The following information and any forward-looking statements should be read in
conjunction with the unaudited financial information and the notes thereto
included in this Quarterly Report on Form 10-Q, including those risks identified
in the "Risk Factors" section of our most recent Annual Report on Form 10-K.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada
corporation (the "Company", "we", "Loop" or "our"), contains "forward-looking
statements," as defined in the United States Private Securities Litigation
Reform Act of 1995. In some cases, you can identify forward-looking statements
by terminology such as "may", "will", "should", "could", "expects", "plans",
"intends", "anticipates", "believes", "estimates", "predicts", "potential" or
"continue" or the negative of such terms and other comparable terminology. These
forward-looking statements include, without limitation, statements about our
market opportunity, our strategies, ability to improve and expand our
capabilities, competition, expected activities and expenditures as we pursue our
business plan, the adequacy of our available cash resources, regulatory
compliance, plans for future growth and future operations, the size of our
addressable market, market trends, and the effectiveness of the Company's
internal control over financial reporting. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Actual results may differ materially from the predictions
discussed in these forward-looking statements. The economic environment within
which we operate could materially affect our actual results. Forward-looking
statements are inherently subject to risks and uncertainties, some of which
cannot be predicted or quantified. These risks and other factors include, but
are not limited to, those listed under "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Critical Accounting Policies and Estimates" included in our most recent Annual
Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the
"SEC") and the description of material changes thereto, if any, included in our
Quarterly Reports on Form 10-Q or subsequent filings with the SEC. Additional
factors that could materially affect these forward-looking statements and/or
predictions include, among other things: (i) commercialization of our technology
and products, (ii) our status of relationship with partners, (iii) development
and protection of our intellectual property and products, (iv) industry
competition, (v) our need for and ability to obtain additional funding, (vi)
building our manufacturing facility, (vii) our ability to sell our products in
order to generate revenues, (viii) our proposed business model and our ability
to execute thereon, (ix) adverse effects on the Company's business and
operations as a result of increased regulatory, media or financial reporting
issues and practices, rumors or otherwise and (x) other factors discussed in our
subsequent filings with the SEC.
Management has included projections and estimates in this Form 10-Q, which are
based primarily on management's experience in the industry, assessments of our
results of operations, discussions and negotiations with third parties and a
review of information filed by our competitors with the SEC or otherwise
publicly available.
In addition, statements that "we believe" and similar statements reflect our
beliefs and opinions on the relevant subject. These statements are based upon
information available to us as at the date of this Form 10-Q, and while we
believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read
to indicate that we have conducted an exhaustive inquiry into, or review of, all
potentially available relevant information. These statements are inherently
uncertain, and investors are cautioned not to unduly rely upon these statements.
We caution readers not to place undue reliance on any such forward-looking
statements, which speak only as at the date made. We disclaim any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
4
Introduction
Loop Industries, Inc. is a technology company whose mission is to accelerate the
world's shift toward sustainable PET plastic and polyester fiber and away from
our dependence on fossil fuels. Loop owns patented and proprietary technology
that depolymerizes no and low value waste PET plastic and polyester fiber,
including plastic bottles and packaging, carpets and textiles of any color,
transparency or condition and even ocean plastics that have been degraded by the
sun and salt, to its base building blocks (monomers). The monomers are filtered,
purified and polymerized to create virgin-quality Loop™ branded PET resin and
polyester fiber suitable for use in food-grade packaging, thus enabling our
customers to meet their sustainability objectives. Loop is contributing to the
global movement toward a circular economy by raising awareness about the
importance of preventing and recovering waste plastic from the environment to
ensure plastic stays in the economy for a more sustainable future for all.
Proprietary Technology and Intellectual Property
The power of our technology lies in its ability to divert and recover what is
currently considered plastic waste from landfills, rivers, oceans and natural
areas for use as feedstock to create new, sustainable, infinitely recyclable
Loop™ PET plastic resin and polyester fiber. We believe our technology can
deliver a cost-effective and profitable virgin quality PET plastic resin
suitable for use in food-grade packaging.
Our Generation I technology process yielded polyethylene terephthalate ("PTA")
and monoethylene glycol ("MEG"), two common monomers of PET plastic, through
depolymerization. While monomers were of excellent purity and high yield, we
continued to challenge ourselves to drive down cost and eliminate inputs. It was
during this process that we realized we could eliminate water and chlorinated
solvents from the purification process, reduce the number of reagents from five
to two and reduce the number of purification steps from 12 to four, if we
shifted from the production of PTA to the production of dimethyl terephthalate
("DMT"), another proven monomer of PET plastic that is far simpler to purify.
