UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended SeptemberJune 30, 2020
-OR-2021
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transaction period from _________ to________
Commission File Number 333-149000
ASTRO AEROSPACE LTD.
(Exact(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification) |
320 W. Main Street, Lewisville,TX 75057
(Address of principal executive offices, including zip code)
(469) 702-8344
(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) 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 (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-accelerate filer, or a small reporting company (as defined by Rule 12b-2 of the Exchange Act):
Large accelerated filer [ ] | Non-accelerated filer [ ] | ||
Accelerated filer [ ] | Smaller reporting company [x] | ||
Emerging growth company [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
The number of outstanding shares of the registrant's common stock as of November 23, 2020: 83,735,586September 29, 2021: 16,590,767
Item 1. Condensed Consolidated Financial Statements | |||
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September 30, | December 31, | |||
2020 | 2019 | |||
(unaudited) | ||||
Assets | ||||
Cash | $ 31,212 | $ 1,159 | ||
Other Receivables | 36,238 | 60,517 | ||
Prepaids | - | 623 | ||
Total Current Assets | 67,450 | 62,299 | ||
Acquired In-Process Research and Development | 871,000 | 871,000 | ||
Deposits | 7,171 | 13,925 | ||
Total Assets | $ 945,621 | $ 947,224 | ||
Liabilities and Stockholders' Deficit | ||||
Current Liabilities | ||||
Accounts Payable and Accrued Liabilities | $ 320,633 | $ 265,604 | ||
8% Senior Secured Convertible Promissory Note, net of discounts of $5,943 at September 30, 2020 and $289,093 at December 31, 2019 | 712,223 | 694,431 | ||
8% Senior Secured Convertible Promissory Note issued December 2, 2019, net of discounts of $0 at September 30, 2020 and $125,453 at December 31, 2019 | 121,691 | 24,093 | ||
Total Current Liabilities | 1,154,547 | 984,128 | ||
Long Term Liabilities | ||||
Promissory Note from MAAB | 1,049,277 | 750,017 | ||
Total Liabilities | 2,203,824 | 1,734,145 | ||
Commitments and Contingencies (Notes 14 and 15) | ||||
Stockholders' Deficit | ||||
Series A Convertible Preferred Stock, $0.0001 par value, 50,000,000 | ||||
Shares Authorized, 1,562,500 shares Issued and Outstanding at September 30, 2020 and December 31, 2019 | 156 | 156 | ||
Series B Convertible Preferred Stock, $0.001 par value, 10,000 | ||||
Shares Authorized, 10,000 Shares Issued and Outstanding at September 30, 2020 and December 31, 2019 | 10 | 10 | ||
Common Stock, $0.001 par value, 250,000,000 Shares authorized, 83,135,586 and 73,201,722 Shares Issued and Outstanding at September 30, 2020 and December 31, 2019 | 83,136 | 73,202 | ||
Additional Paid-In Capital: | ||||
Series A Convertible Preferred Stock | 124,844 | 124,844 | ||
Series B Convertible Preferred Stock | 7,156,204 | 7,156,204 | ||
Common Stock | 2,692,251 | 2,195,636 | ||
Accumulated Other Comprehensive Income (Loss) | 19,226 | (20,098) | ||
Accumulated Deficit | (11,334,030) | (10,316,875) | ||
Total Stockholders’ Deficit | (1,258,203) | (786,921) | ||
Total Liabilities and Stockholders’ Deficit | $ 945,621 | $ 947,224 |
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Cash | $ | 38,775 | $ | 38,517 | ||||
Other Receivables | 62,178 | 75,781 | ||||||
Prepaid Expense | 20,967 | 0 | ||||||
Total Current Assets | 121,920 | 114,298 | ||||||
Property and Equipment | 61,484 | 0 | ||||||
Acquired In-Process Research and Development | 3,040,000 | 871,000 | ||||||
Non-Compete Agreements | 433,800 | 0 | ||||||
Deposits | 97,107 | 18,125 | ||||||
Investment in SPAC | 110,000 | 0 | ||||||
Total Assets | $ | 3,864,311 | $ | 1,003,423 | ||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||
Current Liabilities | ||||||||
Accounts Payable and Accrued Liabilities | $ | 603,530 | $ | 376,392 | ||||
8% Senior Secured Convertible Promissory Note | 0 | 688,166 | ||||||
8% Senior Secured Convertible Promissory Note issued December 2, 2019 | 0 | 121,691 | ||||||
8% Senior Secured Convertible Promissory Note issued March 5, 2021, net of discount of $433,468 | 816,532 | 0 | ||||||
Total Current Liabilities | 1,420,062 | 1,186,249 | ||||||
Long Term Liabilities | ||||||||
Promissory Note from MAAB | 1,476,664 | 1,209,350 | ||||||
Canadian Emergency Business Account Loan Payable | 49,677 | 0 | ||||||
Total Liabilities | 2,946,403 | 2,395,599 | ||||||
Commitments and Contingencies (Notes 14 and 16) | - | |||||||
Stockholders' Equity (Deficit) | ||||||||
Series A Convertible Preferred Stock, $0.0001 par value, 50,000,000 | ||||||||
Shares Authorized, 1,562,500 shares Issued and Outstanding | ||||||||
at June 30, 2021 and December 31, 2020 | 156 | 156 | ||||||
Series B Convertible Preferred Stock, $0.001 par value, 10,000 | ||||||||
Shares Authorized, 10,000 Shares Issued and Outstanding | ||||||||
at June 30, 2021 and December 31, 2020 | 1 | 10 | ||||||
Common Stock, $0.001 par value, 250,000,000 Shares | ||||||||
Authorized, 13,458,380 and 5,724,312 Shares Issued and Outstanding at June 30, 2021 and December 31, 2020 | 13,458 | 5,724 | ||||||
Additional Paid-in Capital: | ||||||||
Series A Convertible Preferred Stock | 124,844 | 124,844 | ||||||
Series B Convertible Preferred Stock | 357,810 | 7,156,204 | ||||||
Common Stock | 28,513,636 | 2,899,026 | ||||||
Accumulated Other Comprehensive Loss | (124,595 | ) | (75,419 | ) | ||||
Accumulated Deficit | (27,967,402 | ) | (11,502,721 | ) | ||||
Total Stockholders' Equity (Deficit) | 917,908 | (1,392,176 | ) | |||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 3,864,311 | $ | 1,003,423 |
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Astro Aerospace Ltd. and SubsidiarySubsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ - | $ - | $ - | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||
Operating Expenses: | ||||||||||||||||||||
Sales and Marketing | 15,086 | 92,374 | 115,730 | 223,253 | 466,003 | 18,220 | 1,030,043 | 100,645 | ||||||||||||
General and Administrative | 96,504 | 73,875 | 231,936 | 200,433 | 219,446 | 65,865 | 410,025 | 134,107 | ||||||||||||
Research and Development | 28,484 | 80,166 | 98,913 | 426,422 | 72,885 | 40,764 | 120,276 | 70,532 | ||||||||||||
Impairment Expense | 14,011,720 | 0 | 14,011,720 | 0 | ||||||||||||||||
Total Operating Expenses | 140,074 | 246,415 | 446,579 | 850,108 | 14,770,054 | 124,849 | 15,572,064 | 305,284 | ||||||||||||
Loss from Operations | (140,074) | (246,415) | (446,579) | (850,108) | (14,770,054 | ) | (124,849 | ) | (15,572,064 | ) | (305,284 | ) | ||||||||
Other Expense (Income) | ||||||||||||||||||||
Other Expense | ||||||||||||||||||||
Interest Expense, Net | 65,963 | 97,632 | 563,197 | 1,094,959 | 638,261 | 211,675 | 881,761 | 497,234 | ||||||||||||
Bank and Filing Fees | 4,281 | 893 | 7,379 | 9,225 | ||||||||||||||||
Miscellaneous Income | - | (176,474) | - | (178,394) | ||||||||||||||||
Total Other Expense (Income) | 70,244 | (77,949) | 570,576 | 925,790 | ||||||||||||||||
Bank and Financing Fees | 9,201 | 4,183 | 10,856 | 4,319 | ||||||||||||||||
Total Other Expense | 647,462 | 215,858 | 892,617 | 501,553 | ||||||||||||||||
Loss Before Income Tax | (210,318) | (168,466) | (1,017,155) | (1,775,898) | (15,417,516 | ) | (340,707 | ) | (16,464,681 | ) | (806,837 | ) | ||||||||
Income Tax | - | - | - | - | 0 | 0 | 0 | 0 | ||||||||||||
Net Loss | (210,318) | (168,466) | (1,017,155) | (1,775,898) | (15,417,516 | ) | (340,707 | ) | (16,464,681 | ) | (806,837 | ) | ||||||||
Less: Preferred Stock Dividends | 2,500 | 2,500 | 7,500 | 7,500 | 2,500 | 2,500 | 5,000 | 5,000 | ||||||||||||
Net Loss Available to Common Stockholders | $ (212,818) | $ (170,966) | $ (1,024,655) | $ (1,783,398) | $ | (15,420,016 | ) | $ | (343,207 | ) | $ | (16,469,681 | ) | $ | (811,837 | ) | ||||
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Net Loss per Common Share: |
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Basic | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.03) | $ | (1.65 | ) | $ | (0.07 | ) | $ | (1.85 | ) | $ | (0.16 | ) | ||||
Diluted | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.03) | $ | (1.65 | ) | $ | (0.07 | ) | $ | (1.85 | ) | $ | (0.16 | ) | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 81,657,869 | 72,176,927 | 78,159,266 | 70,819,765 | ||||||||||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 81,657,869 | 72,176,927 | 78,159,266 | 70,819,765 | ||||||||||||||||
Weighted Average Number of Common | ||||||||||||||||||||
Shares Outstanding - Basic | 9,321,995 | 5,207,026 | 8,893,718 | 5,125,482 | ||||||||||||||||
Weighted Average Number of Common | ||||||||||||||||||||
Shares Outstanding - Diluted | 9,321,995 | 5,207,026 | 8,893,718 | 5,125,482 |
The accompanying Notes are an integral part of the condensed consolidated financial statements
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Astro Aerospace Ltd. and SubsidiarySubsidiaries
Condensed Consolidated Statements of Other Comprehensive Loss
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||
Net Loss | $ (210,318) | $ (168,466) | $ (1,017,155) | $ (1,775,898) | $ | (15,417,516 | ) | $ | (340,707 | ) | $ | (16,464,681 | ) | $ | (806,837 | ) | |||||
Foreign Currency Translation (Loss) Gain | (35,556) | 17,180 | 39,324 | (10,014) | (16,281 | ) | (63,785 | ) | (49,176 | ) | 74,880 | ||||||||||
Comprehensive Loss | $ (245,874) | $ (151,286) | $ (977,831) | $ (1,785,912) | $ | (15,433,797 | ) | $ | (404,492 | ) | $ | (16,513,857 | ) | $ | (731,957 | ) |
The accompanying Notes are an integral part of the condensed consolidated financial statements
