Note 1 – The Company and Basis of Presentation
The Company
Loop Industries, Inc. (the Company) was incorporated on March 11, 2010 under the laws of the State of Nevada, under the name “Radikal Phones Inc.” We changed our name to “First American Group Inc.” on October 7, 2010, and then we subsequently changed our name to, “Loop Industries, Inc.”, effective July 21, 2015.
On June 29, 2015, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, and the holders of common stock of Loop Holdings, Inc. (“Loop Holdings”). Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 23,257,500 shares of common stock in consideration for all the issued and outstanding shares in Loop Holdings. The effect of the issuance was that Loop Holdings shareholders held approximately 78.1% of the issued and outstanding shares of common stock of the Company upon consummation of the Share Exchange Agreement.
Pursuant to a Stock Redemption Agreement dated June 29, 2015 entered into commensurate with the share exchange, the Company redeemed 25,000,000 shares of First American Group common stock from two stockholders’ for an aggregate redemption price of $16,000.
As the former owners and management of the Company had voting and operating control of the Company after the share exchange, the transaction has been accounted for as a recapitalization with Loop Holdings deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer. No step-up in basis or intangible assets or goodwill was recorded and the aggregate cost of $60,571 representing the net liabilities assumed of $35,243, $16,000 cost of the redeemed shares and closing costs of $9,328 has been reflected as a cost of the transaction. The consolidated financial statements reflect the historical results of the Company prior to the Share Exchange, and that of the combined company following the Share Exchange.
The Company engages in the designing, prototyping and building a closed loop plastics recycling business that leverages a proprietary de-polymerization technology.
All references to shares of common stock in this Report on Form 10-Q give retroactive effect to a one-for-four (1:4) reverse split of the Company’s issued and outstanding shares of common stock, which reverse split took effect on the OTCQB on September 21, 2015.
On May 24, 2016, 9449507 Canada Inc. was incorporated to carry on the Company’s depolymerization business. On November 11, 2016, the shares of 9449507 Canada Inc., which were wholly owned by Mr. Solomita, were transferred to Loop Industries, Inc. On December 23, 2016, 9449507 Canada Inc. changed its legal name to Loop Canada Inc. On December 31, 2016, all employees, assets, liabilities, and operations pertaining to the Company’s depolymerization business, were transferred to Loop Canada Inc. from 8198381 Canada Inc., a company wholly owned by Mr. Solomita.
On March 9, 2017, Loop Holdings, a wholly-owned subsidiary of the Company, merged with and into the Company, with the Company being the surviving entity as a result of the merger.
On September 1, 2017, 9449710 Canada Inc. was incorporated, to assist in the depolymerisation 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”.
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 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 generally accepted accounting principles for complete financial statements. The balance sheet information as of February 28, 2017 is derived from the Company’s audited consolidated financial statements and related notes for the fiscal year ended February 28, 2017, which is included in Item 8 of the Company’s 2017 Amended Annual Report on Form 10-K/A filed with the Securities and Exchange Commission (SEC) on January 12, 2018. These unaudited interim condensed consolidated financial statements should be read in conjunction with those consolidated 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 and nine months ended November 30, 2017 are not necessarily indicative of the results that may be expected for the year ending February 28, 2018.
Intercompany balances and transactions have been eliminated in consolidation.
Liquidity
The accompanying 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 accompanying consolidated financial statements, the Company has no recurring source of revenue and during the nine months ended November 30, 2017, the Company incurred a net loss of $10,402,707 and used cash in operations of $4,175,443. As of November 30, 2017, the Company had cash on hand of $3,400,973 and stockholders’ equity of $4,289,192.
Subsequent to November 30, 2017 and as more fully explained in note 8 – Subsequent Events, the Board approved the issuance of up to 1,100,000 shares of the common stock of the Company at $12.00 per share. At January 11, 2018, the Company had sold 612,667shares for aggregate gross proceeds of $7.4 million. As a result, management estimates that the current funds on hand will be sufficient to continue operations for the next twelve months. Management may consider seeking additional funds, primarily through the issuance of debt and equity securities for cash to advance the development of our projects to the point at which they will become commercially viable.
