LOOP INDUSTRIES, INC.
10-Ks and 10-Qs
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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
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☒
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For the
quarterly period ended November 30, 2020
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or
☐
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from ___________ to __________
Commission
File No.
000-54768
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Loop Industries, Inc.
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(Exact
name of Registrant as specified in its charter)
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Nevada
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27-2094706
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(State
or other jurisdiction of incorporation or
organization)
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(I.R.S.
Employer Identification No.)
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480 Fernand-Poitras Terrebonne, Québec, Canada J6Y
1Y4
(Address
of principal executive offices zip code)
Registrant’s
telephone number, including area code
(450) 951-8555
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act
:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common
Stock
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LOOP
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Nasdaq
Global Market
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Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant
was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No
☐
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files) Yes ☒ No
☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large accelerated
filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller reporting
company
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☒
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Emerging growth
company
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☐
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If an emerging
growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
☐ No ☒
As at January 14,
2021, there were 42,413,691 shares of the Registrant’s common
stock, par value $0.0001 per share, outstanding.
LOOP INDUSTRIES, INC.
TABLE OF CONTENTS
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Page No.
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4
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5
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13
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14
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15
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16
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17
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17
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17
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17
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18
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19
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3
I
TEM 1. FINANCIAL
STATEMENTS
Loop Industries, Inc.
Three and Nine months ended November 30, 2020
Index to the Unaudited Interim Condensed Consolidated Financial
Statements
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Contents
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Page(s)
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F-1
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F-2
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F-3
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F-7
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F-8
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4
Loop Industries, Inc.
C
ondensed Consolidated Balance
Sheets
(Unaudited)
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November 30,
2020
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February 29,
2020
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Assets
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Current
assets
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Cash and cash
equivalents
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$
43,613,815
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$
33,717,671
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Sales tax, tax
credits and other receivables (Note 3)
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1,182,107
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664,544
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Prepaid expenses
and deposits (Note 4)
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1,230,442
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141,226
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Total current
assets
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46,026,364
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34,523,441
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Investment in
joint venture (Note 9)
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1,500,000
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850,000
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Property, plant
and equipment, net (Note 5)
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3,355,410
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7,260,254
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Intangible assets,
net (Note 6)
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631,590
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202,863
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Total
assets
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$
51,513,364
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$
42,836,558
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Liabilities and Stockholders' Equity
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Current
liabilities
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Accounts payable
and accrued liabilities (Note 8)
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$
4,088,147
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$
2,082,698
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Current portion of
long-term debt (Note 10)
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53,992
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52,126
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Total current
liabilities
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4,142,139
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2,134,824
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Long-term debt
(Note 10)
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2,336,374
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2,238,026
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Total
liabilities
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6,478,513
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4,372,850
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Commitments and Continencies (Note 17)
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Stockholders' Equity
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Series A Preferred
stock par value $0.0001; 25,000,000 shares authorized; one share
issued and outstanding (Note 12)
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-
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-
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Common stock par
value $0.0001: 250,000,000 shares authorized; 42,412,739 shares
issued and outstanding (February 29, 2020 – 39,910,774) (Note
12)
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4,242
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3,992
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Additional paid-in
capital
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112,112,970
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82,379,413
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Additional paid-in
capital – Warrants
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9,475,996
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9,785,799
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Accumulated
deficit
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(76,468,478
)
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(53,317,047
)
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Accumulated other
comprehensive loss
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(89,879
)
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(388,449
)
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Total
stockholders' equity
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45,034,851
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38,463,708
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Total liabilities
and stockholders' equity
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$
51,513,364
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$
42,836,558
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See accompanying notes to the condensed consolidated financial
statements
.
F-1
Loop Industries, Inc.
C
ondensed Consolidated Statements of
Operations and Comprehensive Loss
(Unaudited)
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Three Months
Ended November 30
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Nine Months
Ended November 30
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2020
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2019
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2020
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2019
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Revenue
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$
-
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$
-
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$
-
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$
-
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Expenses
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Research and
development (Notes 13 and 14)
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6,274,283
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1,278,172
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10,504,093
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3,246,246
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General and
administrative (Note 14)
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2,724,016
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1,825,813
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6,726,339
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5,447,056
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Write-down and
impairment of property, plant and equipment (Note 5)
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5,034,606
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-
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5,043,120
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-
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Depreciation and
amortization (Notes 5 and 6)
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104,307
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219,628
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654,354
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562,382
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Interest and other
financial (income) expenses (Note 17)
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(41,855
)
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693,027
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26,016
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1,817,091
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Interest
income
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(20,008
)
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(171,274
)
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(78,394
)
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(363,565
)
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Foreign exchange
loss
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95,644
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5,533
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275,903
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15,297
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Total
expenses
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14,170,993
|
3,850,899
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23,151,431
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10,747,492
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Net
Loss
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(14,170,993
)
|
(3,850,899
)
|
(23,151,431
)
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(10,747,492
)
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Other comprehensive
income (loss)
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Foreign currency
translation adjustment
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66,170
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7,552
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298,570
|
(30,133
)
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Comprehensive
income (loss)
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$
(14,104,823
)
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$
(3,843,347
)
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$
(22,852,861
)
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$
(10,777,625
)
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Loss per
share
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Basic and
Diluted
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$
(0.34
)
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$
(0.10
)
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$
(0.57
)
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$
(0.29
)
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Weighted average
common shares outstanding
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Basic and
Diluted
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41,715,806
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39,133,627
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40,515,885
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37,404,165
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See accompanying notes to the condensed consolidated financial
statements.
F-2
Loop Industries, Inc.
C
ondensed Consolidated Statements
of Changes in Stockholders’ Equity
(Unaudited)
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Three Months
Ended November 30, 2020
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Common stock par
value $0.0001
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Preferred stock
par value $0.0001
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Number of
Shares
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Amount
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Number of
Shares
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Amount
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Additional
Paid-in Capital
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Additional
Paid-in Capital - Warrants
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Additional
Paid-in Capital
– Beneficial Conversion Feature
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Common Stock
Issuable
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Accumulated
Deficit
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Accumulated
Other Comprehensive (Loss)
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Total
Stockholders' Equity
|
|
Balance, August 31,
2020
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39,935,210
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$
3,994
|
1
|
$
-
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$
84,172,723
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$
9,870,241
|
$
-
|
$
-
|
$
(62,297,485
)
|
$
(156,049
)
|
$
31,593,424
|
|
Issuance of common shares for cash,
net of share issuance costs (Note 12)
|
2,087,000
|
209
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-
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-
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24,996,419
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-
|
-
|
-
|
-
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-
|
24,996,628
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Issuance of shares upon exercise of
warrants (Note 16)
|
190,529
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19
|
-
|
-
|
2,046,854
|
(394,245
)
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-
|
-
|
-
|
-
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1,652,628
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|
Issuance of shares upon the vesting
of restricted stock units (Notes 12 and 14)
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200,000
|
20
|
-
|
-
|
(20
)
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Stock options granted for services
(Note 14)
|
-
|
-
|
-
|
-
|
551,720
|
-
|
-
|
-
|
-
|
-
|
551,720
|
|
Restricted stock units granted for
services (Note 14)
|
-
|
-
|
-
|
-
|
345,274
|
-
|
-
|
-
|
-
|
-
|
345,274
|
|
Foreign currency
translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
66,170
|
66,170
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(14,170,993
)
|
-
|
(14,170,993
)
|
|
Balance,
November 30, 2020
|
42,412,739
|
$
4,242
|
1
|
$
-
|
$
112,112,970
|
$
9,475,996
|
$
-
|
$
-
|
$
(76,468,478
)
|
$
(89,879
)
|
$
45,034,851
|
F-3
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|
Three Months Ended November 30,
2019
|
||||||||||
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|
Common stock par
value $0.0001
|
Preferred stock
par value $0.0001
|
|
|
|
|
|
|
|
||
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Number of
Shares
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Amount
|
Number of
Shares
|
Amount
|
Additional
Paid-in Capital
|
Additional
Paid-in Capital - Warrants
|
Additional
Paid-in Capital – Beneficial Conversion
Feature
|
Common Stock
Issuable
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Loss
|
Total
Stockholders' Equity
|
|
Balance, August 31,
2019
|
39,032,528
|
$
3,903
|
1
|
$
-
|
$
74,414,197
|
$
9,700,102
|
$
1,200,915
|
-
|
$
(45,708,185
)
|
$
(327,909
)
|
$
39,283,023
|
|
Issuance of common shares for cash,
net of share issuance costs (Note 12)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Issuance of shares upon the vesting
of restricted stock units (Notes 12 and 14)
|
200,000
|
20
|
|
|
(20
)
|
|
|
-
|
|
|
-
|
|
Stock options granted for services
(Note 14)
|
-
|
-
|
-
|
-
|
549,810
|
-
|
-
|
-
|
-
|
-
|
549,810
|
|
Restricted stock units granted for
services (Note 14)
|
-
|
-
|
-
|
-
|
326,983
|
-
|
-
|
-
|
-
|
-
|
326,983
|
|
Foreign currency
translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
7,552
|
7,552
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,850,899
)
|
-
|
(3,850,899
)
|
|
Balance,
November 30, 2019
|
39,232,528
|
$
3,923
|
1
|
$
-
|
$
75,290,970
|
$
9,700,102
|
$
1,200,915
|
-
|
$
(49,559,084
)
|
$
(320,357
)
|
$
36,316,469
|
F-4
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|
Nine Months
Ended November 30, 2020
|
||||||||||
|
|
Common stock par
value $0.0001
|
Preferred stock
par value $0.0001
|
|
|
|
|
|
|
|
||
|
|
Number of
Shares
|
Amount
|
Number of
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Additional
Paid-in Capital
- Warrants
|
Additional
Paid-in Capital
– Beneficial Conversion Feature
|
Common Stock
Issuable
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive (Loss)
|
Total
Stockholders' Equity
|
|
Balance, February 29,
2020
|
39,910,774
|
$
3,992
|
1
|
$
-
|
$
82,379,413
|
$
9,785,799
|
$
-
|
$
-
|
$
(53,317,047
)
|
$
(388,449
)
|
$
38,463,708
|
|
Issuance of common shares for cash,
net of share issuance costs (Note 12)
|
2,087,000
|
209
|
-
|
-
|
24,996,419
|
-
|
-
|
-
|
-
|
-
|
24,996,628
|
|
Issuance of shares upon exercise of
warrants (Note 16)
|
190,529
|
19
|
-
|
-
|
2,046,853
|
(394,245
)
|
-
|
-
|
-
|
-
|
1,652,627
|
|
Warrant issued for services (Note
16)
|
-
|
-
|
-
|
-
|
-
|
84,442
|
-
|
-
|
-
|
-
|
84,442
|
|
Issuance of shares upon the vesting
of restricted stock units (Notes 12 and 14)
|
224,436
|
22
|
-
|
-
|
(22
)
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Stock options granted for services
(Note 14)
|
-
|
-
|
-
|
-
|
1,662,155
|
-
|
-
|
-
|
-
|
-
|
1,662,155
|
|
Restricted stock units granted for
services (Note 14)
|
-
|
-
|
-
|
-
|
1,028,152
|
-
|
-
|
-
|
-
|
-
|
1,028,152
|
|
Foreign currency
translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
298,570
|
298,570
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(23,151,431
)
|
-
|
(23,151,431
)
|
|
Balance,
November 30, 2020
|
42,412,739
|
$
4,242
|
1
|
$
-
|
$
112,112,970
|
$
9,475,996
|
$
-
|
$
-
|
$
(76,468,478
)
|
$
(89,879
)
|
$
45,034,851
|
F-5
|
|
Nine Months Ended November 30,
2019
|
||||||||||
|
|
Common stock par
value $0.0001
|
Preferred stock
par value $0.0001
|
|
|
|
|
|
|
|
||
|
|
Number of
Shares
|
Amount
|
Number of
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Additional
Paid-in Capital
- Warrants
|
Additional
Paid-in Capital
– Beneficial Conversion Feature
|
Common Stock
Issuable
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Loss
|
Total
Stockholders' Equity
|
|
Balance, February 28,
2019
|
33,805,706
|
$
3,381
|
1
|
$
-
|
$
38,966,208
|
$
757,704
|
$
1,200,915
|
$
800,000
|
$
(38,811,592
)
|
$
(290,224
)
|
$
2,626,392
|
|
Issuance of common shares for cash,
net of share issuance costs (Note 12)
|
4,693,567
|
469
|
-
|
-
|
30,359,394
|
8,663,769
|
-
|
-
|
-
|
-
|
39,023,632
|
|
Issuance of shares for legal
settlement
|
150,000
|
15
|
-
|
-
|
(15
)
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Issuance of shares upon conversion
of Convertible notes
|
319,326
|
32
|
-
|
-
|
2,372,549
|
316,929
|
-
|
-
|
-
|
-
|
2,689,510
|
|
Issuance of shares upon the vesting
of restricted stock units (Notes 12 and 14)
|
243,932
|
24
|
|
-
|
799,976
|
|
|
(800,000
)
|
|
|
-
|
|
Issuance of shares upon the
cashless exercise of stock options (Note 14)
|
4,565
|
1
|
|
|
(1
)
|
|
|
|
|
|
-
|
|
Issuance of shares upon exercise of
warrants
|
15,432
|
1
|
|
|
182,048
|
(38,300
)
|
|
|
|
|
143,749
|
|
Stock options granted for services
(Note 14)
|
-
|
-
|
-
|
-
|
1,628,897
|
-
|
-
|
-
|
-
|
-
|
1,628,897
|
|
Restricted stock units granted for
services (Note 14)
|
-
|
-
|
-
|
-
|
981,914
|
-
|
-
|
-
|
-
|
-
|
981,914
|
|
Foreign currency
translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(30,133
)
|
(30,133
)
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,747,492
)
|
-
|
(10,747,492
)
|
|
Balance,
November 30, 2019
|
39,232,528
|
$
3,923
|
1
|
$
-
|
$
75,290,970
|
$
9,700,102
|
$
1,200,915
|
-
|
$
(49,559,084
)
|
$
(320,357
)
|
$
36,316,469
|
See accompanying notes to the condensed consolidated financial
statements.
F-6
Loop Industries, Inc.