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Subsidiaries
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid - In Capital Series A | Additional Paid - In Capital Series B | Additional Paid - In Capital | Accumulated Other Comprehensive | (Accumulated | Total Stockholders' Equity | ||||
Shares | Amount | Shares | Amount | Shares | Amount | Preferred | Preferred | Common | Income (Loss) | Deficit) | (Deficit) | |
Balance at December 31, 2018 | 1,562,500 | $ 156 | 10,000 | $ 10 | 69,308,946 | $69,309 | $124,844 | $ 7,156,204 | $ 836,473 | $ 22,704 | $ (8,011,802) | $ 197,898 |
Issuance of inducement shares (Unaudited) | - | - | - | - | 156,250 | 156 | - | - | (156) | - | - | - |
Partial Conversions of 8% Senior Secured Convertible Promissory Notes (Unaudited) | - | - | - | - | 365,054 | 365 | - | - | 93,655 | - | - | 94,020 |
Fair Value of Warrants Issued with 8% Senior Secured Convertible Promissory Note – 2nd Tranche (unaudited) | - | - | - | - | - | - | - | - | 121,320 | - | - | 121,320 |
Fair Value of Beneficial Conversion Feature of the 8% Senior Secured Convertible Promissory Note – 2nd Tranche (unaudited) | - | - | - | - | - | - | - | - | 403,689 | - | - | 403,689 |
Foreign Currency Translation Gain (Unaudited) | - | - | - | - | - | - | - | - | - | 665 | - | 665 |
Net Loss (Unaudited) | - | - | - | - | - | - | - | - | - | - | (696,623) | (696,623) |
Balance at March 31, 2019 (Unaudited) | 1,562,500 | $156 | 10,000 | $10 | 69,830,250 | $69,830 | $124,844 | $7,156,204 | $1,454,981 | $23,369 | $(8,708,425) | $120,969 |
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Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid – In Capital Series A | Additional Paid – In Capital Series B | Additional Paid – In Capital | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Preferred | Preferred | Common | (Loss) Income | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 1,562,500 | $ | 156 | 10,000 | $ | 10 | 4,880,115 | $ | 4,880 | $ | 124,844 | $ | 7,156,204 | $ | 2,263,958 | $ | (20,098 | ) | $ | (10,316,875 | ) | $ | (786,921 | ) | ||||||||||||||||||||||||
Partial Conversions of 8% Senior Secured Convertible Promissory Notes (Unaudited) | 0 | 0 | 0 | 0 | 215,285 | 215 | 0 | 0 | 166,509 | 0 | 0 | 166,724 | ||||||||||||||||||||||||||||||||||||
Puts of Common Stock Under the Equity Purchase Agreement, net of issuance costs of $9,000 (Unaudited) | 0 | 0 | 0 | 0 | 36,667 | 37 | 0 | 0 | 41,844 | 0 | 0 | 41,881 | ||||||||||||||||||||||||||||||||||||
Foreign Currency Translation (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | 138,665 | 0 | 138,665 | ||||||||||||||||||||||||||||||||||||
Net Loss (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | 0 | (466,130 | ) | (466,130 | ) | ||||||||||||||||||||||||||||||||||
Balance at March 31 31, 2020 (Unaudited) | 1,562,500 | $ | 156 | 10,000 | $ | 10 | 5,132,067 | $ | 5,132 | $ | 124,844 | $ | 7,156,204 | $ | 2,472,311 | $ | 118,567 | $ | (10,783,005 | ) | $ | (905,781 | ) | |||||||||||||||||||||||||
Partial Conversions of 8% Senior Secured Convertible Promissory Notes (Unaudited) | 0 | 0 | 0 | 0 | 163,739 | 164 | 0 | 0 | 106,773 | 0 | 0 | 106,937 | ||||||||||||||||||||||||||||||||||||
Puts of Common Stock Under the Equity Purchase Agreement, net of issuance costs of $9,000 (Unaudited) | 0 | 0 | 0 | 0 | 83,333 | 83 | 66,112 | 66,195 | ||||||||||||||||||||||||||||||||||||||||
Foreign Currency Translation Loss (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | (63,785 | ) | 0 | (63,785 | ) | ||||||||||||||||||||||||||||||||||
Net Loss (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | 0 | (340,707 | ) | 0 | (340,707 | ) | |||||||||||||||||||||||||||||||||
Balance at June 30, 2020 (Unaudited) | 1,562,500 | $ | 156 | 10,000 | $ | 10 | 5,379,139 | $ | 5,379 | $ | 124,844 | $ | 7,156,204 | $ | 2,645,196 | $ | 54,782 | $ | (11,123,712 | ) | $ | (1,137,141 | ) |
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Subsidiaries
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid – In Capital Series A | Additional Paid – In Capital Series B | Additional Paid – In Capital | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Preferred | Preferred | Common | Income (Loss) | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 1,562,500 | $ | 156 | 10,000 | $ | 10 | 5,724,312 | $ | 5,724 | $ | 124,844 | $ | 7,156,204 | $ | 2,899,026 | $ | (75,419 | ) | $ | (11,502,721 | ) | $ | (1,392,176 | ) | ||||||||||||||||||||||||
Issuance of Common Stock for Services (Unaudited) | 0 | 0 | 0 | 0 | 14,493 | 15 | 0 | 0 | 43,681 | 0 | 0 | 43,696 | ||||||||||||||||||||||||||||||||||||
Partial Conversion of 8% Senior Secured Convertible Promissory Notes (Unaudited) | 0 | 0 | 0 | 0 | 1,745,342 | 1,745 | 0 | 0 | 1,003,982 | 0 | 0 | 1,005,727 | ||||||||||||||||||||||||||||||||||||
Puts of Common Stock Under the Equity Purchase Agreement, net of issuance costs of $750 (Unaudited) | 0 | 0 | 0 | 0 | 120,000 | 120 | 0 | 0 | 314,296 | 0 | 0 | 314,416 | ||||||||||||||||||||||||||||||||||||
Partial Conversion of the Series B Convertible Preferred Stock(Unaudited) | 0 | 0 | (9,500 | ) | (9 | ) | 844,233 | 844 | 0 | (6,798,394 | ) | 6,797,559 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||
Fair Value of Warrants Issued with 8% Senior Secured Convertible Promissory Note Issued March 5, 2021 (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 369,671 | 0 | 0 | 369,671 | ||||||||||||||||||||||||||||||||||||
Fair Value of Beneficial Conversion Feature of the 8% Senior Secured Convertible Promissory Note, Issued March 5, 2021 (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 780,128 | 0 | 0 | 780,128 | ||||||||||||||||||||||||||||||||||||
Foreign Currency | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | (32,895 | ) | 0 | (32,895 | ) | ||||||||||||||||||||||||||||||||||
Net Loss (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | 0 | (1,047,165 | ) | (1,047,165 | ) | ||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 (Unaudited) | 1,562,500 | $ | 156 | 500 | $ | 1 | 8,448,380 | $ | 8,448 | $ | 124,844 | $ | 357,810 | $ | 12,208,343 | $ | (108,314 | ) | $ | (12,549,886 | ) | $ | 41,402 |
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Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid - In Capital Series A | Additional Paid - In Capital Series B | Additional Paid - In Capital | Accumulated Other Comprehensive | Accumulated | Total Stockholders' Equity | ||||
Shares | Amount | Shares | Amount | Shares | Amount | Preferred | Preferred | Common | Income (Loss) | Deficit | (Deficit) | |
Balance at March 31, 2019 (Unaudited) | 1,562,500 | $156 | 10,000 | $10 | 69,830,250 | $69,830 | $124,844 | $7,156,204 | $1,454,981 | $23,369 | $(8,708,425) | $120,969 |
Partial Conversions of 8% Senior Secured Convertible Promissory Notes | - | - | - | - | 1,830,373 | 1,831 | - | - | 447,566 | - | - | 449,297 |
Foreign Currency Translation Loss (Unaudited) | - | - | - | - | - | - | - | - | - | (27,859) | - | (27,859) |
Net Loss (Unaudited) | - | - | - | - | - | - | - | - | - | - | (910,809) | (910,809) |
Balance at June 30, 2019 (Unaudited) | 1,562,500 | $ 156 | 10,000 | $ 10 | 71,660,623 | $71,661 | $124,844 | $7,156,204 | $1,902,547 | $ (4,490) | $(9,619,234) | $ (368,302) |
Partial Conversions of 8% Senior Secured Convertible Promissory Notes (Unaudited) | - | - | - | - | 750,000 | 750 | - | - | 93,080 | - | - | 93,830 |
Foreign Currency Translation Gain (Unaudited) | - | - | - | - | - | - | - | - | - | 17,180 | - | 17,180 |
Net Loss (Unaudited) | - | - | - | - | - | - | - | - | - | - | (168,466) | (168,466) |
Balance at September 30 2019 (Unaudited) | 1,562,500 | $ 156 | 10,000 | $ 10 | 72,410,623 | $72,411 | $124,844 | $7,156,204 | $1,995,627 | $ 12,690 | $(9,787,700) | $(425,758) |
7
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid - In Capital Series A | Additional Paid - In Capital Series B | Additional Paid - In Capital | Accumulated Other Comprehensive | Accumulated | Total Stockholders' Equity | |||||
Shares | Amount | Shares | Amount | Shares | Amount | Preferred | Preferred | Common | Income (Loss) | Deficit | (Deficit) | ||
Balance at December 31, 2019 | 1,562,500 | $156 | 10,000 | $10 | 73,201,722 | $73,202 | $124,844 | $7,156,204 | $2,195,636 | $(20,098) | $(10,316,875) | $(786,921) | |
Partial Conversion of 8% Senior Secured Convertible Promissory Notes (Unaudited) | - | - | - | - | 3,227,782 | 3,228 | - | - | 163,496 | - | - | 166,724 | |
Puts of Common Stock Under the Equity Purchase Agreement, net of issuance costs of $9,000 (Unaudited) | - | - | - | - | 550,000 | 550 | - | - | 41,331 | - | - | 41,881 | |
Foreign Currency Translation Gain (Unaudited) | - | - | - | - | - | - | - | - | - | 138,665 | - | 138,665 | |
Net Loss (Unaudited) | - | - | - | - | - | - | - | - | - | - | (466,130) | (466,130) | |
Balance at March 31, 2020 (Unaudited) | 1,562,500 | $156 | 10,000 | $10 | 76,979,504 | $76,980 | $124,844 | $7,156,204 | $2,400,463 | $118,567 | $(10,783,005) | $(905,781) | |
Partial Conversion of 8% Senior Secured Convertible Promissory Notes (Unaudited) | - | - | - | - | 2,456,082 | 2,456 | - | - | 104,481 | - | - | 106,937 | |
Puts of Common Stock Under the Equity Purchase Agreement, net of Issuance costs of $9,000 (Unaudited) | - | - | - | - | 1,250,000 | 1,250 | - | - | 64,945 | - | - | 66,195 | |
Foreign Currency Translation Loss (Unaudited) | - | - | - | - | - | - | - | - | - | (63,785) | - | (63,785) | |
Net Loss (Unaudited) | - | - | - | - | - | - | - | - | - | - | (340,707) | (340,707) | |