Since June 2018, when we transitioned to our Generation II technology and our
newly built industrial pilot plant, we continue to see consistently high monomer
yields, excellent purity and improved conversion costs.
This shift, from producing the monomer PTA to the monomer DMT was a pivotal
moment for Loop. We believe that the Generation II technology requires less
energy and fewer resource inputs than conventional PET production processes. We
also believe it to be one of the most environmentally sustainable methods for
producing virgin quality food-grade PET plastic in the world.
To protect our technology, we rely on a combination of patent and trademark
laws, trade secrets, confidentiality provisions and other contractual provisions
to protect our proprietary rights, which are primarily our patents, brand names,
product designs and marks.
We have two patent families, referred to as GEN I technology and the GEN II
technology, with claims relating to our proprietary technology for
depolymerization of PET.
?
The GEN I portfolio has two issued U.S. patents and an allowed U.S. application,
all expected to expire on or around July 2035. Internationally, we also have
issued patents in Taiwan, South Africa and in the members of the Gulf
Cooperation Council, and pending patent applications in Argentina, Australia,
Brazil, Canada, China, Eurasia, Europe, Hong Kong, Israel, India, Japan, Korea,
Mexico, and the Philippines, all expected to expire, if granted, on or around
July 2036 if granted.
?
The GEN II technology portfolio has an issued U.S. patent and a pending U.S.
application, all expected to expire on or around September 2037; as well as a
PCT application and non-PCT country applications in Argentina, Bangladesh,
Bolivia, Bhutan, members of the Gulf Cooperation Council, Iraq, Pakistan,
Taiwan, Uruguay, and Venezuela, all expected to expire on or around September
2038 if granted. An additional aspect of the GEN II technology is claimed in a
U.S. application, a PCT application, and non-PCT country applications in
Argentina, Bangladesh, Bolivia, members of the Gulf Cooperation Council,
Pakistan, Taiwan, and Uruguay, all expected to expire on or around June 2039 if
granted. Additionally, we have two pending provisional applications directed to
further additional aspects of the GEN II technology. Any patents that would
ultimately grant from these provisional applications would be expected to expire
no earlier than 2039, if granted.
5
In connection with the continued transitioned to its newly constructed GEN II
industrial pilot plant. the Company made capital asset investments of $1,647,433
during the nine months ended November 30, 2019.
Government Regulation and Approvals
As we seek to further develop and commercialize our business, we will be subject
to extensive and frequently developing federal, state, provincial and local laws
and regulations. Compliance with current and future regulations could increase
our operational costs.
Our operations require various governmental permits and approvals. We are in the
process of obtaining all necessary permits and approvals for the operation of
our business; however, any of these permits or approvals may be subject to
denial, revocation or modification under various circumstances. Failure to
obtain or comply with the conditions of permits and approvals or to have the
necessary approvals in place may adversely affect our operations and may subject
us to penalties.
The use of mechanically recycled PET for food grade applications in certain
countries is highly inadvisable for a variety of reasons including the
perception of contamination from mechanically recycled sources. We believe that
means that Loop™ PET plastic resin and polyester fiber has a distinct advantage
in these markets. Since our product is not mechanically recycled PET, we expect
that demand from PET manufacturers and global consumer goods companies in these
regions for 100% Loop™ branded PET plastic resin and polyester fiber will be a
significant part of our strategy going forward.
Prospective Future Growth
We plan to continue to allocate available capital to strengthen our intellectual
property portfolio, build a core competency in managing strategic relationships
and continue enhancing our Loop™ brand value. Our research and development
innovation hub in Terrebonne, Quebec, Canada will continue to push forward the
development of our technology. We are investing in building a strong management
team to integrate best in class processes and practices while maintaining our
entrepreneurial culture.
During the three months ended November 30, 2019, we continued executing our
corporate strategy where Loop focused on developing two major streams of
revenue. These revenue streams are expected to be from the sale of Loop™ PET
resin and polyester fiber to customers from our joint venture with Indorama
Ventures Holdings LP ("Indorama") and from our Waste to Resin ("WtRTM")
greenfield facilities, which were recently rebranded to Infinite LoopTM. We are
continuing to develop the engineering of the Infinite LoopTMplatform and we have
increasedour focus on the development of Infinite LoopTMprojects in Europe and
in North America.
