METROSPACES, INC. - FORM 10-Q - November 23, 2015

Attached files

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EX-32.1 - EX-32.2 - METROSPACES, INC.	ex-32_2.htm
EX-31.2 - EX-31.2 - METROSPACES, INC.	ex-31_2.htm
EX-32.1 - EX-32.1 - METROSPACES, INC.	ex-32_1.htm
EX-31.1 - EX-31.1 - METROSPACES, INC.	ex-31_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 30, 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)

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 [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ 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 12b-2 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 ]

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

Check whether the registrant filed all documents and reports required by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

As of November 19, 2015, there were 1,784,461,538 shares of the Registrant’s Common Stock outstanding.

METROSPACES, INC.

For The Quarterly Period Ended June 30, 2014

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		Page No

Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4.	Controls and Procedures	19

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales Of Equity Securities And Use Of Proceeds.	19
Item 3.	Defaults upon senior securities	20
Item 4.	Removed and Reserved	20
Item 6.	Exhibits	20
	Signatures

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT THE COMPANY AND ITS INDUSTRY. FORWARD-LOOKING STATEMENTS ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, ACHIEVEMENTS AND PROSPECTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Metrospaces, Inc.
Consolidated Balance Sheets
(Unaudited)

	September 30,			December 31,
	2015			2014

ASSETS
Current Assets
Cash and cash equivalents		71,999			-
Accounts receivable		59,961			-
Inventory		15,425			-
Prepaid and other current assets		142,347			39,010
Total Current Assets		289,732			39,010

Advance payment for real property		369,891			369,991
Investment in non-consolidated subsidiary		150,000			150,000
Property and equipment, net		2,706,769			-
Goodwill		1,862,048			-

TOTAL ASSETS		5,378,440			559,001

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank overdraft payable		-			166
Accounts payable		95,320			-
Accrued expenses		601,658			68,750
Accrued interest		67,095			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		75,816			25,056
Convertible notes payable related party, net of discount		29,286			39,472
Note payable		10,000			10,000
Derivative liability		8,058,068			2,645,300
Total Current Liabilities		8,988,279			3,441,393

Convertible notes payable		4,167			-
TOTAL LIABILITIES		8,992,446			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, 100,000 shares issued		0			-
Common Stock, $0.000001 par value, 10,000,000,000 shares authorized 5,314,871 and 846,745 shares issued and outstanding		5			847
Additional paid in capital		6,248,274			1,160,693
Stock subscription		20,000			-
Accumulated other comprehensive loss		(32,027	)		-
Accumulated deficit		(9,850,259	)		(4,043,932	)
Total Stockholders' Deficit		(3,614,006	)		(2,882,392	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		5,378,440			559,001

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

Metrospaces, Inc.
Consolidated Statement of Operations
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014

Revenue, net of discounts	$	(99,150	)	$	-		$	214,171		$	-
Cost of revenue		31,145			-			141,591			-
Gross profit		(130,295	)		-			72,580			-

Operating Expenses
General and administrative expenses		124,068			6,573			334,468			65,849
Total operating expenses		124,068			6,573			334,468			65,849

Operating Loss		(254,363	)		(6,573	)		(261,888	)		(65,849	)

Other Income (expense)
Interest expense		(2,320,202	)		(51,906	)		(10,957,746	)		(383,343	)
Gain (loss) on change in fair value of derivative		487,878			(465,838	)		4,051,170			(488,864	)
Gain (loss) on extinguishment of debt		35,498			36,410			1,693,179			(81,099	)
Total other income (expense)		(1,796,826	)		(481,334	)		(5,213,397	)		(953,306	)

Net Loss	$	(2,051,189	)	$	(487,907	)	$	(5,475,285	)	$	(1,019,155	)

Preferred stock dividend		(245,000	)		-			(331,042	)		-

Net Loss to common stockholder	$	(2,296,189	)	$	(487,907	)	$	(5,806,327	)	$	(1,019,155	)

