Loop Industries, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended February 28, 2021. The filing also reports fourth-quarter results for the three months ended February 28, 2021. Figures are in U.S. dollars unless noted.
Business context and reporting period
Loop is a pre-commercial technology company developing a process to depolymerize waste PET plastic and polyester fiber into monomers, then produce virgin-quality recycled PET resin and fiber. The filing describes its Generation II technology and plans to commercialize it through owned facilities, joint ventures, partnerships, and licensing. Loop reported no revenue and had not begun commercial-scale operations.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $36.34 million | $14.51 million |
| Loss per share, basic and diluted | $0.89 | $0.38 |
| Cash used in operating activities | $22.49 million | $9.09 million |
| Cash used in investing activities | $2.98 million | $3.39 million |
| Cash provided by financing activities | $26.60 million | $40.46 million |
- Cash and cash equivalents were $35.22 million at February 28, 2021, compared with $33.72 million a year earlier. Current assets were $37.60 million; current liabilities were $9.06 million.
- Total debt carrying value was approximately $2.45 million, including $938,000 current and $1.52 million long-term. The company’s 20-year bank loan is subject to renewal in January 2022; the Investissement Québec loan has a 36-month repayment moratorium from its first disbursement.
- Stockholders’ equity was $32.82 million, down from $38.46 million. No operating margin is meaningful because the company had no revenue.
- FY2021 financing included approximately $25.00 million net proceeds from a common-stock offering and $1.65 million from warrant exercises. Common shares outstanding increased to 42.41 million at year-end from 39.91 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 also noting the need to pursue further financing for commercial projects and operations.
Material changes versus the prior comparable period
- Annual net loss increased by $21.84 million, primarily reflecting higher R&D costs (+$13.97 million), a $5.04 million property and equipment write-down, and higher general and administrative costs (+$4.32 million). Lower interest and other financial expense partially offset the increase.
- R&D expense rose to $18.69 million, including $5.66 million of external engineering and $6.15 million of machinery and equipment expenditures. After the pilot plant was dedicated to R&D and demonstration use with no alternative future use, relevant equipment purchases were expensed under the company’s accounting policy.
- G&A expense rose to $11.54 million, including increased professional fees principally associated with the SEC investigation and securities litigation, and higher directors’ and officers’ insurance costs.
- Operating cash use increased by $13.40 million as commercialization, engineering, R&D, and legal expenses rose. Financing cash inflow was lower than FY2020.
- Fourth-quarter net loss was $13.19 million, versus $3.76 million in the prior-year quarter, mainly due to higher R&D and G&A expenses.
Outlook, commentary, risks, and unusual items
- Management’s FY2022 priorities included advancing the demonstration plant, engineering and evaluating potential Québec and European facilities, securing feedstock and project financing, progressing the Indorama joint venture, and pursuing customer and strategic partner agreements. These are plans, not assured outcomes.
- The demonstration facility was expected to be substantially complete late in calendar 2021, with customer deliveries targeted for calendar 2022. The planned Indorama Spartanburg facility was sized at 40,000 metric tons annually, but work had been temporarily delayed during 2020; Loop had contracted approximately 40% of expected output.
- In May 2021, after year-end, Loop purchased a 19-million-square-foot Bécancour, Québec site for approximately $4.8 million (C$5.9 million). The Québec project remained in planning, with financing options under exploration. A European project with Suez was also under development.
- Loop reported receiving a U.S. FDA no-objection letter on March 1, 2021 concerning the capability of its methanolysis process to produce recycled PET for food-contact articles. It also reported European REACH registrations for DMT and MEG in November and December 2020. These developments do not establish commercial-scale operating performance.
- Major risks include technology scale-up and commercialization, dependence on additional financing and strategic partners, feedstock supply and costs, competition with fossil-fuel-based PET, permitting, COVID-19 disruption, and foreign-exchange exposure.
- The SEC subpoenaed the company in October 2020 for information concerning technology testing and partnerships. U.S. and Québec securities class-action proceedings were also pending; management said it could not estimate a possible loss and had not recorded a provision. Coca-Cola’s procurement group notified Loop it intended to terminate its supply agreement because a production milestone was not met; it expressed interest in exploring a new framework, with no assurance of a new agreement.
- The $5.04 million write-down of property and equipment followed the decision to dedicate the pilot plant to R&D and demonstration activities. The filing also identifies significant professional and insurance expenses related to the investigation and litigation.
Most important facts for investors to verify
- Whether the GEN II process can operate reliably and economically at commercial scale, and when facilities can be financed, permitted, built, and commissioned.
- Whether contracted customer demand, including the approximately 40% of planned Spartanburg output, remains in place and converts to deliveries and revenue.
- Cash burn, project funding requirements, access to additional capital, and the timing and terms of any financing.
- Progress and potential outcomes of the SEC investigation and U.S. and Québec securities litigation, including any financial or operational consequences.
- Whether feedstock supply, regulatory approvals, and project timelines can be secured despite COVID-19 and other execution risks.