Loop Industries(LOOP) - 2026 Q1 - Quarterly Report

PART I. Financial Information This section presents the company's interim financial statements and management's analysis of its financial condition and operations Item 1. Financial Statements Loop Industries' unaudited interim condensed consolidated financial statements for Q1 2025 and 2024, including balance sheets, operations, equity, cash flows, and notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity | Metric | May 31, 2025 (in thousands) | February 28, 2025 (in thousands) | | :--------------------------------- | :-------------------------- | :----------------------------- | | Cash and cash equivalents | $9,748 | $12,973 | | Total current assets | $11,315 | $13,852 | | Total assets | $15,921 | $18,578 | | Total current liabilities | $4,024 | $3,959 | | Series B Convertible Preferred stock | $10,987 | $10,647 | | Total liabilities | $18,645 | $18,211 | | Total stockholders' equity | $(2,724) | $367 | - Total assets decreased from $18,578 thousand as of February 28, 2025, to $15,921 thousand as of May 31, 2025[12] - Total stockholders' equity shifted from a positive $367 thousand to a negative $(2,724) thousand during the same period[12] Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's revenues, expenses, and net loss over specific periods, reflecting operational performance | Metric (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Revenues | $252 | $6 | | Research and development | $1,374 | $2,237 | | General and administrative | $1,649 | $2,911 | | Loss on equity accounted investment | $302 | $- | | Total expenses | $3,425 | $5,285 | | Net loss | $(3,447) | $(5,189) | | Basic and diluted net loss per share | $(0.07) | $(0.11) | - Revenues significantly increased to $252 thousand in Q1 2025 from $6 thousand in Q1 2024[14][15] - Net loss decreased by $1,742 thousand, from $(5,189) thousand in Q1 2024 to $(3,447) thousand in Q1 2025, primarily due to reduced R&D and G&A expenses, partially offset by increased interest expenses and loss from equity accounted investment[14][15][144] Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity components over a period, including net loss and stock transactions | Metric (in thousands) | Balance, Feb 28, 2025 | Issuance of shares | Stock options issued | Restricted stock units issued | Foreign currency translation | Net loss | Balance, May 31, 2025 | | :-------------------- | :-------------------- | :----------------- | :------------------- | :---------------------------- | :--------------------------- | :------- | :-------------------- | | Total Stockholders' Equity | $367 | $- | $486 | $(111) | $(19) | $(3,447) | $(2,724) | - Total stockholders' equity decreased from $367 thousand at February 28, 2025, to $(2,724) thousand at May 31, 2025, primarily due to a net loss of $(3,447) thousand[17] Condensed Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(3,082) | $(3,915) | | Net cash used in investing activities | $(115) | $(176) | | Net cash (used) provided by financing activities | $(55) | $2,492 | | Net decrease in cash | $(3,225) | $(1,667) | | Cash and cash equivalents, end of period | $9,748 | $5,291 | - Net cash used in operating activities decreased by $833 thousand YoY, from $(3,915) thousand in Q1 2024 to $(3,082) thousand in Q1 2025[20][21] - Net cash from financing activities shifted from a positive $2,492 thousand in Q1 2024 to a negative $(55) thousand in Q1 2025, primarily due to no new borrowings under the credit facility in 2025[20][21][161][163] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the financial statements, including accounting policies and key transactions - The Company is in the pre-commercialization stage, relying on equity financing and expecting continued net losses[23][28][29] - Management assesses liquidity to be sufficient for at least twelve months from the financial statements issuance date, but future strategic development and facility construction depend on securing additional financing[30][31] - The India JV with Ester Industries Ltd. incurred losses of $604 thousand in Q1 2025, with Loop recording its 50% share of loss at $302 thousand[51] - The carrying value of Loop's investment in ELITe was $979 thousand as of May 31, 2025[51] - Series B Convertible Preferred Stock accrued PIK dividends of $340 thousand in Q1 2025, contributing to the increase in interest and other financial expenses[52][143] - Revenues for Q1 2025 totaled $252 thousand, primarily from $244 thousand in engineering fees for the India JV and $8 thousand from sales of Loop™ PET resin[139][60][61] - This