No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company could obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing.
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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 and equipment, analysis of impairments of recorded intellectual property, accruals for potential liabilities and assumptions made in calculating the fair value of certain stock instruments.
Foreign Currency Translations and Transactions
The accompanying consolidated financial statements are presented in United States dollars, the functional currency of the Company. Capital accounts of foreign subsidiaries are translated into US Dollars from foreign currency at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date. Income and expenses are translated at the average exchange rate of the period. As a result, currency exchange fluctuations may impact our revenue and the costs of our operations. We currently do not engage in any currency hedging activities.
The following table summarizes the exchange rates used:
|
|
Nine Months Ended
November 30,
|
|
|
|
2017
|
|
|
2016
|
|
Period end Canadian $: US Dollar exchange rate
|
|
$
|
0.78
|
|
|
$
|
0.74
|
|
Average period Canadian $: US Dollar exchange rate
|
|
$
|
0.77
|
|
|
$
|
0.77
|
|
Restricted cash
In December 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash which requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance must be applied retrospectively to all periods presented. Management adopted this ASU beginning March 1, 2017. All prior periods have been adjusted to conform to the current period presentation, which resulted in no changes to the statement of cash flows for the nine months ended November 30, 2016.
As at November 30, 2017, the Company’s restricted cash consists of term deposits, held as collateral for the revolving credit facility (Note 5).
Value added tax, tax credits and other receivables
The Company is registered for the Canadian Federal and Provincial Goods and Services Taxes. As a registrant, 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 the Balance Sheet date of November 30 and February 28, 2017, the computed net recoverable sale taxes amounted to $128,905 and $198,830, respectively.
Research and Development Costs
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 amounted to $3,894,454 and $368,403 for the three months ended November 30, 2017 and 2016, respectively, and to $5,341,763 and $1,217,600 for the nine months ended November 30, 2017 and 2016, respectively. Research and development costs are net of $4,472 of grants received and research and development tax credit of $127,713 claimed during the period ended November 30, 2017.
Net Loss per Share
The Company computes net loss per share in accordance with FASB ASC 260 Earnings per share. Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the year. 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 and nine months ended November 30, 2017 and 2016, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. The potentially dilutive securities consisted of 1,000,000 common shares issuable, 2,684,582 outstanding warrants and 34,102 outstanding restricted stock units as of November 30, 2017 and 2,035,004 outstanding warrants as of November 30, 2016.
Stock Compensation
In March 2016, the FASB issued ASU 2016-09,
Compensation–Stock Compensation (Topic 718)
, which is intended to simplify accounting for share-based payment transactions. The ASU changed several aspects of the accounting for share-based payment award transactions, including accounting for income taxes, forfeitures and minimum statutory tax withholding requirements. Management adopted this ASU beginning March 1, 2017, with an immaterial impact to the Company's consolidated net loss and cash flows.
The Company accounts for stock compensation in accordance with ASC Subtopic 718-10. Stock compensation expense for a given warrant is recognized over the requisite service period. The Company accounts for forfeitures on share-based payments by recognizing forfeiture awards as they occur
The Company determines the fair value of restricted stock units awarded to employees and directors based on the closing market price of the Company's common stock on the date of grant.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. On August 12, 2015, FASB delayed the required implementation to fiscal years beginning after December 15, 2017 but now permitted organizations such the Company to adopt earlier. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. As the Company does not currently have any revenues from contracts with customers, the adoption of ASU 2014-09 on March 1, 2018 will not to have an impact, on transition.
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02,
Leases
. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.
