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying value of the Company’s cash, other
current assets, accounts payable, accrued expenses and advances from related parties approximates its fair value due to their short-term
maturity. The Company has derivatives that are measured at level 3. The derivatives may require appropriate valuation adjustments that
a market participant would require to arrive at fair value.
10
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Derivatives
Derivative instruments are recognized in the Consolidated
Financial Statements at fair value. Where the Company has entered into master netting agreements with counterparties, the derivative positions
are netted by counterparties and are reported accordingly in other assets or other liabilities. Changes in the fair value of derivative
instruments are recognized in earnings each period, unless the derivative is designated and qualifies as a cash flow or net investment
hedge.
Income Taxes
The Company accounts for its income taxes in accordance
with ASC 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable
to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and
tax credits and carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
Revenue Recognition
The Company recognizes revenue in accordance with
Accounting Standards Update (ASU) 2014-09, “Revenue from contracts with customers” (Topic 606). Revenue is recognized
when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing,
and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the considerations
that the Company expects to receive in exchange for those goods.
The Company applies the following five-step model
in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised
goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction
price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and
(v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts
when it is probably that the entity will collect the consideration it is entitled in exchange for the goods or services it transfers to
the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract
to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company
recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance
obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at
a point in time, typically upon delivery. For our new customers, the Company generally requires orders placed to be backed by advances
or deposits. In general, the Company provides payment terms between 30 to 60 days following receiving of goods.
Cost of Goods Sold
Cost of goods sold includes direct costs of selling
items, direct labor cost, rent expense and electricity.
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 28, 2022 and May 31, 2021, there were no potentially dilutive debt or equity instruments issued or outstanding.
Foreign Currency Translation
Assets and liabilities of the Company’s Swiss
subsidiary are translated from Swiss francs to United States dollars at exchange rates in effect at the balance sheet date. Income and
expenses are translated at average exchange rates during the period. The translation adjustments for the reporting period are included
in the Company’s consolidated statements of operations and comprehensive loss, and the cumulative effect of these adjustments are
reported in the Company’s consolidated balance sheets as accumulated other comprehensive loss within stockholders’ deficit.
11
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Recent Accounting Pronouncements
There have been no recent accounting pronouncements
or changes in accounting pronouncements during the nine months ended February 28, 2022 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 February 28, 2022. The Company has not completed its efforts to establish a stabilized source
of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company’s
ability to continue as a going concern.
Management anticipates that the Company will be dependent,
for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it will
be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the
Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
The impact of the COVID-19 pandemic has had, and is
expected to continue to have, an adverse effect on our business and our financial results. COVID-19 pandemic has negatively affected global
economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets.
The pandemic had and will continue to have an adverse effect on our business and financial performance. The extent of the impact of COVID-19,
including the Company’s ability to execute its business strategies as planned, will depend on future developments, including the
duration and severity of the pandemic, which are uncertain and cannot be predicted. The COVID-19 pandemic could also adversely affect
its liquidity and ability to access the capital markets. Uncertainty regarding the duration of the COVID-19 pandemic may adversely impact
its ability to raise additional capital, or require additional capital.
NOTE 4 - BUSINESS COMBINATION
On November 23, 2020, Cannabis Suisse Corp. (the “Transferor”),
entered into an Asset Transfer Agreement with Cecillia Merige Jensen (the “Transferee”) and Cannabis Suisse LLC. In accordance
with the terms of the Agreement, the Transferor transferred to the Transferee all its right, title and interest to one hundred percent
(100%) of Cannabis Suisse LLC, including all its right, title and interest to one hundred percent (100%) of Grow Factory GmbH and the
Transferee transferred and assigned to the Transferor 10,000,000 restricted shares of Cannabis Suisse Corp., free and clear of any and
all liens and encumbrances. The above-mentioned Asset Transfer Agreement hereby revokes the effect of the Stock Transfer Agreement entered
into with Cecillia Jensen on May 31, 2019, and the 10,000,000 shares were returned to the President of the Company to reinstate his ownership
percentage pre-acquisition.
