UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM10-K

[X]  15, ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 20192020

OR

[ ]  15, 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:  333-149000

ASTRO AEROSPACE LTD.

(Exact name of registrant as specified in its charter)

320 W Main Street,Lewisville,Tx75057 Tx 75057

(Address of principal executive offices, including zip code)

(469)702-8344

(Registrant's telephone number, including area code)

Securities registered pursuant to Section12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in 405 of the SecuritiesAct.

Yes [ ]  No  [x]

Indicate by check mark if the registrant is not required to file reports pursuant to Section13 or Section15(d) of the ExchangeAct.  Yes  [ ]   No  [x]

Indicate by check mark whether the registrant: (1)has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (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 if disclosure of delinquent filers pursuant to Item405 of RegulationS-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in PartIII of this Form10-KForm 10-K or any amendment to this Form10-K.[ ]

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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 (section

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 [x]   No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, a smaller reporting company, or emerging growth company.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

Yes [  ] No [x]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.The market value of the registrant’s voting $0.001par value common stock held by non-affiliates of the registrant as of June28, 2019June 30, 2020 was approximately $5,088,270$1,814,698 which is based on17,791,155 on 1,186,077shares of common stock held by non-affiliates and the price($.2860)price ($1.53) at which the common equity was sold on that date.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.The number of shares outstanding of the registrant's only class of common stock, as ofMay 29, 2020April 14, 2021 was78,129,504 8,448,380 shares of its $.001 par value common stock.

EXPLANATORY NOTE

The sole purpose of this Amendment to the registrant’s Annual Report on Form 10-K for the period ended December 31, 2020 is to furnish revised Interactive Data File exhibits pursuant to Rule 405 of Regulation S-T.

No other changes have been made to the 10-K, and this Amendment has not been updated to reflect events occurring subsequent to the filing of the 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

None

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TABLE OF CONTENTS

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report contains forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to consummate the acquisition of an operating entity and/or assets, our ability to generate revenues and pay our operating expenses, our ability to raise capital as necessary, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

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PART I

The Company was originally incorporated in the State of Nevada on March 27,2007.27, 2007.  On March 14, 2018, the majority of the stock was purchased by MAAB Global Limited, resulting in the name change from CPSM, Inc to Astro Aerospace Ltd. and the business change from pool sales to the research and development of manned and cargo drones.

Current Operations

The Company hasIn 2018, Astro Aerospace Ltd. (“Astro” or the “Company) acquired the software, firmware and hardware for Version 1.0 of a manned drone from Confida Aerospace, Ltd. The drone which is in the early stage of development, has executed multiple flights. It is Astro’s goal to transform how people and things get from place to place. This will be done by making safe, affordable user-friendly autonomous manned and unmanned Electric Vertical Take-Off and Landing (eVTOL) aircraft available to the mass market anywhere. Astro is currently working on Version 2.0 of the aircraft product which will feature design changes that enhance performance characteristics and safety features. The target market will be government, private sector operators and individuals for a wide range of commercial, logistical and personal uses.  The CompanyAstro is currently in the flight testing mode of its Passenger Drone Version 1.0, as well as in the development stages of its versionVersion 2.0 Passenger Drone model.

The Company is working with Infly Technology Ltd., our design and manufacturing partner, who is leading the design and development team with responsibility for developing the team as well as building the new prototypes for the two new aircraft models. The Company applied for approval to test the Passenger Drone 1.0 version in Canada in order to display new software, avionics and stability. The Company received an SFOC (Special Flight Operations Certificate) from Transport Canada in September 2018, allowing Astro to take to the sky, and put the Passenger Drone 1.0 “Elroy” through critical elements of integrated flight testing.  The testing culminated on Wednesday, September 19, 2018 with a 4 minute and 30 second flight, reaching heights of over 60 feet and speeds of over 50 km/h. The avionics and flight control systems were put to task with a multitude of maneuvers and the vehicle remained exceptionally stable, even under the effects of a couple of unexpected wind gusts.

The Company'sAstro's newest prototype focuses on a multitude of applications including passenger transport, cargo delivery, ambulance and med-evac services, rescue and disaster assistance, military, and B2B. Its newly designed modular structure allows the Astro Top Frame (ALTA) to fly independently, as well as in combination with the individually designed "Astro Pods" for the specific need in that specific industry. A fly-in and pick-up system will allow the vehicle to connect, fly, disconnect and repeat, effectively and efficiently, changing from one application to the next. We referAstro refers to it as the Swiss Army Knife of the eVTOL world.

Along with recent Avionics and Control system upgrades this modularity opens the door to the evergrowingever growing opportunities that (eVTOL) electric take-off and landing short haul vehicles bring.  

The CompanyAstro anticipates the new prototype for the frame to be completed and flying by the end of the second quarter 2021. The Pods will be completed by the end of 2022. We have completed the engineering and firmware for the prototype and are now in development ofbuilding the body for the new prototype. Simulations have gone well.

Asset Purchase Agreement with Confida Aerospace Ltd.

On May 8, 2018, the Company entered into an Asset Purchase Agreement with Confida Aerospace Ltd. Pursuant to the Asset Purchase Agreement, the Company purchased in-process research and development (“IPRD”) consisting of inventory, hardware designs, software designs, and a trademark all pertaining to passenger drone design and use from Confida Aerospace Ltd. As consideration for the Asset Purchase Agreement, the Company issued Confida Aerospace Ltd., 10,000 of the registrant’s Series B preferred shares.Eachshares. Each preferred share is convertible into 1,33389 common shares and 1,33389 warrants. Each warrant is exercisable into one of the Company’s common shares at an exercise price of $.75.$11.25. The warrants have an exercise period of five years upon conversion. Additionally, the Company assumed $25,000 of debts incurred by Confida Aerospace Ltd. related to drone development.

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Competition

The Company is currently a research and development company focused on the creation of aerial drones for use in carrying passengers or cargo. It is expected that research and development will continue for at least two years, at

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which point we will seek out a joint venture to help manufacture the design. Once the research and development iscomplete, we intend to supply our products to a variety of industries, such as government, military, and for private use. The cargo drone is intended to be the first available product.

Our prime competitors are Volocopter, a German company, and Ehang, a Chinese company, which are both developing manned eVTOL craft. Our primary competitive advantage is our proprietary avionics and control systems.Currently, we have a working prototype that has flown while manned, and testing has shown that the design is very stable.

Employees

As ofMay 29, 2020,of April 14, 2021, we do not have any employees who are not executive officers.

Change of Control/Discontinued Operations

On March 14, 2018, Lawrence and Loreen Calarco, officers and directors of the Company, the Lawrence & Loreen Calarco Family Trust and the Lawrence and Loreen Calarco Trust of June 3, 2014, majority stockholders controlled by Lawrence and Loreen Calarco, sold 51,711,5713,447,438 common shares and 1,562,500 preferred shares to MAAB Global Limited (“MAAB”), a non-affiliate of the Company, paid from Bruce Bent, officer and director of MAAB’s personal funds resulting in a change of control of the Company.  The stock was transferred to MAAB effective March 14, 2018.  The 51,711,5713,447,438 common shares and 1,562,500 preferred shares represented 62.35% and 100% of the then issued and outstanding common and preferred stock of the Company, respectively.

