Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 31, 2018 | Jun. 22, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Loop Industries, Inc. | |
Entity Central Index Key | 1,504,678 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-28 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 33,805,706 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | May 31, 2018 | Feb. 28, 2018 |
Current assets | ||
Cash | $ 5,355,015 | $ 8,149,713 |
Sales tax and tax credits receivable | 310,935 | 364,634 |
Prepaid expenses | 271,904 | 511,573 |
Total current assets | 5,937,854 | 9,025,920 |
Property, plant and equipment, net | 4,825,133 | 4,036,903 |
Intangible assets, net | 328,866 | 332,740 |
Total assets | 11,091,853 | 13,395,563 |
Current liabilities | ||
Accounts payable and accrued liabilities | 2,100,690 | 1,983,072 |
Current portion of long-term debt | 54,062 | 54,649 |
Total current liabilities | 2,154,752 | 2,037,721 |
Long-term debt | 1,009,165 | 1,033,777 |
Total liabilities | 3,163,917 | 3,071,498 |
Stockholders' Equity | ||
Preferred stock, value | ||
Common stock par value $0.0001: 250,000,000 shares authorized; 33,805,706 shares issued and outstanding (February 28, 2018 - 33,751,088) | 3,381 | 3,376 |
Additional paid-in capital | 32,150,634 | 30,964,970 |
Common stock issuable, 1,000,000 shares | 800,000 | 800,000 |
Accumulated deficit | (24,804,711) | (21,275,181) |
Accumulated other comprehensive loss | (221,368) | (169,100) |
Total stockholders' equity | 7,927,936 | 10,324,065 |
Total liabilities and stockholders' equity | 11,091,853 | 13,395,563 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock, value |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | May 31, 2018 | Feb. 28, 2018 |
Stockholders' Equity | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 33,805,706 | 33,751,088 |
Common stock, shares outstanding | 33,805,706 | 33,751,088 |
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 Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Condensed Consolidated Statements Of Operations And Comprehensive Loss | ||
Revenue | ||
Operating Expenses - | ||
Research and development | 1,066,079 | 496,538 |
General and administrative | 2,355,550 | 889,580 |
Depreciation and amortization | 101,069 | 90,487 |
Interest expense | 12,913 | |
Foreign exchange (gain) loss | (6,081) | 46,485 |
Total operating expenses | 3,529,530 | 1,523,090 |
Net loss | (3,529,530) | (1,523,090) |
Other comprehensive loss - | ||
Foreign currency translation adjustment | (52,268) | 9,976 |
Comprehensive Loss | $ (3,581,798) | $ (1,513,114) |
Loss per share- Basic and diluted | $ (0.11) | $ (0.05) |
Weighted average common shares outstanding- Basic and diluted | 33,140,148 | 31,442,283 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock [Member] | Preferred Stock par value $0.0001 | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Beginning Balance, Shares at Feb. 28, 2017 | 31,451,973 | 1 | |||||
Beginning Balance, Amount at Feb. 28, 2017 | $ 3,146 | $ 8,723,390 | $ 800,000 | $ (7,237,803) | $ (151,211) | $ 2,137,522 | |
Issuance of common shares for cash, net of share issuance costs, Shares | 1,123,266 | ||||||
Issuance of common shares for cash, net of share issuance costs, Amount | $ 112 | 5,897,076 | 5,897,188 | ||||
Warrants issued for services | 222,504 | 222,504 | |||||
Issuance of shares upon cashless exercise of warrants, Shares | 20,000 | ||||||
Issuance of shares upon cashless exercise of warrants, Amount | $ 2 | (2) | |||||
Foreign currency translation | 9,976 | 9,976 | |||||
Net Loss | (1,523,090) | (1,523,090) | |||||
Ending balance, Shares at May. 31, 2017 | 32,595,239 | 1 | |||||
Ending Balance, Amount at May. 31, 2017 | $ 3,260 | 14,842,968 | 800,000 | (8,760,893) | (141,235) | 6,744,100 | |
Beginning Balance, Shares at Feb. 28, 2018 | 33,751,088 | 1 | |||||
Beginning Balance, Amount at Feb. 28, 2018 | $ 3,376 | 30,964,970 | 800,000 | (21,275,181) | (169,100) | 10,324,065 | |
Warrants issued for services | 978,025 | 978,025 | |||||
Issuance of shares upon cashless exercise of warrants, Shares | 18,821 | ||||||
Issuance of shares upon cashless exercise of warrants, Amount | $ 2 | (2) | |||||
Foreign currency translation | (52,268) | (52,268) | |||||
Issuance of shares upon vesting of restricted stock units, Shares | 35,797 | ||||||
Issuance of shares upon vesting of restricted stock units, Amount | $ 3 | (3) | |||||
Restricted stock units issued for services | 207,644 | 207,644 | |||||
Net Loss | (3,529,530) | (3,529,530) | |||||
Ending balance, Shares at May. 31, 2018 | 33,805,706 | 1 | |||||
