☒
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
|
|
|
For the
quarterly period ended May 31, 2019
|
☐
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
|
|
|
For the
transition period from ___________ to __________
|
Loop Industries, Inc.
|
(Exact
name of Registrant as specified in its charter)
|
Nevada
|
|
27-2094706
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification No.)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common
Stock
|
LOOP
|
Nasdaq
Global Market
|
Large accelerated
filer
|
☐
|
Accelerated
filer
|
☒
|
Non-accelerated
filer
|
☐
|
Smaller reporting
company
|
☒
|
|
|
Emerging growth
company
|
☐
|
|
|
|
|
|
|
Financial
Statements
|
4
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
5
|
|
Quantitative
and Qualitative Disclosures About Market Risk
|
13
|
|
Controls
and Procedures
|
14
|
|
|
|
|
|
|
|
|
|
|
Legal
Proceedings
|
15
|
|
Risk
Factors
|
15
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
16
|
|
Defaults
Upon Senior Securities
|
16
|
|
Mine
Safety Disclosures
|
16
|
|
Other
Information
|
16
|
|
Exhibits
|
17
|
|
|
|
|
|
Signatures
|
18
|
Contents
|
Page(s)
|
|
|
Condensed consolidated balance sheets as at May 31, 2019 and
February 28, 2019 (Unaudited)
|
F‑2
|
|
|
Condensed consolidated statements of operations and comprehensive
loss for the three months ended
|
F‑3
|
May 31, 2019 and 2018 (Unaudited)
|
|
|
|
Condensed consolidated statement of changes in stockholders’
equity for the three months ended
|
F‑4
|
May 31, 2019 and 2018 (Unaudited)
|
|
|
|
Condensed consolidated statement of cash flows for the three months
ended May 31, 2019 and 2018 (Unaudited)
|
F‑6
|
|
|
Notes to the condensed
consolidated financial statements (Unaudited)
|
F‑7
|
|
May
31,
2019
|
February
28,
2019
|
|
|
|
Assets
|
|
|
Current
assets
|
|
|
Cash
(Note 17)
|
$6,971,613
|
$5,833,390
|
Sales
tax, tax credits and other receivables (Note 3)
|
741,993
|
599,000
|
Prepaid
expenses
|
176,309
|
226,521
|
Total
current assets
|
7,889,915
|
6,658,911
|
Investment
in joint venture (Note 8)
|
500,000
|
-
|
Property,
plant and equipment, net (Note 4)
|
6,005,335
|
5,371,263
|
Intangible assets,
net (Note 5)
|
146,112
|
127,672
|
Total
assets
|
$14,541,362
|
$12,157,846
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
Current
liabilities
|
|
|
Accounts
payable and accrued liabilities (Notes 7)
|
$3,103,159
|
$2,670,233
|
Convertible
notes (Note 10)
|
3,653,549
|
5,636,172
|
Warrants
(Note 10)
|
-
|
219,531
|
Current
portion of long-term debt (Note 9)
|
51,748
|
53,155
|
Total
current liabilities
|
6,808,456
|
8,579,091
|
Long-term
debt (Note 9)
|
914,221
|
952,363
|
Total
liabilities
|
7,722,677
|
9,531,454
|
|
|
|
Stockholders' Equity
|
|
|
Series
A Preferred stock par value $0.0001; 25,000,000 shares authorized;
one share issued and outstanding (Note 11)
|
-
|
-
|
Common stock par value $0.0001: 250,000,000 shares
authorized; 34,875, 032 shares issued and outstanding
(February 28, 2019 – 33, 805,706) (Note 11)
|
3,488
|
3,381
|
Additional
paid-in capital
|
46,536,157
|
38,966,208
|
Additional paid-in
capital – Warrants (Note 10)
|
1,074,633
|
757,704
|
Additional paid-in
capital – Beneficial conversion feature (Note
10)
|
1,200,915
|
1,200,915
|
Common stock
issuable, 1,000,000 shares (Note 11)
|
800,000
|
800,000
|
Accumulated
deficit
|
(42,366,142)
|
(38,811,592)
|
Accumulated
other comprehensive loss
|
(430,366)
|
(290,224)
|
Total
stockholders' equity
|
6,818,685
|
2,626,392
|
Total
liabilities and stockholders' equity
|
$14,541,362
|
$12,157,846
|
|
|
|
|
|
|
|
Three
Months Ended May 31,
|
|
|
2019
|
2018
|
Revenue
|
$-
|
$-
|
|
|
|
Operating
Expenses -
|
|
|
Research
and development, net (Note 12)
|
997,861
|
1,066,079
|
General
and administrative (Note 12)
|
1,902,630
|
2,355,550
|
Depreciation
and amortization (Notes 4 and 5)
|
164,336
|
101,069
|
Interest
and other finance costs (Note 15)
|
501,849
|
12,913
|
Foreign
exchange (gain)
|
(12,126)
|
(6,081)
|
Total
operating expenses
|
3,554,550
|
3,529,530)
|
|
|
|
Net
loss
|
(3,554,550)
|
(3,529,530)
|
|
|
|
Other
comprehensive loss -
|
|
|
Foreign
currency translation adjustment
|
(140,142)
|
(52,268)
|
Comprehensive
loss
|
$(3,694,692)
|
$(3,581,798)
|
Loss
per share
|
|
|
Basic
and diluted
|
$(0.11)
|
$(0.11)
|
Weighted
average common shares outstanding
|
|
|
Basic
and diluted
|
34,714,510
|
33,140,148
|
|
|
Three
Months Ended May 31, 2018
|
|||||||||
|
Common
stock
|
Preferred
stock
|
|
|
|
|
|
|
|
||
|
par
value $0.0001
|
par
value $0.0001
|
|
|
|
|
|
|
|
||
|
Number
of Shares
|
Amount
|
Number
of Shares
|
Amount
|
Additional
Paid-in Capital
|
Additional
Paid-in Capital - Warrants
|
Additional
Paid-in Capital – Beneficial Conversion
Feature
|
Common
Stock Issuable
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
Stockholders' Equity
|
Balance,
February 28, 2018
|
33,751,088
|
$3,376
|
1
|
$-
|
$30,964,970
|
$-
|
$-
|
$800,000
|
$(21,275,181)
|
$(169,100)
|
$10,324,065
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares upon cashless exercise of warrants
|
18,821
|
2
|
-
|
-
|
(2)
|
-
|
-
|
-
|
-
|
-
|
-
|
Issuance
of shares upon vesting of restricted stock units
|
35,797
|
3
|
-
|
-
|
(3)
|
-
|
-
|
-
|
-
|
-
|
-
|
Warrants
issued for services
|
-
|
-
|
-
|
-
|
978,025
|
-
|
-
|
-
|
-
|
-
|
978,025
|
Restricted
stock units issued for services
|
-
|
-
|
-
|
-
|
207,644
|
-
|
-
|
-
|
-
|
-
|
207,644
|
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(52,268)
|
(52,268)
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,529,530)
|
-
|
(3,529,530)
|
Balance, May 31, 2018
|
33,805,706
|
$3,381
|
1
|
$-
|
$32,150,634
|
$-
|
$-
|
$800,000
|
$(24,804,711)
|
$(221,368)
|
$7,927,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended May 31, 2019
|
|||||||||
|
Common
stock
|
Preferred
stock
|
|
|
|
|
|
|
|
||
|
par
value $0.0001
|
par
value $0.0001
|
|
|
|
|
|
|
|
||
|
Number
of Shares
|
Amount
|
Number
of Shares
|
Amount
|
Additional
Paid-in Capital
|
Additional
Paid-in Capital - Warrants
|
Additional
Paid-in Capital – Beneficial Conversion
Feature
|
Common
Stock Issuable
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive (Loss)
|
Total
Stockholders' Equity
|
Balance,
February 28, 2019
|
33,805,706
|
$3,381
|
1
|
$-
|
$38,966,208
|
$757,704
|
$1,200,915
|
$800,000
|
$(38,811,592)
|
$(290,224)
|
$2,626,392
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common shares for cash, net of share issuance costs (Note
11)
|
600,000
|
60
|
-
|
-
|
4,266,725
|
-
|
-
|
-
|
-
|
-
|
4,266,785
|
Issuance
of shares for legal settlement (Note 15)
|
150,000
|
15
|
-
|
-
|
(15)
|
-
|
-
|
-
|
-