Other comprehensive income (loss)
Foreign currency transaction adjustment		(1,618	)		-			(32,027	)		-
Comprehensive Loss	$	(2,297,807	)	$	(487,907	)	$	(5,838,354	)	$	(1,019,155	)


Net loss per common share - basic and diluted	$	(0.52	)	$	(78.93	)	$	(1.94	)	$	(184.43	)

Weighted average of common shares - basic and diluted		4,432,817			6,181			2,987,258			5,526

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

Metrospaces, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

	Nine Months Ended
	September 30,
	2015			2014

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,806,327	)	$	(1,019,155	)

Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization of imputed interest		-			7,148
Stock-based compensation		119,000			-
Interest accrued to related party		-			12,375
Payment of expenses by issuances of convertible notes		87,976			-
Salary accrued to related party		11,250			11,250
Non-cash interest expense		10,956,842			361,628
(Gain) loss on change in fair value of derivative		(4,051,170	)		488,864
(Gain) loss on extinguishment of debt		(1,693,179	)		81,099
Changes in operating assets and liabilities:
(Increase) decrease in operating assets:
Accounts receivable		(17,708	)		-
Inventory		(15,425	)		-
Prepaid expenses and other assets		(22,689	)		(10,000	)
Increase (decrease) in operating liabilities:
Accounts payable		41,630			4,995
Accrued expenses		311,084			18,414
Net Cash Used in Operating Activities		(78,716	)		(43,382	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired from acquisition		29,415			-
Net Cash provided by Investing Activities		29,415			-

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft		(166	)		-
Proceeds from issuance of note payable		166,360			40,000
Repayment of acquisition loan		(56,100	)		-
Proceeds from issuance of stock		400			-
Proceeds from stockholder loans		-			500
Net Cash Provided By Financing Activities		110,494			40,500

Effect of exchange rate on cash		10,806			-

Net increase (decrease) in cash and cash equivalents		71,999			(2,882	)
Cash and cash equivalents, beginning of period		-			3,179
Cash and cash equivalents, end of period	$	71,999		$	297

Supplemental cash flow information
Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-

Non-cash transactions:
Derivative liability recognized as interest	$	10,199,778		$	-
Derivative liability recognized as debt discount	$	2,974,163		$	300,000
Conversion of convertible debt into common stock	$	37,500		$	-
Conversion of convertible debt related party into common stock	$	14,919		$	205,440
Conversion of convertible debt into series C preferred stock	$	3,412,064		$	-
Common Stock issued from conversion of convertible debt	$	1,025,676		$	-
Series B preferred stock issued from conversion of debt	$	550,000		$	-

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

Metrospaces, Inc.
Notes to Consolidated Financial Statements
September 30, 2015

(Unaudited)

Note 1 – Basis of Presentation and Business

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2015, and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2015, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Amended Annual Report on Form 10-K/A for the year ended December 31, 2014, filed with the SEC on April 22, 2015.

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 Argentine corporation which collectively own 75-hectares of vineyards, from which they currently sell grapes to local wineries.

Note 2 – Significant accounting policies

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. As of September 30, 2015, no impairment of goodwill has been identified.

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 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.

During the three months ended September 30, 2015, the Company reduced revenues by $99,150 because the price agreement was changed due to market circumstances in Argentina.

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 December 31, 2014	$	2,645,300

Issued during the nine months ended September 30, 2015		13,173,941
Converted during the nine months ended September 30, 2015		(3,710,003	)
Change in fair value recognized in operations		(4,051,170	)

Balance September 30, 2015	$	8,058,068

The estimated fair value of the derivative instruments were valued using the Black-Scholes option pricing model, using the following assumptions at September 30, 2015:

Estimated Dividends			None
Expected Volatility			266.03% - 831.76%
Risk free interest rate			0.08 - 0.49%
Expected term			0.35 to 1.83 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.

Foreign Currency Translation

The functional currency of Bodega IKAL, S.A and Bodega Silva Valent S.A. are 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 $9,850,259 and has a working capital deficit of $8,702,714 as of September 30, 2015. The continuation of the Company as a going concern is dependent upon, among other things, continued financial support from its shareholders 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.