Note 3 – Property and Equipment
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
November 30,
|
|
|
February 28,
|
|
|
|
Life
|
|
|
2017
|
|
|
2017
|
|
|
|
(years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and Equipment
|
|
5 - 7
|
|
|
$
|
1,845,256
|
|
|
$
|
1,590,187
|
|
Office equipment and furniture
|
|
5 - 8
|
|
|
|
166,877
|
|
|
|
131,607
|
|
Leasehold improvements
|
|
3
|
|
|
|
382,347
|
|
|
|
342,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,394,480
|
|
|
|
2,064,213
|
|
Less: accumulated depreciation
|
|
|
|
|
|
|
(734,699
|
)
|
|
|
(497,244
|
)
|
Property and equipment, net
|
|
|
|
|
|
$
|
1,659,781
|
|
|
$
|
1,566,969
|
|
Depreciation expense amounted to $82,859 and $86,349 for the three months ended November 30, 2017 and 2016, respectively and to $233,332 and $242,712 for the nine months ended November 30, 2017 and 2016, respectively.
Note 4 – Intellectual Property
On October 27, 2014, the Company entered into an intellectual property agreement with Mr. Hatem Essaddam wherein the Company purchased for cash of $445,050, a certain technique and method for the depolymerization of polyethylene terephthalate at ambient temperature and atmospheric pressure. The Company is using such intellectual property as part of their research and development activities. The technology is being amortized using the straight-line method over the 7 years estimated useful life of the patents.
In addition to the $445,050 paid by the Company under the Intellectual Property Assignment Agreement, the Company is required to make additional payments totaling CDN$800,000 to Mr. Essaddam within sixty (60) days of each of the following milestones (the “Milestones”) having been met, as follows:
|
(i)
|
CDN$200,000 when an average of twenty (20) metric tons per day of terephthalic acid is produced by the Company for twenty (20) operating days;
|
|
|
|
|
(ii)
|
CDN$200,000 when an average of thirty (30) metric tons per day of terephthalic acid is produced by the Company for thirty (30) operating days;
|
|
|
|
|
(iii)
|
CDN$200,000 when an average of sixty (60) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days; and
|
|
|
|
|
(iv)
|
CDN$200,000 when an average of one hundred (100) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days.
|
As of November 30, 2017, the Company is still in its test pilot program, none of the Milestones have been met, and accordingly no additional payments have been made.
Additionally, the Company is obligated to make royalty payments to Mr. Essaddam of up to CDN$25,700,000, payable as follows:
|
(a)
|
10% of gross profits on the sale of all products derived by the Company from the technology assigned to the Company under the agreement;
|
|
|
|
|
(b)
|
10% of any license fee paid to the Company in respect of any licensing or other right to use the technology assigned to the Company and granted to a third party by the Assignee;
|
|
|
|
|
(c)
|
5% of any royalty or other similar payment made to the Company by a third party to whom a license or other right to use the technology assigned to the Company has been granted by the Company; and
|
|
|
|
|
(d)
|
5% of any royalty or other similar payment made to the Company by a third party in respect of a sub-license or other right to use the technology assigned to the Company granted by the third party.
|
As of November 30, 2017, the Company has not made any royalty payments under the Intellectual Property Assignment Agreement.
Amortization expense amounted to $15,895 and $15,895 for the three months ended November 30, 2017 and 2016, respectively and to $47,684 and $47,684 for the nine months ended November 30, 2017 and 2016, respectively.
Note 5 – Credit facility
On September 12, 2017, the Company entered into a credit facility consisting of a CDN$50,000 credit card facility, secured by a CDN$50,000 Guaranteed Investment Certificate bearing interest at 0.45%, annually, maturing on October 1, 2018.
Note 6 – Related Party Transactions
Advances from Major Shareholder
Mr. Daniel Solomita, the Company’s major stockholder and CEO, or companies controlled by him, previously made advances to the Company. The advances were unsecured, non-interest bearing with no formal terms of repayment. During the period ended November 30, 2017, the Company repaid to Mr. Solomita or companies controlled by him, as applicable, an aggregate amount of $249,762 and netted against the advances an aggregate amount of $113,223 representing value added taxes and other receivables owed to Mr. Solomita. The amounts due to these entities as of February 28, 2017 were $391,695.
