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EX-32.2 - CERTIFICATION OF THE PRINCIPAL ACCOUNTING OFFICER OF METROSPACES, INC. PURSUANT - METROSPACES, INC.mspc10k031717ex32_2.htm
EX-32.1 - CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER OF METROSPACES, INC. PURSUANT T - METROSPACES, INC.mspc10k031717ex32_1.htm
EX-31.2 - CERTIFICATION OF THE PRINCIPAL ACCOUNTING OFFICER OF METROSPACES, INC. PURSUANT - METROSPACES, INC.mspc10k031717ex31_2.htm
EX-31.1 - CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER OF METROSPACES, INC. PURSUANT T - METROSPACES, INC.mspc10k031717ex31_1.htm
EX-21 - SUBSIDIARIES OF THE REGISTRANT - METROSPACES, INC.mspc10k031717ex21.htm
EX-10.26 - METROSPACES, INC.mspc10k031717ex10_26.htm
EX-10.9 - METROSPACES, INC.mspc10k031717ex10_9.htm
EX-10.8 - METROSPACES, INC.mspc10k031717ex10_8.htm
EX-10.7 - METROSPACES, INC.mspc10k031717ex10_7.htm
EX-10.6 - METROSPACES, INC.mspc10k031717ex10_6.htm
EX-10.5 - METROSPACES, INC.mspc10k031717ex10_5.htm
EX-3.11 - METROSPACES, INC.mspc10k031717ex3_11.htm
EX-3.10 - METROSPACES, INC.mspc10k031717ex3_10.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

FORM 10-K

 

(MARK ONE)

 

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015

 

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Transition Period from __________ to _________

 

Commission file number: 333-186559

 

METROSPACES, INC.
(Exact name of registrant as specified in its charter)

 

 

 

Delaware   90-0817201
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)

 

888 Brickell Key Dr., Unit 1102,
Miami, FL
  33131
(Address of principal executive offices)   (zip code)

 

(305) 600-0407
(Registrant’s telephone number, including area code)

 

(Former Name, former address and former fiscal year, if changed since last report)

 

Securities Registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class Name of each exchange on which registered
None None

 

Securities Registered pursuant to Section 12(g) of the Exchange Act:

 

Common Stock, Par Value $0.000001 per share

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]  No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

 

 

 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

 

Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)      

 

Indicate by check mark whether the issuer is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes [ ]      No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $338,000 on June 30, 2015.

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

The number of shares of the registrant’s common stock outstanding as of March 15, 2017, was 2,340,525,568.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None

 
 

METROSPACES, INC.
FORM 10-K

 

TABLE OF CONTENTS

    Page
  PART I    
ITEM 1. BUSINESS         1
ITEM 1A. RISK FACTORS    9
ITEM 1B. UNRESOLVED STAFF COMMENTS    9
ITEM 2. PROPERTIES    9
ITEM 3. LEGAL PROCEEDINGS    9
ITEM 4. (REMOVED AND RESERVED)   9
       
  PART II    
       
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES    9
ITEM 6. SELECTED FINANCIAL DATA   11 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS    11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK         16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA        17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   36
ITEM 9A. CONTROLS AND PROCEDURES    36
ITEM 9B. OTHER INFORMATION    36
       
  PART III    
       
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    36
ITEM 11. EXECUTIVE COMPENSATION    41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS    43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   44
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES   44
       
  PART IV    
       
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES    44
SIGNATURES      47
         
 
 

PART I

 

This annual report on Form 10-K contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about the Company, us, our future performance, our beliefs and our Management’s assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict or assess. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the filing of this Form 10-K, whether as a result of new information, future events, changes in assumptions or otherwise.

Throughout this report, we describe contracts and instruments to which the Company or its officers and directors are parties or by which the Company is affected. Where such contracts of instruments are exhibits to this report, either because they are filed herewith or incorporated herein by reference, readers of this report are referred thereto and the descriptions herein are qualified by such reference.

Unless the context otherwise requires, throughout this Annual Report on Form 10-K the words “Company,” “we,” “us” and “our” refer to Metrospaces, Inc. and its subsidiaries.

ITEM 1. BUSINESS

General

The Company is the parent of Urban Spaces, through which we acquire land and design, build, develop and resell condominiums on it, principally in urban areas in Latin America, alone or together with investors; we are also acquiring condominiums that are under construction for resale, but do not intend to conduct business in this manner after these condominiums have been sold. We sell condominiums at different prices, depending principally on their location, size and level of options and amenities to customers who are able to make substantial payments upon signing purchase agreements and at agreed time as construction progresses. Our current projects are located in Buenos Aires, Argentina, and Caracas, Venezuela. One of these projects is nearing completion (see “Business – Urban Spaces– Argentina – Chacabuco Project”), one is in the construction stage (see “Business – Urban Spaces– Venezuela – The Las Naranjas 320 Project”) and one is in the planning stage (see “Business – Urban Spaces– Venezuela – The Las Naranjas 450 Project”). We are considering projects in Peru and Colombia, but have taken no measures to implement them. We will market directly with our own sales force by personal contact, through real estate brokers and agents and internet websites. We will also manage these condominiums for customers who wish to lease them on a long- or short-term basis. The Company is a development-stage company.

The Company is the parent of Urban Spaces and of Bodega IKAL, S.A. and, Bodega Silva Valent S.A., both of which are Argentinian companies, collectively referred to as “IKAL,” which are in the business of operating a winery and are planning to develop a hotel and time share villas. For further information, see “Business – IKAL.”

We own 60% of the capital stock of Inversora Caribe Mar, C.A. and, a Venezuelan corporation, which is planning to build a hotel in city of Pariaguan, Venezuela (see “Business – Hotel Projects – Hotel Santo Cristo de Pariaguan”) and have agreed to acquire 33% of the capital stock of Promotora Turistica Hecos, C.A., which is planning to build a hotel on Coche Island, Venezuela (see “Business – Hotel Projects – Tulasi Mandir Spa and Hotel”). We also own a 26% interest in GBS Real Estate Fund I, LLC, which is constructing a condominium building in Venezuela (see “Business – Urban Spaces – Venezuela – The Los Naranjos 320 Project”).

The Company has no material assets other than the shares of its subsidiaries and minority interests in other companies. The Company has no plans to conduct any business activities other than obtaining or guaranteeing financing for the business conducted by its subsidiaries or assisting them in obtaining such financing.

The address of the Company is 888 Brickell Key Drive, Unit 1102, Miami, FL 33131 and its telephone number is (305) 600-0407.

Our common stock is quoted on the OTC Markets Group Inc. OTC Pink tier under the symbol “MSPC.”

 

Business

Urban Spaces

Through Urban Spaces and its subsidiaries, we acquire and develop land in urban areas primarily for the construction of condominiums on such land, principally in Latin American markets, and offer them at different prices and with varying levels of options and amenities to customers who are able to make substantial payments upon signing purchase agreements and at agreed times as construction progresses. For the foreseeable future, we do not expect our projects to exceed 25 units or to cost more than $5,000,000. Typically, a project will comprise several one- and two- bedroom units with areas from approximately 700 to 1,450 square feet and a few penthouse or luxury units of 3,200 or more square feet.

We do not provide financing to our customers and our target customer base will comprise persons who are able either to self-finance their purchases from us or obtain such financing. The source of substantially all of our revenue from our condominum business will be sales of these condominiums, although we may also obtain additional revenue from managing units that our customers acquire for rental. We do not have sufficient information as to the number of customers who will use these services and we have not yet determined the basis for our compensation for rendering these services; we believe that the aggregate amount that we receive for these services will not be material. We state the purchase price for each condominium in U.S. dollars and purchasers will be required to make payments to us in that currency or in the local currency equivalent thereof on the date that the payment is made. Our intention in so doing is to reduce the effects on us of inflation, adverse currency fluctuations and devaluations, which are a risk if prices are denominated in local currency. On the other hand, we will not benefit from any strengthening of the U.S. dollar against the relevant local currency. We may construct our condominium projects alone or with joint venture partners. If we construct a project on a joint-venture basis, the joint venture partner will usually provide the land on which we will construct a building in exchange for an interest in the joint venture in the range of 15%-25%, depending principally upon the value of the land and the relative bargaining strength of the parties, and we will usually have responsibility for and management control over all other aspects of the project. Although we have less than a majority interest in the projects described below, it is not our intention to invest in the future in projects over which we will not have a majority interest and have management control. We market directly with our own commissioned sales force, by personal contact by our officers, which will not involve additional compensation to them, through real estate brokers and agents and internet websites and manage these condominiums for customers who wish to lease them on a long- or short-term basis.

We have investments in the following condominium projects:

Argentina

The Chacabuco Project

Chacabuco 1353 Caba Trust, an Argentinian trust (the “Trust”), is constructing a 26-unit condominium project at Chacabuco 1353, in Buenos Aires, Argentina. Estudio Peru, a Buenos Aires architectural firm that is not affiliated with the Company and its affiliates, designed and is acting as project manager for this project. The lot on which the building is being constructed is located in the San Telmo area of Buenos Aires, which is an area of that city popular with tourists and has a combination of upscale shops, restaurants, fine homes and condominiums, many of which are leased by their owners to tourists on a short-term basis. There are in San Telmo a number of projects similar to this project that have been completed or are in progress. The lot has an area of approximately 4,850 square feet, the 26 units have a total area of 12,900 square feet and the common areas in the project have an area of approximately 4,850 square feet. The structure has 7 floors. It common areas comprise parking, halls and stairways, a swimming pool, a social area with barbecues and a laundry room. The apartments include flooring, air conditioning and heating, a kitchen area with refrigerator, stove and cabinets and wireless internet service.

 

Construction began in April 2010 and the estimated cost of the project was $1,350,000. The building is approximately 95% complete. Construction was expected to be completed and the units delivered by the end of 2012, but has been delayed on several occasions owing to depleted inventories of building materials, transportation strikes that caused their late delivery, work stoppages due to governmental inspections and various other causes, which ultimately led to construction cost overruns. Currently, all units have been sold at set prices, but approximately $150,000 is required for completion of the project. We have been advised that a reorganization plan being prepared by the Trust, but we have no knowledge of its terms and there is no fixed date for the completion of the project. We have no assurance that this plan will be prepared or implemented. GBS Capital Partners Inc., a Panamanian corporation (“GBS”) has informed us that it will fund the completion of this project.

GBS agreed to purchase substantially similar 9 loft-type efficiency units in this project, each having an area of 495 square feet, and advanced full payment for them to the Trust. GBS assigned its rights to receive these units to Urban Properties, LLC (“UPLLC”). In the instrument of assignment, UPLLC agreed to pay GBS $750,000 in consideration of its assignment. On December 5, 2014, the Company sold the rights to 4 of the units to GBS for $350,000, reducing the amount owed to GBS to $400,000. Upon completion of the project, the Trust will deed the remaining 5 units directly to UPLLC. On February 19, 2015, this indebtedness was exchanged for 450,000 shares of our Series B PIK Convertible Preferred Stock.

UPLLC has entered into contracts for the sale of 4 of the 5 units that it will receive for a total of $360,000 and has received payments of approximately $34,000 under these contracts; we expect the remaining unit to sell for about $55,000, or a total of $415,000. UPLLC has not yet been deeded the 4 sold, because it cannot do so until it acquires them upon the completion of the project. We have invested $415,000 in these 5 units and expect to receive a like amount upon their sale. Thus, we expect to record a small loss after cost of their sale.

For further information respecting GBS, the interest of one of our officers in GBS, the acquisition by GBS of its right to these units, the sale of 4 units to GBS and the exchange of the debt resulting from this sale for convertible preferred stock, see “Directors, Executive Officers and Corporate Governance – Related Party Transactions – GBS.”

Venezuela

The Los Naranjos 320 Project

This project (the “Las Naranjos 320 Project”), which we promote and manage, is located at Los Naranjos de Las Mercedes, Lot 320, in Caracas Venezuela. The project manager is Guillermo Mendez, a civil engineer, with offices in Caracas who has overseen the construction of over 100,000 square feet. The lot on which the project is located is in a neighborhood populated by upper middle-class families, mainly comprising. Individually gated homes. A number of lots in this community are being purchased with a view to demolishing the existing structures and building condominiums.

The building will have 9 units on 4 floors, as follows: (i) one 1-bedroom unit, with an area of 720 square feet, (ii) six 2-bedroom units, with areas between 890 and 1,290 square feet, (iii) two 3-bedroom penthouse units, with areas of 1,450 and 2,150 square feet. The total area of these 9 units is approximately 11,800 square feet and the project has approximately 7,500 square feet of common areas, including a lobby, hallways and staircases, parking and a roof-top social area.

The lot on which the project is located has an area of 6,460 square feet and is owned by Promotora Alon-Bell, C.A., a Venezuelan corporation (“Alon-Bell”), all of whose outstanding shares are held by GBS Real Estate Fund I, LLC, a Florida limited liability company (“Directors, Executive Officers and Corporate Governance – Related Party Transactions – GBS Fund”), which was formed in March 2013 solely for the purpose of obtaining financing for and developing this project. GBS is the managing member.

Although we expected to qualify GBS Fund to do business in Venezuela in order that it could act as the developer of this project, this process was delayed because of the slowdown in the provision of government services because of continuing political unrest in Venezuela. As a result, we decided not to liquidate Alon-Bell and are now using it as the developer of the project. In connection with this decision, GBS Fund, Propietaria Alimentos Globalia C.A. (“PAGCA”), which is the guarantor of a bank loan to finance this project in the principal amount of $1,000,000, to be drawn down as the project reaches prescribed benchmarks, of which $400,000 has been received, and Alon-Bell entered into a joint venture agreement. We are not an obligor with respect to this loan.

 

PAGCA owns the property on which the project is to be built, and will receive 20% of gross sales of units. Alon-Bell, will act as the promoter and builder and will receive 15% of gross sales, GBS Fund will receive the remaining 65% of gross sales, which will be divided such that we receive 26% of gross sales and GBS Fund will retain the rest, subject to change in the event of future equity investments.

We may make further investments in, and provide management, promotional and other services to, GBS Fund; as a result our interest in GBS Fund could increase.

The total cost of this project is expected to be approximately $1,900,000. As of December 31, 2015, approximately $1,700,000 had been invested in this project, approximately $520,000 of which was spent for the shares of Alon-Bell, which owns the land on which the project will be constructed, and the remainder for the expenses described above. We have presold the 1,450-square-foot penthouse unit for $400,000 and the remaining cost of the project is being financed by the above mentioned bank loan.

Construction on this project began in August 2013. We initially expected it to be completed by February 2014. However, because of lack of building materials and for the reasons set forth under the caption “Business – Delays in Projects Due to Political and Other Conditions in Venezuela,” below, this project was not completed by that date. This project is approximately 95% completed.is expected to be finished by May 2017.

As indicated above, one of the penthouse units has been presold. Other units are expected to be sold as the project progresses. The total list price for all of the units is expected to be approximately $3,500,000, but no assurance can be given that it will be possible to sell them at prices that will aggregate this amount.

