Loop Industries' Problems Are More Than Plastic

Summary

• Loop Industries claims to “utilize its proprietary recycling technology to recycle all elements…as well as all additional shipping components,” despite management privately admitting that it sends LDPE to traditional recyclers.
• Loop raised $15.7 million between Q1 and Q4 2018 on twisted language that suggests the company’s recycled plastic is FDA-approved. Recycling trade websites, including corporate partners, have perpetuated this language.
• Loop claims that its chemical recycling process is proprietary; my analysis suggests that Generation II depolymerization doesn’t fall under the company’s patent; management purports that those patents are pending.
• The company has not reported production or recovery rates yet plans on building a second recycling plant. Cash burn leaves a little more than a quarter before necessary capital raise.
• Loop’s CEO tried the same business model at Dragon Polymer. Barron’s and the WSJ reported that LOOP’s second-largest investor leaked revenue numbers at iMergent. Loop's CFO just resigned.

(Editor's Note: Seeking Alpha wishes to note to readers the following edits that were made to the article in the days following publication: 1) The author corrected the description of the fundraising time periods discussed, and made a clarification regarding the $ amounts raised during the period. 2) The author acknowledges Loop Industries' disagreement with his opinions regarding the importance of 'FDA No Objection Letter' or pre-approval, as stated in "Loop disagrees...". 3) The author made a correction to state that Donald Danks is not a current member of Loop's Board of Directors.)

Straight to The Point

Loop Industries (NASDAQ:NASDAQ:LOOP) raised $15.7 million between May 4, 2017 (Q1 2018) and February 28, 2018 (Q4 2018) from investors on the premise that the company is “a leader in sustainably produced polyethylene terephthalate” (Source: Loop Industries). This positioning is based on four key claims that I believe, based on my research, are untrue:

1. That LOOP “utilize[s] its proprietary recycling technology to recycle all elements…as well as all additional shipping components (bags and gaylord boxes)” (Source: 2017 Service Agreement)
2. That LOOP’s recycled plastic is “high quality FDA-approved food-grade plastic” (Source: Loop Industries Q&A). The company has since changed the language on its website. I time-stamped and screenshotted the company’s previous language, which I include below.
3. That LOOP “successfully activated the next generation of their waste PET and polyester fiber upcycling technology which now allows for the continuous production of Loop™ PET products” (Source: Loop Industries June 21, 2018 Press Release).
4. That LOOP’s “proprietary technology breaks down PET into its base chemicals, Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG), at a recovery rate of over 90% and under normal atmospheric pressure and at room temperature” (Source: LOOP 2017 Second Quarter 10-Q).

As part of my research, I tried to contact the company for comments. When I tried submitting a question through the contact form on the company’s website, it didn’t work. When I tried calling their corporate number, LOOP’s phone tree routed me through several French and English options before dropping my call.

I did successfully reach Nelson Switzer, LOOP’s Chief Growth Officer, with whom I’ve spoken twice on the phone and continue to converse via email. Donald Danks, the second largest shareholder of the company, has not responded to my emails for comment on two articles written about him in the WSJ and Barron’s, which claim Danks leaked revenue numbers to analysts covering iMergent, Inc. (CXDO). Both links are from their respective news sources, and I’ve made each article into a PDF, so this reader has access to them. Danks also invested in and helped found dozens of companies many of which have been either delisted from their exchanges, filed for bankruptcy, or fallen into penny stock territory. Links to those sources and stories at the end of this article.

(Source: LOOP’s October 2018 Investor Presentation, pg. 30)

Even if management could produce counter-evidence that disproves all the evidence that I’ve collected, investors still need to worry about LOOP’s cash burn, which leaves the company with only one quarter of solvency—even less if you factor in the company’s commercialization strategy to build a plant that expands current production capacity by 22x. This production capacity has cost the company a cumulative $5.9 million in capital expenditures as of August 31, 2018. If production capacity expands by 22x, investors should brace themselves for at least $15-25 million in dilution. The $15 million quote comes from the company itself in its 2015 Third Quarter 10-Q. The $25 million quote comes from a former-LOOP process specialist with whom I spoke on June 20, 2018. The company currently trades at a $240 million market cap, which means the commercialization project alone could represent a 6-9% dilution. This still doesn’t solve the company’s solvency problem, which could bring total dilution up to 20% assuming the company raises two years’ worth of liquidity to satisfy its current cash burn rate.