C
ondensed Consolidated Statements of
Cash Flows
(Unaudited)
|
|
Nine Months
Ended November 30
|
|
|
|
2020
|
2019
|
|
Cash Flows from Operating Activities
|
|
|
|
Net
loss
|
$
(23,151,431
)
|
$
(10,747,492
)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation and
amortization (Notes 5 and 6)
|
654,354
|
562,382
|
|
Stock-based
compensation expense (Note 14)
|
2,774,749
|
2,610,811
|
|
Write-down and
impairment of property, plant and equipment (Note 5)
|
5,043,120
|
22,985
|
|
Accretion and
accrued interest (Note 10)
|
56,259
|
1,898,409
|
|
Loss on
revaluation of warrants
|
-
|
8,483
|
|
Deferred financing
costs
|
-
|
86,212
|
|
Gain on conversion
of convertible notes
|
-
|
(232,565
)
|
|
Loss (gain) on
revaluation of foreign exchange contracts
|
(58,945
)
|
10,881
|
|
Changes in
operating assets and liabilities:
|
|
|
|
Sales tax, tax
credits and other receivables (Note 3)
|
(477,855
)
|
(37,536
)
|
|
Prepaid expenses
(Note 4)
|
(1,075,291
)
|
52,649
|
|
Accounts payable
and accrued liabilities (Note 8)
|
1,690,789
|
(1,054,967
)
|
|
Net cash used in
operating activities
|
(14,544,251
)
|
(6,819,748
)
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
Investment in
joint venture (Note 9)
|
(650,000
)
|
(850,000
)
|
|
Additions to
property, plant and equipment (Note 5)
|
(1,580,795
)
|
(1,647,433
)
|
|
Additions to
intangible assets (Note 6)
|
(155,798
)
|
(95,488
)
|
|
Net cash used in
investing activities
|
(2,386,593
)
|
(2,592,921
)
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
Proceeds from sale
of common shares and exercise of warrants, net of share issuance
costs (Note 12)
|
26,649,253
|
39,167,381
|
|
Repayment of
long-term debt (Note 10)
|
(32,781
)
|
(39,506
)
|
|
Net cash provided
from financing activities
|
26,616,472
|
39,127,875
|
|
|
|
|
|
Effect of exchange
rate changes
|
210,516
|
(57,105
)
|
|
Net change in cash
and cash equivalents
|
9,896,144
|
29,658,101
|
|
Cash and cash
equivalents, beginning of period
|
33,717,671
|
5,833,390
|
|
Cash and cash
equivalents, end of period
|
$
43,613,815
|
$
35,491,491
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
Income tax
paid
|
$
-
|
$
-
|
|
Interest
paid
|
$
28,613
|
$
45,668
|
|
Interest
received
|
$
78,394
|
$
363,565
|
See accompanying notes to the condensed consolidated financial
statements.
F-7
Loop Industries, Inc.
Three and Nine Months Ended November 30, 2020 and 2019
N
otes to the Condensed Consolidated
Financial Statements
(Unaudited)
1. The Company and Basis of Presentation
The Company
Loop
Industries, Inc.
(the
“Company,” “Loop Industries,”
“we,” or “our”) is a technology company
that owns patented and proprietary technology that depolymerizes no
and low-value waste PET plastic and polyester fiber to its base
building blocks (monomers). The monomers are filtered,
purified and polymerized to create virgin-quality Loop™
branded PET resin suitable for use in food-grade packaging and
polyester fiber.
On
November 20, 2017, Loop Industries commenced trading on the NASDAQ
Global Market under its new trading symbol, “LOOP.”
From April 10, 2017 to November 19, 2017, our common
stock was quoted on the OTCQX tier of the OTC Markets
Group Inc. under the symbol “LLPP.”
Basis of presentation
The
accompanying unaudited interim condensed consolidated financial
statements have been prepared in conformity with generally accepted
accounting principles in the United States of America (“US
GAAP”) and applicable rules and regulations of the U.S.
Securities and Exchange Commission (“SEC”) regarding
interim financial reporting. Certain information and note
disclosures included in these unaudited interim condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes included in
the Company’s Annual Report on Form 10-K for the fiscal year
ended February 29, 2020, filed with the SEC on May 5, 2020. The
unaudited interim condensed consolidated financial statements
comprise the consolidated financial position and results of
operations of Loop Industries, Inc. and its subsidiaries, Loop
Innovations, LLC and Loop Canada Inc. All subsidiaries are, either
directly or indirectly, wholly owned subsidiaries of Loop
Industries, Inc. (collectively, the “Company”). The
Company also owns, through Loop Innovations, LLC, a 50% interest in
a joint venture, Indorama Loop Technologies, LLC, which is
accounted for under the equity method.
Intercompany
balances and transactions are eliminated on consolidation. The
condensed consolidated balance sheet as of February 29, 2020,
included herein, was derived from the audited financial statements
as of that date, but does not include all disclosures including
certain notes required by GAAP on an annual reporting basis. In the
opinion of management, the accompanying unaudited interim condensed
consolidated financial statements present fairly the financial
position, results of operations, comprehensive loss and cash flows
for the interim periods. The results for the three- and nine-month
periods ended November 30, 2020 are not necessarily indicative of
the results to be expected for any subsequent quarter, the fiscal
year ending February 28, 2021, or any other period.
2. Summary of Significant Accounting Policies
Use of estimates
The
preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
Those estimates and assumptions include estimates for depreciable
lives of property, plant and equipment, intangible assets, analysis
of impairments of long-lived assets and intangible assets, accruals
for potential liabilities and assumptions made in calculating the
fair value of stock-based compensation and other equity
instruments.
The
COVID-19 pandemic has disrupted business operations for us and our
customers, suppliers, vendors and other parties with whom we do
business, and such disruptions are expected to continue for an
indefinite period of time. The uncertain duration of these measures
has had and may continue to have an effect on our development and
commercialization efforts. In particular, as previously disclosed,
the situation in the United States and the continued travel
restrictions and quarantine requirements between Canada and the
United States have caused disruptions in our timetable of our joint
venture with Indorama in the development of our Spartanburg
facility and commercialization of our technology.
Although
the Company continues to monitor the situation and may adjust the
Company’s current policies as more information and public
health guidance become available, the COVID-19 pandemic is ongoing,
and its dynamic nature, including uncertainties relating to the
ultimate spread of the virus, the severity of the disease, the
duration of the outbreak and actions that may be taken by
governmental authorities to contain the outbreak or to treat its
impact, makes it difficult to assess whether there will be further
impact on the development and commercialization of the
Company’s technology which could have a material adverse
effect on the Company’s results of operations and cash
flows.
F-8
Foreign currency translations and transactions
The
accompanying unaudited condensed consolidated financial statements
are presented in U.S. dollars, the reporting currency of the
Company. Assets and liabilities of subsidiaries that have a
functional currency other than that of the Company are translated
to U.S. dollars at the exchange rate as at the balance sheet date.
Income and expenses are translated at the average exchange rate of
the period. The resulting translation adjustments are included in
other comprehensive income (loss) (“OCI”). As a result,
foreign currency exchange fluctuations may impact operating
expenses. The Company currently has not engaged in any currency
hedging activities.
For
transactions and balances, monetary assets and liabilities
denominated in foreign currencies are translated into the
functional currency of the entity at the prevailing exchange rate
at the reporting date. Non-monetary assets and liabilities, and
revenue and expense items denominated in foreign currencies are
translated into the functional currency using the exchange rate
prevailing at the dates of the respective transactions. Foreign
exchange gains and losses resulting from the settlement of such
transactions are recognized in the consolidated statements of
operations and comprehensive loss, except for gains or losses
arising from the translation of intercompany balances denominated
in foreign currencies that forms part in the net investment in the
subsidiary which are included in OCI.
Stock-based compensation
The
Company periodically issues stock options, warrants and restricted
stock units to employees and non-employees in non-capital raising
transactions for services and financing expenses. The Company
accounts for stock options granted to employees based on the
authoritative guidance provided by the FASB wherein the fair value
of the award is measured on the grant date and where there are no
performance conditions, recognized as compensation expense on the
straight-line basis over the vesting period and where performance
conditions exist, recognize compensation expense when it becomes
probable that the performance condition will be met. Forfeitures on
share-based payments are accounted for by recognizing forfeitures
as they occur.
The
Company accounts for stock options and warrants granted to
non-employees in accordance with the authoritative guidance of the
FASB wherein the fair value of the stock compensation is based upon
the measurement date determined as the earlier of the date at which
either a) a commitment is reached with the counterparty
for performance or b) the counterparty completes its
performance.
The
Company estimates the fair value of restricted stock unit awards to
employees and directors based on the closing market price of its
common stock on the date of grant.
The
fair value of the stock options granted are estimated using the
Black-Scholes-Merton Option Pricing (“Black-Scholes”)
model, which uses certain assumptions related to risk-free interest
rates, expected volatility, expected life of the stock options, and
future dividends. Stock-based compensation expense is recorded
based on the value derived from the Black-Scholes model and on
actual experience. The assumptions used in the Black-Scholes model
could materially affect stock-based compensation expense recorded
in the current and future periods.
Income taxes
The
Company calculates its provision for income tax on the basis of the
tax laws enacted at the balance sheet date in the countries where
the Company and its subsidiaries operate and generate taxable
income, in accordance with FASB ASC 740,
Income Taxes
. The Company uses an asset
and liability approach for financial accounting and reporting for
income taxes that allows recognition and measurement of deferred
tax assets based upon the likelihood of realization of tax benefits
in future years. Under the asset and liability approach, deferred
taxes are provided for the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. A valuation allowance is provided for deferred tax assets
if it is more likely than not these items will either expire before
the Company is able to realize their benefits, or that future
deductibility is uncertain. The Company’s policy is to
recognize interest and/or penalties related to income tax matters
in income tax expense.
Research and development expenses
Research
and development expenses relate primarily to the development,
design, testing of preproduction samples, prototypes and models,
compensation, and consulting fees, and are expensed as incurred.
Starting in the current quarter, machinery and equipment purchases
related to the pilot plant which is now dedicated solely to
research and development activities with no alternative use are
also expensed as incurred. Total research and development costs
recorded during the three- and nine-month periods ended November
30, 2020 amounted to $6,724,283 and $10,504,093 (2019 –
$1,278,172 and $3,246,246), respectively, and are net of government
research and development tax credits and government grants from the
federal and provincial taxation authorities accrued and recorded
based on qualifying expenditures incurred during the fiscal
periods.
Net earnings (loss) per share
The
Company computes net loss per share in accordance with FASB ASC
260,
Earnings Per Share
.
Basic earnings (loss) per share is computed by dividing the net
income (loss) applicable to common stockholders by the weighted
average number of shares of common stock outstanding during the
year. The Company includes common stock issuable in its
calculation. Diluted earnings (loss) per share is computed by
dividing the net income (loss) applicable to common stockholders by
the weighted average number of common shares outstanding plus the
number of additional common shares that would have been outstanding
if all dilutive potential common shares had been issued, using the
treasury stock method. Potential common shares are excluded from
the computation if their effect is antidilutive.
F-9
For the
three- and nine-month periods ended November 30, 2020 and 2019, the
calculations of basic and diluted loss per share are the same
because potential dilutive securities would have an antidilutive
effect. As at November 30, 2020, the potentially dilutive
securities consisted of 1,590,470 outstanding stock options
(November 30, 2019 – 1,657,081), 4,171,609 outstanding
restricted stock units (November 30, 2019 – 4,219,753) and
4,693,802 outstanding warrants (November 30, 2019 –
5,040,267).
Recently adopted accounting pronouncements
In
August 2018, the FASB issued ASU 2018-15, “Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement that Is a Service Contract,” which aligns the
requirements for capitalizing implementation costs incurred in a
hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to
develop or obtain internal-use software (and hosting arrangements
that include an internal-use software license). This update is
effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. The adoption
of the standard had no impact on the consolidated financial
statements of the Company.
In
February 2018, the FASB issued ASU 2018-02,
Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income
, which permits
entities to reclassify the disproportionate income tax effects of
the Tax Reform Act on items within accumulated other comprehensive
income (loss) (“AOCI”) to retained earnings. These
disproportionate income tax effect items are referred to as
"stranded tax effects." Amendments in this update only relate to
the reclassification of the income tax effects of the Tax Reform
Act. Other accounting guidance that requires the effect of changes
in tax laws or rates to be included in net income from continuing
operations is not affected by this update. ASU 2018-02 should be
applied either in the period of adoption or retrospectively to each
period in which the effect of the change in the U.S. federal
corporate income tax rate in the Tax Reform Act is recognized. ASU
2018-02 is applicable beginning March 1, 2020. The adoption of the
standard had no impact on the consolidated financial statements of
the Company.
In
February 2016, the FASB issued ASU 2016-02, “Leases,”
amended in July by ASU 2018-10, “Codification Improvements to
Topic 842, Leases,” ASU 2018-11, “Targeted
Improvements,” and ASU 2018-20, “Narrow-Scope
Improvements for Lessors,” which requires lessees to
recognize leases on the balance sheet while continuing to recognize
expenses in the income statement in a manner similar to current
accounting standards. For lessors, the new standard modifies the
classification criteria and the accounting for sales-type and
direct financing leases. Enhanced disclosures will also be required
to give financial statement users the ability to assess the amount,
timing, and uncertainty of cash flows arising from leases. This ASU
may either be adopted on a modified retrospective approach at the
beginning of the earliest comparative period, or through a
cumulative-effect adjustment at the adoption date. This update is
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. The Company
adopted these standards effective March 1, 2020. The adoption of
the standard had no impact on the consolidated financial statements
of the Company. The Company elected to apply the package of
practical expedients that allows us not to reassess whether expired
or existing contracts contain leases, the classification of these
leases and whether previously capitalized initial direct costs
would qualify for capitalization under Accounting Standards
Codification (or “
ASC
”) 842. Furthermore, we
elected to use hindsight in determining the lease term and
assessing impairment of the right-of-use assets.
Recently issued accounting pronouncements not yet
adopted
In
December 2019, the FASB issued ASU 2019-12, “Simplifying the
Accounting for Income Taxes,” which removes specific
exceptions to the general principles in ASC 740, “Income
Taxes,” and clarifies certain aspects of the existing
guidance. This update is effective for fiscal years beginning after
December 15, 2020, including interim periods within those fiscal
years, with early adoption being permitted as of the beginning of
an interim or annual reporting period. All amendments to this ASU
must be adopted in the same period on a prospective basis, with
certain exceptions. We are still evaluating the impact of this
accounting guidance on our results of operations and financial
position.
In June
2016, the FASB issued ASU 2016-13, “Financial
Instruments—Credit Losses”. This ASU added a new
impairment model (known as the current expected credit loss
(“CECL”) model) that is based on expected losses rather
than incurred losses. Under the new guidance, an entity recognizes
an allowance for its estimate of expected credit losses and applies
to most debt instruments, trade receivables, lease receivables,
financial guarantee contracts, and other loan commitments. The CECL
model does not have a minimum threshold for recognition of
impairment losses and entities will need to measure expected credit
losses on assets that have a low risk of loss. This update is
effective for fiscal years beginning after December 15, 2022,
including interim periods within those fiscal years for smaller
reporting companies. We are still evaluating the impact of this
accounting guidance on our results of operations and financial
position.
