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Loop Industries Reports Third Quarter Consolidated Financial Results of Fiscal 2020 and Provides Updates on Business Developments

Thursday, 09 January 2020 04:05 PM

Loop Industries, Inc.

Topic:
Earnings

MONTREAL, QC / ACCESSWIRE / January 9, 2020 / Loop Industries, Inc. (NASDAQ:LOOP) (the "Company" or "Loop"), a leading sustainable plastics technology innovator, today announced its consolidated financial results for the third quarter ended November 30, 2019 of its 2020 fiscal year, and provided an update on its continuing progress in implementing its business plan.

"Our focus this quarter has been on executing the engineering work for the Spartanburg facility and further developing our technology." said Daniel Solomita, Loop's Founder & Chief Executive Officer.

"We also rebranded our Waste to Resin ("WtR™") greenfield facilities solution to Infinite Loop™. Infinite Loop™ is our fully integrated and reimagined manufacturing facility for sustainable Loop™ PET plastic resin and polyester fiber. We are continuing to develop the engineering of the Infinite LoopTM platform and we have increased our efforts on the development of Infinite Loop™ projects, in Europe and in North America."

Results of Operations

The following tables summarize our operating results for the three-month period ended November 30, 2019 and 2018, in U.S. Dollars.

 
  Three Months Ended November 30  
 
  2019     2018     $ Change  
Revenues
  -     -     -  
 
                       
Operating expenses
                       
Research and development
                       
Stock-based compensation
    311,353       249,548       61,805  
Other research and development
    966,819       542,563       424,256  
Total research and development
    1,278,172       792,111       486,061  
 
                       
General and administrative
                       
Stock-based compensation
    565,440       721,358       (155,918 )
Other general and administrative
    1,260,373       1,250,489       9,884  
Total general and administrative
    1,825,813       1,971,847       (146,034 )
 
                       
Depreciation and amortization
    219,628       155,053       64,575  
Interest and other finance costs
    693,027       14,883       678,144  
Interest income
    (171,274 )       -       (171,274 )
Foreign exchange (gain) loss
    5,533       (20,132 )     25,665  
Total operating expenses
    3,850,899       2,913,762       937,137  
Net loss
  (3,850,899 )     (2,913,762 )   (937,137 )

Third Quarter Ended November 30, 2019

Following the decision of the joint venture with Indorama Ventures Holdings LP to double the capacity of the Spartanburg plant due to customer demand to 40,000 metric tons per year, as disclosed in our 10-Q for the period ended August 31, 2019, we identified a number of enhancements to the plant design to improve the operability and lower the total construction cost of the plant. The additional engineering is underway and management anticipates it will be completed by the end of this calendar quarter and as a result, the commissioning of the facility is anticipated to occur in the third quarter of the calendar year 2021.

The net loss for the three-month period ended November 30, 2019 increased $0.94 million to $3.85 million, as compared to the net loss for the three-month period ended November 30, 2018 which was $2.91 million. The increase of $0.94 million is primarily attributable to an increase in interest and other finance costs of $0.68 million, an increase in research and development expenses of $0.49 million, an increase in depreciation and amortization expenses of $0.06 million and an increase in foreign exchange loss of $0.03 million, partially offset by lower general and administrative expenses of $0.15 million, and by an increase in interest income of $0.17 million.

Research and development expenses for the three-month period ended November 30, 2019 amounted to $1.28 million compared to $0.79 million for the three-month period ended November 30, 2018, representing an increase of $0.49 million, or representing an increase of $0.42 million excluding stock-based compensation. The increase of $0.42 million was primarily attributable to by higher employee compensation costs of $0.38, by higher purchases and freight costs of $0.08 million, by higher facilities costs of $0.02, by higher equipment rental costs of $0.02 and by higher license fees of $0.03 million, offset by lower legal and professional fees of $0.07 million and by higher research and development tax credits of $0.06 million. The increase in non-cash stock-based compensation expense of $0.06 million is mainly attributable to the timing of stock awards provided to certain employees.

General and administrative expenses for the three-month period ended November 30, 2019 amounted to $1.83 million compared to $1.97 million for the three-month period ended November 30, 2018, representing a decrease of $0.14 million, or an increase of $0.01 million excluding stock-based compensation. The increase of $0.01 million was mainly attributable to higher employee compensation costs of $0.15 million and by higher commercial insurance expenses of $0.08 million, offset by lower legal and professional fees of $0.20 million. Stock-based compensation expense for the three-month period ended November 30, 2019 amounted to $0.57 million compared to $0.72 million for the three-month period ended November 30, 2018, representing a decrease of $0.15 million, which was mainly attributable to lower stock awards provided to executives.

