Loop Industries, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2024, three months ended May 31, 2023; comparisons are to the three months ended May 31, 2022 unless otherwise stated. Amounts are in U.S. dollars, in thousands, except per-share data.
Business context
Loop is a pre-commercialization technology company developing a process to convert waste PET plastic and polyester fiber into monomers and virgin-quality recycled PET. The Terrebonne facility supports R&D, customer launches and initial product deliveries. Revenue remains limited.
Financial results and liquidity
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Revenue | $27 | $0 |
| Research and development expense | $4,490 | $6,800 |
| General and administrative expense | $2,465 | $11,037 |
| Total expenses | $7,088 | $17,976 |
| Net loss | $(7,001) | $(18,006) |
| Basic and diluted loss per share | $(0.15) | $(0.38) |
| Net cash used in operating activities | $(5,504) | $(11,649) |
Gross margin and operating margin are not meaningfully presented in the filing; revenue is nominal relative to operating costs. The $7,001 net loss includes $27 of revenue and $60 of net other income.
- Cash and liquidity: Cash and cash equivalents were $21,970 at May 31, 2023, down from $29,591 at February 28, 2023. Restricted cash was $1,000. Management reported available liquidity of $24,543, including $2,573 available under an undrawn Canadian bank facility.
- Cash flow: Investing activities used $2,122, principally $2,023 in machinery and equipment deposits and $99 for intangible assets. Financing activities used $16 for debt repayment. Cash, cash equivalents and restricted cash totaled $22,970 at quarter-end.
- Debt: Long-term debt had a carrying amount of $3,306, including $208 current and $3,098 long-term. The bank facility was undrawn and secured by the Terrebonne property; the company reported compliance with its minimum equity covenant.
- Balance sheet: Total assets were $35,244, total liabilities $8,134 and stockholders’ equity $27,110. Non-refundable deposits on long-lead equipment were $5,430.
Material changes versus the prior period
- Revenue increased from zero to $27 from initial sales of Loop PET resin produced using monomers from Terrebonne.
- Net loss narrowed by $11,005. Lower R&D spending contributed $2,310 of the reduction, while G&A fell $8,572, mainly because the prior-year quarter included $7,740 in stock-based compensation tied to a CEO performance milestone.
- Operating cash use declined by $6,145, which management attributed mainly to lower operating expenses following completion of Terrebonne upgrades and the basic design package for commercial facilities.
- Cash and cash equivalents declined $7,621 during the quarter, while equipment deposits and accrued machinery and equipment expenses increased.
Outlook, risks and notable matters
- Management believes available resources are sufficient to meet obligations for at least 12 months from issuance of the statements. The company expects continuing losses and negative cash flows and says commercial-scale expansion requires significant additional financing. It cautions that financing may not be available on acceptable terms, or at all.
- Loop and SK Geo Centric signed an Asian joint venture agreement on April 27, 2023. SKGC is to own 51% and Loop 49%; the venture is intended to commercialize Loop technology in Asia, with Loop receiving annual royalties for commercial plants. The planned Ulsan facility is described as having 70,000 metric tons of annual capacity, with groundbreaking anticipated in 2023 and completion targeted by the end of 2025. These are plans, not completed milestones.
- The company has committed to purchase long-lead equipment for up to $8,546; the remaining balance was expected to be paid by fiscal year-end, subject to the agreement’s terms. It may take on further commitments to advance projects.
- Other key execution risks include facility financing, construction, permitting, customer offtake, feedstock availability, scaling and commercialization. The filing also identifies macroeconomic, foreign exchange and interest-rate uncertainties.
- The SEC investigation disclosed in prior filings remained unresolved. The SEC complaint filed in 2022 named the CEO as a relief defendant but did not allege wrongdoing by Loop or the CEO, according to the filing. The company says it cannot predict the investigation’s outcome. No material risk-factor changes were reported for the quarter.
- Management concluded disclosure controls and procedures were effective as of May 31, 2023 and reported no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Cash runway assumptions, committed cash uses and whether additional financing will be required sooner than management expects.
- Progress and funding for the SKGC joint venture, Ulsan project milestones, and any binding customer offtake or feedstock agreements.
- Whether planned facilities can meet construction, permitting, cost and capacity targets, and whether the Terrebonne facility can continue supporting customers and technology validation.
- The timing and outcome of the SEC investigation and any resulting legal, financial or disclosure consequences.
- The reconciliation of expense presentations: the financial statements report total expenses of $7,088; the MD&A results table displays $7,028, while the reported net loss is $(7,001). The filing text does not clearly explain this presentation difference.