Loop Industries, Inc. — FY2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended February 28, 2022; the filing also provides results for the three months ended that date. Loop is a development-stage technology company seeking to chemically recycle waste PET plastic and polyester fiber into virgin-quality recycled PET. Its commercial-scale facilities remain planned or under development.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $44.92 million | $36.34 million |
| Net loss per share, basic and diluted | $0.99 | $0.89 |
| Cash used in operating activities | $42.98 million | $22.49 million |
| Cash used in investing activities | $5.11 million | $2.98 million |
| Cash provided by financing activities | $56.99 million | $26.60 million |
- At February 28, 2022, cash and cash equivalents were $44.06 million, versus $35.22 million a year earlier. Current assets were $52.13 million and current liabilities $9.85 million.
- Total liabilities were $13.23 million, including $3.38 million of long-term debt. The Investissement Québec loan bears 2.36% interest, with principal and interest payments deferred until after a 36-month moratorium; the company repaid its Canadian bank term loan in January 2022.
- Annual R&D expense was $27.74 million, up $9.05 million; general and administrative expense was $12.79 million, up $1.25 million. No gross margin is reported because there were no sales.
- Net proceeds from the SKGC equity investment were approximately $56.05 million. The company issued 4.71 million shares and warrants; common shares outstanding were 47.39 million at year-end.
Changes versus the prior year
- Net loss increased $8.58 million, mainly reflecting higher R&D spending, a $2.52 million legal-settlement accrual, and a $1.12 million loss on the Indorama joint-venture investment. These were partly offset by the absence of the prior-year $5.04 million asset impairment.
- Operating cash use rose by $20.49 million as the company increased commercialization-related spending and upgraded its Terrebonne facility.
- R&D investment included $9.55 million in machinery and equipment expenditures and higher engineering and employee costs. These expenditures are not evidence of commercial-scale production or revenue.
Outlook, risks and unusual items
- Management’s FY2023 priorities include financing operations and commercial projects, advancing the planned Québec facility, securing feedstock and customer offtake, and progressing evaluations in Europe and Asia and the Indorama retrofit project. The filing gives no revenue, earnings or construction-completion guidance.
- Management stated that it expected available resources to fund at least 12 months from financial-statement issuance, but commercial construction and growth require significant additional financing. The Québec facility’s long-lead equipment agreement is for up to $8.55 million, subject to milestones and financing conditions; $2.14 million had been deposited.
- The proposed Bécancour facility’s basic design targets capacity of up to 70,000 metric tons annually. Permitting, financing, construction, scale-up, feedstock availability, costs and customer commitments could affect capacity, timing and viability.
- After year-end, Loop announced a multi-year Danone supply agreement for output planned from the Bécancour facility. The filing describes supply arrangements with PepsiCo, L’Occitane and L’Oréal as well. These arrangements depend on planned commercial production; verify definitive terms, volumes and conditions.
- The U.S. securities class action settlement requires $3.1 million in total payments, with Loop’s cash contribution and related outstanding legal fees estimated at approximately $2.52 million; the balance is expected from D&O insurers. Court approval remained a condition. A separate Québec securities class-action authorization matter was under advisement.
- The SEC had issued subpoenas in October 2020 and March 2022. The company could not predict the investigation’s timing, outcome or consequences. Management also cited COVID-related disruption, financing access, strategic-partner execution, commodity-price competition and currency exposure as risks.
- Management reported effective disclosure controls and internal control over financial reporting at year-end. The filing did not include an auditor attestation of internal controls.
Key facts for investors to verify
- Whether Loop’s technology can operate reliably at commercial scale, and the independent validation report’s scope, findings and limitations.
- Funding secured, total project cost, permits, construction schedule and binding customer offtake and feedstock commitments for Bécancour and other planned facilities.
- Actual production, sales, unit economics and ability to compete with virgin and mechanically recycled PET; the company had no revenue through FY2022.
- Current cash burn and financing runway, including the effect of project spending, debt repayments, equity issuance and potential dilution from outstanding warrants.
- Final status and financial exposure of the U.S. settlement, Québec litigation and SEC investigation.
- Terms and status of the SKGC Asia joint venture and Indorama retrofit project; the filing says final SKGC joint-venture agreements had not been entered into as of the report.