(Source: LOOP Second Quarter 2018 10-Q, pg. F-9, emphasis added.)

Background on Loop Industries

LOOP is a Quebec-based company that claims to have invented a new method for chemically recycling PET plastic (water bottles, polyester, etc.) at atmospheric pressure and ambient temperature. The use case is high: much of the PET plastic we encounter is dyed, which traditional mechanical recycling methods cannot process (think about turning a lurid-orange Tide detergent bottle into a clear water bottle by mulching, melting, and reforming). Moreover, mechanical recycling is resource- and energy-intensive, whereas LOOP’s chemical recycling process purports to operate at atmospheric pressure and ambient temperature.

(Source: LOOP’s Website, explanations and emphasis added.)

As you can see from the diagram above, the company claims that its “patented technology” covers both Generation I depolymerization and Generation II depolymerization. Generation I depolymerization uses hydrolysis to isolate PTA (pure terephthalic acid) and MEG (monoethylene glycol), which can be recombined to create PET plastic. Generation II depolymerization uses methanolysis to isolate DMT (dimethyl terephthalate) and MEG to create PET plastic.

In LOOP’s 2017 Second Quarter 10-Q—the last time LOOP included language about its intellectual property exchange agreement in its SEC filings—management writes, “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 key thing to remember is that LOOP’s technology, which purports to have revolutionized the industry, was purchased for a small sum by most measures.

(Source: LOOP 2017 Second Quarter 10-Q , emphasis.)

LOOP stands out because, while its operations are much smaller in scale compared to those run by other chemical recyclers, it is the only competitor that claims to have developed a chemical recycling process that is commercially-viable at atmospheric pressure and room temperature. From a marketing standpoint, a recycling process that requires zero energy inputs is the gold standard in the circular economy. For example, Carbios (EPA: ALCRB) has 4,000 metric tons of annual production capacity and trades at a €25.8 million market cap; on the other hand, LOOP, has only 912 metric tons (2.5 metric tons per day times 365 days) of annual production capacity but trades at 10x the valuation.

Nonetheless, LOOP’s claims have caught the attention of global brands like Evian (OTCMKTS: DANOY), Pepsico (NASDAQ: PEP), and most recently Coca Cola European Bottlers (NYSE: CCEP), who in January, October, and November 2018, announced joint press releases with LOOP pledging their “support” for the company’s technology. While no cash was exchanged in any of the announcements, both Pepsico and Coca Cola Cross Enterprise Procurement Group (CEPG) announced that they have “secured production capacity for 2020” on LOOP’s currently-unbuilt U.S. manufacturing facility. In my opinion, these announcements represent little more than marketing speak to improve the brand image of all three companies. Pepsico and Coca Cola benefit by attaching their names to a self-proclaimed “leading technology innovator in sustainable plastic,” and LOOP benefits by attaching its name to two large consumer packaged goods brands. LOOP’s partnerships with Pepsico and Coca Cola are not exclusive. For example, The Coca Cola Company (NYSE: KO) sits on the Industrial Advisory Board of DEMETO (Modular, scalable and high-performance DE-polymerization by MicrowavE TechnolOgy), “a European Project financed by the European Community into the framework of the Horizon 2020…[which] is working to bring to reality a revolutionary new way to chemically recycle PET, invented by gr3n, which is both sustainable and profitable” (Source: DEMETO press release).

The Coca Cola Company joined DEMETO’s Industrial Advisory Board in July 2018, four months before it announced its partnership with LOOP. More on gr3n’s technology in the section below on LOOP’s Generation II Depolymerization.

What Got Me Interested

(Source: Google Finance on November 16, 2018)

In the nine-months-ended September 2017, the stock rose more than 300%. Between May 4, 2017 and February 28, 2018, the company raised $15.7 million from shareholders at various prices, as high as $12 per share, a whole 140% higher than the last time it solicited outside capital. For granularity sake, I include herein the breakdown of when exactly LOOP raised this $15.7 million in net cash proceeds.