|
-
|
-
|
Issuance
of shares upon conversion of Convertible notes (Note
10)
|
319,326
|
32
|
-
|
-
|
2,372,549
|
316,929
|
-
|
-
|
-
|
-
|
2,689,510
|
Stock
options issued for services (Note 12)
|
-
|
-
|
-
|
-
|
575,513
|
-
|
-
|
-
|
-
|
-
|
575,513
|
Restricted
stock units issued for services (Note 12)
|
-
|
-
|
-
|
-
|
355,177
|
-
|
-
|
-
|
-
|
-
|
355,177
|
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(140,142)
|
(140,142)
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,554,550)
|
-
|
(3,554,550)
|
Balance, May 31, 2019
|
34,875,032
|
$3,488
|
1
|
$-
|
$46,536,157
|
$1,074,633
|
$1,200,915
|
$800,000
|
$(42,366,142)
|
$(430,366)
|
$6,818,685
|
|
Three
Months Ended May 31,
|
|
|
2019
|
2018
|
Cash Flows from Operating Activities
|
|
|
Net
loss
|
$(3,554,550)
|
$(3,529,530)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
and amortization
|
164,336
|
101,069
|
Stock-based
compensation expense
|
930,690
|
1,185,669
|
Accrued
interest
|
117,433
|
-
|
Loss
on revaluation of warrants
|
8,483
|
-
|
Debt
accretion
|
583,727
|
-
|
Deferred
financing costs
|
46,442
|
-
|
Gain
on conversion of convertible notes
|
(268,730)
|
-
|
Changes
in operating assets and liabilities:
|
|
|
Sales
tax and tax credits receivable
|
(158,954)
|
53,699
|
Prepaid
expenses
|
49,136
|
239,669
|
Accounts
payable and accrued liabilities
|
(5,366)
|
(221,637)
|
Net
cash used in operating activities
|
(2,087,353)
|
(2,171,061)
|
|
|
|
Cash Flows from Investing Activities
|
|
|
Investment
in joint venture
|
(500,000)
|
-
|
Additions
to property, plant and equipment
|
(470,545)
|
(585,958)
|
Additions
to intangible assets
|
(24,811)
|
(6,358)
|
Net
cash used in investing activities
|
(995,356)
|
(592,316)
|
|
|
|
Cash Flows from Financing Activities
|
|
|
Proceeds
from sale of common shares
|
5,130,000
|
-
|
Share
issuance costs
|
(863,216)
|
-
|
Repayment
of long-term debt
|
(13,057)
|
(13,514)
|
Net
cash (used) provided by financing activities
|
4,253,727
|
(13,514)
|
|
|
|
Effect
of exchange rate changes
|
(32,796)
|
(17,807)
|
Net
change in cash
|
1,138,222
|
(2,794,698)
|
Cash,
beginning of period
|
5,833,390
|
8,149,713
|
Cash,
end of period
|
$6,971,612
|
$5,355,015
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
Income
tax paid
|
$-
|
$-
|
Interest
paid
|
$14,488
|
$13,037
|
|
May
31,
2019
|
February
28,
2019
|
Sales
tax
|
$222,215
|
$82,992
|
Research and
development tax credits
|
455,564
|
410,997
|
Other
receivables
|
64,214
|
105,011
|
|
$741,993
|
$599,000
|
|
As at May 31,
2019
|
||
|
Cost
|
Accumulated
depreciation
|
Net book
value
|
Building
|
$1,832,840
|
$(82,178)
|
$1,750,661
|
Land
|
226,540
|
-
|
226,540
|
Building
Improvements
|
373,823
|
(122,274)
|
251,549
|
Machinery and
equipment
|
4,650,026
|
(935,568)
|
3,714,458
|
Office equipment
and furniture
|
113,989
|
(51,863)
|
62,126
|
Balances, end of
period
|
$7,197,218
|
$(1,191,883)
|
$6,005,335
|
|
|
|
|
|
As at February 28,
2019
|
||
|
Cost
|
Accumulated
depreciation
|
Net book
value
|
Building
|
$1,882,665
|
$(68,596)
|
$1,814,069
|
Land
|
232,699
|
-
|
232,699
|
Building
Improvements
|
383,985
|
(119,889)
|
264,096
|
Machinery and
equipment
|
3,834,338
|
(841,236)
|
2,993,102
|
Office equipment
and furniture
|
117,088
|
(49,791)
|
67,297
|
Balances, end of
period
|
$6,450,775
|
$(1,079,512)
|
$5,371,263
|
|
As at May
31,
2019
|
As at February
28,
2019
|
|
|
|
Intangible assets,
at cost - beginning of period
|
$127,672
|
$533,369
|
Intangible assets,
accumulated depreciation – beginning of period
|
-
|
(200,629)
|
|
127,672
|
332,740
|
|
|
|
Add: Additions in
the period
|
24,811
|
153,477
|
Deduct:
Amortization of intangibles
|
(3,015)
|
(59,851)
|
Deduct: Impairment
of intangibles
|
-
|
(298,694)
|
Add (deduct):
Foreign exchange effect
|
(3,356)
|
-
|
|
$146,112
|
$127,672
|
|
Fair Value Measurements as at May 31, 2019
|
||
|
Carrying
Amount
|
Fair
Value
|
Level in the
hierarchy
|
Instruments
measured at fair value:
|
$-
|
$-
|
-
|
|
|
|
|
Instruments
measured at amortized cost:
|
|
|
|
Long-term
debt
|
965,969
|
965,969
|
Level 2
|
Convertible
notes (Second Issuance)
|
$3,556,249
|
$4,900,000
|
Level 2
|
|
Fair Value
Measurements at February 28, 2019
|
||
|
Carrying
Amount
|
Fair
Value
|
Level in the
hierarchy
|
Instruments
measured at fair value:
|
|
|
|
Warrants
(First Issuance)
|
$219,531
|
$219,531
|
Level
3
|
|
|
|
|
Instruments
measured at amortized cost:
|
|
|
|
Long-term
debt
|
1,005,518
|
1,005,518
|
Level
2
|
Convertible
notes (First Issuance)
|
2,495,636
|
2,650,000
|
Level
2
|
Convertible
notes (Second Issuance)
|
$3,126,886
|
$3,150,000
|
Level
2
|
|
May
31,
2019
|
February
28,
2019
|
Trade accounts
payable
|
$2,086,412
|
$1,784,362
|
Accrued
liabilities
|
555,287
|
520,671
|
Accrued
bonuses
|
461,460
|
365,200
|
|
$3,103,159
|
$2,670,233
|
|
May
31,
2019
|
February
28,
2019
|
Instalment
loan
|
$965,969
|
$1,005,518
|
Less current
portion
|
51,748
|
53,155
|
Non-current
portion
|
$914,221
|
$952,363
|
Years ending
February 28,
|
Amount
|
2020
|
$38,811
|
2021
|
51,748
|
2022
|
51,748
|
2023
|
51,748
|
2024
|
51,748
|
Thereafter
|
720,166
|
Total
|
$965,969
|
|
May 31,
2019
|
February 28,
2019
|
Issue
Date
|
November 2018
Convertible Notes – Liability
|
-
|
$2,495,636
|
$2,495,636
|
Accrued interest
– Liability
|
-
|
60,793
|
-
|
Deferred financing
costs
|
-
|
(26,557)
|
(63,738)
|
Total
|
-
|
2,529,872
|
2,431,898
|
|
|
|
|
November 2018
Warrants – Liability
|
-
|
$219,531
|
$154,364
|
|
May 31,
2019
|
February 28,
2019
|
Issue
Date
|
January 2019
Convertible Notes – Liability
|
3,556,249
|
$3,126,886
|
$2,941,381
|
Accrued interest
– Liability
|
147,011
|
49,011
|
-
|
Deferred financing
costs
|
(49,711)
|
(69,597)
|
(79,539)
|
|
3,653,549
|
3,106,300
|
2,861,842
|
|
|
|
|
January 2019
Beneficial Conversion Option – Equity
|
1,200,915
|
1,200,915
|
1,200,915
|
|
|
|
|
January 2019
Warrants – Equity
|
$757,704
|
$757,704
|
$757,704
|
For
the period ended May 31, 2019
|
Number of
shares
|
Amount
|
Balance, February
28, 2019
|
33,805,706
|
$3,381
|
Issuance of shares
for cash
|
600,000
|
60
|
Issuance of shares
upon settlement of legal matter
|
150,000
|
15
|
Issuance of shares
upon conversion of Convertible notes
|
319,326
|
32
|
Balance, May 31,
2019
|
34,875,032
|
$3,488
|
For
the period ended May 31, 2018
|
Number of
shares
|
Amount
|
Balance, February
28, 2018
|
33,751,088
|
$3,376
|
Cashless exercise
of stock options
|
18,821
|
2
|
Issuance of shares
upon vesting of restricted stock units
|
35,797
|
3
|
Balance, May 31,
2018
|
33,805,706
|
$3,381
|
(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.
