EDGAR 10-K Filing

Company CIK: 1504678
Filing Year: 2021
Filename: 1504678_10-K_2021_0001654954-21-006409.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Overview
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. Loop Industries is contributing to the global movement towards a circular economy by reducing plastic waste and recovering waste plastic for a sustainable future.
Industry Background and Market Opportunity
The global annual market demand for PET plastic and polyester fiber at nearly $130 billion per year, and the current growth projections from the 2018 IHS Polymer Market Report indicate this will exceed $160 billion by 2022.
We believe, plastic pollution continues to be one of the most persistently covered environmental issues by media and local and global environmental non-governmental organizations. Some of the main concerns associated with PET are the emissions associated with its production from non-renewable hydrocarbons and the length of time it persists in landfills and the natural environment. 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. Consumer brands are seeking a solution to their plastic challenge, and they are taking action. In recent years we have seen major brands make significant commitments to close the loop on their plastic packaging by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging.
Global consumer goods companies, apparel manufacturers, and retail brands have announced significant public commitments and targets to make the transition to a circular plastic economy, namely:
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In January 2018, Danone’s evian® brand bottled spring water committed to a 100% recycled content package by 2025;
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In 2018, Coca-Cola committed to an average recycled content of 50% across its packaging by 2030;
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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;
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In 2020, L’OCCITANE en Provence committed to 100% recycled content plastic in their bottles by 2025;
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In 2020, L’Oréal Group committed to using 100% recycled or biobased plastic in their packaging by 2030;
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By 2025, Unilever targets increasing the use of post-consumer recycled plastic material in their packaging to at least 25%;
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Colgate-Palmolive states a 2025 goal of increasing recycled content for plastic to 25%;
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Nestlé aims to increase the amount of recycled PET used across their brands globally to 50% by 2025;
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Adidas Group aims to replace all virgin polyester with recycled polyester in all adidas and Reebok products where a solution exists by 2024;
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H&M is aiming to use 30% recycled material by 2025 (based on their 2018 usage as baseline) and ensuring that at least 25% of the plastic they use in packaging is from recycled content;
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Walmart has an objective to use at least 17% post-consumer recycled content globally in their private brand plastic packaging and is taking action to eliminate problematic or unnecessary plastic packaging and move from single-use towards reuse models where relevant by 2025; and
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Ikea’s ambition is, that by 2030, all plastic used in their products will be based on renewable or recycled material.
There is a growing regulatory and policy environment to encourage a reduction in the production of virgin fossil fuel based plastic and for minimum recycled content in packaging imposed by various governments. For example, on July 21 2020, the European Union announced a new tax on plastic waste starting January 1, 2021. This tax will have a rate of €800/ton on nonrecycled plastic packaging. In the UK, a new £200/ton tax will apply to plastic packaging produced or imported into the UK that does not contain at least 30% recycled plastic, effective 2022. A California law filed on September 24, 2020 requires that plastic bottles contain at least 15% post consumer resin by 2022, 25% by 2025 and 50% by 2030. The growing regulatory environment is expected to increase the demand for recycled PET plastic further.
As explained by the International Bottled Water Association, currently, mechanical recycled PET (rPET) plastic is produced principally through the conversion of bales of PET bottles. The materials have been collected and transported to a materials recovery facility (“MRF”), where they are sorted from other materials, baled, and sent to specific PET recycling facilities. The bales are broken and sorted to remove any non-PET materials. The PET is then ground and put through a separation process which separates the PET from the bottle cap and label materials. Clean PET flake is then further processed depending on its intended end market. It may become more highly refined PET pellet for new bottles or extruded into PET sheet for clamshells, trays, and cups. Recycled PET is also spun into fiber for carpet, clothing, fiber fill, or other materials. We believe mechanically recycled PET has a number of challenges in meeting the quality specifications and growing volume requirements implied by commitments from major brands, mainly due to the cost and variety of acceptable PET feedstock.
Some mechanical recycling processes involve remelting the PET flake which reduces the quality of the rPET output each time it is recycled relative to the specifications of virgin PET produced from fossil fuels. Each time the PET plastic is mechanically recycled, its quality and clarity are reduced. Therefore, mechanically recycled PET may need to be mixed with virgin PET from fossil fuels to maintain quality. Lower quality mechanically recycled PET is often downcycled to alternate uses such as polyester fibers which may be dyed and used in carpets or clothing. Additionally, mechanically recycled PET manufactured for use in clear bottles or food containers requires predominently clear and clean PET flakes separated from waste bales, and cannot accommodate darkly colored PET flakes, lower quality fiber feedstock, or materially contaminated feedstock, which may be cheaper.
We believe the commercialization plans of Loop™ PET resin and polyester fiber may provide the ideal solution for global brands because Loop™ PET resin and polyester fiber contains 100% recycled PET and polyester fiber content. The Loop™ PET resin and polyester fiber is virgin quality suitable for use in food-grade packaging. That means consumer packaged goods companies will be able to choose to market packaging made from a 100% Loop™ branded PET resin and polyester fiber.
Proprietary Technology and Intellectual Property
We believe, the power of our technology lies in its ability to use post-industrial and post-consumer waste PET plastic and polyester fiber feedstocks, which could end up in landfills, rivers, oceans and natural areas, to create Loop™ PET resin. We believe our technology can deliver high-purity 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. As the Company evaluated the transition from the GEN I technology from 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 temperatures below 90 °C to depolymerize waste PET and polyester fiber. The low temperature offers several key advantages which the company believes will improve its ability to commercialize the GEN II technology, including;
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Lower energy usage during depolymerization and therefore reduced processing cost relative to higher temperature processes;
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Avoidance of side reactions with non-PET waste, which are inherent in waste PET feedstock streams, during depolymerization which may occur during higher temperature and higher pressure depolymerization processes. This allows for a simplified distillation purification process resulting in less, and more effective, steps to isolate the desired high purity DMT and MEG monomers suitable to produce virgin quality PET required to meet food contact regulations as well as the quality and clarity requirements of global consumer product companies;
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Allowing the depolymerization of less costly and low-quality feedstocks, which cannot be effectively recycled today, such as carpet fiber, clothing and mixed plastics, and upcycling them into high quality PET that can used in food contact use; and
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The GEN II technology uses only trace amounts of water, eliminates the need for a halogenated solvent and uses a catalyst at low concentration.
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 by decoupling PET manufacturing from the fossil fuel industry.
To independently validate that our GEN II technology can produce DMT and MEG monomers at mini-pilot and pilot scale, we commissioned Kemitek, a College Centre for Technology Transfer specialized in the fields of green chemistry and chemical process scale-up. Kemitek’s findings allowed them to confirm that our technology produces monomers that meet our purity specifications for the production of PET resin and polyester fiber. The complete, Kemitek report was filed with the SEC by the Company on December 14, 2020.
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 technology areas, referred to as GEN I technology and the GEN II technology, with patent claims relating to our technology for depolymerizing PET.
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The GEN I technology portfolio has three issued U.S. patents, all expected to expire on or around July 2035. Internationally, we also have issued patents in Argentina, Australia, Europe, Eurasia, Israel, Taiwan, South Africa, and in the members of the Gulf Cooperation Council, allowed patent applications in China and Japan, and pending patent applications in Brazil, Canada, Hong Kong, India, Korea, Mexico, and the Philippines, all expected to expire, if granted, on or around July 2036, not including any patent term extension.
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The GEN II technology portfolio currently consists of four patent families:
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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 issued patent 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, Malaysia, Panama, Papua New Guinea, Philippines, Pakistan, Singapore, Taiwan, Uruguay, Uzbekistan, Venezuela, and South Africa, all expected to expire on or around September 2038, if granted and not including any patent term extension.
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An additional aspect of the GEN II technology is claimed in an issued U.S. patent and a pending U.S. application. Internationally, we also have an allowed patent application in Bangladesh and pending applications in Algeria, Argentina, Australia, Bahrain, Bolivia, Brazil, Cambodia, Canada, Chile, China, Eurasia, Egypt, Europe, India, Indonesia, Israel, Iran, Japan, Korea, Kuwait, Laos, Malaysia, members of the Gulf Cooperation Council, Mexico, Morocco, New Zealand, Oman, Pakistan, Panama, Peru, Philippines, Qatar, Saudi Arabia, Singapore, South Africa, Taiwan, Thailand, Tunisia, United Arab Emirates, Uruguay, Uzbekistan and Vietnam, all expected to expire on or around June 2039, if granted and not including any patent term extension.
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A further additional aspect of the GEN II technology is the subject of a U.S. application and an International 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.
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Another further additional aspect of the GEN II technology is the subject of a U.S. application, an International application, and pending 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.
Loop owns registrations for its trademarks in Canada, the European Union, the United Kingdom, and the U.S. Loop also has pending applications in Cambodia, Canada, Indonesia, Taiwan, the U.S., and Vietnam.
Government Regulation and Approvals
As we seek to further develop and commercialize our technology, we will be subject to extensive and frequently developing federal, state, provincial and local laws and regulations. Compliance with current and future regulations, including food packaging 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 believe that if we are successful in addressing food packaging regulations in various countries and economic regions, that the regulatory environment may provide Loop™ PET resin a competive advantage relative to mechanically recycled alternative resins and virgin PET.
We received a no-objection letter (NOL) on March 1, 2021 from the US Federal Food and Drug Administration (“FDA”) to confirm the capability of Loop Industries’ tertiary recycling process, known as methanolysis, in cleaning and producing post-industrial and post-consumer recycled PET for use in the manufacture of food-contact articles that contact all food types all conditions of use for which PET is permitted. The request to the FDA was initiated on November 23, 2020 and the NOL grant was provided within the expected response period of three to six months.
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.
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 and additionally support the March 1, 2021 NOL from the FDA.
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 use 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 it is recyclable and is made from 100% recycled PET waste and polyester fiber, while being virgin-quality and 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 its marketability to extoll the sustainability credentials of consumer brands that incorporate it, we believe we will be able to sell Loop™ branded PET resin at a premium price relative to virgin and mechanically recycled PET resin.
We are pursuing supply agreements with customers that are located in North America, Europe, and Asia. We currently have agreements with some of the world’s leading brands to be supplied from our planned commercial facility from our joint venture with Indorama Ventures Holdings LP (“Indorama”) in Spartanburg, South Carolina, including:
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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;
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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;
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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
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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 PET 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.
Commercialization Plan and Progress
During the year ended February 28, 2021, we continued executing our corporate strategy with a focus on the commercialization of our technology. We are progressing on the engineering of our full-scale commercial facilities with our engineering partner Worley, a leading global engineering, procurement and construction company. The engineering philosophy we have adopted is design one, build many. This approach allows for the process design package, which has been completed, to be used as the base engineering platform for all future geographical expansion. We believe this approach allows for a quick execution, speed to market and lends itself well to modular construction.
The Infinite LoopTM 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 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, strategic partnerships, and licensing agreements. We believe that industrial companies, some of which today may not be in the business of manufacturing PET resin or polyester fiber, will view involvement in Infinite Loop™ projects as a growth opportunity, which may offer attractive economic returns either as Loop manufacturing partners or as licensees of the technology.
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 resin and polyester fiber manufacturing know-how of INVISTA’s technology and licensing group, INVISTA Performance Technologies (IPT) (“INVISTA”). The INVISTA know how will be used for the polymerization of DMT and MEG monomer output from Loop’s depolymerization technology, the result of which is LoopTM PET resin or polyester fiber made from 100% recycled content. The INVISTA polymerization process and the associated designs are historically proven in the commercial production of PET resin and polyester fiber.
We continue to focus on the completion of the Infinite LoopTM engineering design with an intial target capacity of up to 70,000 metric tons/year. Permitting, site and regulatory considerations may impact plant capacity for the various projects. The design includes the integration of our depolymerization technology with INVISTA’s polymerization technology in partnership with Worley. We intend to use this design when evaluating Infinite LoopTM facilities in various regions. Worley has completed the pre-feasibility engineering as part of the planning phase for an Infinite LoopTM manufacturing facility in the province of Québec. We expect that Worley may also play a role in the feasibility phase of engineering and the future design of larger capacity facilities.
We believe that Infinite LoopTM recycled PET resin and polyester fiber would command premium pricing over virgin, petroleum-based PET resin and provide attractive economic returns. We are targeting multi-year take or pay offtake agreements for planned Infinite LoopTM production. Factors under consideration in determining project economics include pre-feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, logistics, and ramp up, among others.
Infinite LoopTM Bécancour, Québec
We are in the planning phase for an Infinite LoopTM manufacturing facility in the province of Québec (the “Québec Project”). On May 27, 2021, we acquired a 19 million square foot parcel of land in Bécancour, Québec for $4.8 million (CDN $5.9 million) (the “New Site”). The site offers attractive logistics being located on the St-Lawrence river and access to rail. As previously disclosed, we had identified a different 2 million square feet parcel of land in Bécancour, Québec (the “Previous Site”), and had negotiated an option right to purchase that parcel of land. The environmental impact of building on the New Site is lower than the Previous Site because we will be recycling an industrial site that has previously been demolished. The development of this site will likely not result in the destruction of wetlands or forest and it reduces the overall construction costs and permitting time. The site size exceeds our project needs and we may choose to sell a portion of the land to offset part of our project commitment. We will not exercise the purchase option which was agreed in January 2021 to acquire the Previous Site and we will cease monthly payments for the option rights of the Previous Site.
The Québec Project is currently contemplated as wholly-owned and operated by Loop Industries which allows us to commercialize near our Innovation and Engineering teams located in Terrebonne, Québec. To fund the project and enhance our target returns, we are exploring financing options. Alternatives under exploration include incentive and financing programs supported by, or in partnership with, various levels of government.
The Québec Project would allow the Company to proceed with Infinite LoopTM commercialization in a more expeditious manner without being impacted by COVID-19 restrictions on international travel.
Infinite LoopTM Europe
We announced on September 10, 2020 a strategic partnership with SUEZ GROUP (“Suez”), with the objective to build the first Infinite Loop™ manufacturing facility in Europe. With the combination of the Infinite LoopTM 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 ambitious targets for a high level of recycled content in their products. Together with Suez, we 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 and engineering. We are targeting final site selection during the summer of 2021.
Joint Venture with Indorama
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 (“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 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. In 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 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 due to the COVID-19 pandemic (see “The global COVID-19 pandemic” as noted under “Risk Factors”). As part of the Joint Venture Agreement, we are committed to contribute our equity share for the costs under the joint venture agreement to construct the facility. During the year ended February 28, 2021, we made a contribution of $650,000 and as at February 28, 2021, we have contributed a total of $1,500,000 to the joint venture.
The joint venture made a decision over the summer of 2020 that due to the COVID-19 pandemic it would temporarily delay work on the project. Since then, no expenditures have been incurred by the joint venture. The travel restrictions and quarantine requirements between Canada and the US continued to cause disruptions in our timetable. While both joint venture partners currently remain committed to the project, we continue to monitor the COVID-19 implications on the project timetable.
Demonstration Plant and Innovation Center in Terrebonne, Québec
As part of our plan for the commercialization of future Infinite LoopTM manufacturing facilities, we decided to convert our Terrebonne, Québec pilot plant to an Infinite LoopTM demonstration and training facility. This demonstration facility will be used to showcase the Infinite LoopTM end to end technology to potential partners and customers, and train operational teams in advance of the commissioning of commercial plants.
