Loop Industries, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended February 28, 2023; the filing was signed May 18, 2023. Although the request identifies “2022 Q4,” this is an annual report and includes fourth-quarter comparisons. Amounts are U.S. dollars unless stated otherwise.
Business context
Loop is a pre-commercialization technology company seeking to chemically recycle low-value PET plastic and polyester fiber into virgin-quality recycled PET resin. Terrebonne is a small-scale production, research and development, and customer-support facility; the planned commercial-scale facilities are not yet operating. The company reported its first product-sale revenue during FY2023.
Key financial metrics
| Metric | FY ended Feb. 28, 2023 | FY ended Feb. 28, 2022 |
|---|---|---|
| Revenue | $0.173 million | $0 |
| Research and development expense | $17.35 million | $27.74 million |
| General and administrative expense | $20.43 million | $12.79 million |
| Net loss | $21.30 million | $44.92 million |
| Net loss per share, basic and diluted | $0.45 | $0.99 |
| Net cash used in operating activities | $34.89 million | $40.56 million |
| Net cash provided by (used in) investing activities | $21.28 million | $(7.53) million |
| Net cash provided by financing activities | $1.01 million | $56.99 million |
At year-end, cash and cash equivalents were $29.59 million, with a further $1.00 million in restricted cash. Management reported available liquidity of $32.16 million, including a $2.57 million undrawn Canadian bank facility. Total liabilities were $6.82 million, including $3.30 million of long-term debt carrying value and $0.06 million current debt. Stockholders’ equity was $33.74 million. The filing does not provide a meaningful operating margin given the very limited revenue and pre-commercial status.
For the three months ended February 28, 2023, revenue was $12,487 and net income was $5.42 million, compared with no revenue and a $14.27 million net loss in the prior-year quarter. The quarterly profit reflected a $9.98 million land-disposition gain and lower expenses; it does not indicate operating profitability.
Material changes versus prior year
- FY2023 revenue began with initial Loop PET resin deliveries; total revenue remained only $0.173 million.
- Annual net loss narrowed by $23.62 million, largely due to a $16.68 million gain on the Bécancour land sale, lower R&D expense, and prior-year legal-settlement and joint-venture impairment charges. General and administrative expense rose $7.64 million, including $7.74 million of CEO RSU compensation tied to a customer supply-agreement milestone.
- R&D expense fell $10.39 million, principally due to lower equipment and external engineering costs and higher tax credits. The Terrebonne facility reduced operating hours in December 2022 to conserve cash.
- Cash and cash equivalents declined from $44.06 million to $29.59 million. The Bécancour land sale generated $22.31 million net proceeds; FY2022 financing had included $56.05 million in net equity proceeds.
- The company shifted its commercialization focus to planned partner-led projects in Asia and Europe, rather than prioritizing a company-funded Québec facility.
Outlook, risks and unusual items
- Management’s FY2024 priorities include advancing commercialization and customer offtake agreements, securing feedstock and financing, supporting Asian and European project engineering, identifying partners, and protecting intellectual property. No quantitative revenue or earnings guidance is provided.
- On April 27, 2023, after year-end, Loop and SK Geo Centric (SKGC) signed an Asian joint venture agreement: SKGC is to fund 51% and Loop 49% of initial equity. The JV is to hold exclusive Asian commercialization rights, with Loop receiving annual royalties per commercial plant. The planned Ulsan facility is designed for 70,000 metric tons annually, with groundbreaking anticipated in 2023 and completion targeted by the end of 2025; at least three additional Asian facilities are targeted by 2030. These are plans, not completed facilities.
- For Europe, Saint-Avold, France, was selected as the planned site with SKGC and Suez. Site acquisition, permitting, engineering, offtake, feedstock and financing remained project steps.
- Management stated that available liquidity was expected to fund at least 12 months from financial-statement issuance, but commercial construction and continued operations require additional financing. The auditor identified management’s liquidity assessment as a critical audit matter and highlighted the judgments involved in cash-flow forecasts.
- Key execution risks include inability to obtain financing, delays or cost overruns, permitting and partner milestones, feedstock availability and pricing, and whether technology and product quality can be maintained at commercial scale. The filing notes that the technology has not yet been tested at the scale required for large commercial use.
- The SEC investigation remained unresolved; the filing reports no further business- or technology-related information requests after the March 2022 subpoena. The related U.S. securities class action settled for $3.1 million, received final court approval, and was paid into escrow in October 2022, partly offset by insurance. A Québec proposed class action was dismissed and the appeal period expired. The filing says the SEC’s separate complaint against other defendants identified CEO Daniel Solomita as a relief defendant but did not allege wrongdoing by Loop or Solomita.
- The financial statements received an unqualified audit opinion. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Actual cash burn, restricted-cash availability, and financing runway against the company’s project and operating commitments.
- Whether the Ulsan JV obtains committed financing, required approvals and permits, and binding offtake and feedstock arrangements on the stated timetable.
- Evidence of commercial-scale operating performance, yields, product quality, construction costs, and economics beyond the Terrebonne facility.
- Terms and status of the European project and any amendments or milestones under existing customer and strategic-partner agreements.
- Resolution and potential costs of the SEC investigation, and any remaining obligations related to litigation or legal proceedings.
- Potential dilution from future capital raises, outstanding warrants and equity awards; CEO Solomita held 75.7% of voting control as disclosed in the filing.