Employment Agreement and Accrued Compensation due to Major Shareholder
The Company entered into an employment agreement with Daniel Solomita, the Company’s President and Chief Executive Officer for an indefinite term. During the term, the officer shall receive monthly salary of $15,000. Compensation expense under this agreement for the nine month period ended November 30, 2017 and 2016 amounted to $135,000. As at February 28, 2017, accrued compensation $360,000 was due to Mr. Solomita. As at November 30, 2017, the total accrued compensation due to Mr. Solomita was paid.
In addition, as previously disclosed, the Company agreed to grant the Mr. Solomita 4 million shares of the Company’s common stock, if certain milestones were met.
Effective April 10, 2017, the Company achieved the first milestone by becoming qualified to trade on the OTCQX and began trading that same date. Therefore, management determined it was probable that the first performance condition would be achieved at February 28, 2017 and the officer’s entitlement to 1,000,000 shares with a fair value of $800,000, in aggregate, had vested. The performance conditions for the remaining 3,000,000 shares of common stock are not considered probable therefore the stock based compensation expense associated with the grant has not been recognized.
Note 7 – Stockholders’ Equity
Common Stock
On May 4, 2017, the Board of Directors approved the issuance and sale of 1,123,266 common shares of the Company’s common stock, par value $0.0001 per share at an offering price of $5.25 per share, for gross proceeds of $5,897,188.
On September 7, 2017, the Board of Directors approved the issuance and sale of 18,128 common shares of the Company’s common stock, par value $0.0001 per share at an offering price of $12.00 per share, for gross proceeds of $217,536. In addition, the Company reclassified the stock subscriptions in the amount of $54,780, in aggregate, to common stock and paid-in capital.
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.
Equity Incentive Plan
On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”). The Plan permits the granting of options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants of the Company. A total of 3,000,000 shares of common stock were reserved for issuance under the Plan with an automatic share reserve increase, as defined in the Plan, effective commencing 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 option will not exceed 5 years.
Stock Options
On October 19, 2017, the Company’s former Chief Financial Officer, terminated her employment and pursuant to the separation agreement of October 25, 2017, forfeited all vested and unvested warrants, being 100,000 vested and 450,000 unvested warrants. All requisite services were rendered for stock compensation costs recognized, amounting to $505,986, until the date of termination. The warrants were originally granted on April 3, 2017 with an exercise price of $5.25 and had an aggregate fair value of $2,524,995, as determined by a Black-Scholes option pricing model.
On November 8, 2017, the Company issued to its new Chief Financial Officer, Mr. Frank Zitella, under the Plan, a warrant to purchase up to 200,000 shares of common stock at an exercise price $13.89 per share, which vests in 1/3 increments over a period of three years, commencing on November 8, 2018, and having a contractual life of 10 years. This warrant has a grant date fair value of $1,928,840 as determined by a Black Scholes option pricing model and will be amortized over the vesting period. In addition, the Company issued to its Chief Financial Officer a warrant to purchase up to 80,000 additional shares of common stock at an exercise price of $13.89 that will vest when certain milestones are achieved. This warrant has a grand date fair value of $771,536 as determined by a Black Scholes option pricing model and amortization will commence when it is probable that the milestones will be achieved.
The warrants grant date fair value were determined by a Black Scholes option pricing model with the following assumptions:
Risk-free interest rate
|
2.10%
|
Expected dividend yield
|
0%
|
Expected volatility
|
80%
|
Expected life
|
6 years
|
During the three months ended August 31, 2017, the Company issued three warrants to two employees, not covered under the Plan, to purchase up to 530,000 shares of common stock, in aggregate, at an exercise price of $5.25 per share. The warrants to purchase up to an aggregate of 100,000 and 380,000 shares of common stock, respectively, each vest quarterly in equal amounts over 24 and 48 months, respectively, beginning on July 24, 2017 and June 13, 2017, respectively, and each have a contractual life of 10 years. These warrants collectively have a grant date fair value of $4,786,142 as determined by a Black Scholes option pricing model and will be amortized over the vesting period. In addition, a warrant to purchase up to 50,000 additional shares of our common stock will vest when certain milestones are achieved. This warrant had a grant date fair value of $479,885 as determined by a Black Scholes option pricing model and amortization will commence when it is probable that the milestones will be achieved.