Note 4 – Acquisition

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 75 hectares vineyards that produce grapes that they sell to local wineries. The 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. Pro forma historical results of operations have not been presented because they are not material to the consolidated statement of operations.

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:

Current assets	$	152,215
Current liabilities		(264,264	)
Land		2,250,000
Equipment		500,000
Net Assets Acquired		2,637,951
Goodwill		1,862,049
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 12). As consideration for this purchase, the Company agreed to pay $750,000 to GBS, without interest (See note 7). 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 8.) 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 equity method of accounting. 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 is being 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 remaining $400,000 of debt to GBS in exchange for 450,000 shares of newly designated shares of Series B Preferred Stock.

Note 8 – Notes Payable – Related Parties

Notes Payable – related party

(a)

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 $16,990. These amounts were recorded as a loan payable, bearing no interest and due on demand.

Convertible Note Payable – related party

The Company has issued a Convertible Promissory Note, dated May 1, 2014, in the principal amount of $66,944.04 and bearing interest at the rate of 0.33% per annum, to the prior president and sole director of the Company (the “Existing Note”). The Existing Note is subject to and entitled to the benefits of the Convertible Note Exchange Agreement, dated May 1, 2014, between MSPC and prior president and sole director (the “Existing Note Exchange Agreement”), as amended by an Agreement of Amendment and Rescission, dated as of July 11, 2014, by and among the Company, the former officer and director and one of his affiliates. (the “Rescission Agreement”), including, without limitation, its provisions in respect of the conversion of the principal amount thereof and interests thereon into shares of Common Stock. The Existing Note was issued pursuant to the Existing Note Exchange Agreement solely in exchange for a Convertible Promissory Note, dated February 19, 2014, and maturing 1 year later, in the original principal amount of $260,000, the outstanding principal of which and interest accrued thereon at the time of the exchange, was $66,944.04 (the “First Exchange Note”). The Existing Note Exchange Agreement was amended by the Rescission Agreement to increase the conversion price from the par value of the Common Stock ($0.000001 per share), as provided in the Existing Note Exchange Agreement, to 2.5% of its Current Market Value, as that term is defined therein.

The First Exchange Note was acquired by the prior president and sole director pursuant to a Promissory Note Exchange Agreement, dated February 19, 2014, between the Company and him (the “First Exchange Agreement”) solely in exchange for a promissory note, dated August 13, 2012, and maturing one year later, made by the Company and him in the principal amount of $260,000 and bearing interest at the rate of 0.24% per annum, which was amended on August 12, 2013, by a letter agreement between the Company and him (the “Letter Agreement”) to extend its maturity date to April 14, 2014 (as so amended, the “Original Note”).

The prior president and sole director was issued the Original Note pursuant to an Exchange Agreement, dated August 13, 2012 (the “Original Note Exchange Agreement”), under which he surrendered to the Company for cancellation a certificate representing 10,000,000 shares of its Series A Preferred Stock and extinguished $170,146.00 of the Company’s indebtedness to him as consideration for the Original Note.

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 accompanying balance sheet, and revalued to fair market value at each reporting period.

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 nine months ended September 30, 2015, the Company made principal payments aggregating $56,100. On May 29, 2015, the Company exchanged the unpaid $4,443,900 of the note for 100,000 shares of newly designated shares of Series C 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 Note Payable

At September 30, 2015 and December 31, 2014, convertible notes payable consisted of the following:

	September 30,			December 31,
	2015			2014
	(Unaudited)
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 September 30, 2015, convertible note of $40,000 was converted and no discount remained.	$	-		$	25,056

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. These 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 $30,000 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. As of September 30, 2015, the note is presented net of a discount of $6,551.		29,449			-

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 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; $37,000 on April 8, 2015, $21,936 on April 17, 2015, and $9,800 on April 29, 2015. The new maturity date was extended by 1 year from the original maturity date. During the nine months ended September 30, 2015, $6,000 of the note was converted. As of September 30, 2015, the note is presented net of a discount of $66,052 remained.		31,684			-

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 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; $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. As of September 30, 2015, the note is presented net of a discount of $74,917.		14,683

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 note 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 September 30, 2015, the note is presented net of a discount of $20,833 remained.		4,167

Total	$	79,983		$	25,056

Less: current portion of convertible note payable		(75,816	)		(25,056	)

Long-term convertible note payable	$	4,167		$	-

The remaining principal balance of the convertible notes at September 30, 2015 was $248,336. 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 $168,353 as of September 30, 2015.