Depreciation and amortization for the three-month period ended November 30, 2019 totaled $0.22 million compared to $0.16 million for the three-month period ended November 30, 2018, representing an increase of $0.06 million. This increase is mainly attributable to the addition of fixed assets at the Company's pilot plant and corporate offices.

Interest and other finance costs for the three-month period ended November 30, 2019 totaled $0.69 million compared to $0.01 million the three-month period ended November 30, 2018, representing an increase of $0.68 million. The increase is mainly attributable to an increase in accretion expense of $0.55 million, an increase in interest expense of $0.10 million and by an increase in amortization of deferred financing costs of $0.02 million.

Nine Months Ended November 30, 2019

The following table summarizes our operating results for the nine-month periods ended November 30, 2019 and 2018, in U.S. Dollars.

 
  Nine Months Ended November 30  
 
  2019     2018     $ Change  
Revenues
  -     -     -  
 
                       
Operating expenses
                       
Research and development
                       
Stock-based compensation
    941,142       910,004       31,138  
Other research and development
    2,305,104       2,014,479       290,625  
Total research and development
    3,246,246       2,924,483       321,763  
 
                       
General and administrative
                       
Stock-based compensation
    1,669,669       2,252,041       (582,372 )
Other general and administrative
    3,777,387       4,469,755       (692,368 )
Total general and administrative
    5,447,056       6,721,796       (1,274,740 )
 
                       
Depreciation and amortization
    585,367       366,710       218,657  
Interest and other finance costs
    1,817,091       41,117       1,775,974  
Interest income
    (363,565 )       -       (363,565 )
Foreign exchange (gain) loss
    15,297       (72,404 )     87,701  
Total operating expenses
    10,747,492       9,981,702       765,790  
Net loss
  (10,747,492 )     (9,981,702 )   (765,790 )

The net loss for the nine-month period ended November 30, 2019 increased by $0.77 million to $10.75 million, as compared to the net loss for the nine-month period ended November 30, 2018 which was $9.98 million. The increase of $0.77 million is primarily due to an increase in interest and other finance costs of $1.77 million, an increase in research and development expenses of $0.32 million, an increase in depreciation and amortization of $0.22 million and an increase in the foreign exchange loss of $0.09 million, partially offset by lower general and administrative expenses of $1.27 million and an increase in interest income of $0.36 million.

Research and development expenses for the nine-month period ended November 30, 2019 amounted to $3.24 million compared to $2.92 million for the nine-month period ended November 30, 2018, representing an increase of $0.32 million, or representing an increase of $0.29 million excluding stock-based compensation. The increase of $0.29 million was primarily attributable to higher employee compensation costs of $0.55 million, by higher facilities costs of $0.04 million, by higher purchases and freight costs of $0.07, by higher license fees of $0.03 million, by higher repairs and maintenance costs of $0.02 million, and by higher meals, travel and entertainment expenses of $0.04 million, offset by lower legal and professional fees of $0.36 million and by higher research and development tax credits of $0.16 million. The decrease in non-cash stock-based compensation expense of $0.03 million is mainly attributable to the timing of stock awards provided to certain employees.

General and administrative expenses for the nine-month period ended November 30, 2019 amounted to $5.45 million compared to $6.72 million for the nine-month period ended November 30, 2018, representing a decrease of $1.27 million, or a decrease of $0.69 million excluding stock-based compensation. The decrease of $0.69 million was mainly attributable to lower legal and professional fees of $1.36 million, offset by higher employee compensation costs of $0.50 million and by higher commercial insurance expenses totaling $0.17 million. Stock-based compensation expense for the nine-month period ended November 30, 2019 amounted to $1.67 million compared to $2.25 million for the nine-month period ended November 30, 2018, representing a decrease of $0.58 million, which was mainly attributable lower stock awards provided to executives.

Depreciation and amortization for the nine-month period ended November 30, 2019 totaled $0.59 million compared to $0.37 million for the nine-month period ended November 30, 2018, representing an increase of $0.22 million. This increase is mainly attributable to the addition of fixed assets at the Company's pilot plant and corporate offices.