Ending Balance, Amount at May. 31, 2018 | $ 3,381 | $ 32,150,634 | $ 800,000 | $ (24,804,711) | $ (221,368) | $ 7,927,936 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Cash Flows from Operating Activities | ||
Net loss | $ (3,529,530) | $ (1,523,090) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 101,069 | 90,487 |
Stock-based compensation expense | 1,185,669 | 222,504 |
Changes in operating assets and liabilities: | ||
Sales tax and tax credits receivable | 53,699 | 82,892 |
Prepaid expenses | 239,669 | |
Accounts payable and accrued liabilities | (221,637) | 468,282 |
Advances from majority stockholder | (324,844) | |
Net cash used in operating activities | (2,171,061) | (983,769) |
Cash Flows from Investing Activities | ||
Additions to property, plant and equipment | (585,958) | (55,453) |
Additions to intangible assets | (6,358) | |
Net cash used in investing activities | (592,316) | (55,423) |
Cash Flows from Financing Activities | ||
Proceeds from sales of common shares, net of share issuance costs | 5,897,188 | |
Repayment of advances from majority stockholder | (278,472) | |
Repayment of long-term debt | (13,514) | |
Net cash (used) provided by financing activities | (13,514) | 5,618,716 |
Effect of exchange rate changes | (17,807) | 39,039 |
Net change in cash | (2,794,698) | 4,618,533 |
Cash - beginning of period | 8,149,713 | 916,487 |
Cash - end of period | 5,355,015 | 5,535,020 |
Supplemental disclosure of cash flow information: | ||
Income tax paid | ||
Interest paid | $ 12,913 |
The Company, Basis of Presentat
The Company, Basis of Presentation and Going Concern | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 1. The Company, Basis of Presentation and Going Concern | The Company Loop Industries, Inc. (Loop Industries or the Company) was originally incorporated in Nevada in March 2010 under the name Radikal Phones Inc., which was changed to First American Group Inc. in October 2010. On June 29, 2015, Loop Industries, Inc. (then known as First American Group) completed a reverse acquisition of Loop Holdings, Inc. (Loop Holdings), whereby the Company acquired all of its outstanding shares of common stock in a share exchange for approximately 78.1% of the capital of the Company at the time. The depolymerization business of Loop Holdings became its sole operating business. On June 22, 2015, the Board of Directors approved a change in the fiscal year end date from September 30 to the last day of February. On July 21, 2015, the Company changed its name to Loop Industries, Inc. Loop Holdings was originally incorporated in Nevada on October 23, 2014. The depolymerization technology underlying Loop Industries business was originally developed by Hatem Essaddam who sold the technology and related intellectual property rights to Loop Industries in October 2014, pursuant to an Intellectual Property Assignment Agreement dated October 27, 2014, by and among Hatem Essaddam, Loop Holdings and Daniel Solomita. On May 24, 2016, 9449507 Canada Inc. was organized under the federal laws of Canada and on November 11, 2016 became a wholly-owned subsidiary of Loop Industries, Inc. following the transfer of all of its issues and outstanding shares of common stock by Mr. Solomita of all of the issued and outstanding shares of common stock of 9449507 Canada Inc. to Loop Industries, Inc. On December 23, 2016, 9449507 Canada Inc. changed its legal name to Loop Canada Inc. On December 31, 2016, 8198381 Canada Inc. (819 Canada) entered into a purchase and sale agreement to transfer to Loop Canada Inc., all assets and liabilities it held pertaining to its business of depolymerizing plastics, including employees and operations. On March 9, 2017, Loop Holdings, a wholly-owned subsidiary of the Company, merged with and into Loop Industries, Inc., with Loop Industries, Inc. being the surviving entity as a result of the merger. On September 1, 2017, 9449710 Canada Inc. was incorporated to assist in the depolymerization business and is a wholly-owned subsidiary of Loop Canada Inc. 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, the Companys common stock was quoted on the OTCQX tier of the OTC Markets Group Inc. under the symbol LLPP. From October 29, 2015 through April 7, 2017, the Companys common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol LLPP. From September 26, 2012 to October 28, 2015, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol FAMG. Basis of presentation The accompanying unaudited interim condensed consolidated financial statements of Loop Industries, Inc. and its wholly-owned subsidiaries (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, 2018 is derived from the Companys audited consolidated financial statements and related notes for the fiscal year ended February 28, 2018, which is included in Item 8 of the Companys 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 14, 2018. 