ITEM 1. CONDENSED FINANCIAL STATEMENTS.
CHESS SUPERSITE CORPORATION
CONDENSED FINANCIAL STATEMENTS
INDEX
CHESS SUPERSITE CORPORATION
CONDENSED BALANCE SHEETS
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
|
23,422
|
|
|
|
838
|
|
Accounts receivable
|
|
|
519
|
|
|
|
—
|
|
Total current assets
|
|
|
23,941
|
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
23,941
|
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
219,285
|
|
|
|
480,919
|
|
Payable to related parties
[Note 3]
|
|
|
469,697
|
|
|
|
400,000
|
|
Shareholder advances
[Note 4]
|
|
|
131,026
|
|
|
|
195,436
|
|
Shares to be issued
|
|
|
—
|
|
|
|
12,500
|
|
Convertible promissory notes, net
[Note 5]
|
|
|
441,750
|
|
|
|
—
|
|
Derivative liability
[Note 5]
|
|
|
482,339
|
|
|
|
—
|
|
Total current liabilities
|
|
|
1,744,097
|
|
|
|
1,088,855
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,744,097
|
|
|
|
1,088,855
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.0001 par value, 100,000,000 shares authorized, 33,180,000 common shares outstanding as of September 30, 2016 (20,650,000 common shares outstanding as of December 31, 2015)
[Note 6]
|
|
|
3,318
|
|
|
|
2,065
|
|
Shares to be issued
|
|
|
247,550
|
|
|
|
—
|
|
Additional paid-in capital
|
|
|
3,386,716
|
|
|
|
2,017,181
|
|
Accumulated deficit
|
|
|
(5,357,740
|
)
|
|
|
(3,107,263
|
)
|
Total stockholders' deficit
|
|
|
(1,720,156
|
)
|
|
|
(1,088,017
|
)
|
Total liabilities and stockholders' deficit
|
|
|
23,941
|
|
|
|
838
|
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
CHESS SUPERSITE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
For the
|
|
|
For the
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30, 2016
|
|
|
September 30, 2015
|
|
|
September 30, 2016
|
|
|
September 30, 2015
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
519
|
|
|
|
—
|
|
|
|
5,019
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory and consultancy fee
|
|
|
712,900
|
|
|
|
—
|
|
|
|
978,991
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management services fee to related parties
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donation
|
|
|
—
|
|
|
|
—
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and professional fees
|
|
|
26,696
|
|
|
|
23,024
|
|
|
|
78,880
|
|
|
|
52,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software development expense
|
|
|
10,000
|
|
|
|
88,402
|
|
|
|
134,990
|
|
|
|
108,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Website development and marketing expenses
|
|
|
35,649
|
|
|
|
15,899
|
|
|
|
77,316
|
|
|
|
29,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent and utilities
|
|
|
5,733
|
|
|
|
3,000
|
|
|
|
13,263
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office and general
|
|
|
19,924
|
|
|
|
1,808
|
|
|
|
13,061
|
|
|
|
6,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
885,902
|
|
|
|
207,133
|
|
|
|
1,584,501
|
|
|
|
430,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Day one derivative expense
[Note 5]
|
|
|
849,431
|
|
|
|
|
|
|
|
849,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liability
[Note 5]
|
|
|
(259,044
|
)
|
|
|
|
|
|
|
(259,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on settlement
|
|
|
34,290
|
|
|
|
—
|
|
|
|
34,290
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and bank charges
|
|
|
25,167
|
|
|
|
368
|
|
|
|
45,314
|
|
|
|
1,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange loss
|
|
|
414
|
|
|
|
—
|
|
|
|
8,840
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes
|
|
|
(1,535,641
|
)
|
|
|
(207,501
|
)
|
|
|
(2,250,477
|
)
|
|
|
(431,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
(1,535,641
|
)
|
|
|
(207,501
|
)
|
|
|
(2,250,477
|
)
|
|
|
(431,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic and diluted
|
|
|
(0.05
|
)
|
|
|
(0.03
|
)
|
|
|
(0.09
|
)
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares - basic and diluted
|
|
|
30,820,549
|
|
|
|
6,900,000
|
|
|
|
24,663,681
|
|
|
|
6,900,000
|
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
CHESS SUPERSITE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the
|
|
|
For the
|
|
|
|
Nine months ended
|
|
|
Nine months ended
|
|
|
|
September 30, 2016
|
|
|
September 30, 2015
|
|
|
|
$
|
|
|
$