|
|
2019
|
2018
|
||
|
Number of stock
options
|
Weighted average
exercise price
|
Number of stock
options
|
Weighted average
exercise price
|
Outstanding,
beginning of period
|
1,962,400
|
$7.53
|
2,374,581
|
$7.99
|
Granted
|
-
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
(20,000)
|
0.80
|
Forfeited
|
(10,010)
|
8.75
|
(100,000)
|
5.25
|
Expired
|
(260,417)
|
13.89
|
-
|
-
|
Outstanding, end of
period
|
1,691,973
|
$6.60
|
2,254,581
|
$8.17
|
Exercisable, end of
period
|
914,998
|
$6.10
|
926,249
|
$6.61
|
|
2019
|
2018
|
||
Exercise
price
|
Number of stock
options outstanding
|
Weighted average
remaining life (yrs.)
|
Number of stock
options outstanding
|
Weighted average
remaining life (yrs.)
|
$0.80
|
582,081
|
6.51
|
582,081
|
7.50
|
$3.00
|
-
|
-
|
12,500
|
0.01
|
$5.25
|
380,000
|
8.24
|
430,000
|
8.19
|
$8.75
|
16,683
|
0.04
|
-
|
-
|
$11.52
|
13,209
|
0.04
|
-
|
-
|
$12.00
|
700,000
|
8.29
|
700,000
|
9.29
|
$13.49
|
-
|
-
|
250,000
|
9.38
|
$13.89
|
-
|
-
|
280,000
|
9.44
|
Outstanding, end of
period
|
1,691,973
|
7.52
|
2,254,581
|
8.60
|
Exercisable, end of
period
|
914,998
|
7.54
|
926,249
|
7.96
|
|
2019
|
2018
|
||
|
Number of
units
|
Weighted average
fair value price
|
Number of
units
|
Weighted average
fair value price
|
Outstanding,
beginning of period
|
402,868
|
$8.77
|
34,102
|
$13.00
|
Granted
|
25,145
|
9.79
|
24,450
|
12.23
|
Issued as common
stock
|
(7,043)
|
12.16
|
(35,797)
|
13.06
|
Forfeited
|
(17,203)
|
8.75
|
-
|
-
|
Outstanding, end of
period
|
403,767
|
$8.73
|
22,755
|
$12.07
|
Outstanding vested,
end of period
|
5,000
|
12.32
|
-
|
-
|
|
2019
|
2018
|
|
Number of
units
|
Number of
units
|
Outstanding,
beginning of period
|
3,223,516
|
1,735,898
|
Automatic share
reserve increase
|
1,500,000
|
1,500,000
|
Units
granted
|
(25,145)
|
(24,450)
|
Units
forfeited
|
27,213
|
-
|
Units
expired
|
260,417
|
-
|
Outstanding, end of
period
|
4,986,001
|
3,211,448
|
|
2019
|
2018
|
||
|
Number of
warrants
|
Weighted average
exercise price
|
Number of
warrants
|
Weighted average
exercise price
|
Outstanding,
beginning of period
|
802,469
|
$10.74
|
140,667
|
$12.00
|
Issued
|
159,663
|
8.55
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
Expired
|
-
|
-
|
-
|
-
|
Outstanding, end of
period
|
962,132
|
$10.38
|
140,667
|
$12.00
|
|
2019
|
|
|
Number of
warrants
|
Weighted average
exercise price
|
January 15,
2020
|
277,778
|
$9.32
|
January 21,
2020
|
24,691
|
9.32
|
October 9,
2020
|
159,663
|
8.55
|
February 25,
2021
|
200,000
|
11.00
|
February 25,
2021
|
300,000
|
12.00
|
Outstanding, end of
period
|
962,132
|
$10.38
|
|
2019
|
2018
|
Interest on
long-term debt
|
$13,070
|
$13,037
|
Interest on
convertible notes
|
117,435
|
-
|
Accretion
expense
|
547,562
|
-
|
Amortization of
deferred finance costs
|
46,442
|
-
|
Revaluation of
warrants
|
8,483
|
-
|
Gain on conversion
of November 2018 Notes
|
(232,565)
|
-
|
Other
|
1,422
|
(124)
|
|
$501,849
|
$12,913
|
|
Three Months Ended May
31,
|
||
|
2019
|
2018
|
$
Change
|
Revenues
|
$-
|
$-
|
$-
|
|
|
|
|
Operating
expenses
|
|
|
|
Research and
development
|
|
|
|
Stock-based
compensation
|
312,435
|
410,213
|
(97,778)
|
Other research and
development
|
685,426
|
655,866
|
29,560
|
Total research and
development
|
997,861
|
1,066,079
|
(68,218)
|
|
|
|
|
General and
administrative
|
|
|
|
Stock-based
compensation
|
618,255
|
775,456
|
(157,201)
|
Other general and
administrative
|
1,284,375
|
1,580,094
|
(295,719)
|
Total general and
administrative
|
1,902,630
|
2,355,550
|
(452,920)
|
|
|
|
|
Depreciation and
amortization
|
164,336
|
101,069
|
63,267
|
Interest and other
finance costs
|
501,849
|
12,913
|
488,936
|
Foreign exchange (gain)
loss
|
(12,126)
|
(6,081)
|
(6,045)
|
Total
operating expenses
|
3,554,550
|
3,529,530
|
25,020
|
Net
loss
|
(3,554,550)
|
$(3,529,530)
|
$(25,020)
|
|
Three Months Ended
May 31,
|
|
|
2019
|
2018
|
Net cash used in
operating activities
|
$(2,087,353)
|
$(2,171,061)
|
Net cash used in
investing activities
|
(995,356)
|
(592,316)
|
Net cash (used)
provided by financing activities
|
4,253,727
|
(13,514)
|
Effect of exchange
rate changes on cash
|
(32,796)
|
(17,807)
|
Net (decrease)
increase in cash
|
$1,138,222
|
$(2,794,698)
|
|
|
Incorporated by Reference
|
|
||
Number
|
Description
|
Form
|
File No.
