UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended November 30, 2019

¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission file number: 333-214122

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 1,488,932,800 shares of common stock, $0.0001 par value, issued and outstanding as of February 3, 2020.

CANNIS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

ITEM 1. FINANCIAL STATEMENTS

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

Cannis, Inc. and Subsidiaries

Statements of Changes in Stockholders’ Equity

Unaudited

The accompanying notes are an integral part of these financial statements.

The accompanying footnotes are an integral part of these consolidated financial statements

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Cannis, Inc. (“Cannis”), formerly Zartex, Inc. was incorporated under the laws of the State of Nevada on August 17, 2016.

Effective November 14, 2018, a change of control occurred with respect to Cannis, Inc. where Mr. Eu Boon Ching acquired 99.9% of Cannis’s issued and outstanding common stock from former shareholders of Cannis. Simultaneously, Cannis ceased its operations, transferred its assets and became a “shell company.” Mr. Ching also became sole officer and director of Cannis following the change of control.

On December 6, 2018, the Company amended its Articles of Incorporation with the Nevada Secretary of State to effect the name change of the Company to Cannis, Inc. (“Corporate Action”). On November 29, 2018, our majority stockholder, holding 99% of our outstanding voting securities approved the Corporate Action.

On August 5, 2019, Cannis, Inc., Cannisapp Sdn Bhd (“Cannisapp”), and Mr. Ching entered into a Stock Exchange Agreement. Pursuant to the terms of the Stock Exchange Agreement, Cannis, Inc. issued an aggregate of 1,482,492,800 shares of common stock and 8,500,000 shares of Class A Preferred Stock for all of the outstanding capital stock of Cannisapp. As a result, Cannisapp became a wholly owned subsidiary of Cannis, Inc. Immediately following the Share Exchange, the business of Cannisapp became the business of Cannis, Inc. and the executive officers of Cannisapp became executive officers of the Company.

Cannisapp Sdn Bhd, formerly known as Antara Rimbun Sdn Bhd, was incorporated in Malaysia on April 2, 2018 and Mr. Ching owned 100% of the issued and outstanding stock of Cannisapp. Cannis entered into a share exchange agreement with Cannisapp whereas the acquisition was accounted under US GAAP as a business combination under common control with Cannis being the acquirer and Cannisapp being the acquiree as both entities were owned by the same controlling shareholder prior to the business combination. Accordingly, historical cost is the basis for transfer of assets and liabilities in the business combination in accordance with ASC 805-50-30-5. Cannis, Inc. and its consolidated subsidiary is collectively referred to herein as the “Company”, “we” and “us”, unless specific reference is made to an entity.

On April 24, 2019, the Company (i) increased the authorized shares of its common stock, $0.001 par value, from 75,000,000 to 1,500,000,000 shares, and (ii) created a class of preferred stock, $0.001 par value, called the Class A Preferred Stock in the amount of 10,000,000 authorized shares, with each share of Class A Preferred Stock having 100 votes to be cast with respect to any and all matters presented to shareholders for a vote whether at a meeting of shareholders or by written consent. Apart from the voting rights stated in the preceding sentence, the Class A Preferred Stock shall have no other rights, privileges or preferences.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its subsidiary. Significant inter-company transactions have been eliminated in consolidation. In accordance with ASC 805-50-45-5, for transactions between entities under common control, financial statements and financial information presented for prior periods have been be retroactively adjusted to furnish comparative information. The accompanying consolidated financial statements are presented retrospectively as though the share exchange agreement between the Cannis, Inc. and Cannisapp Sdn Bhd occurred at the beginning of the first period presented. Cannisapp Sdn Bhd did not have any activities for the period from April 2, 2018 (Inception) and May 31, 2018, therefore it was not presented in the financial statements.

Interim Financial Information

The unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These financial statements should be read in conjunction with the audited financial statements as of and for the year ended August 31, 2019, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements as of and for the year ended August 31, 2019.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions.

Functional and presentation currency

The accompanying consolidated financial statements are presented in United States dollar (“$”), which is the reporting currency of the Company.