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(2,250,477
|
)
|
|
|
(431,729
|
)
|
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
|
|
|
|
|
|
|
|
|
Day one derivative loss
[Note 5]
|
|
|
849,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liability
[Note 5]
|
|
|
(259,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of liability
|
|
|
34,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued/to be issued for advisory and other services
|
|
|
1,390,400
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in accounts receivable
|
|
|
(519
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Change in accounts payable and accrued liabilities
|
|
|
(177,087
|
)
|
|
|
303,646
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(413,006
|
)
|
|
|
(128,083
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of shareholder advances
|
|
|
(167,043
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Advances received from shareholders
|
|
|
102,633
|
|
|
|
129,222
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible promissory notes
|
|
|
480,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
20,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
435,590
|
|
|
|
129,222
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash during the period
|
|
|
22,584
|
|
|
|
1,139
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
838
|
|
|
|
1,084
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
|
23,422
|
|
|
|
2,223
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
36,000
|
|
|
|
nil
|
|
|
|
|
|
|
|
|
|
|
Cash paid for taxes
|
|
|
nil
|
|
|
|
nil
|
|
The accompanying notes are an integral part of these unaudited
condensed financial statements.
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
1.
|
Organization, Nature of Business, Going Concern and Management Plans
|
Organization and Nature of Business
Chess Supersite Corporation ("Chess
Supersite" or "the Company") was incorporated on July 2, 2013 under the laws of the state of Delaware to engage
in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company’s current
business comprises the operation of an extensive Chess gaming website. This comprehensive user friendly web site www.chessstars.com,
is currently offering a state-of-the-art playing zone, broadcasts of the major tournaments, intuitive mega database, chess skilled
contests and much more.
In May, 2014, the Company effected a change
in control by the redemption of the stock held by its original shareholders, the issuance of shares of its common stock to new
shareholders, the resignation of its original officers and directors and the appointment of new officers and directors.
On July 6, 2015, the Company filed its
form S-1/A, to amend its form S-1 previously filed on January 26, 2015 and December 11, 2014. The prospectus relates to the offer
and sale of 1,500,000 shares of common stock (the “Shares”) of the Company, $0.0001 par value per share, offered by
the holders thereof (the “Selling Shareholder Shares”), who are deemed to be statutory underwriters. The selling shareholders
will offer their shares at a price of $0.50 per share for the duration of the offering.
The maximum number of Shares that can be
sold pursuant to the terms of this offering by the selling shareholders is (in aggregate) 1,500,000 Shares. Funds received by the
selling shareholders will be immediately available to such selling shareholders for use by them. The Company will not receive any
proceeds from the sale of the Selling Shareholder Shares.
On July 13, 2015, the Company received
a notice of effectiveness from the SEC for the registration of its shares.
On September 22, 2015, the Company was
able to secure an OTC Bulletin Board symbol
CHZP
from Financial Industry Regulatory Authority (FINRA).
Going Concern and Management Plans
The Company has not yet generated significant
revenue since inception to date and has sustained operating losses during the nine months ended September 30, 2016. The Company
had working capital deficit of $1,720,156 and an accumulated deficit of $5,357,740 as of September 30, 2016. The Company's continuation
as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or
obtaining additional financing from its members or other sources, as may be required.