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 presentation have been included. Operating results for the three months ended May 31, 2018 are not necessarily indicative of the results that may be expected for the year ending February 28, 2019. Intercompany balances and transactions are eliminated on consolidation. Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the unaudited condensed consolidated financial statements, the Company has not yet begun commercial operations and does not yet have a recurring source of revenue. Since inception, the Company has accumulated a deficit of $24.8 million and during the three months ended May 31, 2018, the Company incurred a net loss of $3.5 million and used cash in operations of $2.2 million, which raises substantial doubt about the Companys ability to continue as a going concern. At the current stage of its development, Loop is a pre-revenue company, with its ongoing operations being financed by raising new equity capital. To date, the Company has been successful in raising capital to finance its ongoing operations. As at May 31, 2018, the Company had cash on hand of $5.4 million. Management is evaluating its plans to continue to raise financing, the proceeds from which would be used to finance the start-up of its commercial operations and fund the further development of its ongoing pre-revenue operations. There can be no assurance that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. The accompanying unaudited condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and discharge its liabilities as a going concern in the normal course of operations. Such adjustments could be material. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 2. Summary of Significant Accounting Policies | Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities 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. The following table summarizes the exchange rates used: Three Months Ended May 31, 2018 2017 Period-end Canadian $: US dollar exchange rate $ 0.77 $ 0.74 Average period Canadian $: US dollar exchange rate $ 0.78 $ 0.74 Expenditures are translated at the average exchange rate for the period presented. Sales tax and tax credits receivable 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. As at May 31, 2018 and February 28, 2018, the computed net recoverable sale taxes amounted to $201,588 and $177,903, respectively. 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 months ended May 31, 2018 and 2017 amounted to $1.1 million and $0.5 million, respectively. Net earnings (loss) per share The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share For the three months ended May 31, 2018 and 2017, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. The potentially dilutive securities consisted of 2,395,248 and 1,860,455 outstanding warrants as at May 31, 2018 and May 31, 2017, respectively. Recently issued accounting pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers In January 2016, the FASB issued ASU 2016-01 , Financial Instruments Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities 1. Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through net income, unless they qualify for the proposed practicability exception for investments that do not have readily determinable fair values. 2. Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in other comprehensive income. 3. Entities would make the assessment of the realizability of a deferred tax asset (DTA) related to an available-for-sale (AFS) debt security in combination with the entitys other DTAs. The guidance would eliminate one method that is currently acceptable for assessing the realizability of DTAs related to AFS debt securities. That is, an entity would no longer be able to consider its intent and ability to hold debt securities with unrealized losses until recovery. 4. Disclosure of the fair value of financial instruments measured at amortized cost would no longer be required for entities that are not public business entities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the impact of this Statement on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income |
Property, Plant and Equipment,