The functional currency of Cannis Inc. is United States dollar.

The functional currency of Cannisapp is the currency of the primary economic environment in which Cannisapp operates which is Malaysia Ringgit (“MYR”).

Transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end of the reporting periods. Exchange differences arising on the settlement of monetary items and on translation of monetary items at period-end are included in income statement of the period.

For the purpose of presenting these financial statements, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.

Exchange rate used for the translation as follows:

US$ to MYR

Fair values of financial instruments

The Company adopted ASC 820 “Fair Value Measurements,” which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. Current assets and current liabilities qualified as financial instruments and management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their current interest rate is equivalent to interest rates currently available. The three levels are defined as follow:

As of the balance sheet date, the estimated fair values of the financial instruments approximated their fair values due to the short-term nature of these instruments. Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates the hierarchy disclosures each year.

Related parties

The Company adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable is recorded at the net value of less estimates for doubtful accounts. Management regularly reviews outstanding accounts and provides an allowance for doubtful accounts. When collection of the original invoice amounts is no longer probable, the Company will either partially or fully write-off the balance against the allowance for doubtful accounts.

Bad debt expenses were $nil and $nil for the three months ended November 30, 2019 and 2018, respectively.

Revenue Recognition

The Company adopted ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes.

The Company’s revenues mainly consist of offline products sales. The Company generally recognizes product sales revenue when the performance obligation have been satisfied pursuant to Malaysia law, including such factors as contract existed with the customer, delivery and acceptance of products by customer has occurred, the sales price is fixed or determinable and allocated to the products sold, sales and value-added tax laws have been complied with, and collectability is reasonably assured.

The Company estimates potential returns and records such estimates against its gross revenue to arrive at its reported net sales revenue. The Company has not experienced any sales returns.

Inventory

Inventories, which are primarily comprised of finished goods for sale, are stated at the lower of cost or net realizable value, using the first-in first-out (FIFO) method. The Company evaluates the need for reserves associated with obsolete, slow-moving and non-salable inventory by reviewing net realizable values on a periodic basis. Only defects products can be return to our suppliers.

Customer Deposits

The Company charges deposits when customers rent the power bank. The deposits will be fully refunded after the power bank is returned.

Advertising

The Company expenses advertising costs as incurred and includes it in selling expenses. The Company recorded $0 and $208,868 for advertising and promotions expenses for the three months ended November 30, 2019 and 2018, respectively.

Income Taxes

Income taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

A tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that the relevant taxing authority that has full knowledge of all relevant information will examine each uncertain tax position. Although the Company believes the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.

Property and Equipment & Depreciation

Property and equipment consist of computer, office furniture and equipment, and leasehold improvement. All property and equipment are stated at historical cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Property and equipment are depreciated on a straight-line basis over the following periods:

Leases

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

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our 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 our leases do not provide an implicit rate, we generally use our 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. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-lived assets

The Company accounts for impairment of property and equipment and amortizable intangible assets in accordance with ASC 360, “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.

Research & development expenses

Product development expenses consist primarily of third-party development and programming costs and other expenses that are directly attributable to the development of mobile applications, databases, software for the businesses of the Company.

The Company expenses all costs that are incurred in connection with the planning and implementation phases of development and costs that are associated with repair or maintenance of the existing mobile applications or the development of software and content.

Costs incurred in the development phase can be capitalized and amortized over the estimated product life when technological feasibility is reached. However, since the inception of the Company, the amount of costs qualifying for capitalization has been insignificant. As a result, all development costs have been expensed as incurred.

The Company did not record any research and development expenses for the three months ended November 30, 2019 and 2018.

New Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.

For finance leases, a lessee is required to do the following:

For operating leases, a lessee is required to do the following:  

In July 2018, the FASB issued Accounting Standards Update No. 2018-11 (ASU 2018-11), which amends ASC 842 so that entities may elect not to recast their comparative periods in transition (the “Comparatives Under 840 Option”). ASU 2018-11 allows entities to change their date of initial application to the beginning of the period of adoption. In doing so, entities would:

In addition, the FASB also issued a series of amendments to ASU 2016-02 that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new lease standard.