3. Sales Tax, Tax Credits and Other Receivables
Sales
tax, research and development tax credits and other receivables as
at November 30, 2020 and February 29, 2020 were as
follows:
|
|
November 30,
2020
|
February 29,
2020
|
|
Sales
tax
|
$
669,966
|
$
180 971
|
|
Research and
development tax credits
|
390,885
|
447,843
|
|
Other
receivables
|
121,256
|
35,730
|
|
|
$
1,182,107
|
$
664,544
|
F-10
4. Prepaid Expenses and Deposits
Prepaid
expenses and deposits as at November 30, 2020 and February 29, 2020
were as follows:
|
|
November 30,
2020
|
February 29,
2020
|
|
Deposits on
machinery and equipment
|
$
747,250
|
$
-
|
|
Insurance
|
427,013
|
61,891
|
|
Other prepaid
expenses
|
56,179
|
79,335
|
|
|
$
1,230,442
|
$
141,226
|
Non-refundable
cash deposits on machinery and equipment that will be used in
research and development activities will be expensed, and
classified as research and development expenses, in the period the
equipment is received and placed into use.
5. Property, Plant and Equipment
|
|
As at November
30, 2020
|
||
|
|
Cost
|
Accumulated
depreciation, write-down and impairment
|
Net book
value
|
|
Building
|
$
1,912,138
|
$
(181,308
)
|
$
1,730,830
|
|
Land
|
236,360
|
-
|
236,360
|
|
Building and land
improvements
|
1,602,766
|
(379,164
)
|
1,223,602
|
|
Machinery and
equipment
|
6,514,252
|
(6,514,252
)
|
-
|
|
Office equipment
and furniture
|
260,220
|
(95,602
)
|
164,618
|
|
Balances, end of
period
|
$
10,525,736
|
$
(7,170,326
)
|
$
3,355,410
|
|
|
As at February 29,
2020
|
||
|
|
Cost
|
Accumulated
depreciation, write-down and impairment
|
Net book
value
|
|
Building
|
$
1,846,070
|
$
(128,911
)
|
$
1,717,159
|
|
Land
|
264,868
|
-
|
264,868
|
|
Building and land
improvements
|
733,884
|
(214,068
)
|
519,816
|
|
Machinery and
equipment
|
6,085,195
|
(1,426,465
)
|
4,658,730
|
|
Office equipment
and furniture
|
162,466
|
(62,785
)
|
99,681
|
|
Balances, end of
period
|
$
9,092,483
|
$
(1,832,229
)
|
$
7,260,254
|
Depreciation
expense for the three- and nine-month periods ended November 30,
2020 amounted to $93,006 and $624,189, respectively (2019 –
$212,968 and $570,165, respectively), and is recorded as an expense
in the consolidated statements of operations and comprehensive
loss.
During
the three- and nine-month periods ended November 30, 2020, the
Company recorded write-down and impairment expenses of $5,034,606
and 5,043,120, respectively (2019 – nil and $22,985). In the
quarter ended November 30, 2020, the Company’s management
made the decision to convert its pilot plant to exclusively a
demonstration and training facility for our future Infinite
Loop™ manufacturing facilities, therefore foregoing any
alternative future use of its machinery and equipment assets
contained within the pilot plant. As such, the carrying value of
the machinery and equipment was written off resulting in an expense
of $5,034,606 being recognized in the three-month period ended
November 30, 2020. With the decision to dedicate the demonstration
and training facility to research and development, the accounting
for future costs associated with these activities are considered in
scope of ASC 730, Research and Development Costs, and will be
recognized as a research and development expense in the
consolidated statements of operations and comprehensive loss in the
period they are incurred. During the three-month period ended
November 30, 2020, the Company purchased $2,325,540 of machinery
and equipment associated with its ongoing research and development
activities, which have no future alternative use and as such, were
recognized as research and development expenses in the consolidated
statements of operations and comprehensive loss. See Note 13 for
components of research and development expenses.
F-11
6. Intangible Assets
|
|
November 30,
2020
|
February 29,
2020
|
|
|
|
|
|
Intangible assets,
at cost - beginning of period
|
$
225,174
|
$
127,672
|
|
Intangible assets,
accumulated depreciation – beginning of period
|
(22,311
)
|
-
|
|
|
202,863
|
127,672
|
|
|
|
|
|
Additions in the
period
|
452,758
|
99,972
|
|
Amortization of
intangibles
|
(30,165
)
|
(22,631
)
|
|
Foreign exchange
effect – increase (decrease)
|
6,133
|
(2,150
)
|
|
|
$
631,589
|
$
202,863
|
Amortization
expense for the three- and nine-month periods ended November 30,
2020 amounted to $11,301 and $30,165, respectively (2019 - $6,660
and $15,202, respectively), and is recorded as an expense in the
unaudited condensed consolidated statements of operations and
comprehensive loss.
7. Fair value of financial instruments
The
following tables present the fair value of the Company’s
financial (assets) liabilities as at November 30, 2020 and February
29, 2020:
|
|
Fair Value
Measurements as at November 30, 2020
|
||
|
|
Carrying Amount
|
Fair Value
|
Level in the
hierarchy
|
|
Instruments
measured at fair value on a recurring basis:
|
|
|
|
|
Foreign exchange
contracts
|
$
(25,797
)
|
$
(25,797
)
|
Level
2
|
|
|
|
|
|
|
Instruments
measured at amortized cost:
|
|
|
|
|
Long-term
debt
|
$
2,390,366
|
$
2,400,897
|
Level
2
|
|
|
Fair Value
Measurements at February 29, 2020
|
||
|
|
Carrying Amount
|
Fair Value
|
Level in the
hierarchy
|
|
Instruments
measured at fair value on a recurring basis:
|
|
|
|
|
Foreign exchange
contracts
|
$
26,840
|
$
26,840
|
Level
2
|
|
|
|
|
|
|
Instruments
measured at amortized cost:
|
|
|
|
|
Long-term
debt
|
$
2,290,152
|
$
2,291,109
|
Level
2
|
8.
Accounts Payable and
Accrued Liabilities
Accounts
payable and accrued liabilities as at November 30, 2020 and
February 29, 2020 were as follows:
|
|
November 30,
2020
|
February 29,
2020
|
|
Trade accounts
payable
|
$
1,514,881
|
$
814,081
|
|
Accrued engineering
fees
|
686,061
|
-
|
|
Accrued employee
compensation and payroll taxes
|
678,925
|
873,242
|
|
Accrued
professional fees
|
676,153
|
133,038
|
|
Accrued cost of
machinery and equipment
|
415,522
|
92,126
|
|
Other accrued
liabilities
|
116,605
|
170,211
|
|
|
$
4,088,147
|
$
2,082,698
|
9. Joint Venture
On
September 15, 2018, the Company, through its wholly-owned
subsidiary Loop Innovations, LLC, a Delaware limited liability
company, entered into a Joint Venture Agreement (the “Joint
Venture Agreement”) with Indorama Ventures Holdings LP, USA,
an indirect subsidiary of Indorama Ventures Public Company Limited,
to manufacture and commercialize sustainable polyester resin. Each
company has a 50/50 equity interest in Indorama Loop Technologies,
LLC (“ILT”), which was specifically formed to operate
and execute the joint venture.
F-12
Under
the Joint Venture Agreement, Indorama Ventures is contributing
manufacturing knowledge and Loop Industries is required to
contribute its proprietary science and technology. Specifically,
the Company is contributing an exclusive world-wide royalty-free
license to ILT to use its proprietary technology to produce 100%
sustainably produced PET resin and polyester fiber.
ILT
meets the accounting definition of a joint venture where neither
party has control of the joint venture entity and both parties
have joint control over the decision-making process in ILT. As
such, the Company uses the equity method of accounting to account
for its share of the investment in ILT. There were no operations in
ILT from the date of inception of September 24, 2018 to November
30, 2020 and, as at November 30, 2020, the carrying value of the
equity investment was $1,500,000, which is the total of the cash
contributions we have made to ILT. During the three- and nine-month
periods ended November 30, 2020, we made contributions to ILT of
nil and $650,000 respectively (2019 – $350,000 and $850,000).
These contributions to ILT, which have been matched by Indorama
Ventures, were used to fund engineering design costs which have
been capitalized in ILT.
The joint venture made a decision in July that due to the COVID-19
situation it would delay work on the project. Since then, no
expenditures have been incurred by the joint
venture.
10. Long-Term Debt
|
|
November 30,
2020
|
February 29,
2020
|
|
Investissement
Québec financing facility:
|
|
|
|
Principal
amount
|
$
1,703,998
|
$
1,645,122
|
|
Unamortized
discount
|
(272,036
)
|
(289,852
)
|
|
Accrued
interest
|
31,549
|
958
|
|
Total
Investissement Québec financing facility
|
1,463,511
|
1,356,228
|
|
Term
loan
|
|
|
|
Principal
amount
|
926,855
|
933,924
|
|
Less: current
portion
|
(53,992
)
|
(52,126
)
|
|
Total term loan,
net of current portion
|
872,863
|
881,798
|
|
Long-term debt, net
of current portion
|
$
2,336,374
|
$
2,238,026
|
Investissement Québec financing facility
On
February 21, 2020, the Company received $1,703,998 (CDN$2,209,234)
from Investissement Québec as the first disbursement of our
financing facility, out of a maximum of $3,548,014 (CDN$4,600,000)
(the “Financing Facility”). The loan bears interest at
2.36% and there is a 36-month moratorium on both capital and
interest repayments starting on the date of the first disbursement,
after which capital and interest is repayable in 84 monthly
installments.
The Company
established the fair value of the loan for the first disbursement
at $1,354,408 based on a discount rate of 5.45%, which reflected a
debt discount of $290,714. The discount rate used was based on the
external financing from a Canadian bank.
The Company, under the loan
agreement, was required to pay fees representing 1% of the loan
amount, $35,480 (CDN$46,000) to Investissment Québec which we
deferred and recorded as a reduction of the Financing Facility.
Debt discount and deferred financing expenses are amortized to
“Interest and other financial expenses” in
our
Consolidated
Statements of Operations and Comprehensive Loss.
The Company recorded interest
expense on the Investissement Québec loan for the three- and
nine-month periods ended November 30, 2020 in the amount of $10,003
and $28,816 respectively (2019 – nil and nil) and an
accretion expense of $9,387 and $27,045 respectively (2019 –
nil and nil).
The
Company has also agreed to issue to Investissement Québec
warrants to purchase shares of common stock of the Company in an
amount equal to 10% of each disbursement up to a maximum aggregate
amount of $354,801 (CDN$460,000). The exercise price of the
warrants is equal to the higher of (i) $11.00 per share and (ii)
the ten-day weighted average closing price of Loop Industries
shares of common stock on the Nasdaq stock market for the 10 days
prior to the issue of the warrants. The warrants can be exercised
immediately upon grant and will have a term of three years from the
date of issuance. The loan can be repaid at any time by the Company
without penalty. In connection the first disbursement of the
Financing Facility, the Company issued a warrant (“First
Disbursement Warrant”) to acquire 15,153 shares of common
stock at a strike price of $11.00 per share to Investissement
Québec. The Company determined the fair value of the warrants
using the Black-Scholes pricing formula. The fair value of the
First Disbursement Warrant was determined to be $77,954 and is
included in “Additional paid-in capital –
Warrants” in our Condensed Consolidated Balance Sheets. The
First Disbursement Warrant remains outstanding as at November 30,
2020.
The
remaining amount available under the financing facility is
$1,844,015 (CDN$2,390,766) to be received in a maximum of two
additional disbursements.
Term loan
On
January 24, 2018, the Company obtained a $1,079,830 (CDN$1,400,000)
20-year term instalment loan (the “Loan”), from a
Canadian bank. The Loan bears interest at the bank’s Canadian
prime rate plus 1.5%. By agreement, the Loan is repayable in
monthly payments of $4,499 (CDN$5,833) plus interest, until January
2021, at which time the monthly repayment amount and interest rate
will be subject to renewal. It includes an option allowing for the
prepayment of the Loan without penalty. In January 2021, the
Company and the Canadian bank agreed to maintain the same repayment
amount and interest rate until January 2022. During the three- and
nine-month periods ended November 30, 2020, we repaid $13,497 and
$32,781 respectively (2019 – $13,168 and $39,506) on the
principal balance of the Loan and interest paid amounted to $9,172
and $29,102 and (2019 - $14,778 and $41,840). The terms of the
credit facility require the Company to comply with certain
financial covenants. As at November 30, 2020 and 2019, the Company
was in compliance with its financial covenants.
F-13
Principal
repayments due on the Company’s long-term debt over the next
five years are as follows:
|
Years
ending
|
Amount
|
|
February 28,
2021
|
$
13,498
|
|
February 28,
2022
|
53,992
|
|
February 28,
2023
|
53,992
|
|
February 29,
2024
|
297,416
|
|
February 28,
2025
|
297,416
|
|
Thereafter
|
1,901,043
|
|
Total
|
$
2,617,355
|
11.
Related
Party Transactions
Employment Agreement
On June
29, 2015, the Company entered into an employment agreement with Mr.
Daniel Solomita, the Company’s President and Chief Executive
Officer (“CEO”). The employment agreement is for an
indefinite term.
On July
13, 2018, the Company and Mr. Solomita entered into an amendment
and restatement of the employment agreement which provided for a
long-term incentive grant of 4,000,000 shares of the
Company’s common stock, in tranches of one million shares
each, upon the achievement of four performance milestones. This was
modified to provide a grant of 4,000,000 restricted stock units
(“RSUs”) covering 4,000,000 shares of the
Company’s common stock while the performance milestones
remained the same. The grant of the restricted stock units became
effective upon approval by the Company’s shareholders at the
Company’s 2019 annual meeting, of an increase in the number
of shares available for grant under the Plan. Such approval
was granted by the Company’s shareholders at the
Company’s 2019 annual meeting.
On
April 30, 2020, the Company and Mr. Solomita entered into an
amendment of Mr. Solomita’s employment
agreement. The amendment clarified the milestones
consistent with the shift in the Company’s business from the
production of terephthalate to the production of dimethyl
terephthalate, another proven monomer of PET plastic.
As at
November 30, 2020, 3,600,000 (2019 – 3,800,000) of Mr.
Solomita’s RSUs were outstanding of which 600,000 were vested
(2019 – 800,000). The vested units are settled annually in
tranches of 200,000 units. During the three- and nine-month periods
ended November 30, 2020 and November 30, 2019, no outstanding
milestones were probable of being met
based on the authoritative guidance
provided by the FASB and, accordingly, the Company did not record
any additional compensation expense. When a milestone becomes
probable, the corresponding expense will be valued based on the
grant date fair value on April 30, 2020, the date of the last
modification of Mr. Solomita’s employment agreement. The
closing price of the Company’s common stock on the Nasdaq on
April 30, 2020 was $7.74 per share.
