UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
-OR-
Commission File Number
(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) |
(Address of principal executive offices, including zip code)
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(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.
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).
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 [ ] |
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Accelerated filer [ ] |
Smaller reporting company |
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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
The number of outstanding shares of the registrant's common stock as of September 29, 2021:
Item 1. Condensed Consolidated Financial Statements | |||
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28 | |||
34 | |||
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37 |
2 |
June 30,
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December 31,
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2021
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2020
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(unaudited) |
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Assets
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Cash
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$ | $ | ||||||
Other Receivables
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Prepaid Expense
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Total Current Assets
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Property and Equipment
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Acquired In-Process Research and Development
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Non-Compete Agreements
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Deposits
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Investment in SPAC |
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Total Assets
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$ | $ | ||||||
Liabilities and Stockholders' Equity (Deficit)
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Current Liabilities
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Accounts Payable and Accrued Liabilities
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$ | $ | ||||||
8% Senior Secured Convertible Promissory Note
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8% Senior Secured Convertible Promissory Note issued December
2, 2019
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8% Senior Secured Convertible Promissory Note issued March 5,
2021, net of discount of $
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Total Current Liabilities
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Long Term Liabilities
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Promissory Note from MAAB
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Canadian Emergency Business Account Loan Payable |
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Total Liabilities
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Commitments and Contingencies (Notes 14 and 16) |
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Stockholders' Equity (Deficit)
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Series A Convertible Preferred Stock, $
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Shares Authorized,
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at June 30, 2021 and December 31, 2020
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Series B Convertible Preferred Stock, $
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Shares Authorized,
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at June 30, 2021 and December 31, 2020
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Common Stock, $
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Authorized,
Outstanding at June 30, 2021 and December 31, 2020
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Additional Paid-in Capital:
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Series A Convertible Preferred Stock
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Series B Convertible Preferred Stock
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Common Stock
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Accumulated Other Comprehensive Loss
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(
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)
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(
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Accumulated Deficit
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(
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) |
(
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) | ||||
Total Stockholders' Equity (Deficit)
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(
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) | |||||
Total Liabilities and Stockholders' Equity (Deficit)
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$
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$
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3 |
Astro Aerospace Ltd. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2021 |
2020 |
2021 |
2020 |
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Revenue |
$ | $ | $ | $ | ||||||||||||
Operating Expenses: |
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Sales and Marketing |
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General and Administrative |
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Research and Development |
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Impairment Expense |
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Total Operating Expenses |
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Loss from Operations |
( |
) | ( |
) | ( |
) | ( |
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Other Expense |
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Interest Expense, Net |