The management has reviewed the accounting pronouncements and adopted the new standard on January 1, 2019 using the modified retrospective method of adoption. The transition method expedient which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, prior periods have not been restated. The adoption of this ASU resulted in the recording of additional lease assets and liabilities $41,638 and $41,638 with no effect to opening balance of retained earnings as the Company did not have any leases prior to the adoption of this ASU.

NOTE 3 – GOING CONCERN

The Company’s financial statements as of November 30, 2019, been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.The Company has not yet established an ongoing source of cash flows sufficient to cover its operating costs and allow it to continue as a going concern. The Company has accumulated net loss of $5,716,280 as of November 30, 2019. These factors among others raise substantial doubt about the ability of the company to continue as a going concern for a reasonable period of time.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 4 – PROPERTY & EQUIPMENT

Property and equipment, net, is comprised of the following:

Depreciation expense was $10,724 and $6,391 for the three months ended November 30, 2019 and 2018, respectively.

Fixed asset written-off was $537,484 and $11,672 for the three months ended November 30, 2019 and 2018, respectively.

NOTE 5 – RELATED PARTY TRANSACTIONS

The related parties consisted of the following:

Related Party Receivable

As of November 30, 2019, total balance due from related party was $29,153, and the balances due from Cannis Group Indonesia and Mr. Mohd Mustaqim bin Abdullah were $28,716 and $437 respectively.

During the three months ended November 30, 2019, Cannis Group Indonesia borrowed $4,305 from the Company and repaid $0.

As of August 31, 2019, total balance due from related party was $24,530, and the balances due from Cannis Group Indonesia and Mr. Mohd Mustaqim bin Abdullah were $24,098 and $432 respectively.

Related Party Payable

For the three months ended November 30, 2019, Mr.Ching Eu Boon advanced $383,287 to the Company as working capital for its operation and received $34,220 from the Company.

As of November 30, 2019, the balance due to Mr.Ching Eu Boon was $3,774,148.

As of August 31, 2019, the outstanding balance due to Mr. Ching was $3,381,115, and the outstanding balance due to World Speed Notion Sdn Bhd was $6,924.

Ms Lim Mei Fong leased the employee accommodation to the Company from April 25,2019 to April 24, 2021, with monthly rent of $770. The total rent expense for the three months ended November 30, 2019 was $2,310 and the rent deposit was $nil as of November 30, 2019.

NOTE 6 – LEASES

The Company has operating leases for corporate offices and employees’ accommodation. These leases have remaining lease terms of 1 year to 3 years. The Company has elected to not recognize lease assets and liabilities for leases with a term less than twelve months.

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based primarily on its lease term in Malaysia which is approximately 5%.

Operating lease expenses were $27,507 and $17,294 for the three months ended November 30, 2019 and 2018.

The undiscounted future minimum lease payment schedule as follows:

NOTE 7 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue 10,000,000 numbers of Class A Preferred Stock at par value of $0.001 per share and 1,500,000,000 shares of common stock.

In December 2018, Mr. Ching converted $177,164 (MYR 732,640) of the outstanding amount into 732,640 shares of ordinary shares of the Company.

On August 5, 2019, the Company, Cannisapp, and Mr. Ching entered into the Stock Exchange Agreement, where the Company issued an aggregate of 1,482,492,800 shares of common stock and 8,500,000 shares of Class A Preferred Stock in exchange for all of the outstanding capital stock of Cannisapp.

As of November 30, 2019, the Company has 1,488,832,800 shares of common shares issued and outstanding, and 8,500,000 shares of Class A Preferred Stock issued and outstanding.

NOTE 8 – INCOME TAX

United States of America

Cannis, Inc. is incoporated in the State of Nevada and is subject to Nevada state and US Federal tax laws. Cannis Inc. has not recognized an income tax benefit for its operating losses based on uncertainties concerning its ability to generate taxable in future period.

