United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the quarterly period ended |
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the transition period from ___________ to __________ |
Commission File No.
(Exact name of Registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices zip code)
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As at January 15, 2024, there were
LOOP INDUSTRIES, INC.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 | ||||
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| Table of Contents |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Loop Industries, Inc.
Three and Nine months ended November 30, 2023
Index to the Unaudited Interim Condensed Consolidated Financial Statements
Contents | Page(s) | ||
Condensed consolidated balance sheets as at November 30, 2023 (Unaudited) and February 28, 2023 | F‑2 | ||
F‑3 | |||
F‑4 | |||
F‑6 | |||
Notes to the condensed consolidated financial statements (Unaudited) | F‑7 |
| F-1 |
| Table of Contents |
Loop Industries, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands of U.S. dollars, except per share data) |
| As at |
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| February 28, 2023 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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Restricted cash |
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Sales tax, tax credits and other receivables (Note 3) |
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Inventories (Note 4) |
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Deposits on equipment (Note 5) |
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Prepaid expenses and other deposits (Note 5) |
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Total current assets |
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Investment in joint venture |
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Property, plant and equipment, net (Note 6) |
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Intangible assets, net (Note 7) |
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Total assets |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable and accrued liabilities (Note 9) |
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Customer deposits |
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Current portion of long-term debt (Note 10) |
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Total current liabilities |
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Long-term debt (Note 10) |
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Total liabilities |
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Stockholders’ Equity |
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Series A Preferred stock par value $ |
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Common stock par value $ |
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Additional paid-in capital |
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Additional paid-in capital – Warrants |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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Commitments (Note 18) |
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Subsequent event (Note 19) |
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See accompanying notes to the condensed consolidated financial statements.
| F-2 |
| Table of Contents |
Loop Industries, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands of U.S. dollars, except per share data) |
| Three Months Ended |
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| Nine Months Ended |
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| November 30, 2023 |
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| November 30, 2022 |
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| November 30, 2023 |
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| November 30, 2022 |
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Revenue from contracts with customers |
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Expenses : |
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Research and development (Note 13) |
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General and administrative (Note 14) |
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Depreciation and amortization (Notes 6 and 7) |
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Total expenses |
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Other (income) loss : |
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Gain on disposition of assets (Note 6) |
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Interest and other financial expenses |
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Interest income |
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Foreign exchange gain |
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Total other (income) loss |
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Net loss |
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Other comprehensive income (loss) - |
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Foreign currency translation adjustment |
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Comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per share |
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Basic and diluted |
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Weighted average common shares outstanding |
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Basic and diluted |
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See accompanying notes to the condensed consolidated financial statements.
| F-3 |
| Table of Contents |
Loop Industries, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
(Unaudited)
(in thousands of U.S. dollars, except for share data) |
| Three months ended November 30, 2023 |
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| Common stock |
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| Preferred stock |
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| Additional |
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| Accumulated |
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| par value $0.0001 |
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| par value $0.0001 |
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| Additional |
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| Paid-in |
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| Other |
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| Total |
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| Number of Shares |
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| Amount |
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Amount |
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| Paid-in Capital |
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| Capital – Warrants |
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| Accumulated Deficit |
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| Comprehensive Income (Loss) |
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| Stockholders’ Equity |
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Balance, August 31, 2023 |
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| $ | ( | ) |
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Issuance of shares upon the exercise of stock options (Note 15) |
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Stock options issued for services (Note 15) |
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Restricted stock units issued for services (Note 15) |
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Foreign currency translation |
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Net loss |
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Balance, November 30, 2023 |
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| $ | ( | ) |
| $ |
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| Three Months Ended November 30, 2022 |
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| Common stock |
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| Series A preferred stock |
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| Additional |
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| Additional |
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| par value $0.0001 |
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| par value $0.0001 |
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| Additional |
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| Paid-in |
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| Other |
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| Total |
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| Number of Shares |
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| Amount |
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| Amount |
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| Paid-in Capital |
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| Capital - Warrants |
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| Accumulated Deficit |
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| Comprehensive (Loss) |
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| Stockholders' Equity |
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Balance, August 31, 2022 |
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| $ | ( | ) |
| $ |
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Issuance of shares upon the vesting of restricted stock units (Note 15) |
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Expiration of warrants (Note 17) |
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Stock options issued for services (Note 15) |
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Restricted stock units issued for services (Note 15) |
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Foreign currency translation |
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Net loss |
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Balance, November 30, 2022 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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See accompanying notes to the condensed consolidated financial statements.
| F-4 |
| Table of Contents |
Loop Industries, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
(Unaudited)
(in thousands of U.S. dollars, except for share data) |
| Nine Months Ended November 30, 2023 |
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| Common stock |
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| Preferred stock |
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| Additional |
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| Accumulated |
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| par value $0.0001 |
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| Additional |
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| Paid-in |
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| Other |
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| Total |
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| Number of Shares |
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| Amount |
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| Number of Shares |
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| Amount |
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| Paid-in Capital |
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| Capital – Warrants |
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| Accumulated Deficit |
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| Comprehensive Income (Loss) |
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| Stockholders’ Equity |
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Balance, February 28, 2023 |
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| $ | - |
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| $ |
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Issuance of shares upon the vesting of restricted stock units (Note 15) |
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Issuance of shares upon the exercise of stock options (Note 15) |
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Stock options issued for services (Note 15) |
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Restricted stock units issued for services (Note 15) |
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Foreign currency translation |
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Net loss |
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Balance, November 30, 2023 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| Nine Months Ended November 30, 2022 |
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| Common stock |
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| Series A preferred stock |
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| Additional |
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| Accumulated |
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| par value $0.0001 |
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| Additional |
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| Paid-in |
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| Other |
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| Total |
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| Number of Shares |
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| Amount |
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| Number of Shares |
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| Amount |
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| Paid-in Capital |
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| Capital - Warrants |
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| Accumulated Deficit |
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| Comprehensive (Loss) |
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| Stockholders' Equity |
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Balance, February 28, 2022 |
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| $ | - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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Issuance of shares upon the vesting of restricted stock units (Note 15) |
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| - |
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| - |
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| - |
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Expiration of warrants (Note 17) |
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| - |
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Stock options issued for services (Note 15) |
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| - |
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Restricted stock units issued for services (Note 15) |
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| - |
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| - |
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Foreign currency translation |
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| - |
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| - |
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| ( | ) |
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Net loss |
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| - |
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| - |
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| ( | ) |
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| ( | ) | |||||
Balance, November 30, 2022 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||||
See accompanying notes to the condensed consolidated financial statements.
| F-5 |
| Table of Contents |
Loop Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of U.S. dollars) |
| Nine Months Ended November 30, |
| |||||
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| 2023 |
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| 2022 |
| ||
Cash Flows from Operating Activities |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization (Notes 6 and 7) |
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Stock-based compensation expense (Note 15) |
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Gain on disposition of assets (Note 6) |
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| ( | ) | |
Accretion and accrued interest expenses (Note 10) |
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Changes in operating assets and liabilities: |
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Sales tax and tax credits receivable (Note 3) |
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Inventories (Note 4) |
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| ( | ) |
Prepaid expenses (Note 5) |
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| ( | ) | |
Accounts payable and accrued liabilities (Note 9) |
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| ( | ) |
Customer deposits |
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|
| |
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Proceeds from disposition of assets (Note 6) |
|
|
|
|
|
| ||
Deposits on equipment (Note 5) |
|
| ( | ) |
|
| ( | ) |
Additions to property, plant and equipment (Note 6) |
|
| ( | ) |
|
| ( | ) |
Additions to intangible assets (Note 7) |
|
| ( | ) |
|
| ( | ) |
Net cash used in investing activities |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Repayment of long-term debt (Note 10) |
|
| ( | ) |
|
|
| |
Net cash (used) provided by financing activities |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes |
|
|
|
|
| ( | ) | |
Net decrease in cash |
|
| ( | ) |
|
| ( | ) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
| ||
Cash, cash equivalents and restricted cash, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
|
Income tax paid |
| $ |
|
| $ |
| ||
Interest paid |
| $ |
|
| $ |
| ||
Interest received |
| $ |
|
| $ |
| ||
See accompanying notes to the condensed consolidated financial statements.
| F-6 |
| Table of Contents |
Loop Industries, Inc.
Three and Nine months Ended November 30, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. The Company and Basis of Presentation
The Company
Loop Industries, Inc. (the “Company,” “Loop,” “we,” or “our”) is a technology company that owns patented and proprietary technology that depolymerizes no and low-value waste polyethylene terephthalate (“PET”) plastic and polyester fiber to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop™ branded PET resin suitable for use in food-grade packaging and polyester fiber. The Company is currently in the pre-commercialization stage with limited revenues.
Basis of Presentation
These unaudited interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures included in these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2023, filed with the SEC on May 18, 2023. The unaudited interim condensed consolidated financial statements comprise the consolidated financial position and results of operations of Loop Industries, Inc. and its subsidiaries, Loop Innovations, LLC and Loop Canada Inc. All subsidiaries are, either directly or indirectly, wholly owned subsidiaries of Loop Industries, Inc. (collectively, the “Company”). The Company also owns, through Loop Innovations, LLC, a
Intercompany balances and transactions are eliminated on consolidation. The condensed consolidated balance sheet as of February 28, 2023, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by US GAAP on an annual reporting basis. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results for the three- and nine-month periods ended November 30, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 29, 2024, or for any other period.
The consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the continuing of operations, the realization of assets and the settlement of liabilities in the normal course of business.
All monetary amounts in these notes to the condensed consolidated financial statements are in thousands of U.S. dollars unless otherwise specified, except for per share data.