|
Filing Date
|
Exhibit No.
|
Form
of Amendment No. 1 to the January 15, 2019 Note Purchase Agreement,
dated April 4, 2019.
|
8-K
|
001-38301
|
10-Apr-19
|
4.1
|
|
Form
of Amendment to 2019 Warrant, dated April 4, 2019.
|
8-K
|
001-38301
|
10-Apr-19
|
4.2
|
|
Form
of Amendment and Conversion Agreement, dated April 5,
2019.
|
8-K
|
001-38301
|
10-Apr-19
|
4.3
|
|
Form
of Amendment to November 2018 Warrant, dated April 8,
2019.
|
8-K
|
001-38301
|
10-Apr-19
|
4.4
|
|
24.1
|
Power
of Attorney (contained on signature page to the previously filed
Annual Report on Form 10-K)
|
10-K
|
000-54768
|
08-May-19
|
24.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
Filed herewith
|
|
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
Filed herewith
|
|
|
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
Furnished herewith
|
|
|
|
Certification
of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
Furnished herewith
|
|
|
|
101.INS
|
XBRL
Instance Document
|
|
Filed herewith
|
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document
|
|
Filed herewith
|
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
Filed herewith
|
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
Filed herewith
|
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
Filed herewith
|
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
Filed herewith
|
|
|
Date:
July 8, 2019
|
By:
|
/s/ Daniel Solomita
|
|
|
Name:
|
Daniel
Solomita
|
|
|
Title:
|
President
and Chief Executive Officer, and Director (Principal Executive
Officer)
|
|
|
|
|
|
Date:
July 8, 2019
|
By:
|
/s/ Nelson Gentiletti
|
|
|
Name:
|
Nelson
Gentiletti
|
|
|
Title:
|
Chief
Financial Officer and Treasurer (Principal Accounting Officer and
Principal Financial Officer)
|
|
|
|
|
|
1.
|
I have
reviewed this quarterly report on Form 10-Q of Loop Industries,
Inc.;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a–15(e)
and 15d–15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a–15(f) and
15d–15(f)) for the registrant and have:
|
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
|
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|
|
|
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
|
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
|
|
|
Date:
July 8, 2019
|
|
/s/ Daniel Solomita
|
|
|
|
Daniel
Solomita
|
|
|
|
President
and Chief Executive Officer (principal executive
officer)
|
|
1.
|
I have
reviewed this quarterly report on Form 10-Q of Loop Industries,
Inc.;
|
|
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
|
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a–15(e)
and 15d–15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a–15(f) and
15d–15(f)) for the registrant and have:
|
|
|
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
|
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|
|
|
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
|
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
|
|
|
Date:
July 8, 2019
|
|
/s/Nelson Gentiletti
|
|
|
|
Nelson
Gentiletti
|
|
|
|
Chief
Financial Officer and Treasurer (principal financial officer and
principal accounting officer)
|
|
Date:
July 8, 2019
|
|
/s/ Daniel Solomita
|
|
|
|
Daniel
Solomita
|
|
|
|
President
and Chief Executive Officer (principal executive
officer)
|
|
(1)
|
such
Quarterly Report on Form 10-K for the quarter ended May 31, 2019,
fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
|
|
|
(2)
|
the
information contained in such Quarterly Report on Form 10-Q for the
quarter ended May 31, 2019, fairly presents, in all material
respects, the financial condition and results of operations of Loop
Industries, Inc.
|
Date:
July 8, 2019
|
|
/s/ Nelson Gentiletti
|
|
|
|
Nelson
Gentiletti
|
|
|
|
Chief
Financial Officer and Treasurer (principal financial officer and
principal accounting officer)
|
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
May 31, 2019 |
Jul. 08, 2019 |
|
Document And Entity Information | ||
Entity Registrant Name | Loop Industries, Inc. | |
Entity Central Index Key | 0001504678 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-29 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 39,012,531 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
May 31, 2019 |
Feb. 28, 2019 |
---|---|---|
Stockholders' Equity | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 34,875,032 | 33,805,706 |
Common stock, shares outstanding | 34,875,032 | 33,805,706 |
Common stock issuable | 1,000,000 | 1,000,000 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, share authorised | 25,000,000 | 25,000,000 |
Preferred stock, share issued | 1 | 1 |
Preferred stock, share outstanding | 1 | 1 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Income Statement [Abstract] | ||
Revenue | $ 0 | $ 0 |
Operating Expenses | ||
Research and development | 997,861 | 1,066,079 |
General and administrative | 1,902,630 | 2,355,550 |
Depreciation and amortization | 164,336 | 101,069 |
Interest and other finance costs | 501,849 | 12,913 |
Foreign exchange (gain) loss | (12,126) | (6,081) |
Total operating expenses | 3,554,550 | 3,529,530 |
Net Loss | (3,554,550) | (3,529,530) |
Other comprehensive loss | ||
Foreign currency translation adjustment | (140,142) | (52,268) |
Comprehensive Loss | $ (3,694,692) | $ (3,581,798) |
Loss per share | ||
Basic and Diluted | $ (0.11) | $ (0.11) |
Weighted average common shares outstanding | ||
Basic and Diluted | 34,714,510 | 33,140,148 |
Nature of the Company, Basis of Presentation and Going Concern |
3 Months Ended |
---|---|
May 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of the Company, Basis of Presentation and Going Concern | The Company
Loop Industries, Inc. is a technology and licensing company who 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 repolymerized to create virgin-quality Loop™ branded PET plastic resin and polyester fiber suitable for use in food-grade packaging to be sold to consumer goods companies.
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.”
Basis of presentation
The accompanying unaudited interim condensed consolidated financial statements of Loop Industries, Inc., its wholly-owned subsidiaries and joint venture (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The balance sheet information as at February 28, 2019 is derived from the Company’s audited consolidated financial statements and related notes for the fiscal year ended February 28, 2019, which is included in Item 8 of the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 8, 2019. These unaudited interim condensed consolidated financial statements should be read in conjunction with those financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair statement have been included. Operating results for the three months ended May 31, 2019 are not necessarily indicative of the results that may be expected for the year ending February 28, 2020.
Intercompany balances and transactions are eliminated on consolidation.
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Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |
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 as at the date of the financial statements and the reported amounts of revenues and 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 recorded intangible assets, accruals for potential liabilities and assumptions made in calculating the fair value of stock-based compensation and other stock instruments.
Foreign currency translations and transactions
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. Assets and liabilities of subsidiaries that have a functional currency other than that of the Company are translated to U.S. dollars at the exchange rate as at the balance sheet date. Income and expenses are translated at the average exchange rate of the period. The resulting translation adjustments are included in other comprehensive income (loss) (“OCI”). As a result, foreign currency exchange fluctuations may impact operating expenses. The Company currently has not engaged in any currency hedging activities.
For transactions and balances, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations and comprehensive loss, except for gains or losses arising from the translation of intercompany balances denominated in foreign currencies that forms part in the net investment in the subsidiary which are included in OCI.
Stock-based compensation
Loop Industries, Inc. periodically issues stock options and restricted stock units to employees and non-employees in non-capital raising transactions for services and financing costs. 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 granted to non-employees in accordance with the authoritative guidance of the FASB wherein the fair value of the stock compensation is based upon the measurement date determined as the earlier of the date at which either a) a commitment is reached with the counterparty for performance or b) the counterparty completes its performance.
The Company estimates the fair value of restricted stock unit awards to employees and directors based on the closing market price of its common stock on the date of grant.
The fair value of the stock options granted are estimated using the Black-Scholes-Merton Option Pricing (“Black-Scholes”) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends. Stock-based compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience. The assumptions used in the Black-Scholes model could materially affect stock-based compensation expense recorded in the current and future periods.