Property, Plant and Equipment, Net | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 3. Property, Plant and Equipment, Net | Estimated May 31, February 28, Useful Life 2018 2018 (years) Building 30 $ 1,914,599 $ 1,935,423 Land indefinite 236,665 239,239 Building improvements 5 330,813 377,253 Machinery and equipment 3 8 2,967,129 2,189,195 Office equipment and furniture 8 119,083 101,756 Property, plant and equipment, gross 5,568,289 4,842,866 Less: accumulated depreciation (743,156 ) (805,963 ) Property, plant and equipment, net $ 4,825,133 $ 4,036,903 Depreciation expense is recorded as an operating expense in the unaudited condensed consolidated statements of operations and comprehensive loss and amounted to $85 thousand and $75 thousands for the three months ended May 31, 2018 and 2017, respectively. |
Intangible Assets, Net
Intangible Assets, Net | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 4. Intangible Assets, Net | Estimated May 31, February 28, Useful Life 2018 2018 (years) Intellectual property 7 $ 545,970 $ 533,369 Less: accumulated amortization (217,104 ) (200,629 ) Intangible assets, net $ 328,866 $ 332,740 Amortization expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $16 thousand for the three months ended May 31, 2018 and 2017. |
Credit Facility and Long-Term D
Credit Facility and Long-Term Debt | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 5. Credit Facility and Long-Term Debt | May 31, 2018 February 28, 2018 Instalment loan $ 1,063,227 $ 1,088,426 Less current portion 54,062 54,649 Non-current portion $ 1,009,165 $ 1,033,777 Interest paid on the instalment loan during the three months ended May 31, 2018 amounted to $12,913 (2017 nil). As at May 31, 2018, the Company was in compliance with its financial covenants. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 6. Related Party Transactions | Advances from majority stockholder Mr. Daniel Solomita, or companies controlled by him, previously made advances to the Company, which were unsecured, non-interest bearing with no formal terms of repayment. During the three months ended May 31, 2017, the Company repaid to Mr. Solomita or companies controlled by him, as applicable, an aggregate amount of $278,472. Additionally, accrued compensation due to Mr. Solomita of $324,844 was repaid during the three months ended May 31, 2017. Accrued compensation of $35,156 was due to Mr. Solomita as at May 31, 2017. Employment Agreement On June 29, 2015, the Company entered into an employment agreement with Mr. Daniel Solomita, the Companys President and Chief Executive Officer for an indefinite term. For the three months ended May 31, 2018, compensation expense for the Companys CEO amounted to $47 thousand (2017 $45 thousand). In addition, pursuant to the employment agreement with Mr. Solomita, 4 million performance incentive shares of the Companys common stock are issuable in tranches of one million shares each if certain milestones are met. During the three months ended May 31, 2018 and 2017, no additional milestone had been met and accordingly, the Company did not record any compensation expense in relation to the performance incentive shares. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 7. Stockholders' Equity | Common Stock For the three months ended May 31, 2018 Number of shares Amount Balance, February 28, 2018 33,751,088 $ 3,376 Cashless exercise of warrants 18,821 2 Issuance of shares upon vesting of restricted stock units 35,797 3 Balance, May 31, 2018 33,805,706 $ 3,381 During the three months ended May 31, 2018, the Company issued 18,821 shares of common stock upon the cashless exercise of 20,000 warrants and 35,797 shares of common stock upon issuance of restricted stock units. During the three months ended May 31, 2017, the Company sold 1,123,266 shares of its common stock at an offering price of $5.25, resulting in net proceeds to the Company of $5,897,188. The shares issued to investors were not registered under the Securities Act of 1933, as amended (the Act), in reliance upon the private offering safe harbor provision of Rule 506 Regulation D. |
Stock-based Compensation Plans
Stock-based Compensation Plans | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 8. Stock-based Compensation Plans | Equity Incentive Plan On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the Plan). A total of 3,000,000 shares of common stock was reserved for issuance under the Plan with an automatic share reserve increase, effective March 1, 2018. On March 1, 2018, in accordance with the provisions of the Plan, the number of shares available for issuance increased by 1,500,000 shares, resulting in 3,211,448 shares available for issuance. Warrants The following table summarizes the continuity of the Companys warrants during the three months ended May 31: 2018 2017 Number of warrants Weighted average exercise