Balance at June 30, 2020 (Unaudited) | 1,562,500 | $156 | 10,000 | $10 | 80,685,586 | $80,686 | $124,844 | $7,156,204 | $2,569,889 | $54,782 | $(11,123,712) | $(1,137,141) |
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid – In Capital Series A | Additional Paid – In Capital Series B | Additional Paid – In Capital | Accumulated Other Comprehensive | Accumulate | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Preferred | Preferred | Common | Income (Loss) | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021: | 1,562,500 | $ | 156 | 500 | $ | 1.00 | 8,448,380 | $ | 8,448 | $ | 124,844 | 357,810 | $ | 12,208,343 | $ | (108,314 | ) | $ | (12,549,886 | ) | $ | 41,402 | ||||||||||||||||||||||||||
Issuance of Common Stock for the Acquisition of Horizon Aircraft, Inc. (Unaudited) | 0 | 0 | 0 | 0 | 5,000,000 | 5,000 | 0 | 0 | 16,222,753 | 0 | 0 | 16,227,753 | ||||||||||||||||||||||||||||||||||||
Issuance of Common Stock for Services (Unaudited) | 0 | 0 | 0 | 0 | 10,000 | 10 | 0 | 0 | 26,290 | 0 | 0 | 26,300 | ||||||||||||||||||||||||||||||||||||
Deposit for Common Stock (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 56,250 | 0 | 0 | 56,250 | ||||||||||||||||||||||||||||||||||||
Foreign Currency Translation Loss (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | (16,281 | ) | 0 | (16,281 | ) | ||||||||||||||||||||||||||||||||||
Adjustment from Horizon Aircraft, Inc. Acquisition (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | 0 | (51,223 | ) | (51,223 | ) | ||||||||||||||||||||||||||||||||||
Net Loss (Unaudited) | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | 0 | (15,417,516 | ) | (15,417,516 | ) | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 (Unaudited) | 1,562,500 | $ | 156 | 500 | $ | 1 | 13,458,380 | $ | 13,458 | $ | 124,844 | $ | 357,810 | $ | 28,513,636 | $ | (124,595 | ) | $ | (27,967,402 | ) | $ | 917,908 |
8
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid - In Capital Series A | Additional Paid - In Capital Series B | Additional Paid - In Capital | Accumulated Other Comprehensive | Accumulated | Total Stockholders' Equity | |||||
Shares | Amount | Shares | Amount | Shares | Amount | Preferred | Preferred | Common | Income (Loss) | Deficit | (Deficit) | ||
Balance at June 30, 2020 (Unaudited) | 1,562,500 | $156 | 10,000 | $10 | 80,685,586 | $80,686 | $124,844 | $7,156,204 | $2,569,889 | $54,782 | $(11,123,712) | $(1,137,141) | |
Partial Conversion of 8% Senior Secured Convertible Promissory Notes (Unaudited) | - | - | - | - | 950,000 | 950 | - | - | 44,073 | - | - | 45,023 | |
Puts of Common Stock Under the Equity Purchase Agreement, net of issuance costs of $1,250 (Unaudited) | - | - | - | - | 1,500,000 | 1,500 | - | - | 78,289 | - | - | 79,789 | |
Foreign Currency Translation Loss (Unaudited) | - | - | - | - | - | - | - | - | (35,556) | - | (35,556) | ||
Net Loss (Unaudited) | - | - | - | - | - | - | - | - | - | (210,318) | (210,318) | ||
Balance at September 30, 2020 (Unaudited) | 1,562,500 | $156 | 10,000 | $10 | 83,135,586 | $83,136 | $124,844 | $7,156,204 | $2,692,251 | $19,226 | $(11,334,030) | $(1,258,203) |
*Shares have been restated for a 1 for 15 reverse stock split and adjusted for fractional shares
9
6
6
8 |
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Cash Flow from Operating Activities: | ||||||||
Net Loss | $ | (16,464,681 | ) | $ | (806,837 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: | ||||||||
Amortization of Note Discounts | 741,331 | 414,545 | ||||||
Issuance of Common Stock for Services | 69,996 | 0 | ||||||
Impairment Expense | 14,011,720 | 0 | ||||||
Changes in Operating Assets and Liabilities: | ||||||||
Other Receivables | 33,389 | 24,957 | ||||||
Prepaids | 0 | 623 | ||||||
Deposits | (188,982 | ) | 3,822 | |||||
Accounts Payable and Accrued Liabilities | 254,977 | 64,513 | ||||||
Net Cash Used In Operating Activities | (1,542,250 | ) | (298,377 | ) | ||||
Cash Flow from Investing Activities: | ||||||||
Purchase of Property and Equipment | (28,192 | ) | 0 | |||||
Cash acquired in Acquisition | 131,896 | 0 | ||||||
Net Cash Provided by Investing Activities | 103,704 | 0 | ||||||
Cash Flow from Financing Activities: | ||||||||
Promissory Note from MAAB | 267,314 | 145,494 | ||||||
8% Senior Secured Convertible Promissory Note, Issued March 5, 2021, net of Issuance Costs of $25,000 | 1,225,000 | 0 | ||||||
Elimination of Note Receivable | (375,000 | ) | 0 | |||||
Puts of Common Stock Under the Equity Purchase Agreement | 314,416 | 87,786 | ||||||
Deposit for Common Stock | 56,250 | 0 | ||||||
Net Cash Provided By Financing Activities | 1,487,980 | 233,280 | ||||||
Effect of Foreign Currency Translation (Loss) Gain | (49,176 | ) | 74,880 | |||||
Net Increase in Cash | $ | 258 | $ | 9,783 | ||||
Cash at the Beginning of the Period | $ | 38,517 | $ | 1,159 | ||||
Cash at the End of the Period | $ | 38,775 | $ | 10,942 |
9 |
(Unaudited)
Nine Months Ended September 30, | ||
2020 | 2019 | |
Cash Flow from Operating Activities: | ||
Net Loss | $ (1,017,155) | $ (1,775,898) |
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: | ||
Amortization of Note Discounts | 434,074 | 1,020,043 |
Amortization of Deferred Offering Costs | - | 2,316 |
Changes in Operating Assets and Liabilities: | ||
Other Receivables | 24,279 | (23,346) |
Prepaids | 623 | 18,567 |
Deposits | 6,754 | 11,199 |
Deferred Offering Costs | - | (48,300) |
Accounts Payable and Accrued Expenses | 55,029 | 112,468 |
Net Cash Used In Operating Activities | (496,396) | (682,951) |
Cash Flow from Financing Activities: | ||
Promissory Note from MAAB | 299,260 | 38,991 |
8% Senior Secured Convertible Promissory Note | - | 600,000 |
Puts of Common Stock Under the Equity Purchase Agreement | 187,865 | - |
Net Cash Provided By Financing Activities | 487,125 | 638,991 |
| ||
Effect of Foreign Currency Translation Gain (Loss) | 39,324 | (10,014) |
Net Increase (Decrease) in Cash | $ 30,053 | $ (53,974) |
Cash at the Beginning of the Period | $ 1,159 | $ 55,129 |
Cash at the End of the Period | $ 31,212 | $ 1,155 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash Paid During the Period for: | ||
Interest | $ 2,377 | $ 1,699 |
Taxes | $ - | $ - |
10
Nine Months Ended September 30, | ||
2020 | 2019 | |
Supplemental Disclosures of Non-Cash Information: | ||
Conversion of 8% Senior Secured Convertible Promissory Notes into Common Stock | $ 318,684 | $ 637,248 |
Discounts Issued with 8% Senior Secured Convertible Promissory Notes | $ - | $ 606,827 |
Amortization to Interest Expense of the Debt Discount from the 8% Senior Secured Convertible Promissory Note | $ 308,621 | $ 1,020,043 |
Discounts Issued in Connection with Forbearance Agreement for 8% Senior Secured Convertible Promissory Notes | $ - | $ 257,135 |
Amortization to Interest Expense of the Debt Discount from the 8% Senior Secured Convertible Promissory Note, Issued December 2, 2019 | $ 125,453 | $ - |
Increase in Note and Additional Discount on 8% Senior Secured Convertible Promissory Note due to the Forbearance Agreement on June 30, 2020 | $ 25,471 | $ - |
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash Paid During the Period for: | ||||||||
Interest | $ | - | $ | 11,155 | ||||
Supplemental Disclosures of Non-Cash Information: | ||||||||
Conversions of 8% Senior Secured Convertible Promissory Notes into Common Stock | $ | 809,857 | $ | 273,661 | ||||
Common Stock Issued for Accrued Interest | $ | 195,870 | $ | - | ||||
Discounts Issued with 8% Senior Secured Convertible Promissory Notes, Issued March 5, 2021 | $ | 1,174,799 | $ | - | ||||
Amortization to Interest Expense of the Debt Discount from the 8% Senior Secured Convertible Promissory Note, Issued March 5, 2021 | $ | 741,331 | $ | - | ||||
Amortization to Interest Expense of the Debt Discount from the 8% Senior Secured Convertible Promissory Note, Issued December 2, 2019 | $ | - | $ | 124,453 | ||||
Receivable Related to Puts of Common Stock Under the Equity Purchase Agreement | $ | - | $ | 20,290 | ||||
Increase in Note and Additional Discount on 8% Senior Secured Convertible Promissory Note due to the Forbearance Agreement on June 30, 2020 | $ | - | $ | 25,472 | ||||
Assets Acquired and Liabilities Assumed in Connection with Horizon Aircraft, Inc. Acquisition: | ||||||||
Cash | $ | 131,896 | $ | - | ||||
Other Receivables | $ | 19,786 | $ | - | ||||
Prepaid Expenses | $ | 20,967 | $ | - | ||||
Property and Equipment | $ | 33,292 | $ | - | ||||
In Process Research and Development | $ | 2,169,000 | $ | - | ||||
Non-Compete Agreement | $ | 433,800 | $ | - | ||||
Goodwill | $ | 14,011,720 | $ | - | ||||
Total Assets Acquired | $ | 16,820,461 | $ | - | ||||
Liabilities: | ||||||||
Promissory Note Payable | $ | 375,000 | $ | - | ||||
Canadian Emergency Business Account Loan Payable | 49,677 | $ | - | |||||
Accounts Payable and Accrued Liabilities | $ | 168,031 | $ | - | ||||
Total Liabilities Assumed | $ | 592,708 | $ | - | ||||
Fair Value of Common Stock Issued | $ | 16,227,753 | $ | - |
11
8
8
10 |
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Astro Aerospace Ltd. (“Astro”(“Astro” or the “Company”“Company”) and its wholly-owned subsidiary, is a developer of self-piloted and autonomous, manned and unmanned, eVTOL (Electric Vertical Take Off and Landing) aerial vehicles. The Company intends to provide the market with a mainstream mode of everyday, aerial transportation for both humans and cargo. Astro currently has a working prototype and is working on ALTA an updated version of the working prototype with engineering and mechanical improvements as well as pods which will be interchangeable with the frame allowing the unit to be used for cargo, passenger and other activities.