The unaudited condensed interim financial
statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial
doubt about the Company's ability to do so. The condensed unaudited financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities
that may result should the Company be unable to continue as a going concern.
In order to maintain its current level
of operations, the Company will require additional working capital from either cash flow from operations or from the sale of its
equity. However, the Company currently has no commitments from any third parties for the purchase of its equity. If the Company
is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations. The
Company has, however, managed to raise financing in the amount of $480,000 during the period and is using these funds towards the
development, operation and marketing of its Chess gaming website.
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The unaudited condensed interim financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) for interim financial information and the rules and regulations of the SEC and are expressed in US dollars. Accordingly,
the unaudited condensed interim financial statements do not include all information and footnotes required by US GAAP for complete
annual financial statements. The unaudited condensed interim financial statements reflect all adjustments, consisting of only
normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative
of results that may be expected for the year ending December 31, 2016 or for any other interim period. The unaudited condensed
interim financial statements should be read in conjunction with the audited financial statements of the Company and the notes
thereto as of and for the year ended December 31, 2015.
Reclassification of comparative figures
Certain of the prior period figures have
been reclassified to align with Management’s current view of the Company’s operations.
Use of Estimates
The preparation of the unaudited condensed
interim financial statements in conformity with US 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 of the unaudited condensed financial
statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining
to accruals. Actual results could materially differ from those estimates.
Revenue recognition
In accordance with ASC 605, revenue is
recognized when persuasive evidence of an arrangement exists, services have been performed, the amount is fixed and determinable,
and collection is reasonably assured.
During the period ended September 30, 2016,
the Company earned revenue of $5,019, which comprises an amount of $4,500, as consideration for the arrangement of equipment and
personnel to setup and produce a live streaming internet chess show and $519 as membership fee for the Company’s chess gaming
website.
Fair Value of Financial Instruments
ASC 825-10 defines financial instruments
and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount
of cash, accounts receivable, accounts payable and accrued liabilities, to approximate their fair values because of the short period
of time between the origination of such instruments and their expected realization.
The Company also analyzes all financial instruments with features
of both liabilities and equity under ASC 480-10, ASC 815-10 and ASC 815-40.
The Company adopted ASC 820-10 on January
1, 2008. ASC 820-10 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement
and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
|
·
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
|
|
·
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments; and
|
|
·
|
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
|
The Company used Level 3 inputs for its
valuation methodology for the conversion option liability in determining the fair value using the Black-Scholes option-pricing
model with the following assumption inputs:
|
|
September 30,
2015
|
|
Annual dividend yield
|
|
|
-
|
|
Expected life (years)
|
|
|
0.5
|
|
Risk-free interest rate
|
|
|
0.52
|
%
|
Expected volatility
|
|
|
260
|
%
|
|
|
Carrying Value
|
|
|
Fair Value Measurements at
|
|
|
|
As of
|
|
|
September 30, 2016
|
|
|
|
September 30,
|
|
|
Using Fair Value Hierarchy
|
|
|
|
2016
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivative liabilities
|
|
|
482,339
|
|
|
|
-
|
|
|
|
-
|
|
|
|
482,339
|
|
Total
|
|
$
|
482,339
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
482,339
|
|
|
|
Carrying Value
|
|
|
Fair Value Measurements at
|
|
|
|
As of
|
|
|
December 31, 2015
|
|
|
|
December 31,
|
|
|
Using Fair Value Hierarchy
|
|
|
|
2015
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivative liabilities
|
|
|
Nil
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
Nil
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
For a roll-forward analysis of embedded
derivative liabilities refer to
Note 5.
At September 30, 2015, the Company had
derivative liabilities of $482,339. For the nine months ended September 30, 2016, the Company had gains on the fair valuation of
derivative liabilities of $259,044. As of September 30, 2016, the Company did not identify any other assets or liabilities
that are required to be presented on the balance sheet at fair value in accordance with ASC 825-10.
