802 N. Washington St.
Spokane, WA 99201
NOTES TO THE FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS THEN ENDED DECEMBER 31, 2016 AND 2015
Chess Supersite Corporation, (“the Company”,
formerly River Run Acquisition Corporation) was incorporated on July 9, 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.
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, until the Company’s common stock is listed on a national securities
exchange or is quoted on the OTC Bulletin Board (or a successor); after which, the selling shareholders may sell their shares at
prevailing market or privately negotiated prices, including (without limitation) in one or more transactions that may take place
by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale.
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).
The summary of significant accounting policies
presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and
accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”)
in all material respects, and have been consistently applied in preparing the accompanying financial statements.
The Company has not yet generated any
revenue since inception to date and has sustained operating losses during the period ended December 31, 2016. The Company had
working capital deficit of $1,957,318 and an accumulated deficit of $5,451,931 as of December 31, 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 accompanying 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 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.
|
4.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
USE OF ESTIMATES
The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ from those estimates.
CASH
Cash and cash equivalents include cash on hand
and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days
or less. The Company did not have cash equivalents as of December 31, 2016 and 2015.
PREPAID ASSET
Prepaid asset represents commitment fee
owed by the Company to a certain investor in respect of a Securities Purchase Agreement entered into by the Company dated October
18, 2016. The Company has issued a convertible promissory note in respect of the commitment fee. The prepaid asset will be amortized
using the straight-line method over the period of draw-down.
INTANGIBLE ASSETS
The Company operates an online chess site
featuring sophisticated playing zones, game broadcasts with software analyses and top analysts' commentaries, education and other
chess oriented resources. Intangible assets represents the amount incurred by the Company related to the development of the online
chess gaming website.
Under ASC 985-20, there are two main stages
of software development. These stages are defined as:
(A) When the technological feasibility is established,
and
(B) When the product is available for general
release to customers.
Costs incurred
by the Company up to stage A have been expensed while costs incurred to move from stage A to stage B have been capitalized
.
The Company evaluates the recoverability
of the infinite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying
amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying
amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying
amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.
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 December 31, 2016,
the Company earned revenue of $5,918, 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 $1,418 as membership fee for the Company’s chess
gaming website.
SOFTWARE DEVELOPMENT COSTS
The costs incurred in the preliminary stages
of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if
direct and incremental, are capitalized until the application is substantially complete and ready for its intended use. These costs
are amortized using the straight-line method over the estimated economic useful life of 5 years starting from when the application
is substantially complete and ready for its intended use.
CONCENTRATION OF RISK
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking
institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December
31, 2016.
INCOME TAXES
Under ASC 740, “Income Taxes,”
deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that
some or all of the deferred tax assets will not be realized. As of December 31, 2016, there were no deferred taxes due to the uncertainty
of the realization of net operating loss or carry forward prior to expiration.
LOSS PER COMMON SHARE
Basic loss per common share excludes dilution
and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss
per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised
or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. Convertible
promissory notes as at December 31, 2016 are likely to be converted into shares, however, due to losses, their effect would be
antidilutive. As of December 31, 2016, convertible notes outstanding could be converted into 81,089,744 shares of common stock.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows guidance for accounting
for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items
that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted
guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial
statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs
(Level 3 measurements).
The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted)
in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for
the asset or liability. The carrying amounts of financial assets such as cash approximate their fair values because of the short
maturity of these instruments.
The estimated fair value of cash, accounts
payable, and accrued liabilities approximate their carrying values due to the short-term maturity of these instruments.
|
5.
|
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
|
From time to time, new accounting pronouncements
are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company
as of the specified effective date.