We made significant investments in the demonstration plant during the year ended February 28, 2021. In particular, we installed and began operation of two new depolymerization reactors in the last quarter. The depolymerization reactors substantially increase our demonstration facility’s depolymerization capacity and confirm the design and scale-up factor for the feasibility engineering of the planned commercial-scale facilities. In addition, we have also entered into an agreement to acquire PET polymerization equipment from Chemtex to manufacture of Loop™ branded PET resin at our demonstration plant. We anticipate the Infinite LoopTM demonstration plant project to be largely completed by late in calendar 2021 and delivering Loop™ branded PET resin to customers starting in calendar 2022.
In addition to the capital requirements for our commercialization, we plan to continue to invest in strengthening our intellectual property portfolio, building a core competency in managing strategic relationships and continue enhancing our brand value. Our research and development innovation center in Terrebonne, Québec will continue to push forward the development of our technology.
Human Capital
Our employees are essential to our success and we are committed to providing a safe, productive, discrimination-free and harassment-free work environment. All employees are responsible for compliance with our Code of Ethics as well as our health and safety, and anti-harassment policies. These policies and practices help us foster a workplace environment that promotes inclusion and diversity.
To attract and retain highly capable and innovative employees, we have developed competitive compensation packages and benefits programs. Our compensation packages include market-competitive pay, healthcare benefits, paid time off and family leave and flexible work schedules. We also offer equity awards with multi-year vesting provisions to incentivize and reward our employees for long term corporate performance and promote retention throughout the vesting period.
To support our employees this fiscal year and to promote their health and safety, we encouraged administrative and engineering employees to work remotely. We provided emergency leave for employees to take care of a child or parent due to COVID-19 disruptions.
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. On January 11, 2021, Mr. Yves Perron was hired as the Company’s Vice-President, Engineering and Construction. On February 26, 2021, Mr. Nelson Gentiletti retired and stepped down as the Company’s Chief Operating Officer (“COO”) and Chief Financial Officer (“CFO”) on March 1, 2021, on which date Drew Hickey was appointed as the Company’s CFO. Mr. Gentiletti remained with the Company until April 30, 2021 to ensure an orderly transition of his responsibilities. 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 February 28, 2021, we had 64 employees of which 29 work in research and development and 22 in engineering and operations.
Corporate History
We were originally incorporated in Nevada in March 2010 under the name Radikal Phones Inc., which was changed to First American Group Inc. in October 2010. On June 29, 2015, we completed a reverse acquisition of Loop Holdings, Inc. (“Loop Holdings”) whereby we acquired all of Loop Holdings’ issued and outstanding shares of common stock in a share exchange for approximately 78.1% of our capital stock at the time. The depolymerization business of Loop Holdings became our sole operating business. On June 22, 2015, our board of directors approved a change in the fiscal year end date from September 30 to the last day of February. On July 21, 2015, we changed our name to Loop Industries, Inc.
Loop Holdings was originally incorporated in Nevada on October 23, 2014. The depolymerization technology underlying our business was originally developed by Hatem Essaddam who sold the technology and related intellectual property rights to Loop Holdings in October 2014, pursuant to an Intellectual Property Assignment Agreement dated October 27, 2014, by and among Hatem Essaddam, Loop Holdings, and Daniel Solomita. The intellectual property acquired pursuant to such Intellectual Property Agreement formed the basis for establishing the GEN I technology that was initially used by us. The GEN I technology has now been superseded by the development of our GEN II technology, which forms the basis for our commercialization into the future. We do not intend to commercialize our GEN I technology.
On May 24, 2016, 9449507 Canada Inc. was organized under the federal laws of Canada and on November 11, 2016 became a wholly-owned subsidiary of Loop Industries, Inc. following the transfer by Mr. Solomita of all of the issued and outstanding shares of common stock of 9449507 Canada Inc. to Loop Industries, Inc. On December 23, 2016, 9449507 Canada Inc. changed its legal name to Loop Canada Inc.
On December 31, 2016, 8198381 Canada Inc. entered into a purchase and sale agreement to transfer to Loop Canada Inc., all assets and liabilities it held pertaining to our business of depolymerizing plastics, including employees and operations.
On March 9, 2017, Loop Holdings, our wholly-owned subsidiary, merged with and into Loop Industries, Inc., with Loop Industries, Inc. being the surviving entity as a result of the merger.
On November 20, 2017, Loop Industries, Inc. 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.” From October 29, 2015 through April 7, 2017, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol “LLPP.” From September 26, 2012 to October 28, 2015, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol “FAMG.”
Corporate Information
Our principal executive offices are located at 480 Fernand-Poitras Street, Terrebonne, Québec, Canada J6Y 1Y4. Our telephone number is (450) 951-8555. The information contained on, or that can be accessed through, our website is not a part of this Annual Report on Form 10-K.
Available Information
Our website is www.loopindustries.com, and our investor relations web page can be found at https://www.loopindustries.com/en/investors/home. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the Securities and Exchange Commission, or the SEC. The SEC also maintains a website that contains our SEC filings. The address of the site is www.sec.gov.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this Form 10-K before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occur, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.
RISK FACTORS SUMMARY
This risk factor summary contains a high-level summary of risks associated with our business, but does not address all of the risks that we face. Additional discussion of the risks summarized below, and other risks that we face, may be found immediately following this summary.
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We have incurred net losses and have never generated revenue since inception and expect to continue to incur losses for the foreseeable future and may never achieve or maintain profitability.
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Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
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We may not be able to execute our business plan or stay in business without additional funding.
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The global COVID-19 pandemic has adversely affected, and may in the future adversely affect, our business, results of operations and financial condition.
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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.
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We have been named as a defendant in a putative shareholder class action lawsuits and are subject to an SEC Investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.
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The macro-economic environment in the United States and abroad has adversely affected, and may in the future adversely affect, our ability to raise capital, which may potentially impact our ability to continue our operations.
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Our technology may not be successful in developing commercial products and if we are unable to successfully scale our manufacturing processes, we may not meet customer demand.
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We face business risks due to our relationships with strategic partners.
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Decreases in our ability to develop or apply new technology and know-how or protect our intellectual property and proprietary technology or obtain or maintain trade secret protection may affect our competitiveness.
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Disruption at, damage to or destruction of our demonstration and training plant or facilities could impede our ability to continue innovating and refining our technological process, which would harm our business, financial condition and operating results.
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The plastics manufacturing industry is extremely price-competitive because of the commodity-like nature of virgin PET resin and its correlation to the price of crude oil. If our cost to manufacture recycled PET is not competitive with virgin PET or if the price of oil reduces significantly, it may adversely impact our ability to penetrate the market or be profitable.
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We are vulnerable to fluctuations in the supply and price of raw materials.
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The loss of the services of Mr. Daniel Solomita, our President and Chief Executive Officer, and Chairman of the Board of Directors, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business.
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Our demonstration and training facility and other facilities must operate under policies, procedures, and controls for the operation of a chemical manufacturing facility as required under various federal, provincial and local regulations and codes. Failure to comply with such regulations and codes may lead to disruption of operations at the pilot plant and the development of our technology, and financial sanctions.
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If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the price of our common stock.
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We are subject to various federal, provincial, 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.
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Raising additional funds may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
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Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity. Our stock price may be volatile, and our stockholders could incur significant investment losses.
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Our President and Chief Executive Officer and Chairman of the Board of Directors, Mr. Daniel Solomita, beneficially owns a majority of the total voting power of our capital stock, and accordingly, has control over stockholder matters, our business and management.
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Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of our company.
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Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
RISKS RELATING TO OUR BUSINESS AND TECHNOLOGY
We have incurred net losses since inception. We expect to continue to incur losses for the foreseeable future and may never achieve or maintain profitability. We have never generated material revenue and may never be profitable.
Since our inception in 2010, we have incurred net losses. Our net loss for the year ended February 28, 2021 was $36.34 million and we have earned no revenues to date. We have financed our operations primarily through sales of common stock and incurrence of debt and have devoted substantial efforts to research and development, as well as building our team. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. Although we believe that our business plan has significant profit potential, we may not attain profitable operations and management may not succeed in realizing our business objectives. Our ability to generate revenue depends on our ability to successfully complete the development of our technology and products, obtain the regulatory approvals necessary to commercialize our products, attract additional customers, finance, build and operate commercial facilities. We expect to incur operating losses in future periods. These losses will occur as we do not have any revenues to offset the expenses associated with our business operations. We may not generate revenues from product sales for the next several years, if ever. If we are not able to develop our business as anticipated, we may not be able to generate revenues or achieve profitability. We cannot guarantee that we will ever be successful in generating revenues in the future. If we are unable to generate revenues, we will not be able to earn profits or continue operations.
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
Our business was started in October 2014 with the incorporation of Loop Holdings, Inc. and 8198381 Canada Inc., and the acquisition of our GEN I technology in October 2014. Our operations to date have been primarily limited to organizing and staffing our company, business planning, raising capital and developing our technology and our demonstration and training plant. We have not yet demonstrated the ability to manufacture a commercial-scale product or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history. In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research focus to a company that is also capable of supporting commercial activities. We may not be successful in such a transition.
There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will almost certainly fail.
We may not be able to execute our business plan or stay in business without additional funding.
Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through a combination of the issuance of debt, equity, and/or joint ventures and/or government incentive programs in order to establish profitable operations, and such financing may not be forthcoming. If we are unable to attract investors to invest in our business, we may not be able to acquire additional financing through debt or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. Our failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on our ability to remain in business.
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 periods from March 25, 2020 to May 11, 2020 and December 25, 2020 to February 7, 2021 to continue reduced operations at our pilot plant, the situation globally 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 delays 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 in full, either in person or in a work-from-home capacity. 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.
As a result of COVID-19 and the measures designed to contain the spread of the virus, we may not have the materials or capacity to continue our development efforts according to our schedule. Further, there may be logistics issues, operations impacts, and transportation disruptions that may cause further delays or increase costs.
The macroeconomic environment in the United States and abroad has adversely affected, and may in the future adversely affect, our ability to raise capital, which may potentially impact our ability to continue our operations.
We have and, prior to commercialization, will continue to rely on raising funds from investors and/or other sources to support our research and development activities and our operations. Macro-economic conditions in the United States and abroad may result in a tightening of the credit markets and/or less capital available for small public companies, which may make it more difficult to raise capital. Specifically, the outbreak of COVID-19 has caused significant disruptions to the global financial markets, which could increase the cost of capital or volatility and adversely impact our ability to raise additional capital, which could negatively affect our liquidity in the future. If we are unable to raise funds as and when we need them, we may be forced to curtail our operations or even cease operating altogether. Therefore, unfavorable macroeconomic conditions, including as a result of COVID-19 and any resulting recession or slowed economic growth, could have a negative impact on us. It is not possible at this time to estimate the impact that COVID-19 could have on our business, as the impact will depend on future developments, which are highly uncertain.
Our technology may not be successful in developing commercial products.
We and our potential future collaborators may spend many years and dedicate significant financial and other resources developing our technology that may never be successfully commercialized. Our technology may never become successfully commercialized for any of the following reasons:
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We may not be able to secure sufficient funding to progress our technology through development and commercial validation;
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We or our future collaborators may be unable to obtain the requisite regulatory approvals for our technology;
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Competitors may launch competing or more effective technology;
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Our technology may not be commercially successful;
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Current and future collaborators may be unable to fully develop and commercialize products containing our technology or may decide, for whatever reason, not to commercialize such products; and
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We may be unable to secure adequate patent protection in the necessary jurisdictions.
If any of these things were to occur, it could have a material adverse effect on our business and our results of operations.
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 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.
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. We may encounter difficulties in scaling up production, including problems with the supply of key components. 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 demonstration plant with limited production capacity used principally for research and development, training and customer marketing purposes. 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.
Decreases in our ability to develop or apply new technology and know-how may affect our competitiveness.
Our success depends partially on our ability to improve production processes and services. We must also introduce new products and services to meet changing customer needs. If we are unable to implement better production processes or to develop new products through research and development or licensing of new technology, we may not be able to remain competitive with other manufacturers. As a result, our business, financial condition or results of operations could be adversely affected.
Disruption at, damage to or destruction of our pilot plant or facilities could impede our ability to continue innovating and refining our technological process, which would harm our business, financial condition and operating results.
Our research and development activities are performed from a single location in Terrebonne, Québec. Our continued innovation activities rely on an uninterrupted and fully functioning pilot plant. Interruptions in operations at this location could result in our inability to provide the most efficient and effective technological solution to our customers. A number of factors could cause interruptions, including, but not limited to, equipment malfunctions or failures, technology malfunctions, work stoppages or slow-downs, damage to or destruction of the facility or regional power shortages. As our equipment ages, it will need to be replaced. Any disruption that impedes our ability to optimize our process in a timely manner could reduce our revenues and materially harm our business.
The plastics manufacturing industry is extremely price-competitive because of the commodity-like nature of virgin PET resin and its correlation to the price of crude oil. If our cost to manufacture recycled PET is not competitive with virgin PET or if the price of oil reduces significantly, it may adversely impact our ability to penetrate the market or be profitable.
The demand for recycled PET has historically 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.
We are vulnerable to fluctuations in the supply and price of raw materials.
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 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 feedstock supply strategy, including any 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.
The loss of the services of Mr. Daniel Solomita, our President and Chief Executive Officer, and Chairman of the Board of Directors, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business.
The development of our business and the marketing of our prospective products will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers who are developing our business, and on our ability to identify and retain competent consultants and employees with the skills required to execute our business objectives. The loss of the services of Mr. Daniel Solomita or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business which could adversely affect our financial results and impair our growth.
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 to continue to incur legal fees in relation to litigation, investigations and other proceedings.
We have been named as a defendant in a putative shareholder class action lawsuits and are subject to an SEC Investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.
We are defending against a putative shareholder class action lawsuits described in “Item 3. Legal Proceedings-Litigation,” including any appeals of such lawsuit. We are currently unable to estimate the possible loss or possible range of loss, if any, associated with the resolution of these lawsuits. In the event that our initial defense of these lawsuits is unsuccessful, there can be no assurance that we will prevail in any appeal. Any adverse outcome, including any plaintiff’s appeal of the judgment in this case, could have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In addition, there can be no assurance that our insurance carriers will cover all or part of the defense costs, or any liabilities that may arise from these matters. The litigation process may utilize a significant portion of our cash resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business. We also may be subject to claims for indemnification related to these matters, and we cannot predict the impact that indemnification claims may have on our business or financial results.
In addition, as described in “Item 3. Legal Proceedings-SEC Investigation,” of this annual report, 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. We cannot predict or provide any assurance as to the timing, outcome or consequences of the SEC investigation. If the SEC were to conclude that enforcement action is appropriate, we could be required to pay civil penalties and fines, and the SEC could impose other sanctions against us or against our current and former officers and directors. We have incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with matters relating to or arising from the SEC investigation. In addition, our board of directors, management and employees may expend a substantial amount of time on the SEC investigation, diverting resources and attention that would otherwise be directed toward our operations and implementation of our business strategy, all of which could materially adversely affect our business, financial condition and results of operations. Furthermore, while the SEC has informed us that the investigation should not be construed as an indication by the SEC or its staff that any violation of law has occurred, nor as a reflection upon any person, entity or security, publicity surrounding the foregoing, or any SEC enforcement action or settlement as a result of the SEC’s investigation, even if ultimately resolved favorably for us, could have an adverse impact on our reputation, business, financial condition, results of operations or cash position.
Our demonstration and training facility or other facilities must operate under policies, procedures, and controls for the operation of a chemical manufacturing facility as required under various federal, provincial and local regulations and codes. Failure to comply with such regulations and codes may lead to disruption of operations at the demonstration and training facility or other facilities and the development of our technology, and financial sanctions.