Recently Issued Accounting Standards
The Company evaluated all recent accounting
pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial
position, results of operations or cash flows of the Company.
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
3.
|
Related Party Transactions and Balances
|
During the nine months ended September
30, 2016, $225,000 (September 30, 2015: $225,000) was recorded as management services fee payable to Rubin Schindermann and Alexander
Starr, who are shareholders in the Company. The amount is included in the related party balance as at September 30, 2016.
Shareholder advances represent
expenses paid by the owners from personal funds. The amount is non-interest bearing, unsecured and due on demand. The amount of
advance as at September 30, 2016 and December 31, 2015 was $131,026 and $195,436, respectively. The amounts repaid during the nine
months ended September 30, 2016 and 2015 were $167,043 and $nil, respectively.
5.
|
Convertible Promissory Notes
|
During the nine months ended
September 30, 2016, the Company issued convertible promissory notes, details of which are as follows:
Convertible promissory notes
issued on July 14, 2016 and September 15, 2016, amounting to $75,000 (Note 4) and $30,000 (Note 5), respectively.
The key terms/features of the convertible
notes are as follows:
|
1.
|
The maturity date of the note is November 19, 2016
|
|
2.
|
Interest on the unpaid principal balance of this note shall accrue at the rate of 8 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 52% of the lowest closing bid price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.
|
|
4.
|
The Company shall not be obligated to accept any conversion request before six months from the date of the note.
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Convertible promissory notes
issued on March 1, 2016 amounting to $150,000 each to two investors (Notes 2 and 3).
The key terms/features of the convertible
notes are as follows:
|
1.
|
The Holders have the right from six months after the date of issuance, and until any time until the Notes are fully paid, to convert any outstanding and unpaid principal portion of the Notes, into fully paid and non–assessable shares of Common Stock (par value $.0001).
|
|
2.
|
The Notes are convertible at a fixed conversion price of 45% of the lowest trading price of the Common Stock as reported on the OTC Pink maintained by the OTC Markets Group, Inc. upon which the Company’s shares are currently quoted, for the four (4) prior trading days including the day upon which a Notice of Conversion is received by the Company.
|
|
3.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of twenty-four (24 %) per annum.
|
|
4.
|
Beneficial ownership is limited to 4.99%.
|
|
5.
|
The Notes may be prepaid in whole or in part, at any time during the period beginning on the issue date and ending on the maturity date September 1, 2016, beginning at 100% of the outstanding principal, accrued interest and certain other amounts that may be due and owing under the Notes.
|
Convertible Redeemable note issued
on May 19, 2016, amounting to $75,000 (Note 1).
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note is May 19, 2017.
|
|
2.
|
Interest on the unpaid principal balance of this Note shall accrue at the rate of 8 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of conversion, the conversion price will be equal to 52% of the lowest closing bid price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion.
|
|
4.
|
The Company shall not be obligated to accept any conversion request before November 19, 2016 (six months from the date of the note).
|
|
5.
|
Conversion is limited to the holder beneficially holding not more than 4.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Interest amounting to $49,336
was accrued for the nine months ended September 30, 2016.
Derivative liability
The Notes 2 and 3 amounting to
$150,000, issued on March 1, 2016 matured on September 1, 2016, thereby resulting in the conversion option becoming exercisable
to the holders. On September 2, 2016, the holder of Note 2 amounting to $150,000, exercised their right to convert principal amount
of $38,250 into shares of the Company, as a result, the Company recorded a derivative liability as follows:
|
|
September 1, 2016
|
|
|
September 2, 2016
|
|
|
September 30, 2016
|
|
Initial valuation of derivative liability
|
|
$
|
849,431
|
|
|
|
|
|
|
|
|
|
Derivate liability
|
|
|
849,431
|
|
|
|
739,393
|
|
|
|
482,339
|
|
Effect of conversion
|
|
|
|
|
|
|
(108,048
|
)
|
|
|
|
|
Change in fair value
|
|
|
|
|
|
|
(1,990
|
)
|
|
|
(257,054
|
)
|
The Company’s authorized capital
stock consists of 100,000,000 shares of common stock and 20,000,000 shares of preferred stock. At September 30, 2016, there were
33,180,000 shares of common stock issued and outstanding (at December 31, 2015: 20,650,000 shares of common stock issued and outstanding)
out of which 24,565,000 are restricted shares.