The components of deferred tax assets and liabilities as follows:

Malaysia

Cannisapp Sdn Bhd is subject to Malaysia income tax laws. The standard corporate tax rate is 24%, while the rate for resident small and medium-sized companies (i.e. companies incorporated in Malaysia with paid-up capital of MYR 2.5 million or less and that are not part of a group containing a companying exceeding this capitalization threshold) is 17% (reduced from 18%, effective 2019) on the first MYR 500,000 (approximately $120,907), with the balance being tax at the 24% rate.

For the three months ended November 30, 2019 and 2018, Cannisapp Sdn Bhd did not record income tax expenses because it reported operating losses.

The components of deferred tax assets and liabilities as follows:

NOTE 9 – SEGMENT INFORMATION

The Company believes that it operates in two business segments offline sales distribution and online commerce and services; and operates in one geographical segment Malaysia.

The Company’s operating segments are as follows:

Online commerce and services which is comprised of platforms operating in retail and wholesale commerce, retail and wholesale commerce — cross-border and global, local consumer services and others.

Offline sales distribution which is comprised of sales and distributions of nutritional supplements which will be integrated with the Company’s mobile application platform.

NOTE 10 – CONCENTRATIONS, RISKS AND UNCERTAINTIES

Credit risk

Cash deposits with banks are held in financial institutions in Malaysia, which are federally insured with deposit protection up to MYR250,000 (approximately $59,899). Accordingly, the Company has a concentration of credit risk related to the uninsured part of bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.

Concentration

The Company offer limited varieties of products for sale while depends on few suppliers for these products. Accordingly, The Company has a concentration risk related to these products and suppliers. Failure to maintain existing relationships with the suppliers or to establish new relationships in the future could negatively affect the Company’s ability to obtain products sold to customers in a timely manner. If the Company is unable to obtain ample supply of products from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which could materially and adversely affect revenues.

The concentration on products sales revenues is as follows:

The concentration on suppliers’ purchases is as follows:

The concentration on customers’ sales revenues is as follows:

NOTE 11 - SUBSEQUENT EVENTS

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. Based on this evaluation, the Company concluded that subsequent to November 30, 2019 but prior to January 21, 2020, the date the financial statements were available to be issued, there was no subsequent event that would require disclosure to or adjustment to the financial statements other than the ones disclosed above.

ITEM 2. MANAGEMENT’ DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENT NOTICE

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Financial information contained in this quarterly report and in our unaudited interim financial statements is stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

GENERAL

We were incorporated in the State of Nevada on August 17, 2016 under the name Zartex, Inc. On December 6, 2018, we changed our name to Cannis, Inc. From inception until November 14, 2018, the Company’s principal business consisted of software development.

Effective November 14, 2018, a change of control occurred with respect to Zartex, Inc. (“Company”). Pursuant to a Securities Purchase Agreement entered into by and among the Company, Mr. Aleksandr Zausaev (“Seller”) and Mr. Eu Boon Ching (“Buyer”), Buyer acquired from Seller 5,000,000 shares of common stock of Company. In addition, pursuant to a separate Stock Purchase Agreement by and among Mr. Ching, as buyer, and certain other shareholders of the Company, Mr. Ching acquired an additional 1,335,000 shares of common stock of the Company. The total number of shares of common stock acquired by Mr. Ching is 6,335,000, and all such shares now held by Mr. Ching are “restricted” and/or “control” securities.

On the closing of the above transaction, Mr. Zausaev, the then sole officer and director of the Company, resigned in all officer and director capacities from the Company and Mr. Ching was appointed the sole officer of the Company (Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer) and a sole Director of the Company. At closing, the Company assigned all of its assets to Mr. Zausaev in exchange for certain considerations including his cancellation and waiver of all outstanding liabilities of the Company in favor of the former sole officer and director.

Effective immediately at closing, the Company permanently ceased its previous operating activities of software development. Consequently, the Company is now a shell company seeking to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders.

On December 6, 2018, the Company amended its Articles of Incorporation with the Nevada Secretary of State to effect the name change of the Company to Cannis, Inc.