2. Summary of Significant Accounting Policies
Liquidity Risk Assessment
Since its inception, the Company has been in the pre-commercialization stage with limited revenues from customers, and its ongoing operations and commercialization plans have been financed primarily by raising equity. The Company has incurred net losses and negative cash flow from operating and investing activities since its inception and expects to incur additional net losses while it continues to develop and plan for commercialization. As at November 30, 2023, the Company’s available liquidity was $
| F-7 |
| Table of Contents |
The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent on whether the Company can obtain the necessary financing through a combination of the issuance of debt, equity, and/or joint ventures, and/or government incentive programs, and/or customers. However, there is no assurance that the Company will be successful in attracting additional funding. Even if additional financing is available, it may not be available on terms favorable to the Company. Failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on the Company’s financial position and on its ability to execute its business plan.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include the going concern assessment, estimates for depreciable lives of property, plant and equipment and intangible assets, recoverability of tax credits receivable, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards.
Net earnings (loss) per share
The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. The Company includes common stock issuable in its calculation. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation if their effect is antidilutive.
For the three- and nine-month periods ended November 30, 2023 and 2022, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at November 30, 2023, the potentially dilutive securities consisted of
3. Sales Tax, Tax Credits and Other Receivables
Sales tax, research and development tax credits and other receivables as at November 30, 2023 and February 28, 2023 were as follows:
|
| November 30, 2023 |
|
| February 28, 2023 |
| ||
Sales tax |
| $ |
|
| $ |
| ||
Investment tax credits |
|
|
|
|
|
| ||
Research and development tax credits |
|
|
|
|
|
| ||
Other receivables |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| F-8 |
| Table of Contents |
4. Inventories
Inventories as at November 30, 2023 and February 28, 2023 were as follows:
|
| November 30, 2023 |
|
| February 28, 2023 |
| ||
Finished goods |
| $ |
|
| $ |
| ||
Work in process |
|
|
|
|
|
| ||
Raw materials |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
As at November 30 and February 28, 2023, inventories included finished goods, work in process and raw materials. Finished goods inventories consist of bottle grade and fiber grade Loop™ PET resin which is intended to be sold to customers. Work in process inventories consist of monomers (dimethyl terephthalate and monoethylene glycol), either purified or yet to be purified, resulting from the depolymerization of PET feedstock. These monomers shall be polymerized into Loop™ PET resin in the future. Raw materials inventories consist of chemicals which are used as inputs in the PET depolymerization process.
5. Deposits and Prepaid Expenses
As at November 30, 2023, the Company had $
Prepaid expenses and other deposits as at November 30, 2023 were $
6. Property, Plant and Equipment
|
| As at November 30, 2023 |
| |||||||||
|
| Cost |
|
| Accumulated depreciation, write-down and impairment |
|
| Net book value |
| |||
Building |
| $ |
|
| $ | ( | ) |
| $ |
| ||
Land |
|
|
|
|
|
|
|
|
| |||
Building and Land Improvements |
|
|
|
|
| ( | ) |
|
|
| ||
Office equipment and furniture |
|
|
|
|
| ( | ) |
|
|
| ||
|
| $ |
|
| $ | ( | ) |
| $ |
| ||
|
| As at February 28, 2023 |
| |||||||||
|
| Cost |
|
| Accumulated depreciation, write-down and impairment |
|
| Net book value |
| |||
Building |
| $ |
|
| $ | ( | ) |
| $ |
| ||
Land |
|
|
|
|
|
|
|
|
| |||
Building and Land Improvements |
|
|
|
|
| ( | ) |
|
|
| ||
Office equipment and furniture |
|
|
|
|
| ( | ) |
|
|
| ||
|
| $ |
|
| $ | ( | ) |
| $ |
| ||
Depreciation expense for the three- and nine-month periods ended November 30, 2023 amounted to $
On May 27, 2021, we acquired land in Bécancour, Québec for cash of $
| F-9 |
| Table of Contents |
7. Intangible Assets
Intangible assets as at November 30, 2023 and February 28, 2023 were $
During the nine-month periods ended November 30, 2023 and 2022, we made additions relating to patent application costs to intangible assets of $
Amortization expense for the three- and nine-month periods ended November 30, 2023 amounted to $
8. Fair Value of Financial Instruments
The following tables presents the fair value of the Company’s financial liabilities as at November 30, 2023 and February 28, 2023:
|
| Fair Value as at November 30, 2023 | |||||||||
|
| Carrying Amount |
|
| Fair Value |
|
| Level in the hierarchy | |||
Financial liabilities measured at amortized cost: |
|
|
|
|
|
|
|
| |||
Long-term debt |
| $ |
|
| $ |
|
| Level 2 | |||
|
| Fair Value as at February 28, 2023 | |||||||||
|
| Carrying Amount |
|
| Fair Value |
|
| Level in the hierarchy | |||
Financial liabilities measured at amortized cost: |
|
|
|
|
|
|
|
| |||
Long-term debt |
| $ |
|
| $ |
|
| Level 2 | |||
The fair value of cash and cash equivalents, restricted cash, customer deposits, other receivables, and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity.
9. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as at November 30, 2023 and February 28, 2023 were as follows:
|
| November 30, 2023 |
|
| February 28, 2023 |
| ||
Trade accounts payable |
| $ |
|
| $ |
| ||
Accrued employee compensation |
|
|
|
|
|
| ||
Accrued professional fees |
|
|
|
|
|
| ||
Accrued insurance premiums |
|
|
|
|
|
| ||
Accrued engineering fees |
|
|
|
|
|
| ||
Accrued director compensation |
|
|
|
|
|
| ||
Other accrued liabilities |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
10. Long‑Term Debt
Long-term debt as of November 30, 2023 and February 28, 2023, was comprised of the following:
|
| November 30, 2023 |
|
| February 28, 2023 |
| ||
Investissement Québec financing facility: |
|
|
|
|
|
| ||
Principal amount |
| $ |
|
| $ |
| ||
Unamortized discount |
|
| ( | ) |
|
| ( | ) |
Accrued interest |
|
|
|
|
|
| ||
Total Investissement Québec financing facility |
|
|
|
|
|
| ||
Less: current portion of long-term debt |
|
| ( | ) |
|
| ( | ) |
Long-term debt, net of current portion |
| $ |
|
| $ |
| ||
| F-10 |
| Table of Contents |
Investissement Québec financing facility
The Company recorded interest expense on the Investissement Québec loan for the three- and nine-month periods ended November 30, 2023 in the amount of $
Total repayments due on the Company’s indebtedness over the next five years are as follows:
Years ending |
| Amount |
| |
February 29, 2024 |
| $ |
| |
February 28, 2025 |
|
|
| |
February 28, 2026 |
|
|
| |
February 28, 2027 |
|
|
| |
February 29, 2028 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
Credit facility from a Canadian bank
On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank. The Credit Facility allows for borrowings of up to $
11. Related Party Transactions
Employment Agreement
During the nine-month period ended November 30, 2022, Mr. Solomita met a performance milestone in relation to the signature of a supply agreement with a customer. Accordingly,
On October 12, 2023, Mr. Solomita and the Company agreed to defer by one year the settlement of
12. Stockholders’ Equity
Common Stock
For the nine-month period ended November 30, 2023 |
| Number of shares |
|
| Amount |
| ||
Balance, February 28, 2023 |
|
|
|
| $ |
| ||
Issuance of shares upon settlement of restricted stock units |
|
|
|
|
|
| ||
Issuance of shares upon the exercise of stock options |
|
|
|
|
|
| ||
Balance, November 30, 2023 |
|
|
|
| $ |
| ||
For the nine-month period ended November 30, 2022 |
| Number of shares |
|
| Amount |
| ||
Balance, February 28, 2022 |
|
|
|
| $ |
| ||
Issuance of shares upon settlement of restricted stock units |
|
|
|
|
|
| ||
Balance, November 30, 2022 |
|
|
|
| $ |
| ||
| F-11 |
| Table of Contents |
During the nine months ended November 30, 2023, the Company recorded the following common stock transaction:
(i) | The Company issued |
(ii) | The Company issued |
During the nine months ended November 30, 2022, the Company recorded the following common stock transaction:
(i) | The Company issued |
13. Research and Development Expenses
Research and development expenses for the three-month periods ended November 30, 2023 and 2022 were as follows:
|
| November 30, 2023 |
|
| November 30, 2022 |
| ||
Employee compensation |
| $ |
|
| $ |
| ||
Machinery and equipment expenditures |
|
|
|
|
|
| ||
External engineering |
|
|
|
|
|
| ||
Plant and laboratory operating expenses |
|
|
|
|
|
| ||
Tax credits |
|
| ( | ) |
|
| ( | ) |
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Research and development expenses for the nine-month periods ended November 30, 2023 and 2022 were as follows:
|
| November 30, 2023 |
|
| November 30, 2022 |
| ||
Employee compensation |
| $ |
|
| $ |
| ||
Machinery and equipment expenditures |
|
|
|
|
|
| ||
External engineering |
|
|
|
|
|
| ||
Plant and laboratory operating expenses |
|
|
|
|
|
| ||
Tax credits |
|
| ( | ) |
|
| ( | ) |
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
14. General and Administrative Expenses
General and administrative expenses for the three-month periods ended November 30, 2023 and 2022 were as follows:
|
| November 30, 2023 |
|
| November 30, 2022 |
| ||
Employee compensation |
| $ |
|
| $ |
| ||
Professional fees |
|
|
|
|
|
| ||
Insurance |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
General and administrative expenses for the nine-month periods ended November 30, 2023 and 2022 were as follows:
|
| November 30, 2023 |
|
| November 30, 2022 |
| ||
Employee compensation(1) |
| $ |
|
| $ |
| ||
Professional fees |
|
|
|
|
|
| ||
Insurance |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| (1) | Includes stock-based compensation expense. During the nine-month period ended November 30, 2022, the Company recorded a stock-based compensation expense of $ |
| F-12 |
| Table of Contents |
15. Share-based Payments
Stock Options
The following tables summarizes the continuity of the Company’s stock options during the three-month periods ended November 30, 2023 and 2022:
|
| 2023 |
|
| 2022 |
| ||||||||||
|
| Number of stock options |
|
| Weighted average exercise price |
|
| Number of stock options |
|
| Weighted average exercise price |
| ||||
Outstanding, beginning of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
| - |
|
|
| - |
|
|
|
|
|
|
| ||
Exercised |
|
| ( | ) |
|
|
|
|
| - |
|
|
| - |
| |
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Outstanding, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Exercisable, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
The following tables summarizes the continuity of the Company’s stock options during the nine-month periods ended November 30, 2023 and 2022:
|
| 2023 |
|
| 2022 |
| ||||||||||
|
| Number of stock options |
|
| Weighted average exercise price |
|
| Number of stock options |
|
| Weighted average exercise price |
| ||||
Outstanding, beginning of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Exercised |
|
| ( | ) |
|
|
|
|
| - |
|
|
| - |
| |