In September 2018, in connection with the first of these streams, we announced a
joint venture with Indorama to retrofit their existing PET manufacturing
facilities. The joint venture was formed to manufacture and commercialize
sustainable Loop™ PET resin and polyester fiber to meet the growing global
demand from beverage and consumer packaged goods companies. The joint venture
agreement details the establishment of an initial 20,700 metric tons per year
facility in the southeastern United States (Spartanburg, South Carolina).
Following the decision of the joint venture with Indorama Ventures Holdings LP
to double the capacity of the Spartanburg plant due to customer demand to 40,000
metric tons per year as disclosed in our 10-Q for the period ended August 31,
2019, we identified a number of enhancements to the plant design to improve the
operability and lower the total construction cost of the plant. The additional
engineering is underway and management anticipates it will be completed by the
end of this calendar quarter and as a result, the commissioning of the facility
is anticipated to occur in the third quarter of the calendar year 2021.
We have currently contracted for the sale of the initial 20,700 metric tons
expected output of the Spartanburg facility and we are in discussion to contract
the additional volume up to its increased capacity of 40,000 metric tons.
During the three months ended November 30, 2019, the Company and L'OCCITANE en
Provence, a global manufacturer and retailer of natural beauty and well-being
products, announced that they are expanding their supply agreement to accelerate
L'OCCITANE en Provence's transition to 100% sustainable PET plastic in all its
bottles. Loop Industries and L'OCCITANE en Provence's supply agreement for Loop™
branded 100% sustainable PET plastic resin was to be supplied from Loop's first
European PET manufacturing facility. With the expanded supply agreement, Loop
will begin supplying its sustainable PET resin to L'OCCITANE en Provence from
its joint venture manufacturing facility with Indorama in Spartanburg, South
Carolina.
6
To drive our Infinite Loop™ business model, which is a key pillar of our
commercialization blueprint, December 2018 saw us enter into a Global Alliance
Agreement with thyssenkrupp Industrial Solutions ("tkIS") aimed at transforming
the future of sustainable PET plastic resin manufacturing by combining our
breakthrough depolymerization technology with tkIS's PET Melt-To-Resin®
technology. As one of the world's leading PET and polyester engineering
companies, we believe tkIS is perfectly positioned to help us commercialize our
Infinite Loop™ solution-a fully integrated and reimagined manufacturing facility
for sustainable Loop™ PET plastic resin and polyester fiber. During the nine
months ended November 30, 2019, the Company and tkIS continued the process of
developing this fully integrated and reimagined manufacturing facility for
sustainable Loop™ PET plastic resin and polyester fiber.
We believe the Infinite Loop™ solution will result in a highly scalable model to
supply the global demand for 100% sustainable Loop™ PET plastic resin and
polyester fiber, allowing us to rapidly penetrate and transform the plastic
market and fully capitalize on our disruptive potential to be the leader in the
circular economy for PET plastic. This fundamentally changes where and how PET
plastic resin production occurs-no longer does PET plastic resin production need
to be bound to fossil fuels and fossil fuel infrastructure. Infinite
Loop™facilities could be located near large urban centers where feedstock is
located, and transportation and logistics costs could be significantly reduced
as the distance between feedstock, manufacturing and customer use is collapsed.
We believe the proposition for those seeking a turnkey solution to manufacture
Loop™ PET plastic resin and polyester fiber, such as chemical companies, waste
managers, existing recyclers and even consumer good companies around the world
is compelling. We further believe that once the first facilities are operational
it may create the possibility of licensing the technology to create a recurring
revenue stream for us while expanding the capacity of Loop™ PET plastic resin
and polyester fiber in the marketplace to meet the substantial demand from
consumer goods companies.
Supply Agreements with Global Consumer Brands
Consumer brands are seeking a solution to their plastic challenge and they are
taking bold action. In the past years we have seen major brands make significant
commitments to close the loop on their plastic packaging in two ways, by
transitioning their packaging to recyclable materials and by incorporating more
recycled content into their packaging. We believe Loop™ PET plastic resin and
polyester fiber provides the ideal solution for these brands because Loop™ PET
plastic resin and polyester fiber is recyclable and contains 100% recycled PET
and polyester fiber content with virgin quality suitable for use in food-grade
packaging. That means consumer packaged goods companies will be able to market
packaging made from a 100% Loop™ branded PET plastic resin and polyester fiber.