(Source: LOOP’s 1Q 2018 Amended 10-Q)

The company's $5.9 million private placement was also announced in this May 4, 2017 press release.

(Source: LOOP’s 3Q Fiscal Year 2018 10-Q, pg. F-15)

This $7.4 million sale of shares and warrants is also corroborated by this January 11, 2018 press release issued by the company.

(Source: LOOP’s Fiscal Year 2018 10-K, pg. F-18)

The remaining $2.4 million ($15.7 - $7.4 - $5.9 million) was also sold in Q4 2018 per the company’s Fiscal Year 2018 10-K, but I couldn't find those particular press releases.

Thus, the total net cash raised per quarter was $5.9 million in Q1 2018 and $9.8 million in Q4 2018.

Since the company's last capital raise in February 2018, the stock has fallen more than 30%. Since its $17 peak, the stock has fallen more than 50%. Based on my research, I don’t believe the company’s technology or leadership qualifies the company to attract the capital it needs to continue as a going concern.

Violated Service Agreement with Drinkfinity

(Source: Drinkfinity’s Website)

On February 28, 2017, LOOP signed a Service Agreement with Drinkfinity, a subsidiary of Pepsico, to provide customers with recycling services for their Drinkfinity pods. When you order a Drinkfinity starter kit, Drinkfinity gives you the option to receive a prepaid Loop Mail Back Envelope to recycle those pods. The bags in which LOOP asks customers to send their empty Drinkfinity pods are made from LDPE (low-density polyethylene) plastic, which LOOP’s technology cannot recycle. Nevertheless, the company’s Service Agreement says, “Service Provider [LOOP] shall utilize its proprietary recycling technology to recycle all elements of such pods, as well as all additional shipping components (bags and gaylord boxes)” (Source: 2017 Service Agreement). No chemical recycler has claimed to be able to recycle LDPE plastic.

(Source: I Ordered and Scanned a Loop Mail Back Envelope)

On October 10^th and October 25^th, I contacted the company and spoke with Nelson Switzer, LOOP’s Chief Growth Officer, on the basis that I was researching LOOP as a potential investor. When I asked him whether LOOP could recycle LDPE plastic, he emphasized that the company's technology is effective because it doesn't comingle other plastics. “LOOP doesn’t recycle LDPE. We only want those polymers that can get to PTA or DMT. It's not only cheaper but less complicated to get to DMT” (Switzer).

I’ve concluded that, because LOOP’s mail back envelopes are made out of LDPE, Switzer’s comment that, “LOOP doesn’t recycle LDPE,” contradicts LOOP’s Service Agreement that the company “shall utilize its proprietary recycling technology to recycle all elements of such pods, as well as all additional shipping components (bags and gaylord boxes)."

In an email, I gave the company another opportunity to comment on the fact that LOOP’s Mail Back Envelopes are made from a plastic that the company cannot recycle. In a reply email, Switzer told me that, “We provide materials that cannot be recycled using the Loop technology to traditional recyclers for processing.”

(Source: LOOP’s 2017 Service Agreement)

While this is true for HDPE (high-density polyethylene) plastic and Aluminum, as explained in the Service Agreement, the document implicitly includes LDPE as one of the plastics that the company can recycle using its proprietary chemical recycling method. As part of LOOP’s other responsibilities, “Service Provider agrees to provide Buyer with such documentation as may be reasonably necessary to substantiate such claims” (Source: LOOP Service Agreement). I reached out to Phyllis Fogarty, the representative on Drinkfinity’s side who signed the deal, for access to the documentation that shows how LOOP recycles Drinkfinity’s mail back envelopes. I didn’t get a response.

I emailed Nelson Switzer for comment on the apparent LDPE recycling dilemma and asked where the company sends its LDPE plastic bags if it isn’t the one recycling them. He didn’t answer my email for comment.

(Source: LOOP’s Website. Screenshotted on November 29, 2018.)

Related to the Drinkfinity partnership but separate from the allegations I make above, LOOP claims on its website that, “Each time you mail back your used Pods, Loop Industries will donate 100% of the proceeds to Water.org” (Source: LOOP’s Website). To the best of my knowledge, the company isn’t donating cash from its Drinkfinity proceeds. The company hasn’t generated any revenues, so I’m not sure how it can claim to donate money it doesn’t earn. Moreover, I couldn’t find language in the company’s statement of cash flows that references “Cash Outflow from Charitable Giving”.