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Bank and Financing Fees |
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Total Other Expense |
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Loss Before Income Tax |
( |
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Income Tax |
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Net Loss |
( |
) | ( |
) | ( |
) | ( |
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Less: Preferred Stock Dividends |
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Net Loss Available to Common Stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Net Loss per Common Share: |
||||||||||||||||
Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Weighted Average Number of Common |
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Shares Outstanding - Basic |
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Weighted Average Number of Common |
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Shares Outstanding - Diluted |
The accompanying Notes are an integral part of the condensed consolidated financial statements
4 |
Astro Aerospace Ltd. and Subsidiaries
Condensed Consolidated Statements of Other Comprehensive Loss
(Unaudited)
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Net Loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Foreign Currency Translation (Loss) Gain |
( |
) | ( |
) | ( |
) | ||||||||||
Comprehensive Loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
The accompanying Notes are an integral part of the condensed consolidated financial statements
5 |
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
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Amount
|
Shares
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Amount
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Shares
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Amount
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Preferred
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Preferred
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Common
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(Loss) Income
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Deficit
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(Deficit)
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|||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019
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$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||
Partial Conversions
of 8% Senior
Secured
Convertible
Promissory Notes
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Puts of Common
Stock Under the
Equity Purchase
Agreement, net of
issuance costs of
$9,000
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Currency
Translation
(Unaudited)
|
- | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Net Loss
(Unaudited)
|
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Balance at March 31
31, 2020
(Unaudited)
|
$ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||
Partial Conversions
of 8% Senior
Secured
Convertible
Promissory Notes
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Puts of Common
Stock Under the
Equity Purchase
Agreement, net of
issuance costs of
$9,000
(Unaudited)
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|
|||||||||||||||||||||||||||||||||||||||||||||||
Foreign Currency
Translation Loss
(Unaudited)
|
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Net Loss
(Unaudited)
|
- | - | - | ( |
) | 0 | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30,
2020 (Unaudited)
|
$ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) |
6 |
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
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Amount
|
Shares
|
Amount
|
Shares
|
Amount
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Preferred
|
Preferred
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Common
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Income (Loss)
|
Deficit
|
(Deficit)
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|||||||||||||||||||||||||||||||||||||
Balance at
December 31,
2020
|
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||
Issuance of
Common Stock for
Services
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Partial Conversion
of 8% Senior
Secured
Convertible
Promissory Notes
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Puts of Common
Stock Under the
Equity Purchase
Agreement, net of
issuance costs of
$750
(Unaudited)
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||||||||||||||||||||||||||||||||||||||||||||||||
Partial Conversion
of the Series B
Convertible
Preferred Stock(Unaudited)
|
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Fair Value of
Warrants Issued
with 8% Senior
Secured
Convertible
Promissory Note
Issued March 5,
2021 (Unaudited)
|
- | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Fair Value of
Beneficial
Conversion
Feature of the 8%
Senior Secured
Convertible
Promissory Note,
Issued March 5,
2021 (Unaudited)
|
- | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Foreign Currency |
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Net Loss
(Unaudited)
|
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Balance at March
31, 2021
(Unaudited)
|
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ |
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
|
Accumulate
|
Total
Stockholders’
Equity
|
||||||||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Preferred
|
Preferred
|
Common
|
Income (Loss)
|
Deficit
|
(Deficit)
|
|||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021: |
|
$ |
|
|
$ |
|
$ |
8,448 |
$ |
124,844 |
|
$ |
12,208,343 |
$ | ( |
) | $ | (12,549,886 | ) | $ |
|
|||||||||||||||||||||||||||
Issuance of
Common Stock for
the Acquisition of
Horizon Aircraft,
Inc. (Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of
Common Stock for
Services
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Deposit for
Common Stock
(Unaudited)
|
- | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Foreign Currency