The warrants grant date fair value were determined by a Black Scholes option pricing model with the following assumptions:
Risk-free interest rate
|
1.46 to 1.74%
|
Expected dividend yield
|
0%
|
Expected volatility
|
82 to 94%
|
Expected life
|
3 to 5 years
|
During the three months ended November 30, 2017, the Company issued three warrants to three employees, under the Plan, to purchase up to 950,000 shares of common stock, in aggregate, at exercise prices ranging from $12.00 to $13.49 per share. The warrants to purchase up to an aggregate of 950,000 shares of common stock vest 200,000 and 100,000 warrants immediately, respectively, and, the balance, monthly in equal amounts over 60 and 24 months, respectively, beginning September 14, 2017 and October 16, 2017, respectively, and each have a contractual life of 10 years. These warrants collectively have a grant date fair value of $10,412,575, in aggregate, as determined by a Black Scholes option pricing model and will be amortized over the vesting period.
The warrants grant date fair value were determined by a Black Scholes option pricing model with the following assumptions:
Risk-free interest rate
|
1.50 to 2.15%
|
Expected dividend yield
|
0%
|
Expected volatility
|
80 to 94%
|
Expected life
|
3 to 6 years
|
During the period ended August 31, 2017, the Company amended the terms of warrants to purchase up to 702,081 shares of our common stock which were originally issued on December 1, 2015 to three employees. The amendment extended the expiry date of the warrants to November 30, 2025 from November 30, 2017. As a result of the modification, we recognized additional compensation expense of $63,677.
Amortization of these costs amounted to $4,314,880 and $32,348 for the three months period ended November 30, 2017 and 2016, respectively, and to $5,235,253 and $106,053 for the nine months period ended November 30, 2017 and 2016, respectively, and are included in operating expenses. As of November 30, 2017 and 2016, the unamortized balance of these costs was $15,844,331 and $424,142. The aggregate intrinsic value of the warrants outstanding as of November 30, 2017 was $20,251,990 calculated as the difference between the closing market price of $14.70 and the exercise price of the Company’s warrants as of November 30, 2017.
The table below summarizes the Company’s warrant activities:
|
|
Number of
Warrant
Shares
|
|
|
Exercise Price Range Per
Share
|
|
Weighted
Average
Exercise
Price
|
|
Balance, February 28, 2017
|
|
|
1,647,670
|
|
|
$0.80 to $6.00
|
|
$
|
2.91
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,310,000
|
|
|
$5.25 to $13.89
|
|
$
|
9.23
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(515,418
|
)
|
|
$0.80 to $5.25
|
|
$
|
4.95
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(213,770
|
)
|
|
$0.80 to $6.00
|
|
$
|
5.52
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(543,900
|
)
|
|
$5.25 to $6.00
|
|
$
|
5.86
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, November 30, 2017
|
|
|
2,684,582
|
|
|
$0.80 to $13.89
|
|
$
|
7.16
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned and exercisable, November 30, 2017
|
|
|
966,250
|
|
|
$0.80 to $13.49
|
|
$
|
4.90
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested, November 30, 2017
|
|
|
1,718,332
|
|
|
$0.80 to $13.89
|
|
$
|
8.42
|
|
As at November 30, 2017, 20,000 shares of the Company’s common stock were issued as a result of a cashless exercise of 22,919 warrants with an exercise price of $0.80 and a fair value of $0.55. In addition, the Company issued 193,770 shares of its common stock upon the exercise of warrants at an offering price of $6.00 per share, resulting in proceeds of $1,163,016.