Not FDA-Approved for Food Grade Plastic, Despite Language Suggesting It Is

(Source: Loop Industries’ Investor Q&A. Screenshotted on November 16, 2018.)

LOOP raised $15.7 million on several pretenses, one of which is that the company’s chemical recycling process produces “FDA-approved food grade plastic” (Loop Industries’ Investor Q&A).

In my October 10, 2018 phone call with Nelson Switzer, I asked Switzer whether the company’s recycled PET resin was FDA-approved as its website and industry trade journals suggested. He explained to me that LOOP’s recycled PET resin isn’t FDA-approved for food grade plastic. Rather, LOOP’s process produces PET plastic that meets FDA compliance for food grade plastic according to a "letter of opinion" from Wiley Rein, LLP, a law firm that provides consultancy services for recyclers that want guidance through FDA compliance and approval.

After our conversation, Switzer included this note saying that it changed the language on its website:

“Looking at our website, we do see instances where it says Loop PET™ is FDA approved. Thank you for notifying us. We have updated the website so that it reads that our process and the Loop™ PET resulting from our process meets the FDA requirements for use in food grade plastics.”

This doesn’t ameliorate the fact that the company raised $15.7 million from investors on the claim that its recycled plastic was FDA-approved for food grade plastic. According to Switzer, the Wiley Rein Letter of Opinion is not publicly available.

Ultimately, there is a material difference in the meaning between “FDA-approved food grade plastic,” which implies FDA review, and letter of opinion for FDA compliance, which is just a preliminary check-over by lawyers. Despite this, the company’s ambiguous language has spread.

Here are a few more instances where the company itself along with a third-party trade journals and websites have claimed that the company’s plastic resin is of an FDA-approved grade for food safe packaging:

“The technology will take waste PET and polyester fiber that can include PET plastic bottles and packaging of any color, transparency or condition...and separate the PET from all contaminants to produce virgin quality FDA-approved food-safe Loop™ PET resin and polyester fiber” (1Q18 LOOP Press Release).

“The monomers are then repolymerised to create virgin-quality PET plastic that is FDA approved for use in food-grade packaging” (Evian website).

“Using this envelope, consumers can ship the pods to Loop Industries, an organization with ‘patented technology that breaks down the pods and reforms them into high purity, FDA-approved PET plastic that we envision will be used to create new pods in the future’” (New Hope Network April 2018).

Now, you may be wondering whether the FDA regulates the different processes that companies employ to create plastic resin that meets safety standards for food safe contact. The FDA does, and the process is called the Post-Consumer Recycled (PCR) Plastics for Food-Contact approval process. After reviewing a particular recycling process’ safety profile and capability to produce food grade plastic, the FDA issues a No Objection Letter (NOL) that indicates to plastics manufacturers that this recycling process has been reviewed by the FDA for consumer food applications. The PCR for Food-Contact database is publicly accessible.

In my searches, I couldn’t find an FDA-issued NOL, let alone a PCR Plastics for Food-Contact filing, for LOOP’s proprietary chemical recycling process—both Generation I and Generation II depolymerization. I conclude that the company's commercialization strategy, as stated in the company’s October 2018 Investor Presentation, is contingent on the company getting a NOL from the FDA—the same “approval” that LOOP’s investors might have already thought they had.

LOOP disagrees with me on this point, suggesting that neither an FDA NOL nor pre-approval is required. The company claims that PET simply needs to meet the end test as defined in 21 C.F.R. § 177.1630, which it claims its PET does. In my opinion, this response runs contrary to the perception that LOOP appears to have tried to cultivate by claiming that it did have FDA-approved food-safe resin in the first place. With a chemical recycling process that claims to be so novel, I question whether consumer packaged food brands will risk supplying PET from LOOP without the non-objection from the FDA.

“Generation II” Depolymerization Doesn’t Advance Prior Technology

On October 27, 2014, LOOP’s CEO, Daniel Solomita paid Hatem Essaddam $445,050 for the patent that today lies ostensibly at the center of the company’s business. The company raised $15.7 million collectively throughout fiscal-year 2018 on the premise that it would develop this technology into a commercially-viable recycling operation. The company claims that it has done so, and commercialization efforts are underway.