12. Stockholders’ Equity
Common Stock
|
For
the period ended November 30, 2020
|
Number of
shares
|
Amount
|
|
Balance, February
29, 2020
|
39,910,774
|
$
3,992
|
|
Issuance of shares
for cash
|
2,087,000
|
209
|
|
Issuance of shares
upon the exercise of warrants
|
190,529
|
19
|
|
Issuance of shares
upon settlement of restricted stock units
|
224,436
|
22
|
|
Balance, November
30, 2020
|
42,412,739
|
$
4,242
|
|
For
the period ended November 30, 2019
|
Number of
shares
|
Amount
|
|
Balance, February
28, 2019
|
33,805,706
|
$
3,381
|
|
Issuance of shares
for cash
|
4,693,567
|
469
|
|
Issuance of shares
upon vesting of restricted stock units
|
243,932
|
24
|
|
Issuance of shares
upon the cashless exercise of stock options
|
4,565
|
1
|
|
Issuance of shares
upon the exercise of warrants
|
15,432
|
1
|
|
Issuance of shares
upon settlement of legal matter
|
150,000
|
15
|
|
Issuance of shares
upon conversion of Convertible notes
|
319,326
|
32
|
|
Balance, November
30, 2019
|
39,232,528
|
$
3,923
|
F-14
During
the nine months ended November 30, 2020, the Company recorded the
following common stock transaction:
|
(i)
|
On
September 23, 2020 and October 1, 2020, the Company sold 1,880,000
and 207,000 shares, respectively of its common stock at an offering
price of $12.75 per share in a registered direct offering, for
total gross proceeds of $26,609,250.
|
|
(ii)
|
The
company issued 192,529 shares of its common stock upon the exercise
of warrants.
|
|
(iii)
|
On
October 15, 2020, the Company issued 200,000 shares of common stock
to settle restricted stock units related to the President and Chief
Executive Officer.
|
|
(iv)
|
The
Company issued 24,436 shares of its common stock to settle
restricted stock units that vested in the period.
|
During
the nine months ended November 30, 2019, the Company recorded the
following common stock transactions:
|
(i)
|
On
March 1, 2019, the Company sold 600,000 shares of its common stock
at an offering price of $8.55 per share in a registered direct
offering, for gross proceeds of $5,130,000.
|
|
(ii)
|
On
March 8, 2019 and March 11, 2019, the Company issued 150,000 shares
of its common stock in settlement of a legal matter.
|
|
(iii)
|
On
April 9, 2019, the Company converted Convertible notes with a face
value of $2,650,000 plus accrued interest of $80,241 at a
conversion price of $8.55, into 319,326 common shares.
|
|
(iv)
|
On June
14, 2019, the Company sold 4,093,567 shares of its common stock at
an offering price of $8.55 per share in a registered direct
offering, for gross proceeds of $35,000,000.
|
|
(v)
|
On June
21, 2019, the Company issued 7,043 shares of common stock upon the
vesting of restricted stock units related to an
employee.
|
|
(vi)
|
On July
2, 2019 and July 3, 2019, the Company issued 23,547 shares of
common stock upon the vesting of restricted stock units related to
current and former Directors.
|
|
(vii)
|
On July
12, 2019, the Company issued 4,565 shares of common stock upon the
cashless exercise of stock options related to an
employee.
|
|
(viii)
|
On July
15, 2019, the Company issued 13,342 shares of common stock upon the
vesting of restricted stock units related to a former
Director.
|
|
(ix)
|
On July
17, 2019, the Company issued 15,432 shares of common stock upon the
exercise of warrants.
|
|
(x)
|
On
October 15, 2019, the Company issued 200,000 shares of common stock
to settle restricted stock units related to the President and Chief
Executive Officer.
|
13. Research and development expenses
Research
and development expenses for the three months ended November 30,
2020 and 2019 were as follows:
|
|
November 30,
2020
|
November 30,
2019
|
|
External
engineering
|
$
2,224,910
|
$
33,131
|
|
Machinery and
equipment expenditures
|
2,325,540
|
-
|
|
Employee
compensation
|
1,214,434
|
973,679
|
|
Pilot plant
operating expenses
|
399,031
|
166,753
|
|
Other
|
110,368
|
104,610
|
|
|
$
6,274,283
|
$
1,278,173
|
Research
and development expenses for the nine months ended November 30,
2020 and 2019 were as follows:
|
|
November 30,
2020
|
November 30,
2019
|
|
External
engineering
|
$
3,241,959
|
$
83,462
|
|
Employee
compensation
|
3,094,151
|
2,453,743
|
|
Machinery and
equipment expenditures
|
2,325,540
|
-
|
|
Pilot plant
operating expenses
|
1,537,271
|
456,942
|
|
Other
|
305,172
|
252,099
|
|
|
$
10,504,093
|
$
3,246,246
|
14. Share-based Payments
Stock Options
During
the three- and nine-month period ended November 30, 2020, the
Company granted 3,389 stock options (2019 – nil) with a
weighted average exercise price of $8.78 (2019 – nil), no
stock options were forfeited (2019 – 39,902; weighted average
exercise price: $9.67) or exercised (2019 – 5,000; weighted
average exercise price: $0.80) and no stock options expired (2019
– 260,417; weighted average exercise price:
$13.59).
F-15
The
Company applies the fair value method of accounting for stock-based
compensation awards granted. Fair value is calculated based on a
Black-Scholes option pricing model. The principal components of the
pricing model were as follows:
|
|
2020
|
2019
|
|
Exercise
price
|
$
8.78
|
$
-
|
|
Risk-free interest
rate
|
1.05
%
|
-
|
|
Expected dividend
yield
|
0.00
%
|
-
|
|
Expected
volatility
|
75.95
%
|
-
|
|
Expected
life
|
7.5
years
|
-
|
The
total number of stock options outstanding as at November 30, 2020
was 1,587,081 (2019 – 1,657,081) with a weighted average
exercise price of $6.81 (2019 - $6.55), of which 1,132,498 were
exercisable (2019 – 1,007,498) with a weighted average
exercise price of $7.12 (2019 – $6.38).
During
the three- and nine-month periods ended November 30, 2020,
stock-based compensation expense attributable to stock options
amounted to $551,720 and $1,662,155 respectively (2019 - to
$549,810 and $1,628,897) and is included in expenses.
Restricted Stock Units
The
Company applies the fair value method of accounting for awards
granted through the issuance of restricted stock units. Fair value
is calculated based on the closing share price at grant date
multiplied by the number of restricted stock unit awards
granted.
During
the three-month period ended November 30, 2020, the Company granted
57,859 restricted stock units (“RSUs”) (2019 –
nil) with a weighted average fair value of $12.96 (2019 –
nil), settled 200,000 RSUs (2019 – 200,000) with a weighted
average fair value of $0.80 (2019 – $0.80) and no RSUs were
forfeited (2019 – nil).
During
the nine-month period ended November 30, 2020, the Company granted
180,232 RSUs (2019 – 4,114,567) with a weighted average fair
value of $10.18 (2019 – $1.06), settled 224,436 RSUs (2019
– 243,932) with a weighted average fair value of $1.78 (2019
– 2.52) and 2,989 RSUs were forfeited (2019 – 53,750)
with a weighted average fair value of $8.78 (2019 –
$9.82).
The
total number of RSUs outstanding as at November 30, 2020 was
4,171,609 (2019 – 4,219,753), of which 691,327 were vested
(2019 – 831,684).
During
the three- and nine-month periods ended November 30, 2020,
stock-based compensation expense attributable to RSUs amounted to
$345,274 and $1,028,152 respectively (2019 - $326,983 and $981,914)
and is included in expenses.
During
the three- and nine-month periods ended November 30, 2020 and
November 30, 2019, stock-based compensation included in research
and development expenses amounted to $350,393 and $1,054,682
respectively (2019 – $311,353 and $941,142), and in general
and administrative expenses amounted to $546,601 and $1,720,067
respectively (2019 - $565,440 and $1,669,669).
15. Equity Incentive Plan
On July
6, 2017, the Company adopted the 2017 Equity Incentive Plan (the
“Plan”). The Plan permits the granting of warrants,
stock options, stock appreciation rights and restricted stock units
to employees, directors and consultants of the Company. A total of
3,000,000 shares of common stock were initially reserved for
issuance under the Plan at July 6, 2017, with annual automatic
share reserve increases, as defined in the Plan, amounting to the
lessor of (i) 1,500,000 shares, (ii) 5% of the outstanding shares
on the last day of the immediately preceding fiscal year, or (iii)
or such number of shares determined by the Administrator of the
Plan, effective March 1, 2018. In March 2020, the Board of
Directors elected to waive the annual share reserve increase for
the fiscal year ending February 28, 2021. The Plan is administered
by the Board of Directors who designates eligible participants to
be included under the Plan, the number of awards granted, the share
price pursuant to the awards and the vesting conditions and period.
The awards, when granted, will have an exercise price of no less
than the estimated fair value of shares at the date of grant and a
life not exceeding 10 years from the grant date. However, where a
participant, at the time of the grant, owns stock representing more
than 10% of the voting power of the Company, the life of the
options shall not exceed 5 years.
F-16
The
following table summarizes the continuity of the Company’s
Equity Incentive Plan units during the nine-month periods ended
November 30, 2020 and 2019:
|
|
2020
|
2019
|
|
|
Number of
units
|
Number of
units
|
|
Outstanding,
beginning of period
|
1,300,518
|
3,223,516
|
|
Share reserve
increase
|
-
|
2,000,000
|
|
Units
granted
|
(183,621
)
|
(4,114,567
)
|
|
Units
forfeited
|
2,989
|
93,652
|
|
Units
expired
|
-
|
260,417
|
|
Outstanding, end of
period
|
1,119,886
|
1,463,018
|
16. Warrants
During
the three-month period ended November 30, 2020 159,664 warrants
were exercised at the price of $8.55 per share and 30,864 warrants
were exercised at the price of $9.32 per share. No warrants were
granted, were forfeited nor expired in the three-month period ended
November 30, 2020.
During
the three-month period ended November 30, 2019, no warrants were
granted, were forfeited, were exercised nor expired.
During
the nine-month period ended November 30, 2020, the Company issued,
in exchange for consulting services, a warrant to purchase 25,000
shares of our common stock at the price of $9.43 per share expiring
May 12, 2022 and warrants to issue 200,000 shares of our common
stock with an exercise price of $11.00 expired. During the
nine-month periods ended November 30, 2020, 159,664 warrants were
exercised at the price of $8.55 per share and 30,864 warrants were
exercised at the price of $9.32 per share. No warrants were
forfeited in the nine-month period ended November 30,
2020.
During
the nine-month period ended November 30, 2019, the Company issued a
warrant to purchase 159,663 shares of our common stock at the price
of $8.55 per share expiring October 5, 2020 as well as a warrant to
purchase 4,093,567 shares of our common stock at the price of
$11.00 per share expiring June 14, 2022. During the nine-month
period ended November 30, 2019, 15,432 shares of our common stock
were issued upon the exercise of a warrant with an exercise price
of $9.32. No warrants were forfeited, and no warrants expired in
the nine-month period ended November 30, 2019.
17. Interest and Other Finance Costs
Interest
and other finance costs for the three- and nine-month periods ended
November 30, 2020 and 2019 are as follows:
|
|
Three Months Ended
November 30
|
Nine Months Ended
November 30
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Interest
on long-term debt
|
$
19,185
|
$
14,778
|
$
57,917
|
$
41,840
|
|
Interest
on convertible notes
|
-
|
98,000
|
-
|
313,433
|
|
Accretion
expense
|
9,387
|
549,090
|
27,044
|
1,584,977
|
|
Amortization
of deferred finance costs
|
-
|
19,885
|
-
|
86,212
|
|
Loss
(gain) on revaluation of foreign exchange contracts
|
(70,427
)
|
10,881
|
(58,945
)
|
10,881
|
|
Revaluation
of warrants
|
-
|
-
|
-
|
8,483
|
|
Gain on
conversion of November 2018 Notes
|
-
|
-
|
-
|
(232,565
)
|
|
Other
|
-
|
393
|
-
|
3,830
|
|
|
$
(41,855
)
|
$
693,027
|
$
26,016
|
$
1,817,091
|
F-17
18. Commitments and Contingencies
Commercial commitments
On
September 2, 2020, the Company entered into a know-how and
engineering agreement (the “Chemtex Agreement”) with
Chemtex Global Corporation (“Chemtex”) to license the
PET plastic and polyester polymer for fiber manufacturing know-how
of INVISTA’s technology and licensing group, INVISTA
Performance Technologies (IPT) (“INVISTA”). The total
value of the Chemtex Agreement is $4,300,000 and covers the
know-how and design of two Infinite Loop™ facilities. Payment
terms are based on the completion of certain milestones and total
$2,150,000 for each facility. During the three and nine months
ended November 30, 2020, $500,000 was paid by the
Company.
On
October 29, 2020, Coca-Cola Cross Enterprise Procurement Group
(“CEPG”) advised the Company of its intention to
terminate the Master Terms and Conditions Supply Agreement for Loop
PET plastic, dated November 14, 2018 (the “MTC”)
because the Company did not satisfy its first production milestone
from the joint venture facility by July 2020 as required by the
MTC.
Contingencies
On
October 13, 2020, the Company and certain of its officers were
named as defendants in a proposed class action lawsuit filed in the
United States District Court for the Southern District of New York,
captioned
Olivier Tremblay,
Individually and on Behalf of All Other Similarly Situated v. Loop
Industries, Inc., Daniel Solomita, and Nelson Gentiletti
,
Case No. 7:20-cv-0838 (“Tremblay Class Action”). The
allegations in the complaint claim that the defendants allegedly
violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities
Exchange Act of 1934 by allegedly making materially false and/or
misleading statements, as well as allegedly failing to disclose
material adverse facts about the Company’s business,
operations, and prospects, which caused the Company’s
securities to trade at artificially inflated prices. Plaintiff
seeks unspecified damages on behalf of a class of purchasers of
Loop’s securities between September 24, 2018 and October 12,
2020.
On
October 13, 2020, the Company, Loop Canada Inc. and certain of
their officers and directors were named as defendants in a proposed
securities class action filed in the Superior Court of Québec
(District of Terrebonne, Province of Québec, Canada), in file
no. 700-06-000012-205. The
Application for authorization of a class
action and for authorization to bring an action pursuant to section
225.4 of the Québec Securities Act
(“the
Application”) was filed by an individual shareholder on
behalf of himself and a class of buyers who purchased our
securities during the “Class Period” (not defined).
Plaintiff alleges that throughout the Class Period, the defendants
allegedly made false and/or misleading statements and allegedly
failed to disclose material adverse facts concerning the
Company’s technology, business model, operations and
prospects, thus causing the Company’s stock price to be
artificially inflated and thereby causing plaintiff to suffer
damages. Plaintiff seeks unspecified damages stemming from losses
he claims to have suffered as a result of the foregoing. On
December 13, 2020, the Application was amended in order to add
allegations regarding specific misrepresentations.
On
October 28, 2020, the Company and certain of its officers were
named as defendants in a second proposed class action lawsuit filed
in the United States District Court for the Southern District of
New York, captioned
Michelle
Bazzini, Individually and on Behalf of All Other Similarly Situated
v. Loop Industries, Inc., Daniel Solomita, and Nelson
Gentiletti
, Case No. 7:20-cv-09031-UA. The allegations in
this complaint are similar in nature to those made in the Tremblay
Class Action.
On
January 4, 2021, the United States District Court for the Southern
District of New York rendered a stipulation and order granting the
consolidation of the two class action lawsuits filed in New York as
In re Loop Industries, Inc.
