Business Context and Reporting Period
Company: First American Group Inc. (operating as Loop Industries, Inc. following reverse acquisition)
Filing Date: June 29, 2015
Event: The Company completed a reverse acquisition of Loop Holdings, Inc., a Nevada corporation focused on depolymerizing waste plastics (specifically PET) into purified terephthalic acid (PTA) and ethylene glycol (EG). Prior to this transaction, First American Group was a shell company with no active operations. Following the transaction, Loop Holdings is a wholly-owned subsidiary, and the Company is no longer considered a shell company.
Key Financial Metrics
Revenue: $0. The Company is a development-stage entity and has never generated revenue.
Net Loss: $789,600 for the period from inception (October 23, 2014) through February 28, 2015.
Operating Expenses: $831,012 for the period from inception through February 28, 2015 (primarily consulting fees of $762,000).
Cash and Deposits: $182,492 as of February 28, 2015. As of June 15, 2015, cash balance was approximately $1,950,000.
Total Assets: $188,442 as of February 28, 2015.
Total Liabilities: $214,010 as of February 28, 2015.
Stockholders' Equity: $409,590 as of February 28, 2015.
Capital Structure: 119,093,200 shares of common stock issued and outstanding as of June 29, 2015. Daniel Solomita beneficially owns 68,000,000 shares (57.1%).
Material Changes
- Reverse Acquisition: Issued 93,030,000 shares of common stock to acquire 100% of Loop Holdings. Former Loop Holdings shareholders now hold approximately 78.1% of the Company.
- Management Change: Daniel Solomita appointed as President, CEO, Secretary, Treasurer, and Chairman. Former officers Mazen Kouta and Zeeshan Sajid resigned and redeemed their shares for nominal amounts ($9,000 and $7,000 respectively).
- Fiscal Year Change: Fiscal year-end changed from September 30 to the last day of February.
- Business Pivot: Shifted from a shell company/VoIP services history to a plastic recycling technology business.
Guidance, Outlook, and Risks
Outlook and Plan of Operation:
- Short-term: Building a pilot plant facility estimated to cost $700,000 to validate technology.
- Medium-term: Construction of a full-scale commercial facility with an estimated cost of $15 million, capable of processing 10 metric tons of PET per hour.
- Long-term: Expansion to depolymerize other plastics (Nylon, HIPS, PE).
Capital Requirements: The Company requires approximately $2,000,000 to fund operations for one year. No financing arrangements are currently secured. Additional funding will likely come from equity financing, resulting in dilution.
Risks and Contingencies:
- Going Concern: Auditors have expressed substantial doubt about the Company's ability to continue as a going concern due to lack of revenue and history of losses.
- Technology Risk: Commercialization is in incipient stages; scaling up the depolymerization technology is unproven and carries significant technical risk.
- Liquidity: Current cash is insufficient to commence the 12-month plan of operation without additional financing.
- Management Concentration: Operations are heavily dependent on Daniel Solomita, who is the sole employee and holds a controlling interest.
- Intellectual Property: No patents currently owned; plans to file within 8 months.
Investor Verification Checklist
- Verify the status of the $1,950,000 cash balance reported as of June 15, 2015, and the source of these funds.
- Confirm the technical validation results of the pilot plant and the timeline for the $15 million commercial facility.
- Review the Intellectual Property Assignment Agreement regarding the $1.3 million purchase price for the depolymerization technology.
- Assess the Company's ability to secure the required $2 million in funding to avoid insolvency.
- Verify the "penny stock" status and liquidity constraints for trading on the OTCQB market.