On April 30, 2018, pursuant to a Share Exchange Agreement dated April 16, 2018, the Company exchanged all of the issued and outstanding common shares of Custom Pool & Spa Mechanics, Inc. and Custom Pool Plastering, its wholly owned subsidiaries, for 13,668,900911,260 common shares of the Company held by the Lawrence & Loreen Calarco Family Trust, an entity controlled by Lawrence & Loreen Calarco, former officers and directors of the Company. The Board of Directors subsequently authorized the cancellation of those common shares.  After said cancellation, the total issued and outstanding common shares was 69,270,060.4,618,004.  The Share Exchange Agreement was approved by the Board of Directors and written consent of shareholders holding 62.35% of the voting securities of the Company as of April 16, 2018.

The Company’s discontinued operation,operations of Custom Pool historically was a full-service pool maintenance, resurfacing and repair company whose main service area is the Martin, Palm Beach, St. Lucie, Indian River and Brevard counties of Florida.  The Company earned revenue by charging service fees in the pool service business and by payments under contracts in the pool resurfacing business.  The Company managed its operating margins of the businesses by controlling personnel costs, chemical and material purchases and other service costs such as motor vehicle and insurance costs.  Personnel were critical to the business since customers choose those companies who have the most experience and perform the service in a timely and professional manner.2018.

Custom Pool competed in its markets on the basis of price and the quality of the service.  There are many pool service companies in the market and throughout Florida.  However, this also presented an opportunity for the Company since many of its competitors are smaller and lack the infrastructure and depth of the Company.  This allowed the Company to compete through offering a larger range of services with a lower cost structure and to pursue growth opportunities either through internal growth or through opportunistic acquisitions.

The occurrence of the COVID-19 pandemic may negatively affect our operations depending on the severity and longevity of the pandemic.

The COVID-19 pandemic is currently impacting countries, communities, supply chains and markets as well as the global financial markets. A pandemic typically resultshas resulted in social distancing, travel bans and quarantine and this may limitwhich have limited access to our facilities, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely

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to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission. Depending on the severity and longevity of the COVID-19 pandemic, our business and shareholders may experience a significant negative impact.  Currently, the COVID-19 pandemic has limited our ability to move forward with our operations and has negatively affected our ability to timely comply with our ongoing filing obligations with the Securities and Exchange Commission.

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None.

The Company is currently using office space at 320 W. Main Street, Lewisville, TX 75057 for corporate management. This office space consists of 4,700 square feet and is provided for the Company’s use rent-free by Bruce Bent, the Company’s CEO. In addition, we have 1,500 square feet allocated to our use at Paterson Composites Inc. at their offices at 20 Fasken Dr., Etobicoke, ON, Canada M9W 1K6 for purposes of research and development. We do not pay rent for this space and the lease terms for both properties arethe property is currently indefinite.

From time to time, we may become involved in various lawsuits and legal proceedings that may arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may have an adverse effect on our business, financial conditions, or operating results. We are not aware of any legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Not applicable.

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PART III

There is a limited public trading market for the common stock. Our common stock is quoted on the OTC Market OTCQB under the symbol "ASDN", with quotations that commenced in October 2009; however, the market for common shares is extremely limited. No assurance can be given that the present limited market for our common stock will continue or will be maintained.

For any market that is maintained for our common stock, the resale of “restricted securities” pursuant to Rule 144 of the Commission by members of management or other persons may have a substantial adverse impact on any such public market.  Present members of management have already satisfied the one-year holding period of Rule 144 for public sales of a large portion of their holdings in the Company thereunder.

A minimum holding period of six months is required for resales under Rule 144. In addition, affiliates of the Company must comply with certain other requirements, including publicly available information concerning the Company; limitations on the volume of “restricted securities” which can be sold in any 90-day period; the requirement of unsolicited broker’s transactions; and the filing of a Notice of Sale on Form 144.

Holders

As ofMay 29, 2020,of April 14, 2021, we have approximately41approximately 36 shareholders of record of our common stock.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who has not been one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least six months, is entitled to sell shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144.

Dividend Policy

As of the date of this annual report, we have not paid any dividends to shareholders. There are no restrictions which would limit our ability to pay dividends on common equity or that are likely to do so in the future. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend; we would not be able to pay our debts as they become due in the usual course of business; or our total assets would be less than the sum of the total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution

Recent Sales of Unregistered Securities

During the last three years, we issued the following securities:

   (a) 5/8/18 –10,000 Series B preferred shares to Confida Aerospace Ltd. pursuant to an Asset Purchase Agreement.

   (b) 10/22/18 –38,886 2,592 common shares to MAAB Global Limited, valued at $52,534, upon conversion of notes payable.

   (c) 11/21/18 –156,250 10,417 common shares to Oasis Capital, valued at $89,531, pursuant to a security purchase agreement.  344,02922,935 common shares underlying warrants issued, with an exercise price of $0.51$7.65 per share.

   (d) 2/12/19 – 421,65628,110 common shares underlying warrants issued to Oasis Capital, with an exercise price of $0.40$6.00 per share for the 2^nd tranche.

   (e) 2/22/19 – 215,05414,337 common shares to Oasis Capital for debt conversion valued at $55,387

   (f) 3/19/19 – 150,0008,219 common shares to Oasis Capital for debt conversion valued at $38,633with an additional 26,712commonshares forsubsequently1,781 common shares for subsequently discovered miscalculation issued in April 2019.

   (g) 2^nd quarter 2019 – 1,830,373122,025 common sharestoshares to Oasis Capital for debt conversion valued at $449,397

   (h) 3^rd quarter 2019 – 750,00050,000 common sharestoshares to Oasis Capital for debt conversion valued at $93,830.

   (i) 4^th quarter 2019 – 491,09932,740 common shares to Oasis Capital for debt conversion valued at $20,000.

   (j) 1^st quarter 2020 –3,227,782215,185 common shares to Oasis Capital for debt conversion valued at $166,724.

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   (k)  1^st quarter 2020 – 550,00036,667 common shares were put to Oasis Capital under the Equity Purchase Agreement and the Company received $41,881.

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   (k)(l) 2^nd quarter 2020 –650,000163,739 common shares to Oasis Capital for debt conversion valued at $31,841.$106,937.

   (l)(m) 2^nd quarter 2020 – 500,00083,333 common shares were put to Oasis Capital under the Equity Purchase Agreement for a total consideration of $66,195.

  (n) 3^rd quarter 2020 –63,333 common shares to Oasis Capital for debt conversion valued at $45,023.

  (o) 3^rd quarter 2020 –100,000 common shares were put to Oasis Capital under the Equity Purchase Agreement and the Company received $21,783.$79,789.  

  (p) 4^th quarter 2020 – 68,553 common shares to Oasis Capital for debt conversion valued at $30,000.

  (q) 4^th quarter 2020 – 113,333 common shares were put to Oasis Capital under the Equity Purchase Agreement and the Company received $99,363.

  (r) On January 6, 2021, the Company issued 14,493 common shares to SRAX, Inc. for payment of services, which include investor intelligence, investor relations and marketing.  

  (s) On January 11, 2021, the Investor converted $29,175 of the principal amount of the 8% Senior Secured Convertible Promissory Note at $0.4376 into 66,667 shares of the Company’s common stock.

  (t) On January 11, 2021, the Company put 40,000 common shares at $2.439 under the Equity Purchase Agreement and received $97,313 in net proceeds.

 (u) On January 19, 2021, the Company put 40,000 common shares at $2.8496 under the Equity Purchase Agreement and received $113,735 in net proceeds.