Our initial investment in this project was for $150,000 and we expect to sell our 26% stake for at least $250,000 in cash or equivalent in equity in other hotel projects.

Las Naranjos 450 Project

This project, which we expected to promote and manage (the “Los Naranjos 450 Project”) has ceased to progress due to a dispute between the owners of the property on which it was to be constructed and we do not believe that it will be revived. The project was to have been constructed at Los Naranjos de Las Mercedes, Lot 450, in Caracas, Venezuela, in the same neighborhood and a few blocks away from the Las Naranjos 320 Project and we expected to enter into an agreement under which we would have received 70% of the shares in the company owning the land in consideration of our investing in and obtaining funding for the project as described below. This project was to have had 9 units, from 1 to 3 bedrooms having areas from 915 to 2,150 square feet, totaling approximately 11,800 square feet. The project was to have had 8,600 square feet of common areas, including a lobby, hallways and staircases, parking and social areas.

We have not invested money in or incurred liabilities in connection with this project and do not expect to incur liabilities as a result of its termination.

Marketing and Sales of Condominium Projects

Our potential customers are highly liquid persons or persons who have the ability to borrow, such that, in either case, they will be able to make a substantial payment to us when they sign a contract for the purchase of a unit, make progress payments at prescribed points specified in the contract and make the final payment due upon delivery of the unit. We plan to market through brokers, by personal contact by members of our management and through websites. We do not plan to have a permanent sales staff or, except when brokers hold “open houses,” to have sales personnel located at our projects.

Legally, the process of creating and selling condominiums in Latin American countries is similar to that in the United States. Condominium units and common areas in a building and the land on which it is situated are created by a legal instrument pursuant to a statute. This instrument will also provide for the governance of the property, typically, by a board of directors appointed by the entity that constructs the project until it is sold or nearly sold and thereafter elected by the owners of the units. This board of directors will adopt rules and regulations to which the owners of units and the use of common areas are subject. When a customer decides to purchase a condominium, he will enter into a contract of purchase and sale, the contents of which will vary in accordance with the unit and project of which it is a part and the applicable provisions of law respecting condominiums and real property generally under the laws of the country in which it is constructed. This agreement will describe the unit to be purchased; the price for the unit; the specifications for the unit and the options and amenities to be included with it; the initial, progress and final payments and, in the case of progress payments, the times at or the milestones upon the occurrence of which they are to be made; the delivery date for the unit and the reasons, such as labor disruptions and unforeseeable events, for which it may be deferred without liability; the warranties, if any, that will be given to the purchaser with respect to the property that he is purchasing, which may be additional to those given to the purchaser in the deed for the property and to those mandated by law; an escalator clause for labor and material costs, where lawful; the rights of the parties to terminate the contract and the remedies of the parties; and other matters that the parties deem desirable or are customary. When the construction of the unit and the property is completed, we will deliver a deed to the customer upon the completion of the payment of the purchase price.

 

Warranty

The laws of Argentina and Venezuela impose liability for defective construction of a building on the person or entity that built it and the architect or engineer that designed it; the seller is liable on if it also had acted in one of those capacities. Accordingly, since we plan to enter into construction contracts with third parties for the buildings that will contain the condominiums that we will sell, we will not be liable to our customers for construction defects in those countries. We will have the opportunity to inspect buildings before we accept them and to require the builder to repair defects.

Nevertheless, we will absorb the costs of repairing minor defects, such as uneven plastering, poorly hung doors and improperly aligned cabinets, that escape our preacceptance inspection. We do not expect these costs to be material.

In the event that we construct buildings in jurisdictions in which such liability is imposed on sellers of real property, we plan to limit our liability contractually and will consider the possible cost of such imposition of liability in setting prices for our condominiums.

Latin American countries impose statutory warranties of title on sellers of real property; we do not believe that we will have liabilities thereunder.

Hotel Projects

Tulasi Mandir Spa and Hotel

On October 20, 2015, we agreed to acquire 60% of the capital stock of Inversora Caribe Mar, C.A. (“Carib Mar”) for $50,000, to be paid, and 2,000 shares of our Series D PIK Convertible Preferred Stock to be issued and delivered, when the transfer of the stock has been registered, which we expect to occur before the end of the third quarter of 2017,. The delay in closing is due to problems of general applicability respecting recording transactions in Venezuela’s public registry. Carib Mar owns approximately 130,000 square feet of land on Coche Island in the State of Nueva Esparta, Venezuela, on which it plans to build a hotel. After the hotel is built, we will either operate it or enter into an arrangement with a third party for its operation. This project includes architectural and engineering plans and has received construction approval. For a description of the interest of one of our officers and directors in the agreements under which we acquired these shares, see “Directors, Executive Officers and Corporate Governance – Related Party Transactions – Tulasi Mandir Spa and Hotel.”

Throughout 2015, we worked working with past management on the redesign of the architectural project, and on obtaining construction permits and bank financing. Late in 2015, we received full planning approval on this project to build a luxury boutique hotel of 35-rooms in two stages, the first of 28 rooms and the second of the remaining 7 rooms. The hotel will be a villa-style hotel with a restaurant, spa, swimming pool and other amenities. All construction permits have been obtained.

The cost of this project will be approximately $2,500,000. In December 2015, we applied for construction financing with Banco de Venezuela and Banco Biententenario, two of Venezuela’s principal commercial banks. Because the project was with a 15% complete when we acquired Caribe execution (24 of the 28 villa’s foundations have been built), management expects to receive full funding for the rest of the construction and equipment from one of these local banks. Currently, Venezuelan banking laws obligate commercial banks to lend out a certain percent of their deposits for hotel and other tourism projects. Construction is budgeted at approximately $2 million dollars. However, we cannot assure that we will receive any loan and cannot continue construction until we do. Construction is expected to require approximately 24 months. Once the hotel is fully operational, we expected it to generate approximately $1.9 million in annual revenue with 35% EBITDA.

We expect to operate the hotel through Prohotel International, a Houston-based hotel operator, through its Latin American division based in Argentina. We are discussing an agreement with Prohotel, but have not signed one and no terms for an agreement have been determined or agreed to. Our president and one of our directors, Carlos Silva, is an officer of Prohotel. We may also associate with an international boutique hotel brand.

Hotel Santo Cristo de Pariaguan

On September 30, 2015, the Company and Oscar Brito, its Senior Vice President and a director, entered into an agreement under which it will acquire a 33% share interest in Promotodora de Turismo Hecos, C.A. (“Hecos”). For a description of this contract and the interest if Mr. Brito therein, see “Hotel Santo Cristo de Pariaguan.” We expect this sale to close by the end of the second quarter of 2017.

 

Hecos owns a 215,000 square foot lot, on which approximately 12,000 square feet of commercial and office space will be built, in the city of Pariaguan, Venezuela, along the Orinoco River in an area was named the “Orinoco Belt.” Petróleos de Venezuela, S.A., the Venezuelan state-owned oil and natural gas company, has estimated that the producible reserves of the Orinoco Belt are up to 235 billion barrels which would make it the largest petroleum reserve in the world. Since then, international oil producers have invested substantial amounts in the development of this area, which is widely rural and lacks any sort of hotel infrastructure. The Company has received full construction permits from the City of Pariaguan to build a 122-room 4-star hotel. This will be the area’s first 4-star hotel and will cater to the demands of oil, gold and diamond industry executives who travel to the area and demand high-quality food and lodging. The current lack of hotels in this area makes this a desirable project.

The total construction budget is for this project, including construction cost and equipment, is approximately $6 million. The Company has presented loan applications to Banco de Venezuela and Banco Biententenario, 2 of Venezuela’s main commercial banks. We expect to receive $4,800,000 (80% of the construction budget) from one of these banks. We plan to construct commercial and office space on the property and to finance the remaining $1,200,000 (20% of the construction budget through sales and presales. Currently, owing to Venezuela’s currency difficulties, its banks cannot loan more than $3,000,000 for any project and we will not be able to proceed until this situation changes. No assurance can be given that we will be able to obtain any loan for this project or that we will be able to presell or sell the commercial and office space for the required amount. We will begin construction as soon as we have obtained financing and expect to complete it in about 30 months.

When the hotel is operational, we will market directly through booking engines internationally and to oil producers locally. Due to high demand in the area for hotels, we do not expect that we will need a very strong sales force or partnership with international hotel brands. Once the hotel is stabilized, it is expected to generate approximately $5.5 million in annual revenue with 35% EBITDA.

IKAL

On January 13, 2015, we entered into a Contrato de Compraventa de Acciones between MRT Consulting, Inc., a Panamanian corporation (“MRT”), and ourselves, whereunder MRT agreed to sell, and we agreed to purchase, 1,969,904 shares of the common stock of Bodega IKAL, S.A., an Argentine corporation, which shares constitute the entire share capital of IKAL and 240 shares of the common stock of Bodega Silva Valent S.A., an Argentine corporation, comprising all of its share capital. The contract contains customary representations and warranties. The corporations that we are purchasing are referred to collectively as “IKAL.” The consideration for these shares was a convertible promissory note in the principal amount of US$4,500,000, dated January 13, 2015, made by the Company in favor of MRT. On June 13, 2015, the unpaid $4,443,000 of the unpaid principal of the note was exchanged for 45,354 shares of Series C PIK Convertible Preferred Stock.

IKAL owns approximately 185 acres of land, located in Valle de Uco, Province of Mendoza, Argentina. IKAL currently produces approximately 770,000 to 1,100,000 pounds of wine grape per annual harvest on a portion of this land. Ikal sells cabernet sauvignon, merlot, pinot noir and chardonnay wine under the “Ikal” and “Ikal 1150” brands. The wine producing operation is financially self-sustained, but is not generating profits. The year 2015 was a record year for grape harvesting, reaching a total approximate of 1.2 million pounds of deliverable wine grapes. 80% of the production was sold to local wine producers. The vineyard generated approximately $245,000 in revenue and $100,000 in EBITDA in 2015.

IKAL has received approval of the city of Valle de Uco to develop a 25 suite hotel, a 53,000 - gallon capacity winery and 29 luxury villas in which it will sell fractional ownership interests. Total costs for constructing the hotel and winery are expected to be approximately $7.5 to $8.0 million; when commenced, construction will require 2 to 2.5 years to complete. Total costs for constructing the villas is expected to be $10.5 million. We plan to raise this amount through one of more investors and/or bank loans, but cannot assure when or if we will raise the requisite funding. When commenced, construction will require 2-2.5 years to complete. Revenue from the sale of fractional interests is expected to be $75 to $80 million. Metrospaces will look to raise these funds from third-party investors, as lenders and/or equity investors. Because of the current state of the Argentinian debt markets, we do not believe that we will be able to obtain bank financing for the foreseeable future. These projects are in their inceptive stages and the foregoing plans are subject to change. We are currently in conversations with several potential equity investors for the development. We don’t expect to be able to raise financing via capital markets or banks. We expect that this project will need direct equity investors.

 

Project Management

Construction management for our hotel projects will be generally performed by us. The Company will act without compensation as its own general contractor, using local engineers and architects, and intends to subcontract only when necessary. We will develop each project through an entity established for that purpose. Rather than have an internal project management staff, once we have acquired the land on which a project will be constructed (either directly or through a joint venture partner), we will retain the services of a local engineer, architect or other person with expertise in overseeing construction projects, who will manage the project and who will receive as compensation a nominal salary and approximately 8% to 10% of the profits of the project. Through him, the local entity will enter into contracts for the construction of the building and its adjacent areas and landscaping; hire labor, to the extent not provided under construction contracts; purchase materials, to the extent not purchased under construction contracts; retain the services of local real estate brokers and arrange for advertising; and contract for other goods and services required to complete the project. He will be responsible for assuring that the project is completed on time, in accordance with its specifications and within its prescribed cost.

We have used independent project managers for our condominium projects, but may not do so in the future. A project manager will typically receive a fee of approximately 7% of construction costs, including the costs of materials and labor. We do not intend to hire an internal sales staff.

Construction Materials

We believe that the materials required for construction of our projects will for the most part be readily available in local markets and that, in most cases, they will be locally produced. At present, we believe that it will be possible to acquire imported materials to the extent necessary, at higher cost than local materials. Nevertheless, it is possible that the supply of such materials may be disrupted, as has occurred in Venezuela due to political unrest (see “Business – Delays in Projects Due to Political and Other Conditions in Venezuela,” or that their cost may rise. We intend to provide in each contract for the purchase of a condominium for escalation in its price in the event that the cost of materials increases above a prescribed level during the period from the signing of a contract of purchase for a unit to its delivery in countries, including Argentina, where such a provision is legally permissible. In countries, including Venezuela, where such a provision is not legally permissible, we will estimate increases in such costs over such period and take this estimate into account in establishing the contract price for the unit, but we can give no assurance that we will be able to make such estimate accurately or be aware of all existing or future factors that might affect such costs. Our failure accurately to make such estimate could adversely our profit on the unit or could even result in a loss.

Labor

We believe that labor for construction of our products will be readily available. Labor disruptions as a result of strikes or political demonstrations occur more often in Latin America than in the United States and are occurring with increasing frequency in Venezuela (see “Business – Delays in Projects Due to Political and Other Conditions in Venezuela”). We intend to provide in each contract for the purchase of a unit for escalation in its price in the event that labor costs increase above a prescribed level during the period from the signing of a contract of purchase for a unit to its delivery in countries, including Argentina, where such a provision is legally permissible. In countries such as Venezuela, where such a provision is not legally permissible, we will estimate increases in labor costs over such period and take this estimate into account in establishing the contract price for the unit, but we can give no assurance that we will be able to make such estimate accurately or be aware of all existing or future factors that might affect such costs. Our failure accurately to make such estimate could adversely our profit on the unit or could even result in a loss.

Competition

We compete primarily in the luxury condominium and luxury hotel segments of their respective industries on the basis of location, price, quality, reputation, design, amenities, and our customers’ overall experiences. These industries in the markets in which we operate or intend to conduct operations are fragmented and highly competitive. We do not believe that any of our competitors in these areas has as much as 5% of the number or value of the hotels or condominiums constructed in these markets. In each of these markets, there are numerous builders of condominiums with which we will compete and our market share is expected to be less than 1% of the units built or the value of the units sold. We will also compete with sales of existing housing inventory, and any provider of housing units, for sale or for rent, including apartment operators and businesses that convert apartments into condominiums, may be considered a competitor. With respect to luxury hotels, we expect that the hotel to be built by the Tulasi Mandir Hotel to be significant competitors in the areas where we are constructing them.

 

Seasonality

In countries that lie near the Equator, such as Venezuela, where temperatures are nearly constant, we do not expect that our construction operations or sales will be materially impacted by seasonality. In countries where there are greater changes of temperature during a year, we expect that both our construction activities and sales will occur at a slower place during the colder portions of the year than they will during the warmer portions.

