10-K: Cannabis Suisse Corp. Reports Net Income Amidst Going Concern Warning

Cannabis Suisse Corp. reported a net income of $122,739 for the fiscal year ended May 31, 2026, but faces substantial doubt regarding its ability to continue as a going concern.

Summary

• Cannabis Suisse Corp. has transitioned its business focus to real estate rental operations, having no involvement in the cannabis industry since June 2022.
• For the fiscal year ended May 31, 2026, the company reported a net income of $122,739, a significant improvement from a net loss of $456,142 in the prior year.
• However, the company continues to face substantial doubt about its ability to continue as a going concern due to limited revenue, a significant working capital deficit of $512,212, and a cash balance of only $476.
• The company relies heavily on advances and borrowings from its CEO and related parties for funding.
• Operating expenses decreased by approximately 7% to $266,888 in fiscal year 2026, primarily due to reduced general and administrative expenses.
• Rental revenue for fiscal year 2026 was $21,000, with a gross loss of $931, compared to $22,500 revenue and a gross profit of $432 in fiscal year 2025.
• The company has significant related-party transactions, including leases and convertible notes, with its CEO and entities he controls.
• Material weaknesses in internal controls over financial reporting were identified, including inadequate control environment, lack of independent board oversight, and insufficient accounting resources.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a very negative filing due to the company's ongoing going concern issues, significant working capital deficit, and reliance on related-party funding, despite a reported net income.

Positives

• Reported a net income of $122,739 for the fiscal year ended May 31, 2026, a substantial improvement from the previous year's net loss.
• Total operating expenses decreased by approximately 7% to $266,888 in fiscal year 2026.
• The company successfully transitioned its business focus to real estate rental operations.
• Secured a new sublease arrangement effective March 1, 2026, contributing to rental income.

Negatives

• Substantial doubt exists regarding the company's ability to continue as a going concern due to recurring losses, a net capital deficiency, and insufficient stable revenue.
• The company has a significant working capital deficit of $512,212 as of May 31, 2026.
• Cash balance is extremely low at $476 as of May 31, 2026.
• The company is heavily dependent on additional capital contributions, borrowings, and advances from its CEO and related parties.
• Rental revenue for fiscal year 2026 resulted in a gross loss of $931.
• There are material weaknesses in internal controls over financial reporting, including a lack of an independent board and inadequate accounting policies and procedures.
• The company's common stock is subject to penny stock rules, making it difficult to dispose of securities and obtain future capital.
• The CEO holds majority voting control, impacting corporate decision-making.

Risks

• The company's ability to continue as a going concern is in doubt due to its financial condition and lack of stable revenue.
• Reliance on related-party funding creates potential conflicts of interest and financial instability if such funding ceases.
• The company's limited operations and lack of employees may hinder its ability to develop and grow its business.
• The penny stock status of its common stock limits liquidity and makes it harder to raise capital.
• The CEO's majority voting control could lead to decisions not aligned with minority shareholder interests.
• Material weaknesses in internal controls increase the risk of financial misstatements and operational inefficiencies.
• The company has an operating lease liability in default of $107,000 related to an expired lease.

Future Outlook

The company expects to remain dependent on additional capital contributions, borrowings, and advances from its CEO and related parties to fund operations. Management intends to seek additional financing through capital markets and other sources, but there is no assurance of success in obtaining sufficient financing or achieving sustained profitable operations.

Management Comments

• "We do not have a bank account. Our CEO, who is also our sole director, pays our expenses through an escrow account set up for the benefit of the Company."
• "In the event this source of funding ceases before we are able to sustainably increase our business operations there is substantial doubt as to the Company's ability to continue as an ongoing enterprise."
• "We do not have any employees. Our CEO also serves as our CFO on a part-time consultant basis. This lack of personnel adversely affects our ability to develop and grow our business."
• "Our sole Director and CEO holds a majority of the voting stock of the Company. As a result, he will be able to control the election of directors to our Board of Directors and our business and affairs..."
• "Management is responsible for establishing and maintaining adequate internal control over financial reporting... Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements."
• "We do not have an adequate control environment or proper corporate governance."
• "We do not maintain appropriate internal controls."
• "We do not have appropriate information technology controls."

Industry Context

StockSavvy.ai notes that Cannabis Suisse Corp. has pivoted from any cannabis industry involvement to focusing solely on commercial real estate rentals. This is a significant strategic shift, and its current operations are minimal, primarily involving subleasing space from entities controlled by its CEO. The company's financial performance and outlook are heavily influenced by its related-party transactions and its struggle to achieve operational scale and financial stability.

Comparison to Industry Standards

• The company's financial performance, particularly its gross loss on rental revenue and significant operating expenses relative to revenue, falls far below industry standards for profitable real estate rental businesses.
• The reliance on related-party funding and the lack of independent board oversight are contrary to corporate governance best practices observed in established real estate firms.
• The company's cash position of $476 is critically low and does not align with the liquidity requirements of even small real estate operations.
• The identification of material weaknesses in internal controls is a significant concern when compared to companies with robust financial reporting and compliance frameworks.

Corporate Governance

Legal Proceedings

• As of May 31, 2026, the Company was not aware of any pending or threatened legal proceedings, claims, or other contingencies that would require accrual or disclosure in the financial statements.

Related Party Transactions

• The Company leases properties from entities controlled by its CEO, Scott McAlister.
• The CEO, Scott McAlister, advanced $58,950 to the Company and received repayments of $21,000 during fiscal year 2026.
• The Company issued a convertible promissory note of $186,089 to Scott McAlister in settlement of unpaid rent, advances, and accrued interest.
• Accrued interest payable to related parties was $122,864 as of May 31, 2026.
• Interest expense related to related-party convertible notes was $64,656 for the year ended May 31, 2026.
• A sublease agreement exists with RLSH, LLC, an entity controlled by the CEO, for a portion of the 10 N Newnan Street property.
• The Company has an operating lease liability in default of $107,000 related to an expired lease with an entity controlled by the CEO.

Stakeholder Impact

• Shareholders: The company's going concern status, reliance on related-party funding, and penny stock status pose significant risks to shareholder value. The CEO's majority voting control also impacts shareholder influence.
• Creditors: The company's financial instability and default on lease liabilities could impact its ability to meet its obligations.
• Suppliers: While not explicitly detailed, the company's precarious financial situation could affect its ability to pay suppliers.
• Employees: The company currently has no employees, so there is no direct impact on employees.

Next Steps

• Management intends to seek additional financing through the capital markets and other available sources.
• The company will continue to rely on related-party funding in the interim.
• The company is evaluating the effect of adopting new accounting standards (ASU 2024-03 and ASU 2025-01) on its financial statement disclosures.

Key Dates

Recommendation

The company's persistent going concern issues, extremely low liquidity, significant working capital deficit, and reliance on related-party funding, despite a reported net income, present substantial risks. The identified material weaknesses in internal controls further exacerbate these concerns. The limited operational scale and the challenges associated with its penny stock status make a turnaround highly uncertain, suggesting a sell recommendation for investors.

Keywords

Real Estate Rental, Form 10-K, Annual Report, Going Concern, Related Party Transactions, Convertible Notes, Lease Agreements, Internal Controls