 (v) On January 20, 2021, the Investor converted $60,600 of the principal amount of the 8% Senior Secured Convertible Promissory Note at $0.4545 into 133,333 shares of the Company’s common stock.

 (w) On January 22, 2021, a third party investor who had purchased $800,000 in principal amount of the 8% Senior Secured Convertible Promissory Notes from the original Investor, converted $30,000 of the principal amount of the 8% Senior Secured Convertible Promissory Note at $1.20 into 25,000 shares of the Company’s common stock.

 (x) On January 25, 2021, a third party investor who had purchased $800,000 in principal amount of the 8% Senior Secured Convertible Promissory Notes from the original Investor, converted $300,000 of the principal amount of the 8% Senior Secured Convertible Promissory Note at $0.60 into 500,000 shares of the Company’s common stock.

 (y) On January 26, 2021, two Series B Preferred investors converted 9,500 shares of the Series B Preferred into 844,233 shares of the Company’s common stock.

 (z) On January 29, 2021, the Company put 40,000 common shares at $2.5905 under the Equity Purchase Agreement and received $103,368 in net proceeds.

 (aa) On January 29, 2021, the Investor converted $44,850 of the principal amount of the 8% Senior Secured Convertible Promissory Note at $0.4545 into 98,679 shares of the Company’s common stock.

 (bb) On February 9, 2021, the Investor converted $37,158 of the principal amount of the 8% Senior Secured Convertible Promissory Note at $0.4545 into 81,755 shares of the Company’s common stock.

  (cc) An independent third party investor subsequently sold $300,000 in principal amount of the Note to SBC on February 12, 2021 and additionally sold $200,000 in principal amount of the Note to SBC on March 12, 2021.

  (dd) On February 12, 2021, SBC converted $300,000 principal amount of the Note at $0.60 into 500,000 shares. On March 12, 2021, SBC converted $200,000 in principal amount of the Note and $3,945 in accrued interest at $0.60 per share into 339,908 of the Company’s common stock.

The above issued common shares were issued to sophisticated investors under an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

Issuer Purchases of Equity Securities

We have not repurchased any of our common shares since inception.

Not applicable

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Recent Events

COVID-19 Pandemic

The COVID-19 pandemic is currently impacting countries, communities, supply chains and markets as well as the global financial markets. Governments have imposed laws requiring social distancing, travel bans and quarantine, and these laws may limit access to the Company’s facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact the Company’s operations, financial condition and demand for the Company’s goods and services, but the Company’s overall ability to react timely to mitigate the impact of this event. Also, it has affected the Company’s efforts to comply with filing obligations with the Securities and Exchange Commission. Depending on the severity and longevity of the COVID-19 pandemic, the Company’s business customers, and stockholders may experience a significant negative impact.Currently, the COVID-19 pandemic has limited ourthe Company’s ability to move forward with our operations and has negatively affected our ability to timely comply with our ongoing filing obligations with the Securities and Exchange Commission.Commission.

Sale of Default and Forbearance on the 8% Senior Secured Convertible Promissory Notes

Refer to Note 7, “Default and Forbearance on the 8% Senior Secured Convertible Promissory Notes”, in the consolidated financial statements.

Reverse Common Stock of Majority StockholdersSplit

On March 14, 2018, Lawrence and Loreen Calarco, officers and directors ofOctober 8, 2020, the Company the Lawrence & Loreen Calarco Family Trust and the Lawrence and Loreen Calarco Trust of June 3, 2014, majority stockholders controlled by Lawrence and Loreen Calarco, sold 51,711,571 common shares and 1,562,500 preferred shares to MAAB Global Limited (“MAAB”), a non-affiliate of the Company, paid from Bruce Bent, officer and director of MAAB’s personal funds resulting inmajority stockholder approved a change1-for-15 reverse common stock split (“the Reverse Stock Split”). On February 5, 2021, the Company effected the Reverse Stock Split, reducing the number of controlcommon shares outstanding. As a result of the Company.  The stock was transferred to MAAB effective March 14, 2018.  The 51,711,571 commonReverse Stock Split, every 15 shares and 1,562,500 preferred shares represented 62.35% and 100% of the then issued and outstanding common and preferred stock of the Company, respectively.

Resignation of Directors and Election of Directors

On March 14, 2018, Lawrence Calarco, Loreen Calarco and Charles Dargan II resigned as officers and directors of the Company.  Additionally, on March 14, 2018, Jeffrey Michel and Randy Sofferman resigned as directors of the Company.

On March 14, 2018, Bruce Bent, age 62, was appointed as Chief Executive Officer and Director of the Company.  He will stand for re-election at the next annual meeting of the shareholders.  There are no material arrangements to which Mr. Bent is a party, and there is no family relationship between him and any other party connected to the Company.

Sale of Custom Pool and Spa Mechanics, Inc. and Custom Pool Plastering, Inc.

On April 30, 2018, pursuant to a Share Exchange Agreement dated April 16, 2018, the Company exchanged all of thewere combined into one issued and outstanding common shares of Custom Pool & Spa Mechanics, Inc. and Custom Pool Plastering, its wholly owned subsidiaries, for 13,668,900 common shares of the Company held by the Lawrence & Loreen Calarco Family

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Trust, an entity controlled by Lawrence & Loreen Calarco, former officers and directors of the Company. The Board of Directors subsequently authorized the cancellation of those common shares.  After said cancellation, the total issued and outstanding common shares was 69,270,060.  The Share Exchange Agreement was approved by the Board of Directors and written consent of shareholders holding 62.35% of the voting securities of the Company as of April 16, 2018.

Authorization of the Series B Convertible Preferred Stock

On May 4, 2018, the Board of the Company authorized 10,000 shares of the Series B Convertible Preferred Stock, par value $0.001 per share. The Preferred is entitled to a dividend, when declared by the Board of Directors, votes with all other classes of stock as a single class of stock on all actions to be voted on by the stockholders of the Company, and each share of Preferred is convertible into 1,333 shares of common stock, without any change in the par value per share and common shares authorized. All current and prior year share amounts and per share calculations have been retrospectively adjusted to reflect the impact of this Reverse Stock Split and to provide data on a five-year warrant to purchase 1,333comparable basis. Such restatements include calculations regarding the Company’s weighted average shares of common stock at an exercise price of $0.75and loss per share.

Asset Purchase Agreement with Confida Aerospace Ltd.

On May 8, 2018, the Company entered into an Asset Purchase Agreement with Confida Aerospace Ltd. Pursuant to the Asset Purchase Agreement, the Company purchased in-process research and development (“IPRD”) consisting of inventory, hardware designs, software designs, and a trademark all pertaining to passenger drone design and use from Confida Aerospace Ltd. As consideration for the Asset Purchase Agreement, the Company issued Confida Aerospace Ltd., 10,000 of the registrant’s Series B preferred shares. Each preferred share is convertible into 1,333 common shares and 1,333 warrants. Each warrant is exercisable into one of the Company’s common shares at an exercise price of $.75. The warrants have an exercise period of five years upon conversion. Additionally, the Company assumed $25,000 of debts incurred by Confida Aerospace Ltd. related to drone development.

Current Operations – Astro Aerospace, Ltd.