Astro is the successor corporation to CPSM, Inc., which was primarily engaged in providing a full line pool and spa services, and pool resurfacing. On March 14, 2018, MAAB Global Limited (“MAAB”(“MAAB”), the majority stockholder and parent of Astro, acquired control of CPSM, Inc. On March 24, 2018, the articles of incorporation were amended to change the name of the Company from CPSM, Inc. to Astro Aerospace Ltd. As of SeptemberJune 30, 2020,2021, the Company has one subsidiary,three subsidiaries, Astro Aerospace Ltd. (Canada), which is incorporated in Canada and is used to record Canadian dollar expenditures in order to recover refunds of the Goods and Services Tax in Canada.Canada, Astro Horizon Acquisition Corporation, a U.S. corporation and Astro Acquisition Corporation Canada, which holds the assets of Horizon Aircraft, Inc (“Horizon”) (See “Note 2, Acquisition of Horizon Aircraft, Inc.”).
In 2018, the Company acquired in-process research and development (“IPRD”(“IPRD”) consisting of inventory, hardware designs, software designs, and a trademark all pertaining to passenger drone design and use from Confida Aerospace Ltd. The drone prototype is in an early development stage. It is anticipatedThe Company expects that Version 2.0, the drone prototype,it will be flying by marketingthe end ofaircraft sometime in the second quarter of 2021. At this time,2022. To date, no commercial applications have been found which would accept the Company hasproduct. To complete an eVTOL aircraft and have it ready to market, forAstro completed the productacquisition of Horizon, who develops advanced eVTOL aircrafts. It is expected that Horizon’s management and no established criteria under whichits technology will expedite the product could be utilized in North America..development and completion of a marketable eVTOL aircraft.
Going Concern
The accompanying condensed consolidated financial statements have 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 condensed consolidated financial statements, for the ninesix months ended SeptemberJune 30, 2020,2021 the Company had a net loss of $1,017,155$16,400,053 and used $496,396$1,542,250 in cash in operations, and at SeptemberJune 30, 2020,2021, had negative working capital of $1,087,097,$1,298,142, current assets of $67,450,$121,920, and an accumulated deficit of $11,334,030.$27,967,402. The foregoing factors raise substantial doubt about the Company’sCompany’s ability to continue as a going concern. Ultimately, the ability to continue as a going concern is dependent upon the Company’sCompany’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’sCompany’s technologies. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company acknowledges that its current cash position is insufficient to maintain the current level of operations and research and development, and that the Company will be required to raise substantial additional capital to continue its operations and fund its future business plans. The Company has continued to raise funds through its parent, MAAB and the outstanding note payable balance was $1,049,277$1,476,664 and there is $200,723$523,336 available under the terms of the note at SeptemberJune 30, 2020.2021. The Company has also raised funds through independent capital sources, of which the Company hashad two Senior Secured Convertible Promissory Notes, both were fully converted into common stock during the first quarter of which has an outstanding balance of $718,166 at September 30, 20202021, and the second of which has an outstanding balance of $121,691 at September 30, 2020. The firstanother 8% Senior Secured Convertible of which part has been converted into common stock.
12
11 |
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS (continued), CONTINUED
Promissory Note issued March 5, 2021 for $1,250,000, less $25,000 for commissions and expenses, with an outstanding balance of $816,532 net of discounts, at June 30, 2021.
Note is subject to a second forbearance agreement and the second Senior Secured Convertible Note is also subject to a forbearance agreement (See Note 7, “Default and Forbearance on the 8% Senior Secured Convertible Promissory Notes”).
The Company has also executed an Equity Purchase Agreement whereby the Investor agreed to purchase from the Company up to $5,000,000 of the Company’sCompany’s common stock (See Note 11, “Equity12, “Equity Purchase Agreement and Registration Rights Agreement”Agreement”). Through November 23, 2020,September 29, 2021, the Company put 3,900,000453,333 shares of common stock at prices ranging from $.04$0.515 to $.10$2.85 per share for total proceeds of $212,301.$601,644.
Astro plans to raise additional capital in the private and public securities markets through 2021.
Reverse Common Stock Split
On October 8, 2020, the Company’s majority stockholder approved a 1-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 common shares outstanding. As a result of the Reverse Stock Split, every 15 shares of issued and outstanding common stock were combined into one issued and outstanding share 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 comparable basis. Such restatements include calculations regarding the Company’s weighted average shares and loss per share.
12 |
ASTRO AEROSPACE LTD. AND SUBSIDIARY
Assets acquired: | |||
May 28, 2021 | |||
Cash | $ | 131,896 | |
Other Receivables | $ | 19,786 | |
Prepaid Expenses | $ | 20,967 | |
Property and Equipment | $ | 33,292 | |
In Process Research & Development | $ | 2,169,000 | |
Non Compete Agreement | $ | 433,800 | |
Goodwill | $ | 14,011,720 | |
Total Assets Acquired | $ | 16,820,461 | |
Liabilities Acquired: | |||
Promissory Note Payable | $ | 375,000 | |
CEBA Loan Payable | $ | 49,677 | |
Accounts Payable and Accrued Liabilities | $ | 168,031 | |
Total Liabilities Assumed | $ | 592,708 | |
Fair Value of Common Stock Issued | $ | 16,227,753 |
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, and the Securities and Exchange Commission ("SEC") rules for interim financial reporting. Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying interim condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company's condensed consolidated financial position as of SeptemberJune 30, 20202021 and the condensed consolidated
13 |
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
results of operations and cash flows for the periods presented. The condensed consolidated results of operations for interim periods are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ended December 31, 2020.2021. The accompanying unaudited, condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019,2020, included in the Company's Form 10-K, which was filed with the SEC on May 29, 2020.April 15, 2021
Cash
All highly liquid short term investments with original maturities of three months or less or money-marketmoney market accounts held at financial institutions are considered to be cash. Substantially all of the cash is placed with one financial institution. From time to time during the year the cash accounts are exposed to credit loss for amounts in excess of insured limits of $250,000 in the event of non-performance by the institution, however, it is not anticipated that there will be non-performance.
Property and Equipment
13Property and equipment are carried at cost and depreciated using the straight-line method over the estimated useful lives of the assets. The equipment is largely comprised of tools, computers and software used in the development of the eVTOL aircraft.
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible Assets–
Acquired In-Process Research and Development
Acquired in-process research and development (“IPRD”(“IPR&D”) consists of acquired drone technology and engineering and trademarks.trademarks in its initial asset acquisition with Confida. It has subsequently acquired additional IPR&D drone technology in the acquisition of Horizon. The Company reviews the IPRD, which currently has an indefinite useful life, for impairment at least annually or more frequently if an event occurs creating the potential for impairment, until such time as the research and development efforts are completed or abandoned. If the research and development efforts are abandoned, the related costs will be written off in the period of such determination. If the research and development efforts are completed successfully, the related assets will be amortized over the estimated useful life of the underlying products. The Company will amortize the cost of identified intangible assets using amortization methods that reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized. A valuation by an independent third party was performed for the year ended December 31, 2019,2020 and no further impairment expense was required. There wasThe Company periodically evaluates the impairment of the asset and currently there has been no impairmentamortization expense incurred inas of the three and nine month periodssix months ended SeptemberJune 30, 20202021.
14 |
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Non-Compete Agreements
As part of the acquisition of Horizon, the Company initiated Employment Agreements (the “Agreements”). With two Horizon executives. Part of the Employment Agreement has non-compete terms and 2019.conditions. The Agreements have an indefinite term, define specific salaries and benefits, including an undetermined number of stock options and specify other rights and duties. Given the indefinite period, the asset has an indeterminate life and therefore there is no amortization.
Stock-Based Compensation
The Company accounts for stock-based compensation under the fair value recognition provisions of GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors including stock options and restricted stock issuances based on estimated fair values.
In accordance with GAAP, the fair value of stock-based awards is generally recognized as compensation expense over the requisite service period, which is defined as the period during which an employee is required to provide service in exchange for an award. The Company uses a straight-line attribution method for all grants that include only a service condition. Compensation expense related to all awards is included in operations.
Convertible Notes, Warrants and Beneficial Conversion Feature (“BCF”(“BCF”)
The convertible note is recorded at its fair value, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the warrant.warrants. Further, the convertible promissory note is examined for any intrinsic BCF of which the convertible price of the note is less than the closing common stock price on date of issuance. If the relative fair value method is used to value the convertible promissory note and there is an intrinsic BCF, a further analysis is undertaken of the BCF using an effective conversion price which assumes the conversion price is the relative fair value divided by the number of shares the convertible debt is converted into by its terms. The BCF value is accounted for as equity.
Warrants issued with the 8% Senior Secured Convertible Promissory NoteNotes are accounted for under the fair value and relative fair value method. The warrant is first analyzed per its terms as to whether it has derivative features or not. If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the condensed consolidated balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”“marked-to-market”).
If the warrant is determined to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.
14
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Convertible Notes, Warrants and Beneficial Conversion Feature (“BCF”) (continued)
The warrant and BCF relative fair values are also recorded as a discount to the convertible promissory notes and as additional paid-in-capital. Discount on the convertible notes is amortized to interest expense over the life of the debt.
Research and Development
Research and development costs are expensed as incurred.
15 |
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Income Taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of asset and liabilities. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax asset and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. Under GAAP, the tax effects of a position are recognized only if it is “more-likely-than-not”“more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not”“more-likely-than-not” to be sustained, then no benefits of the position are recognized. Management believes there are no unrecognized tax benefits or uncertain tax positions as of SeptemberJune 30, 20202021 and December 31, 2019.2020.
The Company assessed its earnings history, trends and estimates of future earnings and determined that the deferred tax asset could not be realized as of SeptemberJune 30, 2021 and December 31, 2020. Accordingly, a valuation allowance was recorded against the net deferred tax asset.
The Company recognizes interest and penalties on income taxes as a component of income tax expense, should such an expense be realized.