We are subject to health and safety as well as environmental, zoning and any other regulatory requirements to operate our demonstration and training facility and our other facilities, and as our business evolves, we, directly or indirectly through our partners or other related parties, may be subject to additional government regulations. Any failure to comply with ongoing regulatory requirements, as well as discovery of previously unknown problems, may result in, among other things, costly regulatory inspections, fines or remediation plans. If regulatory issues arise, the value of our business and our operating results may be adversely affected.
Additionally, applicable regulations may change, and additional government regulations may be enacted that could impact our business. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in Canada, the United States or abroad. If we are not able to maintain regulatory compliance, are slow or unable to adopt new requirements or policies, or effect changes to existing requirements, our business may be adversely affected.
Our failure to protect our intellectual property and proprietary technology may significantly impair our competitive advantage.
Our success and ability to compete depend in large part upon protecting our proprietary technology. We rely on a combination of patent, trademark and trade secret protection, confidentiality, nondisclosure and nonuse agreements to protect our proprietary rights. The steps we have taken may not be sufficient to prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. The patent and trademark law and trade secret protection may not be adequate to deter third party infringement or misappropriation of our patents, trademarks and similar proprietary rights.
We may face costly intellectual property infringement claims, the result of which would decrease the amount of cash available to operate and complete our business plan.
We anticipate that, from time to time, we will receive communications from third parties asserting that we are infringing certain patents and other intellectual property rights of others or seeking indemnification against alleged infringement. If anticipated claims arise, we will evaluate their merits. Any claims of infringement brought forth by third parties could result in protracted and costly litigation, damages for infringement, and the necessity of obtaining a license relating to one or more of our products or current or future technologies, which may not be available on commercially reasonable terms or at all. Litigation, which could result in substantial costs to us and diversion of our resources, may be necessary to enforce our patents or other intellectual property rights or to defend us against claimed infringement of the rights of others. Any intellectual property litigation and the failure to obtain necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations.
We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could harm our business.
We rely on trade secrets to protect some of our technology and proprietary information, especially where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. Litigating a claim that a third party had illegally obtained and used our trade secrets would be expensive and time consuming, and the outcome would be unpredictable. Moreover, if our competitors independently develop similar knowledge, methods and know-how, it will be difficult for us to enforce our rights and our business could be harmed.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the price of our common stock.
We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with our Annual Report on Form 10-K. This report must include management’s assessment of the effectiveness of our internal control over financial reporting as at the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified.
The process of designing and implementing internal control over financial reporting required to comply with Section 404 of the Sarbanes-Oxley Act is time consuming, costly and complicated. If during the evaluation and testing process, we identify one or more other material weaknesses in our internal control over financial reporting or determine that existing material weaknesses have not been remediated, our management will be unable to assert that our internal control over financial reporting is effective. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
The COVID-19 pandemic has not had a significant impact on the design and effectiveness of the Company’s internal controls over financial reporting.
We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations.
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.
We mainly finance our operations through the sale and issuance of shares of common stock 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 U.S. dollar to 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 differ 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.
We are subject to various federal, provincial, 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, provincial, 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.
RISKS ASSOCIATED WITH OUR SECURITIES
Raising additional funds may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
If we raise additional funds through equity offerings or offerings of equity-linked securities, including warrants or convertible debt securities, our existing stockholders may experience significant dilution, and the terms of such securities may include liquidation or other preferences that may adversely affect the rights of our stockholders. Debt financings, if available, may subject us to restrictive covenants that could limit our flexibility in conducting future business activities, including covenants limiting or restricting our ability to incur additional debt, dispose of assets or incur capital expenditures. We may also incur ongoing interest expense and be required to grant a security interest in our assets in connection with any debt issuance. If we raise additional funds through strategic partnerships or licensing agreements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms that are not favorable to us.
Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity. Our stock price may be volatile, and our stockholders could incur significant investment losses.
The trading price for our common stock will be affected by a number of factors, including:
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any change in the status of our Nasdaq listing;
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the need for near-term financing to continue operations;
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our ability to develop and commercialize our technology, relative to investor expectations;
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general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors;
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volatility in the financial and credit markets, including the recent volatility due, in part, to the current COVID-19 outbreak;
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future issuances and/or sales of our securities;
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announcements or the absence of announcements by us, or our competitors, regarding collaborations, new products, significant contracts, commercial relationships or capital commitments;
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commencement of, or involvement in, litigation or investigations;
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any major change in our board of directors or management;
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changes in governmental regulations or in the status of our regulatory approvals;
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announcements related to patents issued to us or our competitors and to litigation involving our intellectual property;
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a lack of, or limited, or negative industry or security analyst coverage;
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uncertainty regarding our ability to secure additional cash resources with which to operate our business;
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short-selling or similar activities by third parties;
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limited trading liquidity in our shares and any short positions held; and
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other factors described elsewhere in these Risk Factors.
As a result of these factors, our stockholders may not be able to resell their shares at, or above, their purchase price. In addition, the stock prices of many technology companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies. Any negative change in the public’s perception of the prospects of companies in our industry could depress our stock price regardless of our results of operations. These factors may have a material adverse effect on the market price and liquidity of our common stock and affect our ability to obtain required financing.
Our President and Chief Executive Officer and Chairman of the Board of Directors, Mr. Daniel Solomita, beneficially owns a majority of the total voting power of our capital stock, and accordingly, has control over stockholder matters, our business and management.
As at May 27, 2021, Mr. Daniel Solomita, our President and Chief Executive Officer, Chairman of the Board of Directors, and controlling shareholder, beneficially owns 19,010,000 shares of common stock, or 44.8% of our issued and outstanding shares of common stock and also holds one share of Series A Preferred Stock. The one share of Series A Preferred Stock issued to Mr. Solomita holds a majority of the total voting power so long as Mr. Solomita holds not less than 7.5% of the issued and outstanding shares of our common stock, assuring Mr. Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of our common stock is diluted to a level below a majority. Currently, Mr. Solomita’s beneficial ownership of 19,010,000 shares of common stock and 1 share of Series A Preferred Stock provides him with 77.0% of the voting control of the Company.
Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which precludes us from taking certain actions without Mr. Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval. More specifically, so long as any shares of Series A Preferred Stock are outstanding, we are not permitted to take certain actions without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class, including for example and without limitation, amending our articles of incorporation, changing or modifying the rights of the Series A Preferred Stock, including increasing or decreasing the number of authorized shares of Series A Preferred Stock, increasing or decreasing the size of the board of directors or remove the director appointed by the holders of our Series A Preferred Stock and declaring or paying any dividend or other distribution.
Moreover, because of the significant ownership position held by our insiders, new investors may not be able to effect a change in our business or management, and therefore, stockholders would have no recourse as a result of decisions made by management.
In addition, sales of significant amounts of shares held by Mr. Solomita, or the prospect of these sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of our company.
Though not now, we may in the future become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the company in the election of directors: (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.
The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of our stockholders, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.
If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights, is entitled to demand fair value for such stockholder’s shares.
In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the company’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the company, or (ii) an affiliate or associate of the company and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the company. The definition of the term “combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the company’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the company and its other stockholders.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.
Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. Stockholders may not be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.
Changes in tax legislation in the countries the Company has operations could adversely affect our results of operations and financial condition.
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (“TCJA”) that significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. The impact of enactment of U.S. tax reform was recorded on a provisional basis as the legislation provides for additional guidance to be issued by the U.S. Treasury Department on several provisions including the computation of the transition tax. We continue to examine the impact this tax reform legislation may have on our business and we urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
On January 26, 2018, we completed the purchase of the land and building housing our pilot plant and corporate offices located at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4. The 31.9 thousand square foot facility includes 7.4 thousand square feet for our executive offices and 24.5 thousand square feet for our innovation and operational activities. We believe that our existing facilities are adequate for our current needs.
On May 27, 2021, we acquired a 19 million square foot parcel of land in Bécancour, Québec for approximately $4.8 million (CDN $ 5.9 million). The site is part of our planning for an Infinite LoopTM manufacturing facility. The location is near existing industrial infrastructure, which reduces project costs, permitting time and does not result in the destruction of wetlands or forest.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. 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 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.
Plaintiffs served a consolidated amended complaint on February 18, 2021 which alleges defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by 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. The consolidated amended complaint relies on the October 13, 2020 report published by a third party regarding the Company to support their allegations. Defendants served a motion to dismiss the consolidated amended complaint on April 27, 2021. Plaintiffs’ opposition to the motion to Dismiss was served on May 27, 2021 and Defendants’ reply in support of the motion to dismiss is due on June 11, 2021.
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.
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.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the section captioned “Executive Officers” contained in our proxy statement for the 2021 annual meeting of stockholders, to be filed with the Commission pursuant to Regulation 14A, not later than 120 days after February 28, 2021.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information for Common Stock
Our common stock is currently traded on the Nasdaq Global Market under the 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.” From October 29, 2015 through April 7, 2017, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol “LLPP.” From September 26, 2012 to October 28, 2015, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol “FAMG.”
Holders
As at May 27, 2021, there were 42,433,320 shares of common stock issued and outstanding (excluding shares of common stock issuable upon conversion or conversion into shares of common stock of all of our currently outstanding Series A Preferred Stock) held by approximately 52 stockholders of record. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Dividends
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future. There are no restrictions in our Articles of Incorporation or By-laws that prevent us from declaring dividends. The Nevada Revised Statutes, however, prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
●
we would not be able to pay our debts as they become due in the usual course of business; or
●
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution, unless otherwise permitted under our Articles of Incorporation.
Recent Sales of Unregistered 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.
Purchases of Equity Securities by the Registrant and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during the year ended February 28, 2021.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
Pursuant to SEC Release No. 33-8876, we are permitted to use the scaled disclosure requirements applicable to a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, and therefore, we are not required to provide the information called for by this Item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. 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 “Risk Factors” discussed elsewhere in this Report. Please refer to the Cautionary Note Regarding Forward-Looking Statements on page 4.
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. Loop Industries is contributing to the global movement towards a circular economy by reducing plastic waste and recovering waste plastic for a sustainable future.
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 use in two ways; by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging. We believe Loop™ PET resin and polyester fiber provides the ideal solution for these brands because it is recyclable and is made from 100% recycled waste PET and polyester fiber, while being virgin-quality and suitable for use in food-grade packaging.
Commercialization Plan and Progress
During the year ended February 28, 2021, we continued executing our corporate strategy with a focus on the commercialization of our technology. We are progressing on the engineering of our full-scale commercial facilities with our engineering partner Worley, a leading global engineering, procurement and construction company. The engineering philosophy we have adopted is design one, build many. This approach allows for the process design package, which has been completed, to be used as the base engineering platform for all future geographical expansion. We believe this approach allows for a quick execution, speed to market and lends itself well to modular construction.
The Infinite LoopTM 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 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, strategic partnerships, and licensing agreements. We believe that industrial companies, some of which today may not be in the business of manufacturing PET resin or polyester fiber, will view involvement in Infinite Loop™ projects as a growth opportunity, which may offer attractive economic returns either as Loop manufacturing partners or as licensees of the technology.
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 resin and polyester fiber manufacturing know-how of INVISTA’s technology and licensing group, INVISTA Performance Technologies (IPT) (“INVISTA”). The INVISTA know how will be used for the polymerization of DMT and MEG monomer output from Loop’s depolymerization technology, the result of which is LoopTM PET resin or polyester fiber made from 100% recycled content. The INVISTA polymerization process and the associated designs are historically proven in the commercial production of PET resin and polyester fiber.
We continue to focus on the completion of the Infinite LoopTM engineering design with an intial target capacity of up to 70,000 metric tons/year. Permitting, site and regulatory considerations may impact plant capacity for the various projects. The design includes the integration of our depolymerization technology with INVISTA’s polymerization technology in partnership with Worley. We intend to use this design when evaluating Infinite LoopTM facilities in various regions. Worley has completed the pre-feasibility engineering as part of the planning phase for an Infinite LoopTM manufacturing facility in the province of Québec. We expect that Worley may also play a role in the feasibility phase of engineering and the future design of larger capacity facilities.
We believe that Infinite LoopTM recycled PET resin and polyester fiber would command premium pricing over virgin, petroleum-based PET resin and provide attractive economic returns. We are targeting multi-year take or pay offtake agreements for planned Infinite LoopTM production. Factors under consideration in determining project economics include pre-feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, logistics, and ramp up, among others.
Infinite LoopTM Bécancour, Québec
We are in the planning phase for an Infinite LoopTM manufacturing facility in the province of Québec (the “Québec Project”). On May 27, 2021, we acquired a 19 million square foot parcel of land in Bécancour, Québec for $4.8 million (CDN $5.9 million) (the “New Site”). The site offers attractive logistics being located on the St-Lawrence river and access to rail. As previously disclosed, we had identified a different 2 million square feet parcel of land in Bécancour, Québec (the “Previous Site”), and had negotiated an option right to purchase that parcel of land. The environmental impact of building on the New Site is lower than the Previous Site because we will be recycling an industrial site that has previously been demolished. The development of this site will likely not result in the destruction of wetlands or forest and it reduces the overall construction costs and permitting time. The site size exceeds our project needs and we may choose to sell a portion of the land to offset part of our project commitment. We will not exercise the purchase option which was agreed in January 2021 to acquire the Previous Site and we will cease monthly payments for the option rights of the Previous Site.
The Québec Project is currently contemplated as wholly-owned and operated by Loop Industries which allows us to commercialize near our Innovation and Engineering teams located in Terrebonne, Québec. To fund the project and enhance our target returns, we are exploring financing options. Alternatives under exploration include incentive and financing programs supported by, or in partnership with, various levels of government.
The Québec Project would allow the Company to proceed with Infinite LoopTM commercialization in a more expeditious manner without being impacted by COVID-19 restrictions on international travel.
Infinite LoopTM Europe
We announced on September 10, 2020 a strategic partnership with SUEZ GROUP (“Suez”), with the objective to build the first Infinite Loop™ manufacturing facility in Europe. With the combination of the Infinite LoopTM 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 ambitious targets for a high level of recycled content in their products. Together with Suez, we 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 and engineering. We are targeting final site selection during the summer of 2021.
Joint Venture with Indorama
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 (“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 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. In 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 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 due to the COVID-19 pandemic (see “The global COVID-19 pandemic” as noted under “Risk Factors”). As part of the Joint Venture Agreement, we are committed to contribute our equity share for the costs under the joint venture agreement to construct the facility. During the year ended February 28, 2021, we made a contribution of $650,000 and as at February 28, 2021, we have contributed a total of $1,500,000 to the joint venture.
The joint venture made a decision over the summer of 2020 that due to the COVID-19 pandemic it would temporarily delay work on the project. Since then, no expenditures have been incurred by the joint venture. The travel restrictions and quarantine requirements between Canada and the US continued to cause disruptions in our timetable. While both joint venture partners currently remain committed to the project, we continue to monitor the COVID-19 implications on the project timetable.
Demonstration Plant and Innovation Center in Terrebonne, Québec
As part of our plan for the commercialization of future Infinite LoopTM manufacturing facilities, we decided to convert our Terrebonne, Québec pilot plant to an Infinite LoopTM demonstration and training facility. This demonstration facility will be used to showcase the Infinite LoopTM end to end technology to potential partners and customers, and train operational teams in advance of the commissioning of commercial plants.
We made significant investments in the demonstration plant during the year ended February 28, 2021. In particular, we installed and began operation of two new depolymerization reactors in the last quarter. The depolymerization reactors substantially increase our demonstration facility’s depolymerization capacity and confirm the design and scale-up factor for the feasibility engineering of the planned commercial-scale facilities. In addition, we have also entered into an agreement to acquire PET polymerization equipment from Chemtex to manufacture of Loop™ branded PET resin at our demonstration plant. We anticipate the Infinite LoopTM demonstration plant project to be largely completed by late in calendar 2021 and delivering Loop™ branded PET resin to customers starting in calendar 2022.