Capitalization
The Company is authorized to issue 100,000,000
shares of common stock, par value $0.0001, of which 35,060,000 shares are outstanding as of the date of this report. The Company
is also authorized to issue 20,000,000 shares of preferred stock, par value $0.0001, of which no shares were outstanding as of
the date of filing of this report.
Common Stock
Holders of shares of common stock are entitled
to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting
rights.
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Subject to preferences that may be applicable
to any outstanding shares of preferred stock, the holders of common stock are entitled to share ratably in dividends, if any, as
may be declared from time to time by the board of directors in its discretion from funds legally available therefor.
Holders of common stock have no pre-emptive
rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with
respect to the common stock. The Company may issue additional shares of common stock which could dilute its current shareholder's
share value.
On March 17, 2016, the Company issued 65,000
shares of common stock at a price of $0.50 per share for an aggregate price of $32,500 in cash. Proceeds of $12,500 were received
during the year ended December 31, 2015 and proceeds of $20,000 were received during the nine months ended September 30, 2016.
On November 25, 2015, the Company filed
a registration statement on Form S-8 for 10,000,000 shares of common stock to be issued as compensation to officers, directors,
employees, advisers and consultants. During the nine months ended September 30, 2016, the Company issued 12,465,000 shares of
common stock to individuals as consideration for advisory and consultancy services amounting to $1,338,288 which were recorded
at fair value. All services have been performed as of September 30, 2016.
Shares to be issued represent 1,960,000
shares of common stock to be issued as compensation to advisers and consultants. These were recorded at fair value. The Company
issued 1,880,000 of these shares in October 2016.
Preferred Stock
Shares of preferred stock may be issued
from time to time in one or more series as may be determined by the board of directors. The board of directors may fix the designation,
powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without
any further vote or action by the stockholders of the Company, except that no holder of preferred stock shall have pre-emptive
rights. Any shares of preferred stock so issued would typically have priority over the common stock with respect to dividend or
liquidation rights. The board of directors does not at present intend to seek stockholder approval prior to any issuance of currently
authorized stock, unless otherwise required by law or otherwise.
FASB ASC 260, Earnings Per Share provides
for calculations of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution
and is computed by dividing net income (loss) available to common stockholders by the weighted average common shares outstanding
for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an
entity similar to fully diluted earnings per share. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
The Company’s management has evaluated
subsequent events up to November 14, 2016, the date the financial statements were
issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent event:
In October 2016, the Company issued 1,580,000
shares of common stock to individuals as consideration for advisory and consultancy services, which were recorded at fair value.
ITEM 2: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information and financial data discussed
below is derived from the unaudited condensed interim financial statements of the Chess Supersite Corporation (“we,”
“us” or the “Company”) for the nine months ended September 30, 2016 and were prepared and presented in
accordance with generally accepted accounting principles in the United States.
Forward Looking Statements
Some of the statements contained in this
Quarterly Report on Form 10-Q that are not historical facts are “forward -looking statements” which can be identified
by the use of the terminology such as “estimates,” “projects,” “plans,” “believes,”
“expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions
of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements,
which are contained in this Quarterly Report, reflect our current beliefs with respect to future events and involve known and
unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances
can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we
face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.