Loop believes that due to the commitments by large global consumer brands to
incorporate more recycled content into their product packaging, the regulatory
requirements for minimum recycled content in packaging imposed by governments,
the virgin-like quality of Loop™ branded PET and the marketability of Loop™ PET
to extoll the sustainability credentials of consumer brands that incorporate
Loop™ PET, it will be able to sell its Loop™ branded PET at a premium price
relative to virgin and mechanically recycled PET.
7
Turning Waste into Feedstock
To us, waste PET plastic and polyester fiber is feedstock, the materials
introduced into our Generation II depolymerization technology to yield PET
monomers. Our technology can use plastic bottles and PET packaging of any color,
transparency or condition, carpet, clothing and other polyester textiles that
may contain colors, dyes or additives, and even ocean plastics that have been
degraded by sun and salt. This is yet another advantage of Loop™ PET over
mechanically recycled PET, our ability to use materials that nearly all other
recyclers cannot use. This also means we are creating a new market for materials
that have persistently been leaking out of the waste management system and into
our shared rivers, oceans and natural areas.
We are identifying the availability of feedstock to ensure each planned facility
can operate continuously. We have identified the sources required for our first
joint venture facility with Indorama and are now focusing on signing supply
agreements to secure this feedstock for the long term.
The team is also studying markets in the United States, Canada, European Union
and Asia to help us evaluate the size and location of our next facilities. The
approach includes a fulsome inventory of PET materials introduced into a region,
the materials collected (or recycled) in the region and the material loss, or
the difference between the material introduced and the material collected. This
allows us to identify not only the material traditionally available for
recycling, but how material can be effectively diverted from landfill, rivers,
oceans and natural areas by providing a new outlet for what was formerly
considered waste.
8
Results of Operations
Third Quarter Ended November 30, 2019
The following table summarizes our operating results for the three-month periods
ended November 30, 2019 and 2018, in U.S. Dollars.
Three Months Ended November 30
2019 2018 $ Change
Revenues $- $- $-
Research and development
Stock-based compensation 311,353 249,548 61,805
Other research and development 966,819 542,563 424,256
Total research and development 1,278,172 792,111 486,061
General and administrative
Stock-based compensation 565,440 721,358 (155,918)
Other general and administrative 1,260,373 1,250,489 9,884
Total general and administrative 1,825,813 1,971,847 (146,034)
Depreciation and amortization 219,628 155,053 64,575
Interest and other finance costs 693,027 14,883 678,144
Interest income (171,274) - (171,274)
Foreign exchange (gain) loss 5,533 (20,132) 25,665
Total operating expenses 3,850,899 2,913,762 937,137
Net loss $(3,850,899) $(2,913,762) $(937,137)
The net loss for the three-month period ended November 30, 2019 increased $0.94
million to $3.85 million, as compared to the net loss for the three-month period
ended November 30, 2018 which was $2.91 million. The increase of $0.94 million
is primarily attributable to an increase in interest and other finance costs of
$0.68 million, an increase in research and development expenses of $0.49
million, an increase in depreciation and amortization expenses of $0.06 million
and an increase in foreign exchange loss of $0.03 million, partially offset by
lower general and administrative expenses of $0.15 million, and by an increase
in interest income of $0.17 million.
Research and development expenses for the three-month period ended November 30,
2019 amounted to $1.28 million compared to $0.79 million for the three-month
period ended November 30, 2018, representing an increase of $0.49 million, or
representing an increase of $0.42 million excluding stock-based compensation.
The increase of $0.42 million was primarily attributable to by higher employee
compensation costs of $0.38, by higher purchases and freight costs of $0.08
million, by higher facilities costs of $0.02 million, by higher equipment rental
costs of $0.02 and by higher license fees of $0.03 million, offset by lower
legal and professional fees of $0.07 million and by higher research and
development tax credits of $0.06 million. The increase in non-cash stock-based
compensation expense of $0.06 million is mainly attributable to the timing of
stock awards provided to certain employees.