The Company has

In 2018, Astro Aerospace Ltd. (“Astro” or the “Company) acquired the software, firmware and hardware for Version 1.0 of a manned drone from Confida Aerospace, Ltd. The drone which is in the early stage of development, has executed multiple flights. It is Astro’s goal to transform how people and things get from place to place. This will be done by making safe, affordable user-friendly autonomous manned and unmanned Electric Vertical Take-Off and Landing (eVTOL) aircraft available to the mass market anywhere. Astro is currently working on Version 2.0 of the aircraft product which will feature design changes that enhance performance characteristics and safety features. The target market will be government, private sector operators and individuals for a wide range of commercial, logistical and personal uses.  The Company is currently in the flight testing mode of its Passenger Drone Version 1.0, as well as in the development stages of its version 2.0 Passenger Drone model.

The Company is working with Infly Technology Ltd., our design and manufacturing partner, who is leading the design and development team with responsibility for developing the team as well as building the new prototypes for the two new aircraft models. The Company applied for approval to test the Passenger Drone 1.0 version in Canada in order to display new software, avionics and stability. The Company received an SFOC (Special Flight Operations Certificate) from Transport Canada in September 2018, allowing Astro to take to the sky, and put the Passenger Drone 1.0 “Elroy” through critical elements of integrated flight testing. The testing culminated on Wednesday, September 19, 2018 with

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a 4 minute and 30 second flight, reaching heights of over 60 feet and speeds of over 50 km/h. The avionics and flight control systems were put to task with a multitude of maneuvers and the vehicle remained exceptionally stable, even under the effects of a couple of unexpected wind gusts.

The Company'sAstro's newest prototype focuses on a multitude of applications including passenger transport, cargo delivery, ambulance and med-evac services, rescue and disaster assistance, military, and B2B. Its newly designed modular structure allows the Astro Top Frame (ALTA) to fly independently, as well as in combination with the individually designed "Astro Pods" for the specific need in that specific industry. A fly-in and pick-up system will allow the vehicle to connect, fly, disconnect and repeat, effectively and efficiently, changing from one application to the next. We referAstro refers to it as the Swiss Army Knife of the eVTOL world.

Along with recent Avionics and Control system upgrades this modularity opens the door to the evergrowingever growing opportunities that (eVTOL) electric take-off and landing short haul vehicles bring.  

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The CompanyAstro anticipates the new prototype for the frame to be completed and flying by the end of the second quarter 2021. The Pods will be completed by the end of 2022. We have completed the engineering and firmware for the prototype and are now in development ofbuilding the body for the new prototype.

Overview – Discontinued Operation, Custom Pool

Simulations have gone well. The Company’s discontinued operation, Custom Pool, historically was a full-service pool maintenance, resurfacing and repair company whose main service areadrone is the Martin, Palm Beach, St. Lucie, Indian River and Brevard counties of Florida.in an early development stage. The Company earned revenue by charging service feesexpects that it will be marketing the aircraft sometime in in the pool service business and by payments under contracts insecond quarter of 2022. To date, no commercial applications have been found which would accept the pool resurfacing business.  The Company managed its operating margins of the businesses by controlling personnel costs, chemical and material purchases and other service costs such as motor vehicle and insurance costs.  Personnel were critical to the business since customers choose those companies who have the most experience and perform the service in a timely and professional manner.

Custom Pool competed in its markets on the basis of price and the quality of the service.  There are many pool service companies in the market and throughout Florida.  However, this also presented an opportunity for the Company since many of its competitors are smaller and lack the infrastructure and depth of the Company.  This allowed the Company to compete through offering a larger range of services with a lower cost structure and to pursue growth opportunities either through internal growth or through opportunistic acquisitions.product.

Plan of Operations

Management will expand the business through further investment of capital provided by the controlling shareholder and through additional capital raises from third party investors. The Company raised an additional $1.2 million of cash in November 2018 through the issuance of an 8%a Senior Secured Convertible Promissory Note in the principal amount of $1,383,636. The first tranche of $600,000 was received in November 2018 and the second tranche of $600,000 was received in February 2019. In December 2019, the Company raised an additional $125,000, in the first tranche, through the issuance of a new 8% Senior Secured Convertible Promissory Note in the principal amount of $575,682.

On August 26, 2019, the Company entered into an Equity Purchase Agreement and Registration Rights Agreement with the same investor who provided the Senior Secured Convertible Promissory Notes.Note. Under the terms of the Equity Purchase Agreement, the investor agreed to purchase from the Company up to $5,000,000 of the Company’s common stock upon effectiveness of a registration statement on Form S-1. The maximum amount that

As of December 31, 2019, the Company shall be entitled to put to the investor in each put notice shallhad not exceed the lesser of $500,000 or one hundred fifty percent (150%) of the average daily trading volume of the Company’s Common Stock during the ten (10) trading days preceding the put. In 2019, no funds were raised by the Company, and noissued any stock issued, under the Equity Purchase Agreement. Through May 28,During the year ended December 31, 2020, the Company raised $63,664 through the Equity Purchase Agreement by selling 1,050,000put a total of 333,333 shares of its common stock at prices ranging from $0.515 and $1.539 for total proceeds of $287,228, net of issuance costs. Subsequent to December 31, 2020, the investor.Company has put 120,000 shares at prices ranging from $2.44 to $2.85 per share for total proceeds of $314,416.

In April 2020, the Company amended the MAAB Promissory Note to increase the maximum principal amount to $1,250,000 and to extend the maturity date to February 28, 2022. The principal amount advanced under the Promissory Note was $1,209,350 at December 31, 2020.

The Company will continue to keep expenses as low as possible with closely monitoring working capital, development cost and schedule, while the Company continues the development of Passenger Drone Version 1.0 and 2.0.

Results of Operations

The Year Ended December 31, 20192020 compared to The Year Ended December 31, 20182019

For the year ended December 31, 2020 and 2019, the Company did not have any revenue. It is developing an eVTOL aircraft and expects that it will be marketing the aircraft sometime in 2021.in the second quarter of 2022. To date, no commercial applications have been found which would accept the product.

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In the year ended December 2020 and 2019, Astro did incur $558,581 and $1,147,261 in operating expenses whichrespectively, a decline of $588,680 or 51%. The decline was across the majority of the expenses was from $232,084board in in sales and marketing, general and $545,639 inadministrative (“G&A”) and research and development.development (“R&D”). The beginning of the COVID-19 induced worldwide economic shutdowns and affected the Company, especially since all of the R&D is being done in Canada and travel to and from the R&D location is prohibited. The Company’s R&D efforts were essentially deferred to future periods. As well, sales and marketing efforts are difficult when the economies are shut down. The Company reduced its overhead expenses in G&A through cost cuts.

Sales and marketing expenses declined from $232,084 in the year ended December 31, 2019 to $115,833 in the year ended December 31, 2020, a decline of $116,251 or 50%. R&D expenses declined $399,170 or 73% in the year ended December 31, 2020 versus 2019 as all R&D spending was drastically reduced and deferred to future periods. General and administrative expenses decreased in the year ended December 31, 2020 versus 2019 to $296,279 from $369,538, largely due to reductions in legal accounting and business fees, offset somewhat by an increase in consulting fees.

