| - SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES | 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, 2021 are not necessarily indicative of the results to be expected for the year ending May 31, 2021. 9 CANNABIS SUISSE CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 former wholly-owned subsidiary, Cannabis Suisse LLC, through the date of disposal. 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 E q ui v a lents T h e C o m p a ny c o nsi d ers all h i gh ly li qu i d inves t m e n ts wit h t h e ori g i n a l m atu ritie s o f thre e m on t hs or les s to be ca s h e q u i v a le n t s. The Company had $0 and $5 of cash and cash equivalents as of February 28, 2021 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 $0 as of February 28, 2021 and May 31, 2020. Inventories Inventories are stated at the lower of cost or market. The Company had $53,091 and $58,061 in inventory as of February 28, 2021 and May 31, 2020, respectively. The Company also determines a reserve for excess and obsolete inventory based on historical usage, and projecting the year in which inventory will be consumed into a finished product. The valuation of inventories requires management to make significant assumptions, including the assessment of market value by inventory category considering historical usage, future usage and market demand for their products, and qualitative judgments related to discontinued, slow moving and obsolete inventories. The Company had $0 and $5,936 in reserve for excess and obsolete inventory as of February 28, 2021 and May 31, 2020, respectively. The Company had $0 and $9,408 of work in progress (WIP) inventory as of February 28, 2021 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 February 28, 2021, and May 31, 2020: February 28, 2021 May 31, 2020 Raw materials $ 53,091 $ 26,768 Finished goods - 27,821 Work in Process inventory - 9,408 Reserve for inventory - (5,936) Total Inventory, net $ 53,091 $ 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. 10 CANNABIS SUISSE CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 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 nine months ended February 28, 2021 and February 29, 2020. 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. 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. 11 CANNABIS SUISSE CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probably that the entity will collect the consideration it is entitled in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon delivery. Cost of Goods Sold Cost of goods sold includes direct costs of selling items, direct labor cost, rent expense and electricity. 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 pperations and comprehensive loss for the nine months ended February 29, 2020, where approximately $214,579 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 February 28, 2021 and February 29, 2020, 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. 12 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, 2021 that are of significance or potential significance to the Company. |