Securities Litigation
, Master File No.
7:20-cv-08538.
Sakari
Johansson and John Jay Cappa have been appointed as Co-Lead
Plaintiffs and Glancy Prongay & Murray LLP and Pomerantz LLP
have been appointed as Co-Lead Counsel for the class.
Management
believes that these cases lack merit and intends to defend them
vigorously. No amounts have been provided for in the consolidated
financial statements with respect to these claims. Management has
not yet determined what effect these lawsuits may have on its
financial position or results of operations as they are still in
the preliminary stages.
19. Subsequent events
Subsequent
to the end of the quarter, the Company entered into an engineering
and equipment supply agreement to acquire PET polymerization
equipment from Chemtex Global Corporation to manufacture PET resin
at the demonstration plant. This agreement represents a total
commitment of $4,200,000.
F-18
I
TEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following information and any forward-looking statements should
be read in conjunction with the unaudited financial information and
the notes thereto included in this Quarterly Report on Form 10-Q,
including those risks identified in the “Risk Factors”
section of our most recent Annual Report on Form 10-K, as
amended.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING
STATEMENTS
This
Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada
corporation (the “Company,” “Loop
Industries,” “we,” or “our”),
contains “forward-looking statements,” as defined in
the United States Private Securities Litigation Reform Act of 1995.
In some cases, you can identify forward-looking statements by
terminology such as “may,” “will,”
“should,” “could,” “expects,”
“plans,” “intends,”
“anticipates,” “believes,”
“estimates,” “predicts,”
“potential” or “continue” or the negative
of such terms and other comparable terminology. These
forward-looking statements include, without limitation, statements
about our market opportunity, our strategies, ability to improve
and expand our capabilities, competition, expected activities and
expenditures as we pursue our business plan, the adequacy of our
available cash resources, regulatory compliance, plans for future
growth and future operations, the size of our addressable market,
market trends, and the effectiveness of the Company’s
internal control over financial reporting. Although we believe that
the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Actual results may differ materially
from the predictions discussed in these forward-looking statements.
The economic environment within which we operate could materially
affect our actual results. Forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot
be predicted or quantified. These risks and other factors include,
but are not limited to, those listed under “Risk
Factors.” Additional factors that could materially affect
these forward-looking statements and/or predictions include, among
other things: (i) commercialization of our technology and products,
(ii) our status of
relationship with partners,
(iii) development and protection
of our intellectual property and products, (iv) industry
competition, (v) our need for and ability to obtain additional
funding, (vi)
building our manufacturing
facility, (vii) our ability to scale, manufacture and sell our
products in order to generate revenues, (viii) our proposed
business model and our ability to execute thereon,
(ix)
adverse effects on the Company’s business and operations as a
result of increased regulatory, media or financial reporting
scrutiny, practices, rumors or otherwise, (x) disease epidemics and
health related concerns, such as the current outbreak of a novel
strain of coronavirus (COVID-19), which could result in (and, in
the case of the COVID-19 outbreak, has resulted in some of the
following) reduced access to capital markets, supply chain
disruptions and scrutiny or embargoing of goods produced in
affected areas, government-imposed mandatory business closures and
resulting furloughs of our employees, travel restrictions or the
like to prevent the spread of disease, and market or other changes
that could result in noncash impairments of our intangible assets,
and property, plant and equipment, (xi) the outcome of the current
SEC investigation or recent class action litigation filed against
us, (xii) our ability to hire and/or retain qualified employees and
consultants and (xiii) other factors discussed in our subsequent
filings with the SEC.
Management
has included projections and estimates in this Form 10-Q, which are
based primarily on management’s experience in the industry,
assessments of our results of operations, discussions and
negotiations with third parties and a review of information filed
by our competitors with the SEC or otherwise publicly
available.
In
addition, statements that “we believe” and similar
statements reflect our beliefs and opinions on the relevant
subject. These statements are based upon information available to
us as at the date of this Form 10-Q, and while we believe such
information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should
not be read to indicate that we have conducted an exhaustive
inquiry into, or review of, all potentially available relevant
information. These statements are inherently uncertain, and
investors are cautioned not to unduly rely upon these
statements.
We
caution readers not to place undue reliance on any such
forward-looking statements, which speak only as at the date made.
We disclaim any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Introduction
Loop
Industries is a technology company whose mission is to accelerate
the world’s shift toward sustainable PET plastic and
polyester fiber and away from our dependence on fossil fuels. Loop
Industries owns patented and proprietary technology that
depolymerizes no and low-value waste PET plastic and polyester
fiber, including plastic bottles and packaging, carpets and
textiles of any color, transparency or condition and even ocean
plastics that have been degraded by the sun and salt, to its base
building blocks (monomers). The monomers are filtered, purified and
polymerized to create virgin-quality Loop™ branded PET resin
suitable for use in food-grade packaging and polyester fiber, thus
enabling our customers to meet their sustainability
objectives.
Industry Background
We
believe there is an increasing demand for action to address the
global plastic crisis, which has been characterized by facts
provided by leading academic and not-for profit
organizations.
In the last few
years, governments in North America and Europe have been enacting
and proposing laws and regulations mandating the use of minimum
recycled content in packaging underlying the strength of this issue
in the marketplace. Plastic pollution continues to be one of the
most persistently covered environmental issues by media and local
and global environmental non-governmental
organizations.
5
In the
last few years, governments in North America and Europe have been
enacting and proposing laws and regulations mandating the use of
minimum recycled content in packaging underlying the strength of
this issue in the marketplace. Plastic pollution continues to be
one of the most persistently covered environmental issues by media
and local and global environmental non-governmental
organizations.
Also,
global consumer goods companies have made significant commitments
to make the transition to a circular plastic economy,
namely:
i.
In January 2018,
Danone’s evian® brand bottled spring water committed to
a 100% recycled content package by 2025;
ii.
In October 2018,
PepsiCo committed to use an average of 25% recycled plastic in its
packaging by 2025; PepsiCo is also aiming to use
50% recycled plastic in its bottles across
the European Union by 2030;
iii.
In 2018,
L’OCCITANE en Provence committed to a 100% recycled content
package by 2025; and
iv.
In March 2019, the
L’Oréal Group, a global
manufacturer and retailer
of natural cosmetics, committed to using 50% recycled or
bio-sourced plastic in their packaging by 2025 and in 2020, they
committed to using 100% recycled or bio-based plastic in their
packaging by 2030.
In addition, the global annual market demand for PET plastic and
polyester fiber at nearly $130 billion, and the current growth
projections from the 2018 IHS Polymer Market Report indicate this
will exceed $160 billion by 2022.
We believe these trends
indicate that the transformation from a linear to a circular
plastic economy is underway. We believe this transition will lead
to a substantial demand for sustainable products such as
Loop™ PET resin.
Proprietary Technology and Intellectual Property
The
power of our technology lies in its ability to use as feedstock
waste PET plastic and polyester fiber from landfills, rivers,
oceans and natural areas to create Loop™ PET resin. We
believe our technology can deliver profitable virgin quality PET
resin suitable for use in food-grade packaging and polyester
fiber.
Our
Generation I technology (“GEN I”) is a hydrolysis based
depolymerization technology which yielded purified terephthalic
acid (“PTA”) and monoethylene glycol
(“MEG”), two common monomers of PET, through
depolymerization. As the Company evaluated the transition from the
Gen I pilot scale to commercial scale, several challenges involving
PTA and MEG purification were identified
.
To overcome the GEN I technology
challenges, we embarked on the development of a second generation
of our technology
.
Our
Generation II technology (“GEN II”) is a
methanolysis based depolymerization technology that uses industrial
temperatures below 90 °C to depolymerize waste PET and
polyester fiber. The low temperature allows Loop’s technology
to depolymerize very low-quality feedstocks which cannot be
effectively recycled today, such as carpet fiber, clothing and
mixed plastics.
The GEN
II technology uses only trace amounts of water, eliminates the need
for a halogenated solvent and uses a catalyst at low concentration.
GEN II allows for the purification of MEG and DMT to be simplified
through distillation.
This
shift, from producing the monomer PTA to the monomer DMT, was a
pivotal moment for Loop Industries. We believe that GEN II requires
less energy and fewer resource inputs than conventional PET
production processes
.
We also
believe it is an environmentally sustainable method for producing
virgin quality food-grade PET plastic in the world.
During
the quarter, we commissioned Kemitek, a College Centre for
Technology Transfer specialized in the fields of green chemistry
and chemical process scale-up, to validate that our technology at
mini-pilot and pilot scale can produce primary building blocks, or
monomers: DMT and MEG.
Kemitek’s
findings through this verification allowed them to attest to the
ability of our technology to produce pure monomers within our
purity specifications.
In
connection with our agreements with Suez and Chemtex, and more
broadly with the commercialization activities of our future
Infinite Loop
TM
manufacturing facilities, we have decided to convert our pilot
plant to an Infinite Loop
TM
demonstration and training facility in support of the
commercialization of our technology. The demonstration facility
will be used to showcase the Infinite Loop
TM
technology to potential partners and customers, and train
operational teams in advance of the commissioning of commercial
plants. We made investments of $2,325,540 for this project during
the three months ended November 30, and we expect this project to
be largely completed by third quarter of calendar 2021. In
addition, subsequent to the quarter, we have also entered into an
agreement to acquire PET polymerization equipment from Chemtex to
manufacture limited quantities of Loop™ branded PET resin at
our demonstration plant and have the capability to supply select
customers.
To
protect our technology, we rely on a combination of patents,
trademarks, trade secrets, confidentiality agreements and
provisions as well as other contractual provisions to protect our
proprietary rights, which are primarily our patents, brand names,
product designs and marks.
We
have two patent families, referred to as GEN I technology and the
GEN II technology, with claims relating to our technology for
depolymerizing PET.
●
The GEN I
portfolio has three issued U.S. patents, all expected to expire on
or around July 2035. Internationally, we also have issued patents
in Australia, Israel, Taiwan, South Africa, Eurasia and in the
members of the Gulf Cooperation Council, and pending patent
applications in Argentina, Brazil, Canada, China, Europe, Hong
Kong, India, Japan, Korea, Mexico, and the Philippines, all
expected to expire, if granted, on or around July
2036.
6
●
The GEN II
technology portfolio currently consists of four patent
families:
o
The first has two
issued U.S. patent and a pending U.S. application, all expected to
expire on or around September 2037. Internationally, we also have
an allowed application in Bangladesh, and pending applications in
Argentina, Australia, Bolivia, Brazil, Bhutan, Canada, China,
Columbia, Eurasia, Europe, members of the Gulf Countries, Hong
Kong, Indonesia, Israel, India, Iraq, Japan, Korea, Kuwait, Laos,
Mexico, Philippines, Pakistan, Singapore, Taiwan, Uruguay,
Uzbekistan, Venezuela, and South Africa, all expected to expire on
or around September 2038, if granted.
o
An additional
aspect of the GEN II technology is claimed in an issued U.S. patent
and a pending U.S. application, and non-PCT country applications in
Argentina, Bangladesh, Bolivia, members of the Gulf Cooperation
Council, Pakistan, Taiwan, and Uruguay, all expected to expire on
or around June 2039, not including any patent term
extension.
o
A further
additional aspect of the GEN II technology is the subject of a
U.S. `application and a PCT application. Any patents that would
ultimately grant from these applications would be expected to
expire on or around March 2040, not including any patent term
extension.
o
Another further
additional aspect of the GEN II technology is the subject of a
U.S. application, a PCT application, and non-PCT country
applications in Argentina, Bolivia, Bangladesh, members of the Gulf
Cooperation Council, Pakistan, Taiwan, and Uruguay. Any patents
that would ultimately grant from these applications would be
expected to expire on or around March 2040, not including any
patent term extension.
Government Regulation and Approvals
As we
seek to further develop and commercialize our business, we will be
subject to extensive and frequently developing federal, state,
provincial and local laws and regulations. Compliance with current
and future regulations could increase our operational
costs.
Our
operations require various governmental permits and approvals. We
are in the process of obtaining all necessary permits and approvals
for the operation of our business; however, any of these permits or
approvals may be subject to denial, revocation or modification
under various circumstances. Additionally, due to the impact of the
COVID-19 pandemic, we may experience delays in obtaining such
permits or approvals. Failure to obtain or comply with the
conditions of permits and approvals or to have the necessary
approvals in place may adversely affect our operations and may
subject us to penalties. See “
Risk Factors
” below for
additional information.
We have
received from the European Chemicals Agency a confirmation of
registration for our MEG on November 17, 2020, and for our DMT on
December 7, 2020. The registration under the
Registration, Evaluation, Authorization and
Restriction of Chemicals
(“REACH”) Regulation
(EC 1907/2006) confirms that our monomers are of a purity equal to
what is currently recognized within Europe and entitles us to
manufacture/import the monomers into Europe. It should be noted
that MEG and DMT are on the positive list for plastic materials,
which means that the two monomers can be used as food contact
materials.
In
addition, as previously disclosed, we are in possession of a legal
opinion confirming that our depolymerization technology meets U.S.
Food and Drug Administration (“FDA”) requirements to
produce suitably pure MEG and DMT for use in food-grade
packaging.
It
should be noted that the levels of monomer purity confirmed by
Kemitek’s verification are in line with the data submitted
for the REACH registration of our DMT and MEG
monomers.
Supply Agreements with Global Consumer Brands
Consumer
brands are seeking a solution to their plastic challenge and they
are taking bold action. In the past years we have seen major brands
make significant commitments to close the loop on their plastic
packaging in two ways, by transitioning their packaging to
recyclable materials and by incorporating more recycled content
into their packaging. We believe Loop™ PET resin provides the
ideal solution for these brands because Loop™ PET resin is
recyclable and is made from 100% recycled PET resin with
virgin-quality suitable for use in food-grade packaging and
polyester fiber.
We
believe that due to the commitments by large global consumer brands
to incorporate more recycled content into their product packaging,
the regulatory requirements for minimum recycled content in
packaging imposed by governments, the virgin-quality of Loop™
branded PET resin and the marketability of Loop™ PET resin to
extoll the sustainability credentials of consumer brands that
incorporate Loop™ PET resin, we believe we will be able to
sell Loop™ branded PET resin at a premium price relative to
virgin and mechanically recycled PET resin.
7
In the
last years, we have made a number of announcements with some of the
world’s leading brands to be supplied from our planned first
commercial facility from our joint venture with Indorama Ventures
Holdings LP (“Indorama”) in Spartanburg, South
Carolina, including:
●
Multi-year supply
agreement with Danone SA, one of the world’s leading global
food and beverage companies. Danone will purchase 100% sustainable
and upcycled Loop™ branded PET for use in brands across its
portfolio including evian®, Danone’s
iconic natural spring
water
;
●
Multi-year supply
agreement with PepsiCo, one of the largest purchasers of recycled
PET plastic, enabling PepsiCo to purchase production capacity and
incorporate Loop™ PET resin into its product
packaging;
●
Multi-year supply
agreement with L’OCCITANE en Provence to supply 100% recycled
and sustainable Loop™ PET resin and incorporate Loop™
PET resin into its product packaging; and
●
Multi-year supply
agreement with L’Oréal Group, the global leader in the
beauty industry, enabling L’Oréal Group to purchase
production capacity and incorporate Loop™ PET resin into its
product packaging.