Factors that may cause actual results, our performance or achievements to differ materially from those contemplated by such forward-looking
statements include without limitation:
|
·
|
Our ability to raise capital when needed and on acceptable terms and conditions;
|
|
·
|
Our ability to attract and retain management;
|
|
·
|
Our ability to enter in to long-term supply agreements for the mineralized material;
|
|
·
|
General economic conditions; and
|
|
·
|
Other factors discussed in Risk Factors.
|
All forward looking statements made in
connection with this Quarterly Report that are attributable to us or persons acting on our behalf are expressly qualified in their
entirety by these cautionary statements. Given the uncertainties that surround such statements you are cautioned not to place undue
reliance on such forward looking statements.
Overview
Chess Supersite Corporation ("Chess
Supersite" or "the Company") was incorporated on July 2, 2013 under the laws of the state of Delaware to engage
in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has limited
operations to date. The company was formed to provide a method for a foreign or domestic private company to become a reporting
company with a class of securities registered under the Securities Exchange Act of 1934.
The Company registered its common stock
on a Form 10 registration statement filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") and Rule
12(g) thereof. The Company files with the Securities and Exchange Commission periodic and current reports under Rule 13(a) of the
Exchange Act, including quarterly reports on Form 10-Q and annual reports Form 10-K.
In May, 2014, the Company effected a change
in control by the redemption of the stock held by its original shareholders, the issuance of shares of its common stock to new
shareholders, the resignation of its original officers and directors and the appointment of new officers and directors.
The Company issued 1,000,000 shares of
its common stock pursuant to Section 4(2) of the Securities Act of 1933 at par representing 66.7% of the total outstanding 1,500,000
shares of common stock as follows:
500,000
|
|
Rubin Schinderman
|
500,000
|
|
Alexander Starr
|
With the issuance of the 1,000,000 shares
of stock and the redemption of 20,000,000 shares of stock, the Company effected a change in its control and the shareholder(s)
elected new management of the Company. The Company changed its name as part of the change in control.
ITEM 2: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Business and Plan of Operations
The Company is designed to become an online
chess site featuring sophisticated playing zone, game broadcasts with software analyses and top analysts' commentaries, education
and other chess oriented resources. With the availability of global high speed Internet access, the Company anticipates that it
will be able to deliver a high quality product featuring broadcasts of top worldwide games, education, interactivity, playing and
other services.
The Company believes that chess players
have two major needs: (1) to play against each other and (2) to watch games of top players including Grandmasters. The viewing
of chess games is particularly adaptable to the Internet to allow for real time or archived viewing while enjoying the comments,
announcements and analyses of top experts. The Company anticipates that the playing zone will utilize two-level architecture allowing
thousands of users to watch and play as individuals and/or as teams. Web-based services designed for browsers and table computers
will be the project's centerpiece and main point of focus. The Company anticipates that such an Internet site will have a great
appeal to the vast worldwide chess playing population.
The Company, acquired certain assets (the
“Acquisition”) of Chess Supersite, Inc., a corporation existing under the laws of Ontario, Canada. The Acquisition
was consummated pursuant to the terms of the Asset Purchase Agreement (the “Agreement”) dated July 23, 2014 and in
exchange for the issuance of 5,000,000 shares of common stock to Chess Supersite, Inc. The purpose of the Acquisition was to develop
the Company’s business and build substantive operations from this initial base of assets, as well as to facilitate and prepare
the Company for a registration statement and/or public offering of securities. On December 11, 2014 the Company filed a form 8-K,
changing the status of the company from shell to operating.
During the current period, the Company
has started to generate revenues. There is currently no income or cash flows from operations, however due to the high initial costs.
The Company's independent auditors have substantial doubt about the Company's ability to continue as a going concern. At present,
continuation of the Company as a going concern is dependent upon financial support from its stockholders and its ability to obtain
necessary equity financing to continue its operations.