In addition to the capital requirements for our commercialization, we plan to continue to invest in strengthening our intellectual property portfolio, building a core competency in managing strategic relationships and continue enhancing our brand value. Our research and development innovation center in Terrebonne, Québec will continue to push forward the development of our technology.
Results of Operations
Fourth Quarter Ended February 28, 2021
The following table summarizes our operating results for the three-month periods ended February 28, 2021 and February 29, 2020, in U.S. Dollars.
Three months ended
February 28, 2021
February 29,
Change
Revenues
$-
$-
$-
Expenses
Research and development
Stock-based compensation
362,321
311,253
51,068
External engineering
2,414,038
65,871
2,348,167
Employee compensation
1,000,652
766,977
233,675
Machinery and equipment expenditures
3,823,535
-
3,823,535
Demonstration plant operating expenses
466,724
280,043
186,681
Other
115,651
46,785
68,866
Total research and development
8,182,921
1,470,929
6,711,992
General and administrative
Stock-based compensation
537,556
547,327
(9,771)
Professional fees
2,807,583
275,151
2,532,432
Employee compensation
760,450
382,645
377,805
Directors and officers insurance
616,693
345,366
271,327
Other
91,720
217,875
(126,155)
Total general and administrative
4,814,002
1,768,364
3,045,638
Depreciation and amortization
121,321
245,065
(123,744)
Interest and other financial expenses
55,980
406,215
(350,235)
Interest income
(14,649)
(136,913)
122,264
Foreign exchange loss
33,929
4,303
29,626
Total expenses
13,193,503
3,757,963
9,435,540
Net loss
$(13,193,503)
$(3,757,963)
$(9,435,540)
The net loss for the three-month period ended February 28, 2021 increased $9.44 million to $13.19 million, as compared to the net loss for the three-month period ended February 29, 2020 which was $3.76 million. The increase is primarily due to increased research and development expenses of $6.71 million, increased general and administrative expenses of $3.05 million and a decrease in interest income of $0.12 million, partially offset by lower interest and other financial expenses of $0.35 million, an increased foreign exchange loss of $0.03 million and by lower depreciation and amortization expenses of $0.12 million.
The $6.71 million increase in research and development for the three-month period ended February 28, 2021 was primarily attributable to the following:
●
$3.82 million increase in purchases of research and development machinery and equipment, including two new recently installed depolymerization reactors. Starting in Q3 of fiscal 2021, the Company expensed research and development machinery and equipment in accordance with ASC 730, Research and Development Costs, and no longer capitalizes these costs. The timing of this accounting treatment is related to management’s decision to convert our 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 in other applications. ;
●
$2.35 million increase in external engineering expenses for ongoing design work for our Infinite LoopTM manufacturing process;
●
$0.23 million increase in employee compensation expenses; and
●
$0.19 million increase in pilot plant and laboratory operating expenses.
The $3.05 million increase in general and administrative expenses for the three-month period ended February 28, 2021 was primarily attributable to the following:
●
$2.53 million increase in expenses for legal and professional fees due to costs principally associated with the ongoing SEC investigation and class action suits described in “Item 3. Legal Proceedings”;
●
$0.38 million increase in employee compensation expenses; and
●
$0.27 million increase in insurance expenses mainly due to directors and officers (“D&O”) insurance renewal costs.
The $0.12 million decrease in depreciation and amortization expenses for the three-month period ended February 28, 2021 is mainly attributable to the write-down of machinery and equipment assets related to the decision in the third quarter of fiscal 2021 to dedicate the demonstration and training facility to research and development activities. Although 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, application of ASC 730, Research and Development Costs requires machinery and equipment assets to be written off and all future costs associated with the demonstration and training facility to be recognized as a research and development expense in the consolidated statements of operations and comprehensive loss.
The decrease in interest and other financial expenses of $0.35 million for the three-month period ended February 28, 2021 is mainly attributable to a decrease in interest expense and accretion expense relating to the convertible notes converted in fiscal 2020 in the amount of $0.31 million and $0.05 million, respectively, offset by increased interest and accretion expenses related to the Investissement Québec loan totaling $0.02 million.
Fiscal Year Ended February 28, 2021
The following table summarizes our operating results for the years ended February 28, 2021 and February 29, 2020, in U.S. Dollars.
Years ended
February 28,
February 29,
Change
Revenues
$-
$-
$-
Expenses
Research and development
Stock-based compensation
1,417,004
1,252,394
164,610
External engineering
5,655,997
149,333
5,506,664
Employee compensation
3,040,121
2,279,579
760,542
Machinery and equipment expenditures
6,149,075
-
6,149,075
Demonstration plant operating expenses
1,852,615
901,687
950,928
Other
572,202
134,182
438,020
Total research and development
18,687,014
4,717,175
13,969,839
General and administrative
Stock-based compensation
2,257,622
2,216,997
40,625
Professional fees
4,613,717
1,193,884
3,419,833
Employee compensation
2,131,597
2,299,175
(167,578)
Directors and officers insurance
2,072,647
761,876
1,310,771
Other
464,757
743,488
(278,731)
Total general and administrative
11,540,340
7,215,420
4,324,920
Depreciation and amortization
775,675
807,447
(31,772)
Impairment of property, plant and equipment
5,043,119
22,985
5,020,134
Interest and other financial expenses
81,996
2,223,304
(2,141,308)
Interest income
(93,043)
(500,478)
407,435
Foreign exchange loss
309,822
19,602
290,220
Total expenses
36,344,923
14,505,455
21,839,468
Net loss
$(36,344,923)
$(14,505,455)
$(21,839,468)
The net loss for the year ended February 28, 2021 increased $21.84 million to $36.34 million, as compared to the net loss for the year ended February 29, 2020 which was $14.51 million. The increase is primarily due to increased research and development expenses of $13.97 million, increased expense for impairment of property, plant and equipment of $5.02 million, increased general and administrative expenses of $4.32 million, a decrease in interest income of $0.41 million and an increased foreign loss of $0.29 million, partially offset by lower interest and other financial expenses of $2.14 million and by lower depreciation and amortization expenses of $0.03 million.
The $13.97 million increase in research and development for the year ended February 28, 2021 was primarily attributable to the following:
●
$6.15 million increase in purchases of research and development machinery and equipment, including two new recently installed depolymerization reactors. The Company expensed research and development machinery and equipment in accordance with ASC 730, Research and Development Costs, and no longer capitalizes these costs. The timing of this accounting treatment is related to management’s decision to convert our 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 in other applications;
●
$5.51 million increase in external engineering expenses for ongoing design work for our Infinite LoopTM manufacturing process;
●
$0.95 million increase in pilot plant and laboratory operating expenses; and
●
$0.76 million increase in employee compensation expenses.
The $4.32 million increase in general and administrative expenses for the year ended February 28, 2021 was primarily attributable to the following:
●
$3.42 million increase in expenses for legal and professional fees due to costs principally associated with the ongoing SEC investigation and class action suits described in “Item 3. Legal Proceedings”; and
●
$1.31 million increase in insurance expenses mainly due to D&O insurance renewal costs.
The $0.32 million decrease in depreciation and amortization expenses for the three-month period ended February 28, 2021 is mainly attributable to the write-down of machinery and equipment assets related to the decision in the third quarter of fiscal 2021 to dedicate the demonstration and training facility to research and development activities. Although 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, application of ASC 730, Research and Development Costs requires machinery and equipment assets for a total of $5.04 million to be written off and all future costs associated with the demonstration and training facility to be recognized as a research and development expense in the consolidated statements of operations and comprehensive loss.
The decrease in interest and other financial expenses of $2.14 million for the three-month period ended February 28, 2021 is mainly attributable to a decrease in interest expense and accretion expense relating to the convertible notes converted in fiscal 2020 in the amount of $1.89 million and $0.36 million, respectively, offset by increased interest and accretion expenses related to the Investissement Québec loan totaling $0.08 million.
LIQUIDITY AND CAPITAL RESOURCES
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 February 28, 2021, we had cash and cash equivalents on hand of $35.22 million. Management actively monitors the Company’s cash balance and short term cash commitments to ensure current operations are funded. We are also exploring options to finance our commercial projects.
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 $35.22 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 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 committed 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 February 28, 2021 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 February 28, 2021, we had accounts payable and accrued liabilities of $9.06 million (Note 7 to the financial statements) which include legal fees, engineering, contracting professional fees and cost of machinery and equipment. The engineering and contracting professional fees relate to investment in commercialisation of the Infinite LoopTM commercial facilities design and the conversion of the pilot plant into the demonstration and training facility of Infinite LoopTM at Terrebone, Québec. The D&O and legal fees increased due to the SEC investigation and class action lawsuits.
We have a short-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 $1,103,666 (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 $4,598 (CDN$5,833) plus interest, until January 2022, at which time it will be subject to renewal. It includes an option allowing for the prepayment of the Loan without penalty.
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 Demonstration and training plant up to a maximum of $3,626,330 (CDN$4,600,000). We received the first disbursement in the amount of $1,741,611 (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 $362,633 (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. The remaining amount available under the financing facility is $1,884,719 (CDN$2,390,766) to be received in a maximum of two additional disbursements before June 30, 2021.
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.
The following table summarizes the exchange rates used:
February 28,
February 29,
Period end Canadian $: US Dollar exchange rate
$0.79
$0.74
Average period Canadian $: US Dollar exchange rate
$0.76
$0.75
Expenditures are translated at the average exchange rate for the period presented.
Flow of Funds
Summary of Cash Flows
A summary of cash flows for the years ended February 28, 2021, and February 29, 2020 and February 28, 2019 was as follows:
Years Ended
February 28,
February 29,
Net cash used in operating activities
$(22,490,636)
$(9,092,549)
Net cash used in investing activities
(2,977,364)
(3,388,985)
Net cash provided by financing activities
26,598,668
40,463,141
Effect of exchange rate changes on cash
373,612
(97,326)
Net change in cash
$1,504,280
$27,884,281
Net Cash Used in Operating Activities
During the year ended February 28, 2021, we used $22.49 million in operations compared to $9.09 million during the year ended February 29, 2020. The increase over each year is mainly due to increased operating expenses as we move forward on commercialization activities. As discussed above in the Results of Operations, the main increases in expenses were engineering fees, research and development machinery and equipment and legal fees.
Net Cash Used in Investing Activities
During the year ended February 28, 2021, we used $2.98 million in investing activities. We made capital asset investments of $1.74 million which was mainly attributable to the expansion and additions to our pilot plant and executive offices in Terrebonne, Canada, before the decision to convert our pilot plant to exclusively a demonstration and training facility at which point we began expensing machinery and equipment expenditures related to our demonstration and training facility as research and development expenses. We also invested $0.59 million in our intellectual property as we developed, during the year ended February 28, 2021, our next generation GEN II technology and filed various patents in various jurisdictions around the world, most of which await approval. During the year ended February 28, 2021 we made capital contributions to our joint venture with Indorama for a total of $0.65 million.
During the year ended February 29, 2020, we used $3.39 million in investing activities. We made capital asset investments of $2.54 million of which $2.44 million was mainly attributable to the expansion and additions to our pilot plant and executive offices in Terrebonne, Canada. We also invested $0.1 million in our intellectual property as we developed, during the year ended February 29, 2020, our next generation GEN II technology and filed various patents in various jurisdictions around the world which await approval. During the year ended February 29, 2020 we made capital contributions to our joint venture with Indorama for a total of $0.85 million.
Net Cash Provided by Financing Activities
During the year ended February 28, 2021, we raised $26.65 million through a registered direct offering of common stock, in the net amount of $25.00 million and through warrants exercised for $1.65 million. We also made payments totaling $0.05 million against our long-term debt, representing the loan agreement we entered into during the year ended February 28, 2018 to purchase the land and building of our pilot plant and executive offices.
During the year ended February 29, 2020, we raised $40.46 million mainly through two separate registered direct offerings of common stock, in the net amounts of $34.60 million and $4.20 million, respectively. We also made payments totaling $0.05 million against our long-term debt, representing the loan agreement we entered into during the year ended February 28, 2018 to purchase the land and building of our pilot plant and executive offices.
During the year ended February 28, 2020, we paid a total of $312,000 in interest in connection with convertible notes that were converted during that year.
On February 21, 2020, we received $1,741,611 (CDN$2,209,234) in connection with the credit facility from Investissement Québec to finance capital expenses incurred for the expansion of our pilot. There is a 36-month moratorium on both capital and interest repayments beginning on the date of receipt of the funds.
OUTLOOK
In connection with the upcoming fiscal year ending February 28, 2022, we will continue to monitor the potential impacts of COVID-19 on our business. We intend to continue to execute our corporate strategy. We believe we must execute on several areas of our operational strategic plan, namely:
●
Protecting our intellectual property;
●
Continuing to upgrade and convert our pilot plant into a demonstration and training facility to ensure the highest quality of sustainable Loop™ PET resin is produced at the facility;
●
Continuing to drive the commercialization of our Infinite Loop™ solution, which we believe is a key pillar of our ambition to sell our technology to potential commercial partners.
●
Supporting Worley in the Class IV pre-feasibility engineering for the Québec and European project evaluations;
●
Identifying and evaluating specific site locations in both Québec and Europe for commercial operations;
●
Identifying and securing feedstock to ensure our current demonstration and training facility and potential commercial facilities can operate continuously and efficiently;
●
Identifying and evaluating financial options and incentives including various forms of debt, equity, strategic partnership, incentive and financing programs supported by, or in partnership with, governments to fund the commercial projects;
●
Identfying and pursuing additional strategic partners and regions for new Infinite LoopTM projects
●
With our joint venture with Indorama, complete the engineering work associated with the Spartanburg facility and proceed with construction; and
●
Continuing to execute brand and other partnerships and/or commercial agreements with customers.
Risks that may affect our ability to execute on this strategy include, but are not limited to, those listed under “Risk Factors” elsewhere in this Annual Report.
CRITICAL 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 as well as the carrying value of our joint venture investment, accruals for potential liabilities, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards and the judgement in the assessment.
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.
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.
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 third quarter of the fiscal year ended February 28, 2021, 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.
See Notes to the consolidated financial statements included elsewhere in this Form 10-K for management’s discussion of recently issued accounting pronouncements.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to SEC Release No. 33-8876, we are permitted to use the scaled disclosure requirements applicable to a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, and therefore, we are not required to provide the information called for by this Item.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Loop Industries, Inc.
February 28, 2021
Index to the Consolidated Financial Statements
Contents
Page(s)
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets as at February 28, 2021 and February 29,
Consolidated statements of operations and comprehensive loss for the years ended February 28, 2021 and February 29, 2020
Consolidated statement of changes in stockholders’ equity for the years ended February 28, 2021 and February 29, 2020
Consolidated statement of cash flows for the years ended February 28, 2021 and February 29
Notes to the consolidated financial statements
Loop Industries, Inc.