Regulation

Our operations are subject to regulations imposed and enforced by various governmental authorities. These regulations may be complex and include building codes, land zoning and similar restrictions, health and safety regulations, labor practices, marketing and sales practices, environmental regulations and various other laws, rules, and regulations. Collectively, these regulations have a significant impact on the site selection and development of our properties, our designs and construction techniques, our relationships with customers, employees, and suppliers/subcontractors, and other aspects of our business. The applicable governing authorities frequently have broad discretion in administering these regulations, including inspections of condominiums prior to their delivery to customers.

In the United States, our only operations will be obtaining financing for our foreign projects. As such, we will be subject to state and federal securities laws if we issue securities in connection with such financing. We are also required by Section 13 of the Exchange Act to file periodic reports with the SEC, including an annual report containing audited financial statements. We will also be required to file Federal and State tax returns. The costs associated with these matters and the amount of time expended by management in connection therewith may be material.

In the foreign counties where we have projects, our most significant regulatory burden is obtaining construction permits. Generally, construction permits (including requisite environmental permissions) are routinely granted in 90 to 120 days, provided that sufficiently detailed plans and other documents necessary to support the issuance of the permit are submitted. However, permitting processes have moved substantially more slowly in Venezuela (see “Business – Delays in Projects Due to Political and Other Conditions in Venezuela”). While the cost of obtaining these permits is not expected to be material, there is a material amount of management time involved in obtaining them. Environmental laws are not as fully developed in these countries as they are in the United States and we do not expect to expend material amounts in connection with complying with them or to experience delays as a result of them. We will also be required to file tax returns in these countries, but do not expect to incur material costs in connection with doing so.

In addition to existing regulations, more stringent requirements could be imposed in the future, thereby increasing the cost of compliance and potentially adversely affecting our profitability.

Employees

We have three employees, namely, our two executive officers and an agro-engineer employed by IKAL.

Delays in Projects Due to Political and Other Conditions in Venezuela.

The death of Hugo Chavez, President of Venezuela, in March 2013, the ensuing political campaign for the election of his successor, continuing civil unrest and political demonstrations, currency flights, labor strikes, continuous inflation and devaluations have affected businesses generally in Venezuela because they have resulted in delays in governmental administrative processes and have materially slowed the conduct of business. Another result is that we have encountered delays in procuring construction materials. We expect these conditions to continue for, and perhaps worsen in, the foreseeable future. The Company has had difficulty in addressing these issues successfully, and they have affected the timing required for financing, construction permits, inspections, completion and recording of property transfers. Accordingly, we will not complete the Los Naranjas 320 Project, and may not complete the Tulasi Mandir Spa and Hotel and the Hotel Santo Cristo de Pariaguan, on schedule. Some delays may be indefinite.

 

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

As we are not an accelerated filer or a large accelerated filer, as defined in Rule 12b-2 of the Exchange Act, or a well-known seasoned issuer, as defined in Rule 405 promulgated under the Securities Act, we are not required to provide information under this item.

ITEM 2. PROPERTIES

We have offices at 888 Brickell Key Drive, Unit 1102, Miami, FL 33131. We do not have a lease and we do not pay rent for the leased space. Except as described above under the caption “Business” we do not own, lease or have an interest in any properties.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any pending legal proceedings nor are any of our property the subject of any pending legal proceedings.

ITEM 4. (REMOVED AND RESERVED).

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the OTC Pink tier maintained by OTC Markets Group Inc. under the symbol “MSPC.”

The following table reflects the high and low closing bid information for our common stock for each fiscal quarter during the fiscal years ended December 31, 2016, 2015 and 2016 and for the first quarter of 2017 through March 15. The bid information was obtained from OTC Markets Group, Inc. and reflects prices between dealers, without retail mark-up, markdown or commission, and may not represent actual transactions.

 

Quarter Ended  Closing Bid High  Closing Bid Low
Fiscal Year 2017          
March 31, 2017 (through March 15, 2017)  $—     $—   
Fiscal Year 2016          
December 31, 2016  $—     $—   
September 30, 2016  $0.0001   $0.0001 
June 30, 2016  $0.0001   $0.0001 
March 31, 2016  $0.0075   $0.0001 
Fiscal Year 2015          
December 31, 2015  $0.01300   $0.0022 
September 30, 2015  $0.0200   $0.0101 
June 30, 2015  $—     $—   
March 31, 2015  $0.0004   $0.0001 

 

 

Fiscal Year 2014              
December 31, 2014   $ 0.0280   $ 0.0001  
September 30, 2014   $ 0.0003 $ 0.0001  
June 30, 2014   $ 0.0008     0.0002  
March 31, 2014   $ 0.0015   $ 0.0005  

 

The information in the table above has not been adjusted for the 1-for-1,000 reverse stock split effected on September 11, 2015, and 1-for-500 reverse stock split effected on October 31, 2014.

As of December 31, 2015, we had 66 holders of record of our common stock.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

Recent Sales of Unregistered Securities.

On August 13, 2012, the Company made a Promissory Note in the principal amount of $260,000 in favor of Richard S. Astrom in exchange for $170,146 of advances that he had made to the Company and 10,000,000 shares of the Company’s Series A Preferred Stock. This note was exchanged pursuant to a Promissory Note Exchange Agreement, dated February 19, 2014, between the Company and Mr. Astrom, for a Convertible Promissory Note in a like principal amount and of even date with the Promissory Note Exchange Agreement. The principal of and interest on this note (the “First Convertible Promissory Note”) was convertible into shares of Common Stock at a conversion price of 41.5% of the Current Market Price, as defined. This note was made and delivered in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933 as a transaction not involving a public offering and/or Rule 506 thereunder. The Company issued 480,000,000 shares of Common Stock (or 960 shares after the effect of reverse stock splits) upon conversions of this note between February 14 and April 23, 2014, under the exemption from registration provided by Rule 144.

The First Convertible Promissory Note was exchanged pursuant to a Promissory Note Exchange Agreement, dated May 1, 2014, between the Company and Mr. Astrom (the “Second Convertible Promissory Note Agreement”) for a Convertible Promissory Note of even date therewith in the principal amount of $66,944.04, being the unpaid balance of the First Convertible Promissory Note and the Promissory Note Exchange Agreement. This note was made and delivered in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933 as a transaction not involving a public offering and/or Rule 506 thereunder. The principal of and interest on this Convertible Promissory Note (was initially convertible into shares of Common Stock at a conversion price equal to its par value of $0.000001 per share; however, on July 14, 2014, the Second Convertible Promissory Note Agreement was amended to change the conversion price to 2.5% of the Current Market Price, as defined. The Company issued 3,224,300,000 shares of Common Stock (or 3,224,300 shares after the effect of reverse stock splits) upon conversions of this note between November 25, 2014, and August 21, 2015, and 178,031,000 shares of Common Stock between September 18, 2015, and November 11, 2015, under the exemption from registration provided by Rule 144.

On February 24, 2014, the Company borrowed $40,000 under an 8% Convertible Redeemable Note, due February 25, 2015, in the like principal amount, made in favor of LG Capital Funding, LLC (“LG”). This note was made and delivered in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933 as a transaction not involving a public offering and/or Rule 506 thereunder. The principal of and interest on this Convertible Promissory Note is convertible into shares of Common Stock at a conversion price equal 58% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future for the 15 prior trading days including the day upon which a notice of conversion is received by the Company. The Company issued 152,622,579 shares of Common Stock (or 305 shares after the effect of reverse stock splits) upon a conversion of this note on September 17, 2014, and 130,913,598 shares of Common Stock between January 15, 2015, and April 20, 2015 (or 130,914 shares after the effect of reverse stock splits), upon conversions of this note under the exemption from registration provided by Rule 144.

 

On February 6, 2015, the Company borrowed $42,000 under a Convertible Promissory Note, dated that date made by the Company in favor of LG; no conversions were made under this note. On July 28, 2015, LG assigned this note to Apollo Capital Corp. (“Apollo”), and on that date, the note was exchanged for an Amended and Restated Convertible Promissory Note in the principal amount of $42,000 made by the Company in favor of Apollo, which is convertible into shares of Common Stock at a conversion price of 30% of the average of the lowest Trading Price (as defined) for the Common Stock during the period of 30 Trading Days (a Trading Day being defined as any day on which the Common Stock is quotable for any period on the OTC, or tradable on the principal securities exchange or other securities market on which the Common Stock is then being traded). Each of these notes was made and delivered in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933 as a transaction not involving a public offering and/or Rule 506 thereunder. The Company issued 200,000,000 shares of Common Stock (or 200,000 shares after the effect of reverse stock splits) upon a conversion of this note on August 28, 2015, and 1,563,334 shares of Common Stock between October 6, 2015, and October 10, 2015 (or 130,914 reverse after the effect of reverse stock splits), upon conversions of this note under the exemption from registration provided by Rule 144.

On November 19, 2014, the Company issued 800,000,000 shares of Common Stock to Oscar Brito, one of its officers, under the Company’s Restricted Stock Plan, and on September 11, 2015, issued 800,000,000 and 799,200,000 shares of Common Stock respectively to Carlos Daniel Silva, one of its officers, and Mr. Brito. These issuances were made to Accredited Investors, as defined in Regulation D under the Securities Act and were exempt from registration thereunder. For further information respecting these issuances, see “Directors, Executive Officers and Corporate Governance - Executive Compensation – Equity Awards, Grant Based Awards, Stock Options, Pension Benefits and Deferred Compensation.”

On March 10, 2014, May 1, 2015, May 8, 2015, and September 11, 2015, the Company issued a total of 340,000 shares of Common Stock (adjusted for reverse stock splits) under 4 consulting agreements. These shares were issued made and delivered in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933 as transactions not involving a public offering and/or Rule 506 thereunder.

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The financial data discussed below are derived from the audited consolidated financial statements of the Company as at December 31, 2015, which were prepared and presented in accordance with generally accepted United States accounting principles. These financial data are only a summary and should be read in conjunction with the financial statements and related notes contained elsewhere herein, which more fully present our financial condition and operations as at that date. We do not believe that the results set forth in these consolidated financial statements are necessarily indicative of our future performance. This section and other parts of this report contain forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements.

Overview

We are a development stage company and there is substantial doubt about our ability to continue as a going concern because we will need a substantial amount of additional capital to continue our operations. No assurance can be given that any additional capital can be obtained or, if obtained, will be adequate to meet our needs. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted or we could be forced to terminate operating. In addition, the following matters may affect our ability to continue as a going concern.

 

RESULTS OF OPERATIONS

FISCAL YEAR ENDED DECEMBER 31, 2015

COMPARED TO

FISCAL YEAR ENDED DECEMBER 31, 2014

 

Revenues

Revenues for the year ended December 31, 2015 (“FY 2015”) were $214,271 compared to $0.00 for the year ended December 31, 2014(“FY 2014”).

Gross Profit

We generated gross profit of $94,918 for FY 2015, compared with $0 for FY 2014. All of this profit was earned by IKAL’s vineyards.

Operating Expenses

Operating expenses for FY 2015 were $600,275, compared to operating expenses of $65,648 for FY 2014. Operating expenses increased for FY 2015 over FY 2014 primarily due to an increase in salaries and wages of approximately $50,000, increases in legal and consulting fees, and an increase of stock based compensation of approximately $239,000. The primary component of our operating expenses during both FY 2015 and FY 2014 was general and administrative expenses. The sole component of our operating expenses during both FY 2015 and FY 2014 was general and administrative expenses. Of these expenses, $67,000 was for salary for FY 2015, and $15,000 for FY 2014.

Income (Loss) from Operations

We had an operating loss of $505,357 for FY 2015, as compared to an operating loss of $65,648 for FY 2014. The loss was higher for FY 2015, as compared to FY 2014, for the reason that operating expenses were higher for FY 2015, as stated above.

Other Income (Expense)

We recorded interest expense of $12,321,666 in FY 2015, as compared to $369,609 in FY 2014. This expense increased in FY 2015 due to interest incurred on promissory convertible notes and the excess of derivative liability over the face amount of the notes. We also recorded a gain on change in fair value of derivative of $749,974 in FY 2015, which resulted from the valuation of derivatives at December 31, 2015, as compared to a loss on change in fair value of derivative incurred in FY 2014, which resulted from the valuation of derivatives at December 31, 2015, as well as a gain on extinguishment of debt of $1,882,323, which resulted from convertible notes converted during FY 2015, as compared to a loss extinguishment of debt of $124,753, which resulted from convertible notes converted during FY 2014.

Net Loss

Our net loss for FY 2015 was $10,194,726, compared with $3,572,349 for FY 2014.

Net Loss Attributable to Common Stockholders

Net loss applicable to common stockholders for FY 2015, was $10,526,768, compared to $3,572,349 for FY 2014.

 

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2015, we had total current assets $245,903, of which $58,668 was in cash, and at December 31, 2014, we had total current assets of $39,010, none of which was cash. On those dates, we had total stockholder deficits of $7,628,426 and $2,882,392, respectively.

All assets are recorded at historical cost. Management reviews on an annual basis the book value, along with the prospective dismantlement, restoration, and abandonment costs and estimate residual value for the assets, in comparison to the carrying values on the financial statements.

 

Net Cash (Used in) Provided By Operating Activities

During FY 2015, net cash used in operating activities was $142,480, compared to $43,845 during FY 2014.

Net Cash Provided by Investing Activities

We received net cash of $19,505 from investing activities in FY 2015, compared with $0 in FY 2014.

Net Cash (Used in) Provided by Financing Activities

In FY 2015, net cash provided by financing activities was $160,994, resulting from a note payable of $216,000 and proceed of issuance of stock of $400, offset by a repayment of note payable of $56,000 and prepayment of an overdraft of $166. During FY 2014, net cash provided by financing activities was $40,666, resulting from loans of $40,500, of which $500 was a loan from our chief executive officer, offset by an overdraft of $166.

At December 31, 2015, we had a stockholders’ deficit of $7,628,426 and a working capital deficit of $12,563,783. We do not have sufficient working capital to pay our operating costs for the next 12 months and we will require additional funds to pay our legal, accounting and other fees associated with our company and its filing obligations under federal securities laws, as well as to pay our other accounts payable generated in the ordinary course of our business. The report of our independent registered public accounting firm on our audited financial statements at December 31, 2015, contains a paragraph regarding doubt as to our ability to continue as a going concern. Our ability to continue as a going concern is dependent on the successful execution of its projects so as to generate revenues and profits, controlling operation expenses, negotiating extensions of existing loans and raising either debt or equity financing. There is no assurance that we will be able to negotiate extensions of loans or raise debt or equity financing on terms acceptable to us or at all or successfully execute any of the other measures set forth in the previous sentence. As stated above, our ability to obtain loans for our Venezuelan projects and to complete them, is adversely affected by political conditions in that country and our ability to obtain funding from pension funds in Argentina has been restricted by the nationalization of the largest Argentine pension funds. As a result, we cannot predict when these projects will be commenced or completed.

The Company believes that it will require approximately $350,000 to fund its basic operations for the next 12 months. The Company needs an additional $13,816,051 to fund its projects to completion, of which $2 million will be needed through December 31, 2017. It intends to raise these funds through bank loans, the sale of debt or equity securities, finding joint venture partners, preconstruction sales of condominiums, time share units and office/commercial space, deposits and/or progress payments thereon.