Turning Waste into Feedstock
We use
waste PET plastic and polyester fiber as feedstock. Our technology
can use PET plastic bottles and packaging of any color,
transparency or condition, carpet, clothing and other polyester
textiles that may contain colors, dyes or additives, and even PET
plastics that have been recovered from the ocean and degraded by
exposure to sun and salt. We believe that our ability to use many
materials that mechanical recyclers cannot use is an important
advantage of Loop™ PET resin over mechanically recycled PET
resin. This also means we are creating a new market for materials
that have persistently been leaking out of the waste management
system and into our shared rivers, oceans and natural
areas.
In
conjunction with the partners with whom we are developing
facilities, we are identifying the availability of feedstock to
ensure such planned facilities can operate continuously at planned
scale. We have identified the sources required for our first joint
venture facility with Indorama and we will be focusing on signing
supply agreements to secure this feedstock for the long term when
the activities of the joint venture resume.
We,
along with certain of our strategic partners, are also studying
certain markets in the United States, Canada, and the European
Union to help us evaluate the size and location of future
facilities.
Commercialization Progress
During
the nine months ended November 30, 2020, we continued executing our
corporate strategy where Loop Industries focused on developing two
distinct business models for the commercialization of Loop™
PET resin: 1) from our joint venture with Indorama, and 2) from
Infinite Loop
TM
, our fully
integrated waste to PET resin manufacturing
technology.
In
September 2018 we announced a joint venture with Indorama to
retrofit their existing PET manufacturing facilities. The joint
venture was formed with the objective to manufacture and
commercialize sustainable Loop™ PET resin to meet the growing
global demand from beverage and consumer packaged goods companies.
This partnership brings together Indorama’s manufacturing
footprint and Loop Industries’ proprietary technology to
become a supplier of 100% sustainable and recycled PET
resin.
We
entered into a Joint Venture Agreement with Indorama through our
wholly-owned subsidiary Loop Innovations, LLC, a Delaware limited
liability company. Each company has 50/50 equity interest in ILT,
which was specifically formed to operate and execute the joint
venture. We are contributing to the 50/50 joint venture an
exclusive world-wide royalty-free license to use its proprietary
technology to produce 100% sustainably produced PET resin in
addition to our equity cash contribution. The Joint Venture
Agreement details the establishment of an initial 20,700 metric
tons per year facility in Spartanburg, South Carolina, in the
southeastern United States. As disclosed in our Quarterly Report on
Form 10-Q for the period ended August 31, 2019, the joint venture
decided to increase the capacity of the planned Spartanburg plant
due to customer demand to 40,000 metric tons per year.
We have currently contracted for the sale of approximately 15,000
metric tons, which represents almost 40% of the planned capacity,
of the expected output of the Spartanburg facility and we will
resume discussions for the remaining volume
once we have more visibility on the
commissioning date of the facility, although we have had and may
continue to experience delays as noted under the “Risk
Factors”.
As part of the Joint Venture Agreement to
establish the facility to produce 40,000 metric tons, we are
committed to contribute our equity share for the costs under the
joint venture agreement to construct the facility. During the
nine-month period ended November 30, 2020, we made a contribution
of $650,000 and as at November 30, 2020, we have contributed a
total of $1,500,000 to the joint venture.
8
The
joint venture made a decision over the summer that due to the
COVID-19 situation it would temporarily delay work on the project.
Since then, no expenditures have been incurred by the joint
venture. In order to move forward more expeditiously with the
Spartanburg facility, Loop is exploring joint venture structures
and financing alternatives with Indorama to possibly increase its
equity participation in the project.
The
continued travel restrictions and quarantine requirements between
Canada and the US continued to cause disruptions in our timetable.
The joint venture is planning to gradually resume certain
activities on the project in the first quarter of calendar
2021.
The
Infinite Loop
TM
manufacturing technology is the key pillar of our commercialization
blueprint. We believe our technology is at the forefront of the
global transition away from fossil fuels and petrochemicals and
into the circular economy, where PET plastic and polyester fiber
are produced from 100% recycled content. The Infinite Loop™
technology is being engineered to support the commitment of global
consumer brands to achieve a high level of recycled content in
packaging. Infinite Loop™ facilities could be located near
large urban centers where more plastic is being consumed and
therefore more waste plastic feedstock is likely
available.
Our
objective is to achieve global expansion of the technology through
a mix of fully owned facilities, partnerships, and licensing
agreements. We believe that industrial companies, which today are
not in the business of manufacturing PET resin, will view Infinite
Loop™ as a growth opportunity, which offers attractive
economic returns either as Loop manufacturing partners or as
licensees of the technology.
Following
a careful evaluation of alternative PET polymerization
technologies
and our
engineering requirements for the development of Infinite
Loop
TM
,
we decided not to move forward with our global alliance agreement
with
ThyssenKrupp Industrial
Solutions’ division, Uhde Inventa-Fischer for the use of
their PET polymerization technology and engineering
services.
On
September 2, 2020, we entered into a know-how and engineering
agreement (the “Chemtex Agreement”) with Chemtex Global
Corporation (“Chemtex”) to license the PET plastic and
polyester polymer for fiber manufacturing know-how of
INVISTA’s technology and licensing group, INVISTA Performance
Technologies (IPT) (“INVISTA”). The total value of the
Chemtex Agreement is $4,300,000 and covers the know-how and design
of two Infinite Loop™ facilities. Payment terms are based on
the completion of certain milestones and total $2,150,000 for each
facility. During the three and nine months ended November 30, 2020,
$500,000 was paid by the Company.
During
this quarter, we continued to focus on the completion of the
Infinite Loop
TM
engineering design including the integration of our
depolymerization process with INVISTA’s polymerization with
the assistance of Worley Group Inc. (“Worley”), a
leading global engineering, procurement and construction company.
We expect Worley may also play a role in the deployment of
Loop’s Infinite Loop
TM
PET manufacturing facilities.
We
announced on September 10, 2020 a strategic partnership with SUEZ
GROUPE (“Suez”), with the objective to build the first
Infinite Loop™ manufacturing facility in Europe. With the
combination of the Infinite Loop
TM
technology and the resource management expertise of Suez, this
partnership seeks to respond to
growth in demand in Europe from
global beverage and consumer goods brand companies who we believe
are committed to aggressive targets for a high level of recycled
content in their products. We, together with Suez, have initiated
the work to enable us to make a final investment decision for the
project with the current priorities being on the site selection,
permitting, and feedstock requirements.
The
Company is in the planning phase for an Infinite Loop
TM
manufacturing facility in the province of Québec. As part of
this process, subsequent to the end of the quarter, the Company
signed a purchase option to acquire approximately 2,000,000 square
feet of land in Bécancour, Québec for a purchase price of
approximately $1,300,000. The option is for 2 years and carries
with it an annual cost of $80,000 which will be credited against
the purchase price if the land is acquired.
In
addition to the capital requirements for our commercialization we
plan to continue to allocate available capital to strengthen our
intellectual property portfolio, build a core competency in
managing strategic relationships and continue enhancing our brand
value. Our research and development innovation hub in Terrebonne,
Québec, Canada will continue to push forward the development
of our technology.
Employees
We are
investing in building a management team to integrate best in class
processes and practices while maintaining our entrepreneurial
culture. On March 9, 2020, we hired Mr. Stephen Champagne as Chief
Technology Officer. Ms. Sheila Morin was hired as Chief Marketing
Officer on September 21, 2020 and resigned from her position on
December 17, 2020. On January 11, 2021, Mr. Yves Perron was hired
as the Company’s Vice-President, Engineering and
Construction.
In
addition, on October 6, 2020, the Company retained the services of
Mr. Laurent Auguste in an advisory capacity to oversee all the
Company’s European activities.
As of
November 30, 2020, we had 61 employees of which 28 work in research
and development and 20 in engineering and operations.
9
Results of Operations
The
following table summarizes our operating results for the
three-month periods ended November 30, 2020 and 2019, in U.S.
Dollars.
|
|
Three Months
Ended November 30
|
||
|
|
2020
|
2019
|
$
Change
|
|
Revenues
|
$
-
|
$
-
|
$
-
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
Research and
development
|
|
|
|
|
Stock-based
compensation
|
350,393
|
311,353
|
39,040
|
|
Other
research and development
|
5,923,890
|
966,819
|
4,957,071
|
|
Total
research and development
|
6,274,283
|
1,278,172
|
4,996,111
|
|
|
|
|
|
|
General and
administrative
|
|
|
|
|
Stock-based
compensation
|
546,601
|
565,440
|
(18,839
)
|
|
Other
general and administrative
|
2,177,415
|
1,260,373
|
917,014
|
|
Total
general and administrative
|
2,724,016
|
1,825,813
|
898,203
|
|
|
|
|
|
|
Write-down and
impairment of property, plant and equipment
|
5.034,606
|
-
|
5,034,606
|
|
Depreciation and
amortization
|
104,307
|
219,628
|
(115,321
)
|
|
Interest and other
financial (income) expenses
|
(41,855
)
|
693,027
|
(734,882
)
|
|
Interest
income
|
(20,008
)
|
(171,274
)
|
151,266
|
|
Foreign exchange
loss
|
95,644
|
5,533
|
90,111
|
|
Total
operating expenses
|
14,170,993
|
3,850,899
|
10,320,094
|
|
Net
loss
|
$
(14,170,993
)
|
$
(3,850,899
)
|
$
(10,320,094
)
|
Third Quarter Ended November 30, 2020
The net
loss for the three-month period ended November 30, 2020 increased
$10.32 million to $14.17 million, as compared to the net loss for
the three-month period ended November 30, 2019 which was $3.85
million. The increase of $10.32 million is primarily
attributable to higher research and development expenses of $5.00
million, higher write-down of machinery and equipment of $5.03
million, higher general and administrative expenses of $0.90
million, lower interest income of $0.15 million, and an increase in
foreign exchange loss of $0.09 million, offset by lower interest
and other financial (income) expenses of $0.73 million and lower
depreciation and amortization expenses of $0.12
million.
Research
and development expenses for the three-month period ended November
30, 2020 amounted to $6.27 million compared to $1.28 million for
the three-month period ended November 30, 2019, an increase of
$5.00 million, or $4.96 million excluding stock-based compensation.
The increase of $4.96 million was primarily attributable to higher
purchases of non-capitalizable research and development machinery
and equipment of $2.33 million, higher engineering fees of $2.19
million due to external engineering costs for the design of our
Infinite Loop
TM
manufacturing process, higher employee compensation expenses of
$0.20 million, higher pilot plant and laboratory consumables and
maintenance expenses of $0.19 million, and by lower research and
development tax credits of $0.10 million.
General
and administrative expenses for the three-month period ended
November 30, 2020 amounted to $2.72 million compared to $1.83
million for the three-month period ended November 30, 2019, an
increase of $0.90 million, or $0.92 million excluding stock-based
compensation.
The increase of
$0.92 million was mainly attributable to higher legal and
professional fees of $0.84 million due to costs principally
associated with the ongoing SEC investigation disclosed in our 8-K
filed on October 16, 2020 and class action suits, and higher
insurance expenses of $0.31, offset by lower employee compensation
costs of $0.23 million.
10
Depreciation
and amortization expenses for the three-month period ended November
30, 2020 totaled $0.10 million compared to $0.22 million for the
three-month period ended November 30, 2019, a decrease of $0.12
million. This decrease is mainly attributable to the write-down of
machinery and equipment assets. The write-down and impairment of
property, plant and equipment for the three-month period ended
November 30, 2020 totaled $5.03 million compared to nil for the
three-month period ended November 30, 2019.
The
machinery and equipment will continue to be utilized at our
demonstration and training facility as it is an integral part of
supporting the commercialization of our technology. However, the
decision to dedicate the demonstration and training facility to
research and development activities requires them to be written off
and all future costs associated with the demonstration and training
facility will be recognized as a research and development expense
in the consolidated statements of operations and comprehensive loss
in accordance with ASC 730, Research and Development
Costs.
Interest
and other financial (income) expenses for the three-month period
ended November 30, 2020 totaled $(0.04) million compared to $0.69
million the three-month period ended November 30, 2019, a decrease
of $0.73 million. The decrease is mainly attributable to a decrease
in accretion expense of $0.56 million, a decrease in interest
expense on convertible notes of $0.09 million and by an increase in
gain on revaluation of foreign exchange contracts of $0.08
million.
Nine Months Ended November 30, 2020
The
following table summarizes our operating results for the nine-month
periods ended November 30, 2020 and 2019, in U.S.
Dollars.
|
|
Nine Months Ended
November 30
|
||
|
|
2020
|
2019
|
$
Change
|
|
Revenues
|
$
-
|
$
-
|
$
-
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
Research and
development
|
|
|
|
|
Stock-based
compensation
|
1,054,682
|
941,142
|
113,540
|
|
Other
research and development
|
9,449,411
|
2,305,104
|
7,144,307
|
|
Total
research and development
|
10,504,093
|
3,246,246
|
7,257,847
|
|
|
|
|
|
|
General and
administrative
|
|
|
|
|
Stock-based
compensation
|
1,720,067
|
1,669,669
|
50,398
|
|
Other
general and administrative
|
5,006,272
|
3,777,387
|
1,228,885
|
|
Total
general and administrative
|
6,726,339
|
5,447,056
|
1,279,283
|
|
|
|
|
|
|
Write-down and
impairment of property, plant and equipment
|
5,043,120
|
(22,985
)
|
5,020,135
|
|
Depreciation and
amortization
|
654,354
|
562,382
|
91,972
|
|
Interest and other
financial (income) expenses
|
26,016
|
1,817,091
|
(1,791,075
)
|
|
Interest
income
|
(78,394
)
|
(363,565
)
|
285,171
|
|
Foreign exchange
loss
|
275,903
|
15,297
|
260,606
|
|
Total
operating expenses
|
23,151,431
|
10,747,492
|
12,403,939
|
|
Net
loss
|
$
(23,151,431
)
|
$
(10,747,492
)
|
$
(12,403,939
)
|
The net
loss for the nine-month period ended November 30, 2020 increased by
$12.40 million to $23.15 million, as compared to the net loss for
the nine-month period ended November 30, 2019 of $10.75. The
increase of $12.40 million is primarily due to higher research and
development expenses of $7.26 million, the write-down of machinery
and equipment of $5.02 million, higher general and administrative
expenses of $1.28 million, lower interest income of $0.29 million,
higher foreign exchange loss of $0.26 million and higher
depreciation and amortization expenses of $0.33 million, offset by
a decrease in interest and other financial (income) expenses of
$1.79 million.