Translation Loss
(Unaudited)
|
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Adjustment from
Horizon Aircraft,
Inc. Acquisition
(Unaudited)
|
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Net Loss
(Unaudited)
|
- | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||||||
Balance at June 30,
2021 (Unaudited)
|
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ |
8 |
Six Months Ended June 30, | ||||||||
2021
|
2020
|
|||||||
Cash Flow from Operating Activities:
|
||||||||
Net Loss
|
$ | ( |
) | $ | ( |
) | ||
Adjustments to Reconcile Net Loss to Net Cash
Used In Operating Activities:
|
||||||||
Amortization of Note Discounts
|
||||||||
Issuance of Common Stock for Services
|
||||||||
Impairment Expense
|
||||||||
Changes in Operating Assets and Liabilities:
|
||||||||
Other Receivables
|
||||||||
Prepaids
|
||||||||
Deposits
|
( |
) | ||||||
Accounts Payable and Accrued Liabilities
|
||||||||
Net Cash Used In Operating Activities
|
( |
) | ( |
) | ||||
Cash Flow from Investing Activities:
|
||||||||
Purchase of Property and Equipment
|
( |
) | ||||||
Cash acquired in Acquisition |
|
|
||||||
Net Cash Provided by Investing Activities
|
||||||||
|
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Cash Flow from Financing Activities:
|
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Promissory Note from MAAB
|
||||||||
8% Senior Secured Convertible Promissory Note, Issued March 5, 2021, net of Issuance Costs of $25,000
|
||||||||
Elimination of Note Receivable
|
( |
) | ||||||
Puts of Common Stock Under the Equity Purchase Agreement
|
||||||||
Deposit for Common Stock
|
||||||||
Net Cash Provided By Financing Activities
|
||||||||
Effect of Foreign Currency Translation (Loss) Gain
|
( |
) | ||||||
Net Increase in Cash
|
$ | $ | ||||||
Cash at the Beginning of the Period
|
$ | $ | ||||||
Cash at the End of the Period
|
$ | $ |
9 |
Supplemental Disclosures of Cash Flow Information: |
||||||||
Cash Paid During the Period for: |
||||||||
Interest |
$ | - | $ | |||||
Supplemental Disclosures of Non-Cash Information: |
||||||||
Conversions of 8% Senior Secured Convertible Promissory Notes into Common Stock |
$ | $ | ||||||
Common Stock Issued for Accrued Interest |
$ | $ | - | |||||
Discounts Issued with 8% Senior Secured Convertible Promissory Notes, Issued March 5, 2021 |
$ | $ | - | |||||
Amortization to Interest Expense of the Debt Discount from the 8% Senior Secured Convertible Promissory Note, Issued March 5, 2021 |
$ | $ | - | |||||
Amortization to Interest Expense of the Debt Discount from the 8% Senior Secured Convertible Promissory Note, Issued December 2, 2019 |
$ | - | $ | |||||
Receivable Related to Puts of Common Stock Under the Equity Purchase Agreement |
$ | - | $ | |||||
Increase in Note and Additional Discount on 8% Senior Secured Convertible Promissory Note due to the Forbearance Agreement on June 30, 2020 |
$ | - | $ | |||||
Assets Acquired and Liabilities Assumed in Connection with Horizon Aircraft, Inc. Acquisition: |
||||||||
Cash |
$ | $ | - | |||||
Other Receivables |
$ | $ | - | |||||
Prepaid Expenses |
$ | $ | - | |||||
Property and Equipment |
$ | $ | - | |||||
In Process Research and Development |
$ | $ | - | |||||
Non-Compete Agreement |
$ | $ | - | |||||
Goodwill |
$ | $ | - | |||||
Total Assets Acquired |
$ | $ | - | |||||
Liabilities: |
||||||||
Promissory Note Payable |
$ | $ | - | |||||
Canadian Emergency Business Account Loan Payable |
$ | - | ||||||
Accounts Payable and Accrued Liabilities |
$ | $ | - | |||||
Total Liabilities Assumed |
$ | $ | - | |||||
Fair Value of Common Stock Issued |
$ | $ | - |
10 |
NOTE 1 – NATURE OF OPERATIONS
Astro Aerospace Ltd. (“Astro” or the “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”), 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 June 30, 2021, the Company has 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, 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”) consisting of inventory, hardware designs, software designs, and a trademark all pertaining to passenger drone design and use from Confida Aerospace Ltd. The drone is in an early development stage. The Company expects that it will be marketing the aircraft sometime in the second quarter of 2022. To date, no commercial applications have been found which would accept the product. To complete an eVTOL aircraft and have it ready to market, Astro completed the acquisition of Horizon, who develops advanced eVTOL aircrafts. It is expected that Horizon’s management and its technology will expedite the 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 six months ended June 30, 2021 the Company had a net loss of $16,400,053 and used $
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 $
11 |
NOTE 1 – NATURE OF OPERATIONS, CONTINUED
Promissory Note issued March 5, 2021 for $
The Company has also executed an Equity Purchase Agreement whereby the Investor agreed to purchase from the Company up to $
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
|
$
|
|
|
Other Receivables
|
$
|
|
|
Prepaid Expenses
|
$
|
|
|
Property and Equipment
|
$
|
|
|
In Process Research & Development
|
$
|
|
|
Non Compete Agreement
|
$
|
|
|
Goodwill
|
$
|
|
|
|
|
|
|
Total Assets Acquired
|
$
|
|
|
|
|
|
|
Liabilities Acquired:
|
|
|
|
|
|
|
|
Promissory Note Payable
|
$
|
|
|
CEBA Loan Payable
|
$
|
|
|
Accounts Payable and Accrued Liabilities
|
$
|
|
|
|
|
|
|
Total Liabilities Assumed
|
$
|
|
|
|
|
|
|
Fair Value of Common Stock Issued
|
$
|
|
|
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 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 June 30, 2021 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, 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, 2020, included in the Company's Form 10-K, which was filed with the SEC on April 15, 2021
Cash
All highly liquid investments with original maturities of three months or less or money 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
Property 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.