Income taxes
The Company calculates its provision for income tax on the basis of the tax laws enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income, in accordance with FASB ASC 740, Income Taxes. The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
Research and development expenses
Research and development expenses relate primarily to the development, design, testing of preproduction samples, prototypes and models, compensation, and consulting fees, and are expensed as incurred. Total research and development costs recorded during the three-month periods ended May 31, 2019 and 2018 amounted to $997,861 and $1,066,079, respectively, and are net of government research and development tax credits and government grants from the federal and provincial taxation authorities accrued and recorded based on qualifying expenditures incurred during the fiscal periods.
Net earnings (loss) per share
The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. The Company includes common stock issuable in its calculation. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation if their effect is antidilutive.
For the three-month periods ended May 31, 2019 and 2018, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at May 31, 2019, the potentially dilutive securities consisted of 1,691,973 outstanding stock options (May 31, 2018 – 2,254,581), 403,767 outstanding restricted stock units (May 31, 2018 – 22,755), 962,132 outstanding warrants (May 31, 2018 – 140,667) and 1,000,000 outstanding issuable common stock (May 31, 2018 – 1,000,000).
Recently adopted accounting pronouncements
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the Tax Reform Act on items within accumulated other comprehensive income (loss) ("AOCI") to retained earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." Amendments in this update only relate to the reclassification of the income tax effects of the Tax Reform Act. Other accounting guidance that requires the effect of changes in tax laws or rates to be included in net income from continuing operations is not affected by this update. ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. ASU 2018-02 is applicable beginning March 1, 2019. The adoption of the standard had no impact on the consolidated financial statements of the Company.
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this Update are effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of the standard had no impact on the consolidated financial statements of the Company.
In July 2018, the FASB issued ASU 2018-09, Codification Improvements, which clarify certain amendments to guidance that may have been incorrectly or inconsistently applied by certain entities and includes Amendments to Subtopic 718-740, Compensation – Stock Compensation – Income Taxes. The guidance in paragraph 718-740-35-2, as amended by the amendments in ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, is unclear on whether an entity should recognize excess tax benefits (or tax deficiencies) for compensation expense that is taken on the entity’s tax return. The amendment to paragraph 718-740-35-2 in this Update clarifies that an entity should recognize excess tax benefits in the period in which the amount of deduction is determined. The amendments in this Update are effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of the standard had no impact on the consolidated financial statements of the Company.
In February 2016, the FASB issued ASU 2016-02, “Leases,” amended in July by ASU 2018-10, “Codification Improvements to Topic 842, Leases,” ASU 2018-11, “Targeted Improvements,” and ASU 2018-20, “Narrow-Scope Improvements for Lessors,” which requires lessees to recognize leases on the balance sheet while continuing to recognize expenses in the income statement in a manner similar to current accounting standards. For lessors, the new standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing, and uncertainty of cash flows arising from leases. This ASU may either be adopted on a modified retrospective approach at the beginning of the earliest comparative period, or through a cumulative-effect adjustment at the adoption date. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted these standards effective March 1, 2019. The adoption of the standard had no impact on the consolidated financial statements of the Company. The Company elected to apply the package of practical expedients that allows us not to reassess whether expired or existing contracts contain leases, the classification of these leases and whether previously capitalized initial direct costs would qualify for capitalization under Accounting Standards Codification (or “ASC”) 842. Furthermore, we elected to use hindsight in determining the lease term and assessing impairment of the right-of-use assets.
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Sales Tax, Tax Credits and Other Receivables |
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Sales Tax, Tax Credits and Other Receivables | Sales tax, research and development tax credits and other receivables as at May 31, 2019 and February 28, 2019 were as follows:
The Company is registered for the Canadian federal and provincial goods and services taxes. As such, the Company is obligated to collect, and is entitled to claim sale 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 three-month periods ended May 31, 2019 and 2018, the Company recorded $55,725 and nil, respectively, as a reduction of research and development expenses. During the three-month periods ended May 31, 2019 and 2018, research and development tax credits received by the Company from taxation authorities amounted to nil and nil, respectively.
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Property, Plant and Equipment |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
Depreciation expense for the three-month periods ended May 31, 2019 and 2018 amounted to $161,321 and $84,590, respectively, and is recorded as an operating expense in the consolidated statements of operations and comprehensive loss.
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Intangible Assets |
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Finite-Lived Intangible Assets, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net | On October 27, 2014, the Company entered into an Intellectual Property Assignment Agreement with Mr. Hatem Essaddam wherein the Company purchased a certain technique and method, which was used to develop the Generation I (“GEN I”) technology, for $445,050 allowing for the depolymerization of polyethylene terephthalate at ambient temperature and atmospheric pressure. The GEN I technology patent portfolio has two issued U.S. patents and a pending U.S. application expected to expire on or around July 2035. Internationally, the Company has an issued patent in Taiwan, an allowed application in the members of the Gulf Cooperation Council, and pending patent applications in Argentina, Australia, Brazil, Canada, China, Eurasia, Europe, Israel, India, Japan, Korea, Mexico, the Philippines, and South Africa, all expected to expire, if granted, on or around July 2036.
In addition to the $445,050 paid by the Company under the Intellectual Property Assignment Agreement, the Company is required to make four additional payments of CDN$200,000, totaling CDN$800,000, to Mr. Essaddam within sixty (60) days of attaining each of the following milestones:
Additionally, the Company is obligated to make royalty payments of up to CDN$25,700,000, based on the GEN I technology, payable as follows:
The Company has no intention of commercializing the GEN I technology at this time.
During the year ended February 28, 2019, the Company finalized the development of its next generation technology, referred to as Generation II (“GEN II”), and has filed various patents in jurisdictions around the world. On April 9, 2019, the GEN II U.S. patent was formally approved and issued and is expected to expire on or around September 2037. The GEN II technology patent portfolio also has a pending U.S. application as well as a PCT application and non-PCT applications in Argentina, Bangladesh, Bolivia, Bhutan, members of the Gulf Cooperation Council, Iraq, Pakistan, Taiwan, Uruguay, and Venezuela, all expected to expire, if granted, on or around September 2037. Additionally, the Company has three pending provisional applications directed to additional aspects of the GEN II technology. Any patents that would ultimately grant from these provisional applications would be expected to expire, if granted, no earlier than 2039.
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.
As a result of the strategic shift away from the GEN I technology, and the development of the GEN II technology during the year ended February 28, 2019, the Company considered the carrying value of its GEN I intangible asset to be impaired and wrote off the remaining balance of the intangible asset, which amounted to $298,694.
Amortization expense for the three-month periods ended May 31, 2019 and 2018 amounted to $3,015 and $16,479, respectively, and is recorded as an operating expense in the unaudited condensed consolidated statements of operations and comprehensive loss.
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Fair value of financial instruments |
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Fair Value Of Financial Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of financial instruments | The following tables presents the fair value of the Company’s financial liabilities as at May 31, 2019 and February 28, 2019:
The Warrants under the First Issuance of Convertible Notes represent a Level 3 in the fair value hierarchy. The Warrants were valued using a Monte Carlo simulation using a volatility of 71.5%. The Company recorded a loss on revaluation from the date of issuance to February 28, 2019 of $65,167.
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Accounts Payable and Accrued Liabilities |
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Accounts Payable and Accrued Liabilities | Accounts payable and accrued liabilities as at May 31, 2019 and February 28, 2019 were as follows:
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Joint Venture |
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Equity Method Investments and Joint Ventures [Abstract] | |
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 “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 Agreement, Indorama Venture is contributing manufacturing knowledge and Loop 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 Indorama Loop Technologies, LLC. There was no activity in ILT from the date of inception of September 24, 2018 to February 28, 2019 and, as at February 28, 2019, the carrying value of the equity investment was nil. On April 18, 2019, Loop Innovations, LLC, the Company’s wholly-owned subsidiary, and Indorama Ventures Holdings LP, USA each contributed cash of $500,000 to ILT. As there were no other transactions during the three-month period ended May 31, 2019, the carrying value of the equity investment as at May 31, 2019 was $500,000.