Interest and other finance costs for the nine-month period ended November 30, 2019 totaled $1.82 million compared to $0.04 million the nine-month period ended November 30, 2018, representing an increase of $1.78 million. The increase is mainly attributable to an increase in accretion expense of $1.58 million, an increase in interest expense of $0.31 million and by an increase in amortization of deferred financing costs of $0.09 million, offset by a gain on conversion of the November 2018 Notes of $0.23 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Loop is a development stage company with no revenues, and our ongoing operations are being financed by raising new equity and debt capital. To date, we have been successful in raising capital to finance our ongoing operations, reflecting the potential for commercializing our branded resin and the progress made to date in implementing our business plans.

As at November 30, 2019, the Company had cash on hand of $35.5 million. On May 29, 2019, the Company entered into a Securities Purchase Agreement ("Purchase Agreement") with Northern Private Capital Fund I Limited Partnership ("Northern Capital") pursuant to which the Company has issued to Northern Capital in a registered direct offering ("Offering") an aggregate of 4,093,567 shares of the Company's common stock at a per share purchase price of $8.55 per share, for aggregate net proceeds of approximately $34.6 million, after deducting offering expenses payable by the Company of approximately $400,000. Concurrently with the Offering and pursuant to the Purchase Agreement, the Company issued to Northern Capital options to purchase up to an additional 4,093,567 shares of the Company's common stock at an exercise price of $11.00 per share, which vested on December 15, 2019, and are exercisable for three years following the closing date of the Offering and which would result in further total net proceeds of approximately $45 million. The proceeds from the Offering will be used to finance the start-up of its joint venture commercial operations, which is estimated to be between $15,000,000 and $20,000,000, and further fund the development of its technology and new technologies and its ongoing pre-revenue operations.

On February 27, 2019, Loop Industries, Inc. entered into a Securities Purchase Agreement with a single institutional investor, pursuant to which the Company agreed to issue and sell to the Purchaser, in a registered direct offering ("Offering"), an aggregate of 600,000 shares ("Shares") of the Company's common stock at a per share purchase price of $8.55 per share, for aggregate net proceeds of approximately $4.2 million, after deducting placement agent fees and estimated offering expenses payable by the Company of approximately $0.9 million. The Offering closed on March 1, 2019. The Company intends to use the net proceeds from the Offering for general corporate purposes and working capital.

As at November 30, 2019, we have a long-term debt obligation to a Canadian bank in connection with the purchase, in Fiscal 2018, of the land and building where our pilot plant and corporate offices are located, at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4. On January 24, 2018, the Company obtained a CDN$1,400,000 20-year term instalment loan (the "Loan"), from a Canadian bank. The Loan bears interest at the bank's Canadian prime rate plus 1.5%. By agreement, the Loan is repayable in monthly payments of CDN $5,833 plus interest, until January 2021, at which time it will be subject be renewal. It includes an option allowing for the prepayment of the Loan without penalty.

On July 24, 2019, the Company executed an agreement with Investissement Quebec providing it with a financing from which we can draw a total equal to 63.45% of all eligible expenses incurred for the expansion of our Pilot Plant up to a maximum CDN$4,600,000. There is a 36-month moratorium on both capital and interest repayments beginning as of the first disbursement date. At the end of the 36-month moratorium, capital and interest will be repayable in 84 monthly installments. The loan will bear interest at 2.36%. The Company has also agreed to issue to Investissement Quebec warrants convertible into common shares in an amount equal to 10% of each disbursement up to a maximum aggregate amount of CDN$460,000. The warrants will be issued at a price per share equal to the higher of (i) $11.00 per share and (ii) the ten-day weighted average closing price of Loop Industries' shares of Common Stock on the Nasdaq stock market for the 10 days prior to the issue of the warrants. The warrants can be exercised immediately upon grant and will have a term of three years from the date of issuance. The loan can be repaid at any time by the Company without penalty. No disbursements have yet been made under the agreement.