Intangible Assets
Acquired In-Process Research and Development
Acquired in-process research and development (“IPR&D”) consists of acquired drone technology and engineering and 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, 2020 and no further impairment expense was required. The Company periodically evaluates the impairment of the asset and currently there has been no amortization expense as of the three and six months ended June 30, 2021.
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 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”)
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 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 Notes 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”).
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.
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” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “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 June 30, 2021 and December 31, 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 June 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 | ) | $ | ( |
) | $ | ( |
) | ||||
Series A Preferred Stock Dividends |
||||||||||||||||
Net Loss Available to Common Stockholders and Assumed Conversions |
$ | (15,420,016 | ) | $ | (343,207 | ) | $ | ( |
) | $ | ( |
) | ||||
|
||||||||||||||||
Weighted Average Shares - Basic |
||||||||||||||||
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 |
||||||||||||||||
Net Loss Per Common Share: |
||||||||||||||||
Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
Comprehensive Loss
Comprehensive loss consists of net loss plus the foreign currency translation (loss) gain.
16 |
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Foreign Currency Translation
The translation of assets and liabilities for the Company’s foreign subsidiaries is made at period end exchange rates, while revenue and expense accounts are translated at the average exchange rates during the period transactions occurred.
Fair Value Measurement
GAAP 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’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 June 30, 2021 and December 31, 2020, there were no assets or liabilities carried or measured at fair value.
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 year. Actual results could differ from those estimates.
A material estimate that is particularly susceptible to significant change in the near-term relate 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 4 – RECENT ACCOUNTING PRONOUNCEMENTS
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, “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 host contract, that meet the definition of a derivative, and that do not qualify for 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 ASU are effective for fiscal years beginning after December 15, 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 adoption of this ASU is not expected to have a material impact on the Company's condensed consolidated financial statements.
NOTE 5 – 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 June 30, 2021, the Company did not have a cash balance that was in excess of federally insured limits. The Company does not anticipate non-performance by its financial institution.
NOTE 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’s own assumptions.
Management believes the carrying amounts of the Company’s cash, other receivables, accounts payable and accrued liabilities as of June 30, 2021 and December 31, 2020 approximate their respective fair values because of the short-term nature of these instruments. The Company measures its promissory note receivable, notes payable and loan in 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 the loan from MAAB at June 30, 2021 and December 31, 2020 were as follows:
|
Quoted Prices In Active Markets for Identical Assets |
Significant Other Observable Inputs |
Significant Unobservable Inputs |
Carrying |
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|
(Level 1)
|
(Level 2)
|
(Level 3) |
Value |
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At June 30, 2021: |
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Assets |
||||||||||||||||
Cash |
$ | $ | ||||||||||||||
|
||||||||||||||||
Liabilities |
||||||||||||||||
8% Senior Secured Convertible Promissory Note, Issued March 5, 2021, Net of Discount |
$ | $ | ||||||||||||||
Loan from MAAB |
$ | $ | ||||||||||||||
CEBA Loan |
$ |
|
$ |
|
||||||||||||
At December 31, 2020: |
||||||||||||||||
Assets |
||||||||||||||||
Cash |
$ | $ | ||||||||||||||
|
||||||||||||||||
Liabilities |
||||||||||||||||
8% Senior Secured Convertible Promissory Note |
$ | $ | ||||||||||||||
8% Senior Secured Convertible Promissory Note issued December 2, 2019 |
$ | $ | ||||||||||||||
Loan from MAAB |
$ | $ |
NOTE 7 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES
Note Issuance November 21, 2018
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.