Currently, the Company is in the process
of completing its comprehensive user friendly web site www.chessstars.com. The portal is going through extensive testing by our
professionals and public-at-large. The website is currently offering a state-of-the-art playing zone, broadcasts of the major tournaments,
intuitive mega database, chess skilled contests and much more. It is expected to be fully tested by the year end 2016, including
the program for the opening date (matches, tournaments, chess skilled contests), incentives for the public (such as 1 year free
Platinum Membership to those registered under their real names) etc. The Company has also involved World’s top Grandmasters
as members of the advisory board, commentators, and as event programming managers, etc. Design, operation and continuous improvement
of the website has been possible at the cost of significant time and expense. These expenses have been reported by us on the statement
of operations as website development and software development expenses, and represent a major value to the Company and its investors.
On July 11, 2016, the Company successfully filed an international patent protection for its online chess competition entitled “Choose
Your Moves and Win” which utilizes an interface mechanics developed by the Company based on live chess broadcasts. The nature
of the Company’s patent is to create a practical, educational yet enjoyable mechanism helping students to understand the
selection of moves by strong grand masters who play a match online. Besides the game itself, students see on their screens 3 hints
(best moves) selected by one of the strongest computer programs, while listening to grand master commentary, all in real time.
Once the game is over, all students/spectators are invited to participate in an analysis of the game just played, along with the
players and commentators.
On July 6, 2015, the Company filed its
form S-1/A, to amend its form S-1 previously filed on January 26, 2015 and December 11, 2014. This prospectus relates to the offer
and sale of 1,500,000 shares of common stock (the “Shares”) of Chess Supersite Corporation. (the “Company”),
$0.0001 par value per share, offered by the holders thereof (the “Selling Shareholder Shares”), who are deemed to be
statutory underwriters. The selling shareholders will sell the shares offered herein at the fixed price of $0.50 per share for
the duration of the offering.
The maximum number of Shares that can be
sold pursuant to the terms of this offering by the selling shareholders is (in aggregate) 1,500,000 Shares. Funds received by the
selling shareholders will be immediately available to such selling shareholders for use by them. The Company will not receive any
proceeds from the sale of the Selling Shareholder Shares.
On July 13, 2015, the Company received
a notice of effectiveness from the SEC for the registration of its shares.
On September 22, 2015, the Company was
able to secure a OTC Bulletin Board symbol
CHZP
from Financial Industry Regulatory Authority (FINRA).
ITEM 2: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations
We have not generated significant revenue
to date and consequently our operations are subject to all of the risks inherent in the establishment of a new business enterprise.
Our analysis on the performance of the Company is as follows:
Balance sheet – As at September
30, 2016 and December 31, 2015
Cash
At September 30, 2016 we had cash of $23,422
compared to $838 as at December 31, 2015. The increase is due to funds contributed by investors and shareholders offset by payment
of software development and consulting expenses and professional and legal expenses during the period.
Accounts payable and accrued liabilities
At September 30, 2016 we had $214,121 of
accounts payable and accrued liabilities as compared to $480,919 as at December 31, 2015. The balance primarily represents software
development charges amounting to $164,308, marketing services cost amounting to $13,650, rent amounting to $18,000, legal fee amounting
to $5,000 and interest on promissory notes amounting to $8,173.
Payable to related parties
At September 30, 2016 we had $469,697 of
amount payable to related parties as compared to $400,000 as at December 31, 2015. The balance represents management services fee
outstanding to the two shareholder/managers of the Company.
Shareholder advances
At September 30, 2016 we had $131,026 of
shareholder advances as compared to $195,436 as at December 31, 2015. The balance represents Company expenses personally paid by
shareholders.
Convertible promissory notes payable
In March, 2016, we entered into agreements
with two investors and issued them convertible promissory notes amounting to $150,000 each. The outstanding amounts under these
notes are due on or before September 1, 2016. In May, 2016, we entered into an agreement with an investor and issued them a convertible
promissory note amounting to $75,000. The outstanding amount under the note is due on or before May 19, 2017. In July and September
2016, we entered into agreements with investors and issued them convertible promissory notes amounting to $75,000 and $30,000,
respectively. The outstanding amount under the notes is due on or before November 19, 2016. We accrued interest on these notes
during the nine months ended September 30, 2016 amounting to $8,173.