Research
and development expenses for the nine-month period ended November
30, 2020 amounted to $10.50 million compared to $3.25 million for
the nine-month period ended November 30, 2019, an increase of $7.26
million, and $7.14 million excluding stock-based compensation. The
increase of $7.14 million was primarily attributable to higher
engineering fees of $3.16 million due to external engineering costs
for the design of our Infinite Loop
TM
manufacturing process, higher purchases of non-capitalizable
research and development machinery and equipment of $2.33 million,
higher employee compensation expenses of $0.53 million, higher
plant and laboratory consumables and maintenance expenses of $0.50
million, and by lower research and development tax credits of $0.32
million which was partially offset by a COVID-19-related government
wage subsidy of $0.19 million. The increase in non-cash stock-based
compensation expense of $0.11 million is mainly attributable to the
timing of stock awards provided to certain employees.
11
General and administrative expenses for the nine-month period ended
November 30, 2020 amounted to $6.73 million compared to $5.45
million for the nine-month period ended November 30, 2019, an
increase of $1.28 million, or $1.23 million excluding stock-based
compensation. The increase of $1.23 million was mainly attributable
to higher insurance expenses of $1.04 million, and higher legal and
professional fees of $0.89 million due to costs principally
associated with the ongoing SEC investigation disclosed in our 8-K
filed on October 16, 2020 and class action suits, offset by lower
employee compensation costs of $0.55 million.
During the nine-month period ended November 30,
2020, the Company recorded a COVID-19-related government wage
subsidy of $0.06 million in general and administrative expenses.
Stock-based compensation expense for the nine-month period ended
November 30, 2020 amounted to $1.72 million compared to $1.67
million for the nine-month period ended November 30, 2019,
representing an increase of $0.05 million, which was mainly
attributable lower stock awards provided to
executives.
Depreciation
and amortization expenses for the nine-month period ended November
30, 2020 totaled $0.65 million compared to $0.56 million for the
nine-month period ended November 30, 2019, an increase of $0.09
million. This increase is mainly attributable to investment in
fixed assets at the Company’s pilot plant and corporate
offices. The write-down for machinery and equipment for the
nine-month period ended November 30, 2020 totaled $5.04 million
compared to $0.02 million for the nine-month period ended November
30, 2019, an increase of $5.02 million.
The
machinery and equipment will continue to be utilized at our
demonstration and training facility as it is an integral part of
supporting the commercialization of our technology. However, the
decision to dedicate the demonstration and training facility to
research and development activities requires them to be written off
and all future costs associated with the demonstration and training
facility will be recognized as a research and development expense
in the consolidated statements of operations and comprehensive loss
in accordance with ASC 730, Research and Development
Costs.
Interest
and other financial (income) expenses for the nine-month period
ended November 30, 2020 totaled $0.03 million compared to $1.82
million the nine-month period ended November 30, 2019, representing
a decrease of $1.80 million. The decrease is mainly attributable to
a decrease in accretion expense of $1.64 million and a decrease in
interest expense on convertible notes of $0.30 million offset by a
decrease in gain on conversion of convertible notes of $0.08
million.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We are
a development stage company with no revenues, and our ongoing
operations and commercialization plans are being financed by
raising new equity and debt capital. To date, we have been
successful in raising capital to finance our ongoing operations. As
at November 30, 2020, we had cash and cash equivalents on hand of
$43.61 million.
Management
continues to pursue our growth strategy and is evaluating our
financing plans to continue to raise capital to finance the
start-up of commercial operations and continue to fund the further
development of our ongoing operations. Although our liquidity
position consists of cash and cash equivalents on hand of $43.61
million, in light of the current global COVID-19 pandemic and its
impacts on the global capital markets, our liquidity position may
change, including the inability to raise new equity and debt,
disruption in completing repayments or disbursements to our
creditors.
On
September 21, 2020, we entered into an underwriting agreement (the
“Underwriting Agreement”) with Roth Capital Partners,
LLC, as underwriter (the “Underwriter”), relating to
the sale and issuance of an aggregate of 1,880,000 shares (the
“Shares”) of the Company’s common stock. The
offering price to the public of the Shares was $12.75 per share,
and the Underwriters have agreed to purchase the Shares from the
Company pursuant to the Underwriting Agreement at a price of $12.11
per share. Under the terms of the Underwriting Agreement, the
Company also granted the Underwriters an option, exercisable for 30
days, to purchase up to an additional 282,000 shares of Common
Stock at the same price per share as the Shares which was exercised
for 207,000 shares. The net proceeds from the offering, including
net proceeds received in connection with the Underwriter’s
option to purchase additional shares, were $25.00
million.
As
reflected in the accompanying interim unaudited condensed
consolidated financial statements, we are a development stage
company, we have not yet begun commercial operations and we do not
have any sources of revenue. Management believes that the Company
has sufficient financial resources to fund planned operating and
capital expenditures and other working capital needs for at least,
but not limited to, the 12-month period from the date of issuance
of the November 30, 2020 interim condensed consolidated financial
statements. There can be no assurance that any future financing
will be available or, if available, that it will be on terms that
are satisfactory to us.
As at
November 30, 2020, we have a long-term debt obligation to a
Canadian bank in connection with the purchase, in the year ended
February 28, 2018, of the land and building where our pilot plant
and corporate offices are located at 480 Fernand-Poitras,
Terrebonne, Québec, Canada J6Y 1Y4. On January 24, 2018, the
Company obtained a $1,073,455 (CDN$1,400,000) 20-year term
instalment loan (the “Loan”), from a Canadian bank. The
Loan bears interest at the bank’s Canadian prime rate plus
1.5%. By agreement, the Loan is repayable in monthly payments of
$4,472 (CDN$5,833) plus interest, until January 2021, at which time
it will be subject to renewal. It includes an option allowing for
the prepayment of the Loan without penalty. In January 2021, the
Company and the Canadian bank agreed to maintain the same repayment
amount and interest rate until January 2022.
We
also have a long-term debt obligation to Investissement Québec
in connection with a financing facility equal to 63.45% of all
eligible expenses incurred for the expansion of its Pilot Plant up
to a maximum of $3,527,066 (CDN$4,600,000). We received the first
disbursement in the amount of $1,693,938 (CDN$2,209,234) on
February 21, 2020. There is a 36-month moratorium on both capital
and interest repayments as of the first disbursement date. At the
end of the 36-month moratorium, capital and interest will be
repayable in 84 monthly installments. The loan bears interest at
2.36%. We have also agreed to issue to Investissement Québec
warrants to purchase shares of our common stock in an amount equal
to 10% of each disbursement up to a maximum aggregate amount of
$352,707 (CDN$460,000). The warrants will be issued at a price per
share equal to the higher of (i) $11.00 per share and (ii) the
ten-day weighted average closing price of Loop Industries shares of
common stock on the Nasdaq stock market for the 10 days prior to
the issue of the warrants. The warrants can be exercised
immediately upon grant and will have a term of three years from the
date of issuance. The loan can be repaid at any time by us without
penalty. On February 21, 2020, upon the receipt of the first
disbursement under this facility, we issued a warrant to purchase
15,153 shares of common stock at a price of $11.00 to
Investissement Québec.
12
Flow of Funds
Summary of Cash Flows
A
summary of cash flows for the nine-month period ended November 30,
2020 and 2019 was as follows:
|
|
Nine Months Ended
November 30
|
|
|
|
2020
|
2019
|
|
Net cash used in
operating activities
|
$
(14,544,251
)
|
$
(6,819,748
)
|
|
Net cash used in
investing activities
|
(2,386,593
)
|
(2,592,921
)
|
|
Net cash provided
(used) by financing activities
|
26,616,472
|
39,127,875
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
210,516
|
(57,105
)
|
|
Net increase
(decrease) in cash and cash equivalents
|
$
9,896,144
|
$
29,658,101
|
Net Cash Used in Operating Activities
During
the nine months ended November 30, 2020, we used $14.54 million in
operations compared to $6.82 million during the nine months ended
November 30, 2019. The increase in cash used in operations of $7.08
million is mainly attributable to higher external engineering costs
paid of $2.47 million for our Infinite Loop
TM
process, higher investments of non-capitalizable machinery and
equipment of $2.33 million, higher directors’ and
officers’ insurance premiums paid of $0.89 million, deposits
on machinery and equipment of $0.75 million, increased professional
fees of $0.59 million and increased research and development
expenses. The variation in the amount for prepaid directors and
officers insurance is due to an increase of $1.30 million of the
annual premium as well as a change in the payment structure
compared to the prior year.
Net Cash Used in Investing Activities
During
the nine months ended November 30, 2020, the Company made
capitalizable investments of $1.58 million in property, plant and
equipment as compared to $1.7 million for the nine months ended
November 30, 2019, primarily in connection with the upgrade of its
pilot plant. Additionally, the Company made deposits on equipment
of $0.42 million as at November 30, 2020 compared to nil at
November 30, 2019.
During
the nine months ended November 30, 2020, the Company made
investments in intangible assets of $0.16 million as compared to
$0.09 million for the nine months ended November 30, 2019,
principally for its GEN II patents.
During
the nine months ended November 30, 2020, the Company also made a
contribution of $0.65 million to Indorama Loop Technologies, LLC,
the joint venture with Indorama Ventures Holdings LP, USA compared
to $0.85 million for the nine months ended November 30,
2019.
Net Cash Provided from (Used in) Financing Activities
During
the nine months ended November 30, 2020, the Company sold 2,087,000
shares of its common stock at an offering price of $12.75 for total
net proceeds of $25.00 million pursuant to the “Underwriting
Agreement”. In the same period, the Company also received net
proceeds of $1.65 million upon the exercise of warrants for 190,529
shares of its common stock.
During
the nine months ended November 30, 2020, we repaid $0.03 million of
long-term debt.
Off-Balance Sheet Arrangements
As at
November 30, 2020, we did not have any off-balance sheet
arrangements as defined in the rules and regulations of the
SEC.
As at
November 30, 2020, we did not have any significant lease
obligations to third parties.
I
TEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We are
subject to risks associated with currency fluctuations and changes
in foreign currency exchange rates as well as fluctuations in the
supply and price of raw materials and commodity
prices.
Foreign Currency Exchange Risk
We
operate mainly through two entities, Loop Industries, Inc., which
is a Nevada corporation and has a U.S. dollar functional currency,
and our wholly-owned subsidiary, Loop Canada Inc. (“Loop
Canada”), which is based in Terrebonne, Québec, Canada
and has a Canadian dollar functional currency. Our reporting
currency is the U.S. dollar.
13
We
mainly finance our operations through the sale and issuance of
shares of common stock and debt of Loop Industries, Inc. in U.S.
dollars while our operations are concentrated in our wholly-owned
subsidiary, Loop Canada. Accordingly, we are exposed to foreign
exchange risk as we maintain bank accounts in U.S. dollars and a
significant portion of our operational costs (including payroll,
site costs, costs of locally sourced supplies and income taxes) are
denominated in Canadian dollars.
Significant
fluctuations in the U.S. dollar to the Canadian dollar exchange
rates could materially affect our result of operations, cash
position and funding requirements. To the extent that fluctuations
in currency exchange rates cause our results of operations to
differ materially from our expectations or the expectations of our
investors, the trading price of our common stock could be adversely
affected.
From
time to time, we may engage in exchange rate hedging activities in
an effort to mitigate the impact of exchange rate fluctuations. As
part of our risk management program, we may enter into foreign
exchange forward contracts to lock in the exchange rates for future
foreign currency transactions, which is intended to reduce the
variability of our operating costs and future cash flows
denominated in currencies that differs from our functional
currencies. We do not enter into these contracts for trading
purposes or speculation, and our management believes all such
contracts are entered into as hedges of underlying transactions.
Nonetheless, these instruments involve costs and have risks of
their own in the form of transaction costs, credit requirements and
counterparty risk. If our hedging program is not successful, or if
we change our hedging activities in the future, we may experience
significant unexpected expenses from fluctuations in exchange
rates. Any hedging technique we implement may fail to be effective.
If our hedging activities are not effective, changes in currency
exchange rates may have a more significant impact on the trading
price of our common stock.
Commodity Price Risk
The
plastics manufacturing industry is extremely price competitive
because of the commodity like nature of PET resin and its
correlation to the price of crude oil. The demand for recycled PET
has fluctuated with the price of crude oil. If crude oil prices
decline, the cost to manufacture recycled PET may become
comparatively higher than the cost to manufacture virgin PET. Our
ability to penetrate the market will depend in part on the cost of
manufacturing virgin PET and if we do not successfully distinguish
our product from those of virgin PET manufacturers, our entry into
the market and our ability to secure customer contracts can be
adversely affected.
Raw Material Price Risk
We
purchase raw materials and packaging supplies from several sources.
While all such materials are available from independent suppliers,
raw materials are subject to fluctuations in price and availability
attributable to a number of factors, including general economic
conditions, commodity price fluctuations, the demand by other
industries for the same raw materials and the availability of
complementary and substitute materials. The profitability of our
business also depends on the availability and proximity of these
raw materials to our factories. The choice of raw materials to be
used at our facility is determined primarily by the price and
availability, the yield loss of lower quality raw materials, and
the capabilities of the producer’s production facility.
Additionally, the high cost of transportation could favor suppliers
located in close proximity to our factories. If the quality of
these raw materials is lower, the quality of our product may
suffer. Economic and financial factors could impact our suppliers,
thereby causing supply shortages. Increases in raw material costs
could have a material adverse effect on our business, financial
condition or results of operations. Our hedging procedures may be
insufficient, and our results could be materially impacted if costs
of materials increase. In light of the uncertain and evolving
situation relating to the global COVID-19 pandemic, our access to
raw materials, the quality and proximity of such materials may be
disrupted. We currently cannot predict the impact that the global
COVID-19 pandemic will have on our access to raw
materials.
I
TEM 4. CONTROLS AND
PROCEDURES
Management’s Evaluation of our Disclosure Controls and
Procedures
A.
Evaluation
of Disclosure Controls and Procedures
Disclosure
controls and procedures are designed to provide reasonable
assurance that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act of
1934, is recorded, processed, summarized and reported, within the
time periods specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed by us in our reports that we
file or submit under the Securities Exchange Act of 1934 is
accumulated and communicated to our management, including our
principal executive and principal financial officers, or persons
performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure.
As of
the end of the period covered by this Quarterly Report, the Company
carried out an evaluation, under the supervision and with the
participation of the Company’s management, including the
Company’s Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the
Company’s “disclosure controls and procedures”
(as defined in Rule 13a-15(e) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), pursuant to Rule
13a-15(b) of the Exchange Act. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that
the Company’s disclosure controls and procedures were
effective as of November 30, 2020.
B.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting
during the nine-month period ended November 30, 2020 that
materially affected, or were reasonably likely to materially
affect, our internal control over financial reporting.
