Loop Industries Provides Business Update and Reports First Quarter Financial Results of Fiscal Year 2022

MONTREAL, QC / ACCESSWIRE / July 15, 2021 / Loop Industries, Inc. (NASDAQ:LOOP) (the “Company” or “Loop”), a clean technology company focused on accelerating a circular plastics economy by manufacturing 100% recycled polyethylene terephthalate (“PET”) plastic and polyester fiber, today provided an update on its activities, and reported its consolidated financial results for the first quarter of fiscal year 2022.

SK global chemical Strategic Partnership and Equity Investment

On June 23, 2021, Loop announced announced that it intends to form a strategic partnership with SK global chemical Co. Ltd. (“SKGC”), a subsidiary of South Korea’s SK Group, one of Asia’s largest conglomerates, to accelerate the commercialization of Loop’s sustainable PET plastic and polyester fiber manufacturing technology throughout Asia. Loop and SKGC intend to form a joint venture with exclusivity to build sustainable food-grade PET resin and polyester fiber manufacturing facilities throughout Asia to support global brand companies. Under the terms of the Memorandum of Understanding (“MOU”) for the proposed joint venture, SKGC will own 51 percent of the joint venture and Loop will own 49 percent. Loop will also receive a recurring annual royalty fee as a percentage of revenue from each facility for the use of its technology.

In addition, Loop and SKGC have entered into a definitive agreement for SKGC to become a strategic investor in Loop. SKGC will purchase 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million. SKGC was also granted options to acquire additional shares at successively higher prices, as well as representation on Loop’s Board of Directors. Closing of the strategic equity investment will be as soon as practical and no later than 90 days from the June 23, 2021 announcement.

Infinite Loop™ Quebec Project

On May 27, 2021, Loop acquired a 19 million square foot parcel of land in Bécancour, Québec for approximately $4.9 million. The site is located near existing industrial infrastructure, which reduces project costs, permitting time and does not result in the destruction of wetlands or forest. Loop intends to use the proceeds from SKGC’s strategic investment toward the funding of its planned Infinite Loop™ manufacturing facility at this recently acquired site.

Management Commentary

Daniel Solomita, Founder and CEO of Loop Industries, said: “As we begin collaboration with our valued partners at SK global chemical, we look forward to accelerating the global commercialization of our sustainable PET plastic manufacturing technology. With an initial investment in four projected facilities in North America, Europe and Asia, including Joint Ventures with Indorama and SUEZ, Loop is well positioned to meet the growing global demand for 100% recycled PET plastic and polyester fiber.”

First Quarter Ended May 31, 2021  

The following table summarizes our operating results for the three-month periods ended May 31, 2021 and 2020, in U.S. Dollars.

 
  Three months ended May 31,  
 
  2021     2020     Change  
Revenues
           
 
                       
Expenses
                       
Research and development
                       
Stock-based compensation
    395,545       352,007       43,538  
External engineering
    2,903,448       74,932       2,828,516  
Employee compensation
    1,690,583       467,041       1,223,542  
Machinery and equipment expenditures
    2,622,892             2,622,892  
Demonstration plant operating expenses
    691,537       286,103       405,434  
Other
    333,900       300,505       33,395  
Total research and development
    8,637,905       1,480,588       7,157,317  
 
                       
General and administrative
                       
Stock-based compensation
    (383,630 )     659,817       (1,043,447 )
Professional fees
    1,631,451       221,697       1,409,754  
Employee compensation
    845,035       483,034       362,001  
Directors and officers insurance
    868,647       473,574       395,073  
Other
    199,068       114,959       84,109  
Total general and administrative
    3,160,571       1,953,081       1,207,490  
 
                       
Depreciation and amortization
    132,001       255,974       (123,973 )
Interest and other financial expenses
    30,588       126,776       (96,188 )
Interest income
    (9,761 )     (40,346 )     30,585  
Foreign exchange loss
    206,060       76,641       129,419  
Total expenses
    12,157,364       3,852,714       8,304,650  
Net loss
  (12,157,364 )   (3,852,714 )   (8,304,650 )
                         

First Quarter Ended May 31, 2021

The net loss for the three-month period ended May 31, 2021 increased $8.30 million to $12.16 million, as compared to the net loss for the three-month period ended May 31, 2020 which was $3.85 million. The increase is primarily due to increased research and development expenses of $7.16 million, increased general and administrative expenses of $1.21 million, an increase in foreign exchange loss of $0.13 million and a decrease in interest income of $0.03 million, partially offset by lower depreciation and amortization expenses of $0.12 million and lower interest and other financial expenses of $0.1 million.