Statement of Operations – For
the three months September 30, 2016 and 2015:
Revenue
Revenue of $519 represents membership fee
for the Company’s chess gaming website.
Expenses
Our expenses are classified primarily into
advisory and consultancy fee, salaries and wages, legal and professional fees, software development expense and website development
and marketing expense. The significant increase in overall expenses for the three months ended September 30, 2016 compared to 2015
is due to the company’s limited operations in the comparative period. During the period, we also hired several independent
consultants to provide us services with respect to our chess gaming website.
Expenses for the three months ended September
30, 2016 primarily represented Advisory and consultancy fee amounting to $712,900, salary for two employees amounting in total
to $75,000, legal and professional charges of $26,696 comprising audit, accounting and Edgar agent fee, software development expense
of $10,000 for the development of the online chess gaming system, website development and marketing expense amounting to $35,649
for the development of the Company’s website Chessstars.com and its marketing and publicity, rent and utilities amounting
to $5,733, office and general expenses amounting to $19,924 and interest and bank charges amounting to $25,167. We also recorded
a day one derivative expense amounting to $849,431, a net loss on settlement of a supplier invoice amounting to $34,290 and a fair
valuation impact of our derivative liability amounting to $(259,044).
ITEM 2: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Statement of Operations – For
the nine months September 30, 2016 and 2015:
Revenue
Revenue of $5,019 comprises an amount of
$4,500, which we invoiced and received as consideration for the supply of equipment and personnel to setup and produce a live streaming
internet chess show from Marshall Chess Club and $519 as membership fee for the Company’s chess gaming website.
Expenses
Our expenses are classified primarily into
advisory and consultancy fee, salaries and wages, legal and professional fees, software development expense and website development
and marketing expense. The significant increase in overall expenses for the nine months ended September 30, 2016 compared to 2015
is due to the company’s limited operations in the comparative period. During the period, we also hired several independent
consultants to provide us services with respect to our chess gaming website.
Expenses for the nine months ended September
30, 2016 primarily represented Advisory and consultancy fee amounting to $965,991, salary for two employees amounting in total
to $225,000, donation of $45,000, legal and professional charges of $78,880 comprising audit, accounting and Edgar agent fee,
software development expense of $134,990 for the development of the online chess gaming system, website development and marketing
expense amounting to $77,316 for the development of the Company’s website Chessstars.com and its marketing and publicity,
rent amounting to $13,263, office and general expenses amounting to $31,061 and interest and bank charges amounting to $50,478.
We also recorded a day one derivative expense amounting to $849,431, a net loss on settlement of a supplier invoice amounting
to $34,290 and a fair valuation impact of our derivative liability amounting to $(259,044).
Liquidity and Capital Resources
At September 30, 2016, we had a working
capital deficit of $1,720,156. We are actively seeking various financing operations to meet the working capital requirements.
To date we have relied on third parties
to provide financing for our operations by way of private placements. The proceeds may not be sufficient to effectively develop
our business to the fullest extent to allow us to maximize our revenue potential, in which case, we will need additional capital.
Off-Balance Sheet Arrangements
We have no 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 stockholders.
Critical Accounting Policies
Revenue is recognized when persuasive evidence
of an arrangement exists, services have been performed, the amount is fixed and determinable, and collection is reasonably assured.
Other critical accounting policies are
described in the Company’s Form 10-K for the year ended December 31, 2015.
Subsequent Events
In October 2016, we issued 1,880,000 shares of common stock
to individuals as consideration for advisory and consultancy services, which were recorded at fair value.
Description of Property
Our principal executive office is located
at 1131A Leslie Street, Suite 101, Toronto, Ontario, Canada, M3C 3L8.