price Number of warrants Weighted average exercise price Outstanding, beginning of period 2,515,248 $ 8.21 1,647,670 $ 2.91 Granted - - 550,000 5.25 Exercised (20,000 ) 0.80 (22,548 ) 0.80 Forfeited (100,000 ) 5.25 - - Expired - - (314,667 ) 6.00 Outstanding, end of period 2,395,248 $ 8.40 1,860,455 $ 3.11 Exercisable, end of period 1,066,916 $ 7.32 836,705 $ 2.82 The following table summarizes information concerning outstanding warrants as at May 31: 2018 2017 Exercise price Number of warrants outstanding Weighted average remaining life Number of warrants outstanding Weighted average remaining life $ 0.80 582,081 7.50 912,452 0.51 $ 3.00 12,500 - 75,000 1.02 $ 5.25 430,000 8.19 550,000 9.98 $ 6.00 - - 323,003 0.08 $ 12.00 840,667 7.84 - - $ 13.49 250,000 9.38 - - $ 13.89 280,000 9.44 - - Outstanding, end of period 2,395,248 8.13 1,860,455 3.26 Exercisable, end of period 1,066,916 6.98 836,705 0.35 Warrants were valued using the Black-Scholes pricing model. The following table shows key inputs into the valuation model for the three months ended May 31: 2018 2017 Exercise price $ - $ 5.25 Risk-free interest rate - 2.02 % Expected dividend yield - 0 % Expected volatility - 110.72 % Expected life - 6 years During the three months ended May 31, 2018, an expense of $1.0 million (2017 $0.2 million) was recorded in the condensed consolidated statement of operations in relation to warrants. Restricted Stock Units The following table summarizes the continuity of the restricted stock units (RSUs) during the three months ended May 31: 2018 2017 Number of RSUs Number of RSUs Outstanding, beginning of period 34,102 - Granted 24,450 - Vested (35,797 ) - Outstanding, end of period 22,755 - Weighted average remaining life (in years) 3.02 - During the three months ended May 31, 2018, an expense of $0.2 million (2017 $nil) was recorded in the condensed consolidated statement of operations in relation to RSUs. |
Contingencies
Contingencies | 3 Months Ended |
May 31, 2018 | |
Notes to Financial Statements | |
Note 9. Contingencies | In April 2018, depositions were held in connection with a claim filed against the Company by two individuals, in the Los Angeles Superior Court, seeking damages for breach of implied covenant of good faith and fair dealing, and promissory fraud, asserting entitlement to two million shares of our common stock. The Company filed a motion for summary judgement on May 30, 2018 to dismiss all claims, which motion will be heard on August 13, 2018. The case is currently set for trial on September 12, 2018 in the Los Angeles Superior Court. Management believes that this case lacks merit and intends to continue to defend it vigorously. No amounts have been provided for in the consolidated financial statements with respect to this claim. Management has not yet determined what effect this lawsuit will have on its financial position or results of operations. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies and Restatement of Previously Issued Financial Statements (Policies) | 3 Months Ended |
May 31, 2018 | |
Significant Accounting Policies 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. The following table summarizes the exchange rates used: Three Months Ended May 31, 2018 2017 Period-end Canadian $: US dollar exchange rate $ 0.77 $ 0.74 Average period Canadian $: US dollar exchange rate $ 0.78 $ 0.74 Expenditures are translated at the average exchange rate for the period presented. |
Sales tax and tax credits receivable | 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. As at May 31, 2018 and February 28, 2018, the computed net recoverable sale taxes amounted to $201,588 and $177,903, respectively. |
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 months ended May 31, 2018 and 2017 amounted to $1.1 million and $0.5 million, respectively. |
Net earnings (loss) per share | The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share For the three months ended May 31, 2018 and 2017, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. The potentially dilutive securities consisted of 2,395,248 and 1,860,455 outstanding warrants as at May 31, 2018 and May 31, 2017, respectively. |
