Loop Industries, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended August 31, 2022 (fiscal second quarter and first half of fiscal 2023). The filing is unaudited. Loop is a development-stage PET recycling technology company with limited revenue; it reported its first product revenue in the quarter.
Key financial metrics
| Metric | Three months ended August 31, 2022 | Six months ended August 31, 2022 |
|---|---|---|
| Revenue | $135,428 | $135,428 |
| Net loss | $7.71 million | $25.71 million |
| Loss per share, basic and diluted | $0.16 | $0.54 |
| Cash used in operating activities | Not separately stated | $20.68 million |
| Cash used in investing activities | Not separately stated | $0.20 million |
- Quarterly revenue came from initial Loop PET resin deliveries made using monomers produced at the Terrebonne facility. Revenue was not sufficient to provide a meaningful operating margin.
- At August 31, cash and cash equivalents were $23.00 million; current assets were $32.42 million and current liabilities were $7.16 million. Total assets were $39.22 million, total liabilities $10.26 million, and stockholders’ equity $28.96 million.
- Debt was $3.35 million, including $0.25 million current and $3.10 million long-term. A separate Canadian bank credit facility of up to $2.67 million was undrawn; it is secured by the Terrebonne property and subject to a minimum-equity covenant.
- Management reported available liquidity of $25.67 million at August 31, including cash and the undrawn facility. The company subsequently received $8.69 million from a partial sale of excess land.
Changes versus prior comparable periods
- Quarterly revenue rose from zero to $135,428. Quarterly net loss narrowed by about $0.69 million from $8.39 million, mainly as R&D expense declined.
- First-half net loss increased by $5.16 million from $20.55 million, despite a $3.37 million reduction in R&D expense. G&A rose by $8.77 million, principally due to stock-based compensation.
- First-half operating cash use improved from $22.40 million to $20.68 million. Investing cash use declined from $5.10 million to $0.20 million; the prior period included the Bécancour land purchase.
- Cash fell from $44.06 million at February 28, 2022 to $23.00 million at August 31, 2022. No financing cash was raised in the first half, compared with $57.95 million of financing cash inflows in the prior-year period.
Outlook, risks and notable items
- Loop is pursuing financing for planned commercial facilities in Québec, Europe and Asia, as well as a proposed facility in South Carolina. Construction sequencing depends on financing discussions. Management says it expects liquidity to fund operations for at least 12 months from issuance, but commercialization and expansion require substantial additional capital; funding may not be available on acceptable terms or at all.
- The planned Bécancour facility has a long-lead equipment agreement of up to $8.55 million, subject to conditions including financing. The company had paid $3.41 million in deposits by August 31. It sold approximately two-thirds of the excess land on September 15, 2022 for $8.69 million in cash proceeds.
- Commercial plans remain dependent on building and scaling facilities, obtaining financing and permits, securing feedstock and customer commitments, and executing partner arrangements. The proposed SK geo centric Asia joint venture had no final agreements as of the filing. The Indorama joint venture project remained delayed, with no expenditures since 2020.
- First-half G&A included $7.74 million of noncash stock-based compensation after the CEO earned a milestone award of 1 million RSUs tied to a customer supply agreement. This materially increased reported first-half loss and G&A.
- A U.S. securities class-action settlement requires a $3.1 million payment, with Loop’s expected combined cash contribution and related legal fees of approximately $2.52 million; preliminary court approval was granted after quarter-end, and a settlement hearing was scheduled for January 5, 2023. A Québec class-action authorization application was dismissed, subject to the appeal period then ending October 26, 2022.
- The SEC filed a complaint on September 30, 2022 against other defendants and named CEO Daniel Solomita as a relief defendant. The filing states that the complaint does not allege wrongdoing by Loop or Solomita and does not allege that Solomita knew of the alleged fraud.
- Management cited continuing COVID-19, supply-chain and geopolitical disruption risks. It provided no specific financial guidance or quantified commercialization timetable in this filing. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Whether the land-sale proceeds and remaining liquidity are sufficient for near-term operating needs and the next phases of the Bécancour project.
- Timing, total funding requirements and financing sources for commercial facilities, including any government support, debt, equity or joint-venture funding.
- Whether supply agreements convert into firm, financeable offtake commitments and when commercial-scale production and meaningful revenue can begin.
- Progress on the U.S. settlement, the Québec appeal period and the SEC matter, including any subsequent developments.
- The impact of continuing operating cash burn, customer and partner execution, construction costs, permitting, feedstock access and supply-chain delays on the company’s plans.