Loop Industries, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended August 31, 2023 (fiscal 2024 second quarter). Unaudited results; amounts are in U.S. dollars, thousands, except per-share data. Loop develops technology to recycle waste PET into virgin-quality resin and remains in the pre-commercialization stage with limited revenue.
Key financial metrics
| Metric | Three months ended Aug. 31, 2023 | Six months ended Aug. 31, 2023 | Prior comparable period |
|---|---|---|---|
| Revenue | $54 | $81 | $135 for both three and six months in 2022 |
| Operating expenses | $5,017 | $12,104 | $7,900 and $25,876, respectively, in 2022 |
| Net loss | $4,750 | $11,751 | $7,705 and $25,711, respectively, in 2022 |
| Basic and diluted loss per share | $(0.10) | $(0.25) | $(0.16) and $(0.54), respectively, in 2022 |
| Operating cash used | Not separately clear for the quarter | $11,017 | $19,408 for six months in 2022 |
| Investing cash used | Not separately clear for the quarter | $5,290 | $1,470 for six months in 2022 |
- Gross profit and gross margin are not presented as separate measures in the filing.
- Cash and cash equivalents were $13,365 at August 31, 2023, down from $29,591 at February 28, 2023. Restricted cash was $1,000 at both dates.
- Management reported available liquidity of $15,952, including $13,365 cash and an undrawn Canadian bank facility of $2,587.
- Debt carrying value was $3,326, including $356 current and $2,970 long-term; the bank facility remained undrawn. Total liabilities were $6,324 and stockholders’ equity was $22,832.
- Equipment deposits were $8,460, up from $3,395 at fiscal year-end; total assets were $29,156, compared with $40,560 at February 28, 2023.
Changes versus prior comparable periods
- Revenue declined $81 in the quarter and $54 for the six-month period, reflecting initial resin deliveries from the Terrebonne facility.
- Six-month net loss narrowed by $13,960, primarily as expenses fell. General and administrative expense declined $9,739, largely because the prior-year period included $7,740 of stock compensation tied to a CEO performance milestone. Research and development expense declined $4,024.
- Operating cash use improved by $8,391 year over year, while investing cash use rose by $3,820, chiefly due to equipment deposits. Cash, cash equivalents and restricted cash fell by $16,226 during the six months.
Outlook, risks and unusual items
- Management says it expects liquidity to fund costs for at least 12 months from the financial statements’ issuance date. It also states commercial-facility development will require significant additional capital; financing may come from debt, equity, government incentives, customers or strategic partners, with no assurance it will be obtained on acceptable terms.
- The April 2023 SK Geo Centric joint venture agreement provides for a Singapore-based entity, with SKGC contributing 51% and Loop 49% of initial equity. No Loop contribution had been made by August 31. The partners plan facilities in Asia, including a 70,000-metric-ton-per-year Ulsan plant; construction was anticipated to begin by year-end 2023 and finish by year-end 2025. These are plans, not completed milestones.
- Loop expects $8,460 of equipment deposits and engineering and development costs to be recoverable from the JV Company when Ulsan construction begins. The estimated recoverable amount of $16,000 was not recognized in the financial statements and is conditional on the project proceeding.
- The Terrebonne facility operates at reduced hours to preserve liquidity. The company says it will continue existing sales commitments and use the facility for customer support, research and development, and analytical work.
- Risks include commercialization and scaling execution, facility construction and permitting, financing needs, supply-chain delays, customer offtake and feedstock availability, and uncertain project recovery. Management reported no material changes to the risk factors in its latest Form 10-K.
- The SEC investigation remains unresolved. The filing says a 2022 SEC complaint against other defendants identified CEO Daniel Solomita as a relief defendant, but did not allege wrongdoing by Loop or Solomita. The outcome and timing are uncertain.
- Management concluded disclosure controls were effective as of August 31, 2023, with no material quarter changes in internal control over financial reporting.
Important facts for investors to verify
- Whether and when the Ulsan project secures financing, reaches construction milestones, and establishes the planned JV funding and reimbursement arrangements.
- Whether Loop can raise further capital and maintain liquidity as cash declines and commercial facilities require substantial investment.
- Whether customer supply agreements convert into material recurring revenue and whether planned offtake volumes and prices support project economics.
- Timing and conditions for recovery of the unrecognized estimated $16,000 in equipment, engineering and development costs.
- Progress and potential implications of the unresolved SEC investigation.