The $7.16 million increase in research and development for the three-month period ended May 31, 2021 was primarily attributable to the following:

  • $2.83 million increase in external engineering expenses for ongoing design work for our Infinite Loop TM manufacturing process;
  • $2.62 million increase in purchases of research and development machinery and equipment. Starting in Q3 of fiscal 2021, we expense research and development machinery and equipment in accordance with ASC 730, Research and Development Costs, and no longer capitalize these costs. The timing of this accounting treatment is related to management’s decision to convert our pilot plant to exclusively a demonstration and training facility for our future Infinite Loop™ manufacturing facilities, therefore foregoing any alternative future use of its machinery and equipment assets in other applications;
  • $1.2 million increase in employee compensation expenses due to an increase in hiring; and
  • $0.41 million increase in demonstration plant and laboratory operating expenses due to increased activity at our demonstration plant.

The $1.21 million increase in general and administrative expenses for the three-month period ended May 31, 2021 was primarily attributable to the following:

  • $1.41 million increase in expenses for legal and professional fees due to costs principally associated with the ongoing SEC investigation and class action suits described in “Part II, Item 1. Legal Proceedings”;
  • $0.40 million increase in insurance expenses mainly due to directors and officers (“D&O”) insurance renewal costs; and
  • $0.36 million increase in employee compensation expenses due to an increase in hiring.

The listed increases in general and administrative expenses were partially offset by lower stock-based compensation expenses of $1.04 million which are mainly due to forfeitures of RSUs recorded in the three-month period ended May 31, 2021 for a total of $0.94 million.

The $0.12 million decrease in depreciation and amortization expenses for the three-month period ended May 31, 2021 is mainly attributable to the write-down of machinery and equipment assets related to the decision in the third quarter of fiscal 2021 to dedicate the demonstration and training facility to research and development activities. Although the machinery and equipment will continue to be utilized at our demonstration and training facility as it is an integral part of supporting the commercialization of our technology, application of ASC 730, Research and Development Costs requires machinery and equipment assets to be written off and all future costs associated with the demonstration and training facility to be recognized as a research and development expense in the consolidated statements of operations and comprehensive loss.

The $0.12 million increase in foreign exchange loss for the three-month period ended May 31, 2021 is mainly due to the fluctuation in USD/CAD exchange rates. The $0.10 million decrease in interest and other financial expenses for the three-month period ended May 31, 2021 is mainly due to the loss on revaluation of foreign exchange contracts in the three-month period ended May 31, 2020 which was nil in the three-month period ended May 31, 2021. The $0.03 million decrease in interest income for the three-month period ended May 31, 2021 is mainly due to lower interest rates as well as lower cash balances on which we receive interest.

Loop Industries, Inc.  
Condensed Consolidated Statements of Operations and Comprehensive Loss  
(Unaudited)

 
  Three Months Ended  
 
  May 31, 2021     May 31, 2020  
Revenue
       
 
               
Expenses :
               
Research and development
    8,637,905       1,480,588  
General and administrative
    3,160,571       1,953,081  
Depreciation and amortization
    132,001       255,974  
Interest and other financial expenses
    30,588       126,776  
Interest income
    (9,761 )     (40,346 )
Foreign exchange loss (gain)
    206,060       76,641  
Total expenses
    12,157,364       3,852,714  
 
               
Net loss
    (12,157,364 )     (3,852,714 )
 
               
Other comprehensive loss –
               
Foreign currency translation adjustment
    206,815       (170,412 )
Comprehensive loss
  (11,950,549 )   (4,023,126 )
Loss per share
               
Basic and diluted
  (0.29 )   (0.10 )
Weighted average common shares outstanding
               
Basic and diluted
    42,433,107       39,916,838  
                 

Loop Industries, Inc.  
Condensed Consolidated Balance Sheets  
(Unaudited)

         
     

As at

     

May 31, 2021

 

February 28, 2021

Assets      
Current assets      
  Cash and cash equivalents

$

18,037,062

 

$

35,221,951

  Sales tax, tax credits and other receivables  

1,551,702

   

1,763,835

  Prepaid expenses  

1,978,390

   

609,782

   

Total current assets

 

21,567,154

   

37,595,568

 

Investment in joint venture

 

1,500,000

   

1,500,000

  Property, plant and equipment, net  

8,569,606

   

3,513,051

  Intangible assets, net  

881,223

   

794,894

Total assets

$

32,517,983

 

$

43,403,513

           
Liabilities and Stockholders’ Equity          
Current liabilities          
  Accounts payable and accrued liabilities

