|
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
|
|
P
aritz
|
&
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
|
|
$
|
4,500,00
0
|
|
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
|
|
|
-
|
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.