Basic and Diluted Net Loss per Share
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
Net Loss Available to Common Stockholders | $ | (15,417,516 | ) | $ | (340,707 | ) | $ | (16,464,681 | ) | $ | (806,837 | ) | ||||
Series A Preferred Stock Dividends | 2,500 | 2,500 | 5,000 | 5,000 | ||||||||||||
Net Loss Available to Common Stockholders and Assumed Conversions | $ | (15,420,016 | ) | $ | (343,207 | ) | $ | (16,469,681 | ) | $ | (811,837 | ) | ||||
| ||||||||||||||||
Weighted Average Shares - Basic | 9,321,995 | 5,207,026 | 8,893,718 | 5,125,482 | ||||||||||||
Shares Issuable Upon Conversion of 8% Senior Secured Convertible Promissory Notes | 0 | 0 | 0 | 0 | ||||||||||||
Shares Issuable Upon Conversion of Preferred Stock – Series A | 0 | 0 | 0 | 0 | ||||||||||||
Shares Issuable Upon Conversion of Preferred Stock – Series B | - | - | - | - | ||||||||||||
Weighted Average Shares - Diluted | 9,321,995 | 5,207,026 | 8,893,718 | 5,125,482 | ||||||||||||
Net Loss Per Common Share: | ||||||||||||||||
Basic | $ | (1.65 | ) | $ | (0.07 | ) | $ | (1.85 | ) | $ | (0.16 | ) | ||||
Diluted | $ | (1.65 | ) | $ | (0.07 | ) | $ | (1.85 | ) | $ | (0.16 | ) |
The Company computes loss per share in accordance with “ASC-260”, “Earnings per Share” which requires presentation of both basic and diluted loss per share on the face of the condensed consolidated statements of operations. Basic loss per share is computed by dividing net loss available to common stockholders by the weighted-average number of outstanding common stock during the period. Diluted loss per share gives effect to all dilutive potential common stock outstanding during the period, computed using the if converted method for convertible notes and preferred stock. Dilutive loss per share excludes all potential common stock if their effect is anti-dilutive. Common stock equivalents are anti-dilutive for the three and nine months ended September 30, 2020 and 2019 due to the net loss during the periods.
The common stock equivalents are the 8% Senior Secured Convertible Promissory Notes and the Series A and Series B Convertible Preferred Stock.
15
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic and Diluted Net Loss per Share (continued)
For the three and nine months ended September 30, 2020 and 2019, the basic and diluted net loss per share were computed as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
Net Loss Available to Common Stockholders | $ (210,318) | $ (168,466) | $ (1,017,155) | $ (1,775,898) |
Series A Preferred Stock Dividends | 2,500 | 2,500 | 7,500 | 7,500 |
Net Loss Available to Common Stockholders and Assumed Conversions | $ (212,818) | $ (170,966) | $ (1,024,655) | $ (1,783,398) |
Weighted-Average Shares - Basic | 81,657,869 | 72,176,927 | 78,159,266 | 70,819,765 |
Shares Issuable Upon Conversion of 8% Senior Secured Convertible Promissory Notes | - | - | - | - |
Shares Issuable Upon Conversion of Preferred Stock – Series A | - | - | - | - |
Shares Issuable Upon Conversion of Preferred Stock – Series B | - | - | - | - |
Weighted-Average Shares - Diluted | 81,657,869 | 72,176,927 | 78,159,266 | 70,819,765 |
Net Loss Per Common Share: | ||||
Basic | $ - | $ - | $ (0.01) | $ (0.03) |
Diluted | $ - | $ - | $ (0.01) | $ (0.03) |
Comprehensive Loss
Comprehensive loss consists of net loss plus the foreign currency translation gain (loss). gain.
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NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Foreign Currency Translation
The translation of assets and liabilities for the Company’sCompany’s foreign subsidiarysubsidiaries is made at period end exchange rates, while revenue and expense accounts are translated at the average exchange rates during the period the transactions occurred.
Fair Value Measurement
Generally accepted accounting principlesGAAP establishes a hierarchy to prioritize the inputs of valuation techniques used to measure fair value. The hierarchy gives the highest ranking to the fair values determined by using unadjusted quoted prices in active markets for identical assets (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). Observable inputs are those that market participants would use in pricing the assets based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’sCompany’s assumptions about inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The Company has determined the appropriate level of the hierarchy and applied it to its financial assets and liabilities. At SeptemberJune 30, 20202021 and December 31, 2019,2020, there were no assets or liabilities carried or measured at fair value.
16
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Use of Estimates and Assumptions
The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.year. Actual results could differ from those estimates.
A material estimate that is particularly susceptible to significant change in the near-term relatesrelate to the determination of the impairment of IPRD. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make this estimate. Although considerable variability is likely to be inherent in this estimate, management believes that the amount provided is reasonable. This estimate is continually reviewed and adjusted if necessary. Such adjustments, if any, are reflected in operations.
NOTE 3 4 – RECENT ACCOUNTING PRONOUNCEMENTS
In August 2018,2020, the Financial Accounting Standards Board (“FASB”(“FASB”) issued Accounting Standards Update (“ASU”(“ASU”) No. 2018-13, “Fair Value Measurement, Topic 820, Disclosure Framework—Changes2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the Disclosure Requirementshost contract, that meet the definition of a derivative, and that do not qualify for Fair Value Measurement”. a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance.
17 |
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED
The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820. Items were removed from disclosure, such as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the valuation processes for Level 3 fair value measurements, among other items. The amendments also modify and add certain disclosures, such as a clarification that a measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date and for certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The amendments in this Update wereASU are effective for all entities for fiscal years, and interim periods within those fiscal years beginning after December 15, 2019.2021, including interim periods within those fiscal years. Management is currently evaluating the effect on the Company’s condensed consolidated financial statements if and when future convertible securities are issued. The new guidance didadoption of this ASU is not expected to have a material impact on the Company's condensed consolidated financial statements.
NOTE 45–CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company maintains its cash with high-credit quality financial institutions. At SeptemberJune 30, 2020 and December 31, 2019,2021, the Company did not have anya cash balancesbalance that was in excess of federally insured limits. The Company does not anticipate non-performance by its financial institution.
NOTE 5 6 – FAIR VALUE ESTIMATES
The Company measures financial instruments at fair value in accordance with ASC 820, which specifies a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’sCompany’s own assumptions.
Management believes the carrying amounts of the Company'sCompany’s cash, other receivables, accounts payable and accrued liabilities as of SeptemberJune 30, 20202021 and December 31, 20192020 approximate their respective fair values because of the short-term nature of these instruments. The Company measures its promissory note receivable, notes payable and loansloan in
17
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 – FAIR VALUE ESTIMATES (continued)
accordance with the hierarchy of fair value based on whether the inputs to those valuation techniques are observable or unobservable. The hierarchy is:
Level 1 – Quoted prices for identical instruments in active markets;
Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
18 |
NOTE 6 – FAIR VALUE ESTIMATES, CONTINUED
The estimated fair value of the cash, notes payable, and loansthe loan from MAAB at SeptemberJune 30, 20202021 and December 31, 2019,2020 were as follows:
Quoted Prices In Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||
(Level 1) | (Level 2) | (Level 3) | Carrying Value | |
At September 30, 2020: | ||||
Assets | ||||
Cash | $ 31,212 | - | - | $ 31,212 |
Liabilities | ||||
8% Senior Secured Convertible Promissory Note, Net | - | - | $ 718,166 | $ 718,166 |
8% Senior Secured Convertible Promissory Note issued December 2, 2019 | - |
- | $ 121,691 | $ 121,691 |
Loan from MAAB | - | - | $1,049,277 | $1,049,277 |
At December 31, 2019: | ||||
Assets | ||||
Cash | $ 1,159 | - | - | $ 1,159 |
Liabilities | ||||
8% Senior Secured Convertible Promissory Note, Net | - | - | $ 983,524 | $ 983,524 |
8% Senior Secured Convertible Promissory Note issued December 2, 2019 | - | - | $149,546 | $149,546 |
Loan from MAAB | - | - | $750,017 | $750,017 |
| Quoted Prices In Active Markets for Identical Assets |
Significant Other Observable Inputs |
Significant Unobservable Inputs | Carrying | ||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Value | ||||||||||||
At June 30, 2021: | ||||||||||||||||
Assets | ||||||||||||||||
Cash | $ | 38,775 | $ | 38,775 | ||||||||||||
| ||||||||||||||||
Liabilities | ||||||||||||||||
8% Senior Secured Convertible Promissory Note, Issued March 5, 2021, Net of Discount | $ | 816,532 | $ | 816,532 | ||||||||||||
Loan from MAAB | $ | 1,476,664 | $ | 1,476,664 | ||||||||||||
CEBA Loan | $ | 49,677 | $ | 49,677 | ||||||||||||
At December 31, 2020: | ||||||||||||||||
Assets | ||||||||||||||||
Cash | $ | 38,517 | $ | 38,517 | ||||||||||||
| ||||||||||||||||
Liabilities | ||||||||||||||||
8% Senior Secured Convertible Promissory Note | $ | 688,166 | $ | 688,166 | ||||||||||||
8% Senior Secured Convertible Promissory Note issued December 2, 2019 | $ | 121,691 | $ | 121,691 | ||||||||||||
Loan from MAAB | $ | 1,209,350 | $ | 1,209,350 |
NOTE 6 7 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES
Note Issuance November 21, 2018
On November 21, 2018, the Company issued an 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”(“OID”) of $81,818, a $20,000 financing fee for the lender’s
18
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES (continued)
lender’s transactional expenses that was expensed and the Company received proceeds of $600,000. The second tranche was issued on February 12, 2019 in the principal amount of $681,818, with an OID of $81,818 and the Company received proceeds of $600,000. Each tranche matured 6 months after the issue date, the first tranche matured on May 21, 2019 and the second tranche matured on August 12, 2019 (See Note 7, “Default And Forbearance On The 8% Senior Secured Convertible Promissory Notes”).date.
The note iswas 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.
19 |
NOTE 7 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES, CONTINUED
The Note had a 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 (See Note 10, “Warrants”) and the BCF fair value was $523,326 for a total debt discount of $694,447. During the six months ended June 30, 2020, the Company amortized $230,843 of the debt discount to interest expense.
In the second tranche, the warrant fair value (See Note 10, “Warrants”) was $121,320 and the BCF fair value was $403,689 for a debt discount of $525,009. During the six months ended June 30, 2020, the Company amortized $230,843 of the debt discount to interest expense.
During the three months ended March 31, 2020, the Investor converted $166,724 in principal amount of the Note into 215,285 shares of the Company’s common stock. During the three months ended March 31, 2021, the Investor converted $50,091 in principal amount of the Note into 81,755 shares of the Company’s common stock. Total accrued interest on the Note before full conversion during the three months ended March 31, 2021 was $151,212 and the Company had accrued interest on the Note of $145,606 at December 31, 2020.
Note Issuance December 2, 2019
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 matured on June 2, 2020. The Company defaulted on this Note and also again defaulted on November 28, 2020 (See Note 7, “Default and Forbearance on the 8% Senior Secured Convertible Promissory Notes”).
The Note was 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.
Amortization of the debt discount into interest expense was $125,452 during the six months ended June 30, 2020.
During the three months ended March 31, 2020, there were no conversions of the Note into shares of the Company’s common stock. During the three months ended March 31, 2021, the Investor converted the remaining principal amount, $121,691 plus accrued interest of $12,612, into 298,679 shares of common stock. The Company had accrued interest of $12,073 on the Note as of December 31, 2020.
Partial Sales, Conversions and Final Disposition of the Notes
On January 29, 2020, the Original Investor sold $30,000 principal amount of the Note to an independent third party investor. Additionally, the Investor entered into a Note Purchase Agreement with the same independent third party investor to sell $800,000 principal amount of the 8% Senior Secured Convertible Promissory Note in three tranches starting January 15, 2021. The tranches were 30 days apart and the principal amounts sold were $300,000 in the first tranche, $300,000 in the second tranche and $200,000 in the third tranche. With the sale of the third tranche, the Original Investor had completely disposed of its Note holdings.
