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 nine months ended September 30, 2017. The Company
had working capital deficit of $1,881,347 and an accumulated deficit of $6,508,153 as of September 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 up-to at least 12 months from the balance sheet date;
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 nine months ended September 30,
2017, $225,000 (September 30, 2016: $225,000) was recorded as management services fee payable to Rubin Schindermann and Alexander
Starr, who are shareholders and officers in the Company. The amount is included in the related party balance as at September
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 September 30, 2017 and December 31, 2016 was $280,907 and $144,474, respectively. The amounts repaid during the nine months
ended September 30, 2017 and 2016 were $nil and $167,043, respectively.
|
5.
|
Convertible Promissory
Notes
|
During the nine months ended September
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 was considered a prepaid asset. During the three
months ended September 30, 2017, the pending S1 registration statement was withdrawn, removing the benefit associated with the
prepaid asset. The amount was therefore written off as commitment fee in the statement of operations.
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.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests on 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.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests on 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.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests 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 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 requests 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.
|
As maturity dates have passed, the Company is now obligated to accept all conversion requests 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.
|
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Derivative liability
During the three and nine months ended
September 30, 2017, holders of convertible promissory notes converted principal and interest amounting to $46,729 and $254,384,
respectively. 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
September 30,
2017
|
|
Note A
|
|
|
92,963
|
|
|
|
(100,471
|
)
|
|
|
7,508
|
|
|
|
-
|
|
Note B and C
|
|
|
382,409
|
|
|
|
(44,996
|
)
|
|
|
122,625
|
|
|
|
460,038
|
|
Note D and E
|
|
|
-
|
|
|
|
(64,277
|
)
|
|
|
126,972
|
|
|
|
62,695
|
|
Note F
|
|
|
-
|
|
|
|
-
|
|
|
|
78,094
|
|
|
|
78,094
|
|
Note G
|
|
|
-
|
|
|
|
-
|
|
|
|
20,157
|
|
|
|
20,157
|
|
Note H
|
|
|
-
|
|
|
|
-
|
|
|
|
164,915
|
|
|
|
164,915
|
|
Note I
|
|
|
-
|
|
|
|
-
|
|
|
|
22,931
|
|
|
|
22,931
|
|
|
|
|
475,372
|
|
|
|
(209,744
|
)
|
|
|
543,202
|
|
|
|
808,830
|
|
On 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. 1,000,000 shares of Preferred Stock having a par value of $0.0001 per
share shall be designated as Series A Preferred Stock (“Series A Stock”). Dividends shall be declared and set
aside for any shares of Series A Stock in the same manner and amount as for the Common Stock. Series A Stock, as a class, shall
have 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.
The Company, as authorized by its Board
of Directors and stockholders, has approved a Reverse Split whereby record owners of the Company’s Common Stock as of the
Effective Date, shall, after the Effective Date, own one share of Common Stock for every one thousand (1,000) held as of the Effective
Date. As a result, an aggregate of $387,978 was reclassified from common stock to additional paid in capital, see further Note
9. The Effective Date of this amendment was November 1, 2017.
The Company’s authorized capital stock
consists of 20,000,000,000 shares of common stock and 20,000,000 shares of preferred stock. At September 30, 2017, there were 3,883,647,339
(3,883,648 – post reverse split) shares of common stock issued and outstanding (at December 31, 2016: 35,644,874 (35,645
– post reverse split) shares of common stock issued and outstanding).
Capitalization
The Company is authorized to issue 20,000,000,000
shares of common stock, par value $0.0001, of which 3,883,647,339 (3,883,648 – post reverse split) shares are outstanding
as at September 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 September 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 (4,000 – post reverse split) 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 (13,917 – post reverse split) 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 (20,000 – post reverse split) 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 (234,458 – post reverse split) 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 (40,000 – post reverse split) 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.
During the quarter ended September 30, 2017,
the Company issued 675,627,230 (675,627 – post reverse split) shares of common stock to individuals on conversion of convertible
promissory notes amounting to $51,729. Of these shares, the Company issued 533,348,384 shares at $30,779 and as a result of the
contractual conversion price adjustments, these shares were issued below par value, with the offsetting balance recorded as a reduction
in additional paid-in capital in the amount of $22,556 during the three months ended September 30, 2017.
During the quarter ended September 30, 2017,
the Company issued 1,400,000,000 (1,400,000 – post reverse split) shares of common stock each to Rubin Schindermann and Alexander
Starr as consideration to settle outstanding management fee in the amount of $140,000 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 (35,000 – post reverse
split) 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.
As at September 30, 2017, holders of convertible
promissory notes may be issued 6,149,850,000 (6,149,850 – post reverse split) shares assuming a conversion price equal to
the current market price of $0.0001 per share.
|
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 November 3, 2017, the date the financial statements were issued, pursuant to the requirements of ASC 855
and has determined the following material subsequent events:
The Company, as authorized by its Board of
Directors and stockholders, has approved a Reverse Split whereby record owners of the Company’s Common Stock as of the Effective
Date, shall, after the Effective Date, own one share of Common Stock for every one thousand (1,000) held as of the Effective Date.
The Effective Date of this amendment was November 1, 2017 and is retrospectively reflected in these financial statements.