In August 2014, the FASB issued ASU 2014-15,
Presentation
of Financial Statements – Going Concern
, which will require an entity’s management to assess, for each annual and
interim period, whether there is substantial doubt about the entity’s ability to continue as a going concern within one year
of the financial statement issuance date. The definition of substantial doubt within the new standard incorporates a likelihood
threshold of “probable” similar to the use of that term under current GAAP for loss contingencies. Certain disclosures
will be required if conditions give rise to substantial doubt. The guidance will be effective for the Company beginning with fiscal
year 2017. Early adoption is permitted. The Company is currently evaluating the impact that this amended guidance will have on
its financial statements and related disclosures.
The Company adopted the accounting pronouncement
issued by the Financial Accounting Standards Board ("FASB") to update guidance on how companies account for certain aspects
of share-based payments to employees. This pronouncement is effective for fiscal years beginning after December 15, 2016, and interim
periods within those years, with early adoption permitted. This guidance requires all income tax effects of awards to be recognized
in the income statement when the awards vest or are settled and changes the presentation of excess tax benefits on the statement
of cash flows.
The Company adopted these provisions on a prospective
basis. In addition, this pronouncement changes guidance on: (a) accounting for forfeitures of share-based awards and (b) employers’
accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation. The
adoption of this pronouncement did not have a material impact on the financial position and/or results of operations.
On January 1, 2016, the Company adopted the
accounting pronouncement issued by the FASB to update the guidance related to the presentation of debt issuance costs. This guidance
requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from
the carrying amount of the related debt liability rather than being presented as an asset. The Company adopted this pronouncement
on a retrospective basis, and the adoption did not have a material impact on the financial position and/or results of operations.
In November 2015, an accounting pronouncement
was issued by the FASB to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates
the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying
assets and liabilities. Instead, the pronouncement requires all deferred tax assets and liabilities, including valuation allowances,
be classified as noncurrent. This pronouncement is effective for fiscal years beginning after December 15, 2016, with early adoption
permitted. The Company intends to adopt this pronouncement on January 1, 2017, and the adoption will not have a material impact
on the financial position and/or results of operations.
On April 7, 2015, the FASB issued Accounting
Standards Update (ASU) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance
Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts and the accounting
for debt issue costs under IFRS. The recognition and measurement guidance for debt issuance costs are not affected by the amendments
in this ASU. The amendments in this Update apply to all companies. They became effective for public business entities in the annual
period ending after December 15, 2015, and interim periods within those fiscal years, with early application permitted.
The Company is continuing software development
and is recognizing costs related to these activities as expenses during the period in which they are incurred. Intangible assets
amounting to $137,611 were capitalized during the year ended and as at December 31, 2016. The Company evaluates the recoverability of the infinite-lived intangible assets for possible impairment
whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.
|
7.
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
Accounts payable amounting to $277,519 as at
December 31, 2016, primarily represents accrual for software development fee amounting to $226,906, accrual for marketing services
amounting to $13,650, and other accruals for professional services. (2015: Accrual for advisory and consultancy fee amounting to $336,111, accrual for software development
fee amounting to $95,318, accrual for marketing services amounting to $28,500, accrual for rent amounting to $9,000 and other accruals
for professional services).
|
8.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
During the year ended December 31, 2016, $300,000
(December 31, 2015: $300,000) was recorded as management services fee payable to Rubin Schindermann and Alexander Starr, who are
shareholders in the Company. They were issued 10,000,000 shares to settle $100,000 of the amount owed. The amount is included
in the related party balance as at December 31, 2016.
During the year ended December 31, 2016, the
Company issued 500,000 shares of Series ‘A’ Preferred Stock each, to the two directors, as consideration for their
services.
Advisory and consultancy fee includes $30,000
(December 31, 2015: $1,500,000) for Rubin Schindermann and Alexander Starr, who are shareholders in the Company. They were issued
1,000,000 shares (December 31, 2015: 3,000,000) for these services performed as of and for the year ended December 31, 2016. These
were recorded at fair value.
Amounts payable to Rubin Schindermann and
Alexander Starr as at December 31, 2016 were $285,000 and $229,697, respectively.
