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 three months ended March 31, 2018. The Company had
working capital deficit of $1,664,697 and an accumulated deficit of $6,973,870 as of March 31, 2018. 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, 2018 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, 2017.
Reclassification of comparative figures
Certain of the prior period figures have
been reclassified to align with Management’s current view of the Company’s operations.
Use of Estimates
The preparation of the unaudited condensed
interim financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial
statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining
to accruals. Actual results could materially differ from those estimates.
Revenue recognition
In accordance with ASC 605, revenue is
recognized when persuasive evidence of an arrangement exists, services have been performed, the amount is fixed and determinable,
and collection is reasonably assured.
On May 28, 2014, the FASB and IASB issued ASC 606,
Revenue From Contracts With Customers,
under which an entity is to recognize revenues to depict the transfer of promised goods or services to a customer in an amount
that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. For public
entities, the effective date is annual reporting periods (including interim reporting periods within those periods) beginning
after December 15, 2017.
The Company qualifies as an “emerging growth company”
under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
As an emerging growth company, management can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. The management has elected to take advantage of the benefits of this extended transition period.
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 three months ended March 31,
2018, $75,000 (March 31, 2016: $75,000) 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 March 31, 2018.
During the year ended December 31, 2017,
Eric Schindermann, who is the son of Rubin Schindermann, became a lender to the Company by way of assignment of an existing promissory
note liability of the Company amounting to $18,000. 465,728 shares of the Company’s common stock were issued to Eric Schindermann
subsequent to the year end, on partial conversion of the debt amounting to $3,805. Amounting outstanding to Eric under promissory
notes is $14,195 as at March 31, 2018.
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, 2018 and December 31, 2017 was $331,842 and $304,322, respectively. The amounts repaid during the three
months ended March 31, 2018 and 2017 were $32,614 and $5,802, respectively.
|
5.
|
Convertible Promissory
Notes
|
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
16, 2018, amounting to $28,000 (Note L).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note is October 30, 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 lowest closing bid price of the Company’s common stock for the twenty (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, 2017, the Company issued convertible promissory notes, details of which are as follows:
Convertible promissory note issued on November
28, 2017, amounting to $33,000 (Note K).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date of the Note is September 10, 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 lowest closing bid price of the Company’s common stock for the twenty (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 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 year
ended December 31, 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.
During the period ended March
31, 2018, the Company obtained forgiveness of the liability and the interest associated with the note payable and recorded $153,471
as forgiveness of debt in the condensed 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
May 13, 2016, amounting to $75,000 (Note D).
The key terms/features of the convertible
note are as follows:
|
1.
|
The maturity date 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 was 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.
|
Interest amounting to $13,318 was accrued
for the period ended March 31, 2018 (2017: $27,919).
All notes maturing prior to the date of
this report are outstanding.
CHESS SUPERSITE CORPORATION
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
Derivative liability
During the three months ended March 31,
2018, holders of convertible promissory notes converted principal amounting to $21,518. The Company recorded and fair valued the
derivative liability as follows:
|
|
Derivative
liability as at
December 31,
2017
|
|
|
Conversions
during the
period
|
|
|
Fair value
adjustment
|
|
|
Derivative
liability as at
March 31,
2018
|
|
Note A
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note B and C
|
|
|
534,214
|
|
|
|
|
|
|
|
(58,404
|
)
|
|
|
475,810
|
|
Note D
|
|
|
87,821
|
|
|
|
(64,323
|
)
|
|
|
29,564
|
|
|
|
53,062
|
|
Note F
|
|
|
98,276
|
|
|
|
(3,377
|
)
|
|
|
(33,427
|
)
|
|
|
61,472
|
|
Note G
|
|
|
21,096
|
|
|
|
|
|
|
|
(3,365
|
)
|
|
|
17,731
|
|
Note H
|
|
|
143,985
|
|
|
|
|
|
|
|
(143,985
|
)
|
|
|
-
|
|
Note I
|
|
|
39,048
|
|
|
|
|
|
|
|
(5,940
|
)
|
|
|
33,108
|
|
Note J
|
|
|
27,396
|
|
|
|
|
|
|
|
(4,145
|
)
|
|
|
23,251
|
|
Note K
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
951,836
|
|
|
|
(67,700
|
)
|
|
|
(219,702
|
)
|
|
|
664,434
|
|
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 March 31, 2018, there were
25,960,163 (post reverse split) shares of common stock issued and outstanding (at December 31, 2017: 14,973,819 (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 25,960,163 (post reverse split) shares are outstanding as at March 31, 2018.
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, 2018.
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 (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 13,917 (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 (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 (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 (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 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 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.
During the quarter ended December 31, 2017,
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.
During the year ended December 31, 2017,
533,348 shares shares of common stock were issued at a fair value which was lower than the par value of the shares. This resulted
in a reduction in additional paid in capital amounting to $22,556.
During the quarter ended March 31, 2018,
the Company issued 5,529,412 shares of common stock each to Rubin Schindermann and Alexander Starr as consideration to settle outstanding
management fee in the amount of $84,000, which was recorded at fair value.
During the quarter ended March 31, 2018,
the Company issued 5,156,932 shares of common stock to individuals on conversion of convertible promissory notes amounting to $21,518
and 300,000 shares were issued as consideration for consulting services amounting to $3,600.
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 recorded as net gain
on settlement of liability in the statement of operations for the year ended December 31, 2017.
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.
|
7.
|
Earnings (loss) Per Share
|
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 March 31, 2018, holders of convertible promissory notes may be issued 41,176,000 shares assuming a conversion price of $0.0106
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 May 1, 2018, the date the financial statements were issued, pursuant to the requirements of ASC 855 and
has determined the following material subsequent events:
The company issued 500,000 shares as consideration
for consultancy services in April 2018.