In Latin American countries, the proceeds of preconstruction sales and deposits are not held in escrow pending closing, but may be used freely. Most commonly, the Company will make a preconstruction sale of one or a few penthouse or luxury condominiums in a project at a discount of 15%-25% from their list price. This discount approximates the rate of interest that the Company would pay for borrowed money in these countries. Such preconstruction sales and deposits are respectively expected to provide approximately 10% to 25% of a project’s costs. We may adopt the same practice with respect to time shares. As indicated above, we plan to presell office/commercial space in the Hotel Santo Cristo de Pariaguan project.

At December 31, 2015, the Company had issued $394,729 principal amount of convertible promissory notes, in addition to the note described above, of which $319,760 was unpaid and an unconvertible promissory note in the principal amount of $10,000. All of these notes are in default, either because they were not paid at maturity or because the Company has failed to comply with the covenants set forth therein. The notes that have not been paid at maturity are due and payable and the notes with respect to which the Company has not complied with their covenants are subject to acceleration by their holders. The Company cannot repay the former and, in the event of acceleration, could not repay the latter. Furthermore, the Company does not has sufficient authorized and unissued shares to convert the outstanding principal amount of all of the convertible notes and the Series D PIK Convertible Preferred Stock, which would, at current market prices, require substantially more than the number of authorized and unissued shares of Common Stock; this situation will be aggravated when the shares of Series B PIK Convertible Preferred Stock and Series C PIK Convertible Preferred Stock become convertible on February 1, 2016. Further, any shares issued upon such conversion could not be sold under Rule 144 because the Company is a former shell company that has failed to comply with its reporting requirements under the Securities Exchange Act of 1934. All of the authorized and unissued share of Common Stock at any time available are reserved for the conversion of convertible notes held by three affiliated holders, who together hold $223,685 of unpaid principal amount of these notes.

 

The very large number of shares of Common Stock issuable upon conversion of these notes and shares of preferred stock and the unavailability of shares to be issued upon conversion should be considered carefully by potential investors in the Common Stock and potential purchasers of convertible instruments because substantial dilution of their interests is likely and/or they may be unable to convert their instruments.

The $319,760 required for the Company to pay the above notes is included in the $13,816,051 that the Company will require to fund its basic operations for the next 12 months, although the Company believes that, in light of its financial condition, if the Company is able again to comply with its reporting requirements such that Rule 144 again becomes available for the sale of shares issued upon conversion of these notes, their holders will convert their notes and sell the resulting shares of Common Stock, rather than enforce payment of the notes. We intend to ask for extensions of the maturity dates of these notes and for waivers of default for failure to comply with the covenants set forth therein, but none of the holders is obligated to extend or waive. Further, we have no information as to whether or on what terms any such extension or waiver would be granted. The Company plans to obtain such funds through the sale of debt or equity securities and from any profits that it receives from the Chacabuco project, rather than from preconstruction sales of condominiums and/or deposits on condominium units sold after construction of its other projects commence but before these units are delivered.

We can give no assurance that any of the funding described above will be available on acceptable terms, or available at all. If we are unable to raise funds in sufficient amounts, when required or on acceptable terms, we may have to significantly reduce, defer or discontinue our operations. To the extent that we raise additional funds by issuing equity securities or securities that are convertible into the Company’s equity securities, its stockholders may experience significant dilution.

Contractual Obligations

The following table sets forth information with respect to our known contractual obligations as of December 31, 2015, setting forth their types and the times at which they are due.

Payments due by period

Contractual obligations Total Less than 1 year 1-3 years 3-5 years More than 5 Years
Long-Term Debt Obligations $ 394,729 $ 242,993 151,736 0 0  
Capital Lease Obligations 0   0 0 0  
Operating Lease Obligations 0 0 0 0 0  
Purchase Obligations* $ 0 $ 0 $ 0 $ 0 0  
Other Long-Term Liabilities Reflected on Our            
Balance Sheet under GAAP 0 0 0 0 0  
Total $ 394,279 $ 242,993 $ 151,736 $ 0 0  
                       

 

 

Off-Balance Sheet Arrangements

None.

Risks and Uncertainties

We operate in an industry that is subject to rapid and sometimes unpredictable change. Our operations will be subject to significant risk and uncertainties, including financial, operational and other risks, including the risk of business failure. Further, as noted in this report, in order to develop its business, the Company will require substantial capital resources.

Unstable economic and political conditions in Venezuela and, to a lesser extent, Argentina have affected us adversely in the past and will continue so to affect us in the future. Particularly with respect to Venezuela, it is difficult to predict with any precision future trends, their effect on us and the manner in which we will be able, if at all, to ameliorate them. For further information respecting conditions in Venezuela, See “Business – Urban Spaces – Delays in Project Due to Political and Other conditions in Venezuela.”

Inflation

According to the CIA Factbook, the inflation rate in Argentina in 2015 was 26.5% and in Venezuela was 275% for that year. We protect ourselves from inflation by pricing our units in United States dollars. We believe that the persons who constitute our target markets are relatively insensitive to the effects of inflation.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Real Property

Real property is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

Investments in non-consolidated subsidiaries

Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

Impairment of Long Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, the Company compares the carrying amount of the asset group to future undiscounted net cash flows, excluding interest costs, expected to be generated by the asset group and their ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

JOBS Act

Section 102(b)(1) of the JOBS Act provides that, as an emerging growth company, the Company (A) need not present more than 2 years of audited financial statements in order for the Company’s registration statement with respect to an initial public offering of the Company’s common equity securities to be effective, and in any other registration statement that the Company files with the SEC, the Company need not present selected financial data prescribed by the Commission in its regulations for any period prior to the earliest audited period presented in connection with the Company’s initial public offering; and (B) may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of Sarbanes-Oxley is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers. The term “issuer” generally means any person who issues or proposes to issue any security, the securities of which are registered under section 12 of the Exchange Act or that is required to file reports under section 15(d) of the Exchange Act, or that files or has filed a registration statement that has not yet become effective under the Securities Act and that it has not withdrawn.

While the Company is permitted to opt out of these provisions of the JOBS Act, it has not done so and do not intend to do so. As a result, our financial statements may not be comparable to companies that that elect to opt out of these provisions.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

  PAGE(S)
   
   
Report of Independent Registered Public Accounting Firm 18
   
Consolidated Balance Sheets as of December 31, 2015, and December 31, 2014 19
   
Consolidated Statements of Operations for the Years Ended December 31, 2015, and December 31, 2014 20
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, and December 31, 2014 21
   
Statement of Changes in Stockholders’ Deficit for the years ended December 31, 2015, and December 31, 2014 23
   
Notes to Consolidated Financial Statements 24-35
 

  Paritz

 

 

& Company, P.A

15 Warren Street, Suite 25

Hackensack, New Jersey 07601

(201) 342-7753

Fax: (201) 342-7598

E-Mail: PARITZ@paritz.com

       
  Certified Public Accountants

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Metrospaces, Inc.

 

We have audited the accompanying consolidated balance sheets of Metrospaces, Inc.as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years ended December 31, 2015 and 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Metrospaces, Inc. as of December 31, 2015 and 2014, and the results of its operations and cash flows for the years ended December 31, 2015 and 2014 in conformity with accepted accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has generated minimal revenues, has an accumulated deficit of $14,238,658, and a stockholders’ deficit of $7,628,426 as of December 31, 2015. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management plans are also discussed in Note 3. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

 

/S/Paritz & Company, P.A.

 

Hackensack, New Jersey

March 21, 2017

  

 

METROSPACES, INC.
Consolidated Balance Sheets

   December 31,  December 31,
   2015  2014
       
ASSETS      
Current Assets          
Cash and cash equivalents   58,668    —   
Accounts receivable   1,033    —   
Inventory   11,223    —   
Prepaid and other current assets   174,979    39,010 
Total Current Assets   245,903    39,010 
           
Advance payment for real property   369,891    369,991 
Investment in non-consolidated subsidiary   159,910    150,000 
Property and equipment, net   4,456,832    —   
Goodwill   —      —   
           
TOTAL ASSETS   5,232,536    559,001 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current Liabilities          
Bank overdraft payable   —      166 
Accounts payable   71,440    —   
Accrued expenses   608,184    68,750 
Accrued interest   74,312    52,013 
Sales deposit   34,046    34,046 
Long term debt related party   —      400,000 
Notes payable - related parties   16,990    166,590 
Current portion of convertible notes payable, net of discount of $77,992 and $12,365   90,032    64,528 
Note payable   10,000    10,000 
Derivative liability   11,904,682    2,645,300 
Total Current Liabilities   12,809,686    3,441,393 
           
Convertible notes payable, net discount of $100,406 and $0   51,276    —   
TOTAL LIABILITIES   12,860,962    3,441,393 
           
Stockholders' Deficit          
Preferred stock, $0.000001 par value, 8,000,000 shares authorized   —      —   
Series B Preferred Stock, $0.000001 par value, 2,000,000 shares authorized, 1,200,000 shares issued   1    —   
Series C Preferred Stock, $0.000001 par value, 100,000 shares authorized, 45,354 shares issued   0    —   
Series D Preferred Stock, $0.000001 par value, 400,000 shares authorized, 0 shares issued   —      —   
Common Stock, $0.000001 par value, 10,000,000,000 shares authorized 1,784,461,982 and 846,745 shares issued and outstanding   1,785    847 
Additional paid in capital   6,747,974    1,160,693 
Accumulated other comprehensive loss   (139,528)   —   
Accumulated deficit   (14,238,658)   (4,043,932)
Total Stockholders' Deficit   (7,628,426)   (2,882,392)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   5,232,536    559,001 
           

The accompanying notes are an integral part of these financial statements.

 

METROSPACES, INC.
Consolidated Statement of Operations

      Year Ended
    December 31,
      2015   2014
           
Revenue, net of discounts    $                          214,171    $                                    -   
Cost of revenue                                119,253                                          -   
Gross profit                                  94,918                                          -   
           
Operating Expenses        
  General and administrative expenses                                600,275                                  65,648
     Total operating expenses                                600,275                                  65,648
           
Operating Loss                              (505,357)                                (65,648)
           
Other Income (expense)        
  Interest expense                         (12,321,666)                              (369,609)
  Gain (loss) on change in fair value of derivative                                749,974                           (3,012,339)
  Gain (loss) on extinguishment of debt                             1,882,323                              (124,753)
     Total other income (expense)                           (9,689,369)                           (3,506,701)
           
Net loss before taxes                         (10,194,726)                           (3,572,349)
           
  Income tax benefit                                          -                                             -   
           
Net Loss    $                (10,194,726)    $                   (3,572,349)
           
  Preferred stock dividend                              (332,042)                                          -   
           
Net Loss attributable to common stockholder    $                (10,526,768)    $                   (3,572,349)
           
Other comprehensive income (loss)        
  Foreign currency transaction adjustment                              (139,528)                                          -   
           
Comprehensive Loss    $                (10,334,254)    $                   (3,572,349)
           
           
Net loss per common share - basic and diluted    $                              (0.01)    $                          (168.77)
           
Weighted average of common shares - basic and diluted                      1,634,607,933                                  21,167
           

Other comprehensive income (loss)        
  Foreign currency transaction adjustment                              (139,528)                                          -   
           
Comprehensive Loss                   (10,284,254)                     (3,572,349)
           
Net loss per common share - basic and diluted                                 (0.01)                             (168.77)
           
Weighted average of common shares - basic and diluted                      1,634,607,933                                  21,167
           

The accompanying notes are an integral part of these financial statements.

 

METROSPACES, INC.
Consolidated Statements of Cash Flows

 

    Year Ended
    December 31,
    2015   2014
               
 CASH FLOWS FROM OPERATING ACTIVITIES:      
         Net loss  $              (10,194,726)    $           (3,572,349)
            
   Adjustments to reconcile net loss to net cash      
   provided by (used in) operating activities:      
      Depreciation and amortization                          30,286                               -   
      Stock-based compensation                        280,519                               -   
      Payment of expenses by issuances of convertible notes                        100,976                               -   
      Salary accrued to related party                          11,250                               -   
      Non-cash interest expense                   12,283,517                     367,417
      (Gain) loss on change in fair value of derivative                       (749,974)                  3,012,339
      (Gain) loss on extinguishment of debt                    (1,882,323)                     124,753
   Changes in operating assets and liabilities:      
   (Increase) decrease in operating assets:      
      Accounts receivable                          41,220                               -   
      Inventory                         (11,223)                               -   
      Prepaid expenses and other assets                         (55,321)                      (10,000)
   Increase (decrease) in operating liabilities:      
      Accounts payable                            17,751                         4,995
      Accrued expenses                         (14,432)                       29,000
  Net Cash Used in Operating Activities                       (142,480)                      (43,845)
         
 CASH FLOWS FROM INVESTING ACTIVITIES:      
     Cash acquired from acquisition                          29,415                               -   
  Investment                           (9,910)                               -   
   Net Cash provided by Investing Activities                          19,505                               -   
           
 

 

 CASH FLOWS FROM FINANCING ACTIVITIES:        
     Cash overdraft (166)                            166
     Proceeds from issuance of note payable                        216,860                       40,000
  Repayment of note payable                         (56,100)                               -   
     Proceeds from issuance of stock                               400                               -   
     Proceeds from stockholder loans                                  -                               500
   Net Cash Provided By Financing Activities                        160,994                       40,666
         
 Effect of exchange rate on cash                          20,649                               -   
         
 Net increase (decrease) in cash and cash equivalents                          58,668                        (3,179)
 Cash and cash equivalents, beginning of period                                  -                            3,179
 Cash and cash equivalents, end of period  $                      58,668    $                         -   
         
 Supplemental cash flow information      
   Cash paid for interest  $                              -       $                         -   
   Cash paid for taxes  $                              -       $                         -   
         
 Non-cash transactions:      
   Derivative liability recognized as debt discount  $                 2,974,163    $               300,000
   Conversion of convertible debt into common stock  $                      38,234    $               223,107
   Conversion of convertible debt into series C preferred stock  $                 3,412,064    $                         -   
   Common Stock issued from conversion of convertible debt  $                 1,678,247    $            1,065,533
   Series B preferred stock issued from conversion of debt  $                    550,000    $                         -   
   Preferred stock dividend accrued  $                    332,042    $                         -   
         
               

The accompanying notes are an integral part of these financial statements.