20 |
NOTE 7 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES, CONTINUED
On January 22, the independent third party investor converted $30,000 in principal amount of the Note at $0.455 into 25,000 shares of the Company’s common stock. Additionally, on January 25, 2021, the same independent third party investor converted $300,000 in principal amount of the Note at $0.60 into 500,000 shares of the Company’s common stock. The independent third party investor subsequently sold $300,000 and $200,000 in principal amount of the Note to SBC Investments Ltd (“SBC”) on February 12, 2021 and March 12, 2021, respectively.
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 shares of the Company’s common stock. With this last conversion, the Notes have been completely converted into common stock.
Issuance of 8% Senior Secured Convertible Promissory Note, dated March 5, 2021
On March 5, 2021, the Company issued an 8% Senior Secured Convertible Promissory Note (“Note”) in the aggregate principal amount of $1,250,000, less expenses of $25,000, which was recorded as a discount to the Note. The Note matured on September 5, 2021. We have received a forebearance note from the investor delaying the due date until December 31, 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 the date of the lender’s notice of conversion and (ii) $4.25. 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 “Security Agreement”“Security Agreement”), the Company has granted to the Investor a security interest in 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 November 23, 2020, 86,032,955September 29, 2021, 166,241,388 shares are 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 warrantsWarrants to acquire up to an aggregate 344,029of 120,000 shares of the Company’sCompany’s common stock at an exercise price of $0.51$5.00 per share. Upon the closing of the second tranche in February 2019, the Company issued additionalThe warrants to acquire up to an aggregate 421,656 shares of the Company’s common stock at an exercise price of $0.40 per share. Each Warrant isare exercisable by the Investor beginning on the Effective Date through the fifth year anniversary thereof. The warrants’ fair value of $524,904 was calculated using the Black Scholes Model (See Note 11, Warrants). This fair value was reduced with the relative fair value method when including the BCF of the convertible note to $369,671.
The Note has a beneficial conversion feature (“BCF,”) for both tranches, which werewas valued, along with the warrants, on a relative fair value method. In the first tranche, theThe warrant fair value was $171,121 (See Note 10, “Warrants”)$369,671 (limited by the relative fair value calculation) and the BCF fair value was $523,326$780,128 for a total debt discount of $694,447.$1,149,799. The exercise price was $0.375$3.50 per share, which converts into 1,871,515356,704 common shares. The common stock price at the valuation date was $0.573$4.66 per share, and the effective conversion price was calculated as $0.293,$2.47, so that the BCF was calculated to be $0.280$2.19 per share valuing the BCF at $523,326.
However, adding$780,128. During the OID andsix months ended June 30, 2021, the inducement shares to the debt discount, made final total debt discount $865,796, larger than the principal amount of the Note. Consequently, $163,978Company amortized $741,331 of the debt discountdiscounts into interest expense. At June 30, 2021, total accrued interest on the Note 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$32,055 which is included in accounts payable and accrued liabilities in the year ended December 31, 2019, bringing the debt discount to $58,250 at December 31, 2019. After the January 31, 2020 conversion, the remaining debt discount of $58,250 was expensed since the entire first tranche was converted into equity.accompanying condensed consolidated balance sheets.
In the second tranche, the warrant fair value (See Note 10, “Warrants”) was $121,320 and the BCF 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 7, “Default and Forbearance on the 8% Senior Secured Convertible Promissory Notes”). Additional amortization of the debt discount into
19
21 |
(Unaudited)
NOTE 6 8 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES (continued)
interest expense through the remainder of the year ended December 31, 2019 was $134,717 bringing the debt discount to $230,843 at December 31, 2019. During the three months ended March 31, 2020, an additional $115,421 was expensed, bringing the debt discount to $115,422, which was completely expensed in the three months ended June 30, 2020.
During the first quarter of 2019, the Investor converted $94,020 in principal amount of the Note into 365,054 shares of the Company’s common stock. During the second quarter of 2019, the Investor converted $449,397 in principal amount of the Note into 1,830,373 shares of the Company’s common stock. During the third quarter of 2019, the Investor converted $93,830 in principal amount of the Note into 750,000 shares of the Company’s common stock.
During the first quarter of 2020, the Investor converted $166,724 in principal amount of the Note into 3,227,782 shares of the Company’s common stock. During the second quarter of 2020, the investor converted $106,937 in principal amount of the Note into 2,456,082 shares of the Company’s common stock. During the third quarter of 2020, the investor converted $17,168 in principal amount of the Note into 350,000 shares of the Company’s common stock. The Company has accrued interest on the Note of $131,574 as of September 30, 2020.
The Company again defaulted on the 8% Senior Secured Convertible Promissory Note as of June 30, 2020. However, the Company reached a forbearance with the Investor on June 30, 2020 (See Note 7, “Default and Forbearance on the 8% Senior Secured Convertible Promissory Notes”).
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 matured on June 2, 2020. The Company defaulted on this Note and has reached a forbearance with the Investor on June 30, 2020 (See Note 7, “Default and Forbearance on the 8% Senior Secured Convertible Promissory Notes”).
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 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 BCF is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the BCF shall be limited to the amount of the proceeds allocated to the convertible instrument. Therefore, the BCF is limited to $132,500, which when added to the OID of $17,046 equals the principal amount of $149,546. The BCF is being amortized using the effective interest method over the term of the note.
20
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES (continued)
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. During the three months ended March 31, 2020, and additional $74,131 was expensed bringing the debt discount to $51,322, which was completely expensed in the three months ended June 30, 2020.
During the third quarter of 2020, the Investor converted $27,855 in principal amount of the Note into 600,000 shares of the Company’s common stock. The Company has accrued interest of $9,619 on the Note as of September 30, 2020.
NOTE 7 – DEFAULT AND FORBEARANCE ON THE 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTESNOTE
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 postponedwas 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%.
$1,062,784. The Company’sCompany’s outstanding principal amount of the Note, after conversions, and the accrued interest as of the Forbearance Agreement date of September 11, 2019, was $805,649. The Forbearance Agreement for the outstanding principal amount and accrued interest of $1,062,784 producesproduced a forbearance penalty of $257,135. This amount increased both the principal balance of the Note and increased the debt discount by the same amount. The $257,135 penalty was amortized over the new maturity of the Note, June 30, 2020, and resulted in a $97,747 amortization2020. The remaining discount was completely amortized to interest expense during the year ended December 31, 2019. The outstanding principal amount of the Note was $983,524 at December 31, 2019. During the three months ended March 31, 2020, $173,671 was amortizedand prior to interest expense. During the three months ended June 30, 2020, the $115,422 was amortized into interest expense, which completely amortized the debt discount before the second forbearance agreement. The outstanding principal amount is $718,166 at September 30, 2020.
21
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 – DEFAULT AND FORBEARANCE ON THE 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES (continued)
As of June 30, 2020, the 8% Senior Secured Convertible Promissory Note was again in default, with a principal balance of $709,862 and an accrued interest of $116,957. Likewise, the 8% Senior Secured Convertible Promissory Note issued December 2, 2019 (together with the 8% Senior Secured Convertible Promissory Note, the “Notes”“Notes”) was in default as of June 2, 2020 with a principal balance of $149,546 and accrued interest of $4,910. The Company was unable to repay the principal and accrued interest on both Notes.
Likewise, the 8% Senior Secured Convertible Promissory Note issued December 2, 2019 balance was reduced to the pre-default balance plus accrued non-default interest of $156,276. The maturity of both Notes iswas extended until November 28, 2020. The penalty was amortized over the new maturity of the Note and was completely amortized to interest expense during the year ended December 31, 2020.
As of November 28, 2020, the Company was again in default on the Notes. Although there was no forbearance agreement in place, both the Investor and Company continued to act according to the terms of the Notes.
During the forbearance period, the accelerationAs of March 12, 2021, both tranches of the Notes and payment of the default amounts shall be deemed suspended, subject to the ability of the Investor hereunder to immediately exercise its rights and remedies under this Forbearance Agreement, including but not limited to the acceleration of the Notes and enforcement of payment of the default amounts.have been completely converted into common stock (See Note 6, “8% Senior Secured Convertible Promissory Notes”).
If at any time after the effective date: (i) the Company fails to abide by any of the terms and conditions of the Agreements; or (ii) the Company fails to comply with any of the terms of any of the other transaction documents; or (iii) the Company fails to timely make the payments required under the Notes; or (iv) any events of default occur, including but not limited to bankruptcy proceedings, then the forbearance period will immediately terminate, and the Investor may immediately exercise any of its rights and remedies provided for under the transaction documents, including but not limited to the acceleration of the Notes and enforcement of payment of the default amounts.
NOTE 8 9 – PROMISSORY NOTE FROM MAAB
On March 14, 2018, MAAB, the parent of Astro has issued a Promissory Note, as amended, for monetary advances to the Company of up to $750,000. The Promissory Note originally matured$2,000,000, maturing on February 28, 2021. On April 22, 2020, the MAAB Note Payable was amended to increase the maximum outstanding principal balance to $1,250,000 and the maturity was extended to February 28, 2022.2023. The Promissory Note has an interest charge of 10%, compounded monthly. 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
22 |
NOTE 9 – PROMISSORY NOTE FROM MAAB, CONTINUED
until and including the date upon which the principal amount and all interest due under this promissory note shall be fully paid. The principal amount advanced under the Promissory Note was $1,049,277 and $750,017 at September 30, 2020 and December 31, 2019, respectively.
The Company has accrued interest expense of $160,833$291,107 at June 30, 2021 and $89,797$207,915 at September 30, 2020 and December 31, 2019, respectively.2020. The accrued interest expense is included in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets.
22
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 10 – CONVERTIBLE PREFERRED STOCK
In December 2015, the Company authorized 50,000,000 shares of Series A Preferred Stock, with a $0.0001 par value and no liquidation 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.
In January 2016, the Company issued 1,562,500 shares of the Series A Preferred Stock. On March 14, 2018, all those shares were sold to MAAB, a non-affiliate of CPSM, Inc. Cumulative undeclared Series A Preferred dividends were $25,000$32,500 at SeptemberJune 30, 2021 and $27,500 at December 31, 2020.
On May 4, 2018, the Board of Directors of Astro Aerospace Ltd. authorized 10,000 shares of the Series B Convertible Preferred Stock, par value $0.001 per share. The Preferred shares are 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 Stock is convertible into 1,33389 shares of common stock and a five year warrant to purchase 1,33389 shares of common stock at an exercise price of $0.75$11.25 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.
In January 2021, Confida assigned 9,500 shares of the Preferred Stock to two investors and on January 26, 2021, the two investors converted 9,500 shares of the Series B Preferred into 844,233 shares of the Company’s common stock. There are 500 shares of the Series B Convertible Preferred Stock outstanding at June 30, 2021.
Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of the Series B Preferred Stock shall share pro rata with the holders of the common stock, on an as if converted basis.