| Disposal of Assets: |
|
|
| Related Party Receivable |
$ |
1,618 |
| Inventory |
|
29,902 |
| Prepaid Taxes |
|
12,346 |
| Property and Equipment |
|
71,006 |
| VAT Tax Receivable |
|
4,316 |
| Operating lease right of use asset |
|
126,881 |
| Total Assets Transferred |
$ |
246,069 |
12
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment:
| |
February 28, 2022 |
|
May 31, 2021 |
| Equipment |
$ |
16,451 |
$ |
16,451 |
| Leasehold Improvements |
|
8,354 |
|
8,354 |
| Accumulated depreciation |
|
(22,128) |
|
(20,422) |
| Net property and equipment |
$ |
2,677 |
$ |
4,383 |
For the three months ended February 28, 2022 and 2021
the Company recognized depreciation expense in the amount of $543 and $679, respectively. For the nine months ended February 28, 2022
and 2021 the Company recognized depreciation expense in the amount of $1,706 and $9,003, respectively.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company
may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance
with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies
and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonable
estimated, it establishes the necessary accruals. As of February 28, 2022, the Company is not aware of any contingent liabilities that
should be reflected in the financial statements.
NOTE 7 – RELATED PARTY TRANSACTIONS
The Company’s
President has agreed to provide interest free advances, due on demand, to the Company up to $100,000. As of February 28, 2022 and May
31, 2021, Suneetha Nandana Silva Sudusinghe advanced to the Company $2,234 and $0, respectively.
On
January 19, 2022 Alain Parrik resigned from the positions of the Chief Operating Officer and Director of the Company.
As
of January 19, 2022 The Company has an outstanding debt to Alan Parrik. The amount of the debt is $85,000. The Agreement contains a provision
that allows Alain Parrik to convert the debt to common stock at a fixed price of $0.005 per share after 3 - month period of lockup.
NOTE 8 – CONVERTIBLE NOTES PAYABLE
On December 1, 2020, Suneetha Nandana Silva Sudusinghe
assigned SAPA Investments, LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows SAPA Investments,
LLC to convert the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30
days.
The original loan to Cannabis Suisse Corp. from Mr.
Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On December 4, 2020 Suneetha Nandana Silva Sudusinghe
assigned SAPA Group, LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows SAPA Group, LLC to
convert the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30 days.
The original loan to Cannabis Suisse Corp. from Mr.
Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On December 7, 2020 Suneetha Nandana Silva Sudusinghe
assigned GSS Group LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows GSS Group LLC to convert
the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30 days.
The original loan to Cannabis Suisse Corp. from Mr.
Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On December 10, 2020 Suneetha Nandana Silva Sudusinghe
assigned Noi Tech LLC $10,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Noi Tech LLC to convert
the loan to common stock at a 70%-discount to the market price at the time of conversion after a period of lockup of 30 days.
13
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The original loan to Cannabis Suisse Corp. from Mr.
Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On April 1, 2021 Suneetha Nandana Silva Sudusinghe
assigned Serhii Cherniienko $60,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Serhii Cherniienko
to convert the loan to common stock at a fixed price of $0.01 per share. Beneficial conversion feature was $60,000 and debt discount was
$19,672.
The original loan to Cannabis Suisse Corp. from Mr.
Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On April 15, 2021 Suneetha Nandana Silva Sudusinghe
assigned Noi Tech LLC $30,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Noi Tech LLC to convert
the loan to common stock at a fixed price of $0.01 per share. Beneficial conversion feature was $30,000 and debt discount was $7,541.
The original loan to Cannabis Suisse Corp. from Mr.
Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On December 1, 2021 Suneetha Nandana Silva Sudusinghe
assigned Serghei Dumanov $12,000 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Serghei Dumanov to
convert the loan to common stock at a fixed price of $0.005 per share.
The original loan to Cannabis Suisse Corp. from Mr.
Sudusinghe was pursuant to Loan Agreement dated March 1, 2016 and Verbal Agreement dated April 2, 2019.
On February 1, 2022 Suneetha Nandana Silva Sudusinghe
assigned Galina Balan $18,500 of his loan to Cannabis Suisse Corp. The Agreement contains a provision that allows Galina Balan to convert
the loan to common stock at a fixed price of $0.005 per share.