(Source: LOOP 8-K, emphasis added.)

The company’s patent claims to advance the current art by using a three-part solution comprising of a non-polar solvent, an alcohol, and a hydroxide to depolymerize PET plastic. This triple combination helps swell the PET polymer, which allows the reaction to occur at atmospheric pressure and ambient temperature, according to the patent.

(Source: Patent Number 10087130, emphasis added)

It’s the combination of the three that is unique to this patent. Without the addition of alcohol, LOOP’s Generation I depolymerization is undifferentiated from the recycling process outlined by Pusztaszeri 1982. Without the non-polar solvent and hydroxide components, LOOP’s Generation II depolymerization is undifferentiated from the recycling process outlined by Naujokas et al. 1991.

Zero external heat and pressure is the gold standard. Dozens of patents claim to chemically recycle PET plastic at atmospheric pressure and room temperature. While these processes work in labs for small batches, the industry has yet to find a way to make chemical recycling profitable without applying external pressure or higher temperatures. This is because pressure and high temperature allow the recycling process to go faster and operate in a smaller volume, both of which are needed to compete with existing mechanical recyclers.

(Sources: LOOP October 2018 Investor Presentation and GreenBlue Report on Gr3n)

LOOP’s chemical recycling competitors include Carbios, Inc., which uses enzymes to break down PET into its component monomers, PTA and MEG. Its process operates between 60-70°C (140- 158°F) resulting in a “90% yield of monomers in approximately 40 hours” (Source: GreenBlue). Gr3n Recycling, Inc. tried LOOP’s process, but added microwaves to speed up the reaction rate (Source: GreenBlue). Every method besides LOOP’s requires applying external heat and/or pressure. I mention this because it’s important to keep in mind that LOOP’s process is radical. These radical claims are precisely why, despite having 1/16th of the production capacity of Carbios and lacking the governmental support of Gr3n’s DEMETO project, LOOP has gotten so much attention.

(Source: LOOP’s October 2018 Investor Presentation, emphasis added)

On slide 25 of LOOP’s October 2018 Investor Presentation, management claims that Generation II depolymerization does not require a chlorinated solvent. In the company’s patent, every type of non-polar solvent enumerated is a chlorinated solvent. The patent says, “In some embodiments, the non-polar solvent is dichloromethane, dichloroethane, tetrachloroethane, chloroform, tetrachloromethane, trichloroethane, or a combinations[sic] thereof” (Source: Patent Number 10087130). While the patent says, “in some embodiments,” it doesn’t go on to list any other potential non-polar solvents. Moreover, every example enumerated in the patent, except one, uses dichloromethane as the reaction’s non-polar solvent.

If the company isn’t using a chlorinated solvent, it ipso facto must not be using a non-polar solvent outlined in the patent, which means Gen II depolymerization isn’t covered within the company’s patent. By using language such as “Generation II depolymerization” the company implies that it builds upon “Generation I depolymerization.” I believe that this is misleading because “Generation II” depolymerization doesn’t fall under the company’s patent.

Moreover, Generation II depolymerization completely switches the company’s depolymerization methodology from hydrolysis to methanolysis. Management calls this new process an improvement to Gen I because it doesn’t use water, but methanolysis is different from hydrolysis precisely because it uses methanol in place water. LOOP hasn’t innovated at all to achieve this fact.

I asked Switzer for comment on my interpretation of the legal standing of LOOP’s Generation II depolymerization process. Switzer told me that, “Indeed Loop and its JV partner, Indorama Ventures, a leading global PET manufacturer believe the process is commercially viable…Our technology is covered by a number of patents and patents pending, which means it is proprietary” (Switzer).

Justia, a free legal information retrieval website, shows two patents assigned to Loop Industries, Inc.; however, the second patent is merely “a continuation of U.S. application Ser. No. 14/795,116, filed Jul. 9, 2015” (Source: Patent Number 10087130).