Acquisition of Cannisapp

On August 5, 2019 (the “Closing Date”), we closed a share exchange under a Share Exchange Agreement (the “Stock Exchange Agreement”), with Cannisapp. Sdn. Bhd, a Malaysian company (“Cannisapp”) and Mr. Ching, its sole stockholder, who is our majority shareholder and officer and director. Mr. Ching held 100% of the issued and outstanding stock of Cannisapp. Pursuant to the Stock Exchange Agreement and upon the closing of the Share Exchange, in exchange for all of the issued and outstanding capital stock of Cannisapp, we issued to Mr. Ching an aggregate amount of 1,482,492,800 shares of our common stock and 8,500,000 shares of Class A Preferred Stock, $0.001 par value, which has 100 for 1 voting rights per share. As a result of the Share Exchange, Mr. Ching remains the controlling shareholder of the Company, owning a total of 99.99% of our outstanding common stock and 100% of our outstanding Class A Preferred Stock. The Share Exchange was accounted for under the business combination under common control of accounting. As a result of the Share Exchange, we ceased to be a “shell company.”

We conduct our operations through our consolidated subsidiary, Cannisapp. The subsidiary was incorporated under the corporation laws in Malaysia on April 2, 2018 under the name Antara Rimbun Sdn Bhd. It affected a name changed to Nimpmos Sdn Bhd on July 5, 2018, and then to Cannisapp Sdn. Bhd. on September 12, 2018.

Cannisapp has two distinct, business segments. One is developing proprietary mobile applications and the other is acting as an offline sales distributor for nutritional supplements manufactured by third parties. We began selling nutritional supplements in September 2018. We commenced the development of our mobile applications operating on Android and iOS operating systems in June 2018.

Our offices are located at Level 11-2, Tower 4, Puchong Financial Corporate Centre (PFCC), Jalan Puteri 1/2, Bandar Puteri,47100 Purchhong, Selangor, Malaysia and our website is www.cannis.app.

On April 24, 2019, the Company amended its Articles of Incorporation by filing a Certificate of Amendment with the Nevada Secretary of State which (i) increased the authorized shares of its common stock, $0.001 par value, from 75,000,000 to 1,500,000,000 shares, and (ii) created a class of preferred stock, $0.001 par value, called the Class A Preferred Stock in the amount of 10,000,000 authorized shares, with each share of Class A Preferred Stock having 100 votes to be cast with respect to any and all matters presented to shareholders for a vote whether at a meeting of shareholders or by written consent. Apart from the voting rights stated in the preceding sentence, the Class A Preferred Stock shall have no other rights, privileges or preferences.

Translation of amounts from the local currency of Cannisapp (Malaysian Ringett “MYR”) into US$1 has been made at the following exchange rates for the respective years:

RESULTS OF OPERATIONS

THREE MONTHS PERIOD ENDED NOVEMBER 30, 2019 COMPARED TO THE THREE MONTHS PERIOD ENDED NOVEMBER 30, 2018

The following table sets forth key components of the Company’s results of operations for the three months ended November 30, 2019 compared to the three months ended November 30, 2018. The discussion following the table addresses these results.

Revenues. During the three months ended November 30, 2019, we had revenue of $370,567, which were derived entirely from offline sales of nutritional supplements. For the same period last year, we had revenues of $310,081 also from sales of nutritional supplements. We act as a distributor for two different manufacturers and we began selling these supplements in September 2018. The increase in revenues for the current quarterly period is due to product expansion into new markets coupled with the impact of the Christmas season.

We began developing our proprietary mobile applications in June 2018. We have not generated revenues from these applications for the quarters ended November 30, 2019 and 2018. We intend to integrate our offline sales with our mobile applications platform as part of our marketing strategy. We expect to generate sale of our mobile applications beginning in November 2020.

Cost of Revenue. For the three months ended November 30, 2019, we had cost of revenue of $263,968 compared with $259,871 in cost of revenue for the same period last year. The slight increase for the current period correlates to the increase in sales for the same period. Cost of revenue represents our costs for the nutritional supplements sold.