 

METROSPACES, INC.
Statement of Changes in Stockholders’ Deficit

 

         Series B Preferred Stock         Series C Preferred Stock         Common Stock         

Additional

 Paid in

    

Accumulated

Other 

Comprehensive

    Accumulated 
          Shares      Amount      Shares      Amount      Shares      Amount      Capital     Income (Loss)      Deficit     Total
                                                   
 Balance, December 31, 2013       —     $—      —     $—      4,860   $0   $42,000   $—     $(471,583)  $(429,583)
                                                   
     Issuance of common stock upon conversion of convertible debt                       41,885    0    1,065,533             1,065,533
     Restricted stock awards                       800,000    1    (1)            -
     Gain on exchange of property with related party                                 54,007             54,007
     Net loss                                      —      (3,572,349)  (3,572,349)
 Balance, December 31, 2014       —      —      —      —      846,745    1    1,161,539    —      (4,043,932)  (2,882,392)
                                                   
     Series B Preferred stock issued upon conversion of long term loan   600,000    1                        549,999             550,000
     Series B Preferred stock issued as compensation   600,000    —                          50,000             50,000
     Preferred stock dividend                                 (332,042)            (332,042)
     Series C Preferred stock upon conversion of note             45,354    0              3,412,064             3,412,064
     Issuance of common stock upon conversion of convertible debt                       189,384,349    189    1,679,094             1,679,282
     Stock compensation                       1,594,230,888    1,595    227,321             228,916
     Issuance of convertible note(derivatives)                                               -
     Translation adjustment                                      (139,528)       (139,528)
     Net loss                                           (10,194,726)  (10,194,726)
                                                   
 Balance, December 31, 2015    $  1,200,000   $1    $ 45,354   $0   $1,784,461,982   $1,785   $6,747,974   $ (139,528)  $(14,238,658)  $(7,628,426)
                                                   

The accompanying notes are an integral part of these financial statements.

 

METROSPACES, INC.
Notes to Consolidated Financial Statements
December 31, 2015

Note 1 – Business

Metrospaces, Inc. (the “Company”) was incorporated as “Strata Capital Corporation” on December 10, 2007, under the laws of the State of Delaware. Urban Spaces, Inc. (“Urban Spaces”) was incorporated on April 3, 2012, under the laws of the State of Nevada and thereafter formed Urban Properties LLC, a Delaware limited liability company and its 99.9% owned subsidiary (“UPLLC”). Through Urban Spaces and its subsidiaries, the Company builds, sells and manages condominium properties located in Argentina and Venezuela. On January 13, 2015, the Company acquired all of the outstanding shares of stock of Bodega IKAL, S.A., an Argentine corporation (“IKAL”), and Bodega Silva Valent S.A., an Argentinian corporation, which collectively own 185 acres of vineyards, from which they currently sell grapes to local wineries. Through its 60% - owned subsidiary Caribe Mar, C.A. (“Carib Mar”), the Company is planning to build a hotel on Coche Island in the State of Nueva Esparta, Venezuela.

Note 2  Significant accounting policies

Basis of Consolidation

The financial statements have been prepared on a consolidated basis, with the Company’s subsidiaries, Bodega IKAL S.A. and Bodega Silva Valent S.A. No intercompany balances or transactions exist during the period ended December 31, 2015.

Use of Estimates

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.

Real Property

Real property is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

Investments in non-consolidated subsidiaries

Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology and trade names from a market participant perspective, useful lives and discount rates.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets

The Company evaluates the recoverability of property and equipment and finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charge during the years presented.

The Company reviews goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. The Company has elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment under Accounting Standards Update (ASU) No. 2011-08, Goodwill and Other (Topic 350): Testing Goodwill for Impairment, issued by the Financial Accounting Standards Board (FASB). If it is determined that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value.

In addition to the recoverability assessment, the Company routinely reviews the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized or depreciated over the revised estimated useful life.

Revenue Recognition

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. We record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured.

The Company generally recognizes revenue from grape sales upon delivery to the customer. The Company does not have any allowance for returns because grapes are accepted upon delivery. 

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

 

Fair Value Measurement

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The derivative liability in connection with the conversion feature of the convertible debt, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis.

The change in the level 3 financial instrument is as follows:

Balance January 1, 2014  $—   
Issued during the year ended   545,061 
Converted during the year   (912,100)
Change in fair value recognized in operations   3,012,339 
      
Balance December 31, 2014   2,645,300 
      
Balance January 1, 2015  2,645,300 
Issued during the year ended   14,540,743 
Converted during the year   (4,531,387)
Change in fair value recognized in operations   (749,974)
      
Balance December 31, 2015  $ 11,904,682 

 

The estimated fair value of the derivative instruments were valued using the Black-Scholes option pricing model, using the following assumptions at December 31, 2015:

Estimated Dividends   None 
Expected Volatility   100.89% to 850.00% 
Risk free interest rate   0.57%
Expected term   0.10 to 1.52 years 

 

 

Convertible Instruments

The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities.”

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: We record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities. During the year ended December 31, 2015, the Company recognized a gain on extinguishment of $1,882,323 from the conversion of convertible debt with a bifurcated conversion option.

Foreign Currency Translation

The functional currency of Bodega IKAL, S.A and Bodega Silva Valent S.A. is denominated in Argentine peso. Assets and liabilities of these operations are translated into United States dollar equivalents using the exchange rates in effect at the balance sheet date. Revenues and expenses are translated using the average exchange rates during each period. Adjustments resulting from the process of translating foreign functional currency financial statements into U.S. dollars are included in accumulated other comprehensive income in shareholders’ deficit.

Note 3 – Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated minimal revenues, has an accumulated deficit of $14,238,658, and stockholders’ deficit of $7,628,426, as of December 31, 2015. The continuation of the Company as a going concern is dependent upon, among other things, continued financial support from its stockholders and the attainment of profitable operations. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. There is no assurance that the Company will be able to generate revenues in the future. These financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to continue as a going concern.

Management plans to alleviate the going concern issues through future equity and debt financing opportunities currently being pursued.

Note 4 – Acquisitions

On January 13, 2015, the Company acquired all of the outstanding shares of common stock of Bodega IKAL, S.A., and all of the outstanding shares of common stock of Bodega Silva Valent S.A., both of which are Argentine corporations which collectively own 185 acres of vineyards that produce grapes that they sell to local wineries. The initial consideration for these shares was a convertible promissory note in the principal amount of $4,500,000. The acquisitions have been recorded in accordance with the acquisition method of accounting and have included the financial results of the acquired companies from the date of acquisition. On June 13, 2015, the unpaid $4,443,000 of the unpaid principal of the note was exchanged for 45,354 shares of Series C PIK Convertible Preferred Stock. For a description of this series, see Note 14. he Company accounted for this exchange as an extinguishment of debt, whereby it recorded the fair value of its Series C PIK Convertible Preferred Stock based on a third party valuation of the stock, and recorded the difference between the fair value, the carrying value of the debt (net of discount) and the bifurcated conversion option, which aggregated $1,687,807 and recorded as a gain on extinguishment of debt. Pro forma historical results of operations have not been presented because they are not material to the consolidated statement of operations.

 

On June 4, 2015, the company entered into agreements under which agreed to acquire 60% of the shares of Caribe Mar, C.A. (“Caribe Mar”). Caribe Mar owns 129,000 square feet of land on Coche Island in the State of Nueva Esparta, Venezuela, on which it plans to build a hotel. After the hotel is built, the Company plans either to operate it or enter into an arrangement with a third party for its operation. On November 14, 2014, the Company issued 2,000 shares of its Series D PIK Convertible Preferred Stock and at the closing will pay $50,000 in cash. For a description of this series, see Note 14. The Company has also agreed to deliver 2,500 shares of its Series D PIK Convertible Preferred Stock to Oscar Brito, one of its officers at the closing.

The Company has estimated the fair value assets acquired and liabilities assumed as part of the acquisition and is currently undergoing a formal valuation and will adjust these estimates accordingly within the one year measurement period.

The following table summarizes the estimated fair values assigned to the assets acquired and liabilities assumed:

Net current assets  $376,514 
Land   3,911,486 
Equipment   212,000 
Net Assets Acquired   4,500,000 
Consideration  4,500,000 

 

Note 5 – Advance payment for Real Property

The Company purchased from GBS Capital Partners, Inc. (“GBS”), a related party, the right to receive 9 loft-type condominium units from their builder upon the completion of these units (See note 9). As consideration for this purchase, the Company agreed to pay $750,000 to GBS, without interest (See note 6). The Company has imputed interest on this obligation at the rate of 8% per annum and has recorded the advance payment net of such imputed interest at a cost of $665,984.

On December 5, 2014, the Company entered into an agreement with GBS to return 4 of the 9 loft-type condominium units in exchange for $350,000 of the debt. The value assigned to the units returned was $295,993 which after the exchange of the debt resulted in a gain of $54,007, which has been recorded as an equity transaction with related parties. The remaining 5 units will be offered for sale upon their acquisition.

Note 6  Investment in non-consolidated subsidiary

On December 3, 2012, UPLLC assigned to GBS Fund I, LLC, a Florida limited liability company (the “Fund”), UPLLC’s rights to acquire all of the outstanding shares of Promotora Alon-Bell, C.A., a Venezuelan corporation which owns vacant land located in Venezuela upon which a condominium project is to be constructed. UPLLC had acquired such rights from a stockholder of the Company in exchange for a promissory note in the principal amount of $150,000. (See note 7.) This stockholder had acquired his rights to acquire these shares under an agreement with their holders, pursuant to which he paid them $150,000 in cash. This investment, which represents an interest of 26.32% in the Fund, is being accounted for under the cost method of accounting due to the Company not having any significant influence. The Fund acquired the shares in Promotora Alon-Bell, C.A. on December 16, 2012.The Company has not recognized any gain or loss from its investment since the subsidiary has not yet commenced any operations.

Note 7  Long Term Debt – Related Party

On April 13, 2012, the Company entered into an agreement to purchase nine condominium units from GBS Capital Partners (GBS), a related party of the Company, in exchange for a two year non-interest bearing note payable. Interest has been imputed at a rate of 8% per annum.

The Company has recorded an initial debt discount of $84,016 related to the imputed interest which was amortized on the effective interest rate method over the term of the note, which was fully amortized as of December 31, 2014.

On December 5, 2014, the Company entered into an agreement with GBS to return 4 of the 9 loft-type condominium units in exchange for $350,000 of the debt leaving a remaining balance of $400,000 on December 31, 2014, which was past due.

On February 19, 2015, the Company exchanged the $400,000 of debt to GBS described above for 450,000 shares of Series B PIK Convertible Preferred Stock, $150,000 of debt to the Company’s shareholder referred to in Note 8 for 150,000 such shares and issued 600,000 shares of such stock to the Company’s chief executive officer under his employment agreement. For a description of this series, see Note 14.

 

Note 8  Notes Payable  Related Parties

Notes Payable – Related Party

(a)$150,000 promissory note payable to a shareholder of the Company incurred for the transfer of an option to purchase the outstanding shares of Promotora Alon-Bell, C.A. (See Note 6), which was due April 20, 2014, and bears interest at the rate of 11% per annum. Interest expense for the year ended December 31, 2014, charged to the statement of operations was $16,500. Accrued interest of $45,375 on this note is included in accrued interest on the accompanying balance sheet. See Note 14. On February 19, 2015 the Company exchanged the $150,000 of debt in exchange for 150,000 shares of newly designated shares of series B preferred stock.
(b)During the period from the inception of Urban Spaces (April 3, 2012) through December 31, 2014, a stockholder of the Company paid operating expenses of the Company in the amount of $16,090. These amounts were recorded as a loan payable, bearing no interest and due on demand.

 

Note 9 – Acquisition Note Payable

In connection with the acquisition referred to in Note 4, the Company issued a convertible promissory note in the principal amount of $4,500,000. The note was convertible at, at any time at the option of the holder, into shares of Common Stock, as provided therein. The Company has determined that the conversion feature embedded in the note constituted a derivative and it has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt or a charge to interest expense where the derivative exceeds the carrying value of the note, on the accompany balance sheet, and revalued to fair market value at each reporting period. During the year ended December 31, 2015, the Company made principal payments aggregating $56,100. On June 13, 2015, the Company exchanged the unpaid $4,443,900 of the note and accrued interest thereon for 45,354 shares of our Series C PIK Convertible Preferred Stock.

Note 10  Notes Payable

On August 28, 2013 the Company received a $10,000 bridge loan from a nonrelated party. The loan bears interest at 15% per annum and matured on February 14, 2014. The loan remains past due and the Company has continued to accrue interest on the note until an agreement with the lender for repayment has been reached.

 

 

Note 11  Convertible Notes Payable

 

At December 31, 2015 and 2014, convertible notes payable consisted of the following:

 

    December 31,   December 31,
    2015   2014
           
On February 25, 2014, the Company entered into a Convertible Note Agreement in the principal amount of $40,000 with an unrelated third party. The note bears interest at 8% per annum and is convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 58% of the lowest closing bid price of the Company’s common stock for fifteen prior trading days upon which a notice of conversion is received by the Company. The note matures on February 25, 2015, but may be redeemed by the Company for a) an amount equal to 125% of the unpaid principal if redeemed within the first 90 days of the note, b) an amount equal to 140% of the unpaid principal if redeemed after the 91st day but before the 151st day of the note, or c) an amount equal to 150% of the unpaid principal if redeemed after the 151st day but before the 180th day of the note. The note may not be redeemed by the Company after 180 days.  The note has been discounted by its beneficial conversion feature of $6,444 at December 31, 2014. As at December 31, 2015, convertible note of $40,000 was converted and no discount remained.   $                    -      $        40,000
             

On February 25, 2014, the Company entered into a Convertible Note Agreement in the principal amount of $40,000 with an unrelated third party, and an additional $42,000 on February 10, 2015. The notes bear interest at 8% per annum and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 58% of the lowest closing bid price of the Company’s common stock for fifteen prior trading days upon which a notice of conversion is received by the Company. The note matures on February 10, 2016, but may be redeemed by the Company for a) an amount equal to 125% of the unpaid principal if redeemed within the first 90 days of the note, b) an amount equal to 140% of the unpaid principal if redeemed after the 91st day but before the 151st day of the note, or c) an amount equal to 150% of the unpaid principal if redeemed after the 151st day but before the 180th day of the note. The note may not be redeemed by the Company after 180 days. Since the inception of the note $40,0000 of principal of the note was converted into shares of common stock according to the terms of the convertible instrument.
On July 23, 2015, the Convertible Note Agreement of remaining principal amount of $42,000 was amended. The note bears interest at 8% per annum and is convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 30% multiplied by the average of the lowest closing bid price for the common stock during 30 trading day period ending on the latest complete trading day prior to the conversion date.
On August 20, 2015, $6,000 of the note was converted into 200,000 shares of common stock.
On October 1, 2015, $83 of the note was converted into 276,667 shares of common stock.
On October 8, 2015, $386 of the note was converted into 1,286,667 shares of common stock.
On October 14, 2015, $265 of the note was converted into 883,333 shares of common stock.
As of December 31, 2015, a total of $46,734 of the notes have been converted.
As of December 31, 2015, the note is presented net of a discount of $2,559.