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Long-Term Debt |
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Long-Term Debt |
Principal repayments due on the Instalment loan over the next five years are as follows:
Interest paid on the instalment loan during the three-month periods ended May 31, 2019 and 2018 amounted to $13,070 and $13,037, respectively. As at May 31, 2019, the Company was in compliance with its financial covenants. |
Convertible Notes |
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Convertible notes | First Issuance
On November 13, 2018, the Company issued convertible promissory 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 promissory 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 November 2018 Notes carry an interest rate of 8.00% per annum and mature on 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 transaction costs related 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.
The aggregate value of the November 2018 Notes and November 2018 Warrants as shown on the consolidated balance sheet are broken down as follows:
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 expire eighteen (18) months from the date of the conversion of the November 2018 Notes.
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 operating expenses.
Second Issuance
On January 15, 2019, the Company issued convertible promissory 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 promissory notes from this issuance, together with related warrants to acquire an additional 50% of the shares issuable upon the conversion of the January 2019 Notes, for an aggregate purchase price of $400,000.
The January 2019 Notes carry an interest rate of 8.00% per annum and mature on 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 shall automatically convert 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 may be adjusted in the event that the Company issues 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 shall equal the outstanding principal amount of the January 2019 Notes divided by the January 2020 Conversion Price.
With respect to accrued and unpaid interest at the January 2020 Maturity Date, the Investors have the option of receiving cash or common stock of the Company at that date. Upon the January 2020 Maturity Date, where the Investor elect’s payment of accrued and unpaid interest on the January 2019 Notes in common stock, the price per share shall be 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.
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 shall be equal to 115% of the January 2020 Conversion Price. The January 2019 Warrants will 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 elects to take accrued and unpaid interest on the January 2019 Notes in common stock, additional warrants will 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”). The January 2019 Warrants expire twenty-four (24) months from the date of their issuance (the “January 2019 Expiration Date”). The Investors may exercise the January 2019 Warrants at any time prior to the January 2019 Expiration Date.
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. The BCF related to the issuance of the January 2019 Notes was recorded at the issuance date. The BCF was measured using the intrinsic value method and is shown as a discount to the carrying amount of the convertible note and is credited to additional paid-in capital. The intrinsic value of the BCF at the issuance 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 recognized as a discount on the carrying amount of the January 2019 Notes and is credited to additional paid-in capital. The fair value of the warrants at the issuance date was determined to be $757,704.
The allocated fair values of the BCF and the warrants was recorded as a debt discount from the face amount of the January 2019 Notes and such discount is being accreted over the expected term of the January 2019 Notes and is charged to interest expense.
The aggregate values of the January 2019 Warrants, the January 2019 Notes and the related BCF are as follows:
The transaction costs relating to this issuance were split pro-rata between the January 2019 Notes, the BCF and the January 2019 Warrants. The portion relating to the January 2019 Notes were deferred and are being amortized over the life of the January 2019 Notes. The portion relating to the BCF and the January 2019 Warrants were recorded as share issuance expenses and offset against additional paid-in capital.
The Company recorded accretion interest expense on the January 2019 Notes for the three-month period ended May 31, 2019 of $429,363 (2018 – nil) and is included in operating expenses. The Company also recorded interest expense on the January 2019 Notes for the three-month period ended May 31, 2019 in the amount of $98,000 (2018 – nil).
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Stockholders' Equity |
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Stockholders' Equity | Series A Preferred Stock
Mr. Solomita’s amended employment agreement July 13, 2018 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 currently-held 53.3% 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 currently-held 53.3% of the issued and outstanding shares of common stock of the Company is diluted to a level below a majority.
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:
Common Stock
During the three months ended May 31, 2019, the Company recorded the following common stock transactions:
During the three months ended May 31, 2018, the Company recorded the following common stock transactions:
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Share-based Payments |
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Share-based Payments |
Stock Options
The following tables summarizes the continuity of the Company’s stock options during the three-month periods ended May 31, 2019 and 2018:
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. As there were no new issuances of stock options for the three-month periods ended May 31, 2019 and 2018, there are no principal components of the Black-Scholes option pricing model for stock options during those periods.
During the three-month periods ended May 31, 2019 and 2018, stock-based compensation expense attributable to stock options amounted to $575,513 and $978,025, respectively, and is included in operating expenses.
Restricted Stock Units
The following table summarizes the continuity of the restricted stock units (“RSUs”) during the three-month periods ended May 31, 2019 and 2018:
The Company applies the fair value method of accounting for awards granted through the issuance of restricted stock units. Fair value is calculated based on the closing share price at grant date multiplied by the number of restricted stock unit awards granted.
During the three-month periods ended May 31, 2019 and 2018, stock-based compensation attributable to RSUs amounted to $355,178 and $207,645, respectively, and is included in operating expenses.
During the three-month periods ended May 31, 2019 and 2018, stock-based compensation included in Research and development expenses amounted to $312,435 and $410,213, respectively, and in General and administrative expenses amounted to $618,255 and $775,456, respectively.
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Equity Incentive Plan |
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Share-based Payment Arrangement, Noncash Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. 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 three-month periods ended May 31, 2019 and 2018:
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Warrants |
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Warrants | The following table summarizes the continuity of warrants during the three-month periods ended May 31, 2019 and 2018:
The expiration dates of the warrants outstanding as at May 31, 2019 are as follows:
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Interest and Other Finance Costs |
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Interest and Other Finance Costs |
Interest and other finance costs for the three-month periods ended May 31, 2019 and 2018 are as follows:
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Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments | The Company has entered into multi-year supply agreements with PepsiCo, Coca-Cola’s Cross Enterprise Procurement Group and Danone SA that will enable them to purchase production capacity from the Company’s joint venture facility with IVL in the United States, and incorporate Loop™ PET resin into its product packaging starting in 2020. Also, the Company has entered into a multi-year supply agreement with L’Occitane that will enable them to purchase production capacity from the Company’s first European production facility. |
Subsequent Events |
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Subsequent Events [Abstract] | |
Subsequent Event | On May 29, 2019, Loop Industries, Inc. entered into a Securities Purchase Agreement (“Purchase Agreement”) by and among the Company, Northern Private Capital Fund I Limited Partnership, an accredited investor (the “Purchaser”), and Daniel Solomita (“Solomita”), in his individual capacity and solely for the purposes of a voting arrangement, pursuant to which the Company has agreed to issue and sell to the Purchaser in a registered direct offering (“Offering”) an aggregate of 4,093,567 shares (“Shares”) of the Company’s common stock (the “Common Stock”) at a per share purchase price of $8.55 per share, for aggregate net proceeds of approximately $34.6 million, after deducting estimated offering expenses payable by the Company, of approximately $400,000. The issuance and sale of the Shares is registered under the Securities Act of 1933 pursuant to the Company’s Registration Statement on Form S-3 which was declared effective by the Securities and Exchange Commission (“SEC”) on August 10, 2018, supplemented by a prospectus supplement dated May 29, 2019. Concurrently with the Offering and pursuant to the Purchase Agreement, the Company has agreed to issue to the Purchaser options to purchase up to an additional 4,093,567 shares of the Company’s common stock at an exercise price of $11.00 per share, which will vest on December 15, 2019, and are exercisable for three years following the closing date of the Offering. The Offering closed on June 14.
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |
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 as at the date of the financial statements and the reported amounts of revenues and 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 recorded intangible assets, accruals for potential liabilities and assumptions made in calculating the fair value of stock-based compensation and other stock instruments.
