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, 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 six months ended June 30, 2017. The Company had working
capital deficit of $1,766,728 and an accumulated deficit of $6,058,534 as of June 30, 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.
|
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, 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.
|
Related Party Transactions and Balances
|
During the six months ended June 30, 2017,
$150,000 (June 30, 2016: $150,000) 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 June 30, 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 June 30, 2017 and December 31, 2016 was $219,186 and $144,474, respectively. The amounts repaid during the six months ended
June 30, 2017 and 2016 were $5,802 and $115,055, respectively.
5.
|
Convertible Promissory Notes
|
During the six months ended June
30, 2017, the Company issued convertible promissory notes, details of which are as follows:
Convertible promissory note issued
on May 5, 2017 amounting to $23,000 (Note J).
The key terms/features of the convertible note
are as follows:
|
1.
|
The maturity date of the note is February 20, 2018
|
|
2.
|
Interest on the unpaid principal balance of this note shall accrue at the rate of 12% per annum.
|
|
3.
|
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.
|
|
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 note issued
on January 31, 2017 amounting to $33,000 (Note I).
The key terms/features of the convertible note
are as follows:
|
1.
|
The maturity date of the note is November 5, 2017
|
|
2.
|
Interest on the unpaid principal balance of this note shall accrue at the rate of 12% per annum.
|
|
3.
|
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.
|
|
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.
|
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 commitment fee is considered a prepaid asset (see further
Note 9 for subsequent events).
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.
|
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Convertible promissory note issued on September
15, 2016, amounting to $30,000 (Note E).
The key terms/features of the convertible note
are as follows:
|
1.
|
The maturity date of the note is September 15, 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 55% of the lowest closing bid price of the Company’s common stock for the twenty (20) trading days prior to the date of conversion. If lowest closing bid price is equal to or less than $0.01, then the conversion price will be 45% of the bid price.
|
|
4.
|
The Company is obligated to accept all conversion requests on the note after 6 months from the issue date.
|
|
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 note issued on May 13,
2016, amounting to $75,000 (Note D).
The key terms/features of the convertible note
are as follows:
|
1.
|
The maturity dates of the note was May 13, 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.
|
As maturity dates have passed, the Company is now obligated to accept all conversion request on 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.
|
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:
|
|
Derivative liability as at December 31, 2016
|
|
|
Conversions during the period
|
|
|
Fair value adjustment
|
|
|
Derivative liability as at June 30, 2017
|
|
Note A
|
|
|
92,963
|
|
|
|
(100,471
|
)
|
|
|
9,281
|
|
|
|
1,773
|
|
Note B and C
|
|
|
382,409
|
|
|
|
(39,349
|
)
|
|
|
173,904
|
|
|
|
516,964
|
|
Note D and E
|
|
|
-
|
|
|
|
(64,277
|
)
|
|
|
152,265
|
|
|
|
87,988
|
|
Note F
|
|
|
|
|
|
|
-
|
|
|
|
54,010
|
|
|
|
54,010
|
|
Note G
|
|
|
-
|
|
|
|
-
|
|
|
|
11,331
|
|
|
|
11,331
|
|
|
|
|
475,372
|
|
|
|
(204,097
|
)
|
|
|
400,791
|
|
|
|
672,066
|
|
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 June 30, 2017, there were 408,020,109
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 408,020,109 shares are outstanding as at June 30, 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 June
30, 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.
During the quarter ended March 31, 2017,
the Company issued 13,916,741 shares of common stock to individuals on conversion of convertible promissory notes amounting to
$26,126, 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.
During the quarter ended June 30,
2017, the Company issued 234,458,494 shares of common stock to individuals on conversion of convertible promissory notes amounting
to $181,530.
During the quarter ended June 30, 2017,
the Company issued 40,000,000 shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle
outstanding management fee in the amount of $108,000 each, which were recorded at fair value.
Shares to be issued include the following:
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.
35,000,000 shares to be issued as settlement
of amount due for website development services amounting to $247,306. The fair value of the shares on the date of settlement was
$21,000, resulting in gain on settlement amounting to $226,306.
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.
8.
|
Contingencies and commitments
|
The Company is party to a website and software
development services agreement under which the Company is to arrange weekly payments amounting to $1,250 as consideration for such
services, which are indefinite.
The Company’s management has evaluated
subsequent events up to August 14, 2017, the date the financial statements were issued, pursuant to the requirements of ASC 855
and has determined the following material subsequent events:
Effective July 3, 2017, the Company filed an
amended Certificate of Incorporation in Delaware to increase its authorized common stock to 20,000,000,000 shares. The Company’s
authorized preferred stock remained at 20,000,000 shares.
In July and August 2017, the Company issued
350,693,179 shares of common stock on conversion of convertible promissory notes.
On October 18, 2016, the Company issued
a Convertible Promissory Note (“Note”) in the amount of $140,000 to Blackbridge Capital Growth Fund, LLC (“Blackbridge”)
in payment of the commitment fee owing by the Company to Blackbridge under the equity line of credit established pursuant to a
Stock Purchase Agreement dated October 18, 2016. On August 7, 2017, the Company informed Blackbridge in writing that the Company
does not consider the Note a valid obligation of the Company because the Company was required by the U.S. Securities and Exchange
Commission to withdraw the Company’s registration statement covering the resale of shares purchased by Blackbridge pursuant
to the Company’s draw down requests. The Company considers the Stock Purchase Agreement and the Note null and void and is
evaluating the situation based on the facts.