 

 

 

 

 

 

               73,500                    -   

 

 

On March 23 2015, the Company entered into a Convertible Note Agreement in the principal amount of $29,000 with an unrelated third party and an additional $37,000 on April 8, $21,936 on April 17, $9,800 on April 29, 2015.  The notes bear interest at 10% per annum and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 2.5% of the current market price which is the average of the daily closing price for a share of common stock for the three consecutive trading days ending on the trading day immediately prior to the day on which a conversion notice is delivered. The notes mature on the date which is one year after the agreement date.
On September 23, 2015, the Company entered into an agreement to extend the maturity date of the following notes;  $37,000 on April 8, $21,936 on April 17, and $9,800 on April 29, 2015. The new maturity date was extended by 1 year from the original maturity date.
 As of December 31, 2015, the notes are presented net of a discount of $50,210.
               97,736                    -   
             
On May 8, 2015, the Company entered into a Convertible Note Agreement in the principal amount of $7,000 with an unrelated third party and an additional $25,000 on May 29, 2015, $10,000 on July 8, 2015, $16,000 on July 28, $8,000 on August 11, 2015, $17,600 on August 25, 2015 and $6,000 on September 24, 2015.  The notes bears interest at 10% per annum and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 2.5% of the current market price which is the average of the daily closing price for a share of common stock for the three consecutive trading days ending on the trading day immediately prior to the day on which a conversion notice is delivered. The note matures on the date which is one year after the agreement date.
On September 23, 2015, the Company entered into an agreement to extend the maturity date of the following notes; $7,000 on May 8, 2015, $25,000 on May 29, 2015, $10,000 on July 8, 2015, and $16,000 on July 28. The new maturity date was extended by 1 year from the original maturity date.

On October 23, November 3, ,November 19, and November 24, 2015, the Comany entered into a Convertible Note Agreement in the principal amount for $12,000, $4,500, $13,000 and $2,000 respectively.   The notes bears interest at 10% per annum and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 2.5% of the current market price which is the average of the daily closing price for a share of common stock for the three consecutive trading days ending on the trading day immediately prior to the day on which a conversion notice is delivered. The notes matures on the date which is one year after the agreement date.
As of December 31, 2015, the notes are presented net of a discount of $85,017.
             121,100                    -   
             
On July 28, 2015, the Company entered into a Convertible Note Agreement in the principal amount of $25,000 with an unrelated third party.  The notes bears interest at 12% per annum and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 50% multiplied by the lowest closing bid price for the Common Stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date. The note matures on January 28, 2017. As of December 31, 2015, the note is presented net of a discount of $16,667.                25,000                    -   

 

 

31

 
 

On October 8, 2015, the Company entered into a Convertible Note Agreement in the principal amount of $32,000 with an unrelated third party.  The note bears interest at 8% per annum and is convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 58% multiplied by the lowest closing bid price for the Common Stock during the 15 trading day period ending on the latest complete trading day prior to the conversion date. The note matures on October 8, 2016. As of December 31, 2015, the note is presented net of a discount of $24,000.                32,000                    -   
             
On October February 15, 2015,the Company entered into a Convertible Note Agreement, which was subsequent amended with an unrelated third party.  The principal balance as of January 1, 2015 was $45,393.  The note bears interest at 2.5% per annum,  and is convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to 58% multiplied by the lowest closing bid price for the Common Stock during the 15 trading day period ending on the latest complete trading day prior to the conversion date. The notes mature on  February 15, 2016. An amount of $36,734 was converted during the period ended December 31, 2015.   As of December 31, 2015, the note is presented net of a discount of $0.                45,393            45,393
Total Convertible Notes              394,729            85,393
Notes converted              (74,969)             (8,500)
Discount of Convertible Notes            (178,452)           (12,365)
Total Convertible Notes              141,308            64,528
             
Less: current portion of convertible loan              (90,033)           (64,528)
             
Long-term convertible notes payable   $            51,276   $                -   

 

The remaining principal balance of the convertible notes at December 31, 2015 was $349,336. The Company has determined that the conversion feature embedded in the notes constitutes a derivative and has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt, on the accompany balance sheet, and revalued to fair market value at each reporting period. The notes are presented net of a discount of $178,452, and net of notes converted of $38,234 as of December 31, 2015.

Note 12  Related Party Transactions

A stockholder is a 33% partner in GBS Capital Partners (see Note 4), the entity from which the Company acquired the deposit of nine condominium units.

The stockholder referred to above is entitled to receive a monthly salary of $1,250. The Company has accrued an amount of $9,970 and $15,000 for the years ended December 31, 2015, and 2014, for salary. The Company has accrued an aggregate amount of $53,220 since inception which is reflected in accrued expenses in the accompanying Balance Sheet at December 31, 2015.

An amount of $50,000 was accrued as salary to the CEO of the Company during the period ending December 31, 2015.

On February 19, 2015, the Company issued 600,000 shares of Series B PIK Convertible Preferred Stock to the Company’s executive officer as payment under his employment agreement.

See Notes 5 and 7 regarding the partial assignment of the right to acquire 9 condominium units from an entity in which a stockholder of the Company has an interest.

 

Note 13  Income Taxes

The reconciliation of income tax benefit at the U.S. statutory rate of 34% to the Company’s effective rate for the periods presented is as follows:

U.S. federal statutory rate   (34.0)
State income tax, net of federal benefit   (4.0)
Increase in valuation allowance   38.0 
Income tax provision (benefit)   0.0 

As of December 31, 2015, the Company had approximately $5,515,123 of federal and state net operating loss carryovers (“NOLs”) which begin to expire in 2032. Utilization of the NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the related regulations.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

Note 14  Stockholders Equity

Common stock

The Company is authorized to issue 10,000,000,000 shares of common stock, par value $0.000001 per share.

On October 31, 2014, the Company effected a 1-for-500 reverse stock split of its issued and outstanding shares of common stock and on September 11, 2015, the Company effected a 1-for-1000 reverse stock split of its issued and outstanding shares of common stock. All relevant information relating to numbers of shares and per share information have been retrospectively adjusted to reflect the reverse stock split for all periods presented.

During the year ended December 31, 2015, $36,734 of the principal amount of the convertible note payable to a related party referred to in Note 8 was converted into 2,070,300 shares of common stock according to the terms of the convertible instrument.

During the year ended December 31, 2015, $38,234 of the principal amount of the convertible notes payable referred to in Note 11 was converted into 187,314,049 shares of common stock according to the terms of the convertible instrument.

During the year ended December 31, 2015, 1,599,230,444 shares of common stock were issued as consulting fees and stock compensation valued at approximately $208,916.

As of December 31, 2015 and 2014, respectively, 1,784,461,982 and 846,745 shares of Common Stock were issued and outstanding.

Preferred stock

The Company is authorized to issue 8,000,000 shares of preferred stock, par value of $0.000001 per share, in series. Information as to each designated series is as follows:

Series B PIK Convertible Preferred Stock

The Board of Directors of the Company has designated 2,000,000 shares of preferred stock as Series B PIK Convertible Preferred Stock.

Shares of this series have a liquidation preference of $1.00, plus the value of the dividends accrued and unpaid thereon through the date of liquidation. Holders of shares of this series are entitled to receive cumulative dividends at the quarterly rate of $2.1875 per share from the date of their original issuance through the date of redemption or conversion thereof, payable in arrears on March 31, June 30, September 30 and December 31 of each year. Until December 31, 2019, such dividends shall be paid, at the Company’s option, (a) in kind, as fully paid and nonassessable shares of this series at the rate of 0.00021875 of a share for each $1.00 not paid in cash or (b) in cash. After December 31, 2017, shares of this series will be redeemable at the option of the Company, in whole or in part from and after the time that the closing price of the Common Stock on each trading day occurring during any period of twenty (20) consecutive trading days equals or exceeds $1.40 per share (subject to adjustment for stock splits, stock dividends and similar events). Each share will be redeemed in cash for $1.00, plus the value of the dividends accrued and unpaid thereon through the redemption date. Shares of this series are convertible into Common Stock after February 1, 2016, such that each share will be convertible into a number of shares of Common Stock equal to its liquidation value divided by 90% of the Market Price, as defined, of a share of Common Stock.

 

As of December 31, 2015 and 2014, 1,200,000 and 0 shares of this series were issued and outstanding.

Series C PIK Convertible Preferred Stock

The Board of Directors of the Company has designated 100,000 shares of preferred stock as Series C PIK Convertible Preferred Stock.

Shares of this series have a liquidation preference of $100, plus the value of the dividends accrued and unpaid thereon through the date of liquidation. Holders of shares of this series are entitled to receive cumulative dividends at the quarterly rate of $2.1875 per share from the date of their original issuance through the date of redemption or conversion thereof, payable in arrears on March 31, June 30, September 30 and December 31 of each year. Until December 31, 2019, such dividends shall be paid, at the Company’s option, (a) in kind, as fully paid and nonassessable shares of this series at the rate of 0.00021875 of a share for each $1.00 not paid in cash or (b) in cash. After December 31, 2017, shares of this series will be redeemable at the option of the Company, in whole or in part from and after the time that the closing price of the Common Stock on each Trading Day occurring during any period of twenty (20) consecutive trading days equals or exceeds $1.00 per share (subject to adjustment for stock splits, stock dividends and similar events). Each share will be redeemed in cash for $100, plus the value of the dividends accrued and unpaid thereon through the redemption date. These shares are convertible into Common Stock after February 1, 2016, such that each share will be convertible into a number of shares of Common Stock equal to its liquidation value divided by 90% of the Market Price, as defined, of a share of Common Stock.

As of December 31, 2015 and 2014, 45,354 and 0 shares of this series were issued and outstanding.

Series D PIK Convertible Preferred Stock

The Board of Directors of the Company has designated 400,000 shares of preferred stock as Series D PIK Convertible Preferred Stock.

These shares have a liquidation preference of $100, plus the value of the dividends accrued and unpaid thereon through the date of liquidation. Holders of shares of this series are entitled to receive cumulative dividends at the quarterly rate of $2.1875 per share from the date of their original issuance through the date of redemption or conversion thereof, payable in arrears on March 31, June 30, September 30 and December 31 of each year. Until December 31, 2019, such dividends shall be paid, at the Company’s option, (a) in kind, as fully paid and nonassessable shares of this series at the rate of 0.00021875 of a share for each $1.00 not paid in cash or (b) in cash. . After December 31, 2017, shares of this series will be redeemable at the option of the Company, in whole or in part from and after the time that the closing price of the Common Stock on each trading day occurring during any period of twenty (20) consecutive Trading Days equals or exceeds $1.00 per share (subject to adjustment for stock splits, stock dividends and similar events). Each share will be redeemed in cash for $100, plus the value of the dividends accrued and unpaid thereon through the redemption date. These shares are convertible into Common Stock at any time, such that each share will be convertible into a number of shares of Common Stock equal to its liquidation value divided by 90% of the Market Price, as defined, of a share of Common Stock.

As of December 31, 2015 and, 2014, no shares of this series were issued and outstanding.

Note 15 – Stock-Based Compensation

On November 4, 2014, the Board of Directors adopted the Metrospaces, Inc. Restricted Stock Plan. The plan is administered by the Company’s Compensation Committee. Also on November 4, 2014, the Compensation Committee granted an award of 800,000,000 shares under the plan to Oscar Brito, who then served as the Company’s Principal executive officer. The shares awarded vest as follows:

1.After the Company publishes its audited annual financial statement for the year ended December 31, 2019, the Grantee shall receive a number of shares (subject to the Base Amount and Additional Annual Amount, as defined in the Plan), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price (as defined in the Plan), of twenty percent (20%) of the sum of the amounts, if any, shown as net income on the Company’s statement of operations for the years ended December 31, 2019, 2018, 2017, 2016 and 2015.
2.For each of the years ended December 31, 2020, 2021, 2022, 2023 and 2024, when the Company publishes its audited annual financial statements with respect to such year, the Grantee shall receive a number of shares (subject to the Base Amount and Additional Annual Amount), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price, of twenty percent (20%) of the amount, if any, shown as net income on the Company’s statement of operations for such year.
 
3.Shares of Restricted Stock that have not vested on the date of the publication of the Company’s audited annual financial statements for the year ended December 31, 2024, shall never vest and the grantee shall have no further rights with respect to them.

As a result of the 1-for 1,000 reverse stock split that was effected on September 11, 2015, the number of shares of Common Stock held by Mr. Brito was reduced to 800,000. In order to retain his services, on October 25, 2015, the Compensation Committee granted an award of 799,200,000 shares under the plan to Mr. Brito, who was then the Company’s Senior Vice President. Also on that date, the Compensation Committee granted an award of 800,000,000 shares under the plan to Carlos Silva, who had become the Company’s Principal executive officer. The shares awarded vest as follows:

  1.      After the Company publishes its audited annual financial statement for the year ended December 31, 2020, the Grantee shall receive a number of shares (subject to the Base Amount and Additional Annual Amount), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price, of twenty percent (20%) of the sum of the amounts, if any, shown as net income on the Company’s statement of operations for the years ended December 31, 2020, 2019, 2018, 2017 and 2016.
  2.      For each of the years ended December 31, 2021, 2022, 2023, 2024 and 2025, when the Company publishes its audited annual financial statements with respect to such year, the Grantee shall receive a number of shares (subject to the Base Amount and Additional Annual Amount), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price, of twenty percent (20%) of the amount, if any, shown as net income on the Company’s statement of operations for such year.

 

  3.      Shares of Restricted Stock that have not vested on the date of the publication of the Company’s audited annual financial statements for the year ended December 31, 2024, shall never vest and the grantee shall have no further rights with respect to them.
  4.      Restricted shares may not vest in any person under more than one Award Agreement in any year, except to the extent that there are insufficient shares available under an agreement
       

No shares under either award had vested as of December 31, 2015.

Note 16  Subsequent Events

Management has evaluated events occurring after the date of these financial statements through the date that these financial statements were issued.

After December 31, 2015, the Company issued 556,063,586 shares of Common Stock upon conversion of convertible promissory notes.

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act as of December 31, 2015. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were not effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be disclosed by our company in the reports we file or submit under the Exchange Act is: (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management has concluded that our internal control over financial reporting was not effective as of December 31, 2015. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting pursuant to temporary rules of the Commission.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with our assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified the following material weaknesses in our internal control over financial reporting as of December 31, 2015:

· We have difficulty in accounting for complex accounting transactions particularly in relation to complex equity transactions.