Note 12 – Related Party Transactions

A stockholder is a 33% partner in GBS Capital Partners (see Note 5), 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 salary of $5,030 and $0 has been paid and the Company has accrued an amount of $6,220 and $11,250 for the nine months ended September 30, 2015 and 2014. The Company has accrued an aggregate amount of $49,470 since inception which is reflected in accrued expenses in the accompanying Balance Sheet at September 30, 2015.

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

See Notes 5 and 7 regarding the 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

As of September 30, 2015, the Company had approximately $3,743,100 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 the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under 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 of $0.000001 per share.

On September 11, 2015, the Company amended its Certificate of Incorporation, as amended, to effect 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 nine months ended September 30, 2015, $16,107 of principal of the convertible note payable to a related party referred to in Note 8 was converted into 3,715,300 shares of common stock according to the terms of the convertible instrument.

During the nine months ended September 30, 2015, $31,500 of principal of the convertible note payable referred to in Note 11 was converted into 412,821 shares of common stock according to the terms of the convertible instrument.

During the nine months ended September 30, 2015, 340,000 shares of common stock were issued as consulting fee valued at approximately $28,760.

As of September 30, 2015 and December 31, 2014, respectively, 5,314,871 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 at a par value of $0.000001 per share in series. As of September 30, 2015 and December 31, 2014, no shares of preferred stock were issued and outstanding.

Series B 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 (“Series B Preferred Stock”).

On February 19, 2015 the Company exchanged the $400,000 of debt to GBS referred to in Note 7 for 450,000 shares of Series B Preferred Stock and the $150,000 of debt to the Company’s shareholder referred to in note 8 for 150,000 shares of Series B Preferred Stock and issued 600,000 shares of newly designated shares of Series B Preferred Stock to the Company’s executive officer for the $50,000 of compensation.

As of September 30, 2015 and December 31, 2014, 1,200,000 and 0 shares of Series B Preferred Stock were issued and outstanding.

Series C Preferred stock

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

On May 29, 2015, the Company exchanged the unpaid $4,443,900 of acquisition note payable referred to in Note 9 for 100,000 shares of newly designated shares of Series C Preferred Stock. The Company accounted for the conversion as an extinguishment of debt, whereby it recorded the fair value of the Series C Preferred Stock, based on a third party valuation of the Series C, 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.

As of September 30, 2015 and December 31, 2014, 100,000 and 0 shares of series C preferred stock 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 board’s compensation committee. Also on November 4, 2014, the compensation committee granted an award of 800,000 shares of common stock (800,000,000 shares prior to the reverse split referred to in note 14) under the plan to Oscar Brito, who was then the Company’s principal executive officer and a director. The shares awarded shall vest as follows:

After the Corporation 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), 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 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, 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 Corporation’s statement of operations for such year.

3.	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 the Grantee shall have no further rights with respect to them.

As of September 30, 2015 none of the award have vested and no compensation cost has been recorded in the Company’s financial statements. Based on the $.0001 per share closing price of the Company’s common stock on September 30, 2015 there was approximately $800,000 of unrecognized compensation cost related to these non-vested restricted shares outstanding.

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 and did not have any material recognizable subsequent events, except as follows;

On June 4, 2015 the Company has entered into agreements under which it will acquire 60% of the shares of Sociedad Mercantile Inversora Caribe Mar, C.A. (“Carib Mar”) from Oscar Brito, Senior vice president and shareholder of the Company for $500. Carib Mar owns 12.000 square meters of land on Coche Island in the State of Nueva Esparta, Venezuela, on which it plans to build a hotel.