Operating expenses. Operating expenses consist of selling, general and administrative expenses, and research and development expense.

For the quarter ended November 30, 2019, we had selling, general and administrative expenses of $868,713 compared with selling, general and administrative expenses of $480,188 for the quarter ended November 30, 2018, representing an 81% increase from the prior period.

Selling expenses include marketing and advertising costs related to the operations and development of Cannisapp. These expenses were $191 and $208,868 for the quarters ended November 30, 2019 and 2018, respectively. The significant decrease for the current period was due to a reduction of our the advertising expenditures for the current period. During the current quarter, we ceased our advertising for all of the business.

General and administrative expenses mainly consist of salaries and related employee benefits, office expenses, professional service fees, depreciation expenses, rent, and related costs. These expenses were $868,522 and $271,320 for the quarter ended November 30, 2019 and 2018, respectively, representing an increase of $597,202. The significant increase for the current period was due to the fixed assets written-off of $537,484 for the three months ended November 30, 2019.

We did not incur any research and development expenses for three months ended November 30, 2019 and 2018.

Loss from Operations. For the quarter ended November 30, 2019, we had loss from operations of $762,114 compared with loss from operations of $429,978 for the quarter ended November 30, 2018 for the reasons discussed above.

Total Comprehensive Loss. For the quarter ended November 30, 2019, we had loss from foreign currency translation adjustment in the amount of $58,952 which resulted in a comprehensive loss of $821,053 for the 2019 quarterly period. For the quarter ended November 30, 2018, we had gain from foreign currency translation adjustment in the amount of $24,073 which resulted in a comprehensive loss of $370,204 for the 2018 quarterly period. Foreign currency translation adjustments reflects the fluctuations in the two currencies (USD and MYR).

LIQUIDITY AND CAPITAL RESOURCES

Working Capital Deficit. As of November 30, 2019, the Company had working capital deficit of $5,606,322, compared to a working capital deficit of $5,354,942 as of August 31, 2019. The increase in working capital deficit is a result of a slight increase in accounts payable and a slight increase in related party payables as of November 30, 2019.

Cash Flows.

The following is a summary of the Company’s cash flows from operating, investing and financing activities for the quarter ended November 30, 2019 and 2018, respectively:

Operating Activities. Net cash used in operating activities was $355,470 for the quarter ended November 30, 2019 consisting mainly of a net loss of $762,102 fixed asset written-off of $537,484, and customer deposits of $167,304. This compares with net cash used in operating activities of $597,552 for the quarter ended November 30, 2018 consisting mainly of a net loss of $394,277 and accounts payable of $162,723. The increase was primarily the result of the significant increase in operating expenses of Cannisapp, partly offset by the increase in account payable.

Investing Activities. Net cash used in investing activities was $nil for the quarter ended November 30, 2019, compared to net cash from investing activities of $115,168 for ended quarter ended November 30, 2018. Net cash used in investing activities solely reflect purchase or disposal of fixed assets and intangible assets, such as computer, office equipment and leasehold improvement.

Financing Activities. Net cash provided by financing activities was $342,050 for the quarter ended November 30, 2019 compared to $1,235,045 for the quarter ended November 30, 2018. All of the cash inflow was advances from our related party. We continue to rely on advances from our majority shareholder to fund our operations.

Going Concern

The financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

Our monthly expenses are estimated to be $95,500 per month. The estimated monthly allocations are as follows:

The Company has not yet established an ongoing source of revenues and cash flows sufficient to cover the operating costs and allow it to continue as a going concern. The Company has an accumulated deficit of $5,716,280 as of November 30, 2019. These factors among others raise substantial doubt about the ability to continue as a going concern for a reasonable period of time.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

OFF-BALANCE SHEET ARANGEMENTS

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is 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 Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2018 Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in

SEC rules and forms. Management also confirmed that there was no change in our internal control over financial reporting during the three-month period ended November 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our Company.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

The following exhibits are included as part of this report by reference:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.