The following table summarizes information concerning outstanding and exercisable warrants as of November 30, 2017:
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Range of Exercise Prices
|
|
|
Number
Outstanding
|
|
|
Average Remaining Contractual Life (in years)
|
|
|
Weighted Average Exercise Price
|
|
|
Number Exercisable
|
|
|
Average Remaining Contractual Life (in years)
|
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.80
|
|
|
|
912,082
|
|
|
|
6.21
|
|
|
$
|
0.80
|
|
|
|
594,582
|
|
|
|
6.32
|
|
|
$
|
0.80
|
|
$
|
3.00
|
|
|
|
12,500
|
|
|
|
0.50
|
|
|
$
|
3.00
|
|
|
|
12,500
|
|
|
|
0.50
|
|
|
$
|
3.00
|
|
$
|
5.25
|
|
|
|
530,000
|
|
|
|
9.74
|
|
|
$
|
5.25
|
|
|
|
36,250
|
|
|
|
9.74
|
|
|
$
|
5.25
|
|
$
|
12.00
|
|
|
|
700,000
|
|
|
|
9.79
|
|
|
$
|
12.00
|
|
|
|
216,668
|
|
|
|
9.79
|
|
|
$
|
12.00
|
|
$
|
13.49
|
|
|
|
250,000
|
|
|
|
9.88
|
|
|
$
|
13.49
|
|
|
|
106,250
|
|
|
|
9.88
|
|
|
$
|
13.49
|
|
$
|
13.89
|
|
|
|
280,000
|
|
|
|
9.94
|
|
|
$
|
13.89
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Total
|
|
|
|
2,684,582
|
|
|
|
|
|
|
|
|
|
|
|
966,250
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units
During the period ended November 30, 2017, the Company issued, under the Plan, four restricted stock unit awards to directors of the Company to purchase up to 34,102 shares of common stock, in aggregate. The restricted stock units vest upon completion of services, on May 31, 2018. These restricted stock units have a grant date fair value of $443,326, based on the closing market price of the Company's common stock on the date of grant, reduced by the present value of the estimated future dividends during the vesting period in which the restricted stock rights holder will not participate. The weighted average grant date fair value of the restricted stock units is $13.00 and no dividends are expected during the vesting period.
Amortization of these costs amounted to $88,665 for the three months period ended November 30, 2017, and are included in operating expenses. As of November 30, 2017, the unamortized balance of these costs was $354,661.
Note 8 – Subsequent Events
Common Stock
On January 9, 2018, the Board of Directors approved plans to issue and sell in a private placement up to 1,100,000 shares of common stock, par value $0.0001 per share, of the Company (the “Shares”) at an offering price of $12.00 per share and to issue warrants to investors to purchase up to a number of shares of Common Stock equal to 25% of the Shares purchased (the “Private Placement”).
At January 11, 2018, the Company had sold 612,667 Shares and 104,167 warrants for gross proceeds of $7.4 million.
In connection with the Private Placement, the Company agreed to file a registration statement to register the Shares (the “Resale Registration Statement”). The warrants will only vest if the Company does not file the Resale Registration Statement covering the shares sold in the Private Placement within 60 days of the closing of the Private Placement. The Company also granted holders of the Shares piggyback registration rights for certain registration statements. Additionally, for a period of 90 days following the closing of the Private Placement, in the event the Company issues shares of common stock or any securities of the Company that would entitle the holder thereof to acquire common stock for a consideration per share less than $12.00 per share (subject to certain customary exceptions, including but not limited to issuances pursuant to existing equity incentive plans and strategic partnerships or relationships), certain investors would be entitled to additional shares of common stock equal to the quotient of the aggregate price paid by the investor for the total number of shares purchased divided by the price per share that was issued for consideration per share less than $12.00 per share less the number of shares purchased by such investor in the Private Placement.
The Shares and warrants 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, Section 4(a)(2) of the Act or Regulation S.
Promise to Purchase a Land and Building
On December 11, 2017, the Company entered into a promise to purchase land and building for consideration of $2,153,123, in aggregate. An amount of $77,590, was deposited in escrow on the date of the agreement. Subject to satisfactory due diligence, in its sole discretion, the Company has until February 9, 2018 to proceed to the execution of the deed of sale.