On July 7, 2014, Mr. Brito, 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”), and acquired 62,500 shares of Caribe Mar, comprising 10% of its shares, from Isaias Arturo Medina Meijas.

Mr. Medina held a right of first refusal with respect to the transfer of the LW Shares, which he waived under an agreement, 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.

The shares of Series D Preferred Stock, when issued and delivered, will have a liquidation preference of $100.00 per share, will accrue dividends at the quarterly rate of $2.1875 per share to be paid prior to the payment of dividends on the common stock, will be optionally redeemable by the Registrant in certain events, and will be convertible into shares of common stock on and after February 1, 2016, such that each share of Series D Stock will be convertible into a number of shares of common stock equal to the Liquidation Value of such share of Series D Stock divided by 90% of the Market Price, as defined, of a share of common stock. Each holder of Series D Stock will have the right to cast at meetings of stockholders a number of votes equal to the number of shares that he holds divided by the market price of a share of common stock.

On September 30, 2015, the Company and Oscar Brito entered into an agreement entitled "Cesion de Derecho Preferencial de Acciones de la Sociedad Mercantil Promotodora de Turismo Hecos, C.A.," under which Mr. Brito would transfer to the Corporation 1,000 shares of Sociedad Mercantil Promotodora de Turismo Hecos, C.A. ("Hecos"), constituting one-third of its share capital, in exchange for 2,500 shares of the Corporation's Series D PIK Convertible Preferred Stock ("Series D Stock"), the certificate of designations of which is being filed with the Secretary of State of the State of Delaware and the provisions of which are discussed above. The shares that he sold to the Registrant comprise his entire interest in Hecos.

Hecos owns 20,000 square meters of land in the Jurisdiction of Parroquia Pariaguan, Municipio Francisco de Miranda, State of Anzoategui, as well as architectural plans, engineering plans, renderings and a web site relating to the construction of a hotel on that property.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY’S FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS REPORT.

General

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, one has commenced construction and one is in the planning stage. 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’s operating subsidiary, Urban Spaces, Inc., a Nevada corporation (“Urban Spaces”) which the Company acquired on August 13, 2012, commenced operations on April 3, 2012. The Company is a development-stage company.

Our consolidated financial statements include only the periods commencing with the inception of our operating subsidiary, Urban Spaces, on April 3, 2012, include the financial statements of Urban Spaces and its subsidiaries and do not include any historical financial data of the Company, which was incorporated on December 10, 2007, and which never conducted any business until April 3, 2012. Accordingly, these financial statements are those of Urban Spaces, which was the accounting acquirer in the merger which is discussed below.

Our History

Prior to the Merger

The Company was incorporated in Delaware on December 10, 2007, under the corporate name “Strata Capital Corporation.”

The Merger

On August 13, 2012, the closing under the Merger Agreement took place and on October 5, 2012, Urban Spaces and Acquisition filed articles of merger with the Secretary of State of the State of Nevada, pursuant to which Acquisition was merged with and into Urban Spaces, with Urban Spaces being the surviving corporation. As a result of the Merger, the Company is no longer a shell company. In connection with the Merger, the Company issued 2,000,000,000 shares of Common Stock to Oscar Brito, the sole holder of the common stock of Urban Spaces, who thereby became the Company’s controlling stockholder. Upon the closing of the Merger, Richard Astrom resigned as the Company’s sole director and president and Oscar Brito became the Company’s sole director and president.

Also in connection with the Merger:

On August 13, 2012, the Company completed a private placement with 9 investors (the “Private Placement”) of 335,200,000 shares of Common Stock for proceeds of $36,396 in cash and payment for services valued at $3,604 under Securities Purchase Agreements. The price paid by each investor was 0.0001193317 per share. The Company also entered into Registration Rights Agreements with these investors, pursuant to which the Company filed the registration statement under the Securities Act covering the shares issued in the Private Placement, which became effective on May 15, 2013.