The only significant, non-grammatical change that was made between patent filings is, in some places where the patent originally said, “…the terephthalic acid or salt thereof obtained from the depolymerization process contains less than about 1% impurity (w/w),” Essaddam changed the impurity level to “less than about 3% of an impurity (w/w)” (Sources: Patent Number 9550713 and Patent Number 10087130). Thus, by “a number of patents,” Because these are the only two patents assigned to the company, I assume Switzer’s reference to “a number of patents” refers solely to these two, although they are almost completely identical.

The crux of my issue with LOOP’s Generation II depolymerization process is that management’s language surrounding Generation II depolymerization suggests that it directly follows Generation I depolymerization despite the process being completely different from Generation I in depolymerization methodology. Moreover, my research suggests that Generation II depolymerization doesn’t even fall under the purview of the company’s only patent.

Where is the MEG?

Between Gen I (hydrolysis) and Gen II depolymerization (methanolysis), the company still must recover the MEG (monoethylene glycol) that is present in PET. The MEG has to be separated, purified, and recombined with the PTA or DMT to create PET. While the company has successfully focused investors’ attention on its switch to DMT, the real limiting factor in the company’s claims to recover 90-100% of the original material is its ability to recover MEG.

On June 20, 2018, I asked to speak with LOOP’s former process specialist, who agreed to speak with me on the condition that they remain anonymous. According to the employee, as of July 2017, LOOP was only able to recover 100 kg/day of PTA and only 1/10^th of the recoverable amount of MEG. This directly contradicts LOOP’s 2017 Second Quarter 10-Q, which claims that the company’s “proprietary technology breaks down PET into its base chemicals, Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG), at a recovery rate of over 90% and under normal atmospheric pressure and at room temperature” (Source: LOOP 2017 Second Quarter 10-Q).

As this employee recalls, “the team was losing MEG in every step to control purity standards.”

(Source: October 2018 LOOP Investor Presentation)

In all of the company’s interviews and press releases, they deemphasize the purification process after the initial depolymerization step, saying that the company employs “standard industrial processes” (Source: LOOP’s October 2018 Investor Presentation, pg. 22). While management claims that the depolymerization step is the most difficult step, David Cornell, who was recently inducted into the Plastics Hall of Fame and has a plastics consulting firm called Cornell Dd Associates, told me that the real difficulty is in filtering the “soup” of chemicals that LOOP is left with after depolymerization. This opinion corroborates LOOP’s former employee’s testimonies that the company is wary about giving details surrounding its filtration process because it was actually losing a lot of recycled material.

The separation techniques that LOOP uses are standard, viz., precipitation, filtration decantation, reacidification, esterification, etc. But, after purifying the PTA (now DMT) and MEG, the company is left with only a fraction of the original material. They don’t even meet the 90% recovery rate that Gr3n Recycling has achieved, and they’re nowhere near the 100% recyclability they claim in their service contract with Drinkfinity and in their press releases to investors and brand partners.

Moreover, after LOOP raised $15.7 million between Q1 2018 and Q4 2018, it stopped mentioning current production, production capacity, recovery rates, or MEG in its SEC filings. You won’t find “MEG”, “production capacity”, “recovery rate”, or “ton(S) per day” in any of the company’s investor reports after Q2 2018.

Recovery rates and production volumes are material to investors’ understanding of the company’s operations and how its progress compares to the progress of competitors.

Insiders Have Spotty Track Records and Are Registered to Sell

LOOP’s CEO Daniel Solomita and current Strategic Advisor to the CEO Donald Danks are the largest and second-largest stockholders of LOOP common stock. They both have had spotty business records.

Daniel Solomita—CEO and President of LOOP:

(Source: Dragon Polymers, Inc.)

Immediately before coming to LOOP, Solomita served as CEO and President of Dragon Polymers, Inc. (PINKSHEETS: DRAG) from 2010 to 2014 (Source: Bloomberg). Before Solomita joined Dragon Polymers, the company was incorporated as “a web destination for Urban/Gospel Christian music fans and consumers” (Source: Dragon Polymers 2014 10-K). In March 2010, the company began selling private-label water and organic beverages and switched its name to Blue Gold Beverages, Inc. Just eight months later, with Solomita at the helm, the company purchased Ty Recycling, “a nylon and plastics recycling company with operations in Ontario Canada in exchange for 10,000,000 shares of Blue Gold Beverages…valued at $600,000” (Source: Dragon Polymers 2014 10-K).