$

9,057,423

 

$

8,124,865

  Current portion of long-term debt  

971,257

   

938,116

   

Total current liabilities

 

10,028,680

   

9,062,981

  Long-term debt  

1,614,971

   

1,516,008

Total liabilities

 

11,643,651

   

10,578,989

           
Stockholders’ Equity          
  Series A Preferred stock  

   

  Common stock  

4,244

   

4,242

  Additional paid-in capital  

113,663,032

   

113,662,677

  Additional paid-in capital – Warrants  

8,826,165

   

8,826,165

  Accumulated deficit  

(101,819,334)

   

(89,661,970)

  Accumulated other comprehensive loss  

200,225

   

(6,590)

Total stockholders’ equity

 

20,874,332

   

32,824,524

Total liabilities and stockholders’ equity

$

32,517,983

 

$

43,403,513

           
           

Loop Industries, Inc.  
Condensed Consolidated Statements of Cash Flows  
(Unaudited)

       
 
  Three Months Ended May 31,  
 
  2021     2020  
Cash Flows from Operating Activities
           
Net loss
  (12,157,364 )   (3,852,714 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    132,001       256,090  
Stock-based compensation expense
    15,357       1,011,824  
Accretion and accrued interest expenses
    21,408       17,963  
Loss on revaluation of foreign exchange contracts
          98,502  
Changes in operating assets and liabilities:
               
Sales tax and tax credits receivable
    287,116       76,410  
Prepaid expenses
    (1,326,519 )     (1,865,216 )
Accounts payable and accrued liabilities
    622,443       (720,759 )
Net cash used in operating activities
    (12,405,558 )     (4,977,900 )
 
               
Cash Flows from Investing Activities
               
Investment in joint venture
          (650,000 )
Additions to property, plant and equipment
    (4,867,007 )     (394,403 )
Additions to intangible assets
    (52,319 )     (144,386 )
Net cash used in investing activities
    (4,919,326 )     (1,188,789 )
 
               
Cash Flows from Financing Activities
               
Repayment of long-term debt
    (14,496 )     (12,693 )
Net cash (used) provided by financing activities
    (14,496 )     (12,693 )
 
               
Effect of exchange rate changes
    154,491       (29,534 )
Net decrease in cash
    (17,184,889 )     (6,208,916 )
Cash, beginning of period
    35,221,951       33,717,671  
Cash, end of period
  18,037,062     27,508,755  
 
               
Supplemental Disclosure of Cash Flow Information:
               
Income tax paid
       
Interest paid
  9,178     10,311  
Interest received
  9,761     40,346  
                 

About Loop Industries

Loop Industries 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 Industries owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber, including plastic bottles and packaging, carpets and textiles of any color, transparency or condition and even ocean plastics that have been degraded by the sun and salt, to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop™ branded PET resin suitable for use in food-grade packaging and polyester fiber, thus enabling our customers to meet their sustainability objectives. Loop Industries is contributing to the global movement towards a circular economy by reducing plastic waste and recovering waste plastic for a sustainable future.

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 Loop on Twitter: @loopindustries , Instagram: loopindustries , Facebook: Loop Industries and LinkedIn: Loop Industries

Forward-Looking Statements

This news release contains “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such statements may be preceded by the words “intends”, “may”, “will”, “plans”, “expects”, “anticipates”, “should”, “could”, “projects”, “predicts”, “estimates”, “aims”, “believes”, “hopes”, “potential” or “continute” the negative of such terms or similar words. 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. 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 among other things: (i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding, (vi) building our manufacturing facility, (vii) our ability to scale, manufacture and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) adverse effects on the Company’s business and operations as a result of increased regulatory, media or financial reporting scrutiny and practices, rumors or otherwise, (x) disease epidemics and health related concerns, such as the current outbreak of a novel strain of coronavirus (COVID-19), which could result in (and, in the case of the COVID-19 outbreak, has resulted in some of the following) reduced access to capital markets, supply chain disruptions and scrutiny or embargoing of goods produced in affected areas, government-imposed mandatory business closures and resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, and market or other changes that could result in noncash impairments of our intangible assets, and property, plant and equipment, (xi) the outcome of the current SEC investigation or recent class action litigation filed against us, (xii) our ability to hire and/or retain qualified employees and consultants and (xiii) 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:

Media Inquiries:

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

Investor Inquiries:

Greg Falesnik
MZ Group-MZ North America
+1 949-259-4987
[email protected]  
www.mzgroup.us

SOURCE: Loop Industries, Inc.

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