Recently issued accounting pronouncements | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers In January 2016, the FASB issued ASU 2016-01 , Financial Instruments Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities 1. Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through net income, unless they qualify for the proposed practicability exception for investments that do not have readily determinable fair values. 2. Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in other comprehensive income. 3. Entities would make the assessment of the realizability of a deferred tax asset (DTA) related to an available-for-sale (AFS) debt security in combination with the entitys other DTAs. The guidance would eliminate one method that is currently acceptable for assessing the realizability of DTAs related to AFS debt securities. That is, an entity would no longer be able to consider its intent and ability to hold debt securities with unrealized losses until recovery. 4. Disclosure of the fair value of financial instruments measured at amortized cost would no longer be required for entities that are not public business entities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the impact of this Statement on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income |
Summary of Significant Accoun17
Summary of Significant Accounting Policies and Restatement of Previously Issued Financial Statements (Tables) | 3 Months Ended |
May 31, 2018 | |
Summary Of Significant Accounting Policies And Restatement Of Previously Issued Financial Statements | |
Foreign Currency Translations and Transactions | Three Months Ended May 31, 2018 2017 Period-end Canadian $: US dollar exchange rate $ 0.77 $ 0.74 Average period Canadian $: US dollar exchange rate $ 0.78 $ 0.74 |
Property, Plant and Equipment18
Property, Plant and Equipment, Net (Tables) | 3 Months Ended |
May 31, 2018 | |
Property Plant And Equipment Net | |
Property and Equipment | Estimated May 31, February 28, Useful Life 2018 2018 (years) Building 30 $ 1,914,599 $ 1,935,423 Land indefinite 236,665 239,239 Building improvements 5 330,813 377,253 Machinery and equipment 3 8 2,967,129 2,189,195 Office equipment and furniture 8 119,083 101,756 Property, plant and equipment, gross 5,568,289 4,842,866 Less: accumulated depreciation (743,156 ) (805,963 ) Property, plant and equipment, net $ 4,825,133 $ 4,036,903 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 3 Months Ended |
May 31, 2018 | |
Intangible Assets Net | |
Schedule of intangible assets | Estimated May 31, February 28, Useful Life 2018 2018 (years) Intellectual property 7 $ 545,970 $ 533,369 Less: accumulated amortization (217,104 ) (200,629 ) Intangible assets, net $ 328,866 $ 332,740 |
Credit Facility and Long-Term20
Credit Facility and Long-Term Debt (Tables) | 3 Months Ended |
May 31, 2018 | |
Credit Facility And Long-term Debt | |
Schedule of Installment loan | May 31, 2018 February 28, 2018 Instalment loan $ 1,063,227 $ 1,088,426 Less current portion 54,062 54,649 Non-current portion $ 1,009,165 $ 1,033,777 |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 3 Months Ended |
May 31, 2018 | |
Stockholders Equity | |
Schedule of common stock | For the three months ended May 31, 2018 Number of shares Amount Balance, February 28, 2018 33,751,088 $ 3,376 Cashless exercise of warrants 18,821 2 Issuance of shares upon vesting of restricted stock units 35,797 3 Balance, May 31, 2018 33,805,706 $ 3,381 |
Stock-based Compensation Plans
Stock-based Compensation Plans (Tables) | 3 Months Ended |
May 31, 2018 | |
Stockholders Equity | |
Warrants activities | 2018 2017 Number of warrants Weighted average exercise price Number of warrants Weighted average exercise price Outstanding, beginning of period 2,515,248 $ 8.21 1,647,670 $ 2.91 Granted - - 550,000 5.25 Exercised (20,000 ) 0.80 (22,548 ) 0.80 Forfeited (100,000 ) 5.25 - - Expired - - (314,667 ) 6.00 Outstanding, end of period 2,395,248 $ 8.40 1,860,455 $ 3.11 Exercisable, end of period 1,066,916 $ 7.32 836,705 $ 2.82 |
Outstanding and exercisable warrants | 2018 2017 Exercise price Number of warrants outstanding Weighted average remaining life Number of warrants outstanding Weighted average remaining life $ 0.80 582,081 7.50 912,452 0.51 $ 3.00 12,500 - 75,000 1.02 $ 5.25 430,000 8.19 550,000 9.98 $ 6.00 - - 323,003 0.08 $ 12.00 840,667 7.84 - - $ 13.49 250,000 9.38 - - $ 13.89 280,000 9.44 - - Outstanding, end of period 2,395,248 8.13 1,860,455 3.26 Exercisable, end of period 1,066,916 6.98 836,705 0.35 |
Estimated fair value of warrants on grant date | 2018 2017 Exercise price $ - $ 5.25 Risk-free interest rate - 2.02 % Expected dividend yield - 0 % Expected volatility - 110.72 % Expected life - 6 years |
Summarizes of restricted stock units | 2018 2017 Number of RSUs Number of RSUs Outstanding, beginning of period 34,102 - Granted 24,450 - Vested (35,797 ) - Outstanding, end of period 22,755 - Weighted average remaining life (in years) 3.02 - |
The Company, Basis of Present23
The Company, Basis of Presentation and Going Concern (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Jun. 29, 2015 | May 31, 2018 | May 31, 2017 | Feb. 28, 2018 | |