General and administrative expenses for the three-month period ended November
30, 2019 amounted to $1.83 million compared to $1.97 million for the three-month
period ended November 30, 2018, representing a decrease of $0.14 million, or an
increase of $0.01 million excluding stock-based compensation. The increase of
$0.01 million was mainly attributable to higher employee compensation costs of
$0.15 million and by higher commercial insurance expenses of $0.08 million,
offset by lower legal and professional fees of $0.20 million. Stock-based
compensation expense for the three-month period ended November 30, 2019 amounted
to $0.57 million compared to $0.72 million for the three-month period ended
November 30, 2018, representing a decrease of $0.15 million, which was mainly
attributable to lower stock awards provided to executives.
Depreciation and amortization for the three-month period ended November 30, 2019
totaled $0.22 million compared to $0.16 million for the three-month period ended
November 30, 2018, representing an increase of $0.06 million. This increase is
mainly attributable to the addition of fixed assets at the Company's pilot plant
and corporate offices.
Interest and other finance costs for the three-month period ended November 30,
2019 totaled $0.69 million compared to $0.01 million the three-month period
ended November 30, 2018, representing an increase of $0.68 million. The increase
is mainly attributable to an increase in accretion expense of $0.55 million, an
increase in interest expense of $0.10 million and by an increase in amortization
of deferred financing costs of $0.02 million.
9
Nine Months Ended November 30, 2019
The following table summarizes our operating results for the nine-month periods
ended November 30, 2019 and 2018, in U.S. Dollars.
Nine Months Ended November 30
2019 2018 $ Change
Revenues $- $- $-
Research and development
Stock-based compensation 941,142 910,004 31,138
Other research and development 2,305,104 2,014,479 290,625
Total research and development 3,246,246 2,924,483 321,763
General and administrative
Stock-based compensation 1,669,669 2,252,041 (582,372)
Other general and administrative 3,777,387 4,469,755 (692,368)
Total general and administrative 5,447,056 6,721,796 (1,274,740)
Depreciation and amortization 585,367 366,710 218,657
Interest and other finance costs 1,817,091 41,117 1,775,974
Interest income (363,565) - (363,565)
Foreign exchange (gain) loss 15,297 (72,404) 87,701
Total operating expenses 10,747,492 9,981,702 765,790
Net loss $(10,747,492) $(9,981,702) $(765,790)
The net loss for the nine-month period ended November 30, 2019 increased by
$0.77 million to $10.75 million, as compared to the net loss for the nine-month
period ended November 30, 2018 which was $9.98 million. The increase of $0.77
million is primarily due to an increase in interest and other finance costs of
$1.77 million, an increase in research and development expenses of $0.32
million, , an increase in depreciation and amortization of $0.22 million and an
increase in the foreign exchange loss of $0.09 million, partially offset by
lower general and administrative expenses of $1.27 million and an increase in
interest income of $0.36 million.
Research and development expenses for the nine-month period ended November 30,
2019 amounted to $3.24 million compared to $2.92 million for the nine-month
period ended November 30, 2018, representing an increase of $0.32 million, or
representing an increase of $0.29 million excluding stock-based compensation.
The increase of $0.29 million was primarily attributable to higher employee
compensation costs of $0.55 million, by higher facilities costs of $0.04
million, by higher purchases and freight costs of $0.07 million, by higher
license fees of $0.03 million, by higher repairs and maintenance costs of $0.02
million, and by higher meals, travel and entertainment expenses of $0.04
million, offset by lower legal and professional fees of $0.36 million and by
higher research and development tax credits of $0.16 million. The decrease in
non-cash stock-based compensation expense of $0.03 million is mainly
attributable to the timing of stock awards provided to certain employees.
General and administrative expenses for the nine-month period ended November 30,
2019 amounted to $5.45 million compared to $6.72 million for the nine-month
period ended November 30, 2018, representing a decrease of $1.27 million, or a
decrease of $0.69 million excluding stock-based compensation. The decrease of
$0.69 million was mainly attributable to lower legal and professional fees of
$1.36 million, offset by higher employee compensation costs of $0.50 million and
by higher commercial insurance expenses totaling $0.17 million. Stock-based
compensation expense for the nine-month period ended November 30, 2019 amounted
to $1.67 million compared to $2.25 million for the nine-month period ended
November 30, 2018, representing a decrease of $0.58 million, which was mainly
attributable lower stock awards provided to executives.
