Loop Industries(LOOP) - 2021 Q1 - Quarterly Report

Technology and Innovation - Loop Industries' Generation II (GEN II) technology has improved monomer yields and reduced costs by shifting from producing purified terephthalic acid (PTA) to dimethyl terephthalate (DMT), resulting in a more environmentally sustainable process[90] - The company believes its technology can deliver virgin-quality PET resin suitable for food-grade packaging, addressing the global plastic crisis[89] - Loop Industries' proprietary technology allows the use of waste PET plastic and polyester fiber from various sources, including ocean-recovered materials[101] - The Infinite Loop™ technology aims to produce PET plastic and polyester fiber from 100% recycled content, supporting the transition to a circular economy[115] - The GEN I technology portfolio has three issued U.S. patents expected to expire around July 2035, while the GEN II technology portfolio consists of multiple patent families with expiration dates extending to March 2040[100] Financial Performance - The net loss for the three-month period ended May 31, 2020, increased to $3.85 million, compared to a net loss of $3.55 million for the same period in 2019, primarily due to increased research and development expenses[121] - Research and development expenses for the three-month period ended May 31, 2020, amounted to $1.48 million, an increase of $0.48 million from $1.00 million in the same period in 2019[122] - The company reported a net decrease in cash of $6.21 million for the three months ended May 31, 2020, compared to an increase of $1.14 million in the same period of 2019[132] - The company had cash and cash equivalents of $27.51 million as of February 29, 2020, to finance ongoing operations and commercialization plans[126] - For the three months ended May 31, 2020, the company used $4.98 million in operating activities, an increase from $2.01 million in the same period of 2019, primarily due to a $1.87 million prepayment of insurance premiums and a $0.72 million variation in accounts payable[133] Investments and Joint Ventures - The company made capital investments of $394,403 in its industrial pilot plant during the quarter ended May 31, 2020[92] - Loop Industries is focusing on securing long-term supply agreements for feedstock to ensure continuous operation of its first joint venture facility with Indorama Ventures in Spartanburg, South Carolina[102] - Loop Industries has established a joint venture with Indorama to retrofit existing PET manufacturing facilities, aiming to meet the growing demand for sustainable Loop™ PET resin and polyester fiber[105] - The joint venture with Indorama will establish a facility in Spartanburg, South Carolina, with an initial capacity of 20,700 metric tons per year, which is planned to be doubled to 40,000 metric tons due to customer demand[106][107] - The company has secured multi-year supply agreements with major brands including Danone, PepsiCo, Coca-Cola, L'OCCITANE, and L'Oréal for 100% sustainable Loop™ PET resin[108] Debt and Financing - The company has a long-term debt obligation of $1,015,449 (CDN$1,400,000) related to the purchase of land and building for its pilot plant, with monthly payments of $4,231 (CDN$5,833) plus interest[129] - A financing facility from Investissement Québec covers 63.45% of eligible expenses for the expansion of the pilot plant, with a maximum of $3,336,476 (CDN$4,600,000) and a 36-month moratorium on repayments[130] - The company repaid $0.01 million of long-term debt during the three months ended May 31, 2020[136] Market and Demand - The global annual market demand for PET plastic and polyester fiber is nearly $130 billion, projected to exceed $160 billion by 2022[86] - Loop Industries aims to supply its Loop™ PET resin at a premium price due to commitments from global consumer brands to incorporate more recycled content into their packaging[100] - The company is studying markets in the U.S., Canada, EU, and Asia to evaluate the size and location of future facilities, identifying material loss to divert waste effectively[103] Risks - The company is exposed to foreign currency exchange risks due to operations in Canada and financing in U.S. dollars, which could materially affect its results of operations[142] - The company faces commodity price risks as the demand for recycled PET fluctuates with crude oil prices, impacting its market penetration[144] - The company is subject to raw material price risks, which could adversely affect its business and financial condition due to fluctuations in availability and costs[145] Operational Activities - The company invested $0.39 million in property, plant, and equipment during the three months ended May 31, 2020, compared to $0.50 million in the same period of 2019, mainly for upgrading its GEN II industrial pilot plant[134] - The net cash used in investing activities was $1.19 million for the three months ended May 31, 2020, compared to $0.99 million in 2019[132] - The company continues to invest in research and development, particularly in the implementation of its GEN II technology as it moves towards commercialization[133] - The company is exploring joint venture structures and financing alternatives to increase equity participation in the Spartanburg project, which is strategically important for sustainability[113]