Consolidated Balance Sheets
(in United States dollars)
As at
February 28, 2021
February 29, 2020
Assets
Current assets
Cash and cash equivalents
$35,221,951
$33,717,671
Sales tax, tax credits and other receivables (Note 3)
1,763,835
664,544
Prepaid expenses
609,782
141,226
Total current assets
37,595,568
34,523,441
Investment in joint venture
1,500,000
850,000
Property, plant and equipment, net (Note 4)
3,513,051
7,260,254
Intangible assets, net (Note 5)
794,894
202,863
Total assets
$43,403,513
$42,836,558
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities (Note 7)
$8,124,865
$2,082,698
Current portion of long-term debt (Note 9)
938,116
52,126
Total current liabilities
9,062,081
2,134,824
Long-term debt (Note 9)
1,516,008
2,238,026
Total liabilities
10,578,989
4,372,850
Stockholders' Equity
Series A Preferred stock par value $0.0001; 25,000,000 shares authorized; one share issued and outstanding (Note 12)
-
-
Common stock par value $0.0001; 250,000,000 shares authorized; 42,413,691 shares issued and outstanding (2020 - 39,910,774) (Note 12)
4,242
3,992
Additional paid-in capital
113,662,677
82,379,413
Additional paid-in capital - Warrants
8,826,165
9,785,799
Accumulated deficit
(89,661,970)
(53,317,047)
Accumulated other comprehensive loss
(6,590)
(388,449)
Total stockholders' equity
32,824,524
38,463,708
Total liabilities and stockholders' equity
$43,403,513
$42,836,558
See accompanying notes to the consolidated financial statements.
Loop Industries, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in United States dollars)
Years Ended
February 28, 2021
February 29, 2020
Revenue
$-
$-
Expenses :
Research and development (Notes 13 and 15)
18,687,014
4,717,175
General and administrative (Notes 14 and 15)
11,540,340
7,215,420
Write-down and impairment of property, plant and equipment (Note 5)
5,043,119
22,985
Depreciation and amortization (Notes 4 and 5)
775,675
807,447
Interest and other financial expenses (Note 18)
81,996
2,223,304
Interest income
(93,043)
(500,478)
Foreign exchange loss (gain)
309,822
19,602
Total expenses
36,344,923
14,505,455
Net loss
(36,344,923)
(14,505,455)
Other comprehensive loss -
Foreign currency translation adjustment
381,859
(98,225)
Comprehensive loss
$(35,963,064)
$(14,603,680)
Loss per share
Basic and diluted
$(0.89)
$(0.38)
Weighted average common shares outstanding
Basic and diluted
40,983,752
37,936,094
See accompanying notes to the consolidated financial statements.
Loop Industries, Inc.
Consolidated Statement of Changes in Stockholders’ Equity
For the Years Ended February 28, 2021 and February 29,
(in United States dollars)
Year ended February 29, 2020
Common stock
Preferred stock
par value $0.0001
par value $0.0001
Number of Shares
Amount
Number of Shares
Amount
AdditionalPaid-in Capital
AdditionalPaid-in Capital - Warrants
Additional Paid-in Capital - Beneficial Conversion Feature
Common Stock Issuable
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Stockholders' Equity
Balance, February 28, 2019
33,805,706
$3,381
$-
$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
-
-
30,408,410
8,663,769
-
-
-
-
39,072,648
Issuance of shares for legal settlement (Note 20)
150,000
-
-
(15)
-
-
-
-
-
-
Issuance of shares upon conversion of Convertible notes (Notes 10)
932,084
-
-
8,553,403
324,672
(1,200,915)
-
-
-
7,677,254
Issuance of shares upon the vesting of restricted stock units (Note 15)
244,884
-
-
799,975
-
-
(800,000)
-
-
-
Issuance of shares upon the cashless exercise of stock options (Note 15)
69,101
-
-
(7)
-
-
-
-
-
-
Issuance of shares upon exercise of warrants (Notes 10 and 17)
15,432
-
-
182,048
(38,300)
-
-
-
-
143,749
Issuance of warrants for financing facility (Notes 9 and 17)
-
-
-
-
-
77,954
-
-
-
-
77,954
Stock options granted for services (Note 15)
-
-
-
-
2,178,948
-
-
-
-
-
2,178,948
Restricted stock units granted for services (Note 15)
-
-
-
-
1,290,443
-
-
-
-
-
1,290,443
Foreign currency translation
-
-
-
-
-
-
-
-
-
(98,225)
(98,225)
Net loss
-
-
-
-
-
-
-
-
(14,505,455)
-
(14,505,455)
Balance, February 29, 2020
39,910,774
$3,992
$-
$82,379,413
$9,785,799
$-
$-
$(53,317,047)
$(388,449)
$38,463,708
Loop Industries, Inc.
Consolidated Statement of Changes in Stockholders’ Equity
For the Years Ended February 28, 2021 and February 29, 2020 (continued)
(in United States dollars)
Year ended February 28, 2021
Common stock
Preferred stock
par value $0.0001
par value $0.0001
Number of Shares
Amount
Number of Shares
Amount
AdditionalPaid-in Capital
AdditionalPaid-in Capital - Warrants
Additional Paid-in Capital - Beneficial Conversion Feature
Common Stock Issuable
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Total Stockholders' Equity
Balance, February 29, 2020
39,910,774
$3,992
$-
$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
-
-
24,996,419
-
-
-
-
-
24,996,628
Issuance of shares upon the vesting of restricted stock units (Notes 12 and 15)
225,388
-
-
(22)
-
-
-
-
-
-
Issuance of shares upon exercise of warrants (Notes 10 and 17)
190,529
-
-
2,046,852
(394,245)
-
-
-
-
1,652,626
Issuance of warrant for services (Note 17)
-
-
-
-
-
84,442
-
-
-
-
84,442
Expiration of warrants (Notes 10 and 17)
-
-
-
-
649,831
(649,831)
-
-
-
-
-
Stock options granted for services (Note 17)
-
-
-
-
2,212,078
-
-
-
-
-
2,212,078
Restricted stock units granted for services (Note 17)
-
-
-
-
1,378,106
-
-
-
-
-
1,378,106
Foreign currency translation
-
-
-
-
-
-
-
-
-
381,859
381,859
Net loss
-
-
-
-
-
-
-
-
(36,344,923)
-
(36,344,923)
Balance, February 28, 2021
42,413,691
$4,242
$-
$113,662,677
$8,826,165
$-
$-
$(89,661,970)
$(6,590)
$32,824,524
See accompanying notes to the consolidated financial statements.
Loop Industries, Inc.
Consolidated Statements of Cash Flows
(in United States dollars)
February 28, 2021
February 29, 2020
Cash Flows from Operating Activities
Net loss
$(36,344,923)
$(14,505,455)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization (Notes 4 and 5)
775,675
807,447
Stock-based compensation (Note 15)
3,674,626
3,469,390
Write-down and impairment of property, plant and equipment (Note 4)
5,043,120
22,985
Accretion, and accrued interest (Note 18)
76,446
2,255,575
Deferred financing costs
-
96,155
Gain on conversion of convertible notes (Notes 10 and 18)
-
(232,565)
Other, net
(32,605)
43,356
Changes in operating assets and liabilities:
Valued added tax and tax credits receivable
(1,034,014)
(77,294)
Prepaid expenses
(449,535)
83,876
Accounts payable and accrued liabilities
5,800,575
(1,056,019)
Net cash used in operating activities
(22,490,636)
(9,092,549)
Cash Flows from Investing Activities
Investment in joint venture (Note 8)
(650,000)
(850,000)
Additions to property, plant and equipment (Note 4)
(1,735,079)
(2,439,013)
Additions to intangible assets (Note 5)
(592,285)
(99,972)
Net cash used in investing activities
(2,977,364)
(3,388,985)
Cash Flows from Financing Activities
Proceeds from sales of common shares and exercise of warrants, net of share issuance costs (Note 12)
26,649,253
39,182,145
Proceeds from issuance of long-term debt (Note 9)
-
1,645,122
Payment of accrued interest on convertible notes (Note 10)
-
(312,000)
Repayment of long-term debt
(50,585)
(52,126)
Net cash provided by financing activities
26,598,668
40,463,141
Effect of exchange rate changes
373,612
(97,326)
Net change in cash
1,504,280
27,884,281
Cash and cash equivalents, beginning of year
33,717,671
5,833,390
Cash and cash equivalents, end of year
$35,221,951
$33,717,671
Supplemental Disclosure of Cash Flow Information:
Income tax paid
$-
$-
Interest paid
$38,157
$368,482
Interest received
$93,043
$500,478
See accompanying notes to the consolidated financial statements.
Loop Industries, Inc.
February 28, 2021 and February 29, 2020
Notes to the Consolidated Financial Statements
(in United States dollars except where otherwise indicated)
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.
Basis of presentation
These consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) and 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.
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 as well as the carrying value of our joint venture investment, accruals for potential liabilities, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards and the judgement in the assessment.
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.
Fair value of financial instruments
The Company applies Financial Accounting Standards Board (“FASB”) Codification (“ASC”) 820, Fair Value Measurement, which defines fair value and establishes a framework for measuring fair value and making disclosures about fair value measurements. FASB ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of financial instruments and the characteristics specific to them. Financial instruments with readily available quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
There are three levels within the hierarchy that may be used to measure fair value:
Level 1 -
A quoted price in an active market for identical assets or liabilities.
Level 2 -
Significant pricing inputs are observable inputs, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.
Level 3 -
Significant pricing inputs are unobservable inputs, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.
The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values.
The fair value of cash and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity.
Government grants
US GAAP for profit-oriented entities does not define government grants; nor is there specific guidance applicable to government grants. Under the Company’s accounting policy for government grants and consistent with non-authoritative guidance, grants are recognized on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.
Grants that relate to the acquisition of an asset are recognized as a reduction of the cost of the asset and in the statement of operations and comprehensive loss as the asset is depreciated or amortized.
A grant that is compensation for expenses or losses already incurred, or for which there are no future related costs, is recognized in the statement of operations and comprehensive loss in the period in which it becomes receivable.
Low-interest loans or interest-free loans from a government are initially measured at fair value and interest expense is recognized on the loan subsequently under the effective interest method, with the difference recognized as a government grant.
Deferred financing costs and other transaction costs
Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These fees are amortized as a component of interest expense over the terms of the respective financing agreements, including convertible notes, on a straight-line basis. Unamortized deferred financing fees are expensed in full when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not be successful. Deferred financing fees related to the liability portion of Convertible Notes are deducted from their related liabilities on the balance sheet.
Transaction costs associated with the equity portion of convertible notes are reflected as a charge to deficit or as a reduction of accumulated paid-in-capital. The cost of issuing equity is reflected as a reduction of accumulated paid-in-capital.
Foreign currency translations and transactions
The accompanying 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 is 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.
Property, plant and equipment
Property, plant and equipment are recorded at cost and are amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method over the following periods:
Building
years
Land
Indefinite
Office equipment and furniture
years
Machinery and equipment
3-8 years
Building improvements
years
Costs related to repairs and maintenance of property, plant and equipment are expensed in the period in which they are incurred. Upon sale or disposal, the Company writes off the cost of the asset and the related amount of accumulated depreciation. The resulting gain or loss is included in the consolidated statement of operations and comprehensive loss.
Management reviews the carrying values of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows.
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 third quarter of the fiscal year ended February 28, 2021, 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.
Intangible assets
Intangible assets are recorded at cost and are amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method over 7 years.
The Company reviews the carrying value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an intangible asset might not be recoverable, or a change in the remaining useful life of an intangible asset. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. If the carrying value of assets is determined not to be recoverable, the Company records an impairment loss equal to the excess of the carrying value over the fair value of the assets. The Company’s estimate of fair value is based on the best information available, in the absence of quoted market prices. The Company generally calculates fair value as the present value of estimated future cash flows that the Company expects to generate from the asset. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life.
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.
Net 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.
For the years ended February 28, 2021 and February 29, 2020, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at February 28, 2021, the potentially dilutive securities consisted of 1,587,081 outstanding stock options (2020 - 1,587,081), 4,210,520 outstanding restricted stock units (2020 - 4,218,802), and 4,133,720 outstanding warrants (2020 - 5,059,331).
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 this accounting guidance did not materially impact our results of operations or financial position.
Recently issued accounting pronouncements not yet adopted
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.
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 do not expect this accounting guidance to materially impact our results of operations or financial position.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This update provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform. This update is effective as of March 12, 2020, through December 31, 2022. We are currently evaluating this accounting guidance and have not elected an adoption date.
3. Sales Tax, Tax Credits and Other Receivables
Sales tax, research and development tax credits and other receivables as at February 28, 2021 and February 29, 2020 were as follows:
February 28,
February 29,
Sales tax
$1,155,504
$180,971
Research and development tax credits
435,467
447,843
Other receivables
172,864
35,730
$1,763,835
$664,544
The Company is registered for the Canadian federal and provincial goods and services taxes. As such, the Company is obligated to collect from third parties, and is entitled to claim sales taxes paid on its expenses and capital expenditures incurred in Canada.
In addition, Loop Canada Inc. is entitled to receive government assistance in the form of refundable and non-refundable research and development tax credits from the federal and provincial taxation authorities, based on qualifying expenditures incurred during the fiscal year. The refundable credits are from the provincial taxation authorities and are not dependent on its ongoing tax status or tax position and accordingly are not considered part of income taxes. The Company records refundable tax credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not, they will be received. During the year ended February 28, 2021, the Company recorded a $115,566 net expense included in research and development expenses due to adjustments made to prior year estimates of refundable tax credits. This adjustment was related to a re-assessment by tax authorities, reducing our research and development tax credits and resulted in the Company repaying $93,249 during the year ended February 28, 2021 for research and development tax credits previously received by the Company from taxation authorities. During the year ended February 29, 2020, the Company recorded tax credits of $221,603 as a reduction of research and development expenses and received $175,929 from taxation authorities for research and development tax credits.
We received during the year ended February 28, 2021 a wage subsidy from the Canadian federal government related to a COVID-19 relief program that amounted to $259,273 (2020 - nil), of which $221,603 was recorded against research and development expenses and $37,670 against general and administrative expenses. Government grants receivable at February 28, 2021 amounted to nil (2020 - nil).
The Company is also eligible for non-refundable research and development tax credits from the federal taxation authorities which can be used as a reduction of income tax expense in any given year to the extent the Company has taxable income. The Company has not had taxable income since inception and has not been able to use these non-refundable federal research and development tax credits. During the year ended February 28, 2021, the Company was eligible for non-cash research and development tax credits in the amount of $272,206 (2020 - $251,019). These non-cash tax credits, which have an unlimited carry forward period are not recognized in the Company’s consolidated financial statements. As at February 28, 2020, the carry forward balance of non-cash research and development tax credits was $1,090,691 (2020 - $764,507).
4. Property, Plant and Equipment
As at February 28,
Cost
Accumulated depreciation, write-down and impairment
Net book value
Building
$1,954,345
$(201,589)
$1,752,756
Land
241,578
-
241,578
Building Improvements
1,804,872
(474,114)
1,330,758
Machinery and equipment
6,514,252
(6,514,252)
-
Office equipment and furniture
292,946
(104,987)
187,959
$10,807,993
$(7,294,942)
$3,513,051
As at February 29,
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 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
$
$9,092,483
$(1,832,229)
7,260,254
Depreciation expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $733,831 for the year ended February 28, 2021 (2020 - $807,800).
During the year ended February 28, 2021, the Company recorded write-down and impairment expenses of $5,043,119, (2020 - $22,985). In the year ended February 28, 2021, 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 year ended February 28, 2021. 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 year ended February 28, 2021, the Company purchased $7,475,742 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 14 for components of research and development expenses.