Flow of Funds

Summary of Cash Flows

A summary of cash flows for the nine-month period ended November 30, 2019 and 2018 was as follows:

 
  Nine Months Ended November 30  
 
  2019     2018  
Net cash used in operating activities
  (6,819,748 )     (5,455,317 )
Net cash used in investing activities
    (2,592,921 )       (1,523,353 )
Net cash provided from (used in) financing activities
    39,127,875       2,510,529  
Effect of exchange rate changes on cash and cash equivalents
    (57,105 )       (53,314 )
Net increase (decrease) in cash and cash equivalents
  29,658,101     (4,521,455 )

Net Cash Used in Operating Activities

During the nine months ended November 30, 2019, we used $6.8 million in operations compared to $5.5 million during the nine months ended November 30, 2018. The Company continued to invest in research and development on its existing technologies and new technologies, particularly on the evolution of its GEN II technology as the Company moves to the next phase of commercialization.

Net Cash Used in Investing Activities

During the nine months ended November 30, 2019, the Company made investments of $1.7 million in property, plant and equipment as compared to $1.4 million for the nine months ended November 30, 2018, primarily in connection with the upgrade of its GEN II industrial pilot plant.

During the nine months ended November 30, 2019, the Company made investments in intangible assets of $0.09 million as compared to $0.09 million for the nine months ended November 30, 2018, particularly in its GEN II patent technology in the United States and around the world.

During the nine months ended November 30, 2019, the Company also made its initial contribution of $850,000 to Indorama Loop Technologies, LLC, the joint venture with Indorama Ventures Holdings LP, USA.

Net Cash Provided from Financing Activities

During the nine months ended November 30, 2019, we raised net proceeds of $39.2 million through the sale of common stock.

As at November 30, 2019, the Company was in compliance with its financial covenants.

Off-Balance Sheet Arrangements

As at November 30, 2019, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As at November 30, 2019, we did not have any significant lease obligations to third parties.

Loop Industries, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in United States dollars)

 
  Three Months Ended
November 30
    Nine Months Ended
November 30
 
 
  2019     2018     2019     2018  
 
                       
Revenue
  -     -     -     -  
 
                               
Expenses -
                               
Research and development, net
    1,278,172       792,111       3,246,246       2,924,483  
General and administrative
    1,825,813       1,971,847       5,447,056       6,721,796  
Depreciation and amortization
    219,628       155,053       585,367       366,710  
Interest and other finance costs
    693,027       14,883       1,817,091       41,117  
Interest income
    (171,274 )     -       (363,565 )     -  
Foreign exchange loss (gain)
    5,533       (20,132 )     15,297       (72,404 )
Total expenses
    3,850,899       2,913,762       10,747,492       9,981,702  
 
                               
Net Loss
    (3,850,899 )     (2,913,762 )     (10,747,492 )     (9,981,702 )
 
                               
Other comprehensive loss -
                               
Foreign currency translation adjustment
    7,552       (91,249 )     (30,133 )     (202,838 )
Comprehensive Loss
  (3,843,347 )   (3,005,011 )   (10,777,625 )   (10,184,540 )
 
                               
Loss per share
                               
- Basic and Diluted
  (0.10 )   (0.09 )   (0.29 )   (0.30 )
 
                               
Weighted average common shares outstanding
                               
- Basic and Diluted
    39,133,627       33,805,706       37,404,165       33,792,293  
                                 

Loop Industries, Inc.
Condensed Consolidated Balance Sheets
(in United States dollars)

 
  November 30, 2019     February 28, 2019  
 
           
Assets
           
Current assets
           
Cash and cash equivalents
  35,491,491     5,833,390  
Sales tax, tax credits and other receivables
    631,436       599,000  
Prepaid expenses
    173,153       226,521  
Total current assets
    36,296,080       6,658,911  
Investment in joint venture
    850,000       -  
Property, plant and equipment, net
    6,495,389       5,371,263  
Intangible assets, net
    206,831       127,672  
Total assets
  43,848,300     12,157,846  
 
               
Liabilities and Stockholders' Equity
               
Current liabilities
               
Accounts payable and accrued liabilities
  1,648,165     2,670,233  
Convertible notes
    4,926,734       5,636,172  
Warrants
    -       219,531  
Current portion of long-term debt
    52,675       53,155  
Total current liabilities
    6,627,574       8,579,091  
Long-term debt
    904,257       952,363  
Total liabilities
    7,531,831       9,531,454  
 