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Foreign currency translations and transactions | The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. Assets and liabilities of subsidiaries that have a functional currency other than that of the Company are translated to U.S. dollars at the exchange rate as at the balance sheet date. Income and expenses are translated at the average exchange rate of the period. The resulting translation adjustments are included in other comprehensive income (loss) (“OCI”). As a result, foreign currency exchange fluctuations may impact operating expenses. The Company currently has not engaged in any currency hedging activities.
For transactions and balances, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations and comprehensive loss, except for gains or losses arising from the translation of intercompany balances denominated in foreign currencies that forms part in the net investment in the subsidiary which are included in OCI. |
Stock-based compensation | Loop Industries, Inc. periodically issues stock options and restricted stock units to employees and non-employees in non-capital raising transactions for services and financing costs. 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 granted to non-employees in accordance with the authoritative guidance of the FASB wherein the fair value of the stock compensation is based upon the measurement date determined as the earlier of the date at which either a) a commitment is reached with the counterparty for performance or b) the counterparty completes its performance.
The Company estimates the fair value of restricted stock unit awards to employees and directors based on the closing market price of its common stock on the date of grant.
The fair value of the stock options granted are estimated using the Black-Scholes-Merton Option Pricing (“Black-Scholes”) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends. Stock-based compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience. The assumptions used in the Black-Scholes model could materially affect stock-based compensation expense recorded in the current and future periods. |
Income taxes | The Company calculates its provision for income tax on the basis of the tax laws enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income, in accordance with FASB ASC 740, Income Taxes. The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. |
Research and development expenses | Research and development expenses relate primarily to the development, design, testing of preproduction samples, prototypes and models, compensation, and consulting fees, and are expensed as incurred. Total research and development costs recorded during the three-month periods ended May 31, 2019 and 2018 amounted to $997,861 and $1,066,079, respectively, and are net of government research and development tax credits and government grants from the federal and provincial taxation authorities accrued and recorded based on qualifying expenditures incurred during the fiscal periods. |
Net earnings (loss) per share | The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. The Company includes common stock issuable in its calculation. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation if their effect is antidilutive.
For the three-month periods ended May 31, 2019 and 2018, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at May 31, 2019, the potentially dilutive securities consisted of 1,691,973 outstanding stock options (May 31, 2018 – 2,254,581), 403,767 outstanding restricted stock units (May 31, 2018 – 22,755), 962,132 outstanding warrants (May 31, 2018 – 140,667) and 1,000,000 outstanding issuable common stock (May 31, 2018 – 1,000,000). |
Recently adopted accounting pronouncements | In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the Tax Reform Act on items within accumulated other comprehensive income (loss) ("AOCI") to retained earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." Amendments in this update only relate to the reclassification of the income tax effects of the Tax Reform Act. Other accounting guidance that requires the effect of changes in tax laws or rates to be included in net income from continuing operations is not affected by this update. ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. ASU 2018-02 is applicable beginning March 1, 2019. The adoption of the standard had no impact on the consolidated financial statements of the Company.
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this Update are effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of the standard had no impact on the consolidated financial statements of the Company.
In July 2018, the FASB issued ASU 2018-09, Codification Improvements, which clarify certain amendments to guidance that may have been incorrectly or inconsistently applied by certain entities and includes Amendments to Subtopic 718-740, Compensation – Stock Compensation – Income Taxes. The guidance in paragraph 718-740-35-2, as amended by the amendments in ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, is unclear on whether an entity should recognize excess tax benefits (or tax deficiencies) for compensation expense that is taken on the entity’s tax return. The amendment to paragraph 718-740-35-2 in this Update clarifies that an entity should recognize excess tax benefits in the period in which the amount of deduction is determined. The amendments in this Update are effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of the standard had no impact on the consolidated financial statements of the Company.
In February 2016, the FASB issued ASU 2016-02, “Leases,” amended in July by ASU 2018-10, “Codification Improvements to Topic 842, Leases,” ASU 2018-11, “Targeted Improvements,” and ASU 2018-20, “Narrow-Scope Improvements for Lessors,” which requires lessees to recognize leases on the balance sheet while continuing to recognize expenses in the income statement in a manner similar to current accounting standards. For lessors, the new standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing, and uncertainty of cash flows arising from leases. This ASU may either be adopted on a modified retrospective approach at the beginning of the earliest comparative period, or through a cumulative-effect adjustment at the adoption date. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted these standards effective March 1, 2019. The adoption of the standard had no impact on the consolidated financial statements of the Company. The Company elected to apply the package of practical expedients that allows us not to reassess whether expired or existing contracts contain leases, the classification of these leases and whether previously capitalized initial direct costs would qualify for capitalization under Accounting Standards Codification (or “ASC”) 842. Furthermore, we elected to use hindsight in determining the lease term and assessing impairment of the right-of-use assets.
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Sales Tax, Tax Credits and Other Receivables (Tables) |
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Sales Tax Tax Credits And Other Receivables Tables Abstract | ||||||||||||||||||||||||||||||||||||||||||||||
Sales Tax, Tax Credits and Other Receivables |
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Property, Plant and Equipment, Net (Tables) |
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Property, plant and equipment |
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Intangible Assets, Net (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-Lived Intangible Assets, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets |
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Fair value of financial instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Of Financial Instruments Tables Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of financial instruments |
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Accounts Payable and Accrued Liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable And Accrued Liabilities Tables Abstract | ||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities |
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Long-Term Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long term debt |
Principal repayments due on the Instalment loan over the next five years are as follows:
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Convertible Notes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of convertible notes |
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Stockholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||
Schedule of common stock |
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Share-Based Payments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option activity |
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Stock options outstanding |
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RSU activity |