As disclosed in Note 12, the Company is party
to a lease agreement dated October 1, 2015, with Hard Assets Capital Corp., which is a related entity by virtue of common directorship.
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 December 31, 2016 and 2015 was $144,474 and $195,436, respectively. The amounts repaid during the years ended December 31,
2016 and 2015 were $174,595 and $nil, respectively.
|
10.
|
CONVERTIBLE PROMISSORY NOTES
|
During the year ended December 31,
2016, the Company issued convertible promissory notes, details of which are as follows:
Convertible Redeemable note issued
on October 18, 2016, amounting to $140,000 (Note H), representing commitment fee owed by the Company pursuant to Securities Purchase
Agreement entered into by the Company dated October 18, 2016.
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of
the Note is July 18, 2017.
|
|
2.
|
Interest on the unpaid
principal balance of this Note shall accrue at the rate of 7 % per annum.
|
|
3.
|
In the event the Note
holder exercises the right of conversion, the conversion price will be equal to 80% of the lowest trading 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 9.99% of the Company’s then issued and outstanding common stock after the
conversion.
|
Convertible Redeemable notes issued
on October 18, 2016, amounting to $100,000 and $25,000 (Notes F and G).
The key terms/features of the convertible note
are as follows:
|
1.
|
The maturity date of the Note is July 18, 2017.
|
|
2.
|
Interest on the unpaid principal balance of this Note
shall accrue at the rate of 7 % per annum.
|
|
3.
|
In the event the Note holder exercises the right of
conversion, the conversion price will be equal to 57.5% of the lowest trading 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 9.99% of the Company’s then issued and outstanding common stock after the conversion.
|
Convertible promissory notes issued
on July 14, 2016 and September 15, 2016, amounting to $75,000 (Note D) and $30,000 (Note E), respectively.
The key terms/features of the convertible notes
are as follows:
|
1.
|
The maturity dates of the notes were January 13, 2017 and March 14, 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 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 B and C).
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 A).
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.
|
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 year ended December 31, 2016.
Derivative liability
The Notes B and C amounting to
$150,000 and Note A amounting to $75,000, issued on March 1, 2016 and May 19, 2016, respectively, matured on September 1, 2016
and November 19, 2016, respectively, thereby resulting in the conversion option becoming exercisable to the holders. On September
2, 2016, the holder of Note B amounting to $150,000, exercised their right to convert principal amount of $38,250 into shares of
the Company. On December 14, 2016, the holder of Note A amounting to $75,000 exercised their right to convert principal amount
of $5,231 into shares of the Company. The Company recorded and fair valued the derivative liability as follows:
|
|
September 1
|
|
|
September 30
|
|
|
November 19
|
|
|
December 14
|
|
|
December 31
|
|
Initial valuation of derivative liability
|
|
$
|
849,431
|
|
|
|
|
|
|
|
100,640
|
|
|
|
|
|
|
|
|
|
Derivate liability
|
|
|
849,431
|
|
|
|
482,339
|
|
|
|
582,979
|
|
|
|
584,670
|
|
|
|
475,372
|
|
Effect of conversion
|
|
|
|
|
|
|
(108,048
|
)
|
|
|
|
|
|
|
10,692
|
|
|
|
-
|
|
Change in fair value
|
|
|
|
|
|
|
(259,044
|
)
|
|
|
|
|
|
|
(268,046
|
)
|
|
|
(377,344
|
)
|
|
11.
|
STOCKHOLDERS’ DEFICIT
|
The Company’s authorized capital stock
consists of 100,000,000 shares of common stock. At December 31, 2016, there were 35,644,874 shares of common stock issued and outstanding
(at December 31, 2015: 20,650,000 shares of common stock issued and outstanding).
The Company has not declared any dividends
in its fiscal year ended December 31, 2016 (December 31, 2015: $nil). Currently, the Company has no intention of paying cash dividends
in the foreseeable future, but rather intends to use any future earnings for the development of its business in the foreseeable
future.
