Miami, FL – May 30, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Chess Supersite Corp. (OTC Pink: CHZP).
- Possible revamp or merger?
- Up 48% Tuesday
- 4th straight day of volume after spans of no trade days
Chess Supersite (CHZP) has been trading by appointment, but there are some breadcrumbs that indicate that may be about to change. Recent volume has increased, along with share price and bid size. Something is going on and usually where there is smoke…there is fire!
The 2017 10-Kwas filed on March 28, 2018 on time and then on May 15, 2018 the 10-Q was filed. The auditors have been paid and the company’s financials are current and listed on OTC market as current pink. The core chess business is an operating disaster with little to no management oversight and a stale website with no social media presence. So why the sudden interest on a quiet company that’s more a less a shell with a failed attempt at a Chess supersite?
We can speculate there are a few potential things going on, but they all lead to a revamping of the chess/gaming business model or something totally new and exciting.
Option 1… THE REVAMP
Much money was spent getting the Chess Stars website up and running. According to the 10-K $470,000 was spend on software development in addition to the $1.9 million worth of stock that was given to advisors. Despite all this investment the site has only produced revenues of $5,918 and $15,434 in 2016 and 2017 respectively. Did they overpay the developers, or do they just have a big disconnect with the marketplace?
It’s probably a function of both because there is a very large chess industry and some publicized games get more viewing than the NFL’s Super Bowl. The marketing and the monetization needs to be part of the plan and that seems to be lacking given the paltry revenue numbers. Management needs to have a rated “Chess” person to run the operation because other sites like chess.com and chesskid.com have clearly had success in monetizing their playing sites. As a public company they could be pursuing a roll up strategy, but it seems inevitable that the only publicly traded chess company is going to eventually be rebranded.
Until the company announces a change in management and the appointment of a “Chess” person that can relate to the industry, this is just a barely operating shell of a company. Right now there are two employees each making $12,500/month or $150,000/year off of a website that brought in $263 in Gross sales during the quarter. They have to be pursuing a different direction in order to avoid an excessive pay litigation.
The recent Supreme Court ruling in regards to the legalization of “sports betting” does play into our speculation, as the company would love to have head to head wagers based on skill and gain traction in the states. Revamping the company with sports related gaming tied in with their chess business could be the company’s next move.
OPTION 2 …Reverse Merger in the Works
The agreementwith Gunpowder Capital to list on the Canadian exchange is a prelude to other things. At the end of the year CHZP only had $562 in cash so for it to engage Gunpowder Capital (GNPWF) and pay at $30,000 fee and also commit to a $5,000 monthly advisory fee for 6 months represents a total of $60,000. It’s doubtful that the management at CHPZ is just blindly throwing away $60,000 on a company that is going nowhere unless they have alternative plans that are outside the scope of the core business.
Gunpowder capital provides a long list of services although the agreement is primarily for the listing it could lead to a fund raising event along with the announcement of a new acquisition. Gunpowder Capital has built a following by consulting with blockchain, technology and marijuana companies. Given the rut that cryptocurrency has been in that narrows the field to marijuana. Gunpowder was responsible for the Thunderhawk Cannabis LtdFunding so it’s not a hard stretch to see that Chess may be next on the list.
Advisory Board Lacks Motivation
Their advisory board is the “who’s who” of chess but they barely pay them anything so it’s unclear what motivation these advisors have. The advisors have only about $1500 to $4500 worth of stock after the reverse split done 11/01/2017. Due to these holdings seen below, unless a new deal is in place, we speculate an acquisition is more likely than a revamp of the chess business on the notion these advisors need more incentive at the end of the day.
Garry Kasparov 150,000 shares
Michael Khodarkovsky 50,000 shares
Nava Star 50,000 shares
Capital Structure / Conversions
The company has 20 billion shares authorized but went through a reverse stock split and cleaned up the corporation in 2016 and shrunk the share count down to 35,645 shares. As of March 31, 2018, the company currently has 25,960,339 shares issued and outstanding. Of that 17,872,812 is owned by CEO Rubin Schindermann and Alexander Starr which represents 68% of the outstanding shares. This leaves 8,087,527 shares in the potential float. At the end of 2017 the number of shares converted was 1,922,094 and 96,094 for advisory services. In 2018 5,156,932 shares were converted for $21,518 representing a conversion price of $.00417. This means that 3-4 people have concentrated control of 7,175,120 shares of the float and that 912,407 shares represent the small investors float. Subsequent events show an additional 500,000 shares were issued to a consultant in April 2018 which could mean that some sort of reverse merger is coming into this company.
Given the recent uptick in volume in the past few days and some big 100K share offers that were swiped it seems like CHZP might be a good bet for a reverse acquisition merger announcement. Normally this type of announcement will happen in two stages. First will be the LOI announcing the deal and then the definitive agreement consummating the deal, although a chess revamp could also be an option.
Investors speculating on these events need to count the trading volume and realize they are competing for about 1.0 million shares in the float and about 3 shareholders that have a massive number of shares that might come to the dilution party if the stock gets too heady. If these investors are able to keep their dilution in check and a nice acquisition target is placed in here, then there is a significant amount of upside.
Many shells looking for a deal are trying to capitalize in the resurgence of Marijuana, Online Gaming, or Blockchain technology. There is a likelihood that this could be a Marijuana deal and get a good bump in up the stock price. Speculative investors might want to look at the price down here because the market capitalization is only $625,000 and that is just about what a shell company is worth, but investors need to realize there is a potential for massive dilution and so tread lightly.
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