|
Equity Incentive Plan (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity incentive plan |
|
Warrants (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrant activity |
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Warrants outstanding |
|
Interest and Other Finance Costs (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||
Interest And Other Finance Costs Tables Abstract | |||||||||||||||||||||||||||||||||||||
Interest and other finance costs |
|
Nature of the Company, Basis of Presentation and Going Concern (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
May 31, 2019 |
May 31, 2018 |
Feb. 28, 2019 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Accumulated deficit | $ (42,366,142) | $ (38,811,592) | |
Net Loss | (3,554,550) | $ (3,529,530) | |
Net cash used in operating activities | (2,087,353) | $ (2,171,061) | |
Cash | $ 6,971,613 | $ 5,833,390 |
Sales Tax, Tax Credits and Other Receivables (Details) - USD ($) |
May 31, 2019 |
Feb. 28, 2019 |
---|---|---|
Accounting Policies [Abstract] | ||
Sales tax receivables | $ 222,215 | $ 82,992 |
Research and development tax credits | 455,564 | 410,997 |
Other receivables | 64,214 | 105,011 |
Sales tax, research and development tax credits and other receivables | $ 741,993 | $ 599,000 |
Property, Plant and Equipment, Net (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 161,321 | $ 84,590 |
Intangible Assets, Net (Details) - USD ($) |
May 31, 2019 |
Feb. 28, 2019 |
Feb. 28, 2018 |
---|---|---|---|
Finite-Lived Intangible Assets, Net [Abstract] | |||
Intangible assets, at cost - beginning of period | $ 127,672 | $ 533,369 | |
Intangible assets, accumulated depreciation – beginning of period | 0 | (200,629) | |
Intangible assets, net | $ 146,112 | $ 127,672 | $ 533,369 |
Intangible Assets, Net (Details 1) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
May 31, 2019 |
Feb. 28, 2019 |
|
Intangible Assets Net | ||
Intangible assets, net beginning | $ 127,672 | $ 533,369 |
Add: Additions in the period | 24,811 | 153,477 |
Deduct: Amortization of intangibles | (3,015) | (59,851) |
Deduct: Impairment of intangibles | 0 | (298,694) |
Add (deduct): Foreign exchange effect | (3,356) | 0 |
Intangible assets, net ending | $ 146,112 | $ 127,672 |
Intangible Assets, Net (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Amortization expense | $ 3,015 | $ 16,479 |
Fair value of financial instruments (Details) - USD ($) |
May 31, 2019 |
Feb. 28, 2019 |
---|---|---|
Fair Value Of Financial Instruments Details Abstract | ||
Warrants (First Issuance), carrying amount | $ 219,531 | |
Warrants (First Issuance), fair value | 219,531 | |
Long-term debt, carrying amount | 965,969 | 1,005,518 |
Long-term debt, fair value | 965,969 | 1,005,518 |
Convertible notes (First Issuance), carrying amount | 2,495,636 | |
Convertible notes (First Issuance), fair value | 2,650,000 | |
Convertible notes (Second Issuance), carrying amount | 3,556,249 | 3,126,886 |
Convertible notes (Second Issuance), fair value | $ 4,900,000 | $ 3,150,000 |
Accounts Payable and Accrued Liabilities (Details) - USD ($) |
May 31, 2019 |
Feb. 28, 2019 |
---|---|---|
Accounts Payable And Accrued Liabilities Details Abstract | ||
Trade accounts payable | $ 2,086,412 | $ 1,784,362 |
Accrued liabilities | 555,287 | 520,671 |
Accrued bonuses | 461,460 | 365,200 |
Accounts payable and accrued liabilities | $ 3,103,159 | $ 2,670,233 |
Long-Term Debt (Details) - USD ($) |
May 31, 2019 |
Feb. 28, 2019 |
---|---|---|
Long-term Debt, Unclassified [Abstract] | ||
Installment loan | $ 965,969 | $ 1,005,518 |
Less current portion | 51,748 | 53,155 |
Non-current portion | $ 914,221 | $ 952,363 |
Long-Term Debt (Details 1) - USD ($) |
May 31, 2019 |
Feb. 28, 2019 |
---|---|---|
Long-term Debt | ||
2020 | $ 38,811 | |
2021 | 51,748 | |
2022 | 51,748 | |
2023 | 51,748 | |
2024 | 51,748 | |
Thereafter | 720,166 | |
Total | $ 965,969 | $ 1,005,518 |
Long-Term Debt (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Long-term Debt, Unclassified [Abstract] | ||
Interest paid | $ 13,070 | $ 13,037 |
Share-Based Payments (Details) - $ / shares |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Share-based Payment Arrangement [Abstract] | ||
Number of options outstanding, beginning | 1,962,400 | 2,374,581 |
Number of options, granted | 0 | 0 |
Number of options, exercised | 0 | (20,000) |
Number of options, forfeited | (10,010) | (100,000) |
Number of options, expired | (260,417) | 0 |
Number of options outstanding, ending | 1,691,973 | 2,254,581 |
Number of options outstanding, exercisable | 914,998 | 926,249 |
Weighted average exercise price outstanding, beginning | $ 7.53 | $ 7.99 |
Weighted average exercise price, granted | 0.00 | 0.00 |
Weighted average exercise price, exercised | 0.00 | 0.8 |
Weighted average exercise price, forfeited | 8.75 | 5.25 |
Weighted average exercise price, expired | 13.89 | 0.00 |
Weighted average exercise price outstanding, ending | 6.60 | 8.17 |
Weighted average exercise price outstanding, exercisable | $ 6.10 | $ 6.61 |
Share-Based Payments (Details 2) - $ / shares |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Share-based Payment Arrangement [Abstract] | ||
Number of units outstanding, beginning | 402,868 | 34,102 |
Number of units, granted | 25,145 | 24,450 |
Number of units, vested | (7,043) | (35,797) |
Number of units, forfeited | (17,203) | 0 |
Number of units outstanding, ending | 403,767 | 22,755 |
Weighted average exercise price outstanding, beginning | $ 8.77 | $ 13 |
Weighted average exercise price, granted | 9.79 | 12.23 |
Weighted average exercise price, vested | 12.16 | 13.06 |
Weighted average exercise price, forfeited | 8.75 | 0 |
Weighted average exercise price outstanding, ending | $ 8.73 | $ 12.07 |
Equity Incentive Plan (Details) - shares |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Number of units outstanding, beginning | 402,868 | 34,102 |
Number of units, granted | (25,145) | (24,450) |
Number of units, forfeited | 17,203 | 0 |
Number of units outstanding, ending | 403,767 | 22,755 |
Equity Incentive plan [Member] | ||
Number of units outstanding, beginning | 3,223,516 | 1,735,898 |
Automatic share reserve increase | 1,500,000 | 1,500,000 |
Number of units, granted | (25,145) | (24,450) |
Number of units, forfeited | 27,213 | 0 |
Number of units, expired | 260,417 | 0 |
Number of units outstanding, ending | 4,986,001 | 3,211,448 |
Warrants (Details) - $ / shares |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Number of units outstanding, beginning | 402,868 | 34,102 |
Number of units, issued | 25,145 | 24,450 |
Number of units outstanding, ending | 403,767 | 22,755 |
Weighted average exercise price outstanding, beginning | $ 8.77 | $ 13 |
Weighted average exercise price, issued | 9.79 | 12.23 |
Weighted average exercise price outstanding, ending | $ 8.73 | $ 12.07 |
Warrants [Member] | ||
Number of units outstanding, beginning | 802,469 | 140,667 |
Number of units, issued | 159,663 | 0 |
Number of units, exercised | 0 | 0 |
Number of units, expired | 0 | 0 |
Number of units outstanding, ending | 962,132 | 140,667 |
Weighted average exercise price outstanding, beginning | $ 10.74 | $ 12.00 |
Weighted average exercise price, issued | 8.55 | 0.00 |
Weighted average exercise price, exercised | 0.00 | 0.00 |
Weighted average exercise price, expired | 0.00 | 0.00 |
Weighted average exercise price outstanding, ending | $ 10.38 | $ 12.00 |
Warrants (Details 1) |
3 Months Ended |
---|---|
May 31, 2019
$ / shares
shares
| |
Number of warrants outstanding | shares | 962,132 |
Weighted average exercise price | $ / shares | $ 10.38 |
Warrants 1 | |
Expiration date | Jan. 15, 2020 |
Number of warrants outstanding | shares | 277,778 |
Weighted average exercise price | $ / shares | $ 9.32 |
Warrants 2 | |
Expiration date | Jan. 21, 2020 |
Number of warrants outstanding | shares | 24,691 |
Weighted average exercise price | $ / shares | $ 9.32 |
Warrants 3 | |
Expiration date | Oct. 09, 2020 |
Number of warrants outstanding | shares | 159,663 |
Weighted average exercise price | $ / shares | $ 8.55 |
Warrants 4 | |
Expiration date | Feb. 25, 2021 |
Number of warrants outstanding | shares | 200,000 |
Weighted average exercise price | $ / shares | $ 11 |
Warrants 5 | |
Expiration date | Feb. 25, 2021 |
Number of warrants outstanding | shares | 300,000 |
Weighted average exercise price | $ / shares | $ 12 |
Interest and Other Finance Costs (Details) - USD ($) |
3 Months Ended | |
---|---|---|
May 31, 2019 |
May 31, 2018 |
|
Interest And Other Finance Costs Details Abstract | ||
Interest on long-term debt | $ 13,070 | $ 13,037 |
Interest on convertible notes | 117,435 | 0 |
Accretion expense | 547,562 | 0 |
Amortization of deferred finance costs | 46,442 | 0 |
Revaluation of warrants | 8,483 | 0 |
Gain on conversion of November 2018 Notes | (232,565) | 0 |
Other | 1,422 | (124) |
Interest and other finance costs | $ 501,849 | $ 12,913 |
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