Depreciation and amortization for the nine-month period ended November 30, 2019
totaled $0.59 million compared to $0.37 million for the nine-month period ended
November 30, 2018, representing an increase of $0.22 million. This increase is
mainly attributable to the addition of fixed assets at the Company's pilot plant
and corporate offices.
10
Interest and other finance costs for the nine-month period ended November 30,
2019 totaled $1.82 million compared to $0.04 million the nine-month period ended
November 30, 2018, representing an increase of $1.78 million. The increase is
mainly attributable to an increase in accretion expense of $1.58 million, an
increase in interest expense of $0.31 million and by an increase in amortization
of deferred financing costs of $0.09 million, offset by a gain on conversion of
the November 2018 Notes of $0.23 million.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Loop is a development stage company with no revenues, and our ongoing operations
are being financed by raising new equity and debt capital. To date, we have been
successful in raising capital to finance our ongoing operations, reflecting the
potential for commercializing our branded resin and the progress made to date in
implementing our business plans.
As at November 30, 2019, the Company had cash on hand of $35.5 million. On May
29, 2019, the Company entered into a Securities Purchase Agreement ("Purchase
Agreement") with Northern Private Capital Fund I Limited Partnership ("Northern
Capital") pursuant to which the Company has issued to Northern Capital in a
registered direct offering ("Offering") an aggregate of 4,093,567 shares of the
Company's common stock at a per share purchase price of $8.55 per share, for
aggregate net proceeds of approximately $34.6 million, after deducting offering
expenses payable by the Company of approximately $400,000. Concurrently with the
Offering and pursuant to the Purchase Agreement, the Company issued to Northern
Capital 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 vested on
December 15, 2019, and are exercisable for three years following the closing
date of the Offering and which would result in further total net proceeds of
approximately $45 million. The proceeds from the Offeringwill be used to finance
the start-up of its joint venture commercial operations, which is estimated to
be between $15,000,000 and $20,000,000, and further fund the development of its
technology and new technologies and its ongoing pre-revenue operations.
On February 27, 2019, Loop Industries, Inc. entered into a Securities Purchase
Agreement with a single institutional investor, pursuant to which the Company
agreed to issue and sell to the Purchaser, in a registered direct offering
("Offering"), an aggregate of 600,000 shares ("Shares") of the Company's common
stock at a per share purchase price of $8.55 per share, for aggregate net
proceeds of approximately $4.2 million, after deducting placement agent fees and
estimated offering expenses payable by the Company of approximately $0.9
million. The Offering closed on March 1, 2019. The Company intends to use the
net proceeds from the Offering for general corporate purposes and working
capital.
As at November 30, 2019, we have a long-term debt obligation to a Canadian bank
in connection with the purchase, in Fiscal 2018, of the land and building where
our pilot plant and corporate offices are located, at 480 Fernand-Poitras,
Terrebonne, Québec, Canada J6Y 1Y4. On January 24, 2018, the Company obtained a
CDN$1,400,000 20-year term installment loan (the "Loan"), from a Canadian bank.
The Loan bears interest at the bank's Canadian prime rate plus 1.5%. By
agreement, the Loan is repayable in monthly payments of CDN $5,833 plus
interest, until January 2021, at which time it will be subject be renewal. It
includes an option allowing for the prepayment of the Loan without penalty.
On July 24, 2019, the Company executed an agreement with Investissement Quebec
providing it with a financing from which we can draw a total equal to 63.45% of
all eligible expenses incurred for the expansion of our Pilot Plant up to a
maximumCDN$4,600,000. There is a 36-month moratorium on both capital and
interest repayments beginning as of the first disbursement date. At the end of
the 36-month moratorium, capital and interest will be repayable in 84 monthly
installments. The loan will bear interest at 2.36%. The Company has also agreed
to issue to Investissement Quebec warrants convertible into common shares in an
amount equal to 10% of each disbursement up to a maximum aggregate amount of
CDN$460,000. The warrants will be issued at a price per share equal to the
higher of (i) $11.00 per share and (ii) the ten-day weighted average closing
price of Loop Industries' shares of Common Stock on the Nasdaq stock market for
the 10 days prior to the issue of the warrants. The warrants can be exercised
immediately upon grant and will have a term of three years from the date of
issuance. The loan can be repaid at any time by the Company without penalty. No
disbursements have yet been made under the agreement.
11
Flow of Funds
Summary of Cash Flows
A summary of cash flows for the nine-month period ended November 30, 2019 and
2018 was as follows:
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