Company Basis Of Presentation And Going Concern | ||||
Entity incorporation date | Mar. 31, 2010 | |||
Entity incorporation state name | Nevada | |||
Percentage of share exchange agreement | 78.10% | |||
Net Loss | $ (3,529,530) | $ (1,523,090) | ||
Cash | 5,355,015 | $ 8,149,713 | ||
Net Cash Used in Operating Activities | (2,171,061) | $ (983,769) | ||
Accumulated deficit | $ (24,804,711) | $ (21,275,181) |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Details) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Summary Of Significant Accounting Policies Details | ||
Period-end Canadian $: US dollar exchange rate | 0.77 | 0.74 |
Average period Canadian $: US dollar exchange rate | 0.78 | 0.74 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |||
May 31, 2018 | May 31, 2017 | Feb. 28, 2018 | Feb. 28, 2017 | |
Summary Of Significant Accounting Policies | ||||
Sales tax receivables | $ 201,588 | $ 177,903 | ||
Research and development expenses | $ 1,066,079 | $ 496,538 | ||
Warrants outstanding | 2,395,248 | 1,860,455 | 2,515,248 | 1,647,670 |
Property, Plant and Equipment26
Property, Plant and Equipment, Net (Details) - USD ($) | 3 Months Ended | |
May 31, 2018 | Feb. 28, 2018 | |
Property, plant and equipment, gross | $ 5,568,289 | $ 4,842,866 |
Less: accumulated depreciation | (743,156) | (805,963) |
Property, plant and equipment, net | $ 4,825,133 | 4,036,903 |
Building [Member] | ||
Estimated Useful Life (Years) | 30 years | |
Property, plant and equipment, gross | $ 1,914,599 | 1,935,423 |
Land [Member] | ||
Estimated Useful Life (Years) | 0 years | |
Property, plant and equipment, gross | $ 236,665 | 239,239 |
Building Improvements [Member] | ||
Estimated Useful Life (Years) | 5 years | |
Property, plant and equipment, gross | $ 330,813 | 377,253 |
Machinery and equipment [Member] | ||
Property, plant and equipment, gross | $ 2,967,129 | 2,189,195 |
Machinery and equipment [Member] | Minimum [Member] | ||
Estimated Useful Life (Years) | 3 years | |
Machinery and equipment [Member] | Maximum [Member] | ||
Estimated Useful Life (Years) | 8 years | |
Office equipment and furniture [Member] | ||
Estimated Useful Life (Years) | 8 years | |
Property, plant and equipment, gross | $ 119,083 | $ 101,756 |
Property, Plant and Equipment27
Property, Plant and Equipment, Net (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Property And Equipment Details Narrative Abstract | ||
Depreciation expense | $ 85,000 | $ 75,000 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details) - USD ($) | 3 Months Ended | |
May 31, 2018 | Feb. 28, 2018 | |
Intellectual property | $ 545,970 | $ 533,369 |
Less: accumulated amortization | (217,104) | (200,629) |
Intangible assets, net | $ 328,866 | $ 332,740 |
Intellectual Property [Member] | ||
Estimated Useful Life (Years) | 7 years |
Intangible Assets, Net (Detai29
Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Intellectual Property Details Narrative Abstract | ||
Amortization expense | $ 16,000 | $ 16,000 |
Credit Facility and Long-Term30
Credit Facility and Long-Term Debt (Details) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
Credit Facility And Longterm Debt Details Narrative Abstract | ||
Installment loan | $ 1,063,227 | $ 1,088,426 |
Less current portion | 54,062 | 54,649 |
Non-current portion | $ 1,009,165 | $ 1,033,777 |
Credit Facility and Long-Term31
Credit Facility and Long-Term Debt (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Credit Facility Details Narrative Abstract | ||
Interest paid | $ 12,913 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | ||
May 31, 2018 | May 31, 2017 | Jun. 29, 2015 | |
Repayment of related party debt | $ 278,472 | ||
Employment Agreement [Member] | |||
Common stock shares reserved for future issuance under agreement | 4,000,000 | ||
Common stock shares issuable in each tranche | 1,000,000 | ||
Chief Executive Officer [Member] | |||
Compensation expense | $ 47,000 | 45,000 | |
Mr. Solomita [Member] | |||
Repayment of related party debt | 278,472 | ||
Repayment of accrued compensation | 324,844 | ||
Accrued compensation | $ 35,156 |
Stockholders_ Equity (Details)
Stockholders’ Equity (Details) | 3 Months Ended |
May 31, 2018USD ($)shares | |
Beginning Balance, Amount | $ 10,324,065 |
Issuance of shares upon vesting of restricted stock units, Amount | |
Ending Balance, Amount | $ 7,927,936 |
Common Stock [Member] | |
Beginning Balance, Shares | shares | 33,751,088 |
Beginning Balance, Amount | $ 3,376 |
Cashless exercise of warrants, Shares | shares | 18,821 |