The Company’s convertible promissory notes gave
rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to
the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
The following tables summarize the components of the
Company’s derivative liabilities and linked common shares as of February 28, 2022 and 2021 and the amounts that were reflected in
income related to derivatives for the period ended:
| |
|
February 28, 2022 |
|
| The financings giving rise to derivative financial instruments |
|
Indexed
Shares |
|
|
Fair
Values |
|
| Embedded derivatives |
|
|
606,506 |
|
|
$ |
6,254 |
|
| Total |
|
|
606,506 |
|
|
$ |
6,254 |
|
| |
|
February 28, 2021 |
|
| The financings giving rise to derivative financial instruments |
|
Indexed
Shares |
|
|
Fair
Values |
|
| Embedded derivatives |
|
|
737,982 |
|
|
$ |
22,150 |
|
| Total |
|
|
737,982 |
|
|
$ |
22,150 |
|
14
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table summarizes the effects on the
Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for
the three months ended February 28, 2022 and 2021:
| |
|
For the Three Months Ended |
| February 28, 2022 |
|
February 28, 2021 |
| Embedded derivatives |
|
$ |
938 |
|
$ |
10,981 |
| Total |
|
$ |
938 |
|
$ |
10,981 |
The following table summarizes the effects on the
Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for
the nine months ended February 28, 2022 and 2021:
| |
|
For the Nine Months Ended |
| February 28, 2022 |
|
February 28, 2021 |
| Embedded derivatives |
|
$ |
902 |
|
$ |
10,981 |
| Total |
|
$ |
902 |
|
$ |
10,981 |
Current accounting principles that are provided in
ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried
at fair value with changes recorded in income. The Company has selected the Monte Carlo Simulation Model, which approximates the Monte
Carlo Simulations, valuation technique to fair value the embedded derivative because it believes that this technique is reflective of
all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving
embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption
behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Binomial Lattice
Model technique is a level three valuation technique because it requires the development of significant internal assumptions in addition
to observable market indicators. For instruments in which the time to expiration has expired, the Company has utilized the intrinsic value
as the fair value. The intrinsic value is the difference between the quoted market price on the valuation date and the applicable conversion
price.
Significant inputs and results arising from the Monte
Carlo Simulation process are as follows for the embedded derivatives that have been bifurcated from the convertible notes and classified
in liabilities:
| |
|
December 1, 2020 |
|
| Quoted market price on valuation date |
|
$0.0615 |
|
| Effective contractual conversion rates |
|
$0.044 |
|
| Contractual term to maturity |
|
0.25 years |
|
| Market volatility: |
|
|
|
| Volatility |
|
299.09% - 479.35% |
|
| Risk-adjusted interest rate |
|
0.13% |
|
| |
|
December 4, 2020 |
|
| Quoted market price on valuation date |
|
$0.0722 |
|
| Effective contractual conversion rates |
|
$0.056 |
|
| Contractual term to maturity |
|
0.25 years |
|
| Market volatility: |
|
|
|
| Volatility |
|
239.43% - 391.85% |
|
| Risk-adjusted interest rate |
|
0.13% |
|
15
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| |
|
December 7, 2020 |
|
| Quoted market price on valuation date |
|
$0.06 |
|
| Effective contractual conversion rates |
|
$0.0455 |
|
| Contractual term to maturity |
|
0.25 years |
|
| Market volatility: |
|
|
|
| Volatility |
|
281.02% - 381.87% |
|
| Risk-adjusted interest rate |
|
0.12% |
|
| |
|
December 10, 2020 |
|
| Quoted market price on valuation date |
|
$0.0551 |
|
| Effective contractual conversion rates |
|
$0.0419 |
|
| Contractual term to maturity |
|
0.25 years |
|
| Market volatility: |
|
|
|
| Volatility |
|
196.85% - 382.99% |
|
| Risk-adjusted interest rate |
|
0.12% |
|
| |
|
February 28, 2022 |
|
| Quoted market price on valuation date |
|
$0.0245 |
|
| Effective contractual conversion rates |
|
$0.0172 |
|
| Contractual term to maturity |
|
0.25 years |
|
| Market volatility: |
|
|
|
| Volatility |
|
152.28% |
|
| Risk-adjusted interest rate |
|
3.25% |
|
The following table reflects the issuances of embedded
derivatives and changes in fair value inputs and assumptions related to the embedded derivatives as of February 28, 2022 and May 31, 2021.
| |
|
Period Ended |
|
Period Ended |
| February 28, 2022 |
May 31, 2021 |
| Balances at beginning of period |
|
$ |
25,228 |
|
$ |
- |
| Issuances: |
|
|
|
|
|
|
| Embedded derivatives |
|
|
- |
|
|
33,132 |
| Conversions |
|
|
(18,071) |
|
|
|
| Changes in fair value inputs and assumptions reflected in income |
|
(902) |
|
|
(7,904) |
| |
|
|
|
|
|
|
| Balances at end of period |
|
$ |
6,254 |
|
$ |
25,228 |
NOTE 9 – REPORTABLE SEGMENTS
The Company follows segment reporting in accordance
with ASC Topic 280, Segment Reporting. As a result of the business combination with Cannabis Suisse LLC in May 2019, the Company
has changed its operating segments to consist of the Cannabis Suisse LLC segment and the Cannabis Suisse Corp segment. After the Cannabis
Suisse LLC business combination, the Company's CEO began assessing performance and allocating resources based on the financial information
of these two reporting segments.
