Loop Industries, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended August 31, 2021; fiscal second quarter of 2022. Financial statements are unaudited and reported in U.S. dollars.
Business context
Loop is a development-stage technology company seeking to convert waste PET plastic and polyester fiber into virgin-quality recycled PET resin. It had not begun commercial operations and reported no revenue in the quarter or six-month period. Its results therefore reflect development and commercialization spending rather than operating margins.
Financial performance and liquidity
| Metric | Three months ended Aug. 31, 2021 | Six months ended Aug. 31, 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development | $5.28 million | $13.92 million | $2.75 million; $4.23 million |
| General and administrative | $3.12 million | $6.28 million | $2.05 million; $4.00 million |
| Net loss | $8.39 million | $20.55 million | $5.13 million; $8.98 million |
| Loss per share, basic and diluted | $0.19 | $0.47 | $0.13; $0.22 |
| Operating cash used | — | $22.40 million | $7.46 million |
The comparable-period figures in the table are for three months and six months, respectively. No meaningful revenue margin was reported because revenue was zero.
- Cash and cash equivalents were $65.56 million at August 31, 2021, up from $35.22 million at February 28, 2021. Cash increased by $30.34 million over the six months.
- Investing cash outflow was $5.10 million; financing cash inflow was $57.95 million, including $56.09 million net proceeds from the SK strategic investment and $1.89 million from the Investissement Québec facility.
- Total liabilities were $9.47 million, including $4.24 million of long-term debt and $0.92 million current debt. Stockholders’ equity was $69.00 million.
- Current assets were $71.29 million and current liabilities $6.15 million. Management said available resources were expected to fund committed operating and capital needs for at least 12 months from issuance of the financial statements, while noting that future financing might be needed.
Material changes versus prior period
- Six-month net loss increased by $11.57 million year over year, primarily as R&D spending rose $9.69 million and G&A rose $2.27 million.
- R&D spending rose in part because the company began expensing machinery and equipment costs for its small-scale facility rather than capitalizing them, and because of higher engineering and employee costs.
- G&A rose mainly from legal and professional fees associated principally with the SEC investigation and securities litigation, and higher directors’ and officers’ insurance costs. RSU forfeitures produced a stock-compensation reversal that partly offset the increase.
- The company issued 4,714,813 shares to SK at $12 per share, alongside warrants for up to 7,533,518 additional shares. The transaction generated approximately $56.1 million net proceeds and increased shares outstanding to 47,160,164 at period-end.
Outlook, management commentary, and risks
- No revenue or earnings guidance was provided. Management’s plan centers on engineering and building commercial facilities, developing the small-scale Terrebonne facility, and securing customer offtake, feedstock, permitting, and project financing.
- Loop acquired land in Bécancour, Québec for a planned facility; excess land valued at $3.41 million was classified as held for sale. The company was exploring financing options for the project.
- The planned Spartanburg joint venture with Indorama was delayed, with no joint-venture operations or spending reported through August 31. Loop said COVID-related travel restrictions and disruptions had affected the project timetable. About 40% of planned capacity was contracted, with discussions on remaining volume dependent on greater commissioning-date visibility.
- Loop reported food-contact-related milestones: independent testing found its PET compliant with cited FDA and EU regulations, and Health Canada issued a no-objection letter, subject to technical suitability for intended use. These developments do not establish commercial-scale production or sales.
- Key risks include commercialization and scale-up, facility construction and permitting, securing funding and feedstock, commodity-price competition, foreign-exchange exposure, and continuing COVID-19 disruption.
- The SEC investigation remained unresolved. U.S. and Québec securities class actions alleging misleading statements were pending; management said it intended to defend them and had not recorded a provision. The filing states the potential effect was not yet determined.
Most important facts for investors to verify
- Whether the technology can achieve reliable commercial-scale output, costs, yields, and product quality.
- Facility milestones, commissioning timelines, permits, financing, construction costs, and binding customer offtake terms, especially for Spartanburg and Bécancour.
- Cash burn and the assumptions underlying management’s statement that resources would cover at least 12 months of needs.
- Potential dilution from the SK warrants, other outstanding warrants, options, and restricted stock units.
- Developments and any financial exposure from the SEC investigation and securities litigation.
- Whether the reported regulatory testing and approvals translate into sustained commercial customer adoption and revenue.