Other expenses declined in the year ended December 31, 2020 versus 2019 from $1,157,812 to $627,265, a decline of $530,547 or 46%. The largest portion of the decline is in interest expense, which declined $699,218 or 53%. This is due to the amortization of the 8% Senior Secured Convertible Promissory Notes, which after the original amortization starting in November 2018 (first tranche), February 2019 (second tranche) and December 2019 for the new 8% Senior Secured Convertible Promissory Note, and the Notes maturing in November 2020, the amortization decreased to $440,017 versus $1,191,874 in the year ended December 31, 2020 versus 2019. There was also $369,538a $9,723 decline in generalbank and administrative expenses. Other expenses were $1,157,812 and consisting mainly of banking and financingfiling fees and interest expense. The interest expense of $1,316,407 includes $1,191,894 of amortization ofin the  debt discount. Other expenseyear ended December 31, 2020 versus 2019. In the year ended December 31, 2019, there was offset by $178,394 in miscellaneous income all of which came$178,394 all from the disgorgement of short swing profits underpursuant to Section 16(a) of the Securities and Exchange Act of 1934.The Company expects to incur operating losses until the eVTOL aircraft is marketable and has passed government and safety regulations.1934.

For the year ended December 31, 2018, the Company did not have any revenue. It is developing an eVTOL aircraft and expects that it will be marketing the aircraft sometime in 2021. Astro did incur $7,436,347 in operating expenses, which the majority of the expenses was from an impairment of the assets acquired from Confida Aerospace of $6,285,214. The impairment expense was reduced by $25,000 due to a reduction of assumed accrued expenses as the expenses were incurred. The Company also incurred $901,857 in research and development expenses from the design and engineering of the eVTOL aircraft. There was $249,276 in sales and marketing and general and administrative expenses. Other expenses were $331,185 and consist of banking and financing fees and interest expense, offset by an adjustment to prepaid corporate taxes. The Company expects to incur operating losses until the eVTOL aircraft is marketable and has passed government and safety regulations

Discontinued Operations

The discontinued operations of Custom Pool are not comparable in the year ended December 31, 2019 and 2018 since Custom Pool was sold on April 30, 2018 and therefore only had operations in the 2018 period. Custom Pool had a pre-tax income of $178,300 on revenue of $1,786,911 during the year ended December 31, 2018.  The pre-tax income is a result of revenue at the resurfacing business having rebounded from a poor fourth quarter in 2017. This also improved the operating margin. Some of the improvement was offset in general and administrative expenses due to higher compensation and more employees hired in the office. Additionally, this created a higher allocation of employee expenses, such as health and workers compensation insurance.

Net Loss

The Company had a net loss of $1,185,846 versus $2,305,073 forin the year ended December 31, 20192020 versus a net loss of $7,626,599 for the year ended December 31, 2018, largely comprised of the eVTOL aircraft operations. The reduction in the loss between 2019, and 2018 is largely due to the impairment expense of $6,285,214 incurreddeclines in 2018. Thesales and marketing, R&D spending and a reduction is also due to the short swing profit disgorgement of income of $178,394 during 2019. This was offset somewhat by the increase in interest expense from the $1,383,636 principal amount of the 8% Senior Secured Convertible Promissory Note issued on November 21, 2018 and the interest expense from the issuance of a new 8% Senior Secured Convertible Promissory Note issued in December 2019 in the principal amount up to $575,682. The first tranche had a principal amount of $149,546.expense. There was also an undeclared preferred dividend of $10,000 in both the 2020 and 2019 and 2018 periods,years which made the net loss available to common stockholders of $1,195,846 and $2,315,073, in 2019 and $7,636,599 in 2018.respectively.

The CompanyAstro also had a  foreign currency translation losslosses  of $55,321 and $42,802, respectively in the years ended December 31, 2020 and 2019 from the difference in the Canadian dollar and U.S. dollar exchange rates which produced athose years. The increase in the translation loss is mainly due to the decline in the average Canadian dollar rate versus the average U.S. dollar rate in the fluctuating currency markets. Astro’s comprehensive loss ofwas $1,241,167 and $2,347,875 forin the year ended December 31, 2019. In the comparable 2018 period, Astro had a foreign currency translation gain of $22,704 which produced a comprehensive loss of $7,603,895.2020 and 2019, respectively.

Capital Resources and Liquidity

The Company currently is not profitable and must finance its business through raising additional capital. The Company is financed through its parent, MAAB, which has loaned the Company $750,017$1,209,350 and there is $499,983$40,650 available under the terms of the note through December 31, 2019.2020. The note was amended on April 22, 2020 to increase the maximum principal amount to $1,250,000 and to extend the maturity to February 28, 2022.

The Company also raised an additional $1.2 million of cash in November 2018 through the issuance of a Senior Secured Convertible Promissory Note in the principal amount of $1,383,636. The first tranche of $600,000 was received in November 2018 and the second tranche of $600,000 was received in February 2019. On December 2, 2019, the Company issued a new 8% Senior Secured Convertible Promissory Note and received $125,000 in proceeds. As of March 12, 2021, both tranches of the Note have been completely converted into common stock.

On March 5, 2021, the Company issued a new 8% Senior Secured Convertible Promissory Note (“Note”) in the aggregate principal amount of up$1,250,000 less commissions and expenses of $25,000. The Note matures in six months on September 5, 2021.

The Note is convertible into common shares of the Company at a price which is the lower of: (i) 80% of the lowest volume weighted average price in the five trading days prior to $575,682.the date of the lender’s notice of conversion and (ii) $4.25. The initial tranche principalCompany is subject to certain penalties if the shares are not issued within two business days of $149,546 was issued,receiving

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10

the conversion notice. Pursuant to a Security Agreement between the Company and the Investor (the “Security Agreement”), the Company received $125,000has granted to the Investor a security interest in proceeds.its assets to secure repayment of the Notes. The Company must reserve an amount of shares equal to 500% of the total amount of shares issuable upon full conversion of the promissory note. The Company meets this requirement since it has 250,000,000 common shares authorized and as of April 14, 2021, 174,034,699 shares are available to be issued.

On August 26, 2019, the Company entered into an Equity Purchase Agreement and Registration Rights Agreement with the same Investorinvestor who provided the funding with the 8% Senior Secured Convertible Promissory Notes.Note. Under the terms of the Equity Purchase Agreement, the Investorinvestor agreed to purchase from the Company up to $5,000,000 of the Company’s common stock upon effectiveness of a registration statement on Form S-1 filed with the U.S. SecuritiesS-1.

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and Exchange Commission and subject to certain limitations and conditions set forth in the Equity Purchase Agreement.  InAs of December 31, 2019, no funds were raised by the Company and nohad not issued any stock issued, under the Equity Purchase Agreement. Through May 29,During the year ended December 31, 2020, the Company raised $63,664 through the Equity Purchase Agreement by selling 1,050,000put a total of 333,333 shares of its common stock at prices ranging from $0.515 and $1.539 for total proceeds of $287,228, net of issuance costs. Subsequent to December 31, 2020, the investor.Company has put 120,000 shares at prices ranging from $2.44 to $2.85 per share for total proceeds of $314,416.

Further capital support will come from the parent, and additional capital from third party sources. There is no assurance that the third party capital will be available. In the event that additional capital from the private or public markets is not available, the Company will need to reduce its spending on development and operations to the level of the capital that is available from the parent.

The Company has prepared itsaccompanying consolidated financial statements for the year ended December 31, 2019have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. As reflected in the accompanying consolidated financial statements, for the year ended December 31, 20192020 the Company had a net loss of $2,305,073,$1,185,846 and used $950,546$653,882 in cash in operations, and at December 31, 2019,2020, had negative working capital of $921,829,$1,071,951, current assets of $62,299,$114,298, and an accumulated deficit of $10,316,875.$11,502,721. The foregoing factors raise substantial doubt about the Company’s ability to continue as a going concern. Ultimately, the ability to continue as a going concern is dependent upon the Company’s ability to attract significant new sources of capital, attain a reasonable threshold of operating efficiencies and achieve profitable operations by licensing or otherwise commercializing products incorporating the Company’s technologies. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

While the Company has Net Operating Losses (“NOL”) for tax purposes due to the net losses through the year ended December 31, 2019,2020, the Company has taken a 100% income tax valuation allowance against it resulting in no deferred tax asset. At this time, it is not known if the Company will become profitable with the ability to use the NOL.