Cashless exercise of warrants, Amount | $ 2 |
Issuance of shares upon vesting of restricted stock units, Shares | shares | 35,797 |
Issuance of shares upon vesting of restricted stock units, Amount | $ 3 |
Ending balance, Shares | shares | 33,805,706 |
Ending Balance, Amount | $ 3,381 |
Stockholders_ Equity (Details N
Stockholders’ Equity (Details Narrative) - Common Stock [Member] - USD ($) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Issuance of shares upon cashless exercise of warrants, Shares | 18,821 | 20,000 |
Issuance of shares upon vesting of restricted stock units, Shares | 35,797 | |
Sale of common stock | 1,123,266 | |
Common stock offering price per share | $ 5.25 | |
Proceeds from issuance of common stock | $ 5,897,188 |
Stock-based Compensation Plan35
Stock-based Compensation Plans (Details) - $ / shares | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Number of Warrant Shares | ||
Outstanding, beginning of period | 2,515,248 | 1,647,670 |
Granted | 550,000 | |
Exercised | (20,000) | (22,548) |
Forfeited | (100,000) | |
Expired | (314,667) | |
Outstanding, end of period | 2,395,248 | 1,860,455 |
Exercisable, end of period | 1,066,916 | 836,705 |
Weighted Average Exercise Price | ||
Outstanding, beginning of period | $ 8.21 | $ 2.91 |
Granted | 5.25 | |
Exercised | 0.80 | 0.80 |
Forfeited | 5.25 | |
Expired | 6 | |
Outstanding, end of period | 8.40 | 3.11 |
Exercisable, end of period | $ 7.32 | $ 2.82 |
Stock-based Compensation Plan36
Stock-based Compensation Plans (Details 1) - shares | 3 Months Ended | |||
May 31, 2018 | May 31, 2017 | Feb. 28, 2018 | Feb. 28, 2017 | |
Number of warrants outstanding | 2,395,248 | 1,860,455 | 2,515,248 | 1,647,670 |
Warrants exercisable | 1,066,916 | 836,705 | ||
Warrants outstanding, weighted average remaining life | 8 years 1 month 16 days | 3 years 3 months 4 days | ||
Warrant exercisable, weighted average remaining life | 6 years 11 months 23 days | 4 months 6 days | ||
Exercise Prices 0.80 [Member] | ||||
Number of warrants outstanding | 582,081 | 912,452 | ||
Warrants outstanding, weighted average remaining life | 7 years 6 months | 6 months 3 days | ||
Exercise Prices 3.00 [Member] | ||||
Number of warrants outstanding | 12,500 | 75,000 | ||
Warrants outstanding, weighted average remaining life | 0 years | 1 year 7 days | ||
Exercise Prices 5.25 [Member] | ||||
Number of warrants outstanding | 430,000 | 550,000 | ||
Warrants outstanding, weighted average remaining life | 8 years 2 months 8 days | 9 years 11 months 23 days | ||
Exercise Prices 6.00 [Member] | ||||
Number of warrants outstanding | 323,003 | |||
Warrants outstanding, weighted average remaining life | 0 years | 29 days | ||
Exercise Prices 12.00 [Member] | ||||
Number of warrants outstanding | 840,667 | |||
Warrants outstanding, weighted average remaining life | 7 years 10 months 3 days | 0 years | ||
Exercise Prices 13.49 [Member] | ||||
Number of warrants outstanding | 250,000 | |||
Warrants outstanding, weighted average remaining life | 9 years 4 months 17 days | 0 years | ||
Exercise Prices 13.89 [Member] | ||||
Number of warrants outstanding | 280,000 | |||
Warrants outstanding, weighted average remaining life | 9 years 5 months 9 days | 0 years |
Stock-based Compensation Plan37
Stock-based Compensation Plans (Details 2) - $ / shares | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Stock-based Compensation Plans | ||
Exercise price | $ 5.25 | |
Risk-free interest rate | 2.02% | |
Expected dividend yield | 0.00% | |
Expected volatility | 110.72% | |
Expected life years | 6 years |
Stock-based Compensation Plan38
Stock-based Compensation Plans (Details 3) - shares | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
Number of RSUs | ||
Granted | 550,000 | |
Restricted Stock Units (RSUs) [Member] | ||
Number of RSUs | ||
Outstanding, beginning of period | 34,102 | |
Granted | 24,450 | |
Vested | (35,797) | |
Outstanding, end of period | 22,755 | |
Weighted average remaining life (in years) | 3 years 7 days |
Stock-based Compensation Plan39
Stock-based Compensation Plans (Details Narrative) - USD ($) | Jul. 06, 2017 | May 31, 2018 | May 31, 2017 | Jun. 06, 2017 |
Share-based compensation expense | $ 1,000,000 | $ 200,000 | ||
Restricted Stock Units (RSUs) [Member] | ||||
Share-based compensation expense | $ 200,000 | |||
Equity Incentive plan [Member] | ||||
Common stock shares reserved for future issuance | 3,000,000 | |||
Description of provision for plan | On March 1, 2018, in accordance with the provisions of the Plan, the number of shares available for issuance increased by 1,500,000 shares, resulting in 3,211,448 shares available for issuance. |