NOTE 11 – WARRANTS
NOTE 10 – WARRANTS
As part of the 8% Senior Secured Convertible Promissory Note issuance, the Company issued warrants to acquire up to an aggregate 344,02922,935 shares of the Company’sCompany’s common stock at an exercise price of $0.51$7.65 per share. These warrants were fair valued using the Black Scholes Model with the following inputs: stock price on November 21, 2018, date of issuance, $0.57,$8.55, strike price $0.51,$7.65, time to expiration, five years, five year Treasury constant maturity rate, 2.33%, volatility 253% and no dividend yield. The result was a fair value of $0.5676$8.51 per warrant or $195,271 in aggregate. This fair value was reduced with the relative fair value method when including the BCF of the convertible note (See Note 6, “8%7, “8% Senior Secured Convertible Promissory Note”Notes”) to $171,121. The warrant relative fair value was added to additional paid in capital – common stock.
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NOTE 11 – WARRANTS, CONTINUED
In the second tranche, the Company issued warrants to acquire up to an aggregate 421,65628,110 shares of the Company’sCompany’s common stock at an exercise price of $0.40$6.00 per share. These warrants were fair valued using the Black Scholes Model with the following inputs: stock price on February 12, 2019, date of issuance, $0.33,$4.95, strike price $0.40,$6.00, time to expiration, five years, five year Treasury constant maturity rate, 2.34%, volatility 173% and no dividend yield. The result was a fair value of $0.35$5.25 per warrant or $147,580 in aggregate. This fair value was reduced with the relative fair value method when including the BCF of the convertible note (See Note 6, “8%7, “8% Senior Secured Convertible Promissory Note”Note”) to $121,320. The warrant relative fair value was added to additional paid in capital – common stock.
23As part of the 8% Senior Secured Convertible Promissory Note, issued March 5, 2021, the Company issued a Warrant to acquire up to an aggregate of 120,000 shares of the Company’s common stock at an exercise price of $5.00 per share. The Warrant is exercisable by the Investor beginning on the Effective Date through the fifth year anniversary thereof. The Warrant fair value of $524,904 was calculated using the Black Scholes Model. This fair value was reduced with the relative fair value method when including the BCF of the convertible note (See Note 6, “8% Senior Secured Convertible Promissory Notes”) to $369,671. The warrant relative fair value was added to additional paid in capital – common stock. The inputs for the model were: stock price, $4.66, exercise price, $5.00, time to expiration, 5 years, stock volatility, 169%, 5 Year Constant Maturity Treasury Rate, 0.382% and no dividends.
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – WARRANTS (continued)
A summary of the warrant activity follows:
|
| Price per | |||||||||||||
Warrants outstanding | Exercise price per share | Price per Share on Date of Issuance | |||||||||||||
Balance, December 31, 2018 | 13,674,029 | $0.51 – $0.75 | $0.57 – $1.00 | ||||||||||||
Granted -Convertible Promissory Note | 421,656 | $0.40 | $0.33 | ||||||||||||
Expired | - | $ - | |||||||||||||
Balance, September 30, 2019 | 14,095,685 | $0.40 – $0.75 | $0.33 – $1.00 | ||||||||||||
Warrants | Exercise | Share on Date | |||||||||||||
Balance, December 31, 2019 | 14,095,685 | $0.40 – $0.75 | $0.33 – $1.00 | 939,712 | 6.00 – 11.25 | 4.95 – 15.00 | |||||||||
Granted | - | $ - | 0 | 0 | 0 | ||||||||||
Expired | - | $ - | 0 | 0 | 0 | ||||||||||
Balance, September 30, 2020 | 14,095,685 | $0.40-$0.75 | $0.33-$1.00 | ||||||||||||
Balance, June 30, 2020 | 939,712 | 6.00 – 11.25 | 4.95 – 15.00 | ||||||||||||
| |||||||||||||||
| |||||||||||||||
Balance, December 31, 2020 | 939,712 | 6.00 – 11.25 | 4.95 – 15.00 | ||||||||||||
Granted | 120,000 | 5.00 | 4.66 | ||||||||||||
Expired | 0 | 0 | 0 | ||||||||||||
Balance, June 30, 2021 | 1,059,712 | 5.00 – 11.25 | 4.66 – 15.00 |
NOTE 1112 - EQUITY PURCHASE AGREEMENT AND REGISTRATION RIGHTS AGREEMENT
On August 26, 2019, the Company entered into an 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’sCompany’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 Purchase Agreement.
Following effectiveness of the Registration Statement, and subject to certain limitations and conditions set forth in the Equity Purchase Agreement, the Company shall have the discretion to deliver put notices to the Investor and the Investor will be obligated to purchase shares of the Company’sCompany’s common stock, par value $0.001 per share based on the investment amount specified in each put notice. note.
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The maximum amount that the Company shall be entitled to put to the Investor in each put notice shall not exceed the lesser of $500,000 or one hundred fifty percent (150%) of the average daily trading volume of the Company’sCompany’s Common Stock during the ten (10) trading days preceding the put. Pursuant to the Equity Purchase Agreement, the Investor and its affiliates will not be permitted to purchase and the Company may not put shares of the Company’sCompany’s Common Stock to the Investor that would result in the Investor’sInvestor’s beneficial ownership of the Company’sCompany’s outstanding Common Stock exceeding 9.99%. The price of each put share shall be equal to eighty five percent (85%) of the Market Price (as defined in the Equity Purchase Agreement). Puts may be delivered by the Company to the Investor until the earlier of (i) the date on which the Investor has purchased an aggregate of $5,000,000 worth of Common Stock under the terms of the Equity Purchase Agreement, (ii)August 26, 2022, or (iii) written notice of termination delivered by the Company to the Investor, subject to certain equity conditions set forth in the Equity Purchase Agreement.
On August 26, 2019, in connection with its entry into the Equity Purchase Agreement and the Registration Rights Agreement, the Company committed to 600,00040,000 Commitment Shares (as defined in the Equity Purchase Agreement) to the Investor. These shares are initially beingwere issued pursuant to the Section 4(a)(2) exemption and will bewere 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 300,00020,000 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
During the yearsix months ended December 31, 2019.
24
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 11 - EQUITY PURCHASE AGREEMENT AND REGISTRATION RIGHTS AGREEMENT (continued)
As of December 31, 2019,June 30, 2020, the Company had not issued any stock under the Equity Purchase Agreement. For During the three monthsyear ended MarchDecember 31, 2020, the Company put 550,000 sharesa total of common stock at prices between $0.065 and $0.10 for total proceeds of $41,881. Through June 30, 2020 the Company put an additional 1,250,000120,000 shares of common stock at prices ranging from $.052$0.79 and $1.54 for total proceeds of $108,076, net of issuance costs. During the six months ended June 30, 2021, the Company has put 120,000 shares at prices ranging from $2.44 to $.069$2.85 per share for total proceeds of $66,195. Through September 30, 2020, the Company put 1,500,000 shares$314,416, net of common stock at prices ranging from $.049 to $.059 per share for total proceeds of $79,789. Subsequent to the third quarter end, the Company has put 600,000 shares at prices ranging from $.04 to $.043 per share for total proceeds of $24,395.issuance costs.
The Registration Rights Agreement provides that the Company shall (i) file with the Commission the Registration Statement by November 25, 2019; and (ii) use its best efforts to have the Registration Statement declared effective by the Commission at the earliest possible date (in any event, within 120 days after the execution date of the definitive agreements). The Company filed a Registration Statement on Form S-1 with the Commission on November 25, 2019 and the S-1 was declared effective on December 27, 2019.
NOTE 12 –13 - 2014 STOCK AWARDS PLAN
In November 2014, theboard of directors of the Company approved the adoptions of a Stock Awards Plan. A total of 7,000,000 shares was authorized to be issued under the plan. For incentive stock options, at the grant date the stock options exercise price is required to be at least 110% of the fair value of the Company’sCompany’s common stock. The Plan permits the grants of common stock or options to purchase common stock. As plan administrator, the Board of Directors has sole discretion to set the price of the options. Further, the Board of Directors may amend or terminate the plan.
On March 14, 2018, the Company cancelled all 3,250,000216,667 outstanding stock options under the 2014 Stock Awards Plan, with 1,500,000100,000 of the stock options exchanged for two 10% Convertible Promissory Notes with a six month maturity, which were subsequently converted
25 |
NOTE 13 – 2014 STOCK AWARDS PLAN, CONTINUED
into common stock in September 2018. Consequently, there are 7,000,000 shares available for issuance at SeptemberJune 30, 2021 and December 31, 2020. There are not anyno outstanding stock options.options at June 30, 2021 and December 31, 2020.
NOTE 13 - 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, which was recorded as miscellaneous income and a reduction of the debt owed to MAAB, the parent of the Company.
25
ASTRO AEROSPACE LTD. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 14 – 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’sCompany’s facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact the Company’sCompany’s operations, financial condition and demand for the Company’sCompany’s goods and services, but the Company’sCompany’s overall ability to react timely to mitigate the impact of this event. Also, it has affected the Company’sCompany’s efforts to comply with filing obligations with the Securities and Exchange Commission.SEC. Depending on the severity and longevity of the COVID-19 pandemic, the Company’sCompany’s business and stockholders may experience a significant negative impact. Currently, the COVID-19 pandemic has limited the Company’sCompany’s ability to move forward with its operations and has negatively affected its ability to timely comply with our ongoing filing obligations with the Securities and ExchangeSEC Commission.
NOTE 15 – BUSINESS ADVISORY AND PLACEMENT AGENT AGREEMENTS
Business Advisory Agreement
On February 10, 2021, the registrant entered into Business Advisory Agreements with SBC Investments Ltd. (“SBC”) and KTAP LLC (“KTAP”) to provide such advice and services to the registrant as may be reasonably requested by the registrant concerning equity and/or debt financings, strategic planning, merger and acquisition possibilities and business development activities. The term of the agreements is for twelve months and shall automatically renew for additional one year periods unless terminated in writing not less than thirty days prior to the expiration date.
The registrant shall pay SBC Investments Ltd. a one-time fee of 1,500 Series B preferred shares of the registrant for the introduction and subsequent closing of the acquisition of Horizon. The fee will be payable once the acquisition has closed and $5,000,000 has been raised. The registrant shall pay SBC Investments a fee equal to 5 percent of equity the registrant issued in an equity financing on which SBC Investments worked. At SBC Investments discretion, the fee shall be paid in cash or in the same form of the registrant’s equity issued in the equity financing.
If the registrant completes a business combination, other than Horizon, with a public or private company on which SBC Investments worked, the registrant shall pay SBC Investments a fee equal to 2.5% of the registrant’s issued and outstanding common stock, on an as-converted, fully diluted basis. The fee shall be deemed and earned and payable upon the closing of the business combination.
The registrant shall pay KTAP LLC a one-time fee of 200,000 common shares of the registrant due upon the milestones agreement between the registrant and KTAP. The registrant shall pay KTAP a fee equal to 1 percent of equity the registrant issues in an equity financing on which KTAP worked. At KTAP’s discretion, the fee shall be paid in cash or in the same form of the registrant’s equity issued in the equity financing.