 

· Documented processes do not exist for several key processes

 

Because of the material weaknesses noted above, we have concluded that we did not maintain effective internal control over financial reporting as of December 31, 2015, based on Internal Control over Financial Reporting – Guidance for Smaller Public Companies issued by COSO.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following persons were serving as an executive officers in the following positions on December 31, 2015:

 Name   Age   Position
Carlos Daniel Silva   55   CEO and Director
Oscar Brito   44   CFO and Director
Alexander Victor Batallés   38   Director

 

 

Carlos Daniel Silva (55). Mr. Silva has served as the Company’s chief executive officer and one of its directors since January 2015. He was admitted to practice as an attorney in Argentina in 1986, and in 2011 obtained an MBA from Universidad Di Tella in Buenos Aires, Argentina. From 1986 to 1998, as a consultant, he served in various international and multilateral agencies including, World Bank, Inter-American Development Bank, the United Nations Program for Environment, United Nations Development Programme, German Technical Cooperation Agency, the Latin American Parliament. During those years, he provided professional services as a private consultant to several private and public international consulting firms, including Radian International (USA), Tetra Tech (USA), PRC EMInc (USA), AG (Spain), ERM (UK). Between 1998 and 2000 he was Vice President of ERM (UK) in Argentina. Between 2000 and 2006, he served as chairman of Deloitte & Touche Argentina Environmental, a Deloitte & Touche Tohmatsu company. He founded and became CEO of Ikal Winery & Lodge (Argentina) in 2007. Ikal Winery and Lodge is a world-class 75-hectare vineyard in Mendoza, Argentina. In 2008, he became Vice President of Prohotel International (Houston, USA) in South America, and owner of several hotels, including Ikal del Mar and Esencia, both in Riviera Maya, Mexico. Mr. Silva is a recognized hotel entrepreneur having developed and sold the Hotel Esencia and Ikal del Mar (now Viceroy) in Playa del Carmen. In the academic field, he has been a professor at the University of Buenos Aires, Argentina Catholic University, the University of Belgrano and the School of Business at the University of San Andrés, having published more than 10 books in his field.

Oscar Brito (44). Mr. Brito founded Urban Spaces in April 2012 and has been its president since that time. On August 13, 2012, he was elected as Director, President, and Acting Chief Financial Officer of the Company. He ceased to be president of the Company and became its Senior Vice President on June 17, 2014. He also co-founded GBS in 1997, and has served as its Managing Partner since its founding. Since April 2012, Mr. Brito has been inactive in GBS’ business and management, but GBS has not formally replaced him as its president. GBS is in the business of assisting its clients in raising capital and providing them with business advice and in investing in real estate and other project projects for its own account. Since its inception, GBS has assisted its clients in raising approximately $350 million in several financial transactions, of which approximately $200 million involved real estate, and has made investments of approximately $8 million on its own account in several projects, including the Bulgari Hotel in London, England. In 1995, Mr. Brito received a law degree from Universidad Catolica Andres Bello in Caracas, Venezuela, and in 2005, received an MBA from Duke University in Durham, North Carolina.

Alexander Victor Batallés (38). Mr. Batallés has served as president and chief executive officer of Raul V. Batallés S.A., a fire extinguisher business located in Buenos Aires, Argentina, since 2008. He received the degree of Masters in Business Administration from Universidad Torcuato di Tella in Buenos Aires in 2012 and the degree of Bachelor of Science (Economics) from the Massachusetts Institute of Technology in Cambridge, Massachusetts, in 2004.

Messrs. Silva, Brito and Batallés will serve as directors until the next annual meeting of the Company’s stockholders or until their successors have been elected and duly qualified. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement. There was and is no arrangement or understanding between any director or officer of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and, to the Company’s knowledge, there is no arrangement, agreement, plan or understanding (a) as to whether non-management stockholders will exercise their voting rights to continue to elect the current directors to the Company’s board and or (b) between non-management stockholders and management under which non-management stockholders may directly or indirectly participate in or influence the management of the Company’s affairs.

The prior general business experience of our directors and, in the case of Messrs. Silva and Brito, their experience in real estate, as well as their financial interest in the Company, led to the conclusion that they were desirable persons to serve as directors.

 

Family Relationships

None.

Related Party Transactions

The following describes transactions for FY 2015 and FY 2014, or any currently proposed transactions, in which the Company was or is to be a participant and in which any related person had or will have a direct or indirect material interest (other than compensation described in this Item 10 under “Executive Compensation”):

GBS

On April 20, 2012, GBS, in which Mr. Brito holds one-third of the shares, assigned to UPLLC the right to receive the 9 condominium units described under the caption “Business – Projects – Argentina – The Chacabuco Project” from GBS in exchange for the agreement of UPLLC to pay $750,000 to GBS without interest in installments of $350,000 on April 15, 2013, and of $400,000 on April 15, 2014. GBS orally represented to UPLLC that these units would be delivered to UPLLC by the end of 2012, but such delivery has not yet occurred owing to delays in the project. On March 22, 2013, GBS and UPLLC entered into an agreement under which (i) GBS represented that the units will be delivered by May 30, 2013, (ii) extended the above due dates to October 15, 2013 and 2014, respectively, (iii) in the event that the units are not delivered by May 30, 2013, provided for the automatic extension of each of these due dates by the number of days that elapse after that date until delivery and (iv) released GBS from liability for the inaccuracy of its representation that these units would be delivered to UPLLC by the end of 2012.

In connection with this assignment, Urban Spaces pledged to GBS all of the membership interests in UPLLC owned by Urban Spaces are pledged to secure the obligations of UPLLC to pay GBS $750,000 under the instrument whereby GBS assigned the right to receive the 9 units comprising the Chacabuco project to UPLLC. In the event that the UPLLC were to default in this obligation, GBS would be entitled to foreclose on and sell these membership units at a public or private sale and apply the proceeds of such sale to satisfy this obligation. The result of such sale would be that Urban Spaces would no longer own UPLLC, which could materially and adversely affect the Company and the holders of its Common Stock.

As indicated above, the Company reduced its liability to GBS to $400,000 by selling the right to acquire 4 units to GBS and eliminated the remaining liability by exchanging the $450,000 of indebtedness for 450,000 shares of our Series B Convertible PIK Preferred Stock.

The Company believes that, in light of the fact that GBS acquired these units at preconstruction prices when financing for the project was not yet fully in place, the fact that the project was relatively advanced when the units were assigned to UPLLC, the rate of inflation in Argentina and the general increase in real estate prices in that country, the price of the assignment was fair to UPLLC.

 

Chacabuco Project

As indicated above, GBS, in which Mr. Brito holds one-third of the shares, agreed to purchase substantially similar 9 loft-type efficiency units in the Chacabuco Project. GBS assigned its rights to receive these units to UPLLC. In the instrument of assignment, UPLLC agreed to pay GBS $750,000 in consideration of its assignment and UPLLC. This amount was originally to be paid in installments of $400,000 and $350,000, due on April 15, 2013, and April 15, 2014, respectively. The dates for these payments were first extended to October 15, 2013, and October 15, 2014, respectively, because of delays in completion of this project. Due to further delays, they were extended further to dates that were based on the actual completion date of the project. On December 5, 2014, the Company sold the rights to 4 of the units to GBS for $350,000, reducing the amount owed to GBS to $400,000. On February 19, 2015, this indebtedness was exchanged for 450,000 shares of our Series B Convertible Preferred Stock.

Tulasi Mandir Spa and Hotel

On October 20, 2015, we acquired 60% of the capital stock of Inversora Caribe Mar. Carib Mar owns approximately 130,000 square feet of land on Coche Island in the State of Nueva Esparta, Venezuela, on which it plans to build a hotel. After the hotel is built, we will either operate it or enter into an arrangement with a third party for its operation. This project includes architectural and engineering plans and has received construction approval. The acquisition occurred as follows:

·On July 7, 2014, Oscar Brito, Senior Vice President of the Company, acquired 312,500 shares of Caribe Mar, comprising 50% of its shares, from LW Proyectos y Construcciones C.A., a Venezuelan corporation (the “LW Shares”) for 17,333,250 Bolivars or approximately $250,000, and acquired 62,500 shares of Caribe Mar, comprising 10% of its shares, from Isaias Arturo Medina Meijas, an unrelated person, for 312,500 Bolivars or approximately $4,500.
·On October 20, 2015, Mr. Brito transferred these shares to the Company for $500.
·Mr. Medina held a right of first refusal with respect to the transfer of the LW Shares, which he waived under an agreement with the Company, dated June 4, 2015, in consideration of a payment of $50,000 in cash and 2,000 shares of the Series D PIK Convertible Preferred Stock of the Company. These shares have been delivered, but the cash consideration will not be delivered until the transaction in closed.

Hotel Santo Cristo de Pariaguan

On September 30, 2015, the Company and Oscar Brito, its Senior Vice President and a director, entered into an agreement entitled “Cesión de Derecho Preferencial de Acciones de la Sociedad Mercantil Promotodora de Turismo Hecos, C.A.,” under which Mr. Brito will transfer to the Company 1,000 shares of Promotodora de Turismo Hecos, C.A., which he acquired on September 30, 2015, for approximately $92,500, in exchange for 2,500 shares of the Company’s Series D PIK Convertible Preferred Stock, having a liquidation value of $250,000. The contact was approved by the Board of Directors, after Mr. Brito disclosed his interest in it, by a majority of the board, with Mr. Brito abstaining.

Exchange Agreement

On February 19, 2015, the Company entered into an Exchange Agreement, dated as of that date, with Oscar Brito, Senior Vice President and a director of the Company, and GBS, of which Sr. Brito is the president, a director and the holder of one-third of its outstanding shares. Under this agreement (the “Exchange Agreement”), Mr. Brito exchanged $150,000 of indebtedness owed to him by the Company and the interest accrued thereon for 150,000 shares of the Company’s Series B PIK Convertible Preferred Stock and GBS exchanged $450,000 of indebtedness owed to it by the Company and the interest accrued thereon for 450,000 such shares.

Involvement in Certain Legal Proceedings

None of the Company’s directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree, or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters, if any, that were dismissed without sanction or settlement.

 

Committees

The Company has established a Share Reserve Committee of its Board of Directors to administer its reserves for conversion of its convertible notes. The Company has not established any other committees, including a compensation committee, nominating committee or an audit committee, although it is permitted to do so under the General Corporation Law of the State of Delaware and its by-laws. The Company believes that, until it begins to develop a compensation plan for its officers and directors, a compensation committee is not necessary.

Meetings of Directors

The Board of Directors did not meet during 2015, but acted by consent on several occasions.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership of equity securities of the Company with the Securities and Exchange Commission. Officers, directors and greater-than 10% shareholders are required by rules of the Securities and Exchange Commission to furnish the Company with copies of all Section 16(a) forms that they file.

Mr. Alexander Victor Batallés, a director, and Messrs. Oscar Brito and Carlos Daniel Silva, officers, directors and holders of more than 10% of the Company’s Common Stock (which is the only registered class of its securities), were required to file such forms during the last fiscal year. The Company is unaware of any other holders of more than 10% of the Company’s Common Stock during its last fiscal year.

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during the Company’s most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year:

·Mr. Batallés failed to file a Form 3, which would have stated that he beneficially owned no Common Stock on the date that it was required to be filed.
·Mr. Brito failed to file a Form 4 relating to his acquisition of 800,000,000 shares of Common Stock under the Restricted Stock Plan on November 19, 2014, a Form 4 relating to his acquisition of 799,200,000 shares of Common Stock under the Restricted Stock Plan on September 11, 2015, and a Form 4 relating to his acquisition of 150,000 shares of Series B Preferred Stock on February 19, 2015, pursuant to the Exchange Agreement.
·Mr. Silva failed to file a Form 3, which would have stated that he beneficially owned no Common Stock on the date that it was required to be filed and that he had received 600,000 shares of Series B PIK Convertible Preferred Stock under his employment agreement with the Company. He failed to file a Form 4 relating to his acquisition of 800,000,000 shares of Common Stock under the Restricted Stock Plan on September 11, 2015.

 

These persons were also required to file Form 5 with respect to the acquisitions described above by reason of the fact that the Forms 3 and 4 described above were not timely filed.

The ownership and acquisition of the securities described in the previous paragraph has been disclosed in this report and in other reports previously filed by the Company. The Company has received representations from Messrs. Batallés, Brito and Silva that they disposed of no securities of the Company during said fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

(a)       Compensation

The following table sets forth compensation awarded to, earned by or paid to our Chief Executive Officer and the four other most highly compensated executive officers with compensation in excess of $100,000 for the years ended December 31, 2015 and 2014 (collectively, the “Named Executive Officers”).

SUMMARY COMPENSATION TABLE

 

Name and principal position   Year    Salary    Bonus    Stock Awards(1)    Option Awards    Non-Equity Incentive Plan Compensation    Nonqualified Deferred Compensation Earnings    All Other Compensation   Total
Carlos Daniel   2015   $50,000    —     $4,000,000    —      —      —      —     $4,050,000
Silva, CEO   2014    —      —      —      —      —      —      —    
    2013    —      —      —      —      —      —      —    
Oscar Brito,   2015   $15,000    —     $4,000,000    —      —      —      —     $4,015,000
CFO   2014   $15,000    —     $4,000,000    —      —      —      —     $4,015,000
    2013   $15,000    —      —      —      —      —      —     $15,000
(1)All stock awards were restricted stock, which does not vest, if at all, until 2020. For further information, see “Equity Awards, Grant Based Awards, Stock Options, Pension Benefits and Deferred Compensation” in this Item 10.

Employment Arrangements

On February 19, 2015, we entered into a Contrato de Trabajo (a labor agreement), dated as of that date, with Carlos Daniel Silva, our chief executive officer and one of our directors. Under this agreement, Mr. Silva agreed to serve as chief executive officer and a director of Company for 5 years and we agreed (i) to pay him a salary of $50,000 per year, plus such bonuses and incentives as the board of directors may determine, and (ii) to issue 600,000 shares of our Series B PIK Convertible Preferred Stock to him. None of such salary has been paid and has been accrued as debt on the Company’s consolidated financial statements.

Since the inception of Urban Spaces, Mr. Brito has received a salary of $1,250 per month from Urban Spaces and is to be repaid for his expenses under arrangements that have not been formalized. None of such salary has been paid and has been accrued as debt on the Company’s consolidated financial statements.

Compensation Analysis

The Company is presently paying compensation to its officers and directors that the Company believes is inadequate in light of the compensation that they might be able to obtain from other employers. In particular, the Company believes that adequate compensation for a person with their experience compensation at a company in a similar business and at a like stage of its development would involve a base salary of at least $150,000 per year, a cash bonus and non-cash incentive compensation based on the performance of the Company, and stock options. These base salaries are substantially in excess of the present base salaries of our officers, which is $50,000 per year in the case of Mr. Silva and $15,000 per year in the case of Mr. Brito; both base salaries have been accrued but not paid. While Messrs. Silva and Brito have been awarded large numbers of restricted shares under our Restricted Stock Plan, but unless the Company becomes profitable, these shares will never vest. The Company recognizes that it needs to develop compensation programs that will provide adequate cash and short- and long-term incentive compensation in addition to its Restricted Stock Plan in order to attract and retain qualified officers and key employees, but the Company has not yet determined what the compensation program is designed to reward; the various elements of compensation; why the Company chooses to pay each element; how it will determine the amount to be paid for each element (or the formula for such payment); and how its decisions regarding that element fit into its overall compensation objectives and affect decisions regarding other elements. In addition, the Company’s financial condition and the market price of the Common Stock make it difficult, if not impossible to pay competitive base salaries and design attractive compensation plans.