5. Intangible Assets
During the year ending February 28, 2021, the Company continued to develop its next Generation II (“GEN II”) technology and filed various patents in jurisdictions around the world. On April 9, 2019, the first GEN II U.S. patent was issued. The GEN II technology portfolio has two issued U.S. patents and a pending U.S. application, all expected to expire, if granted, on or around September 2037. Internationally, the GEN II technology portfolio also has an issued patent and 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, Malaysia, Panama, Papua New Guinea, Philippines, Pakistan, Singapore, Taiwan, Uruguay, Uzbekistan, Venezuela, and South Africa, all expected to expire on or around September 2038, if granted. Additional aspects of the GEN II technology are claimed in an issued U.S. patent and a pending U.S. application, an allowed patent application in Bangladesh, and pending applications in Algeria,Argentina, Australia, Bahrain, Bolivia, Brazil, Cambodia, Canada, Chile, China, Eurasia, Egypt, Europe, India, Indonesia, Israel, Iran, Japan, Korea, Kuwait, Laos, Malaysia, members of the Gulf Cooperation Council, Mexico, Morocco, New Zealand, Oman, Pakistan, Panama, Peru, Philippines, Qatar, Saudi Arabia, Singapore, South Africa, Taiwan, Thailand, Tunisia, United Arab Emirates, Uruguay, Uzbekistan and Vietnam, all expected to expire on or around June 2039, if granted.. Additionally, a further apsect of the GEN II technology are subject of a U.S. application and an International application. Any patents that would ultimately grant from these applications would be expected to expire on or around March 2040. Another additional aspect of the GEN II technology is the subject of a U.S. application, an International application, and pending applications in Argentina, Bolivia, Bangladesh, members of the Gulf Cooperation Council, Pakistan, Taiwan, and Uruguay. Any patents that wouldtely grant from these applications would be expected to expire on or around March 2040.
Concurrent with the GEN II development, in June 2018, the Company transitioned to its newly constructed GEN II industrial pilot plant. The GEN II technology forms the basis for the commercialization of the Company into the future.
Amortization expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $41,844 for the year ended February 28, 2021 (2020 - $22,631).
As at February 28,
As at February 29,
Patents, at cost - beginning of period
$225,174
$127,672
Patents, accumulated depreciation - beginning of period
(22,310)
-
Patents, net - beginning of period
202,864
127,672
Additions in the year - patents
623,811
99,972
Amortization of patents
(41,844)
(22,631)
Foreign exchange effect
10,063
(2,150)
Patents, net - end of period
$794,894
$202,863
6. Fair value of financial instruments
The following table presents the fair value of the Company’s financial liabilities at February 28, 2021 and February 29, 2020:
Fair Value Measurements as at February 28, 2021
Carrying Amount
Fair Value
Level in the hierarchy
Financial liabilities measured at amortized cost:
Long-term debt
$2,454,123
$2,464,540
Level 2
Fair Value Measurements at February 29, 2020
Carrying Amount
Fair Value
Level in the hierarchy
Financial liabilities measured at amortized cost:
Long-term debt
$2,290,152
$2,314,117
Level 2
7. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as at February 28, 2021 and February 29, 2020 were as follows:
February 28,
February 29,
Trade accounts payable
$5,082,736
$814,081
Accrued engineering fees
535,359
-
Accrued employee compensation and payroll taxes
970,154
873,242
Accrued professional fees
1,270,628
133,038
Other accrued liabilities
265,988
262,337
$8,124,865
$2,082,698
8. 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.
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 February 28, 2021 and, as at February 28, 2021, 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 year ended February 28, 2021, we made contributions to ILT of $650,000 (2020 - $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.
Although the Company remains committed to the project, the joint venture made a decision in July 2020 that due to the COVID-19 situation it would delay work. Since then, no expenditures have been incurred by the joint venture.
9. Long-term Debt
February 28,
February 29,
Investissement Québec financing facility:
Principal amount
$1,741,612
$1,645,122
Unamortized discount
(268,192)
(289,852)
Accrued interest
42,588
Total Investissement Québec financing facility
1,516,008
1,356,228
Term loan
Principal amount
938,116
933,924
Less: current portion
(938,116)
(52,126)
Total term loan, net of current portion
-
881,798
Long-term debt, net of current portion
$1,516,008
$2,238,026
Investissement Québec financing facility
On February 21, 2020, the Company received $1,741,611 (CDN$2,209,234) from Investissement Québec as the first disbursement of our financing facility, out of a maximum of $3,626,330 (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 lo an 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, $36,263 (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 year ended February 28, 2021 in the amount of $39,599 (2020 - $968) and an accretion expense of $36,847 (2020 - $872).
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 $362,633 (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 February 28, 2021.
The remaining amount available under the financing facility is $1,884,719 (CDN$2,390,766) to be received in a maximum of two additional disbursements before June 30, 2021.
Term Loan
On January 24, 2018, the Company obtained a $1,103,666 (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 $4,598 (CDN$5,833) plus interest, until January 2022. 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, at which time the monthly repayment amount and interest rate will be subject to renewal. During the year ended February 28, 2021, we repaid $50,585 (2020 - $52,126) on the principal balance of the Loan and interest paid amounted to $38,157 (2020 - $56,152). The terms of the credit facility require the Company to comply with certain financial covenants. As at February 28, 2021 and February 29, 2020, the Company was in compliance with its financial covenants.
Principal repayments due on the Company’s bank indebtedness over the next five years are as follows:
Years ending
Amount
February 28,
$938,116
February 28,
-
February 28,
248,798
February 29,
248,798
February 28,
248,794
Thereafter
995,222
Total
$2,679,728
10. Convertible Notes
First Issuance
Initial terms and accounting treatment
On November 13, 2018, the Company issued convertible notes (the “November 2018 Notes”), together with related warrants to acquire an additional 50% of the shares issued upon the conversion of the November 2018 Notes (the “November 2018 Warrants”), for an aggregate purchase price of $2,450,000 (the “November 2018 Private Placement”). On January 3, 2019, the Company issued additional convertible notes from this issuance (the “November 2018 Notes”), together with related warrants to acquire an additional 50% of the shares issued upon the conversion of the November 2018 Notes (the “November 2018 Warrants”), for an aggregate purchase price of $200,000 (the “November 2018 Private Placement”). The Company used the net proceeds of the November 2018 Private Placement for general corporate and working capital purposes. The November 2018 Notes were converted on April 5, 2019.
The November 2018 Notes carried an interest rate of 8.00% per annum and had initial maturity dates of May 13, 2019 and July 3, 2019 (the “November 2018 Maturity Date”), respectively, upon which date the outstanding principal amount of the November 2018 Notes and all accrued and unpaid interest shall automatically convert into shares of the common stock of the Company at the price per share equal to the lesser of (i) $13.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day to the conversion of the November 2018 Notes (the “November 2018 Conversion Price”). The total number of shares of Common Stock to be issued upon automatic conversion shall equal the outstanding principal amount of the November 2018 Notes and all accrued and unpaid interest on the November 2018 Notes, divided by the November 2018 Conversion Price.
The November 2018 Warrants are exercisable for an additional fifty percent (50%) of the shares of Common Stock issued upon the conversion of the November 2018 Notes (the “November 2018 Warrant Shares”). The per share purchase price (the “November 2018 Exercise Price”) for each of the November 2018 Warrant Shares purchasable under the November 2018 Warrants shall be equal to the lesser of (i) $15.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day of the conversion of the November 2018 Notes. The November 2018 Warrants will be issued upon conversion of the November 2018 Notes. The November 2018 Warrants expire eighteen (18) months from the date of the conversion of the November 2018 Notes (the “November 2018 Expiration Date”). The Investors may exercise the November 2018 Warrants at any time prior to the November 2018 Expiration Date.
Due to the variable conversion price, the November 2018 Notes contain characteristics of a variable share-forward sales contracts (“VSF”) under the guidance of ASC 480-10. Management has determined that for the purpose of ‎the accounting for the November 2018 Notes, it is more likely than not that the November 2018 Conversion Price will be below $13.00, resulting in the issuance of a variable number of shares, the November 2018 Notes are classified as a liability, and accounted for at amortized cost.
Due to the variable number of warrants to be issued and the variable strike price of the November 2018 Warrants, these do not meet the “fixed-for-fixed” criteria under ASC 815-40. Accordingly, the November 2018 Warrants are classified as a derivative liability, initially measured at fair value and subsequently revalued at fair value through the income statement. The fair value was calculated using a Monte Carlo simulation.
The aggregate value of the November 2018 Notes and November 2018 Warrants as shown on the consolidated balance sheet are broken down as follows:
February 28,
February 29,
Issue Date
November 2018 Convertible Notes - Liability
$-
$-
$2,495,636
Accrued interest - Liability
-
-
-
Deferred financing costs
-
-
(63,738)
-
-
2,431,898
November 2018 Warrants - Liability
$-
$-
$154,364
The transaction costs relating to this issuance were split pro-rata between the November 2018 Notes and the November 2018 Warrants. The portion relating to the November 2018 Notes were deferred and are being amortized over the life of the convertible notes. The portion relating to the November 2018 Warrants was immediately expensed.
Amendment and subsequent accounting treatment
On April 5, 2019, the Company and the Investors that purchased the November 2018 Notes from the Company pursuant to the Note and Warrant Purchase Agreement dated as of November 13, 2018 or January 3, 2019, executed an Amendment, Surrender and Conversion Agreement (“Conversion Agreement”) whereby the parties agreed to convert the November 2018 Notes, and all accrued and unpaid interest, into shares of the common stock of the Company at a newly agreed conversion price per share equal to $8.55 (the “New Conversion Price”), replacing the previous formula which converted the November 2018 Notes and accrued and unpaid interest into shares of the common stock of the Company at the price per share equal to the lesser of (i) $13.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day to the conversion of the November 2018 Notes. The Conversion Agreement stipulates that the interest on the November 2018 Notes would be paid up to and including April 3, 2019. Pursuant to the 2018 Note Purchase Agreement, the Investors also received related warrants to acquire an additional 50% of the shares issued upon the conversion of the November 2018 Notes. As part of the Conversion Agreement, the exercise price of the November 2018 Warrants will also be the New Conversion Price, replacing the previous formula which established the conversion price for the November 2018 Warrants as the lesser of (i) $15.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day of the conversion of the November 2018 Notes. As a result of the Conversion Agreement, the Company issued 319,326 shares of common stock of the Company and issued 159,663 warrants. The November 2018 Warrants expiration date was eighteen (18) months from the date of the conversion of the November 2018 Notes, on October 5, 2020. All of the November 2018 Warrants were exercised in the quarter ended November 30, 2020.
The Company recorded an expense upon revaluation of the warrants for the period from March 1, 2019 to April 5, 2019 in the amount of $8,483 (2018 - nil) and is included in operating expenses. The Company recorded accretion interest expense on the November 2018 Notes from March 1, 2019 to April 5, 2019 in the amount of $154,364 and is included in operating expenses. The Company recorded interest expense on the November 2018 Notes for the period from March 1, 2019 to April 3, 2019 in the amount of $19,433 (2018 - nil). The value of the 159,633 warrants issued as part of the conversion was determined using the Black-Scholes pricing formula and amounted to $316,929 and is included in additional paid-in capital - warrants. Also, the conversion of the November 2018 Notes into common stock resulted in a gain of $232,565 and has been offset against expenses.
Second Issuance
On January 15, 2019, the Company issued convertible notes (the “January 2019 Notes”), together with related warrants to acquire an additional 50% of the shares issuable upon the conversion of the January 2019 Notes (the “January 2019 Warrants”), for an aggregate purchase price of $4,500,000 (the “January 2019 Private Placement”). On January 21, 2019, the Company issued additional convertible notes from this issuance (the “January 2019 Notes”), together with related warrants to acquire an additional 50% of the shares issuable upon the conversion of the January 2019 Notes (the “January 2019 Warrants”), for an aggregate purchase price of $400,000 (the “January 2019 Private Placement”). The Company used the net proceeds of the January 2019 Private Placement for general corporate and working capital purposes.
The January 2019 Notes carried an interest rate of 8.00% per annum and had initial maturity dates of January 15, 2020 and January 21, 2020 (the “January 2020 Maturity Date”), respectively. At the January 2020 Maturity Date, the outstanding principal amount of the January 2019 Notes automatically converted into shares of the common stock of the Company at the price per share equal to $8.10 (the “January 2020 Conversion Price”). The January 2020 Conversion Price could have been adjusted in the event that the Company issued common shares in a private sale or offering at a lower price per share than $8.10 within 180 days of the closing date. The lower price would become the new conversion price of the January 2019 Notes, which would impact the number of shares that would be issued. The total number of shares of Common Stock to be issued upon automatic conversion would equal the outstanding principal amount of the January 2019 Notes divided by the January 2020 Conversion Price. The January 2019 Notes were converted at the January 2020 Maturity Date with no adjustment to the January 2020 Conversion Price.
With respect to accrued and unpaid interest at the January 2020 Maturity Date, the Investors had the option of receiving cash or common stock of the Company at that date. Upon the January 2020 Maturity Date, where the Investor elected payment of accrued and unpaid interest on the January 2019 Notes in common stock, the price per share would equal to the trading price of the common stock at the close of the market on the date immediately preceding the January 2020 Maturity Date. On the January 2020 Maturity Date, $312,000 in accrued interest was paid in cash and a value of $80,000 was paid in common stock (7,820 shares).
The January 2019 Warrants are exercisable for an additional fifty percent (50%) of the shares of Common Stock issuable upon the conversion of the January 2019 Notes (the “January 2019 Warrant Shares”). The per share purchase price (the “January 2019 Exercise Price”) for each of the January 2019 Warrant Shares purchasable under the January 2019 Warrants would equal to 115% of the January 2020 Conversion Price. The January 2019 Warrants would be calculated and issued upon the closing date of the January 2019 Notes, based upon the initial $8.10 conversion price. As such, the Company issued 302,469 warrants at the closing dates of the January 2019 Notes. If the Investor elected to take accrued and unpaid interest on the January 2019 Notes in common stock, additional warrants would be issued to acquire 50% of the shares issued in connection with the accrued and unpaid interest (also referred to as the “January 2019 Warrants”). Upon conversion, 3,911 additional warrants were issued in connection with accrued interest paid in common stock. The January 2019 Warrants expire twenty-four (24) months from the date of their issuance (the “January 2019 Expiration Date”). The Investors could exercise the January 2019 Warrants at any time prior to the January 2019 Expiration Date. During the year ended February 28, 2021, 30,864 of the January 2019 Warrants were exercised (2020 - 15,432). The remaining January 2019 Warrants expired on January 15, 2021.
A beneficial conversion feature (“BCF”) of a convertible note is normally characterized as the convertible portion feature that provides a rate of conversion that is below market value or “in-the-money” when issued. A BCF related to the issuance of a convertible note is recorded at the issue date. With the conversion feature on the January 2019 Notes being “in the money”, the beneficial conversion feature is measured using the intrinsic value method and is shown as a discount on the carrying amount of the convertible note and is credited to additional paid-in capital. The intrinsic value of the beneficial conversion feature at the issue date of the January 2019 Notes was determined to be $1,200,915.
In connection with the January 2019 Warrants issued along with the January 2019 Notes, they meet the requirements of the scope exemptions in ASC 815-10-15-74 and are thus classified as equity upon issuance. The Company determined the fair value of the warrants using the Black-Scholes pricing formula and is shown as a discount on the carrying amount of the convertible note and is credited to additional paid-in capital. The fair value of the warrants at the issue date was determined to be $757,704. The fair value of the additional warrants issued in connection with accrued interest paid in stock was also calculated using the Black-Scholes and amounted to $7,744.
The allocated fair values of the beneficial conversion feature and the warrants is recorded in the financial statements as a debt discount from the face amount of the convertible note and such discount is amortized over the expected term of the convertible note and is charged to interest expense.