Capitalization
The Company is authorized to issue 500,000,000
shares of common stock, par value $0.0001, of which 35,644,874 shares are outstanding as of December 31, 2016 and 20,000,000 shares
of preferred stock, par value $0.0001, of which 1,000,000 were designated as Series ‘A’ Preferred Stock during the
year. This Series ‘A’ preferred stock carried voting rights equal to a multiple of 2X the number of shares of Common
Stock issued and outstanding that are entitled to vote on any matter requiring shareholder approval.
During the year ended December 31, 2016,
the Company issued 500,000 shares of Series ‘A’ Preferred Stock each, to the two directors, as consideration for their
services.
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.
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 November 23, 2015, the Company issued 5,000,000
shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle outstanding management fee in
the amount of $50,000 each, which were recorded at fair value.
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. In December 2015, the Company issued 3,750,000 shares of common stock under the registration statement, as compensation
for advisory and consultancy services amounting to $1,838,801, which were recorded at fair value. All services had been performed
as of December 31, 2015.
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 year ended December 31, 2016.
During the year ended December 31, 2016, the
Company issued 13,845,000 shares of common stock to individuals as consideration for advisory and consultancy services amounting
to $1,387,640 which were recorded at fair value. All services have been performed as of December 31, 2016.
During the year ended December 31, 2016, the
Company issued 1,500,000 and 584,874 shares of common stock to individuals on conversion of convertible promissory notes amounting
to $38,250 and $5,231, respectively.
Shares to be issued represent 80,000 shares
of common stock to be issued as compensation to advisers and consultants. These were recorded at fair value of $52,000, based on
the market price of the Company’s stock on the date of issue.
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.
The Company is party to a lease agreement dated
October 1, 2015, with Hard Assets Capital Corp., for the lease of its office premises. The term of the lease was one year from
the date of the agreement and provides for a base rent of $1,000 per month for the premises. This agreement was renewed on October
1, 2016 for one year.
Income
taxes
The provision for income taxes is calculated
at US corporate tax rate of approximately 35% (2015: 35%) as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
$
|
(2,344,668
|
)
|
|
$
|
(2,748,266
|
)
|
Expected income tax recovery from net loss
|
|
|
820,634
|
|
|
|
961,893
|
|
Tax effect of expenses not deductible for income tax:
|
|
|
|
|
|
|
|
|
Fair value of shares issued for services
|
|
|
(485,674
|
)
|
|
|
(678,580
|
)
|
Change in valuation allowance
|
|
|
(334,960
|
)
|
|
|
(283,313
|
)
|
|
|
|
-
|
|
|
|
-
|
|
Deferred tax assets
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following
components as of December 31:
|
|
2016
|
|
|
2015
|
|
Deferred Tax Assets - Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect of NOL Carryover
|
|
$
|
743,922
|
|
|
$
|
408,962
|
|
Less valuation allowance
|
|
|
(743,922
|
)
|
|
|
(408,962
|
)
|
Deferred tax assets, net of valuation allowance
|
|
|
-
|
|
|
|
-
|
|
At December 31, 2016, the Company had net
operating loss carryforwards of approximately $2,125,491 (2015: $1,168,462) that may be offset against future taxable income from
the year by 2036. No tax benefit has been reported in the December 31, 2016 financial statements since the potential tax benefit
is offset by a valuation allowance of the same amount.
The Company’s management has evaluated
subsequent events up to March 31, 2017, the date the financial statements were issued, pursuant to the requirements of ASC 855
and has determined the following material subsequent events:
In January, February and March 2017,
the Company issued an aggregate of 9,661,095 shares of common stock pursuant to conversion notices received from one of the
holders of the convertible promissory notes.
In March 2017, the Company issued 1,857,000
shares of common stock pursuant to conversion notices received from one of the holders of the convertible promissory notes.
During February and March 2017, the Company
issued 4,000,000 shares of common stock as consideration for consulting services.