Loop Industries, Inc. - 10-Q filing on 2015-10-20

Commitments and Contingencies

6 Months Ended

Aug. 31, 2015

Business Advisory/Consulting Agreements

Business Advisory Agreements

On December 1, 2014, the Company entered into consulting agreements with certain consultants (“the Consultants”) with the following terms and conditions:

Services

The Consultants will provide consulting support and advisory services to include business expansion strategies and corporate finance.

Terms

The Agreement shall commence on the date above and shall continue for a period of twelve (12) months.

Consideration

In consideration for services rendered herein; upon signing of the Agreements, the Consultants will be granted 890,000 shares of Loop common stock. The shares will be fully vested, fully earned, and non-forfeitable.

Accounting Treatment of the Consideration

The Company valued 890,000 common shares issued to the Consultants at $0.80 per share, the most recent PPM price, or $712,000 in aggregate and immediately recognized as an expense the full value of the consideration paid on the date of grant due to the fact that these shares are fully-vested, fully earned, and non-forfeitable.

Entry into Investor Relations Agreement

On January 15, 2015, the Company engaged John H. Shaw ("Consultant"), as a corporate communications consultant with the following terms and conditions:

Responsibilities and Scope

Effective January 15, 2015, the Company ("Client") retained the Consultant for a period of three months to consult on corporate communications matters ("Corporate Communication Agreement").

Terms

a.	Six thousand dollars ($6,000) for Month One, and four thousand dollars ($4,000) for each of both Months Two and Three. (For companies with a "Going Concern" or negative cash flow, fees are invoiced as a retainer due and are payable by the 1st of each month.) Retainers shall be pro-rated in the first and last months: January 15 to the end of the month is $3,000; February 1: $5,000; March 1: $4,000; April 1: $2,000). The initial retainer is due at program commencement. Thereafter, Client will be invoiced in advance and, if retainer or any other fee is not received by the 10th of the month or within 10 calendar days after being invoiced -- whichever comes last -- services are automatically suspended without deferral until the account is brought current.

b.	Fifteen thousand (15,000) shares of Loop Industries restricted common stock as a one-time non-refundable retainer in consideration of Consultant's dedicated allocation of time on Client's behalf. The Restricted Stock shall be issued as fully-paid and non-assessable securities. The Company shall take all corporate action necessary for the issuance of Restricted Stock to be legally valid and irrevocable. For a period of thirteen months from the date of this Agreement, Client shall maintain its "status" as (1) a fully SEC reporting company, (2) listed on the OTCQB or a more senior exchange. Should Client fail to maintain said status for "five or more consecutive trading days", Client shall pay Consultant a one-time-ever fee of $6,500 cash due within ten days of the above referenced "fifth consecutive trading day."

Accounting Treatment of the Compensation Arrangement

a.	$8,000 was recorded as professional fees - investor relations for the reporting period ended February 28, 2015.

b.	The Company granted 15,000 shares of its common stock to the Consultant which was valued at $0.80 per share, the most recent PPM price, or $12,000 which was recorded as professional fees - investor relations on the date of grant due to the fact that these shares are issued as fully-paid and non-assessable securities.

Employment/Consultancy Agreements

John Denzer Employment/Consultancy Agreement

On May 4, 2015, the Company engaged John Denzer (the "Consultant"), as a VP of Business Development consultant ("Employment /Consultancy Agreement") with the following key terms and conditions:

Responsibilities and Scope

Effective May 4, 2015, the Company (the "Client") retained the Consultant for a period of one year to consult on corporate business development activities.

Consideration

1. Salary

In consideration for services rendered herein, Polyven Group LLC shall invoice the Company a monthly fee of $5,000, which is equivalent to $60,000 on an annual basis up and until the full commercial operation of the Company’s initial depolymerization plant in the Montreal area. After reach that milestone, Plyven Group LLC shall invoice the Company a fee of $8,000, which is equivalent to $96,000 on an annual basis.