The aggregate values of the beneficial conversion feature, the January 2019 Warrants and the January 2019 Notes are broken down as follows:
February 28,
February 29,
Issue Date
January 2019 Convertible Notes - Liability
$-
$-
$2,941,381
Accrued interest - Liability
-
-
-
Deferred financing costs
-
-
(79,539)
-
-
2,861,842
January 2019 Beneficial Conversion Option - Equity
-
-
1,200,915
January 2019 Warrants - Equity
$-
$727,148
$757,704
The Company recorded accretion expense during the year ended February 28, 2021 of $1,773,114 (2020 - $1,773,114; 2019 - $185,505) and is included in operating expenses. The Company recorded interest expense on the January 2019 Notes for the year ended February 29, 2021 in the amount of $342,989 (2020 - $342,989; 2019 - $49,011).
The transaction costs relating to this issuance were split pro-rata between the January 2019 Notes, the beneficial conversion feature and the January 2019 Warrants. The portion relating to the January 2019 Notes were deferred and are being amortized over the life of the convertible notes. The portion relating to the beneficial conversion feature and January 2019 Warrants were recorded as share issuance expenses and offset against paid-in capital. Upon conversion of the notes, the liability portion and $80,000 in accrued interest were reversed to equity (common stock $61,28 and additional paid-in capital $4,979,939) and the BCF was reversed to additional paid-in capital.
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. The amended and restated employment agreement provides for an increase in Mr. Solomita’s base salary and eligibility to participate in an annual cash bonus subject to performance measures. Mr. Solomita’s base salary and bonus opportunity are retroactive effective to March 1, 2018.
In addition, the employment agreement 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 performance conditions in the form of four performance milestones. This was modified to provide a grant of 4,000,000 restricted stock units covering 4,000,000 shares of the Company’s common stock while the performance milestones remained the same. The Company’s board of directors approved the grant of the restricted stock units, effective and contingent 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. The restricted stock units vest upon the achievement of applicable performance milestones, as follows:
i)
1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s securities are listed on an exchange or the OTCQX tier of the OTC Markets;
ii)
1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of DMT/MEG or a PET;
iii)
1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s first full- scale production facility is in commercial operation; and
iv)
1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s second full- scale production facility is in commercial operation.
During the year ended February 28, 2017, it became probable that the first milestone would be met. Accordingly, 1,000,000 performance incentive shares of common stock with a fair value of $800,000 were earned and are issuable to Mr. Solomita. This amount was reflected as stock-based compensation expense during the year ended February 28, 2017 based on the grant date fair value. The 1,000,000 performance incentive shares of common stock have been replaced by restricted stock units and are issuable to Mr. Solomita, of which 200,000 were settled in October 2020 and 200,000 were settled in October 2019.
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 February 28, 2021, 3,600,000 (2020 - 3,800,000) of Mr. Solomita’s RSUs were outstanding of which 600,000 were vested (2020 - 800,000). The vested units are settled annually in tranches of 200,000 units. The unvested 3,000,000 RSUs would be forfeited if Mr. Solomita left the Company, except in the case of termination without cause or resignation for good reason, in which case he would receive 50% of the unvested RSUs at the time of termination, or 100% in the case of termination without cause or resignation for good reason within 24 months after a change in control. During the years ended February 28, 2021 and February 29, 2020, 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
Series A Preferred Stock
Mr. Solomita’s amended employment agreement of February 15, 2016 provides that the Company shall issue to Mr. Solomita one share of the Company’s Series A Preferred Stock in exchange for Mr. Solomita agreeing not to terminate his employment with the Company for a period of five years from the date of the agreement. The agreement effectively provides Mr. Solomita with a “change of control” provision over the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to less than a majority. In order to issue Mr. Solomita his one share of Series A Preferred Stock under the amendment, the Company created a “blank check” preferred stock. Subsequently, the board of directors of the Company approved a Certificate of Designation creating the Series A Preferred Stock. Subsequently, the Company issued one share of Series A Preferred Stock to Mr. Solomita.
The one share of Series A Preferred Stock issued to Mr. Solomita holds a majority of the total voting power so long as Mr. Solomita holds not less than 7.5% of the issued and outstanding shares of common stock of the Company, assuring Mr. Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to a level below a majority. Currently, Mr. Solomita’s ownership of 19,010,000 shares of common stock and 1 share of Series A Preferred Stock provides him with 77.0% of the voting control of the Company.
Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which precludes the Company from taking certain actions without Mr. Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval. More specifically, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class:
(a)
amend the Articles of Incorporation or, unless approved by the Board of Directors, including by the Series A Director, amend the Company’s By-laws;
(b)
change or modify the rights, preferences or other terms of the Series A Preferred Stock, or increase or decrease the number of authorized shares of Series A Preferred Stock;
(c)
reclassify or recapitalize any outstanding equity securities, or, unless approved by the Board of Directors, including by the Series A Director, authorize or issue, or undertake an obligation to authorize or issue, any equity securities or any debt securities convertible into or exercisable for any equity securities (other than the issuance of stock-options or securities under any employee option or benefit plan);
(d)
authorize or effect any transaction constituting a Deemed Liquidation (as defined in this subparagraph) under the Articles, or any other merger or consolidation of the Company;
(e)
increase or decrease the size of the Board of Directors as provided in the By-laws of the Company or remove the Series A Director (unless approved by the Board of Directors, including the Series A Director);
(f)
declare or pay any dividends or make any other distribution with respect to any class or series of capital stock (unless approved by the Board of Directors, including the Series A Director);
(g)
redeem, repurchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any outstanding shares of capital stock (other than the repurchase of shares of common stock from employees, consultants or other service providers pursuant to agreements approved by the Board of Directors under which the Company has the option to repurchase such shares at no greater than original cost upon the occurrence of certain events, such as the termination of employment) (unless approved by the Board of Directors, including the Series A Director);
(h)
create or amend any stock option plan of the Company, if any (other than amendments that do not require approval of the stockholders under the terms of the plan or applicable law) or approve any new equity incentive plan;
(i)
replace the President and/or Chief Executive Officer of the Company (unless approved by the Board of Directors, including the Series A Director);
(j)
transfer assets to any subsidiary or other affiliated entity (unless approved by the Board of Directors, including the Series A Director);
(k)
issue, or cause any subsidiary of the Company to issue, any indebtedness or debt security, other than trade accounts payable and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase or otherwise alter in any material respect the terms of any indebtedness previously approved or required to be approved by the holders of the Series A Preferred Stock (unless approved by the Board of Directors, including the Series A Director);
(l)
modify or change the nature of the Company’s business;
(m)
acquire, or cause a Subsidiary of the Company to acquire, in any transaction or series of related transactions, the stock or any material assets of another person, or enter into any joint venture with any other person (unless approved by the Board of Directors, including the Series A Director); or
(n)
sell, transfer, license, lease or otherwise dispose of, in any transaction or series of related transactions, any material assets of the Company or any Subsidiary outside the ordinary course of business (unless approved by the Board of Directors, including the Series A Director).
Common Stock
For the year ended February 28, 2021
Number of shares
Amount
Balance, February 29, 2020
39,910,774
$3,992
Issuance of shares for cash
2,087,000
Issuance of shares upon the exercise of warrants
190,529
Issuance of shares upon settlement of restricted stock units
225,388
Balance, February 28, 2021
42,413,691
$4,242
For the year ended February 29, 2020
Number of shares
Amount
Balance, February 28, 2019
33,805,706
$3,381
Issuance of shares for cash
4,693,567
Issuance of shares upon vesting of restricted stock units
244,884
Issuance of shares upon the cashless exercise of stock options
69,101
Issuance of shares upon the exercise of warrants
15,432
Issuance of shares upon settlement of legal matter
150,000
Issuance of shares upon conversion of convertible notes
932,084
Balance, February 29, 2020
39,910,774
$3,992
During the year ended February 28, 2021, the Company recorded the following common stock transactions:
(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 190,529 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 25,388 shares of its common stock to settle restricted stock units that vested in the period.
During the year ended February 29, 2020, 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 July 17, 2019, the Company issued 15,432 shares of common stock upon the exercise of warrants;
(vi)
On January 16, 2020 and January 21, 2020, the Company converted convertible notes with a face value of $4,900,000 at a conversion price of $8.10 plus $80,000 of accrued interest at a conversion price of $10.23 into a total of 612,758 shares of common stock;
(vii)
The Company issued 244,884 shares of common stock, in aggregate, upon the vesting of restricted stock units related to employees and directors; and
(viii)
The Company issued 69,101 shares of common stock, in aggregate, upon the cashless exercise of stock options related to employees;
13. Research and development expenses
Research and development expenses for the years ended February 28, 2021 and February 29, 2020 were as follows:
February 28,
February 29,2020
External engineering
$5,655,997
$149,333
Employee compensation
4,457,125
3,531,973
Machinery and equipment expenditures
6,149,075
-
Demonstration plant operating expenses
1,852,615
901,687
Other
572,202
134,182
$18,687,014
$4,717,175
14. General and administrative expenses
General and administrative expenses for the years ended February 28, 2021 and February 29, 2020 were as follows:
February 28,
February 29,2020
Professional fees
$4,613,717
$1,193,884
Employee compensation
4,389,219
4,516,171
Directors and officers insurance
2,072,647
761,876
Other
464,757
743,489
$11,540,340
$7,215,420
15. Share-Based Payments
Stock Options
The following tables summarizes the continuity of the Company’s stock options during the years ended February 28, 2021 and February 29, 2020:
Number of stock options
Weighted average exercise price
Number of stock options
Weighted average exercise price
Outstanding, beginning of year
1,587,081
$6.81
1,962,400
$7.53
Granted
-
-
-
-
Exercised
-
-
(75,000)
0.80
Forfeited
-
-
(39,902)
9.67
Expired
-
-
(260,417)
13.59
Outstanding, end of year
1,587,081
$6.81
1,587,081
$6.81
Exercisable, end of year
1,181,248
$7.19
986,248
$6.89
Exercise price
Number of stock options outstanding
Weighted average remaining life (years)
Number of stock options outstanding
Weighted average remaining life (years)
$0.80
507,081
4.75
507,081
5.75
$5.25
380,000
6.49
380,000
7.49
$12.00
700,000
6.54
700,000
7.54
Outstanding, end of year
1,587,081
5.96
1,587,081
6.96
Exercisable, end of year
1,181,248
6.06
986,248
6.97
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. There were no new issuances of stock options for the years ended February 28, 2021 and February 29, 2020.
During the year ended February 28, 2021, stock-based compensation expense attributable to stock options amounted to $2,212,078 (2020 - $2,178,948).
Restricted Stock Units
The following table summarizes the continuity of the restricted stock units (“RSUs”) during the years February 28, 2021 and February 29, 2020:
Number of units
Weighted average fair value price
Number of units
Weighted average fair value price
Outstanding, beginning of year
4,218,802
$1.60
402,868
$8.77
Granted
239,611
9.74
4,114,567
1.06
Settled
(225,388)
1.80
(244,884)
2.54
Forfeited
(22,505)
12.27
(53,750)
9.82
Outstanding, end of year
4,210,520
$1.98
4,218,802
$1.60
Outstanding vested, end of year
691,327
$2.07
831,684
$1.19
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 closing share price at grant date multiplied by the number of restricted stock unit awards granted.
During the year ended February 28, 2021, stock-based compensation attributable to RSUs amounted to $1,378,106 (2020 - $1,290,443).
During the years ended February 28, 2021 and February 29, 2020, stock-based compensation included in research and development expenses amounted to $1,417,004 and $1,252,394 respectively, and in general and administrative expenses amounted to $2,257,622 and $2,216,997 respectively.
16. 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 ended 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.
The following table summarizes the continuity of the Company’s Equity Incentive Plan units during the years ended February 28, 2021 and February 29, 2020:
Number of units
Number of units
Outstanding, beginning of year
1,300,518
3,223,516
Share reserve increase
-
2,000,000
Units granted
(239,611)
(4,114,567)
Units forfeited
22,505
93,652
Units expired
-
97,917
Outstanding, end of year
1,083,412
1,300,518
17. Warrants
Number of warrants
Weighted average exercise price
Number of warrants
Weighted average exercise price
Outstanding, beginning of year
5,059,331
$10.89
802,469
$10.74
Issued
25,000
9.43
4,272,294
10.91
Exercised
(190,529)
8.68
(15,432)
9.32
Expired
(760,082)
10.83
-
-
Outstanding, end of year
4,133,720
$10.99
5,059,331
$10.89
The expiration dates of the warrants outstanding as at February 28, 2021 are as follows:
Number of warrants
Weighted average exercise price
May 12,
25,000
$9.43
June 14,
4,093,567
11.00
February 21,
15,153
11.00
Outstanding, end of year
4,133,720
$10.99
18. Interest and Other Finance Costs
Interest and other finance costs for the years ended February 28, 2021 and February 29, 2021 are as follows:
Interest on long-term debt
$77,756
$57,450
Interest on convertible notes
-
362,426
Accretion expense
36,847
1,892,185
Amortization of deferred finance costs
-
96,155
Revaluation of warrants
-
8,483
Gain on conversion of November 2018 Notes
(232,565)
Other
(32,607)
39,170
$81,996
$2,223,304
19. Income Taxes
The components of the Company’s loss before taxes are summarized below:
February 28,
February 29,
U.S. operations
$(7,126,988)
$(4,220,000)
Foreign operations
(29,217,935)
(10,285,455)
Loss before taxes
$(36,344,923)
$(14,505,455)
A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate, as computed on loss before taxes, is as follows:
February 28,
February 29,
Statutory Federal rate
21%
21%
Federal income tax at statutory rate
$(7,632,436)
$(3,046,145)
Effect of foreign jurisdiction
(1,433,653)
(424,593)
Non-deductible expenses
695,941
1,069,845
Tax credits related to research and development expenditures
(302,703)
(446,967)
Unrecognized tax benefit of net operating losses and other available deductions
8,672,851
2,847,860
Effective income tax expense
$-
$-
Current
$-
$-
Deferred
$-
$-
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“U.S. tax reform”) that lowers the statutory tax rate on U.S. earnings to 21%, taxes historic foreign earnings at a reduced rate of tax, establishes a territorial tax system and enacts new taxes associated with global operations.
The impact of enactment of U.S. tax reform was recorded on a provisional basis as the legislation provided for additional guidance to be issued by the U.S. Department of the Treasury on several provisions including the computation of the transition tax. Loop's Controlled Foreign Corporations ("CFC") were deficit earnings & profit corporations, as such no income was recognized by Loop during 2018. No further inclusions were made thereafter based on the guidance issued.
Additionally, as part of tax reform, the U.S. has enacted a minimum tax on foreign earnings (“global intangible low tax income”). We have not made an accrual for the deferred tax aspects of this provision as Loop's CFCs have suffered net tested losses.
With the enactment of U.S. tax reform, we recorded, for the year ended February 28, 2018, tax expense of $876,812 to reflect the revaluation of deferred taxes. For the years ended February 28, 2019 through February 28, 2021, we finalized our provisional estimate of the enactment of U.S. tax reform without additional tax expense.
On March 27, 2020, the US government signed the Coronavirus Aid, Relief and Economic Security (“CARES”) Act into law, a $2 trillion relief package to provide support to individuals, businesses and government organizations during the COVID-19 pandemic. The income tax provisions contained in the CARES Act are not likely to have an impact for the Company.