Richard S. Astrom, the Company’s president and sole director, entered into an Exchange Agreement with the Company, under which 10,000,000 shares of the Company’s Series A Preferred Stock owned by him and $170,146 of the Company’s indebtedness to him were exchanged for the proceeds of the Private Placement and a secured promissory note of the Company payable to him in the principal amount of $260,000 and bearing interest at the rate of 0.24% per annum. The promissory note is due on August 13, 2013, is subject to acceleration in the event of certain events of default, contains certain restrictive covenants and is secured by a pledge of all of the shares of common stock of Urban Spaces.

·	On October 31, 2012, the Company filed a certificate of amendment to its certificate of incorporation with the Secretary of State of the State of Delaware changing the Company’s corporate name from “Strata Capital Corporation.” to “Metrospaces, Inc.”

As a result of the Merger, we became a company that acquires and develops land in urban areas, principally in South American markets, primarily for the construction of condominiums on such land and sell 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. We will 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.

Post-Merger

On January 13, 2015, we acquired all of the common stock or Bodega IKAL, S.A., an Argentine corporation, and of Bodega Silva Valent S.A., an Argentine corporation, comprising all of its share capital (the “Contrato”). 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. Total wine production, including sales of the bottled wine, generated approximately $220,000 in revenue in 2014 and in the first three quarters of 2015 has generated revenue of $214,000.

IKAL has received approval to develop a 25 master 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; 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.

On June 4, 2015, the Company has entered into agreements under which it will acquire 60% of the shares of Sociedad Mercantile Inversora Caribe Mar, C.A. (“Carib Mar”) from Oscar Brito, Senior vice president and shareholder of the Company for $500. Carib Mar owns 12.000 square meters of land on Coche Island in the State of Nueva Esparta, Venezuela, on which it plans to build a hotel.

On September 30, 2015, the Company and Oscar Brito entered into an agreement entitled “Cesion de Derecho Preferencial de Acciones de la Sociedad Mercantil Promotodora de Turismo Hecos, C.A.,” under which Mr. Brito would transfer to the Corporation 1,000 shares of Sociedad Mercantil Promotodora de Turismo Hecos, C.A. (“Hecos”), constituting one-third of its share capital, in exchange for 2,500 shares of the Corporation's Series D PIK Convertible Preferred Stock (“Series D Stock”), the certificate of designations of which is being filed with the Secretary of State of the State of Delaware and the provisions of which are discussed above. The shares that he sold to the Registrant comprise his entire interest in Hecos. Hecos owns 20,000 square meters of land in the Jurisdiction of Parroquia Pariaguan, Municipio Francisco de Miranda, State of Anzoategui, as well as architectural plans, engineering plans, renderings and a web site relating to the construction of a hotel on that property.

Our Common Stock is quoted on OTC Pink under the trading symbol “MSPC.”

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2015

Revenues and Gross Profits

We had negative revenues of $99,150 for the three months ended September 30, 2015, and no revenues for the three months ending September 30, 2014. The negative revenues of $99,150 for the three months ended September 30, 2015, resulted from the repricing of an agreement relating to the purchase of grapes due to market circumstances in Argentina. The cost of generating these revenues was $33,145 for the three months ended September 30, 2015, and the Company did not generate any revenue for the three months ended September 30, 2014. As a result, we generated a gross loss of $130,295 for the three months ended September 30, 2015, compared to $0 for the three months ended September 30, 2014.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2015, were $124,068, compared with $6,573 for the three months ended September 30, 2014. These expenses were higher during the later period primarily because of expenses, including legal and accounting expenses, associated with being a public company, stock-based compensation and the increased d expenses of new subsidiaries.

Interest

Interest expense for the three months ended September 30, 2015, was $2,320,202, compared with $51,906 for the period ended September 30, 2014. Of the interest expense for the three months ended September 30, 2015, $5,922 was for accrued interest and for the three-month period ended September 30, 2014, was $4,125; in each period, the remaining portion of interest was for non-cash items relating to the derivative accounting for the embedded conversion feature of our convertible debt.

Other Gains and Expenses

We also incurred a gain on the change in fair value of derivative relating to the conversion feature of our convertible debt, and a gain on extinguishment of debt due to the accounting treatment of the conversion of convertible debt with a corresponding embedded conversion option accounted for as a derivative.