The Cannabis Suisse LLC segment is involved in cannabis
cultivation and distribution in Switzerland of recreational tobacco products and medical CBD oils. On November 23, 2020, Cannabis Suisse
LLC and Cannabis Suisse Corp canceled their acquisition by Asset Transfer Agreement.
Cannabis Suisse Corp is engaged in the development
of its business activities by conquering the USA market of CBD products since November 2020.
16
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Net revenue by reporting segment for the three and nine
months ended February 28, 2022 and 2021, is as follows:
| |
For the three
months ended
February 28, 2022 |
|
For the nine
months ended
February 28, 2022 |
|
For the three
months ended
February 28, 2021 |
|
For the nine
months ended
February 28, 2021 |
| Cannabis Suisse Corp |
$ |
- |
$ |
7,770 |
$ |
- |
$ |
- |
| Cannabis Suisse LLC |
|
- |
|
- |
|
- |
|
50,850 |
| Total Revenue |
$ |
- |
$ |
7,770 |
$ |
- |
$ |
50,850 |
Gross profit by reporting segment for the three and nine
months ended February 28, 2022 and 2021, is as follows:
| |
For the three
months ended
February 28, 2022 |
|
For the nine
months ended
February 28, 2022 |
|
For the three
months ended
February 28, 2021 |
|
For the nine
months ended
February 28, 2021 |
| Cannabis Suisse Corp |
$ |
- |
$ |
6,036 |
$ |
- |
$ |
- |
| Cannabis Suisse LLC |
|
- |
|
- |
|
- |
|
(51,798) |
| Total Gross (Loss) Profit |
$ |
- |
$ |
6,036 |
$ |
- |
$ |
(51,798) |
Assets by reporting segment as of February 28, 2022 and
May 31, 2021, is as follows:
| |
February 28, 2022 |
|
May 31,
2021 |
| Cannabis Suisse Corp |
$ |
12,912 |
$ |
6,567 |
| Cannabis Suisse LLC |
|
- |
|
- |
| Total Assets |
$ |
12,912 |
$ |
6,567 |
NOTE 10 – STOCKHOLDERS’
EQUITY
On March 17,
2021, the Board of Directors, along with the majority stockholder, resolved that the 5,000,000 preferred shares with voting rights of
1 to 10 shall be issued to Suneetha Nandana Silva Sudusinghe in exchange for 5,000,000 common shares that Suneetha Nandana Silva
Sudusinghe owned previously.
The 5,000,000
preferred shares were issued on July 21, 2021.
NOTE 11 – 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 February 28, 2022
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 February
28, 2022. The Company’s utilization of any net operating loss carryforward may be unlikely as a result of its intended activities.
The valuation allowance
at February 28, 2022 was $235,312. The net change in valuation allowance for the nine months ended February
28, 2022 and year ended May 31, 2021 was $51,593 and $88,068, respectively. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The
ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment.
17
CANNABIS SUISSE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 28, 2022 and May 31, 2021. All tax years since inception remains open for examination only
by taxing authorities of US Federal and state of Nevada.
The Company has a net operating loss carryforward
for tax purposes totaling $1,120,535 at February 28, 2022, 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 28,
2022 and May 31, 2021 are as follows:
| |
|
February 28, 2022 |
|
May 31, 2021 |
| Net operating loss carryforward |
$ |
(1,120,535) |
$ |
(874,854) |
| Effective tax rate |
|
21 % |
|
21 % |
| Deferred tax asset |
|
235,312 |
|
183,719 |
| Less: Valuation allowance |
|
(235,312) |
|
(183,719) |
| Net deferred asset |
$ |
- |
$ |
- |
The change in the valuation allowance during the nine
months ended February 28, 2022 and year ended May 31, 2021 was $51,593 and $88,068, respectively.
| |
|
February 28, 2022 |
|
May 31, 2021 |
| Federal income tax benefit attributed to: |
|
|
|
|
| Valuation allowance |
|
(235,312) |
|
(183,719) |
| Net benefit |
$ |
- |
$ |
- |
NOTE 12 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855), Subsequent
Events the Company has analyzed its operations subsequent to February 28, 2022 to the date these consolidated financial statements were
issued, and has determined that it does not have any material subsequent events to disclose.
18