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Outstanding, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Exercisable, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
The Company applies the fair value method of accounting for stock-based compensation awards granted. Fair value is calculated based on a Black-Scholes option pricing model. There were no new issuances of stock options for the three-month period ended November 30, 2022. The principal components of the pricing model for the stock options granted in the nine-month period ended November 30, 2023 were as follows:
Exercise price |
| $ |
| |
Risk-free interest rate |
|
| % | |
Expected dividend yield |
|
| % | |
Expected volatility |
|
| % | |
Expected life |
|
| ||
During the three-month periods ended November 30, 2023 and 2022, stock-based compensation expense attributable to stock options amounted to $
| F-13 |
| Table of Contents |
Restricted Stock Units
The following table summarizes the continuity of the restricted stock units during the three-month periods ended November 30, 2023 and 2022:
|
| 2023 |
|
| 2022 |
| ||||||||||
|
| Number of units |
|
| Weighted average fair value price |
|
| Number of units |
|
| Weighted average fair value price |
| ||||
Outstanding, beginning of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Settled |
|
| - |
|
|
| - |
|
|
| ( | ) |
|
|
| |
Forfeited |
|
| - |
|
|
| - |
|
|
| ( | ) |
|
|
| |
Outstanding, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Outstanding vested, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
The following table summarizes the continuity of the restricted stock units during the nine-month periods ended November 30, 2023 and 2022:
|
| 2023 |
|
| 2022 |
| ||||||||||
|
| Number of units |
|
| Weighted average fair value price |
|
| Number of units |
|
| Weighted average fair value price |
| ||||
Outstanding, beginning of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Settled |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Forfeited |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Outstanding, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Outstanding vested, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
The Company applies the fair value method of accounting for awards granted through the issuance of restricted stock units. Fair value is calculated based on the intrinsic value at grant date multiplied by the number of restricted stock unit awards granted.
During the three-month periods ended November 30, 2023 and 2022, stock-based compensation attributable to RSUs amounted to $
Stock-Based Compensation Expense
During the three-month periods ended November 30, 2023 and 2022, stock-based compensation included in research and development expenses amounted to $
During the nine-month periods ended November 30, 2023 and 2022, stock-based compensation included in research and development expenses amounted to $
| F-14 |
| Table of Contents |
16. Equity Incentive Plan
On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”). The Plan permits the granting of warrants, stock options, stock appreciation rights and restricted stock units to employees, directors and consultants of the Company. A total of
The following table summarizes the continuity of the Company’s Equity Incentive Plan units that were authorized for issuance as at and during the nine-month periods ended November 30, 2023 and 2022:
|
| 2023 |
|
| 2022 |
| ||
|
| Number of units* |
|
| Number of units* |
| ||
Authorized, beginning of period |
|
|
|
|
| 1,043,705 |
| |
Automatic share reserve increase |
|
|
|
|
| - |
| |
Units granted |
|
| ( | ) |
|
| ( | ) |
Units forfeited |
|
|
|
|
|
| ||
Units expired |
|
| - |
|
|
| - |
|
Authorized, end of period |
|
|
|
|
|
| ||
*The use of the term “units” in the table above describes a combination of stock options and RSUs.
17. Warrants
During the nine-month period ended November 30, 2022, warrants to purchase
18. Commitments
Agreement for purchase of equipment
In December 2021, the Company entered into an agreement for the purchase of long-lead equipment in connection with the construction of our first Infinite Loop™ manufacturing facility for up to $
Agreement with SK Geo Centric Co. Ltd. (“SKGC”)
On April 27, 2023, the Company and SKGC entered into an agreement to build Infinite Loop manufacturing facilities in Asia. Pursuant to the agreement, the Company and SKGC agreed to form a new entity, which will be headquartered in Singapore. SKGC will contribute
19. Subsequent Event
On January 16th, Loop announced that the Company signed a non-binding memorandum of understanding with Reed Management, a European investment firm, for $
The non-binding memorandum of understanding is subject to customary due diligence and the fulfillment of certain pre-closing conditions.
| F-15 |
| Table of Contents |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information and any forward-looking statements should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q, including those risks identified in the “Risk Factors” section of our most recent Annual Report on Form 10-K.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the “Company,” “Loop,” “we,” or “our”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, ability to improve and expand our capabilities, competition, expected activities and expenditures as we pursue our business plan, the adequacy of our available cash resources, regulatory compliance, plans for future growth and future operations, the size of our addressable market, market trends, and the effectiveness of the Company’s internal control over financial reporting. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Actual results may differ materially from the projections discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under “Risk Factors.” Additional factors that could materially affect these forward-looking statements and/or projections include, among other things: (i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our current and future financial commitments, (vi) engineering, contracting, and building our manufacturing facilities, (vii) our ability to scale, manufacture, and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) the ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (x) our joint venture projects and our ability to recover certain expenditures in connection therewith, (xi) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xii) disease epidemics and other health-related concerns and crises, which could result in reduced access to capital markets, supply chain disruptions and scrutiny, embargoing of goods produced in affected areas, government-imposed mandatory business closures and any resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, or market or other changes that could result in non-cash impairments of our intangible assets, and property, plant and equipment, (xiii) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xiv) the outcome of any SEC investigations or class action litigation filed against us, (xv) our ability to hire and/or retain qualified employees and consultants, (xvi) other events or circumstances over which we have little or no control, and (xvii) other factors discussed in our subsequent filings with the SEC.
Management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties, and a review of information filed by our competitors with the SEC or otherwise publicly available.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as at the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
We caution readers not to place undue reliance on any such forward-looking statements, which speak only as at the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
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General
As used in this Quarterly Report on Form 10-Q, the following terms are being provided so investors can better understand our business:
Depolymerization refers to the chemical process of breaking down a polymer molecule into its constituent monomers or smaller subunits. Depolymerization is the opposite of polymerization.
DMT is an acronym for dimethyl terephthalate, which is a monomer used in the production of polyethylene terephthalate (“PET”).
MEG is an acronym for monoethylene glycol, which is a monomer used in the production of PET.
Polymerization refers to a process of reacting monomer molecules together in a chemical reaction to form polymer chains or three-dimensional networks.
PET is an acronym for polyethylene terephthalate, which is a resin and a type of polyester showing excellent tensile and impact strength, chemical resistance, clarity, and processability, and reasonable thermal stability. PET is the material which is most commonly used for the production of polyester fiber and plastic packaging, including plastic bottles for water and carbonated soft drinks, containers for food and other consumer products; it is commonly identified by the number “1”, often inside an image of a triangle, on the packaging. PET is also used as a polyester fiber for a variety of applications including textiles, clothing and apparel.
rPET is an acronym for recycled polyethylene terephthalate.
All monetary amounts in this Quarterly Report on Form 10-Q are in thousands of U.S. dollars unless otherwise specified, except for per share data.
Introduction
Loop is a technology company whose mission is to accelerate the world’s shift towards sustainable PET plastic and polyester fiber and away from the dependence on fossil fuels. Loop owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber, including plastic bottles and packaging, carpets and textiles of any color, transparency or condition and even ocean plastics that have been degraded by the sun and salt, to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop™ branded PET resin suitable for use in food-grade packaging and polyester fiber, thus enabling our customers to meet their sustainability objectives. Loop is contributing to the global movement towards a circular economy by reducing and recovering plastic waste for a sustainable future.
The Company is presently in the planning stages of pursuing the construction of Infinite Loop™ commercial scale facilities. Loop is currently engaged in discussions to secure financing for its investments in the various planned manufacturing facilities and the sequencing of the manufacturing facilities will be determined in conjunction with the outcome of the Company’s financing discussions and discussions with our partners.
Background
Industry Background
We believe Loop's depolymerization technology offers a complementary solution to mechanical recycling by enabling the use of a wider variety of PET feedstock, including complex and degraded plastics as well as polyester fiber, to produce virgin quality rPET with no degradation through continued recycling.
Mechanically recycled PET plastic is produced principally through the conversion of bales of PET bottles. The materials have been collected and transported to a materials recovery facility, where they are sorted from other materials, baled, and sent to specific PET recycling facilities. The bales are broken and sorted to remove any non-PET materials. The PET is then ground and put through a separation process which separates the PET from the bottle cap and label materials. Clean PET flake is then further processed depending on its intended end market. It may become more highly refined PET pellets for new bottles or extruded into PET sheet for clamshells, trays, and cups. Recycled PET is also spun into fiber for carpet, clothing, fiber fill, or other materials.
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We believe mechanically recycled PET faces a number of challenges in meeting the quality specifications and growing volume requirements implied by commitments from major brands, mainly due to the cost and variety of acceptable PET feedstock. Some mechanical recycling processes involve remelting the PET flake which reduces the quality of the rPET output each time it is recycled relative to the specifications of virgin PET produced from fossil fuels. Each time PET plastic is mechanically recycled, its quality and clarity are reduced. Therefore, mechanically recycled PET may need to be mixed with virgin PET from fossil fuels to maintain quality. Lower quality mechanically recycled PET is often downcycled to alternate uses such as polyester fibers which may be dyed and used in carpets or clothing. Additionally, mechanically recycled PET manufactured for use in clear bottles or food containers requires predominantly clear and clean PET flakes separated from waste bales, and cannot accommodate colored or opaque PET flakes, lower quality fiber feedstock, or materially contaminated feedstock, which may be cheaper.
Depolymerization is a process in which plastics are broken down into their constituent molecules through chemical reactions, rather than being physically melted down and reprocessed as in mechanical recycling. This approach, which we utilize, has several advantages over mechanical recycling, which can have limitations due to the complexity and diversity of plastics.
One of the main limitations of mechanical recycling is that it is difficult to recycle plastics that have been contaminated or degraded. For example, if a plastic container has been exposed to heat or sunlight, it may become brittle and prone to breaking during the recycling process. Another limitation of mechanical recycling is that it is difficult to recycle certain types of plastics, such as multi-layered or composite plastics. These plastics are often used in food packaging or other products that require specialized properties like barrier protection or insulation. Depolymerization, however, can break down these degraded or complex plastics into their constituent molecules, which can then be purified and used to create new products.
Loop’s depolymerization technology has the potential to create a closed-loop system for plastic waste, whereby plastics can be recycled an infinite number of times without degrading the quality of the material. This is because the constituent molecules can be broken down and reassembled without losing their original properties, which can reduce the need for new plastics to be produced.
We believe Loop’s depolymerization technology offers a promising solution to the limitations of mechanical recycling by enabling the recirculation of more diverse and complex plastics, reducing waste and pollution, and creating a closed-loop system for plastic waste.
Our depolymerization technology breaks down waste PET into DMT and MEG. The monomers are purified and then recombined into virgin quality PET plastic and polyester fiber. We use low value PET plastic and polyester fiber waste as feedstock. Our technology can process PET plastic bottles and packaging of any color, transparency or condition, carpet, clothing and other polyester textiles that may contain colors, dyes or additives, and even PET plastics that have been recovered from the ocean and degraded by exposure to sun and salt. We believe that our ability to use many materials that mechanical recyclers cannot process is an important advantage of Loop™ PET resin and further expands the range of PET waste streams that may be recycled. This also means we are creating a new market for materials that have persistently been leaking out of the waste management system and into shared rivers, oceans and natural areas.
Supply Agreements with Global Consumer Brands
In the past years, we have seen major consumer brands make significant commitments to close the loop on their plastic use by transitioning their packaging to recyclable materials like PET, and by incorporating more recycled content into their packaging. We believe Loop™ PET resin provides the ideal solution for these brands because it is recyclable and is made from 100% recycled PET waste and polyester fiber, while being virgin-quality and suitable for use in food-grade packaging and polyester fiber.
Due to the commitments by large global consumer brands to incorporate more recycled content into their product packaging, the regulatory requirements for minimum recycled content in packaging imposed by governments, the virgin-quality of Loop™ branded PET resin and its marketability to enhance the sustainability credentials of consumer brands that incorporate it, we believe we will be able to sell Loop™ branded PET resin at a premium price relative to virgin and mechanically recycled PET resin.
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We currently have agreements with some of the world’s leading brands to be supplied from our planned commercial facilities, including:
| · | Multi-year supply agreement with Danone SA (“Danone”), one of the world’s leading global food and beverage companies, enabling Danone to purchase 100% sustainable and upcycled Loop™ branded PET for use in brands across its portfolio including evian®, Danone’s iconic natural spring water; |
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| · | Multi-year supply agreement with L’OCCITANE en Provence (“L’OCCITANE”) to supply 100% recycled and sustainable Loop™ PET resin and incorporate Loop™ PET resin into its product packaging; and |
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| · | Multi-year supply agreement with L’Oréal Group, the global leader in the beauty industry, enabling L’Oréal Group to purchase production capacity and incorporate Loop™ PET resin into its product packaging. |
We also have a signed letter of intent with On AG, a sportswear brand and subsidiary of On Holding AG, to secure volumes of Loop™ PET resin from the Asian Infinite Loop™ manufacturing facility in Ulsan, South Korea, which Loop is planning to construct with its strategic partner SK Geo Centric (“SKGC”).
We are pursuing amended supply agreements with existing customers and new agreements with additional customers that are located in North America, Europe, and Asia to sell the production volumes of our planned Infinite Loop™ commercial facilities.
Strategic Partnership with SKGC
In June 2021, Loop and SKGC concluded a definitive agreement for SKGC to become a strategic investor in Loop, with SKGC acquiring a 10% stake in Loop at $12.00 per share for a total of $56.5 million. The transaction, which closed in July 2021, also included warrants for SKGC to purchase Loop common stock at $15.00 and $20.00 per share. Concurrent with the strategic investment, Loop and SKGC entered into a memorandum of understanding (“MOU”) to form a joint venture with exclusivity to build sustainable PET plastic and polyester fiber manufacturing facilities throughout Asia.
SKGC is a global chemical company and member of the SK Group, one of South Korea’s largest conglomerates. SKGC is a general energy and chemical leader in the global market and is growing into a technology-based global chemical company through continuous R&D efforts. SKGC aims to achieve its “Green for Better Life” vision by establishing a plastics based circular economy through collaboration with various partners and stakeholders, such as Loop.
Asia represents approximately 60% of the world’s population and 70% of global PET consumption and is the main hub for the polyester fiber supply chain for textiles. The Asian market represents a prime opportunity for Loop’s growth and commercialization of its technology. SKGC is well established with a deep understanding of the Asian market, and vast expertise in building and operating large-scale petrochemical facilities, making them a uniquely well-suited partner for Loop in helping to ensure the successful commercialization of Loop’s technology in this market.
On April 27, 2023, Loop and SKGC entered into a joint venture agreement (the “JV Agreement”) to deploy Loop’s depolymerization technology in the Asian market through multiple commercial manufacturing facilities. Pursuant to the JV Agreement, Loop and SKGC agreed to form a new company (the “JV Company”), which will be headquartered in Singapore. SKGC will contribute 51% and Loop will contribute 49% of the initial equity capital of the JV Company. The JV Agreement outlines that the JV Company will have exclusive rights to commercialize Loop’s technology in the Asian market and Loop will receive an annual royalty fee for each of the commercial plants.
The first planned commercial manufacturing facility with Infinite Loop™ technology, located in Ulsan, South Korea, is expected to have an annual capacity to supply up to 70,000 metric tons per year of Loop™ PET resin for packaging and polyester fiber applications, and is anticipated to break ground in the first half of 2024 and to have construction completed in 2026. In addition to Infinite Loop™ Ulsan, the two partners have outlined plans which target a minimum of three additional commercial manufacturing facilities to be constructed throughout Asia by 2030. Loop and SKGC have partnered with SK ecoengineering, a subsidiary of the SK Group that brings considerable experience and proficiency as an EPC contractor, for the engineering and construction of the commercial manufacturing facilities.
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Infinite Loop™ Europe
We announced on September 10, 2020 a strategic partnership with SUEZ Group (“Suez”), with the objective to build the first Infinite Loop™ manufacturing facility in Europe. On June 16, 2022, Loop, together with Suez and SKGC, announced that the three companies will become equal participants in the strategic partnership.
The expanded partnership intends to combine SKGC's petrochemical manufacturing experience with Suez's resource management expertise and Loop’s breakthrough proprietary technology to supply up to 70,000 M/T of virgin quality, 100% recycled PET plastic and polyester fiber to the European market. The planned Infinite Loop™ facility will offer a solution to consumer goods companies which have committed to goals for significantly increased use of recycled content in their products and/or packaging and help to meet the growing demand for recycled PET resin and polyester fiber.
On February 16, 2023, the three companies announced that the Chemesis industrial platform in Saint-Avold, located in the Grand Est region of France, has been selected as the site for their planned manufacturing facility in Europe. We are working with our partners Suez and SKGC on acquiring the project site, alignment of various levels of government support and additional steps for the project which include advancing permitting, site specific engineering, customer offtake contracts, feedstock and financing.
Product activations with evian, L’Occitane, On AG, and Garnier
Loop has collaborated with multiple customers in recent and upcoming launches for products and product packaging incorporating Loop™ PET manufactured from monomers produced at the Terrebonne Facility.
In 2021, Loop, in partnership with iconic global beverage brand evian, unveiled a new “evian Loop” prototype virgin-quality water bottle made from 100% recycled content. The monomers used to produce the evian Loop bottles were made at the Terrebonne Facility. Evian began selling water bottles made from Loop™ PET in South Korea in October 2022. The waste plastic used to produce these bottles includes polyester fibers from carpets and clothing which are considered unrecyclable and destined for landfill and other natural environments. This initiative reflects evian’s commitment to its stated goal for circularity and 100% recycled content by 2025.
On October 11, 2022, Loop and L’OCCITANE, a global manufacturer and retailer of sustainable beauty and wellness products, unveiled a new bottle for the brand’s Almond Shower Oil that was manufactured with 100% recycled Loop™ PET resin produced using monomers from Loop’s Terrebonne Facility. Loop has partnered with L’OCCITANE to help meet the brand’s sustainability goal of using 100% recycled PET in its bottles by 2025. In partnership with the brand, a pilot project was executed where the bottle (excluding cap and label) was produced using 100% recycled Loop™ PET resin and was successfully carried out on L’OCCITANE production lines. This initiative marks a significant step forward in the partnership between the two companies and sets the pathway to implement Loop’s technology across other products in the brand’s assortment. As part of this partnership with L’OCCITANE, Loop’s branding is featured prominently on the front of the packaging, with additional details speaking to Loop’s technology on the back label.
We also entered into an agreement in May 2022 with On AG to supply Loop™ PET to be utilized in polyester fiber by the brand, pursuant to which Loop™ PET resin was delivered in the year ended February 28, 2023.
On April 19, 2023, Loop and Garnier, one of the world’s largest mass market beauty brands, launched the brand’s first Micellar Cleansing Water All-In-1 bottle made of Loop™ PET produced using monomers from Loop’s Terrebonne Facility (excluding cap and label). The Loop logo, featured on the front of this packaging innovation, serves as an anchor to highlight Loop’s technology, the quality of materials and the bottle’s recyclability. The inclusion of Loop branding on the packaging strongly supports Garnier's sustainability goals by promoting the infinitely recyclable potential of the product and brings awareness to PET plastic circularity. This packaging innovation will first be distributed in Garnier’s largest market, the US, and the brand’s home market of France.
Loop continues to pursue opportunities for new activations and marketing campaigns with additional consumer goods brand companies.
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Terrebonne Facility
As part of our plan for the commercialization of future Infinite Loop™ manufacturing facilities, we enhanced our Terrebonne, Québec pilot plant to become a small-scale PET depolymerization production facility, incorporating all key pieces of depolymerization equipment that will be used in the full-scale commercial facilities. In addition to our research and development activities, this facility is used to deliver initial production volumes to support co-branded market launch campaigns with partners and customers and will also be used to showcase the Infinite Loop™ end-to-end technology and train operational teams in advance of the commissioning of the Infinite Loop™ full-scale commercial facilities.
On December 22, 2022, we announced that we had reduced hours of operation at the Terrebonne Facility in order to reduce operating costs and preserve liquidity. The primary purpose of the Terrebonne Facility was to demonstrate that Loop’s breakthrough depolymerization technology was scalable, and also to produce commercial quantities of virgin quality PET resin and polyester fiber for global brands. We believe the Terrebonne Facility has achieved this objective. We will continue to fulfill existing commitments related to ongoing sales contracts.
In the nine-month period ended November 30, 2023, Loop reported revenues of $108 from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, including those with whom Loop is collaborating on product launches. In addition to supplying customers with initial volumes of Loop™ PET, the Terrebonne Facility continues to support our customers and partners with R&D and analytical capabilities.
Recent Developments
Memorandum of Understanding (“MOU”) with Reed Management (“Reed”)
On January 16th, Loop announced that the Company signed a non-binding MOU with Reed, a European investment firm focused on high impact and technology-enabled infrastructure, for US$66 million in non-dilutive financing as part of a joint venture (the “JV”) to roll-out Loop’s technology in the European market.
Loop and Reed intend to form a strategic long-term partnership through the establishment of a 50/50 JV to commercialize Loop’s technology in Europe. Reed intends to provide financing of €60 million (US$66 million) in non-dilutive capital. Of this amount, US$33 million is to be provided to Loop as non-dilutive capital to fund Loop’s technology commercialization globally. The remaining US$33 million is to be invested in the JV.
Under the terms of the MOU, Reed will provide capital as follows:
| · | US$11 million equity investment in the JV to acquire from Loop exclusive rights to co-invest alongside Loop in commercialization projects using Loop’s technology in Europe through the planned JV between Loop and Reed; |
| · | US$22 million loan from the JV to Loop in two equal tranches – first tranche paid at closing and second tranche paid in the following 12 months with both tranches having a 10% PIK rate and 3-year term; |
| · | US$33 million commitment to cover initial costs to develop projects in Europe, including Loop’s equity contribution to the previously announced JV to construct an Infinite Loop™ plant in Saint-Avold, France; |
| · | Any subsequent capital injections in the JV will be funded on a 50/50 basis between Reed and Loop. |
This intended partnership allows for Loop Industries to reduce the funding needs for its equity contributions to support the rollout of an increased number of facilities to be constructed in the European market using the Infinite Loop™ technology. Loop Industries will receive royalty and engineering fees directly from the planned facilities in Europe.
The non-binding MOU is subject to customary due diligence and the fulfillment of certain pre-closing conditions. The transaction is expected to close by the end of March 2024.
Ulsan ARC Groundbreaking Ceremony
Loop and SKGC announced on April 27th, 2023 that they have signed a joint venture agreement to build Infinite Loop™ facilities in the Asian market. The two companies plan to build four Infinite Loop™ manufacturing facilities throughout Asia by 2030. The first planned facility in Asia will be part of SKGC’s Ulsan Advanced Recycling Cluster (“Ulsan ARC”) in South Korea.
Daniel Solomita, Loop’s Founder and CEO, participated in the groundbreaking ceremony of the Ulsan ARC which took place on November 15th, 2023 in South Korea. Mr. Solomita presented the Company’s sustainable plastics technology and its Infinite Loop™ manufacturing model at the event, which included attendees ranging from central and local government officials, industry officials, environmental institutions, academic experts, customers and media.
The Ulsan ARC groundbreaking ceremony is a key milestone in the lead-up towards breaking ground on the planned Infinite Loop™ manufacturing facility in the Ulsan ARC, which is expected to take place in the first half of 2024, with construction being completed by 2026.
Loop™ Branded PET Resin Compliant for Pharmaceutical Industry Packaging Applications
On December 13, 2023, Loop announced that its Loop™ branded PET resin has been tested and is compliant for use in packaging applications in the pharmaceutical industry. The rigorous requirements and standards outlined by the United States Pharmacopeia (USP <661.1>, Plastic Materials of Construction) and the European Pharmacopeia (Ph.Eur. 3.1.15, Polyethylene Terephthalate for Containers for Preparations not for Parenteral Uses) ensure that materials used in pharmaceutical packaging maintain the highest levels of integrity and do not compromise the safety and efficacy of the enclosed products. Test results executed by a worldwide leader in laboratory testing services confirm that Loop's PET resin has successfully met these requirements, opening new possibilities for sustainable packaging solutions in the pharmaceutical industry.
The pharmaceutical industry is increasingly recognizing the importance of adopting sustainable practices and materials to reduce its environmental impact. Loop's 100% recycled virgin quality PET can help support pharmaceutical companies with a sustainable packaging alternative and address the growing demand for environmentally responsible choices in the industry.
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Market Opportunity
The estimated global annual market demand for PET plastic and polyester fiber is approximately $180 billion. We believe plastic pollution and climate change continue to be the most persistently covered environmental issues by media and local and global environmental non-governmental organizations. Some of the main concerns associated with PET are the greenhouse gas (“GHG”) emissions associated with its production from non-renewable hydrocarbons and the length of time it persists in landfills and the natural environment. There is an increasing demand for action to address the global plastic crisis, as evidenced by the March 2022 endorsement by 175 nations of a historic resolution at the UN Environmental Assembly to end plastic pollution and forge an international legally binding agreement by the end of 2024. In the last few years, governments in North America, Europe and Asia have been enacting and proposing laws and regulations mandating the use of minimum recycled content in packaging, which underlies the strength of this issue in the marketplace. Consumer brands are seeking a solution to their plastic challenge, and they are taking action. In recent years we have seen major brands make significant commitments to close the loop on their plastic packaging by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging.
Global consumer packaged goods companies (“CPG companies”), apparel manufacturers, and retail brands have announced significant public commitments and targets to make the transition to a circular plastic economy, for example:
| · | Adidas Group aims to replace all virgin polyester with recycled polyester in all of its Adidas products by 2024; |
| · | Danone, the provider of evian® brand bottled water, committed to a goal of using 100% recycled content packaging by 2025; |
| · | Coca-Cola committed to an average recycled content of 50% across its packaging by 2030; |
| · | PepsiCo has set new goals to cut virgin plastic per serving by 50% across its global food & beverage portfolio by 2030 and plans to utilize 50% recycled content in its plastic packaging. In the U.S., the company plans to increase its use of rPET in its bottled products in 2023, with an objective to roll out 100% rPET bottles in multiple U.S. areas by 2030; |
| · | In 2020, L’OCCITANE committed to implementing 100% recycled content plastic in their bottles by 2025; |
| · | Nike has announced a 2025 target of diverting 100% of its waste from landfills, with at least 80% recycled back into its products and goods; |
| · | L’Oréal Group committed to using 100% recycled or biobased plastic in their packaging by 2030; |
| · | Ikea maintains its goal that, by 2030, all plastic used in its products will be based on renewable or recycled material; and |
| · | By 2025, Lululemon aims to achieve at least 75% sustainable materials for their products, including fibers that are recycled, renewable, regenerative, sourced responsibly and are manufactured using low-resource processes. |
There is a growing regulatory and policy environment to encourage a reduction in the production of virgin fossil fuel-based plastic and for minimum recycled content in packaging imposed by various governments:
| · | North America: |
| o | Canada has announced a goal of zero-plastic waste by 2030 and is targeting for all plastic packaging to contain 50% recycled content by 2030. |
| o | California law requires that plastic bottles contain at least 25% post-consumer resin by 2025, and at least 50% by 2030. |
| · | Europe: |
| o | As of January 2021, the European Union introduced a new tax of €800/ton on non-recycled plastic packaging based on the amount of plastic packaging placed on each member state’s market. |
| o | Spain imposed a tax of €450 per ton on non-reusable plastic packaging, effective January 1, 2023. |
| o | Italy introduced a tax in January 2023 of €450 per ton on virgin plastic used in manufacture or importation of single use plastic. |
| o | Effective April 2022, a new £200/ton tax applies in the UK to plastic packaging produced or imported into the UK that does not contain at least 30% recycled plastic. |
| o | France maintains its goal of having 100% plastics recycled by 2025 and 77% of beverage bottles to be collected. |
| · | Asia: South Korea continues to target reduction of plastic waste by 20%, an increase in recycling rates from 54% to 70% by 2025, and utilization of 30% renewable plastic by 2030. |
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The growing regulatory environment combined with global consumer goods companies, apparel manufacturers, and retail brand commitments for 2025 and 2030 are expected to further increase the demand for rPET.
Closed-loop circularity and keeping materials within their own cycle (bottle-to-bottle and fiber-to-fiber) is gaining increasing attention as the focus on sustainability intensifies. Governments and regulators have considered or enacted heightened standards for recycled materials that discourage downcycling of bottles into polyester fiber. Additionally, it is becoming increasingly difficult to secure inventory of post-consumer bottles due to the increased demand from the bottle industry as they strive to achieve their own sustainability goals. A fiber-to-fiber recycling strategy addresses these problems and allows fashion brands and companies to secure volume and support the increasing demand of recycled polyester fiber in the textile industry.
We believe the commercialization plans of Loop™ PET resin and polyester fiber may provide the ideal solution for global brands because Loop™ PET resin and polyester fiber contains 100% recycled PET and polyester fiber content. The Loop™ PET resin and polyester fiber is virgin-quality and is suitable for use in food-grade packaging. That means CPG companies will be able to market packaging made from a 100% recycled Loop™ branded PET resin and polyester fiber.
Commercialization Strategy
Our objective is to achieve global expansion of Loop’s technology through a mix of fully owned manufacturing facilities, strategic partnerships, and licensing agreements. We believe that industrial companies, some of which today may not be in the business of manufacturing PET resin or polyester fiber, will view involvement with Infinite Loop™ projects as a significant growth opportunity, which may offer attractive economic returns either as Loop manufacturing partners or as licensees of the technology.
On December 22, 2022, we announced a shift in our commercialization strategy which now focuses on our planned joint venture projects with SKGC in Asia and Europe. These projects have a lower requirement for Loop equity investment and higher expected return on capital, and leverage SKGC’s engineering and operational infrastructure. In addition, the joint venture projects will provide Loop with an annual technology licensing fee. SKGC is committed to commercializing Loop’s technology as the underpinning of its sustainable plastics strategy. Loop is working collaboratively with SKGC to put in place a financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the first Asian manufacturing facility in Ulsan, South Korea, which is anticipated to break ground in the first half of 2024 and to have construction completed in 2026.
The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop™ PET resin and polyester fiber into their packaging and clothing. As countries around the globe continue to increase sustainability targets and recycled content mandates, our customers are increasing the use of sustainably produced materials into their products.
The Infinite Loop™ manufacturing technology is the key pillar of our commercialization blueprint. We believe our technology is at the forefront of the global transition away from fossil fuels and petrochemicals and into the circular economy, where PET plastic and polyester fiber are produced by recycling waste plastic rather than depleting finite resources. The Infinite Loop™ manufacturing technology allows for waste PET plastic and polyester fiber to be broken down into its base building blocks, monomers DMT and MEG, using Loop’s patented technology. Once the monomers are purified, they are then repolymerized into PET plastic or polyester fiber using INVISTA know how, which Loop licenses, and Chemtex Global Corporation’s engineering. The INVISTA polymerization process and the associated designs are historically proven in the commercial production of PET resin and polyester fiber.
We have completed our basic design package for the Infinite Loop™ full-scale manufacturing facilities. The engineering philosophy we have adopted is “design one, build many.” This approach allows for the basic design package to be used as the base engineering platform for all future geographical expansion. We believe this approach allows for quick execution, speed to market, and lends itself well to modular construction. The basic design package has a capacity of up to 70,000 M/T of PET resin output per year. Permitting, site and regulatory considerations may impact plant capacity.
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Our market strategy is to assist global consumer goods brands in meeting their public sustainability commitments by offering co-branded packaging or polyester fibers that are made with Loop, 100% recycled, virgin-quality PET or polyester fibers. We believe that Loop™ recycled PET resin and polyester fiber could command premium pricing over virgin, petroleum-based PET resin and provide attractive economic returns. We are targeting multi-year take or pay offtake agreements for planned Infinite Loop™ production. Factors under consideration in determining project economics include the feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, PET bale index pricing, logistics, and ramp up, among others.
Proprietary Technology and Intellectual Property
We believe the power of our technology lies in its ability to use post-industrial and post-consumer waste PET plastic and polyester fiber feedstocks, which could end up in landfills, rivers, oceans and natural areas, to create Loop™ PET resin. We believe our technology can deliver high-purity profitable virgin-quality, 100% recycled PET resin suitable for use in food-grade packaging and polyester fiber.
Our Generation II technology (“GEN II”) is a methanolysis-based depolymerization technology that uses temperatures below 90 °C to depolymerize waste PET and polyester fiber. The low temperature offers several key advantages which the Company believes will improve its ability to commercialize the GEN II technology, including;
| · | Lower energy usage during depolymerization, and therefore reduced processing cost and lower GHG emissions relative to higher temperature processes; |
| · | Avoidance of side reactions with non-PET waste, which are inherent in waste PET feedstock streams, during depolymerization which may occur during higher temperature and higher pressure depolymerization processes. This allows for a simplified distillation purification process resulting in fewer, and more effective, steps to isolate the desired high purity DMT and MEG monomers suitable to produce virgin-quality PET required to meet food contact regulations as well as the quality and clarity requirements of global consumer product companies; |
| · | Allowing the depolymerization of less costly and low-quality feedstocks, which cannot be effectively recycled today, such as carpet fiber, clothing and mixed plastics, and upcycling them into high-quality PET that can be used in food contact use; and |
| · | The GEN II technology uses only trace amounts of water, eliminates the need for a halogenated solvent and uses a catalyst at low concentration. |
We believe that GEN II requires less energy and fewer resource inputs than conventional PET production processes. We also believe it is an environmentally sustainable method for producing virgin-quality food-grade PET plastic by decoupling PET manufacturing from the fossil fuel industry.
To independently validate that our GEN II technology can produce DMT and MEG monomers at mini-pilot and pilot scale, we commissioned Kemitek, a College Centre for Technology Transfer specialized in the fields of green chemistry and chemical process scale-up. Kemitek’s findings allowed them to confirm that our technology produces monomers that meet our purity specifications for the production of PET resin and polyester fiber. The complete Kemitek report was filed with the SEC by the Company on December 14, 2020.
Additionally, Loop’s strategic partners, Suez and Danone, among others, collectively engaged an independent, globally recognized third-party engineering firm to execute a thorough due diligence and technology validation report. We believe the final report, which was communicated in May 2022, validated and reinforced the quality, effectiveness, and scalability of our technology. Our technology was further validated in March 2023, when Loop and SKGC announced the successful completion of the technical due diligence conducted by SKGC. Key parameters of Loop’s technology that were validated through SKGC’s comprehensive due diligence include the production yields, operational stability, quality of the output monomers and overall performance of Loop’s Terrebonne Facility. The technical due diligence validated that the PET resin and polyester fiber produced using Loop’s technology is of virgin quality.
To protect our technology and intellectual property rights, we rely on a combination of patents, trademarks, trade secrets, confidentiality agreements and provisions as well as other contractual provisions to protect our proprietary rights, which are primarily our patents, brand names, product designs and marks.
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The GEN II technology portfolio currently consists of four patent families:
| · | One family has three issued U.S. patents, and two pending U.S. applications, the last of which is expected to expire on or around September 2037, not including any patent term extensions. Internationally, this patent family has nine issued or allowed patents in foreign jurisdictions, including China, Bangladesh, Argentina, Taiwan, and Brazil, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted, not including any patent term extensions. |
| · | An additional aspect of the GEN II technology, as claimed in two issued U.S. patents and a pending U.S. application, all expected to expire on or around June 2039, not including any patent term extensions. Internationally, this patent family includes seven issued or allowed patents in foreign jurisdictions, including China, Morocco, Algeria, Indonesia and Bangladesh, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around June 2039, if granted, not including any patent term extensions. |
| · | Another aspect of the GEN II technology, which is the subject of an issued U.S. patent and a pending U.S. application, both expected to expire on or around March 2040, not including any patent term extensions. Internationally, this patent family includes pending applications in Canada, Europe, India, Singapore, Papua New Guinea, Brazil, and South Africa. |
| · | Another aspect of the GEN II technology, which is the subject of two issued U.S. patents and a pending U.S. application, both expected to expire on or around March 2040, not including any patent term extensions. Internationally, this patent family includes four issued or allowed patents in foreign jurisdictions, including Europe, Chile, Bangladesh and South Africa, and pending applications in Canada, China, Korea, the Eurasian Patent Organization, the Gulf Cooperation Council, India, Japan, Mexico, and various other countries, all expected to expire on or around March 2040, if granted, not including any patent term extensions. |
| ·
| We have also filed a U.S. provisional application directed to another aspect of the GEN II technology. Any patents that ultimately issue from this application are expected to expire on or around September 2044, not including any patent term adjustment or extensions. |
Loop owns registrations for its trademarks in Cambodia, Canada, China, the European Union, Japan Taiwan, the United Kingdom, Vietnam and the U.S. Loop also has pending applications in Canada, China, South Korea, and the U.S.
Government Regulation and Approvals
As we seek to further develop and commercialize our technology, we will be subject to extensive and frequently developing federal, state, provincial and local laws and regulations. Compliance with current and future regulations, including food packaging regulations, could increase our operational costs.
Our operations require various governmental permits and approvals. We are in the process of obtaining all necessary permits and approvals for the operation of our business; however, any of these permits or approvals may be subject to denial, revocation or modification under various circumstances. Failure to obtain or comply with the conditions of permits and approvals or to have the necessary approvals in place may adversely affect our operations and may subject us to penalties. See “Risk Factors” below for additional information.
We believe that if we are successful in addressing food packaging regulations in various countries and economic regions, the regulatory environment may provide Loop™ PET resin a competitive advantage relative to mechanically recycled alternative resins and virgin PET.
Loop’s PET resin was subjected to independent testing by an external and certified laboratory, which confirmed the PET complies with FDA Regulation 21 CFR § 177.1630 on August 26, 2021, as well as EU Commission Regulation No 10/2011 on July 27, 2021. These results attest that Loop’s PET is safe for use in food-contact applications, including but not limited to bottled water, carbonated drinks and food trays. Demonstration of compliance with food-contact requirements follows the No Objection Letter (“NOL”) from the FDA previously granted to Loop in March 2021. The NOL confirms that Loop’s monomers can produce rPET of a purity suitable for food-contact use, provided it meets the applicable requirements of Title 21 of the Code of Federal Regulations. The monomers used in the PET resin submitted for testing were produced at Loop’s small-scale production facility in Terrebonne, Québec (the “Terrebonne Facility”).
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We have received from the European Chemicals Agency a confirmation of registration for our MEG on November 17, 2020, and for our DMT on December 7, 2020. The registration under the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) Regulation (EC 1907/2006) confirms that our monomers are of a purity equal to what is currently recognized within Europe and entitles us to manufacture/import the monomers into Europe. It should be noted that MEG and DMT are on the positive list for plastic materials, which means that the two monomers can be used as food contact materials.
On August 31, 2021, Loop also received a NOL from Health Canada, which states that the PET produced by Loop’s recycling process is suitable for use in the manufacture of water bottles and articles for contact with all food types under all conditions of use.
On December 13, 2023, Loop announced that its Loop™ branded PET resin has been tested and is compliant for use in packaging applications in the pharmaceutical industry. The rigorous requirements and standards outlined by the United States Pharmacopeia (USP <661.1>, Plastic Materials of Construction) and the European Pharmacopeia (Ph.Eur. 3.1.15, Polyethylene Terephthalate for Containers for Preparations not for Parenteral Uses) ensure that materials used in pharmaceutical packaging maintain the highest levels of integrity and do not compromise the safety and efficacy of the enclosed products. Test results executed by a worldwide leader in laboratory testing services confirm that Loop's PET resin has successfully met these requirements, opening new possibilities for sustainable packaging solutions in the pharmaceutical industry.
Human Capital
As of November 30, 2023, we had 60 employees of which 22 work in research and development, 24 in engineering and operations, and 14 in administrative functions.
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Results of Operations
Three Months Ended November 30, 2023
The following table summarizes our operating results for the three-month periods ended November 30, 2023 and 2022, in thousands of U.S. Dollars.
|
| Three months ended November 30, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| Change |
| |||
Revenue from contracts with customers |
| $ | 26 |
|
| $ | 25 |
|
| $ | 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation |
|
| 1,107 |
|
|
| 1,540 |
|
|
| (433 | ) |
Stock-based compensation |
|
| 161 |
|
|
| 455 |
|
|
| (294 | ) |
Machinery and equipment expenditures |
|
| 4 |
|
|
| 1,059 |
|
|
| (1,055 | ) |
External engineering |
|
| 262 |
|
|
| 707 |
|
|
| (445 | ) |
Plant and laboratory operating expenses |
|
| 322 |
|
|
| 916 |
|
|
| (594 | ) |
Tax credits |
|
| (221 | ) |
|
| (300 | ) |
|
| 79 |
|
Other |
|
| 198 |
|
|
| 205 |
|
|
| (7 | ) |
Total research and development |
|
| 1,833 |
|
|
| 4,582 |
|
|
| (2,749 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation |
|
| 599 |
|
|
| 492 |
|
|
| 107 |
|
Stock-based compensation |
|
| 236 |
|
|
| 419 |
|
|
| (183 | ) |
Professional fees |
|
| 720 |
|
|
| 1,278 |
|
|
| (558 | ) |
Insurance |
|
| 645 |
|
|
| 710 |
|
|
| (65 | ) |
Other |
|
| 258 |
|
|
| 284 |
|
|
| (26 | ) |
Total general and administrative |
|
| 2,458 |
|
|
| 3,183 |
|
|
| (725 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on disposition of assets |
|
| - |
|
|
| (6,704 | ) |
|
| 6,704 |
|
Depreciation and amortization |
|
| 131 |
|
|
| 134 |
|
|
| (3 | ) |
Interest and other financial expenses |
|
| 42 |
|
|
| 54 |
|
|
| (12 | ) |
Interest income |
|
| (166 | ) |
|
| (13 | ) |
|
| (153 | ) |
Foreign exchange gain |
|
| (28 | ) |
|
| (198 | ) |
|
| 170 |
|
Total expenses |
|
| 4,270 |
|
|
| 1,038 |
|
|
| 3,232 |
|
Net loss |
| $ | (4,244 | ) |
| $ | (1,013 | ) |
| $ | (3,231 | ) |
Revenues
Revenues for the three-month period ended November 30, 2023 increased $1 to $26, as compared to $25 for the same period in 2022. The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.
Research and Development
Research and development expense for the three-month period ended November 30, 2023 decreased $2,749 to $1,833, as compared to $4,582 for the same period in 2022. The decrease was primarily attributable to a $1,055 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $594 decrease in plant and laboratory operating expenses, a $445 decrease in external engineering costs for design work for our Infinite Loop™ manufacturing process, a $433 decrease in employee compensation expenses, and a $294 decrease in stock-based compensation expenses.
General and administrative expenses
General and administrative expenses for the three-month period ended November 30, 2023 decreased $725 to $2,458, as compared to $3,183 for the same period in 2022. The decrease was primarily attributable to a $558 decrease in professional fees, and a $183 decrease in stock-based compensation expenses.
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Net Loss
The net loss for the three-month period ended November 30, 2023 increased $3,231 to $4,244, as compared to $1,013 for the same period in 2022. The increase is primarily due to a gain on disposition of assets of $6,704 recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec, partially offset by the $2,749 decrease in research and development expenses, and the decrease in general and administrative expenses of $725.
Nine months Ended November 30, 2023
The following table summarizes our operating results for the nine-month periods ended November 30, 2023 and 2022, in thousands of U.S. Dollars.
|
| Nine months ended November 30, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| Change |
| |||
Revenue from contracts with customers |
| $ | 108 |
|
| $ | 160 |
|
| $ | (52 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation |
|
| 3,611 |
|
|
| 5,179 |
|
|
| (1,568 | ) |
Stock-based compensation |
|
| 476 |
|
|
| 1,171 |
|
|
| (695 | ) |
Machinery and equipment expenditures |
|
| 1,240 |
|
|
| 4,133 |
|
|
| (2,893 | ) |
External engineering |
|
| 1,558 |
|
|
| 2,914 |
|
|
| (1,356 | ) |
Plant and laboratory operating expenses |
|
| 1,238 |
|
|
| 2,366 |
|
|
| (1,128 | ) |
Tax credits |
|
| (269 | ) |
|
| (1,207 | ) |
|
| 938 |
|
Other |
|
| 507 |
|
|
| 577 |
|
|
| (70 | ) |
Total research and development |
|
| 8,361 |
|
|
| 15,133 |
|
|
| (6,772 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation |
|
| 1,884 |
|
|
| 1,929 |
|
|
| (45 | ) |
Stock-based compensation |
|
| 664 |
|
|
| 8,799 |
|
|
| (8,135 | ) |
Professional fees |
|
| 2,251 |
|
|
| 3,841 |
|
|
| (1,590 | ) |
Insurance |
|
| 2,058 |
|
|
| 2,883 |
|
|
| (825 | ) |
Other |
|
| 910 |
|
|
| 778 |
|
|
| 132 |
|
Total general and administrative |
|
| 7,767 |
|
|
| 18,230 |
|
|
| (10,463 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on disposition of assets |
|
| - |
|
|
| (6,704 | ) |
|
| 6,704 |
|
Depreciation and amortization |
|
| 400 |
|
|
| 411 |
|
|
| (11 | ) |
Interest and other financial expenses |
|
| 140 |
|
|
| 139 |
|
|
| 1 |
|
Interest income |
|
| (484 | ) |
|
| (36 | ) |
|
| (448 | ) |
Foreign exchange gain |
|
| (81 | ) |
|
| (289 | ) |
|
| 208 |
|
Total expenses |
|
| 16,103 |
|
|
| 26,884 |
|
|
| (10,781 | ) |
Net loss |
| $ | (15,995 | ) |
| $ | (26,724 | ) |
| $ | 10,729 |
|
Revenues
Revenues for the nine-month period ended November 30, 2023 decreased $52 to $108, as compared to $160 for the same period in 2022. The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.
Research and Development
Research and development expense for the nine-month period ended November 30, 2023 decreased $6,772 to $8,361, as compared to $15,133 for the same period in 2022. The decrease was primarily attributable to a $2,893 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $2,263 decrease in employee compensation expenses, including stock-based compensation, a $1,356 decrease in external engineering costs for design work for our Infinite Loop™ manufacturing process, and a $1,128 decrease in plant and laboratory operating expenses, partially offset by a decrease in tax credits accounted for as a reduction of R&D expenses of $938.
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General and administrative expenses
General and administrative expenses for the nine-month period ended November 30, 2023 decreased $10,463 to $7,767, as compared to $18,230 for the same period in 2022. The decrease was primarily attributable to a $8,135 decrease in stock-based compensation which is mostly related to a $7,740 expense recorded in relation to the achievement of a performance milestone for 1,000,000 RSUs in the nine-month period ended November 30, 2022, a $1,590 decrease in professional fees, and a $825 decrease in insurance costs.
Net Loss
The net loss for the nine-month period ended November 30, 2023 decreased $10,729 to $15,995, as compared to $26,724 for the same period in 2022. The decrease is primarily due to the decrease in general and administrative expenses of $10,463, and the $6,772 decrease in research and development expenses, partially offset by a gain on disposition of assets of $6,704 recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Since its inception, the Company has been in the pre-commercialization stage with limited revenues, with its ongoing operations and commercialization plans financed primarily by raising equity. To date, we have been successful in raising capital to finance our ongoing operations. Our liquidity position consists of cash and cash equivalents on hand of $9,366 at November 30, 2023 and an undrawn senior loan facility from a Canadian bank of $2,577. Our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and the Risk Factors section included in Part I, Item 1A of our 2023 Annual Report on Form 10-K.
Management actively monitors the Company’s cash resources against the Company’s short-term cash commitments to ensure the Company has sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is substantial doubt about the Company’s ability to continue as a going concern. In preparing this liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts which includes developing assumptions related to: (i) estimation of amount and timing of future cash outflows and cash inflows and (ii) determining what future expenditures are committed and what could be considered discretionary. Management prepared the Company’s consolidated financial statements on a going concern basis in accordance with ASC 205-40, as management believes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they become due for a period of no less than 12 months from the date of issuance of these unaudited interim condensed consolidated financial statements.
Management continues to pursue our growth strategy and is evaluating our financing plans to continue to raise capital to finance the start-up of commercial operations and continue to fund our ongoing operations. We will require a significant amount of capital to fund our growth as we invest in our planned commercial facilities in Europe, Asia and North America, as well as additional research and development. In addition to our cash on hand, we may also raise additional capital through equity offerings or debt financings, government incentives, as well as through collaborations or strategic alliances to execute our growth strategy. Such financing will depend on many factors, including actual construction costs of the planned commercial facilities, potential delays in our supply chain, and our ability to secure customers, which may not be available on acceptable terms, if at all. If we are unable to raise additional capital when required, our business, financial condition and results of operations would be adversely affected.
In December 2021, the Company entered into an agreement for the purchase of long-lead equipment for up to $8,546 which can be used in any Infinite Loop™ manufacturing facility. As of November 30, 2023, the Company has paid an aggregate of $8,460 in cash deposits. This amount, along with engineering and development costs that have been and may continue to be incurred, is currently expected to be recovered from the JV Company when construction begins on the Infinite Loop™ Ulsan facility. The total estimated recoverable amount of $16,000 has not been recognized in the interim unaudited financial statements included in this Quarterly Report.
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We have a long-term debt obligation to Investissement Québec in connection with a financing facility (the “Financing Facility”) for the expansion of the Terrebonne Facility up to a maximum of $3,387. We received the first disbursement in the amount of $1,627 on February 21, 2020 and the second disbursement in the amount of $1,760 on August 26, 2021. The loan can be repaid at any time by us without penalty. The loan bears interest at a rate of 2.36% and there was a 36-month moratorium on both capital and interest repayments as of the first disbursement date. Under the original terms of the financing facility, at the end of the 36-month moratorium, capital and interest was repayable in 84 monthly installments. On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “the Financing Facility Amendment”). As per the Financing Facility Amendment, a total of $37 of the principal amount is repayable in monthly installments in the fiscal year ending February 29, 2024 and the remainder of the principal amount is repayable in 72 monthly installments. The Financing Facility Amendment does not modify the interest rates, the repayment terms of accrued interest or any other terms of the Financing Facility.
Under the terms of the Financing Facility, Investissement Québec was also issued warrants to purchase shares of our common stock in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $339. The warrants were issued at a price per share equal to the higher of (i) $11.00 per share and (ii) the ten-day weighted average closing price of Loop Industries shares of common stock on the Nasdaq stock market for the 10 days prior to the issue of the warrants. The warrants can be exercised immediately upon grant and have a term of three years from the date of issuance. On February 21, 2020, upon the receipt of the first disbursement under this facility, we issued a warrant to purchase 15,153 shares of common stock at a price of $11.00 to Investissement Québec, which expired in February 2023. On August 26, 2021, upon the receipt of the second disbursement under this facility, we issued a warrant to purchase 17,180 shares of common stock at a price of $11.00 to Investissement Québec, which remains outstanding. There is no remaining amount available under the Financing Facility after the second disbursement.
On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank. The Credit Facility allows for borrowings of up to $2,577 in aggregate principal amount and provides for a two-year term. The Credit Facility is secured by the Company’s Terrebonne, Québec property and is subject to a minimum equity covenant, tested quarterly. All borrowings under the Credit Facility will bear interest at an annual rate equal to the bank’s Canadian prime rate (as defined in the Credit Facility) plus 1.0%. The Company is subject to a guarantee of the liabilities of Loop Canada Inc. As at November 30, 2023, the Credit Facility was undrawn.
Flow of Funds
Summary of Cash Flows
A summary of cash flows for the three months ended November 30, 2023 and 2022 was as follows, in thousands of U.S. Dollars:
|
| Three Months Ended November 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net cash used in operating activities |
| $ | (14,762 | ) |
| $ | (25,012 | ) |
Net cash provided from (used in) investing activities |
|
| (5,453 | ) |
|
| 6,995 |
|
Net cash used by financing activities |
|
| (47 | ) |
|
| - |
|
Effect of exchange rate changes on cash |
|
| 37 |
|
|
| (419 | ) |
Net (decrease) increase in cash |
| $ | (20,255 | ) |
| $ | (18,436 | ) |
Net Cash Used in Operating Activities
During the nine-month period ended November 30, 2023, we used $14,762 in operations compared to $25,012 during the same period in 2022. As discussed above in the Results of Operations, the year-over-year decrease is mainly due to decreased operating expenses as we have completed the upgrade of the Terrebonne Facility and our basic design package for the Infinite Loop™ full-scale manufacturing facilities.
Net Cash Used in Investing Activities
During the nine-month period ended November 30, 2023, we used $5,453 in investing activities compared to cash provided from investing activities of $6,995 during the same period in 2022. During the nine-month period ended November 30, 2023, we made $5,065 in deposits on long-lead equipment for use in a commercial project, as compared to $1,271 for the same period in 2022. During the nine-month period ended November 30, 2023, we made investments in intangible assets of $378, as compared to $225 for the same period in 2022, particularly in our patent technology in the United States and around the world. During the nine-month period ended November 30, 2022, we sold land in Bécancour, Québec for cash proceeds of $8,559.
Net Cash (Used) Provided by Financing Activities
During the three months ended November 30, 2023, we repaid $47 of long-term debt.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
ITEM 4. CONTROLS AND PROCEDURES
Management’s Evaluation of our Disclosure Controls and Procedures
A. Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of November 30, 2023.
B. Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended November 30, 2023 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SEC Investigation
As previously disclosed, we received a subpoena from the SEC in October 2020 requesting certain information from us, including information regarding testing, testing results and details of results from our GEN I and GEN II technologies, and certain of our partnerships and agreements. In March 2022, we received a second subpoena requesting additional information, including information concerning our reverse-merger in 2015, and communications with certain individuals and entities. There have been no additional information requests from the SEC relating to the Company’s business or technology.
The SEC informed us that its investigation does not mean that the SEC has concluded that anyone has violated the law and that the investigation does not mean that the SEC has a negative opinion of us. We cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation.
On September 30, 2022 the SEC filed a complaint (the “SEC complaint”) against several named defendants (“Defendants”), and also identified as a relief defendant Daniel Solomita, our Chief Executive Officer. The SEC complaint does not allege wrongdoing by the Company or Mr. Solomita. The SEC complaint identifies Mr. Solomita and an entity he owns as relief defendants because they purportedly received monies from the Defendants in 2015 that the SEC alleges were derived from the Defendants’ fraud. The SEC complaint does not allege that Mr. Solomita was aware of the alleged wrongdoing by the Defendants and does not allege that he was aware that any alleged monies received were derived from fraud.
Litigation
From time to time, we may become involved in various lawsuits and legal proceedings or investigations which arise in the ordinary course of business. Except as noted above, we are not presently a party to any legal proceedings, government actions, administrative actions, investigations or claims that are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business, financial condition or operating results. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
It is possible that we may expend financial and managerial resources in the defense of our intellectual property rights in the future if we believe that our rights have been violated. It is also possible that we may expend financial and managerial resources to defend against claims that our products and services infringe upon the intellectual property rights of third parties.
ITEM 1A. RISK FACTORS
We are subject to various risks and uncertainties in the course of our business. Risk factors relating to us are set forth under “Risk Factors” in our Annual Report on Form 10-K, filed on May 18, 2023. No material changes to such risk factors have occurred during the three months ended November 30, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following Exhibits, as required by Item 601 of Regulation SK, are attached or incorporated by reference, as stated below.
Exhibit Index
Incorporated by Reference | ||||||||||
Number | Description | Form | File No. | Filing Date | Exhibit No. | |||||
10-K | 000-54768 | May 30, 2017 | 3.1 | |||||||
8-K | 000-54768 | April 10, 2018 | 3.1 | |||||||
Filed herewith | ||||||||||
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| Filed herewith |
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Furnished herewith | ||||||||||
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| Furnished herewith |
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101.INS | XBRL Instance Document | Filed herewith | ||||||||
101.SCH | XBRL Taxonomy Extension Schema Document |
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101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith | ||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith | ||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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| Filed herewith |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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| Filed herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Date: January 16, 2024 | By: | /s/ Daniel Solomita |
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| Name: | Daniel Solomita |
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| Title: | President and Chief Executive Officer, and Director (Principal Executive Officer) |
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Date: January 16, 2024 | By: | /s/ Fady Mansour | |
Name: | Fady Mansour | ||
Title: | Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) |
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