Net Loss

We had a net loss of $2,051,189 for the three-month period ended September 30, 2015, compared with $487,907 for the three-month period ended September 30, 2014. The reasons for the increase in net loss were that interest increased to $2,320,202 in the later period from $51,906 in the earlier period and the increase in general and administrative expense. We incurred a non-cash gain of $487,879 on change in fair value of derivative as the result of the conversion of portions of convertible instruments into Common Stock. We also had a gain of $35,498 from the extinguishment of debt.

NINE MONTHS ENDED SEPTEMBER 30, 2015

Revenues and Gross Profits

We had revenues of $214,171 for the nine-month period ended September 30, 2015, and no revenues for the nine-month period ended September 30, 2014. The cost of generating these revenues was $141,591 for the nine months ended September 30, 2015, and the Company did not generate any revenue for the nine months ended September 30, 2014. As a result, we generated a gross profit of $72,580 for the nine months ended September 30, 2015, compared to $0 for the nine months ended September 30, 2014.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2015, were $334,468, compared with $65,849 for the nine months ended September 30, 2014. These expenses were higher during the later period primarily because of expenses, including legal and accounting expenses, associated with being a public company, stock-based compensation and the increased d expenses of new subsidiaries.

Interest

Interest expense for the nine months ended September 30, 2015, was $10,957,746, compared with $383,343 for the nine months ended September 30, 2014. Of the interest expense for the nine months ended September 30, 2015, $15,987 was for accrued interest and for the nine-month period ended September 30, 2014, was $12,375; portion of interest was for non-cash items relating to the derivative accounting for the embedded conversion feature of our convertible debt increased by $200,729 in the later period.

Other Gains

We also received a gain on the change in fair value of our derivative instrument relating to the conversion feature of our convertible debt, and a gain loss on extinguishment of debt due to the accounting treatment of the conversion of convertible debt with a corresponding embedded conversion option accounted for as a derivative.

Net Loss

We had a net loss of $5,475,285 for the nine-month period ended September 30, 2015, compared with $1,019,155 for the nine-month period ended September 30, 2014. The principal reason for the increase in net loss was the increased interest expense resulting from the fair value of the derivative liability in excess of the face value of the note, which was recorded as interest upon inception. This was net against a gain on fair value of the derivative liability due to the decline in the fair value of our quoted stock price and a gain on extinguishment of debt during the nine month period.

LIQUIDITY AND CAPITAL RESOURCES

Our net loss for the nine months ended September 30, 2015, was $5,475,285 and our accumulated deficit at that date was $9,850,259. We had $71,999 in cash available at that date. We financed our operations during this period through the issuance of a note in the principal amount of $166,360, the issuance of stock for $400 and the receipt of $29,415 from an acquisition. During the nine-month period then ended, Mr. Oscar Brito, our president, earned $11,250 in salary from Urban Spaces. We were unable to pay this obligation and it has been accrued in our financial statements. We will be able to pay this and our other obligations only from revenues from our operations and/or financing. Given our current financial condition and prospects, we can give no assurance as to whether or when we will be able to do so.

Net cash used in operating activities for the nine months ended September 30, 2015, was $78,716.

Net cash provided by financing activities for the nine months ended September 30, 2015, was $110,494.

Cash Requirements

We believe that we will require approximately $200,000 in working capital to fund our operations for the next 12 months.

In addition, we have received or will require funding for our projects as follows:

During the second quarter of 2013, GBS Real Estate Fund I, LLC, a Florida limited liability company (“GBS Fund”), which is the developer of our Los Naranjos 320 Project, obtained financing of approximately $1 million from a Venezuelan bank, reducing the projected $2 million cost for this project by a like amount. During the second and third quarters of 2015, GBS Fund received additional bank financing commitments for $750,000, with funds to be disbursed as construction milestones are met. We believe that we will be able to meet the remaining construction costs for this project by presales of units.