The Company expects to spend $250,000$760,000 in the next six months and then another $1,000,000$1,500,000 in the subsequent six months on the development and marketing of the eVTOL aircraft.

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In December 2015,

See Notes to the Company authorized 50,000,000 shares ofconsolidated financial statements for Series A Preferred Stock, with a $0.0001 par value. The Series A Preferred has an 8% dividend paid quarterly and is convertible into one share of common stock. The Series A Preferred is senior to the common stock, as to dividends, and any liquidation, dissolution or winding up of the Company. The Series A Preferred also has certain voting and registration rights.

On March 14, 2018, Lawrence and Loreen Calarco, officers and directors of the Company, the Lawrence & Loreen Calarco Family Trust and the Lawrence and Loreen Calarco Trust of June 3, 2014, sold all 1,562,500 preferred shares to MAAB, a non-affiliate of CPSM, Inc.

On March 14, 2018, 1,500,000 stock options were cancelled and two 10% Convertible Promissory Notes (“Notes”) with a six month maturity were issued to the former option holders. The principal amount was $25,000 each and there was no prepayment penalty. The Notes were convertible into the Company’s common stock based upon the average of the previous ten trading days’ closing price of the stock, at the maturity date of the Notes. Upon conversion of the notes, Bruce Bent or MAAB had the option to purchase the common stock issued at a 5% discount to the average closing price of the stock over the previous 10 trading days. The option to purchase expired ten days after the issuance of the common stock.

On September 18, 2018, at the maturity of the Notes, the entire outstanding balance was converted into 38,886 shares of common stock of the Company, which included $2,534 of accrued interest. The Company issued the shares of common stock on October 22, 2018

On May 4, 2018, the Board of Directors of the Company authorized 10,000 shares of the Series B Convertible Preferred Stock, par value $0.001 per share. The Preferred is entitled to a dividend, when declared by the Board of Directors, votes with all other classes of stock as a single class of stock on all actions to be voted on by the stockholders of the Company, and each share of Preferred is convertible into 1,333 shares of common stock and a five year warrant

to purchase 1,333 shares of common stock at an exercise price of $0.75 per share. On May 8, 2018, the Company issued all of the 10,000 authorized Series B Preferred shares in the acquisition of certain assets from Confida Aerospace Ltd.

On March 14, 2018, MAAB Global Limited, the parent of Astro, issued a Promissory Note for monetary advances to the Company of up to $750,000. The Promissory Note matures on February 28, 2021. The Promissory Note has an interest rate of 10%, compounded monthly. On April 22, 2020, the Promissory Note was amended to increase the maximum principal amount to $1,250,000 and to extend the maturity to February 28, 2022.

Interest accrues on the principal amount or portion thereof which remains unpaid from time to time as well as any interest outstanding, from the date the principal amount is advanced until and including the date upon which the principal amount and all interest due under thisstock, promissory note shall be fully paid. The principal amount advanced under the Promissory Note is $750,017 through December 31, 2019. The Company has accrued interest expense of $89,797 at December 31, 2019.

On November 21, 2018, the Company issued anfrom MAAB, 8% Senior Secured Convertible Promissory Note in the aggregate principal amount of $1,383,636 in exchange for a total investment of $1,200,000, less commissions and expenses, payable in two tranches. The first tranche was payable upon the closing of the agreement, and the second tranche was payable within ten (10) business days of the Investor receiving written notice confirming the effectiveness of the initial registration statement. The first tranche principal of $701,818 was issued, with an Original Issue Discount (“OID”) of $81,818, a $20,000 financing fee for the lender’s transactional expenses that was expensed and the Company received proceeds of $600,000. Each tranche matured 6 months after the issue date. The Company also received the second tranche of $600,000 in February 2019.

The note is convertible into common shares of the Company at a price equal to 75% of the lowest market value in the thirty trading days prior to the conversion date.  The Company is subject to certain penalties if the shares are not issued within two business days of receiving the conversion notice.  Pursuant to a Security Agreement between the Company and the Investor, the Company has granted to the Investor a security interest in its assets to secure repayment of the Notes. The Company must reserve a number of shares equal to 500% of the total amount of shares issuable upon full conversion of the promissory note. The Company meets this requirement since it has 250,000,000 common shares authorized and as of May 29, 2020, 88,882,955 common shares available to be issued.

As additional consideration for the investment, the Company issued 156,250 shares of its common stock to the Investor, valued at $89,531 at the date of issuance, plus warrants to acquire up to an aggregate 344,029 shares of the Company’s common stock at an exercise price of $0.51 per share. Upon the closing of the second tranche in February 2019, the Company issued additional warrants to acquire up to an aggregate of 421,656 shares of the Company’s common stock at an exercise price of $0.40 per share.  Each Warrant is exercisable by the Investor beginning on the Effective Date through the fifth year anniversary thereof.

The Note has a beneficial conversion feature (“BCF”) for both tranches, which were valued, along with the warrants, on a relative fair value method. In the first tranche, the warrant fair value was $171,121 and the beneficial conversion feature fair value was $523,326 for a total debt discount of $694,447. The exercise price was $0.375 per share which converts into 1,871,515 common shares. The common stock price at the valuation date was $0.573 per share and the effective conversion price was calculated as $0.293, so that the BCF was calculated to be $0.280 per share valuing the BCF at $523,326.

However, adding the OID and the inducement shares to the debt discount, made final total debt discount $865,796, larger than the principal amount of the Note. Consequently, $163,978 of the debt discount was expensed. Additionally, $108,886 of the debt discount was amortized to interest expense for the year ended December 31, 2018, with an additional $534,682 amortized to interest in the year ended December 31, 2019, bringing the debt discount to $58,250 at December 31, 2019.

In the second tranche, the warrant fair value was $121,320 and the beneficial conversion feature fair value was $403,689 for a debt discount of $525,009. The exercise price was $0.2475 per share which converts into 2,754,820

common shares. The common stock price at the valuation date was $0.35 per share and the effective conversion price was calculated as $0.204, so that the BCF was calculated to be $0.146 per share valuing the BCF at $403,689.

Including the $81,818 of OID, the total debt discount is $606,827. Prior to the forbearance agreement dated September 11, 2019, $498,402 of the debt discount was amortized into interest expense, bringing the debt discount to $108,425. However, the forbearance agreement increased the principal amount, and the debt discount, which were allocated to the second tranche, so there was a net increase in the principal and the debt discount in the second tranche of $257,135 (See Note 10, “Default and Forbearance on the 8% Senior Secured Convertible Promissory Note”). Additional amortization of the debt discount into interest expense in the fourth quarter of the year ended December 31, 2019 was $117,986 bringing the debt discount to $230,843 at December 31, 2019.

On February 22, 2019, the Investor converted $55,387 in principal amount of the Note into 215,054 shares of the Company’s common stock. Likewise, on March 19, 2019, the Investor converted $38,633 in principal amount of the Note into 150,000 shares of the Company’s common stock. However, the conversion share calculation was incorrect for the March 19, 2019 conversion of the $38,633 in principal amount of the Note and the actual shares issued for the conversion were 26,712 shares less than what it should have been. These shares were added to a subsequent conversion in April 2019.