 

(b)       Equity Awards, Grant Based Awards, Stock Options, Pension Benefits and Deferred Compensation

Grants of Plan Based Awards

Estimated future payouts under equity incentive plan awards

          
Name  Grant
 Date
   Threshold    Maximum    Grant date fair
 value of stock
and option awards
 
Carlos Daniel Silva  10/25/15  $0   $4,000,000   $4,000,000 
Oscar Brito  11/19/14  $0   $4,000,000   $4,000,000 
Oscar Brito  10/25/15  $0   $4,000,000   $4,000,000 

 

Under the Company’s Restricted Stock Plan, Mr. Silva was awarded 800,000,000 shares of restricted common stock on September 11, 2015; Mr. Brito was awarded 800,000 shares of restricted common stock on November 19, 2014 (800,000,000 shares prior to the 1-for-1,000 reverse split that was effected on September 11, 2015) and was awarded an additional 799,200,000 shares of restricted stock on October 25, 2015. The grant fair value of stock and option awards is recorded in the above table for each award at $4,000,000 because the market value of the shares that can vest under the plan is limited to $4,000,000, as determined on the dates on which shares vest, although each of these awards had a substantially higher market value on the award date. The award made on October 25, 2015, was made by the Compensation Committee in order to retain Mr. Brito’s services, after the 1-for-1,000 reverse split that was effected on September 11, 2015, reduced the number of his restricted shares to 800,000.

The 800,000 restricted shares awarded to Mr. Brito on November 19, 2014, vest as follows:

·After the Company publishes its audited annual financial statement for the year ended December 31, 2019, Mr. Brito shall receive a number of shares (subject to the limitation that after shares having a market value of $2,000,000 have vested, he may receive shares having a maximum market value in any subsequent year), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price, as defined, of twenty percent (20%) of the sum of the amounts, if any, shown as net income on the Corporation’s statement of operations for the years ended December 31, 2019, 2018, 2017, 2016 and 2015.
·For each of the years ended December 31, 2020, 2021, 2022, 2023 and 2024, when the Corporation publishes its audited annual financial statements with respect to such year, he may receive a number of shares (subject to the limitation that after shares having a market value of $2,000,000 have vested, he may receive shares having a maximum market value in any subsequent year), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price, as defined of twenty percent (20%) of the amount, if any, shown as net income on the Corporation’s statement of operations for such year.
·Shares of Restricted Stock that have not Vested on the date of the publication of the Corporation’s audited annual financial statements for the year ended December 31, 2024, shall never Vest and he shall have no further rights with respect to them.

The 800,000,000 restricted shares awarded to Mr. Silva and the 799,200,000 restricted shares awarded to Mr. Brito on October 25, 2015, vest as follows:

·After the Company publishes its audited annual financial statement for the year ended December 31, 2020, each of them shall receive a number of shares (subject to the limitation that after shares having a market value of $2,000,000 have vested, he may receive shares having a maximum market value in any subsequent year), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price, as defined, of twenty percent (20%) of the sum of the amounts, if any, shown as net income on the Corporation’s statement of operations for the years ended December 31, 2020, 2019, 2018, 2017 and 2016.
·For each of the years ended December 31, 2021, 2022, 2023, 2024 and 2025, when the Corporation publishes its audited annual financial statements with respect to such year, each of them may receive a number of shares (subject to the limitation that after shares having a market value of $2,000,000 have vested, each of them may receive shares having a maximum market value in any subsequent year), free of all restrictions, equal to the market value on the date of such publication, determined on the basis of the Last Price, as defined of twenty percent (20%) of the amount, if any, shown as net income on the Corporation’s statement of operations for such year.
 
·Shares of Restricted Stock that have not Vested on the date of the publication of the Corporation’s audited annual financial statements for the year ended December 31, 2025, shall never Vest and they shall have no further rights with respect to these shares.

 

Except as set forth above, the Company has never granted equity or grant based awards, stock options or pension benefits to its officers and has not entered into any deferred compensation plan or arrangement with them.

(c)       Director Compensation

The Company has never paid or deferred any compensation to its directors, nor has it ever granted stock or options awards, non-equity incentive plan compensation or pension to them.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Persons Other than Management

The following table sets forth certain information regarding the beneficial ownership of Common Stock as of December 31, 2015, for each person, other than directors and executive officers, who is known by us to own beneficially five percent (5%) or more of our outstanding Common Stock.

Security Ownership of Five Percent (5%) Stockholders

Title of class   Name and address of beneficial owner   Amount and nature of beneficial ownership   Percent of class
Common Stock   None   ----   ----


Security Ownership of Management

The following table sets forth certain information regarding the beneficial ownership of Common Stock as of December 31, 2015, for the following: (1) each of our directors and executive officers and (2) our directors and executive officers as a group.

Security Ownership of Management

Title of class  Name of Beneficial Owner  Amount and nature of Beneficial Ownership (1)  Percent of class
Common Stock  Carlos Daniel Silva   800,000,000    44.8%(1)
   Oscar Brito   800,004,000    44.8%(1)
   Alexander Victor Batallés   ----    ---- 
Series B Convertible Preferred Stock  Carlos Daniel Silva   600,000    50.0%(2)
   Oscar Brito   150,000    12.5%(2)(3)
Directors and Executive officers as a group (2 persons) (1)  Common Stock   1,600,004,000    89.7.7%
   Series B Convertible Preferred Stock   750,000(2)   62.5%(2)

 

(1)Based upon 1,784,461,982 shares of Common Stock outstanding as of December 31, 2015.
(2)The Series B Convertible Preferred Stock was not convertible into Common Stock on, or within 60 days after, December 31, 2015.
(3)In addition, GBS, in which Mr. Brito holds a 33.33% interest, beneficially owns 450,000 shares of Series B Convertible Preferred Stock, constituting 37.5% of the class

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

None of our directors or executive officers or their respective immediate family members or affiliates is indebted to us. As of the date of this report, there is no material proceeding to which any of our directors, executive officers or affiliates is a party or has a material interest adverse to us.

Currently, the Company has only one director who is independent namely, Mr. Batallés The Company has used the definition of “independent director” set forth in NASDAQ Stock Market Listing Rule 5605(a)(2) to make this determination. This rule provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

This rule further provides that a director cannot be considered independent if:

·he is, or at any time during the past three years was, an employee of the company;
·he or his family member accepted any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions);
·his family member is, or at any time during the past three years was, an executive officer of the company;
·he or his family member is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
·he or his family member is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the Company served on the compensation committee of such other entity; or
·he or his family member is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

We were billed $12,500 for FY 2014 and $14,500 for FY 2014, and, for professional services rendered by the principal accountant for the audit of our annual financial statements, the review of our quarterly financial statements, and other services performed in connection with our statutory and regulatory filings.

Audit Related Fees

There were $0 in audit related fees for each of FY 2015 and FY 2014. Audit related fees include fees for assurance and related services rendered by the principal accountant related to the audit or review of our financial statements, not included in the foregoing paragraph.

Tax Fees

Tax fees were $0 for each of FY 2015 and FY 2015.

 

All Other Fees

There were no other professional services rendered by our principal accountant during the last two fiscal years that were not included in the above paragraphs.

Preapproval Policy

Our Board of Directors reviews and approves audit and permissible non-audit services performed by its independent accountants, as well as the fees charged for such services. In its review of non-audit service fees and its appointment of Paritz & Company, P.A. as the Company’s independent accountants, the Board of Directors considered whether the provision of such services is compatible with maintaining independence.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)     Financial Statements and Schedules. The following financial statements and schedules for the Company as of December 31, 2015, are filed as part of this report.

(1)     Consolidated financial statements of the Company.

(2)     Financial statement schedules:

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(A) EXHIBITS.

The following Exhibits are incorporated herein by reference or are filed with this report as indicated below.

 

Exhibit No.                                 Description
     
3.1   Certificate of Incorporation of the Registrant. Incorporated by reference to Exhibit 3.4 to Registration Statement on Form S-1, Registration No. 333-166237.
3.2   Certificate of Conversion from Florida corporation to Delaware corporation filed in Florida. Incorporated by reference to Exhibit 3.5 to Registration Statement on Form S-1, Registration No. 333-166237.
3.3   Certificate of Conversion from Florida corporation to Delaware corporation filed in Delaware. Incorporated by reference to Exhibit 3.6 to Registration Statement on Form S-1, Registration No. 333-166237.
3.4   Certificate of Amendment to Certificate of Incorporation dated January 18, 2008. Incorporated by reference to Exhibit 3.7 to Registration Statement on Form S-1, Registration No. 333-166237.
3.5   Certificate of Amendment to Certificate of Incorporation dated March 31, 2010. Incorporated by reference to Exhibit 3.8 to Registration Statement on Form S-1, Registration No. 333-166237.
3.6   Articles of Merger. Incorporated by reference to Exhibit 3.6 to Registration Statement on Form S-1, Registration No. 333-186559.
3.7   Certificate of Amendment to Certificate of Incorporation dated October 26, 2012 and filed October 31, 2012, changing corporate name of the Registrant to Metrospaces, Inc. Incorporated by reference to Exhibit 3.7 to Registration Statement on Form S-1, Registration No. 333-186559.
3.8   Bylaws. Incorporated by reference to Exhibit 3.9 to Registration Statement on Form S-1, Registration No. 333-166237.
3.9   Certificate of Designations of Series B PIK Convertible Preferred Stock. Filed as Exhibit 3.1 to Current Report on Form 8-K filed by the Registrant on February 20, 2015, and incorporated herein by reference.
3.10   Certificate of Designations of Series C PIK Convertible Preferred Stock. Filed herewith.
3.11   Certificate of Designations of Series D PIK Convertible Preferred Stock. Filed herewith.
10.1   Exchange Agreement, dated as of August 13, 2012, by and between Registrant and Richard S. Astrom. Incorporated by reference to Exhibit 10.3 to Registration Statement on Form S-1, Registration No. 333-186559.
10.2   Promissory Note, dated August 13, 2012, made by the Registrant in favor of Richard S. Astrom. Incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-1, Registration No. 333-186559.
10.3   Promissory Note Exchange Agreement, dated as of February 19, 2014, by and between the Company and Richard S. Astrom. Incorporated by reference to Exhibit 10.14 to Current Report of the Registrant on Form 8-K, dated March 13, 2014.
10.4   Convertible Promissory Note, dated as of February 19, 2014, made by the Company in favor of Richard S. Astrom. Incorporated by reference to Exhibit 10.15 to Current Report of the Registrant on Form 8-K, dated March 13, 2014.
10.5   Convertible Promissory Note Exchange Agreement, dated as of May 1, 2014, by and between the Registrant and Richard S. Astrom. Filed herewith.
10.6   Convertible Promissory Note, dated as of May 1, 2014, by and between the Registrant and Richard S. Astrom. Filed herewith.
10.7   Agreement of Amendment and Rescission, dated as of July 11, 2014, by and among the Registrant, Richard S. Astrom and Dixie Assets Management, Inc. Filed herewith.
10.8   8% Convertible Redeemable Note, dated February 24, 2014, in the principal amount of $40,000, made by the Registrant in favor of LG Capital Funding, LLC. Filed herewith.
10.9   Amended and Restated Convertible Promissory Note, dated as of July 28, 2015, in the principal amount of $42,000, made by the Registrant in favor of Apollo Capital Corp. Filed herewith.
10.10   Acta de Asamblea Extraordinaria de Accionistas de la Empresa “Inversora Caribe Mar C.A. Filed as Exhibit 10.9 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.11   Cesión de Acciones de la Sociedad Mercantil Inversora Caribe Mar, C.A. Filed as Exhibit 10.10 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.12   Cesión de Derecho Preferencial de Acciones de la Sociedad Mercantil Inversora Caribe Mar, C.A. Filed as Exhibit 10.11 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.13   Cesión de Acciones de la Sociedad Mercantil Promotora de Turismo Hecos, C.A. Filed as Exhibit 10.12 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.

 

 

10.14   Contrato de Trabajo, dated as of February 19, 2015, by and between Registrant and Carlos Daniel Silva. Filed as Exhibit 10.1 to Current Report on Form 8-K filed by the Registrant on February 20, 2015, and incorporated herein by reference.
10.15   Exchange Agreement, dated as of February 19, 2015, by and between Registrant and the Exchangers named therein. Filed as Exhibit 10.2 to Current Report on Form 8-K filed by the Registrant on February 20, 2015, and incorporated herein by reference.
10.16   Contrato de Compraventa de Acciones, dated January 13, 2015, by and between MRT Consulting S.A. and the Registrant. Filed as Exhibit 10.1 to Current Report on Form 8-K filed by the Registrant on January 21, 2015, and incorporated herein by reference.
10.17   Convertible Promissory Note, dated January 13, 2015, made by Registrant in favor of MRT Consulting S.A. Filed as Exhibit 10.2 to Current Report on Form 8-K filed by the Registrant on January 21, 2015, and incorporated herein by reference.
10.18   Restricted Stock Plan of the Registrant. Filed as Exhibit 10.2 to Current Report on Form 8-K filed by the Registrant on November 19, 2014, and incorporated herein by reference.
10.19   Award Agreement, dated November 5, 2014, between the Registrant and Oscar Brito. Filed as Exhibit 10.3 to Current Report on Form 8-K filed by the Registrant on November 19, 2014, and incorporated herein by reference.
10.20   Amended Restricted Stock Plan of the Registrant. Filed as Exhibit 10.8 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.21   Award Agreement, dated September 23, 2015, between the Registrant and Carlos Daniel Silva. Filed as Exhibit 10.4 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.22   Award Agreement, dated September 23, 2015, between the Registrant and Oscar Britto. Filed as Exhibit 10.5 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.23   Award Agreement, dated October 22, 2015, between the Registrant and Carlos Daniel Silva. Filed as Exhibit 10.6 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.24   Award Agreement, dated October 22, 2015, between the Registrant and Oscar Brito. Filed as Exhibit 10.7 to Current Report on Form 8-K filed by the Registrant on November 10, 2015, and incorporated herein by reference.
10.25   Boleto de Compraventa, dated December 5, 2014, by and between the Registrant and GBS Capital Partners. Filed as Exhibit 10.23 to Annual Report on Form 10-K filed by the Registrant on April 15, 2015, and incorporated herein by reference.
10.26   Form of Convertible Promissory Notes made by the Registrant, on the one hand, and Dixie Assets Management. Filed herewith.
21   Subsidiaries of the Registrant. Filed herewith.
31.1   Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. Filed herewith.
31.2   Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. Filed herewith.
32.1   Section 1350 Certification of Principal Executive Officer. Filed herewith.
 32.2    Section 1350 Certification of Principal Financial Officer. Filed herewith.

 

 

 

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

METROSPACES, INC.

By: /s/ Carlos Daniel Silva
Name: Carlos Daniel Silva
Title: Principal Executive Officer

Date: March 21, 2017

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

/s/ Carlos Daniel Silva
Name: Carlos Daniel Silva
Title: Chief Executive Officer; Director 

Date: March 21, 2017

/s/ Oscar Brito
Name: Oscar Brito
Title: Principle Financial Officer; Director

Date: March 21, 2017

/s/ Alexander Victor Batallés
Name: Alexander Victor Batallés
Title: Director

Date: March 21, 2017