The Company has net operating loss carry forwards of approximately $22,043,030 (2020 - $16,074,873) for U.S. Federal income tax purposes expiring between 2035 and 2038, post 2018 net operating losses may be carried forward indefinitely. The Company has net operating loss carry forwards for Canadian Federal and Québec tax purposes of approximately 34,715,320 (CDN$43,953,067), 2020 - 15,560,615 (CDN$19,701,295), and 35,224,105 (CDN$44,597,239), 2020 - 15,727,538 (CDN$19,912,636), respectively, expiring between 2037 and 2041. Realization of future tax assets is dependent on future earnings, the timing and amount of which are uncertain. Accordingly, the net future tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $8,860,563 and $2,896,093, respectively, for the years ended February 28, 2021 and February 29, 2020. The Company has provided a full valuation allowance on the deferred tax assets as a result of the uncertainty regarding the probability of its realization.
The Company has approximately $3,678,832 (CDN$4,657,769), 2020 - $3,340,127 (CDN$4,485,456), of research and development expenditures for Canadian Federal and Québec provincial purposes that are available to reduce taxable income in future years and have an unlimited carry forward period, the benefit of which has not been reflected in these financial statements. Research and development expenditures are subject to audit by the taxation authorities and accordingly, these amounts may vary.
The tax effect of temporary differences between US GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:
As at
February 28,
February 29,
Deferred tax assets
Canada net operating loss carry forward
$9,258,070
$3,905,836
U.S. net operating loss carry forward
4,629,036
3,376,117
Accrual and reserves
335,742
186,985
Intangibles
123,711
92,292
Property, plant and equipment
2,482,633
140,538
Research and development expenditures and credits
1,778,078
1,426,470
Other
126,362
Deferred tax assets
18,607,968
9,254,600
Deferred tax liabilities
Property, plant and equipment
-
-
Intangibles
(211,049)
(27,267)
Accrual and reserves
(64,112)
-
Investment tax credits
-
-
Unrealized foreign exchange
-
-
Other
(244,910)
-
Deferred tax liabilities
(520,072)
(27,267)
Deferred tax assets, net
18,087,896
9,227,333
Valuation allowance
(18,087,896)
(9,227,333)
Deferred tax assets, net
$-
$-
Assessment of the amount of value assigned to the Company's deferred tax assets under the applicable accounting rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the likelihood that the Company will be able to realize the benefit of its deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of the Company's deferred tax assets is dependent on generating sufficient taxable income in future periods. Management does not believe that it is more likely than not that future taxable income will be sufficient to allow it to recover substantially all of the value assigned to its deferred tax assets. Accordingly, the Company has provided for a valuation allowance of the Company's deferred tax asset.
The tax years subject to examination by major tax jurisdiction include the years 2016 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2016 and forward for the Canadian jurisdiction.
20. Legal Settlement
On January 27, 2017, two individuals (“Plaintiffs”), filed a claim against the Company in the Los Angeles Superior Court (“Court”), seeking damages for breach of implied covenant of good faith and fair dealing, breach of contract, and promissory fraud, asserting entitlement to shares of the Company’s common stock. On February 25, 2019, the Company and the Plaintiffs entered into a settlement agreement and release (“Settlement Agreement”), which sets forth the parties’ agreement in principle for settlement. Through the Settlement Agreement, Plaintiffs, the Company and certain other parties to the Settlement Agreement agreed to mutual releases of any and all claims.
Pursuant to the terms of the Settlement Agreement, without agreeing that any of the Plaintiffs’ claims have merit, the Company agreed to issue to the Plaintiffs 150,000 shares of the Company’s common stock (“Plaintiff Common Shares”) and 500,000 warrants exercisable for shares of the Company’s common stock (“Plaintiff Warrants”). The Plaintiff Common Shares will be restricted upon issuance, but within 180 days following the date of the Settlement Agreement, the Company has agreed to file and use its reasonable best efforts to have declared effective a registration statement to register the Plaintiff Common Shares and the shares of the Company’s common stock underlying the Plaintiff Warrants. The Company also agreed to maintain such registration statement for 2 years from the date of effectiveness unless the Plaintiffs sell or otherwise transfer the shares covered by such registration statement prior to the two-year anniversary. 300,000 of the Plaintiff Warrants are exercisable for shares of the Company’s common stock at an exercise price of $12.00 per share for a period of 24 months following the date of the Settlement Agreement. The remaining 200,000 Plaintiff Warrants are exercisable for shares of the Company’s common stock at an exercise price of $11.00 per share for a period of 24 months, but in the event the Company’s 5-day average trading price during any period in the first 18 months following the date of the Settlement Agreement is above $11 per share, then the exercise term of such warrants shall automatically be reduced to 18 months instead of 24 months.
In connection with the legal settlement, the Company recorded an expense in the amount of $4,041,627, based on the fair value of the Plaintiff Common Shares and Plaintiff Warrants that were issued on February 25, 2019, under the terms of the Settlement Agreement. During the year ended February 28, 2021, all of the Plaintiff Warrants expired.
21. 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 amount 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 year ended February 28, 2021, $900,000 was paid by the Company related to this agreement and included in research and development expenses.
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 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.
Plaintiffs served a consolidated amended complaint on February 18, 2021 which alleges defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by 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. The consolidated amended complaint relies on the October 13, 2020 report published by a third party regarding the Company to support their allegations. Defendants served a motion to dismiss the consolidated amended complaint on April 27, 2021. Plaintiffs’ opposition to the motion to Dismiss was served on May 27, 2021 and Defendants’ reply in support of the motion to dismiss is due on June 11, 2021.
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.
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.
22. Subsequent Events
On May 27, 2021, we acquired a 19 million square foot parcel of land in Bécancour, Québec for $4.8 million (CDN $5.9 million). The site is part of our planning for an Infinite LoopTM manufacturing facility. The location is near existing industrial infrastructure, which reduces project costs, permitting time and does not result in the destruction of wetlands or forest. We will not exercise the purchase option which was agreed in January 2021 to acquire approximately 2 million square feet of land in Bécancour, Québec. Therefore, we will cease monthly payments for the option rights.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and the Chief Financial Officer, we are responsible for conducting an evaluation of the effectiveness of the design and operation of our internal controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as at the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this assessment, management determined that the Company’s disclosure controls and procedures over financial reporting as of February 28, 2021 were effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP in the United States of America and includes those policies and procedures that:
∙
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;
∙
Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
∙
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Our Chief Executive Officer and Chief Financial Officer have performed an evaluation of our internal control over financial reporting under the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective at February 28, 2021. Based on this assessment, management determined that the Company’s internal control over financial reporting as of February 28, 2021 was effective.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to law, rules and regulations that permit us to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during our most recent fiscal year that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitation on the Effectiveness of Internal Controls
The effectiveness of any system of internal controls over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting can only provide reasonable, not absolute, assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item concerning our directors is incorporated by reference to the information set forth in the section titled “Election of Directors” in our Proxy Statement. Information required by this item concerning our executive officers is incorporated by reference to the information set forth in the section entitled “Executive Officers” in our Proxy Statement. Information required by this item concerning our audit committee and our security holder director nomination procedures is incorporated by reference to the information set forth in the section entitled “Corporate Governance” in our Proxy Statement. Information regarding Section 16 reporting compliance is incorporated by reference to the information set forth in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement.
Our Board of Directors adopted a Code of Ethics for all of our directors, officers and employees on January 25, 2017. A copy of our Code of Ethics is available under Corporate Governance Documents in the Investors section of our website, and via the following hyperlink: https://www.loopindustries.com/en/investors/corporate-governance. To date, there have been no waivers under our Code of Ethics. We will post waivers, if and when granted, of our Code of Ethics on our website at www.loopindustries.com. The information contained on, or that can be accessed through, our website is not a part of this Annual Report on Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item regarding director’s compensation table and compensation risk management disclosures are incorporated by reference to the information set forth in the section titled “Corporate Governance” in our Proxy Statement. All other information required by this item regarding executive compensation is incorporated by reference to the information set forth in the section titled “Executive Compensation” in our Proxy Statement.
Employment Agreement
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 that is far simpler to purify.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference to the information set forth in the sections titled “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation” in our Proxy Statement.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
It is the policy of the Board that all transactions required to be reported pursuant to Item 404 of Regulation S-K be subject to approval by the Audit Committee of the Board. In furtherance of relevant Nasdaq rules and our commitment to corporate governance, the charter of the Audit Committee provides that the Audit Committee shall review and approve any proposed related party transactions including, transactions required to be reported pursuant to Item 404 of Regulation S-K for potential conflict of interest situations. The Audit Committee reviews the material facts of all transactions that require the committee’s approval and either approves or disapproves of the transaction. In determining whether to approve a transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances.
The additional information required by this item regarding director independence, certain relationships and related party transactions is incorporated by reference to the information set forth in the sections titled “Transactions with Related Persons” and “Corporate Governance” in our Proxy Statement.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this section is incorporated by reference from the information in the section entitled “Ratification of Appointment of Independent Registered Public Accounting Firm” in our Proxy Statement.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(1) Financial Statements
The response to this portion of Item 15 is set forth under Item 8 above.
(2) Financial Statement Schedules.
All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto set forth under Item 8 above.
(3) Exhibits.
The following Exhibits, as required by Item 601 of Regulation SK, are attached or incorporated by reference, as stated below.
for
Exhibit Index
Incorporated by Reference
Number
Description
Form
File No.
Filing Date
Exhibit No.
2.1
Share Exchange Agreement, dated June 29, 2015, by and among First American Group Inc., Loop Holdings, Inc., and the stockholders of Loop Holdings, Inc.
8-K
000-54768
June 30,
2.1
3.1
Articles of Incorporation, as amended to date
10-K
000-54768
May 30,
3.1
3.2
By-laws, as amended to date
8-K
000-54768
April 10,
3.1
4.1
Description of Securities
10-K
001-38301
May 8,
4.1
4.2
Form of Amendment No. 1 to the January 15, 2019 Note Purchase Agreement, dated April 4, 2019.
8-K
001-38301
April 10,
4.1
4.3
Form of Amendment to 2019 Warrant, dated April 4, 2019.
8-K
001-38301
April 10,
4.2
4.4
Form of Amendment and Conversion Agreement, dated April 5, 2019.
8-K
001-38301
April 10,
4.3
4.5
Form of Amendment to November 2018 Warrant, dated April 8, 2019.
8-K
001-38301
April 10,
4.4
4.6
Form of Convertible Promissory Note, dated January 15, 2019 (under Note and Warrant Purchase Agreement).
8-K
001-38301
January 16,
4.1
4.7
Form of Warrant, dated January 15, 2019 (under Note and Warrant Purchase Agreement).
8-K
001-38301
January 16,
4.2
4.8
Form of Note and Warrant Purchase Agreement, dated November 13, 2018.
8-K
001-38301
November 13,
4.1
4.9
Form of Note, dated November 13, 2018 (under Note and Warrant Purchase Agreement).
8-K
001-38301
November 13,
4.2
4.10
Form of Warrant, dated January 11, 2018
8-K
001-38301
January 18,
4.1
4.11
Form of Indenture
S-3
333-226789
August 10,
4.1
4.12
2017 Equity Incentive Plan
10-Q
000-54768
October 11,
4.3
4.13
Form of Stock Option Agreement
10-Q
000-54768
October 11,
4.4
4.14
Form of Restricted Stock Unit Agreement
10-Q
000-54768
October 11,
4.5
10.1
Intellectual Property Assignment Agreement dated October 27, 2014, as supplemented April 10, 2015, by and among Hatem Essaddam, Loop Holdings, Inc. and Daniel Solomita.
10-K
000-54768
May 30,
10.1
10.2
Subscription Agreement, dated May 22, 2015, by and between 9121820 Canada Inc. and Loop Holdings, Inc.
10-K
000-54768
May 30,
10.2
10.3
Technology Transfer Agreement, dated June 22, 2015 by and between 8198381 Canada Inc. and Loop Holdings, Inc.
8-K
000-54768
June 30,
10.7
10.4
Amended and Restated Employment Agreement, dated July 13, 2018, by and between Loop Industries, Inc. and Daniel Solomita.
8-K
001-38301
July 13,
10.12
10.5
Master Services Agreement, dated September 1, 2015, by and between 8198381 Canada Inc. and Loop Holdings, Inc.
10-K
000-54768
May 30,
10.5
10.6
Purchase and Sale Agreement, by and between 8198381 Canada Inc. and Loop Canada Inc. (formerly 9449507 Canada Inc.)
10-K
000-54786
May 30,
10.7
10.7†
Agreement for Services, dated February 28, 2017, by and between Loop Industries, Inc. and Drinkfinity USA, Inc.
10-K
000-54768
May 30,
10.8
10.8
Articles of Merger of Loop Holdings, Inc. into Loop Industries, Inc.
10-K
000-54768
May 30,
10.9
10.9
Form of Indemnification Agreement
10-K
000-54768
May 30,
10.10
10.10
Securities Purchase Agreement, dated February 27, 2019, by and between Loop Industries, Inc. and the purchaser identified therein.
8-K
001-8301
February 28,
10.1
10.11
Form of Note and Warrant Purchase Agreement, dated January 15, 2019.
8-K
001-8301
January 16,
10.1
10.12
Form of Warrant, dated November 13, 2018 (under Note and Warrant Purchase Agreement).
8-K
001-8301
November 13,
10.1
10.13
Terms and Conditions Agreement, dated October 9, 2018, by and between Loop Industries, Inc. and Pepsi-Cola Advertising and Marketing, Inc.
8-K
001-8301
October 15,
10.1
10.14
Limited Liability Company Agreement, dated September 24, 2018, by and between Loop Industries, Inc. and Indorama Loop Technologies, LLC.
8-K
001-8301
September 28,
10.1
10.15
License Agreement, dated September 24, 2018 by and between Loop Industries, Inc. and Indorama Loop Technologies, LLC.
8-K
001-8301
September 28,
10.2
10.16
Marketing Agreement, dated September 24, 2018, by and between Loop Industries, Inc. and Indorama Loop Technologies, LLC.
8-K
001-8301
September 28,
10.3
10.17
Form of Common Stock Subscription Agreement
8-K
001-8301
January 18,
10.1
10.18
Employment Agreement, dated December 19, 2018, by and between Loop Canada Inc. and Nelson Gentiletti.
10-K
000-54768
May 8,
10.35
10.19
Employment Agreement May 28, 2019 by and between Loop Canada Inc. and Michel Megelas
10-K
000-54768
May 5, 2020
10.21
10.20
Amendment No. 1, dated April 30, 2020, to the Amended and Restated Employment Agreement by and between Loop Industries, Inc. and Daniel Solomita, dated July 13, 2018.
10-K
000-54768
May 5, 2020
10.22
10.21
Employment Agreement, dated February 23, 2021, by and between Loop Canada Inc. and Thomas Andrew (Drew) Hickey.
Filed herewith
10.22
Deed of sale of 7000 boulevard Raoul Duchesne, Becancour, Quebec, dated May 27,
Filed herewith
Code of Ethics
8-K
000-54768
Jan 31,
14.1
21.1
Subsidiaries of Registrant
10-K
000-54768
May 30,
21.1
23.1
Consent of PricewaterhouseCoopers LLP regarding the registration on form S-3 filed with the SEC on October 8, 2019, form S-3 filed with the SEC on August 10, 2018, and form S-8 filed with the SEC on July 10, 2019.
Filed herewith
24.1
Power of Attorney (contained on signature page to the previously filed Annual Report on Form 10-K)
10-K
000-54768
May 30,
24.1
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
32.1
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith
32.2
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith
99.1
Kemitek Report, dated December 10, 2020
8-K
000-54768
December 14,
99.2
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
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
________
† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been submitted separately to the SEC.