In the second quarter ended June 30, 2019, the Investor converted $449,397 in principal amount of the Note into 1,830,373 shares of the Company’s common stock. In the third quarter ended September 30, 2019, the Investor converted $93,830 in principal amount of the Note into 750,000 shares of the Company’s common stock. In the fourth quarter ended December 31, 2019, the Investor converted $20,000 in principal amount of the Note into 491,099 shares of the Company’s common stock. The Company has accrued interest on the Note of $83,557 through December 31, 2019. The effective interest rate for both tranches of this Note was 8.33% as of December 31, 2019 and 2018.

On May 21, 2019, six months after the issuance of the first tranche of the 8% Senior Secured Convertible Promissory Note, the Note matured with $307,798 in principal outstanding and approximately $24,118 in accrued interest. The Company was unable to repay the principal and accrued interest and therefore was in default of the Note. The Note has default provisions permitting default interest of 18% to be charged on the Note as well as to charge a default amount of 150% of the unpaid principal and interest.

The Note was issued with two $600,000 tranches of cash payments. Since both tranches are in one Note, both tranches are in default as of May 21, 2019.

The Company and the Investor promptly began negotiations on a Forbearance Agreement and on September 11, 2019, the Company and the Investor agreed to a Forbearance Agreement. Pursuant to this agreement, the Investor is willing to postpone pursuing its rights and remedies under the agreements, in particular and without limitation with respect to the acceleration of the promissory note and the immediate payment of the default amount and reduce the balance of the promissory note to the pre-default balance plus accrued non-default interest of $1,062,784 on the following terms:

1)    Subject to the Company’s compliance with the forbearance agreement, the forbearance shall commence on the effective date and will expire on June 30, 2020.  

2)    Should the Company fail to abide by any of the terms and conditions of the forbearance agreement, fail to comply with the terms of the other agreements, or fail to timely make the payments required under the promissory notes, or should the Company trigger an event of default, the forbearance period will immediately terminate.  

3)    Subject to the Company’s compliance with the forbearance period, the repayment of the promissory note will be reduced from 35% to 0%.

On December 2, 2019, the Company issued a new 8% Senior Secured Convertible Promissory Note in the aggregate principal amount of up to $575,682. The initial tranche principal of $149,546 was issued, with an OID of $17,046, the pro-rated portion of the $68,182 OID for the entire principal amount of $575,682, a $7,500 financing fee for the lender’s transactional expenses that was expensed and the Company received proceeds of $125,000. The Note will mature on June 2, 2020.

The Note is convertible into common shares of the Company at a price equal to 75% of the lowest market value in the thirty trading days prior to the conversion date, which created a BCF valued at greater than the total principal amount of the Note issued of $149,546. The exercise price was $0.0375 per share which converts into 3,987,880 common shares. The common stock price at the valuation date was $0.13 per share and the effective conversion price was calculated as $0.0375, so that the BCF was calculated to be $0.0925 per share valuing the BCF at $368,879.

In accordance with ASC 470-20-30-8, if the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature shall be limited to the amount of the proceeds allocated to the convertible instrument. Therefore, the beneficial conversion feature is limited to $132,500, which when added to the OID of $17,046 equals the principal amount of $149,546. The beneficial conversion feature is being amortized using the effective interest method over the term of the note.

Amortization of the debt discount into interest expense was $24,093 for the year ended December 31, 2019, bringing the debt discount to $125,453 at December 31, 2019. The Company has accrued interest of $1,927 on the Note through the year ended December 31, 2019. The effective interest rate for this Note was 8.33% at December 31, 2019.

On August 26, 2019, the Company entered into anNotes, Equity Purchase Agreement and Registration Rights Agreement with the same Investor who provided the funding with the 8% Senior Secured Convertible Promissory Note. Under the terms of the Equity Purchase Agreement, the Investor agreed to purchase from the Company up to $5,000,000 of the Company’s common stock upon effectiveness of a registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission and subject to certain limitations and conditions set forth in the Equity PurchaseForbearance Agreement.

On August 26, 2019, in connection with its entry into the Equity Purchase Agreement and the Registration Rights Agreement, the Company committed to 600,000 Commitment Shares (as defined in the Equity Purchase Agreement) to the Investor.  These shares are initially being issued pursuant to the Section 4(a)(2) exemption and will be registered pursuant to the Registration Rights Agreement. Subsequent to the Agreement and prior to the issuance of the Commitment Shares, the Company renegotiated the payment to 300,000 shares of common stock. The fair value of the Commitment Shares as of August 26, 2019 was $48,300. The fair value was entirely expensed in the year ended December 31, 2019.

As of December 31, 2019, the Company had not issued any stock under the Equity Purchase Agreement. Through May 29, 2020, the Company raised $63,664 through the Equity Purchase Agreement by selling 1,050,000 shares of its common stock to the investor.

For the Year Ended December 31, 20192020 compared to the Year Ended December 31, 20182019

For the year ended December 31, 2020, we had a net loss of $1,185,846. We had the following adjustments to reconcile net loss to cash flows from operating activities: an increase of $440,017 due to the amortization of the Senior Secured Convertible Promissory Note discounts. We had the following changes in operating assets and liabilities: a decrease of $24,844 in other receivables, a decrease of $623 in prepaid expenses, an increase of $4,200 in deposits and an increase of $110,788 in accounts payable and accrued liabilities.

As a result, we had net cash used in operating activities of $613,774 for the year ended December 31, 2020 which is largely due to the continued development of the eVTOL aircraft.

For the year ended December 31, 2019, we had a net loss of $2,305,073. We had the following adjustmentadjustments to reconcile net loss to cash flows from operating activities: an increase of $1,191,894 due to the amortization of the 8% Senior Secured Convertible Promissory Note discounts.

We had the following changes in operating assets and liabilities: an increase of $27,860 in other receivables, a decrease of $18,567 in prepaid expenses, a decrease of $274 in deposits and an increase of $171,652 in accounts payable and accrued liabilities.

As a result, we had net cash used in operating activities of $950,546 for the year ended December 31, 2019 which is largely due to the continued development of the eVTOL aircraft.

For the year ended December 31, 2018,2020, we hadreceived $459,333 from a net loss of $7,626,599. We had the following adjustments to reconcile net loss to cash flows from operating activities: an increase of $6,285,214 due to an impairment expense and an increase of $295,398 due to the amortization of the 8% Senior Secured Convertible Promissory Note discounts.

We had the following changes in operating assets and liabilities: an increase of $32,657 in other receivables, an increase of $19,190 in prepaid expenses, an increase of $14,199 in deposits, an increase of $96,452 in accounts payable and accrued expenses, and a decrease of $358,355 from the discontinued operations.

parent and received $247,120 from the puts of common stock under the Equity Purchase Agreement.

As a result, we had net cash used in operatingprovided by financing activities of $1,373,936$706,453 for the year ended December 31, 2018 which is largely due to the continued development of the eVTOL aircraft.2020.

For the year ended December 31, 2019, we received $158,578 from a Promissory Note from the parent, received $600,000 from the issuance of the 8% Senior Secured Convertible Promissory Note, received $125,000 from the issuance of a new 8% Senior Secured Promissory Note and an increase of $48,300 from the issuance of 300,00020,000 shares of common stock for a financing fee. We also had a non-cash financing fee of $7,500 issued as a component of the new 8% Senior Secured Convertible Promissory Note of December 2, 2019.