2. Bonus and Incentives:

	2.1	The Consultants will be granted 100,000 common shares. The shares will vest over 1 year and be issued quarterly.

	2.2	The Consultants will be granted 200,000 common shares at signing of a contact with a virgin PET resin manufacturer or any other buyer to purchase a minimum of 25,000 M/T of purified Terephthalic Acid and/or Ethelyne Glycol combined.

	2.3	The Consultants will be granted 100,000 common shares at completion of its second production facility.

	2.4	The Consultants will be granted 100,000 common shares at completion of its third production facility.

Termination of Employment/Consultancy Agreement

On July 1, 2015, the Company terminated the Employment/Consultancy Agreement, effective immediately.

Accounting Treatment of the Consideration

	1.	$12,500 was recorded as professional fees – consulting fees for the reporting period ended August 31, 2015.

	2.1.	The Company inadvertently issued the entire 100,000 common shares upon signing of the Employment/Consultancy Agreement. The Company valued first quarter 25,000 common shares at $0.80 per share, the most recent PPM price, or $20,000 and recorded the value of the issuance as consulting fees in May 2015. On October 16, 2015 the Company and the Consultant reached a tentative agreement whereby the Consultant will return the 100,000 share certificate in exchange for cash settlement of $30,000. The Company accrued $30,000 of professional fees - consulting and reversed $20,000 (25,000 shares at $0.80 per share) of professional fees - consulting previous recognized.

Daniel Solomita (the "CEO") Employment Agreement

On June 29, 2015, the Company entered into employment agreement with Daniel Solomita (“Executive”) with the following key terms and conditions:

Services

Executive is employed as President and Chief Executive Officer of the Company, reporting to the Company’s Board of Directors (the “Board”). The duties and responsibilities of Executive shall include the duties and responsibilities for the direct supervision, direction and control of the Company’s operations and activities. The Executive shall perform such duties as from time to time may be prescribed for him by the Board, in all cases to be consistent with Executive’s corporate offices and positions.

Terms

The employment of Executive under this Agreement shall be for an indefinite term.

Compensation

During the Term, Executive shall receive a monthly base salary of $15,000, which is equivalent to $180,000 on an annualized basis. Executive’s monthly base salary will be payable pursuant to the Company’s normal payroll practices for payment of salary to executive employees. Executive’s base salary will be reviewed as part of the Company’s normal salary review process.

Bonus Shares

Pursuant to the Employment Agreement, the Company shall grant a bonus to Mr. Solomita as follows:

	(i)	1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s securities are listed on an exchange or the OTCQX tier of the OTCMarkets;

	(ii)	1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of PTA/EG or a PET;

	(iii)	1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s first fill-scale production facility is in commercial operation; and

	(iv)	1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s second full-scale production facility is in commercial operation.

The term “commercial operation” means a full-scale production facility of the Company produces 10 M/T per hour of PTA and EG combined, for a term of not less than six (6) months.

In lieu of an issuance of the shares common stock referenced in this Exhibit A, Daniel Solomita may, in his sole discretion, elect to receive such shares of common stock, in whole or in part, in the form of a restricted stock grant with a future vesting date, or a warrant or an option with no or a nominal exercise price.

Grant and Accounting Treatment of the Bonus Shares

The Company did not grant any bonus shares as none of the condition for the issuance of the bonus shares have been met as of August 31, 2015.

Master Equipment Lease Agreement

On June 23, 2015, the Company (“Lessee”) entered into a master equipment lease agreement ("Master Equipment Lease Agreement") with Komline-Sanderson Engineering Corp (“Lessor”), whereas, the Lessor agrees to lease to Lessee the paddle dryer equipment for the initial term of 10 hours of service. The key terms and conditions of the Master Equipment Lease Agreement are as follows:

Consideration

Initial deposit due prior to shipment of equipment is $10,000. The rental charge is $6,000 per month for the minimum of four months.

Onsite technical support is 8 Hr. work days including travel portal to portal in two trips $10,000.