“On October 12th, 2014, the Company [Dragon Polymers] had a change in the management. The new management changed the name of the Company to Hitec Corp on November 4th, 2014. The new management decided that it is not generating sufficient revenue and has no hopes of future revenue from the recycling operations and impaired the asset of $600,000” (Source: Dragon Polymers 2014 10-K).

On October 24, 2014, Solomita received $240,000 for selling Dragon Polymers, Inc (Source: Dragon Polymers, Inc.)

Just three days after the dissolution of Ty Recycling, Solomita signed the Intellectual Property Assignment Agreement to purchase what would become LOOP’s core technology. Both Ty Recycling and the technology that ostensibly underlies LOOP’s business claim to chemically recycle PET plastic and polyester.

Solomita still owns 55% of LOOP. He registered to sell 300,000 shares in the most recent shelf filing, which is currently worth about $2.25 million (Source: LOOP Prospectus dated August 23, 2018).

(Source: LinkedIn, screen-shot taken on December 10, 2018.)

Donald Danks—Strategic Advisor to the CEO and Second Largest Investor in LOOP:

Donald Danks sat on LOOP's original board of directors from June 2015 to June 2018 and resigned just a little over a month before registering 98% his shares to be sold (Source: LOOP Prospectus dated August 23, 2018).

Danks still serves the company in his role as "Strategic Advisor to the CEO," a position he has held since October 2014, according to his LinkedIn. Solomita signed to purchase LOOP's seminal technology on October 24, 2014, which means Danks was either hired immediately after or helped advise Solomita on the acquisition.

Danks has held management and director positions at countless penny stocks over the years. He served as Co-Founder, Chairman, and CEO of Regal Communications and Prosoft Training, both of which filed for Chapter 11 (Source: Barron’s). He served as Chairman and CEO of Advantage Life Products, Inc., a penny stock that had its registration revoked by the SEC (Source: Administrative Proceeding File No. 3-14223). On January 12, 2015, Cardinal Resources, Inc. appointed Donald Danks to its Board of Directors to help the company raise capital; just two years later, the stock defaulted on two convertible notes, and the SEC revoked its registration (Source: Administrative Proceeding File No. 3-18004).

Most notably, Donald Danks served as Co-Founder, Chairman, and CEO of iMergent, which changed its name to Crexendo (OTCMarkets: CXDO) after a slew of legal settlements and accusations of misleading customers and deceptive business practices by BBB and Australian Competition and Consumer Commission. The WSJ and Barron’s reported on Danks leaking revenue numbers before earnings calls to analysts.

According to LOOP’s 2015 Share Exchange Agreement, Donald Danks is a shareholder of LOOP under the Danks Family Trust but not as a beneficial shareholder through Touchstone Advisors, even though Danks continues to be Managing Director at Touchstone. Donald Danks is selling out of 1.379 million shares as registered in the company’s most recent shelf filing, which is currently worth about $10.3 million (Source: LOOP Prospectus dated August 23, 2018).

To top it all off, LOOP announced that its CFO, Frank Zitella, will resign from his position on December 6^th (Source: Loop Industries).

Conclusion:

LOOP claims to be “a leading technology innovator in sustainable plastic,” but my analysis uncovers new evidence that suggests LOOP violated clauses in its Service Agreement with Drinkfinity and faces obstacles to commercialization from not having a FDA-issued NOL to flagging MEG recovery rates. Moreover, LOOP’s management team has a history of business failures. Even if management produced counterevidence that disproves the evidence that I’ve collected, investors still need to worry about LOOP’s cash burn, which leaves the company will just one quarter of solvency. Having brought these concerns to the public domain, I don’t foresee a scenario where the company raises the capital it needs to stay solvent. Bankruptcy is around the corner.

Having said all this, the bull case remains that, if management can provide evidence that disproves my research and supports its claims that LOOP is a legitimate player with proprietary, FDA-reviewed, well-functioning technology that allows it to successfully deliver on its promise to chemically recycle PET plastic at atmospheric pressure and ambient temperature, larger plastics manufacturers or recyclers could potentially take an interest in acquiring LOOP or its technology.

Analyst’s Disclosure: I am/we are short LOOP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.