As a result, we had net cash provided by financing activities of $939,378 for the year ended December 31, 2019.

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For the year ended December 31, 2018, we accrued a preferred stock dividend of $2,500, received $591,439 from a Promissory Note from the parent2020 and received $600,000 from the issuance of the 8% Senior Secured Convertible Promissory Note. As a result, we had net cash provided by financing activities of $1,188,939 for the year ended December 31, 2018.

For the year ended December 31, 2019, we had a loss on foreign currency translation of $42,802. For the year ended December 31, 2018, we had a gain on foreign currency translation of $22,704.$55,321 and $42,802, respectively.

Section 16(a) Beneficial Ownership Reporting Compliance

Under Section 16(a) of the Securities Exchange Act of 1934, as amended, an officer, director, or greater-than-10% shareholder of the Company must file a Form 4 reporting the acquisition or disposition of Company’s equity securities with the Securities and Exchange Commission no later than the end of the second business day after the day the transaction occurred unless certain exceptions apply.  Transactions not reported on Form 4 must be reported on Form 5 within 45 days after the end of the Company’s fiscal year.  Such persons must also file initial reports of ownership on Form 3 upon becoming an officer, director, or greater-than-10% shareholder.  Mr. Bruce Bent, the Company’s Chief Executive Officer, is currently up to date in meeting these requirements and has notified the Company that he is now compliant.  On August 30, 2019, pursuant to Section 16(a), Mr. Bent disgorged short swing profits of $178,394 to the Company.

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CriticalCritical Accounting Policies and Estimates

Management's Discussion and Analysis of its Consolidated Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.America (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on- going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses and the valuation of our assets and contingencies.  We believe our estimates and assumptions to be reasonable under the circumstances. However, actual results could differ from those estimates under different assumptions or conditions. Our consolidated financial statements are based on the assumption that we will continue as a going concern. If we are unable to continue as a going concern, we would experience additional losses from the write-down of assets.

Recent Accounting Pronouncements

See Note 63 to the Consolidated Financial Statements, “Recent Accounting Pronouncements”, for the applicable accounting pronouncements affecting the Company.

Off - Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of December 31, 2019.2020.

Contractual Obligations

The registrant has no material contractual obligations

The long-termlong term debt repayments as of December 31, 2020 are as follows:

The Company does not have any significant market risk exposures.

15

Index toConsolidatedFinancialto Consolidated Financial Statements

Page 

Report of Independent Registered Public Accounting Firm

1917

Consolidated Balance Sheets as of December 31, 20192020 and December 31, 20182019

2019

Consolidated Statements of Operations for the years ended December 31, 20192020

and 20182019

2120

Consolidated Statements of Comprehensive Loss for the years ended December 31,

23   2020 and 2019

21

Consolidated Statements of Stockholders’Equity (Deficit)Equity for the years ended

  December 31, 20192020 and 20182019

2422

Consolidated Statements of Cash Flow for the years ended December 31, 20192020

  and 20182019

2624

Notes to Consolidated Financial Statements

2826

16

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors

Astro Aerospace Ltd.

Lewisville, Texas:

Opinion on the Consolidated Financial StatementsConsolidatedFinancial Statements

We have audited the accompanying consolidated balance sheets of Astro Aerospace Ltd. and SubsidiariesSubsidiary (the "Company"), as of December 31, 20192020 and 20182019 and the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit)equity and cash flows for the years then ended and the related notes (collectively referred to as the "consolidatedfinancial"consolidated financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 20192020 and 2018,2019, and the consolidated results of its operations and its cash flows for years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit of $10,316,875$11,502,721 at December 31, 20192020 and a loss from operations of $2,305,073$1,185,846 for the year ended December 31, 2019,2020, and a working capital deficiency of $921,829$1,071,951 which raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

Theseconsolidatedfinancial

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company'sconsolidatedfinancialCompany's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, the Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of theconsolidatedfinancialthe consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidatedfinancialthe consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of theconsolidatedfinancialthe consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

17

To the Shareholders and the Board of Directors

Astro Aerospace Ltd.

Page Two

Critical Audit Matters

The critical audit matter communicated below is a atter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the Board of Directors and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments  The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Acquired In-Process Research and Development Costs

The Company acquired in-process research and development (“IPRD”) consisting of inventory, hardware designs, software designs, and a trademark all pertaining to early development stage drone design.

As described in Note 2 to the consolidated financial statements, the Company’s acquired IPRD costs balance was $871,000 as of December 31, 2020.  IPRD is reviewed for impairment annually, or more frequently if indicators of impairment exist.  The Company performed an impairment test for the IPRD and concluded that it was not impaired at December 31, 2020. The evaluation of impairment involves comparing the current fair value of IPRD to its carrying value.  Management uses the assistance of an independent specialist to determine the estimated fair value of IPRD.  Fair value is estimated using a model that contains various quantitative adjustments.  The determination of fair value using this technique requires the use of significant inputs, estimates and assumptions and other industry-based information of peer companies within the aerospace industry and similar industries that have development stage research and development (“R&D”) activities.

The principal consideration for our determination that performing procedures relating to the impairment assessments of the IPRD is a critical audit matter is the significant and inherent judgment required in developing the fair value measurement of the asset.  In turn, this led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating audit evidence related to these inputs, estimates, and significant assumptions for the impairment assessment.  In addition, the audit effort involved the use of an independent impairment analysis provided by a management specialist with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.  These procedures included the following, among others:

·

We assessed the reasonableness of the inputs, assumptions, and estimates utilized within the Company’s impairment analysis, which included financial data of certain peers within the Company’s industry and similar industries that have development stage R&D activities.

·

We tested financial data utilized in the impairment analysis to assess the accuracy of the inputs.

·

We assessed the reasonableness of other quantitative inputs by obtaining and evaluating the information against source documentation.

·

We tested the completeness and accuracy of total R&D costs data provided by management to the independent specialist.

·

We tested the overall mathematical accuracy of the impairment calculation.

/s/HACKER, JOHNSON & SMITH PA

We have served as the Company's auditor since 2014.

Fort Lauderdale, Florida

May29, 2020April 14, 2021

18

Astro Aerospace Ltd. and SubsidiariesSubsidiary

Consolidated Balance Sheets

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

19

Astro Aerospace Ltd. and SubsidiariesSubsidiary

Consolidated Statements of Operations

The accompanying Notes are an integral part of the consolidated financial statements

20

Astro Aerospace Ltd. and SubsidiariesSubsidiary

Consolidated Statements of Operations

(Continued)Comprehensive Loss

The accompanying notes are an integral part of the consolidated financial statements

21

Astro Aerospace Ltd. and Subsidiary

Consolidated Statements of Stockholders’Equity (Deficit)

Years Ended December 31, 2020 and 2019

22

Astro Aerospace Ltd. and Subsidiary

Consolidated Statements of Stockholders’Equity (Deficit)

Years Ended December 31, 2020 and 2019

*Shares have been restated for a 1 for 15 reverse stock split.

The accompanying notes are an integral part of the consolidated financial statements.

Astro Aerospace Ltd. and Subsidiaries

ConsolidatedStatements of Comprehensive Loss

The accompanyingnotes are an integral part of the consolidated financial statements

23

Astro Aerospace Ltd. and Subsidiaries

Consolidated Statements of Stockholders’(Deficit)Equity

Years Ended December 31, 2019 and 2018