26 |
NOTE 15 – BUSINESS ADVISORY AND PLACEMENT AGENT AGREEMENTS, CONTINUED
If the registrant completes a business combination with a public or private company on which KTAP worked, the registrant shall pay KTAP a fee equal to 0.5% of the registrant’s issued and outstanding common stock, on an as-converted, fully diluted basis. The fee shall be deemed and earned and payable upon the closing of the business combination.
Both advisors agreed not to introduce the registrant to any potential financing source who is a U.S. Person and will not engage in any “directed selling efforts” in the United States.
The registrant granted both advisors piggyback registration rights.
Placement Agent Agreement
On February 8, 2021, the registrant entered into a Placement Agent Agreement with Kingswood Capital Markets (“Kingswood”), a division of Benchmark Investments, Inc. whereby Kingswood shall serve as the exclusive placement agent of the registrant, on a “reasonable best efforts” basis. The terms of the placement and the securities shall be mutually agreed upon by the registrant and the purchasers.
The registrant shall pay Kingswood a cash fee equal to an aggregate of 8 percent of the aggregate gross proceeds raised in the placement. The cash fee shall be paid at the Closing of the placement. As additional compensation, at Closing, the registrant shall issue to Kingswood or its designees warrants to purchase shares of the registrant’s common stock equal to five percent of the agreement number of the common stock sold in the placement. The exercise period of the warrants shall be four and a half years commencing six months from the effective date of the placement and the exercise price of the warrants shall be equal of 110% of the price per common share of the securities sold in the placement. The warrants shall have registration rights and customary anti-dilution provisions and protection.
Kingswood shall have tail financing rights for six months following the termination of the Placement Agent Agreement. Additionally, Kingswood shall have right of first refusal to act as sole investment banker, sole book-runner and/or sole placement agent for a period of six months after the offering is completed.
Company intends to hold the investment on the balance sheet.
NOTE 16 – COMMITMENTS AND CONTINGENCIES
The Company does not have any significant or long term commitments. The Company is not currently subject to any litigation.
NOTE 1617 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the condensed consolidated balance sheet date through November 23, 2020September 30, 2021 (the condensed consolidated financial statement issuance date) and noted the following disclosures:
On October 6, 2020, the Company put 300,000July 1, 2021, Westworld Capital converted $50,000 principal amount and $370 of accrued interest into 28,405 common shares at $0.043 under the Equity Purchase Agreementa conversion price of $1.79.
On July 2, 2021 Westworld Capital converted $300,000 principal amount and received $12,673 in net proceeds.
On October 20, 2020, the Company put 300,000$7,533 of accrued interest into 171,722 common shares at $0.0399 under the Equity Purchase Agreement and received $11,722 in net proceeds.
The Company is currently negotiating a further extensionconversion price of the maturity of the 8% Senior Secured Convertible Promissory Notes, since the Company does not believe it will be able to repay the outstanding principal balance and accrued interest by the extended maturity date of November 28, 2020.$1.79.
Reverse Stock Split
Effective October 8, 2020, the Company’s majority stockholder approved a 1-for-15 reverse common stock split (“the reverse stock split”). The Company intends to effectuate the reverse stock split as soon as practicable, however, the transaction is subject to approval from the Financial Industry Regulatory Authority (FINRA). Since the Company cannot guaranty FINRA’s approval, management believes that the transaction has not occurred and has presented the financial information in this 10Q as if the transaction has not occurred.
If the Company receives FINRA’s approval and the reverse stock split is completed, it will reduce the number of common shares outstanding at September 30, 2020 from 83,135,586 to 5,542,372. As a result of the reverse stock split, every 15 shares of issued and outstanding common stock will be combined into one issued and outstanding share of common stock, without any change in the par value per share or the number of
26
27 |
(Unaudited)
NOTE 1617 - SUBSEQUENT EVENTS (continued)
authorizedOn July 8, 2021, the Company issued 400,000 common shares. As well,shares under a Securities Purchase Agreement dated May 5, 2021 to Lallande Poydras (“Lallande”). The total investment is for $1,000,000 with the number of outstanding common stock warrants will be reducedpriced at $2.50. To date, Lallande has paid $535,850, and still owes the Company $464,150. The Company has made a verbal agreement that Lallande can make payments on the balance on the condition that the blance is fully paid by a factor of 15December 2021.
On September 5, 2021, Westworld Capital 8% Senior Secured Convertible Promissory Note matured and exercise price increasedthe Company is currently in default. The loan has been verbally extended and the Company is waiting for document review by a factor of 15 concurrently. By contract,Westworld Capital.
On August 3, 2021, the Company issued 25,000 common shares to TraDigital Marketing Group at $2.26 per common share under the terms of a services agreement dated March 3, 2021.
On August 4, 2021, the Series ACompany issued 20,000 common shares to Anargyros Arty Mandalas and Series B Convertible Preferred Stock will not change.20,000 common shares to David Smulowitz at $2.07 per common share.
The following isOn August 17, 2021, Westworld Capital converted $100,000 principal amount and $3,444 of accrued interest into 63,403 common shares at a conversion price of $1.63 per common share.
On August 19, 2021, the impactCompany issued 2,000,000 common shares to SBC Investments for the introduction of the 1Horizon Aircraft, Inc. transaction valued at $1.00 per common share. Due to non-performance, SBC Investments has agreed to return the common shares to the treasury for 15 reverse stock split incancellation.
On August 25, 2021, the presentationCompany issued 150,000 common shares for media, investor relations and marketing services valued at $4.23 per common share.
On August 31, 2021, Westworld Capital converted $100,000 principal amount plus $3,867 of accrued interest into 85,546 common shares at the three and nine months endedconversion price of $1.21.
On September 30, 2020 and 2019 basic and diluted loss per share:13, 2021, Westworld Capital converted $100,000 principal amount plus $4,178 of accrued interest into 168,311 common shares at the conversion price of $1.23.
Three Months Ended September 30, | Nine Months Ended September 30, | |||
2020 | 2019 | 2020 | 2019 | |
Net Loss Available to Common Stockholders | $ (210,318) | $ (168,466) | $ (1,017,155) | $ (1,775,898) |
Series A Preferred Stock Dividends | 2,500 | 2,500 | 7,500 | 7,500 |
Net Loss Available to Common Stockholders and Assumed Conversions | $ (212,818) | $ (170,966) | $ (1,024,655) | $ (1,783,398) |
Weighted-Average Shares - Basic | 5,443,858 | 4,811,795 | 5,210,618 | 4,721,318 |
Shares Issuable Upon Conversion of 8% Senior Secured Convertible Promissory Notes | - | - | - | - |
Shares Issuable Upon Conversion of Preferred Stock – Series A | - | - | - | - |
Shares Issuable Upon Conversion of Preferred Stock – Series B | - | - | - | - |
Weighted-Average Shares - Diluted | 5,443,858 | 4,811,795 | 5,210,618 | 4,721,318 |
Net Loss Per Common Share: | ||||
Basic | $ (0.04) | $ (0.04) | $ (0.20) | $ (0.38) |
Diluted | $ (0.04) | $ (0.04) | $ (0.20) | $ (0.38) |
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27
MANAGEMENT’S
29 |
Default and Forbearance onFinal Disposition of the 8% Senior Secured Convertible Promissory Notes
statements for the final disposition of the Notes.
28
from one application to the next. Astro 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 eVTOL aircraft is in an early development stage. The Company expects that it will be marketing the aircraft sometime in the fourth quarter of 2022. To date, no commercial applications have been found which would accept the product.
30 |
In 2019, no funds were raised by
issuance costs.
2021.
29
Sales and marketing expenses declined from $92,734operating expenses. Further, in the three months ended SeptemberJune 30, 20192020 the spending was significantly reduced due to $15,086the worldwide COVID-19 economic shutdowns.
Other expenses declined Finally, there was a goodwill
31 |
bank and filing fees.
pandemic.
Finally, there was a goodwill impairment expense of $14,011,720 in the six months ended June 30, 2021, related to the acquisition of Horizon.
30
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 June 2020, the amortization dropped to $434,074 versus $1,020,043 in the nine months ended September 30, 2020 versus 2019.Issued March 5, 2021. There was also a $1,846 declinesmall increase of $6,537 in the bank and filing fees in the nine months ended September 30, 2020 versus 2019. In the nine months ended September 30, 2019, there was miscellaneous income of $178,394 all from the disgorgement of short swing profits pursuant to Section 16(a) of the Securities Exchange Act of 1934.
fees.
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2020.
The On September 13, 2021, the Company also raised an additional $1.2 million of cash in November 2018 throughagain amended the issuance of a Senior Secured ConvertibleMAAB Promissory Note into increase the maximum principal amount of $1,383,636. to $2,000,000 and to extend the maturity to February 28, 2023.
expenses of $25,000. The Note matures on December 31, 2021.
In 2019, no funds were raised by
issuance costs.
31
33 |
liabilities.
The Company had the following changes in operating assets and liabilities: an increase of $23,346 in other receivables, a decrease of $18,567 in prepaid expenses, a decrease of $11,199 in deposits, an increase of $48,300 in deferred offering costs and an increase of $112,468 in accounts payable and accrued expenses.
common stock.
10
10
2021.
32
For the nine months ended SeptemberJune 30, 2020, the Company received $299,260$145,494 in proceeds from the Promissory Note from MAAB and received $187,865$87,786 from the puts of common stock under the Equity Purchase Agreement. As a result, the Company had net cash provided by financing activities of $487,125$233,280 for the ninesix months ended SeptemberJune 30, 2020.
For
For the nine months ended SeptemberJune 30, 2020 the Company had a gain from the effect of the foreign currency translation of $39,324 and for the nine months ended September 30, 2019 the Company has a loss from the effect of the foreign currency translation of $10,014.
$74,880.
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2021.
2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | |
Promissory Note - MAAB | - | - | $1,049,277 | - | - | - | $1,049,277 |
8% Senior Secured Convertible Promissory Notes | $ 839,857 | - | - | - | - | - | $ 839,857 |
Total Repayments | $ 839,857 | $ - | $1,049,277 | $ - | $ - | $ - | $1,889,134 |
33
2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | ||||||||||||||||||||||
Promissory Note - MAAB | - | - | $ | 1,476,664 | - | - | - | $ | 1,476,664 | |||||||||||||||||||
8% Senior Secured Convertible Promissory Notes | $ | 1,250,000 | - | - | - | - | - | $ | 1,250,000 | |||||||||||||||||||
CEBA Loan | - | $ | 49,677 | - | - | - | - | $ | 49,677 | |||||||||||||||||||
Total Repayments | $ | 1,250,000 | $ | 49,677 | $ | - | $ | - | $ | - | $ | - | $ | 2,776,341 |
35 |
2021.
34
12
12
36 |
Exhibit 31*31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32*32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
35
37 |
September 30, 2021
Bruce Bent
Patricia Trompeter
36
14
14
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