               
Stockholders' Equity
               
Series A Preferred stock, par value $0.0001; 25,000,000 shares authorized; one share issued and outstanding
    -       -  
Common stock, par value $0.0001: 250,000,000 shares authorized; 39,232,528 shares issued and outstanding (February 28, 2019 - 33, 805,706)
    3,923       3,381  
Additional paid-in capital
    75,290,970       38,966,208  
Additional paid-in capital - Warrants
    9,700,102       757,704  
Additional paid-in capital - Beneficial conversion feature
    1,200,915       1,200,915  
Common stock issuable, 1,000,000 shares
    -       800,000  
Accumulated deficit
    (49,559,084 )     (38,811,592 )
Accumulated other comprehensive loss
    (320,357 )     (290,224 )
Total stockholders' equity
    36,316,469       2,626,392  
Total liabilities and stockholders' equity
  43,848,300     12,157,846  
 
               

Loop Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(in United States dollars)

 
  Nine Months Ended November 30  
 
  2019     2018  
Cash Flows from Operating Activities
           
Net loss
  (10,747,492 )   (9,981,702 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    585,366       366,710  
Stock-based compensation expense
    2,610,811       3,162,045  
Accrued interest
    313,433       -  
Loss on revaluation of warrants
    8,483       -  
Debt accretion
    1,584,977       -  
Deferred financing costs
    86,212       -  
Gain on conversion of convertible notes
    (232,565 )     -  
Loss on revaluation of foreign exchange contracts
    10,881       -  
Changes in operating assets and liabilities:
               
Sales tax, tax credits and other receivables
    (37,536 )     67,606  
Prepaid expenses
    52,649       446,770  
Accounts payable and accrued liabilities
    (1,054,967 )     483,254  
Net cash used in operating activities
    (6,819,748 )     (5,455,317 )
 
               
Cash Flows from Investing Activities
               
Investment in joint venture
    (850,000 )     -  
Additions to property, plant and equipment
    (1,647,433 )     (1,428,174 )
Additions to intangible assets
    (95,488 )     (95,179 )
Net cash used in investing activities
    (2,592,921 )     (1,523,353 )
 
               
Cash Flows from Financing Activities
               
Proceeds from sale of common shares
    40,273,751       -  
Share issuance costs
    (1,106,370 )     -  
Proceeds from issuance of convertible debt
    -       2,450,000  
Convertible debt subscriptions
    -       100,000  
Repayment of long-term debt
    (39,506 )     (39,471 )
Net cash provided from (used in) financing activities
    39,127,875       2,510,529  
 
               
Effect of exchange rate changes
    (57,105 )     (53,314 )
Net change in cash and cash equivalents
    29,658,101       (4,521,455 )
Cash and cash equivalents, beginning of period
    5,833,390       8,149,713  
Cash and cash equivalents, end of period
  35,491,491     3,628,258  
 
               
Supplemental Disclosure of Cash Flow Information:
               
Income tax paid
  -     -  
Interest paid
  45,668     41,117  
Interest received
  363,565     325  
                 

About Loop

Loop is a technology company whose mission is to accelerate the world's shift toward sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels. Loop owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber, including plastic bottles and packaging, carpets and textiles of any color, transparency or condition and even ocean plastics that have been degraded by the sun and salt, to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop™ branded PET resin and polyester fiber suitable for use in food-grade packaging, thus enabling our customers to meet their sustainability objectives. Loop is contributing to the global movement toward a circular economy by raising awareness about the importance of preventing and recovering waste plastic from the environment to ensure plastic stays in the economy for a more sustainable future for all.

Common shares of the Company are listed on the Nasdaq Global Market under the symbol "LOOP."

For more information, please visit www.loopindustries.com. Follow us on Twitter: @loopindustries, Instagram: loopindustries, Facebook: Loop Industries and LinkedIn: Loop Industries

Forward-Looking Statements

This news release contains "forward-looking statements." Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond Loop's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding, (vi) building our manufacturing facility, (vii) our ability to sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) adverse effects on the Company's business and operations as a result of increased regulatory, media or financial reporting issues and practices, rumors or otherwise, and (x) other factors discussed in our subsequent filings with the SEC. More detailed information about Loop and the risk factors that may affect the realization of forward-looking statements is set forth in our filings with the Securities and Exchange Commission (SEC). Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov. Loop assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

For More Information:

Investors:

Nelson Gentiletti
Loop Industries, Inc.
+1 (450) 951 8555 ext. 223

[email protected]

Media Inquiries:

Stephanie Corrente
Loop Industries, Inc.
+1 (450) 951-8555 ext. 226
[email protected]

SOURCE: Loop Industries, Inc.

Topic:
Earnings
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