Our total financing needs for our Las Naranjas 450 Project were approximately $2.2 million. Once we begin construction, we expect to obtain an initial construction loan of $1 million from the same bank that is currently financing the Las Naranjas 320 Project, with further financing of $850,000 as construction milestones are met.

In the third quarter of 2013, we sold our rights to four of the nine 9 condominium units in our Chacabuco Project that are to be transferred to us when their construction is complete for $360,000, of which $320,000 is outstanding. We believe that we will receive approximately $850,000 (including the outstanding $320,000) for all of the nine units, which is $100,000 more than the $750,000 that that we are obligated to pay for them. However, until all of these units are sold and the payments for them are collected, no assurance can be given as to the profit or loss that we will accrue.

We will also require $3 million to develop our IKAL project, $6 million for the project being developed by Hecos and $2 million for the project being developed Caribe Mar. We are holding discussions with banks for funding these projects and believe, but cannot assure, that such funding will be forthcoming on terms to be negociated.

Our ability to fund our operations as set forth above is subject to a number of factors, some of which are beyond our control, including our ability to obtain bank loans, to meet construction milestones, the prices at which we will be able to sell units and political and economic conditions in Venezuela, where these conditions have become and we believe will continue to be difficult and unpredictable, and Argentina. Accordingly, we cannot assure that we will be able to fund our operations as described above.

We also owe $304,612 in respect of notes that we have issued, of which $26,990 is now payable and $96,600 of which will become due by the end of 2016. Of this indebtedness, $0 is in default. A substantial portion of this indebtedness is convertible into common stock. Such conversion would result in the reduction of such indebtedness, but we cannot predict whether such conversions will occur or, if so, in what amount.

To the extent that we do not receive funds as expected, we plan to fund our activities during the balance of 2015 and beyond through the sale of debt or equity securities and increased preconstruction sales of condominiums and/or deposits on condominium units sold after construction of a project commences but before these units are delivered. Our ability to obtain funding from pension funds in Argentina has been restricted by the recent nationalization of the largest Argentine pension funds. We believe that we will be able to obtain funding for our projects from private lenders, but can give no assurance that we will be successful in so doing or that such financing, if available, will be on acceptable terms.

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, we 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 we 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 believe that we will receive approximately $650,000 from preconstruction sales and deposits over the next 12 months.

On April 13, 2012, one of our subsidiaries entered into an agreement under which it is acquiring the 9 condominium units in Argentina for $750,000. Payment was to be made in an installment of $350,000 on October 15, 2013, and an installment of $400,000 on October 15, 2014, based upon the promise of the seller to deliver them by May 31, 2013. The units have not yet been delivered and under an agreement with the seller, each of these due dates has been extended by the number of days after May 31, 2013, that they remain undelivered. Our interest in the subsidiary that is acquiring these units has been pledged to secure this obligation.

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 amount, when required or on acceptable terms, we may have to significantly reduce, or discontinue, our operations. To the extent that we raise additional funds by issuing equity securities or securities that are convertible into our equity securities, our stockholders may experience significant dilution.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Acting 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 30, 2015. Based on this evaluation, our Chief Executive Officer and Acting Chief Financial Officer concluded that these disclosure controls and procedures were effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the 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 Acting 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.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. We have assessed the effectiveness of those internal controls as of September 30, 2015, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Integrated Framework as a basis for our assessment.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified a material weakness in our internal control over financial reporting. This material weakness consisted of an insufficiency of employees who have bookkeeping and accounting experience. This is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

As we are not aware of any instance in which we failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, we determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use of our very limited resources at this time and not in the interest of our stockholders.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

EXHIBIT NUMBER		DESCRIPTION

31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1		Section 1350 Certification of Principal Executive Officer
32.2		Section 1350 Certification of Principal Financial Officer

SIGNATURES

Pursuant to the requirements 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. November 20, 2015

By: /s/ Carlos Daniel Silva

Principal executive officer; Director;

By: /s/ Oscar Brito
Principal accounting officer;
Principal financial officer;

Director

Attached files

METROSPACES, INC. Reports

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