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 $
In the second tranche, the warrant fair value (See Note 10, “Warrants”) was $
During the three months ended March 31, 2020, the Investor converted $
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 $
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 $
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, $
Partial Sales, Conversions and Final Disposition of the Notes
On January 29, 2020, the Original Investor sold $
20 |
NOTE 7 – 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTES, CONTINUED
On January 22, the independent third party investor converted $
On February 12, 2021, SBC converted $
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 $
As additional consideration for the investment, the Company issued Warrants to acquire up to an aggregate of
The Note has a BCF, which was valued, along with the warrants, on a relative fair value method. The warrant fair value was $
21 |
NOTE 8 – DEFAULT AND FORBEARANCE ON THE 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
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 $
As of June 30, 2020, the 8% Senior Secured Convertible Promissory Note was again in default, with a principal balance of $
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.
As of March 12, 2021, both tranches of the Notes have been completely converted into common stock (See Note 6, “
NOTE 9 – PROMISSORY NOTE FROM MAAB
MAAB, the parent of Astro has issued a Promissory Note, as amended, for monetary advances to the Company of up to $
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 Company has accrued interest of $
NOTE 10 – CONVERTIBLE PREFERRED STOCK
In December 2015, the Company authorized
In January 2016, the Company issued
On May 4, 2018, the Board of Directors of Astro Aerospace Ltd. authorized
In January 2021, Confida assigned
NOTE 11 – WARRANTS
As part of the 8% Senior Secured Convertible Promissory Note issuance, the Company issued warrants to acquire up to an aggregate
23 |
NOTE 11 – WARRANTS, CONTINUED
In the second tranche, the Company issued warrants to acquire up to an aggregate
As 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
A summary of the warrant activity follows:
|
|
|
Price per |
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|
Warrants |
Exercise |
Share on Date |
|||||||||
Balance, December 31, 2019 |
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Granted |
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Expired |
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Balance, June 30, 2020 |
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|
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|
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Balance, December 31, 2020 |
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Granted |
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Expired |
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Balance, June 30, 2021 |
NOTE 12 - 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 $
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’s common stock, par value $0.001 per share based on the investment amount specified in each note.
24 |
On August 26, 2019, in connection with its entry into the Equity Purchase Agreement and the Registration Rights Agreement, the Company committed to
During the six months ended June 30, 2020, the Company had not issued any stock under the Equity Purchase Agreement. During the year ended December 31, 2020, the Company put a total of
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 13 - 2014 STOCK AWARDS PLAN
In November 2014, the board of directors of the Company approved the adoptions of a Stock Awards Plan. A total of
On March 14, 2018, the Company cancelled all
25 |
NOTE 13 – 2014 STOCK AWARDS PLAN, CONTINUED
into common stock in September 2018. Consequently, there are
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’s facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact the Company’s operations, financial condition and demand for the Company’s goods and services, but the Company’s overall ability to react timely to mitigate the impact of this event. Also, it has affected the Company’s efforts to comply with filing obligations with the SEC. Depending on the severity and longevity of the COVID-19 pandemic, the Company’s business and stockholders may experience a significant negative impact. Currently, the COVID-19 pandemic has limited the Company’s ability to move forward with its operations and has negatively affected its ability to timely comply with our ongoing filing obligations with the SEC 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
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
The registrant shall pay KTAP LLC a one-time fee of
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
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
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 17 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the condensed consolidated balance sheet date through September 30, 2021 (the condensed consolidated financial statement issuance date) and noted the following disclosures:
On July 1, 2021, Westworld Capital converted $
On July 2, 2021 Westworld Capital converted $
27 |
NOTE 17 - SUBSEQUENT EVENTS
On July 8, 2021, the Company issued
On September 5, 2021, Westworld Capital 8% Senior Secured Convertible Promissory Note matured and the Company is currently in default. The loan has been verbally extended and the Company is waiting for document review by Westworld Capital.
On August 3, 2021, the Company issued
On August 4, 2021, the Company issued
On August 17, 2021, Westworld Capital converted $
On August 19, 2021, the Company issued
On August 25, 2021, the Company issued
On August 31, 2021, Westworld Capital converted $
On September 13, 2021, Westworld Capital converted $
28 |
29 |
30 |
31 |
32 |
33 |
34 |
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 |
36 |
Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
37 |
38 |