14
P
ART II. OTHER INFORMATION
I
TEM 1. LEGAL
PROCEEDINGS
SEC Investigation
As
previously disclosed in our Current Report on Form 8-K filed with
the SEC on October 16, 2020, on October 15, 2020, we received a
subpoena from the SEC requesting certain information from us,
including information regarding testing, testing results and
details of results from our GEN I and GEN II technologies and
certain of our partnerships and agreements. Prior to its receipt,
there had been no previous communication between us and the SEC on
this issue and we were unaware of this investigation. The SEC
informed us that its investigation does not mean that the SEC has
concluded that anyone has violated the law and that the
investigation does not mean that the SEC has a negative opinion of
us. We cannot predict when this matter will be resolved or what, if
any, action the SEC may take following the conclusion of the
investigation.
Litigation
On
October 13, 2020, the Company and certain of its officers were
named as defendants in a proposed class action lawsuit filed in the
United States District Court for the Southern District of New York,
captioned
Olivier Tremblay,
Individually and on Behalf of All Other Similarly Situated v. Loop
Industries, Inc., Daniel Solomita, and Nelson Gentiletti
,
Case No. 7:20-cv-0838 (“Tremblay Class Action”). The
allegations in the complaint claim that the defendants allegedly
violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities
Exchange Act of 1934 by allegedly making materially false and/or
misleading statements, as well as allegedly failing to disclose
material adverse facts about the Company’s business,
operations, and prospects, which caused the Company’s
securities to trade at artificially inflated prices. Plaintiff
seeks unspecified damages on behalf of a class of purchasers of
Loop’s securities between September 24, 2018 and October 12,
2020.
On
October 13, 2020, the Company, Loop Canada Inc. and certain of
their officers and directors were named as defendants in a proposed
securities class action filed in the Superior Court of Québec
(District of Terrebonne, Province of Québec, Canada), in file
no. 700-06-000012-205. The
Application for authorization of a class
action and for authorization to bring an action pursuant to section
225.4 of the Québec Securities Act
(the
“Application”) was filed by an individual shareholder
on behalf of himself and a class of buyers who purchased our
securities during the “Class Period” (not defined).
Plaintiff alleges that throughout the Class Period, the defendants
allegedly made false and/or misleading statements and allegedly
failed to disclose material adverse facts concerning the
Company’s technology, business model, operations and
prospects, thus causing the Company’s stock price to be
artificially inflated and thereby causing plaintiff to suffer
damages. Plaintiff seeks unspecified damages stemming from losses
he claims to have suffered as a result of the foregoing. On
December 13, 2020, the Application was amended in order to add
allegations regarding specific misrepresentations.
On
October 28, 2020, the Company and certain of its officers were
named as defendants in a second proposed class action lawsuit filed
in the United States District Court for the Southern District of
New York, captioned
Michelle
Bazzini, Individually and on Behalf of All Other Similarly Situated
v. Loop Industries, Inc., Daniel Solomita, and Nelson
Gentiletti
, Case No. 7:20-cv-09031-UA. The allegations in
this complaint are similar in nature to those made in the Tremblay
Class Action.
On
January 4, 2021, the United States District Court for the Southern
District of New York rendered a stipulation and order granting the
consolidation of the two class action lawsuits filed in New York as
In re Loop Industries, Inc.
Securities Litigation
, Master File No.
7:20-cv-08538.
Sakari
Johansson and John Jay Cappa have been appointed as Co-Lead
Plaintiffs and Glancy Prongay & Murray LLP and Pomerantz LLP
have been appointed as Co-Lead Counsel for the class.
From
time to time, we may become involved in various lawsuits and legal
proceedings or investigations which arise in the ordinary course of
business. Except as noted above, we are not presently a party to
any legal proceedings, government actions, administrative actions,
investigations or claims that are pending against us or involve us
that, in the opinion of our management, could reasonably be
expected to have a material adverse effect on our business,
financial condition or operating results. However, litigation is
subject to inherent uncertainties, and an adverse result in these
or other matters may arise from time to time that may harm our
business.
It is
possible that we may expend financial and managerial resources in
the defense of our intellectual property rights in the future if we
believe that our rights have been violated. It is also possible
that we may expend financial and managerial resources to defend
against claims that our products and services infringe upon the
intellectual property rights of third parties.
15
I
TEM 1A. RISK FACTORS
We are
subject to various risks and uncertainties in the course of our
business. Risk factors relating to us are set forth under
“Risk Factors” in our Annual Report on Form 10-K, filed
on May 5, 2020 and amended on May 6, 2020 and September 21, 2020.
Other than as included below no material changes to such risk
factors have occurred during the nine months ended November 30,
2020.
Risks related to our business and commercialization
The global COVID-19 pandemic has adversely affected, and may in the
future adversely affect, our business, results of operations and
financial condition.
The
COVID-19 pandemic has disrupted business operations for us and our
customers, suppliers, vendors and other parties with whom we do
business and such disruptions are expected to continue for an
indefinite period of time. In an effort to control the spread
of COVID-19, governments and municipalities around the world have
instituted restrictive measures, including orders to
shelter-in-place, travel restrictions, mandated business closures
and social distancing. The pandemic and resulting governmental
restrictions and regulations have adversely affected businesses,
economies, and financial markets globally, leading to an economic
downturn, a sharp increase in unemployment and increased market
volatility of uncertain severity and duration. Additionally,
as a result the disruption to the global economy, we may experience
a decline in the consumption of our products as a result of change
of consumer preference, perception or confidence and spending
habits. Any continued disruption or prolonged change in consumer
spending habits could adversely affect our business.
The
uncertain duration of these measures has had and may continue to
have increasingly negative effects on critical development and
commercialization efforts. In particular, although we were
able to take advantage of exemptions in the order
from
Québec provincial
government closing all non-essential business and commercial
activity in the province during the shutdown period between March
25, 2020 and May 11, 2020 to continue reduced operations at our
pilot plant, the situation in the United States and the continued
border closures and quarantine requirements between Canada and the
United States have caused disruptions in our timetable of our
joint venture with Indorama in the development of our Spartanburg
facility and commercialization of our technology. We cannot ensure
whether there will be further delays in light of the COVID-19
pandemic and further impact on the development and
commercialization of our technology could have a material adverse
effect on our results of operations and cash
flows.
In
addition, as a result of COVID-19 and the measures designed to
contain the spread of the virus, we may experience further
restrictions on the movement of employees, disruption of supply
chains, shipping of raw materials, restrictions on manufacturing
and decline in value of assets held by us, including property and
equipment. In particular, the COVID-19 outbreak has caused
disruption to our business, including our furloughing a number of
employees, which have now returned to work.
Additionally,
our management team has,
and will likely continue, to spend time, attention and resources
monitoring the COVID-19 pandemic and seeking to manage its effects
on our business and workforce.
Further, we are in
the process of obtaining all necessary permits and approvals for
the operation of our business, which processes may be delayed due
to the impact of the COVID-19 pandemic.
Although we
continue to monitor the situation and may adjust our current
policies as more information and public health guidance become
available, the COVID-19 pandemic is ongoing, and its dynamic
nature, including uncertainties relating to the ultimate spread of
the virus, the severity of the disease, the duration of the
outbreak and actions that may be taken by governmental authorities
to contain the outbreak or to treat its impact, makes it difficult
to accurately forecast any effects on our results of operations for
2021 and beyond.
Additionally, our
efforts to mitigate the impact of COVID-19 on our business,
employees and the community in which we operate efforts may not be
successful and may require additional costs and have a material
adverse effect on our results of operations and cash
flows.
We face business risks due to our relationships with strategic
partners.
We
rely on our strategic partner relationships for the scaling,
manufacturing and commercialization of our technology. We have
various arrangements with Indorama and Suez to commercially scale
our technology in Spartanburg and Europe respectively and with
Chemtex and our external engineering firm Worley. We also have
various supply agreements with Danone, Pepsi, L’Oreal and
L’OCCITANE en Provence for our planned Spartanburg facility.
Termination of any of these agreements could have an adverse effect
on our business. In particular, certain of our agreements with our
strategic partners have termination rights related to the
satisfaction of milestones, some of which we have not achieved.
Other than as noted below and though we have not received any
indication from our strategic partners as to their indication to
terminate, we cannot provide assurance that these strategic
partners with whom we have entered into such agreements will not
exercise their applicable termination rights, which are not within
our control. For example, we previously announced that Coca-Cola
Cross Enterprise Procurement Group (“CEPG”) advised us
that it was terminating our Master Terms and Conditions Supply
Agreement for Loop PET plastic, dated November 14, 2018 (the
“MTC”) because we did not satisfy our first production
milestone from the joint venture facility by July 2020 as required
by the MTC. CEPG indicated in its notice that it is open and
interested in exploring a new framework agreement with us for North
America and/or Europe. We intend to engage with CEPG regarding the
joint venture facility when we have more clarity on the
commissioning as well as for our planned Infinite Loop European
project. We cannot provide any assurances that we will be able to
enter into a new agreement with CEPG on terms that are favorable to
us or at all.
Any
failure of our strategic partners or us to meet our required
commitments, whether financial or otherwise, could result in a
termination of such agreements as described above, operational
issues, increased expenditures or damage to our reputation or loss
of clients or customers, any of which could adversely affect our
business and operations, financial performance or
prospects.
16
Risk related to adverse litigation, investigations and other
proceedings
We are subject to certain risks related to litigation filed by or
against us and investigations we are subject to, and adverse
results may harm our business.
We
cannot predict with certainty the cost of defense, of prosecution
or of the ultimate outcome of litigation, investigations and other
proceedings filed by or against us, including penalties or other
civil or criminal sanctions, or remedies or damage awards, and
adverse results in any litigation and other proceedings may
materially harm our business, including the subpoena we received
from the SEC in October 2020 requesting certain information
regarding testing, testing results and details of results from our
GEN I and GEN II technologies and certain of our partnerships and
agreements. Litigation and other proceedings may include, but are
not limited to, actions relating to intellectual property,
international trade, commercial arrangements, product liability,
environmental, health and safety, joint venture agreements, labor
and employment or other harms resulting from the actions of
individuals or entities outside of our control. In the case of
intellectual property litigation and proceedings, adverse outcomes
could include the cancellation, invalidation or other loss of
material intellectual property rights used in our business and
injunctions prohibiting our use of business processes or technology
that are subject to third-party patents or other third-party
intellectual property rights. We expect legal fees to continue to
increase in relation to litigation, investigations and other
proceedings.
If we are unable to successfully scale our manufacturing processes,
we may not meet customer demand.
To be
successful, we will have to scale our manufacturing processes while
maintaining high product quality and reliability. If we cannot
maintain high product quality at a large scale, our business will
be adversely affected. Even if we are successful in developing our
manufacturing capability, we do not know whether we will do so in
time to satisfy the requirements of our customers. The current
manufacturing facility is a pilot plant with limited production
capacity used principally for research and development. In order to
fully implement our business plan, we will need to scale the
operations to a larger industrial commercial facility, develop
strategic partnerships or find other means to produce greater
volumes of finished product. We, however, have not yet tested our
technology at the scale that will be required for large commercial
use nor at a scale sufficient to conclude the success of our
technology.
Risks related to regulatory approvals
We are subject to various federal, state and local laws and
regulations and failure to secure and maintain permits could result
in costs that have a material adverse effect on our business,
results of operations and financial condition.
Many
federal, state and local regulations govern plants and
facilities and licenses to be held by individuals. We are in
the process of obtaining all necessary permits and approvals for
the operation of our business; however, any of these permits or
approvals may be subject to denial, revocation or modification
under various circumstances. The requirements for
such permits vary depending on the location where our
regulated activities are operated. As these are governmental
permitting processes, there is a degree of uncertainty as to
whether a permit will be granted, the time it will take for a
permit to be issued, the duration of the permit and the conditions
that may be imposed in connection with the granting of the
permit.
We
believe that we have all licenses required to conduct our
operations and are in material compliance with
applicable regulatory requirements. Failure to comply
with applicable regulations could result in substantial fines or
revocation of our permits and licenses or an inability to perform
work, which could adversely affect our business.
I
TEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
On May
12, 2020, we issued a warrant to acquire 25,000 shares of common
stock at a strike price of $9.43 per share.
I
TEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
I
TEM 4.
MINE SAFETY DISCLOSURES
Not
applicable.
I
TEM 5. OTHER INFORMATION
None.
17
I
TEM 6. EXHIBITS
The
following Exhibits, as required by Item 601 of Regulation SK, are
attached or incorporated by reference, as stated
below.
Exhibit Index
|
|
|
|
|
Incorporated by Reference
|
|
|
||||
|
Number
|
|
Description
|
|
Form
|
|
File No.
|
|
Filing Date
|
|
Exhibit No.
|
|
|
Termination
of a Material Definitive Agreement, by and between Loop Industries,
Inc. and Coca-Cola Cross Enterprise Procurement Group.
|
|
8-K
|
|
001-38301
|
|
4-Nov-20
|
|
|
|
|
|
Amendment
to Securities Purchase Agreement dated June 14, 2019 between Loop
Industries, Inc. and the Purchaser identified therein.
|
|
8-K
|
|
001-38301
|
|
14-Jun-19
|
|
10.1
|
|
|
|
Employment
Agreement, dated August 26, 2020, by and between Loop Canada Inc.
and Sheila Morin
|
|
10-Q
|
|
000-54768
|
|
10-July-20
|
|
10.1
|
|
|
10.2
|
|
Know-how
and Engineering Agreement, dated September 2, 2020, by and between
Loop Canada Inc. and Chemtex Global Corporation
|
|
10-Q
|
|
000-54768
|
|
10-July-20
|
|
10.2
|
|
10.3
|
|
Enhanced
Recycling Partnership Agreement, dated September 10, 2020, by and
between Loop Industries, Inc. and Suez Groupe
|
|
10-Q
|
|
000-54768
|
|
10-July-20
|
|
10.3
|
|
24.1
|
|
Power
of Attorney (contained on signature page to the previously filed
Annual Report on Form 10-K)
|
|
10-K
|
|
000-54768
|
|
05-May-19
|
|
24.1
|
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
Filed
herewith
|
|
|
|
|
|
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
Filed
herewith
|
|
|
|
|
|
|
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
Furnished
herewith
|
|
|
|
|
|
|
|
Certification
of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
Furnished
herewith
|
|
|
|
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
|
|
Filed
herewith
|
|
|
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
Filed
herewith
|
|
|
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
Filed
herewith
|
|
|
|
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
|
Filed
herewith
|
|
|
|
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
Filed
herewith
|
|
|
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
|
|
Filed
herewith
|
|
|
|
|
18
S
IGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates
indicated.
|
Date:
January 14, 2021
|
By:
|
/s/ Daniel Solomita
|
|
|
|
Name:
|
Daniel
Solomita
|
|
|
|
Title:
|
President
and Chief Executive Officer, and Director (Principal Executive
Officer)
|
|
|
|
|
|
|
|
Date:
January 14, 2021
|
By:
|
/s/ Nelson Gentiletti
|
|
|
|
Name:
|
Nelson
Gentiletti
|
|
|
|
Title:
|
Chief
Financial Officer and Treasurer (Principal Accounting Officer and
Principal Financial Officer)
|
|
|
|
|
|
|
19
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits