美國
證券交易委員會
華盛頓特區20549
表格
根據1934年證券交易所法案第13或第15(D)條的季度報告。 | |
|
|
| 截至2024年6月30日季度結束 |
或
根據1934年證券交易法第13或15(d)條規定的過渡報告 | |
|
|
| 在從___________到___________的過渡期間 |
委員會檔案號碼。
（依照公司章程規定指定的登記證券名稱） |
(成立地或組織其他管轄區) | （聯邦稅號） |
(主要行政辦公室郵遞區號地址)
註冊人的電話號碼，包括區號 (
根據該法案第12(b)條規定註冊的證券：
每種類別的名稱 | 交易標的（s） | 每個註冊交易所的名稱 |
輝瑞公司面臨數起分開的訴訟，這些訴訟仍在進行中，需等待第三項索賠條款的裁決。2023年9月，我們與輝瑞公司同意合併2022和2023年的訴訟，並將審判日期從2024年11月推遲至2025年上半年，具體時間將由法院確定。 |
請回答以下問題：（1）公司是否在過去12個月內依據 1934年交易所法第13條或第15(d)條呈報了所有要求呈報的報告（或者在更短的期限內公司是否需要呈報此類報告），（2）公司是否在過去90天內需要呈報此類報告。
請標註勾選，以示該登記人是否在過去12個月內（或登記人應提交此類文件的較短期限）依照Regulation S-t（本章第232.405條）的規定遞交了每一個要求提交的互動數據檔案。
請勾選指示登記者是否為大型快速提交人、快速提交人、非快速提交人、較小的報告公司或新興成長型公司。請參閱交易所法規120億2條，了解「大型快速提交人」、「快速提交人」、「較小的報告公司」和「新興成長型公司」的定義。
大型加速歸檔人 | ☐ | 加速歸檔人 | ☐ |
☒ | 小型報告公司 | ||
|
| 新興成長型企業 |
如果是新興成長型企業，在符合任何依據證券交易法第13(a)條所提供的任何新的或修改的財務會計準則的遵循的延伸過渡期方面，是否選擇不使用核准記號進行指示。☐
請勾選表示，是否申報人屬於外殼公司（根據交易所法案第120億2條定義）。
是
截至2024年10月14日，公司發行的普通股股數為
LOOP INDUSTRIES, INC.
目 錄
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2 |
| 目錄 |
第一部分 財務信息
項目1. 基本報表
Loop Industries, Inc.
2024年8月31日結束的三個月和六個月
指数到未經審核的中期簡明合併基本報表
Contents | Page(s) | ||
Condensed consolidated balance sheets as at August 31, 2024 (Unaudited) and February 29, 2024 | 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 29, 2024 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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Sales tax, tax credits and other receivables (Note 3) |
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Inventories (Note 4) |
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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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Current portion of long-term debt (Note 10) |
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Unearned revenue (Note 11) |
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Total current liabilities |
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Due to customer |
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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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Going Concern (Note 1) |
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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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| Six Months Ended |
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| August 31, 2024 |
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| August 31, 2023 |
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| August 31, 2024 |
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| August 31, 2023 |
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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 loss (income) : |
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Interest and other financial expenses |
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Interest income |
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Foreign exchange loss (gain) |
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Total other loss (income) |
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Net loss |
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Other comprehensive 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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Going Concern (Note 1) |
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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 August 31, 2024 |
| |||||||||||||||||||||||||||||||||
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| Common stock par value $0.0001 |
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| Preferred stock par value $0.0001 |
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| Additional |
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| Additional Paid-in |
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| Accumulated 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, May 31, 2024 |
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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, August 31, 2024 |
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Going Concern (Note 1) |
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(in thousands of U.S. dollars, except for share data) |
| Three months ended August 31, 2023 |
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| Common stock par value $0.0001 |
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| Preferred stock par value $0.0001 |
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| Additional |
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| Accumulated Other |
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| Total |
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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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Balance, May 31, 2023 |
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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, August 31, 2023 |
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Going Concern (Note 1) |
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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) |
| Six months ended August 31, 2024 |
| |||||||||||||||||||||||||||||||||
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| Common stock par value $0.0001 |
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| Preferred stock par value $0.0001 |
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| Additional |
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| Additional Paid-in |
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| Accumulated 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, 2024 |
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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, August 31, 2024 |
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Going Concern (Note 1) |
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| Six Months Ended August 31, 2023 |
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| Common stock par value $0.0001 |
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| Series A preferred stock par value $0.0001 |
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| Additional |
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| Additional Paid-in |
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| Accumulated Other |
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| Total |
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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, 2023 |
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Issuance of shares upon the vesting of restricted stock units (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 |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
Balance, August 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||||
|
|
|
|
|
|
|
|
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|
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|
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|
|
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|
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|
|
|
Going Concern (Note 1) |
|
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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) |
| Six Months Ended August 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
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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| ||
Accretion expense (Note 10) |
|
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| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Sales tax and tax credits receivable (Note 3) |
|
| ( | ) |
|
| ( | ) |
Inventories (Note 4) |
|
|
|
|
| ( | ) | |
Prepaid expenses (Note 5) |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities (Note 9) |
|
|
|
|
| ( | ) | |
Customer deposits |
|
|
|
|
| ( | ) | |
Unearned revenue (Note 11) |
|
|
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|
| ||
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
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|
|
Cash Flows from Investing Activities |
|
|
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|
|
Deposits on equipment (Note 5) |
|
|
|
|
| ( | ) | |
Additions to intangible assets (Note 7) |
|
| ( | ) |
|
| ( | ) |
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
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|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
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|
|
Borrowings under credit facility (Note 10) |
|
|
|
|
|
| ||
Repayment of long-term debt (Note 10) |
|
| ( | ) |
|
| ( | ) |
Net cash (used) provided by financing activities |
|
|
|
|
| ( | ) | |
|
|
|
|
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|
|
|
Effect of exchange rate changes |
|
|
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|
|
| ||
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 |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Going Concern (Note 1) |
|
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|
|
See accompanying notes to the condensed consolidated financial statements.
| F-6 |
| Table of Contents |
Loop Industries, Inc.
Three and Six Months Ended August 31, 2024 and 2023
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. The Company, Basis of Presentation and Going Concern
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 29, 2024, filed with the SEC on May 29, 2024. 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 29, 2024, 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 six-month periods ended August 31, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 28, 2025, or for any other period.
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.
Going Concern
These unaudited interim condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the date of issuance of these consolidated financial statements.
Since its inception, the Company has been in the pre-commercialization stage with no material revenues from customers, and its ongoing operations and commercialization plans have been financed primarily by raising equity and debt. Therefore, 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 August 31, 2024, the Company’s available liquidity was $
Management continuously monitors the Company’s cash resources against its short-term cash commitments to ensure there is sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date.
| F-7 |
| Table of Contents |
Management evaluates the Company’s liquidity to determine if there is substantial doubt about its ability to continue as a going concern. In preparing this going concern 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 the estimation of amount and timing of future cash outflows and inflows. Based on this assessment, it is estimated that the Company has sufficient liquidity to cover expected cash outflows until end of November 2024, by which time management believes the financing with Reed (see Note 18 for additional details) will be completed, and that the remaining closing conditions will have been addressed. This is expected to provide an initial amount of $11,080 (€10,000), with further amounts at future dates. To secure the Company’s liquidity in the event of timing delays in funding, certain insiders have committed to provide bridge financing of $2,000 if necessary. Notwithstanding, these events and conditions are material uncertainties that raise substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of accounting principles applicable to a going concern.
The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent on, among other factors, 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. The Company is seeking to finalize the negotiation of previously announced financing initiatives on acceptable terms (see Note 18 for additional details), however, there is no assurance it will succeed.
These unaudited interim condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
2. Summary of Significant Accounting Policies
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.
Unearned revenue
Unearned revenue represents obligations to our customers for which payment has been received in advance of the delivery of goods or performance of services. Such revenue is recognized on the balance sheet as a contract liability until we fulfill our contractual obligations.
The timing of revenue recognition is based upon the transfer of control of the specified goods or services to the customer. For goods, this typically occurs at the time of shipment or delivery, depending on the terms of the contract. For services, revenue is recognized as the services are performed, either at a point in time or over a specified period.
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.
| F-8 |
| Table of Contents |
For the three- and six-month periods ended August 31, 2024 and 2023, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at August 31, 2024, the potentially dilutive securities consisted of
Recently issued accounting pronouncements not yet adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. The updated standard is effective for our annual periods beginning after December 15, 2024. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our financial statement disclosures. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements, other than additional disclosures in our notes to the consolidated financial statements.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for our annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our financial statement disclosures.
3. Sales Tax, Tax Credits and Other Receivables
Sales tax, research and development tax credits and other receivables as at August 31, 2024 and February 29, 2024 were as follows:
|
| August 31, 2024 |
|
| February 29, 2024 |
| ||
Sales tax |
| $ |
|
| $ |
| ||
Research and development tax credits |
|
|
|
|
|
| ||
Interest income receivable |
|
|
|
|
|
| ||
Other receivables |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
4. Inventories
Inventories as at August 31, 2024 and February 29, 2024 were as follows:
|
| August 31, 2024 |
|
| February 29, 2024 |
| ||
Finished goods |
| $ |
|
| $ |
| ||
Work in process |
|
|
|
|
|
| ||
Raw materials |
|
|
|
|
|
| ||
Allowance for inventory write-down |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
| F-9 |
| Table of Contents |
As at August 31, 2024 and February 29, 2024, inventories included finished goods, work in process and raw materials. Finished goods inventories consist of bottle grade and fiber grade Loop™ PET resin. Work in process inventories consist of recycled monomers (dimethyl terephthalate (“rDMT”) and monoethylene glycol (“rMEG”), either purified or yet to be purified, resulting from the depolymerization of PET feedstock. These monomers can be polymerized into Loop™ PET. Raw materials inventories consist of chemicals which are used as inputs in the PET depolymerization process. As at August 31, 2024 and February 29, 2024, finished goods and work in process inventories were presented at their net realizable value, while raw materials were presented at average cost. As at August 31, 2024, the Company recorded an allowance for inventory write-down of $
5. Prepaid Expenses and Other Deposits
Prepaid expenses and other deposits as at August 31, 2024 and February 29, 2024 were as follows:
|
| August 31, 2024 |
|
| February 29, 2024 |
| ||
Insurance |
| $ |
|
| $ |
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
As of August 31, 2023, the Company had placed non-refundable cash deposits totaling $
6. Property, Plant and Equipment, Net
|
| As at August 31, 2024 |
| |||||||||
|
| Cost |
|
| Accumulated depreciation, write-down and impairment |
|
| Net book value |
| |||
Machinery and equipment(1) |
| $ |
|
| $ |
|
| $ |
| |||
Building |
|
|
|
|
| ( | ) |
|
|
| ||
Land |
|
|
|
|
|
|
|
|
| |||
Building and Land Improvements |
|
|
|
|
| ( | ) |
|
|
| ||
Office equipment and furniture |
|
|
|
|
| ( | ) |
|
|
| ||
|
| $ |
|
|
| ( | ) |
|
|
| ||
(1) | The equipment, which is being held in storage, and can be utilized in a commercial facility, is presented in machinery and equipment at cost and is currently not being amortized. As at August 31, 2024 there were no indicators of impairment of the equipment. |
|
| As at February 29, 2024 |
| |||||||||
|
| Cost |
|
| Accumulated depreciation, write-down and impairment |
|
| Net book value |
| |||
Machinery and equipment |
| $ |
|
| $ |
|
| $ |
| |||
Building |
|
|
|
|
| ( | ) |
|
|
| ||
Land |
|
|
|
|
|
|
|
|
| |||
Building and Land Improvements |
|
|
|
|
| ( | ) |
|
|
| ||
Office equipment and furniture |
|
|
|
|
| ( | ) |
|
|
| ||
|
| $ |
|
| $ | ( | ) |
| $ |
| ||
Depreciation expense for the three- and six-month periods ended August 31, 2024 amounted to $
| F-10 |
| Table of Contents |
7. Intangible Assets, Net
Intangible assets as at August 31, 2024 and February 29, 2024 were $
During the six-month periods ended August 31, 2024 and 2023, we made additions relating to patent application costs to intangible assets of $
Amortization expense for the three- and six-month periods ended August 31, 2024 amounted to $
8. Fair Value of Financial Instruments
The following tables presents the fair value of the Company’s financial liabilities as at August 31, 2024 and February 29, 2024:
|
| Fair Value at August 31, 2024 | |||||||||
|
| Carrying Amount |
|
| Fair Value |
|
| Level in the hierarchy | |||
Financial liabilities measured at amortized cost: |
|
|
|
|
|
|
|
| |||
Long-term debt |
| $ |
|
| $ |
|
| Level 2 | |||
Due to customer |
| $ |
|
| $ |
|
| Level 2 | |||
|
| Fair Value at February 29, 2024 | |||||||||
|
| Carrying Amount |
|
| Fair Value |
|
| Level in the hierarchy | |||
Financial liabilities measured at amortized cost: |
|
|
|
|
|
|
|
| |||
Long-term debt |
| $ |
|
| $ |
|
| Level 2 | |||
Due to customer |
| $ |
|
| $ |
|
| Level 2 | |||
The fair value of cash, restricted cash, due to customer, 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 August 31, 2024 and February 29, 2024 were as follows:
|
| August 31, 2024 |
|
| February 29, 2024 |
| ||
Trade accounts payable |
| $ |
|
| $ |
| ||
Accrued employee compensation |
|
|
|
|
|
| ||
Accrued engineering fees |
|
|
|
|
|
| ||
Accrued professional fees |
|
|
|
|
|
| ||
Other accrued liabilities |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| F-11 |
| Table of Contents |
10. Long‑Term Debt
Long-term debt as of August 31, 2024 and February 29, 2024, was comprised of the following:
|
| August 31, 2024 |
|
| February 29, 2024 |
| ||
Investissement Québec financing facility: |
|
|
|
|
|
| ||
Principal amount |
| $ |
|
| $ |
| ||
Unamortized discount |
|
| ( | ) |
|
| ( | ) |
Accrued interest |
|
|
|
|
|
| ||
Total Investissement Québec financing facility |
|
|
|
|
|
| ||
Less: current portion of long-term debt |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
| ||
Credit facility |
|
|
|
|
|
| ||
Long-term debt, net of current portion |
| $ |
|
| $ |
| ||
Investissement Québec financing facility
The Company recorded interest expense on the Investissement Québec loan for the three- and six-month periods ended August 31, 2024 in the amount of $
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 $
Total repayments due on the Company’s indebtedness over the next five years are as follows:
Years ending |
| Amount |
| |
February 28, 2025 |
| $ |
| |
February 28, 2026 |
|
|
| |
February 28, 2027 |
|
|
| |
February 29, 2028 |
|
|
| |
February 28, 2029 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
11. Unearned revenue
As at August 31, 2024, unearned revenue was $
12. Stockholders’ Equity
Common Stock
For the period ended August 31, 2024 |
| Number of shares |
|
| Amount |
| ||
Balance, February 29, 2024 |
|
|
|
| $ |
| ||
Issuance of shares upon settlement of restricted stock units |
|
|
|
|
|
| ||
Balance, August 31, 2024 |
|
|
|
| $ |
| ||
For the period ended August 31, 2023 |
| Number of shares |
|
| Amount |
| ||
Balance, February 28, 2023 |
|
|
|
| $ |
| ||
Issuance of shares upon settlement of restricted stock units |
|
|
|
|
|
| ||
Balance, August 31, 2023 |
|
|
|
| $ |
| ||
| F-12 |
| Table of Contents |
During the six months ended August 31, 2024, the Company recorded the following common stock transaction:
(i) | The Company issued |
During the six months ended August 31, 2023, 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 August 31, 2024 and 2023 were as follows:
|
| August 31, 2024 |
|
| August 31, 2023 |
| ||
Employee compensation |
| $ |
|
| $ |
| ||
External engineering |
|
|
|
|
|
| ||
Plant and laboratory operating expenses |
|
|
|
|
|
| ||
Tax credits |
|
| ( | ) |
|
| ( | ) |
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Research and development expenses for the six-month periods ended August 31, 2024 and 2023 were as follows:
|
| August 31, 2024 |
|
| August 31, 2023 |
| ||
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 August 31, 2024 and 2023 were as follows:
|
| August 31, 2024 |
|
| August 31, 2023 |
| ||
Employee compensation |
| $ |
|
| $ |
| ||
Insurance |
|
|
|
|
|
| ||
Professional fees |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
General and administrative expenses for the six-month periods ended August 31, 2024 and 2023 were as follows:
|
| August 31, 2024 |
|
| August 31, 2023 |
| ||
Employee compensation |
| $ |
|
| $ |
| ||
Insurance |
|
|
|
|
|
| ||
Professional fees |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| F-13 |
| Table of Contents |
15. Share-based Payments
Stock Options
The following table summarizes the continuity of the Company’s stock options during the three-month periods ended August 31, 2024 and 2023:
|
| 2024 |
|
| 2023 |
| ||||||||||
|
| 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 |
|
|
|
| $ | 6.39 |
|
|
|
|
| $ |
| |||
The following tables summarizes the continuity of the Company’s stock options during the six-month periods ended August 31, 2024 and 2023:
|
| 2024 |
|
| 2023 |
| ||||||||||
|
| 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 |
|
| 2,771,216 |
|
| $ | 5.25 |
|
|
| 2,782,000 |
|
| $ | 5.08 |
|
Exercisable, end of period |
|
| 1,890,000 |
|
| $ |
|
|
| 1,670,000 |
|
| $ | 6.84 |
| |
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. The principal components of the pricing model for the stock options granted in the six-month period ended August 31, 2024 and 2023 were as follows:
|
| 2024 |
|
| 2023 |
| ||
Exercise price |
| $ |
|
| $ |
| ||
Risk-free interest rate |
|
| % |
|
| % | ||
Expected dividend yield |
|
| % |
|
| % | ||
Expected volatility |
|
| % |
|
| % | ||
Expected life |
|
|
|
| ||||
During the three-month periods ended August 31, 2024 and 2023, stock-based compensation expense attributable to stock options amounted to $
| F-14 |
| Table of Contents |
Restricted Stock Units
The following table summarizes the continuity of the restricted stock units during the three-month periods ended August 31, 2024 and 2023:
|
| 2024 |
|
| 2023 |
| ||||||||||
|
| 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 six-month periods ended August 31, 2024 and 2023:
|
| 2024 |
|
| 2023 |
| ||||||||||
|
| 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 August 31, 2024 and 2023, stock-based compensation attributable to RSUs amounted to $
Stock-Based Compensation Expense
During the three-month periods ended August 31, 2024 and 2023, stock-based compensation included in research and development expenses amounted to $
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
| F-15 |
| Table of Contents |
The following table summarizes the continuity of the Company’s Equity Incentive Plan units that were authorized for issuance as at and during the six-month periods ended August 31, 2024 and 2023:
|
| 2024 |
|
| 2023 |
| ||
|
| Number of units* |
|
| Number of units* |
| ||
Authorized, beginning of period |
|
|
|
|
|
| ||
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 six-month period ended August 31, 2024, warrants for the purchase of
18. Contractual agreements
Agreement with Reed Management SAS (“Reed”)
On May 30, 2024, the Company and Reed, a European investment firm, entered into definitive binding agreements, subject to certain closing conditions, for an investment of €
Under the terms of the agreement, which has been signed following the completion by Reed of extensive operational, technical, ESG, and legal due diligence, Reed will provide capital as follows:
| · | € |
| · |
The closing of the transaction is subject to the fulfillment of certain closing conditions, principally the conditions that (i) Reed shall have completed its first capital raising for its fund; and (ii) Loop shall have received a binding financing commitment from a governmental agency.
Strategic partnership with Ester Industries Ltd. (“Ester”)
On May 1, 2024, the Company entered into an agreement with Ester, a manufacturer of polyester films and specialty polymers in India, to form a 50/50 joint venture based in India ("India JV"). The purpose of the India JV is to build and operate an Infinite Loop™ manufacturing facility in India which will produce lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop™ Technology. To date, no amounts have been contributed by the Company to the India JV.
| F-16 |
| Table of Contents |
Subject to the terms of the relevant governing documents, Ester will be the exclusive producer of specialty polymers for the India JV, and the Company will be the exclusive seller and marketing agent of the India JV’s products. Ester and the Company will work in collaboration on all financing activities for the India JV pursuant to the terms of the agreement. Pursuant to the terms of the relevant governing documents,
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. To date, no amounts have been contributed by the Company to the new entity.
19. Subsequent event
Distribution from Joint Venture
The carrying value of the Company’s investment in Indorama Loop Technologies, LLC (“ILT”), its joint venture with Indorama Ventures Holdings LP, USA (“Indorama”), was $
| F-17 |
| 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” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and 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) our ability to commercialize our technology and products, (ii) the status of our relationships with our 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) our ability to continue as a going concern, (vii) engineering, contracting, and building our manufacturing facilities, (viii) our ability to scale, manufacture, and sell our products in order to generate revenues, (ix) our proposed business model and our ability to execute it, (x) our ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (xi) our joint venture projects and our ability to recover certain expenditures in connection them, (xii) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xiii) public health issues, such as disease epidemics, which may lead to reduced access to capital markets, supply chain disruptions, and government-imposed business closures, (xiv) war, regional tensions, and economic or other conflicts that could impact market stability and our business; (xv) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xvi) the outcome of any SEC investigations or class action litigation filed against us, (xvii) our ability to hire and/or retain qualified employees and consultants, (xviii) other events or circumstances over which we have little or no control, and (xix) other factors discussed in our subsequent filings with the Securities and Exchange Commission (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 Quarterly Report on 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. Except as required by law, 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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| Table of Contents |
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”), as well as other products.
MEG is an acronym for monoethylene glycol, which is a monomer used in the production of PET, as well as other products.
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, rDMT and rMEG are acronyms for recycled PET, DMT and MEG.
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 (“Infinite Loop™ Technology”), 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.
We also intend to leverage the Infinite Loop™ Technology to expand into specialty chemicals and polymers through a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers. Loop intends to produce and sell rDMT, rMEG and other specialty polymers directly to chemical companies as a simple drop-in supplement and circular alternative. We believe this expanded product portfolio will enable the Infinite Loop™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging and other applications. This recent expansion in Loop’s product offering is non-reliant on green premiums or carbon and plastic credits, and we believe it addresses a global shortage in supply of DMT and high demand for low carbon MEG, and lowers capital intensity for commercial projects with the removal of polymerization equipment.
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.
| 4 |
| Table of Contents |
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.
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.
| 5 |
| Table of Contents |
Currently, the DMT market is largely dominated by a few key players, leaving limited options for customers and high market concentration. Additionally, the market is experiencing a global shortage of DMT, amplifying market challenges and creating a pressing need for alternative sources. The introduction of Loop’s rDMT has the potential to shift the market dynamic by offering a sustainable alternative to traditional DMT produced from fossil fuels.
In parallel, low-carbon MEG is in high demand and customers are increasingly seeking alternative solutions, but market options are limited and costly. As sustainability concerns intensify and regulatory pressures mount, the demand for low carbon MEG solutions is expected to continue to grow. Loop’s rMEG has the potential to address a gap in the market and help fulfill customers’ needs by offering a lower carbon footprint recycled alternative to the current market options for MEG.
Agreement with Reed Management SAS (“Reed”)
On May 30, 2024, the Company and Reed, a European investment firm focused on high impact and technology-enabled infrastructure, entered into definitive binding agreements, subject to certain closing conditions, for an investment of €35 million from Reed to fund the global commercialization of the Infinite Loop™ Technology and have agreed to form a 50/50 joint venture for the European deployment of Loop’s technology.
Under the terms of the agreement, which was signed following the completion by Reed of extensive operational, technical, ESG, and legal due diligence, Reed is to provide capital as follows:
| · | €10M investment in a Convertible Preferred Security (“CPS”) to be issued by Loop, bearing a 13% PIK dividend rate and 5-year term; and |
| · | €25M loan to Loop in two equal tranches – first tranche to support global deployment opportunities paid at closing and second tranche to support European deployment opportunities paid in the following 12 months with both tranches having a 13% PIK interest rate and 3-year term; |
The closing of the transaction is subject to the fulfillment of certain closing conditions, principally the conditions that (i) Reed shall have successfully completed its first capital raising for its fund; and (ii) Loop shall have received a binding financing commitment from a governmental agency.
On July 31, 2024, Reed and Societe Generale announced that Societe Generale has agreed to acquire 75% of Reed and provide funding for Reed initially amounting to €250 million, which can be further increased to €350 million. This transaction, which is subject to customary closing conditions including regulatory approval, would secure Reed’s funding for its planned investments, including the financing package for Loop.
We are expecting that the remaining closing conditions will have been addressed, and that the financing will be completed in November 2024. This is expected to provide the initial tranche of €10 million, with further amounts at future dates. Although the Company anticipates its current liquidity position to be sufficient to cover expenses until the end of November 2024, in order to secure the Company’s liquidity in the event of timing delays in funding, certain insiders have committed to provide bridge financing of $2,000 if necessary.
| 6 |
| Table of Contents |
Strategic partnership with Ester Industries Ltd. (“Ester”)
On May 1, 2024 Loop entered into an agreement with Ester, one of India's leading manufacturers of polyester films and specialty polymers, to form a 50/50 India joint venture (“India JV”). The purpose of the India JV is to build and operate an Infinite Loop™ manufacturing facility in India which will produce a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop™ Technology.
Loop and Ester have a well-established working relationship, with Ester producing Loop™ PET using monomers produced at Loop’s Terrebonne Facility for global brand companies over the last four years. The India JV intends to leverage the complementary skill set of each partner by combining Loop's innovative technology and global customer relationships with Ester's nearly 40 years of specialized polymer production, operational proficiency, and local expertise, including sourcing of PET plastic and polyester fiber waste feedstocks.
The Infinite Loop™ India facility is expected to produce 70,000 tonnes of rDMT and 23,000 tonnes of rMEG annually and Ester will toll convert the rDMT and rMEG into various grades of specialty polymers, offering chemical companies a simple drop-in supplement and circular alternative.
The rDMT and rMEG product offerings expected to be manufactured at the Infinite Loop™ India facility represent a strategic product expansion in a low-cost manufacturing environment which we believe complements Loop's existing PET plastic and polyester fiber manufacturing business and will fuel growth by addressing the large and growing demand in the market. We believe this expansion will enable the Infinite Loop™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging.
We believe the India JV offers attractive projected economic returns without the need for substantial sustainability-linked premium pricing. Loop and Ester anticipate that initial funding required to finance the India JV for the purposes of construction, development and operationalization of the project along with initial working capital requirements for the business is expected to be $165 million. Ester and Loop will each contribute 50% of the initial equity capital of the India JV.
Subject to the terms of the relevant governing documents, Ester will be the exclusive producer of specialty polymers for the India JV, and Loop will be the exclusive seller and marketing agent of the India JV’s products. Ester and Loop will work in collaboration on all financing activities for the India JV pursuant to the terms of the agreement.
Loop and Ester will also enter into (i) a technology license agreement with Loop (the “Loop Technology License Agreement”), (ii) a service agreement with Ester, and (iii) a sales and marketing agreement with Loop, each on terms to be mutually agreed upon by the parties. Pursuant to the Loop Technology License Agreement, the India JV will be granted an exclusive, subject to certain exceptions, license to exploit the Infinite Loop™ Technology in India at a royalty rate to be set forth in the Loop Technology License Agreement.
The India facility will leverage the Infinite Loop™ Technology and existing engineering package which should accelerate the lead-time towards groundbreaking, expected to occur by the end of the current fiscal year. Feedstock sourcing for the facility, in which there is abundant supply from textile waste in India, is well advanced. Additionally, following the completion of a detailed land study by an external engineering firm, the India JV partners have identified the Gujarat province of India as the optimal location for the facility based on several key requirements such as infrastructure, proximity to a seaport for exports, renewable energy for a reduction in CO2 emissions and close proximity to waste PET and polyester feedstocks. Construction is expected to be completed by the end of 2026, with commercial operations commencing in early 2027.
Strategic Partnership with SK Geo Centric (“SKGC”)
The planned Infinite Loop™ commercial manufacturing facility 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 was planned to break ground in the first half of 2024. The timing of the facility is currently under review by the partners while they evaluate opportunities to reduce capital costs and carry out discussions with the Korean government for subsidies related to the facility. Loop and SKGC are also evaluating the opportunity to build a monomer facility in order to capitalize on the large and growing market and attractive economics for DMT and MEG, including lower capital investment requirements for such a facility.
| 7 |
| Table of Contents |
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 is designed to 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
Loop has collaborated with multiple customers in recent and upcoming launches for products and product packaging incorporating Loop™ PET manufactured from monomers produced at Loop’s small-scale production facility in Terrebonne, Québec (the “Terrebonne Facility”).
Most recently, Loop and On AG, the Swiss sportswear brand, collaborated to launch the Cloudeasy Cyclon shoe which was unveiled on May 21, 2024. The upper of the Cloudeasy shoe is crafted with 100% recycled and infinitely recyclable yarn, using the Infinite Loop™ Technology. On AG is the first footwear company to launch a shoe using the Infinite Loop™ Technology which enables fiber-to-fiber recycling. The Cloudeasy Cyclon shoe is part of On AG’s monthly subscription service Cyclon™ where customers receive, wear, and then return Cylon™ products, which are then recycled.
Loop continues to pursue opportunities for new activations and marketing campaigns with additional consumer goods brand companies.
Commercialization Strategy
Our objective is to achieve global expansion of the Infinite Loop™ 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 DMT, MEG, PET resin, polyester fiber or other specialty polymers, 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.
The Infinite Loop™ 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™ 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 can be sold directly to chemical companies, used in the production of specialty polymers, or 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 rDMT and 23,000 M/T of rMEG, or 70,000 M/T of PET resin output per year, or a combination thereof. Permitting, site and regulatory considerations may impact plant capacity.
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| Table of Contents |
On May 1, 2024, we announced our strategic partnership with Ester to build and operate an Infinite Loop™ manufacturing facility in India which will produce a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop™ Technology. Loop has a well-established working relationship with Ester, which has nearly 40 years of specialized polymer production, operational proficiency, and local expertise, including sourcing of PET plastic and polyester fiber waste feedstocks. The rDMT and rMEG product offerings expected to be manufactured at the Infinite Loop™ India facility represent a strategic product expansion in a low-cost manufacturing environment which we believe complements Loop's existing PET plastic and polyester fiber manufacturing business and will fuel growth by addressing the large and growing demand in the market. We believe this expansion will enable the Infinite Loop™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging.
The India facility will leverage the Infinite Loop™ Technology and existing engineering package which should accelerate the lead-time towards groundbreaking, expected to occur by the end of the current fiscal year. Feedstock sourcing for the facility, in which there is abundant supply from textile waste in India, is well advanced and the partners have engaged an external firm to source and secure the land for the facility. Construction is expected to be completed by the end of 2026, with commercial operations commencing in early 2027. Loop anticipates receiving an annual technology license fee from the Infinite Loop™ manufacturing facility in India.
We are also focused on our planned joint venture projects with SKGC in Asia and Europe to build and operate Infinite Loop™ manufacturing facilities producing and selling Loop™ PET resin and polyester fiber. These projects leverage SKGC’s engineering and operational infrastructure. In addition, the joint venture projects are anticipated to 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 planned Asian manufacturing facility in Ulsan, South Korea.
The planned Infinite Loop™ commercial manufacturing facility 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 was planned to break ground in the first half of 2024. The timing of the facility is currently under review by the partners while they evaluate opportunities to reduce capital costs and carry out discussions with the Korean government for subsidies related to the facility. Loop and SKGC are also evaluating the opportunity to build a monomer facility in order to capitalize on the large and growing market and attractive economics for DMT and MEG, including lower capital investment requirements for such a facility.
The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies, apparel companies, and chemical companies, to integrate Loop™ PET resin, polyester fiber, rDMT and rMEG into their products and packaging. We believe as countries around the globe continue to increase sustainability targets and recycled content mandates, our customers will increase the use of sustainably produced materials into their products.
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 MEG, DMT, 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.
The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent on, among other factors, 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.
Human Capital
As of August 31, 2024, we had 50 employees of which 18 work in research and development, 20 in engineering and operations, and 12 in administrative functions.
| 9 |
| Table of Contents |
Results of Operations
The following table summarizes our operating results for the three-month periods ended August 31, 2024 and 2023, in thousands of U.S. Dollars.
|
| Three months ended August 31, |
| |||||||||
|
| 2024 |
|
| 2023 |
|
| Change favorable / (unfavorable) |
| |||
Revenue from contracts with customers |
| $ | 23 |
|
| $ | 54 |
|
| $ | (31 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
External engineering |
|
| 651 |
|
|
| 141 |
|
|
| (510 | ) |
Employee compensation |
|
| 862 |
|
|
| 1,218 |
|
|
| 356 |
|
Stock-based compensation |
|
| 131 |
|
|
| 155 |
|
|
| 24 |
|
Plant and laboratory operating expenses |
|
| 197 |
|
|
| 447 |
|
|
| 250 |
|
Tax credits |
|
| (49 | ) |
|
| (22 | ) |
|
| 27 |
|
Other |
|
| 153 |
|
|
| 99 |
|
|
| (54 | ) |
Total research and development |
|
| 1,945 |
|
|
| 2,038 |
|
|
| 93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees |
|
| 1,007 |
|
|
| 912 |
|
|
| (95 | ) |
Employee compensation |
|
| 585 |
|
|
| 647 |
|
|
| 62 |
|
Stock-based compensation |
|
| 231 |
|
|
| 233 |
|
|
| 2 |
|
Insurance |
|
| 476 |
|
|
| 709 |
|
|
| 233 |
|
Other |
|
| 296 |
|
|
| 342 |
|
|
| 46 |
|
Total general and administrative |
|
| 2,595 |
|
|
| 2,843 |
|
|
| 248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 129 |
|
|
| 136 |
|
|
| 7 |
|
Interest and other financial expenses |
|
| 119 |
|
|
| 44 |
|
|
| (75 | ) |
Interest income |
|
| (6 | ) |
|
| (219 | ) |
|
| (213 | ) |
Foreign exchange loss (gain) |
|
| 80 |
|
|
| (38 | ) |
|
| (119 | ) |
Total expenses |
|
| 4,862 |
|
|
| 4,804 |
|
|
| (58 | ) |
Net loss |
| $ | (4,839 | ) |
| $ | (4,750 | ) |
| $ | (88 | ) |
Second Quarter Ended August 31, 2024
Revenues
Revenues for the three-month period ended August 31, 2024 decreased $31 to $23, as compared to $54 for the same period in 2023. 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 August 31, 2024 decreased $93 to $1,945, as compared to $2,038 for the same period in 2023. The decrease was primarily attributable to a $356 decrease in employee compensation, and a $250 decrease in plant and laboratory expenses at our Terrebonne Facility. These decreases were partially offset by a $510 increase in external engineering costs for design work for our Infinite Loop™ manufacturing process.
General and administrative expenses
General and administrative expenses for the three-month period ended August 31, 2024 decreased $248 to $2,595, as compared to $2,843 for the same period in 2023. The decrease was primarily attributable to a $233 decrease in insurance expenses which is mainly attributable to a favourable renewal of D&O insurance.
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| Table of Contents |
Net Loss
The net loss for the three-month period ended August 31, 2024 increased $88 to $4,839, as compared to $4,750 for the same period in 2023. The increase is primarily due to the $213 decrease in interest income and the $119 increase in foreign exchange, partially offset by the $248 decrease in general and administrative expenses.
Six Months Ended August 31, 2024
The following table summarizes our operating results for the six-month periods ended August 31, 2024 and 2023, in thousands of U.S. Dollars.
|
| Six months ended August 31, |
| |||||||||
|
| 2024 |
|
| 2023 |
|
| Change |
| |||
Revenue from contracts with customers |
| $ | 29 |
|
| $ | 81 |
|
| $ | (52 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
External engineering |
|
| 1,279 |
|
|
| 1,297 |
|
|
| 18 |
|
Employee compensation |
|
| 1,877 |
|
|
| 2,504 |
|
|
| 627 |
|
Machinery and equipment expenditures |
|
| 3 |
|
|
| 1,236 |
|
|
| 1,233 |
|
Stock-based compensation |
|
| 261 |
|
|
| 315 |
|
|
| 54 |
|
Plant and laboratory operating expenses |
|
| 467 |
|
|
| 916 |
|
|
| 449 |
|
Tax credits |
|
| (35 | ) |
|
| (47 | ) |
|
| (12 | ) |
Other |
|
| 330 |
|
|
| 307 |
|
|
| (23 | ) |
Total research and development |
|
| 4,182 |
|
|
| 6,528 |
|
|
| 2,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees |
|
| 2,262 |
|
|
| 1,531 |
|
|
| (731 | ) |
Employee compensation |
|
| 1,221 |
|
|
| 1,285 |
|
|
| 64 |
|
Stock-based compensation |
|
| 471 |
|
|
| 428 |
|
|
| (43 | ) |
Insurance |
|
| 968 |
|
|
| 1,412 |
|
|
| 444 |
|
Other |
|
| 584 |
|
|
| 652 |
|
|
| 68 |
|
Total general and administrative |
|
| 5,506 |
|
|
| 5,308 |
|
|
| (198 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 266 |
|
|
| 268 |
|
|
| 2 |
|
Interest and other financial expenses |
|
| 179 |
|
|
| 98 |
|
|
| (81 | ) |
Interest income |
|
| (132 | ) |
|
| (318 | ) |
|
| (186 | ) |
Foreign exchange loss (gain) |
|
| 56 |
|
|
| (52 | ) |
|
| (108 | ) |
Total expenses |
|
| 10,057 |
|
|
| 11,832 |
|
|
| 1,775 |
|
Net loss |
| $ | (10,028 | ) |
| $ | (11,751 | ) |
| $ | 1,723 |
|
Revenues
Revenues for the six-month period ended August 31, 2024 decreased $52 to $29, as compared to $81 for the same period in 2023. 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 six-month period ended August 31, 2024 decreased $2,346 to $4,182, as compared to $6,528 for the same period in 2023. The decrease was primarily attributable to a $1,223 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $681 decrease in employee compensation expenses, including stock-based compensation, and a $449 decrease in plant and laboratory expenses to operate our Terrebonne Facility.
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| Table of Contents |
General and administrative expenses
General and administrative expenses for the six-month period ended August 31, 2024 increased $198 to $5,506, as compared to $5,308 for the same period in 2023. The increase was primarily attributable to a $731 increase in professional fees, partially offset by a decrease in insurance expenses of $444.
Net Loss
The net loss for the six-month period ended August 31, 2024 decreased $1,723 to $10,028, as compared to $11,751 for the same period in 2023. The decrease is primarily due to the decrease in research and development expenses of $2,346, partially offset by $198 increase in research and development expenses, a $186 decrease in interest income, and a $108 increase in foreign exchange.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Since its inception, the Company has been in the pre-commercialization stage with no material revenues, and its ongoing operations and commercialization plans have been financed primarily by raising equity and debt. Therefore, 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. 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 $1,395 and an undrawn senior loan facility from a Canadian bank of $1,008 at August 31, 2024. Also, current liabilities exceeded current assets by $2,510 as at August 31, 2024. 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 2024 Annual Report on Form 10-K.
Management continuously monitors the Company’s cash resources against its short-term cash commitments to ensure there is 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 its ability to continue as a going concern. In preparing this going concern 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 the estimation of amount and timing of future cash outflows and inflows. Based on this assessment, it is estimated that the Company has sufficient liquidity to cover expected cash outflows until end of November 2024, by which time management believes the financing with Reed will be completed, and that the remaining closing conditions will have been addressed. This is expected to provide an initial amount of $11,080 (€10,000), with further amounts at future dates. To secure the Company’s liquidity in the event of timing delays in funding, certain insiders have committed to provide bridge financing of $2,000 if necessary. Notwithstanding, these events and conditions are material uncertainties that raise substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of accounting principles applicable to a going concern.
The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent on, among other factors, 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. The Company is seeking to finalize the negotiation of previously announced financing initiatives on acceptable terms, although there is no assurance it will succeed.
| 12 |
| Table of Contents |
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 $3,410. We received the first disbursement in the amount of $1,638 on February 21, 2020 and the second disbursement in the amount of $1,772 on August 26, 2021. The loan can be repaid at any time by us without penalty. The loan’s interest rate was initially set at 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. There is no remaining amount available under the Financing Facility after the second disbursement.
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 “Financing Facility Amendment”). As per the Financing Facility Amendment, a total of $37 of the principal amount was repaid in monthly installments in the fiscal year ended February 29, 2024 and the remainder of the principal amount is repayable in 72 monthly installments. The Financing Facility Amendment did not modify the interest rates, the repayment terms of accrued interest or any other terms of the Financing Facility.
On February 28, 2024, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modified the repayments of the principal amount (the “Second Financing Facility Amendment”). As per the Second Financing Facility Amendment, a total of $74 of the principal amount is repayable in monthly installments in the fiscal year ending February 28, 2025, with the remainder of the principal amount being repayable in 60 monthly installments. Pursuant to the Second Financing Facility Amendment the interest rate of the Financing Facility was increased from 2.36% to 3.36%. The Second Financing Facility Amendment did not modify the repayment terms of accrued interest or any of the other terms of the Financing Facility that are not mentioned above.
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. 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 expired in August 2024
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 $2,594 in aggregate principal amount and provides for a two-year term on amounts drawn. The Credit Facility is secured by the Company’s Terrebonne, Québec property and is subject to a minimum equity covenant, tested quarterly with which the Company was in compliance as at August 31, 2024. All borrowings under the Credit Facility bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0%. As at August 31, 2024, the Company borrowed $1,587 under the Credit Facility.
Flow of Funds
Summary of Cash Flows
A summary of cash flows for the six months ended August 31, 2024 and 2023 was as follows, in thousands of U.S. Dollars:
|
| Six Months Ended August 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net cash used in operating activities |
| $ | (6,775 | ) |
| $ | (11,017 | ) |
Net cash used in investing activities |
|
| (325 | ) |
|
| (5,290 | ) |
Net cash provided by (used in) financing activities |
|
| 1,537 |
|
|
| (32 | ) |
Effect of exchange rate changes on cash |
|
| - |
|
|
| 113 |
|
Net decrease in cash |
| $ | (5,563 | ) |
| $ | (16,226 | ) |
| 13 |
| Table of Contents |
Net Cash Used in Operating Activities
During the six-month period ended August 31, 2024, we used $6,775 in operations compared to $11,017 during the six-month period ended August 31, 2023. 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, partially offset by increased legal costs related to our partnerships with Reed and Ester.
Net Cash Used in Investing Activities
During the six months ended August 31, 2024, we used $325 in investing activities compared to $5,290 during the six-month period ended August 31, 2023. During the three-month period ended August 31, 2023, we made $5,065 in deposits on long-lead equipment for use in a commercial project. During the six-month period ended August 31, 2024, we made investments in intangible assets of $325, as compared to $225 for the same period in 2023, particularly in our patent technology in the United States and around the world.
Net Cash Provided by (Used in) Financing Activities
During the six months ended August 31, 2024, we borrowed $1,587 under the Credit Facility and we repaid $50 of long-term debt. During the six months ended August 31, 2023, we repaid $32 of long-term debt.
| 14 |
| Table of Contents |
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 August 31, 2024.
B. Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended August 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 15 |
| Table of Contents |
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 29, 2024. No material changes to such risk factors have occurred during the three months ended August 31, 2024.
| 16 |
| Table of Contents |
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
During the three months ended August 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
| 17 |
| Table of Contents |
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 | 001-38301 | May 29, 2024 | 3.1 | |||||||
8-K | 001-38301 | April 10, 2018 | 3.1 | |||||||
|
|
|
| Filed herewith |
|
|
|
| ||
|
|
|
| Filed herewith |
|
|
|
| ||
Furnished herewith | ||||||||||
|
|
| Furnished herewith |
|
|
|
| |||
101.INS | XBRL Instance Document | Filed herewith | ||||||||
101.SCH | XBRL Taxonomy Extension Schema Document |
|
|
| Filed herewith |
|
|
|
| |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith | ||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
|
|
| Filed herewith |
|
|
|
| |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith | ||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
| Filed herewith |
|
|
|
| |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | Filed herewith | ||||||||
| 18 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized..
Date: October 15, 2024 | By: | /s/ Daniel Solomita |
|
| Name: | Daniel Solomita |
|
| Title: | President and Chief Executive Officer, and Director (Principal Executive Officer) |
|
|
|
|
|
Date: October 15, 2024 | By: | /s/ Fady Mansour | |
Name: | Fady Mansour | ||
Title: | Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) |
| 19 |