NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
1.
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Organization, Nature of Business, Going Concern and Management Plans
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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, 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).
Going Concern and Management Plans
The Company has not yet generated significant
revenue since inception to date and has sustained operating losses during the three months ended March 31, 2017. The Company had
working capital deficit of $2,341,400 and an accumulated deficit of $5,995,932 as of March 31, 2017. 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.
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
2.
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Summary of Significant Accounting Policies
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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, 2017 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, 2016.
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.
Intangible Assets
Identifiable intangible assets with finite
lives are amortized over their estimated useful lives and are reviewed for impairment whenever facts and circumstances indicate
that their carrying values may not be fully recoverable. The intangible assets with definite lives are being amortized over its
estimated useful lives of 10 years using the straight-line method.
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.
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.
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Related Party Transactions and Balances
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During the three months ended March 31,
2017, $75,000 (March 31, 2016: $75,000) 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 March 31, 2017.
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 March 31, 2017 and December 31, 2016 was $169,084 and $144,474, respectively. The amounts repaid during the three
months ended March 31, 2017 and 2016 were $5,802 and $7,015, respectively.
5.
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Convertible Promissory Notes
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During the three months ended
March 31, 2017, the Company issued convertible promissory notes, details of which are as follows:
Convertible promissory note issued
on January 31, 2017 amounting to $33,000 (Note I).
The key terms/features of the convertible
note are as follows:
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1.
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The maturity date of the note is November 5, 2017
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2.
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Interest on the unpaid principal balance of this note shall accrue at the rate of 12% per annum.
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3.
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In the event the Note holder exercises the right of conversion, the conversion price will be equal to 58% of the average of the three (3) lowest closing bid price of the Company’s common stock for the fifteen (15) trading days prior to the date of conversion.
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4.
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The Company shall not be obligated to accept any conversion request before six months from the date of the note.
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5.
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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.
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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:
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1.
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The maturity date of the Note is July 18, 2017.
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2.
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Interest on the unpaid principal balance of this Note shall accrue at the rate of 7 % per annum.
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3.
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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.
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4.
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The Company shall not be obligated to accept any conversion request before six months from the date of the note.
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5.
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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.
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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:
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1.
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The maturity date of the Note is July 18, 2017.
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2.
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Interest on the unpaid principal balance of this Note shall accrue at the rate of 7 % per annum.
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3.
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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.
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4.
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The Company shall not be obligated to accept any conversion request before six months from the date of the note.
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5.
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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.
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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:
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1.
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The maturity dates of the notes were January 13, 2017 and March 14, 2017.
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2.
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Interest on the unpaid principal balance of this note shall accrue at the rate of 8 % per annum.
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3.
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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.
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4.
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As maturity dates have passed, the Company is now obligated to accept all conversion request on the notes.
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5.
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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.
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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:
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1.
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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).
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2.
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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.
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3.
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Interest on the unpaid principal balance of this Note shall accrue at the rate of twenty-four (24 %) per annum.
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4.
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Beneficial ownership is limited to 4.99%.
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5.
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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.
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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:
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1.
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The maturity date of the Note is May 19, 2017.
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2.
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Interest on the unpaid principal balance of this Note shall accrue at the rate of 8 % per annum.
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3.
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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.
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4.
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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.
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CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
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:
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Derivative liability as at December 31, 2016
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Conversions during Q1 2017
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Initial Valuation during Q1 2017
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Fair value adjustment on March 31
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Derivative liability as at March 31, 2017
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Note A
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92,693
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(25,963
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)
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-
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7,424
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74,424
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Note B and C
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382,409
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31,610
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-
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84,823
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498,842
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Note D and E
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-
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-
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136,969
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72,558
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209,527
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475,372
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5,647
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136,969
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164,805
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782,793
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The Company’s authorized capital
stock consists of 2,000,000,000 shares of common stock and 20,000,000 shares of preferred stock. At March 31, 2017, there were
93,561,615 shares of common stock issued and outstanding (at December 31, 2016: 35,644,874 shares of common stock issued and outstanding).
Capitalization
The Company is authorized to issue 2,000,000,000
shares of common stock, par value $0.0001, of which 93,561,615 shares are outstanding as at March 31, 2017. The Company is also
authorized to issue 20,000,000 shares of preferred stock, par value $0.0001, of which 1,000,000 shares were outstanding as at March
31, 2017.
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.
During the quarter ended March 31, 2017,
the Company issued 4,000,000 shares of common stock to individuals as consideration for advisory and consultancy services amounting
to $36,000 which were recorded at fair value. All services have been performed as of March 31, 2017.
During the quarter ended March 31, 2017,
the Company issued 12,059,741 and 1,857,000 shares of common stock to individuals on conversion of convertible promissory notes
amounting to $20,741 and $5,385, respectively.
During the quarter ended March 31, 2017,
the Company issued 20,000,000 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.
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.
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 May 15, 2017, the date the financial statements were issued, pursuant to the requirements of ASC 855 and
has determined the following material subsequent events:
Effective April 10, 2017, the Company
filed an amended Certificate of Incorporation to increase its authorized common stock to 2,000,000,000 shares.
In April 2017, the Company issued 40,000,000
shares of common stock each, to Rubin Schindermann and Sasha Starr, as consideration for advisory and consultancy services, which
were recorded at fair value.
In April 2017, the Company issued 4,000,000
shares of common stock as consideration for advisory and consultancy services, which were recorded at fair value.
In April and May 2017, the Company issued
69,617,396 shares of common stock to individuals on conversion of convertible promissory notes.