marks a significant increase from $6 thousand in Q1 2024, which was solely from PET resin sales[61] - Research and development expenses decreased by $863 thousand to $1,374 thousand in Q1 2025, mainly due to a $623 thousand decrease in external engineering expenses and a $313 thousand decrease in employee compensation, partially offset by a $183 thousand increase in stock-based compensation[140][62] - General and administrative expenses decreased by $1,262 thousand to $1,649 thousand in Q1 2025, primarily due to an $894 thousand decrease in professional fees (related to partnership legal costs in 2024) and a $178 thousand decrease in stock-based compensation[141][63] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Loop Industries' Q1 2025 financial condition and operational results, covering pre-commercialization, strategic partnerships, liquidity, and capital resources Introduction This section introduces Loop Industries' core business, technology, and commercialization strategy for sustainable plastics - Loop Industries is a technology company focused on depolymerizing waste PET plastic and polyester fiber into virgin-quality Loop™ branded PET resin, aiming to accelerate the shift towards sustainable plastics and a circular economy[84] - The company plans to commercialize its Infinite Loop™ technology through direct investments with strategic partners to operate commercial facilities and by licensing its technology[85] - Loop is executing its commercialization strategy through a 50/50 joint venture in India with Ester Industries Ltd. for an Infinite Loop™ manufacturing facility and a technology license sale to Reed Societe Generale Group for a facility in Europe[87] Background This section outlines the challenges in PET recycling and highlights the advantages of Loop's Infinite Loop™ Technology - The industry faces challenges with mechanical recycling of PET due to impurity issues, degradation of material properties, and inability to effectively handle polyester fiber waste, leading to 'downcycling' and reliance on virgin materials[92][93][94] - Loop's Infinite Loop™ Technology offers advantages by depolymerizing a wider range of contaminated PET plastic and polyester fiber waste at low temperatures and no added pressure, producing virgin-quality material that can be recycled infinitely without degradation[96][97][98][99] Agreements with Reed Societe Generale Group This section details the partnership with Reed Societe Generale Group for European facilities and the financial proceeds received - Loop entered into an Amended and Restated Share Purchase Agreement with Reed Societe Generale Group, forming Infinite Loop Europe (90% Reed, 10% Loop) to develop manufacturing facilities in Europe[101] - The Company received $20.8 million (€20.0 million) cash proceeds, including an initial upfront royalty payment of $10.4 million (€10.0 million) for a technology license for one European facility and $10.4 million (€10.0 million) from the sale of Series B Convertible Preferred Stock[102] - Proceeds are funding the India JV project and Loop's operational cash flow needs, validating the commercial readiness of Loop's technology[103][104] Joint Venture with Ester This section describes the 50/50 India joint venture with Ester Industries Ltd. for an Infinite Loop™ manufacturing facility - Loop formed a 50/50 India joint venture with Ester Industries Ltd. to build and operate an Infinite Loop™ manufacturing facility in India with a planned production capacity of 70,000 tons per year of Loop branded PET resin and polyester fiber[107][109] - The India JV will be financed by a combination of debt and equity, with Loop and Ester each contributing 50% of the equity capital[111] - As of May 31, 2025, each partner contributed $1.9 million in cash[111] - The estimated total investment cost for the India facility is approximately $176 million, with groundbreaking expected in the second half of calendar 2025 and commercial operations projected to commence in calendar 2027[117] - Loop generated $0.2 million in engineering services revenue in Q1 2025 from its agreement to provide engineering services to the India JV[115] Commercialization Strategy This section outlines Loop's approach to commercializing its technology through direct investments, licensing, and modular construction - Loop's commercialization strategy involves direct investments with strategic partners in low-cost manufacturing regions and licensing its Infinite Loop™ Technology globally[118][123][127] - Revenue generation is expected from profits from commercial facility operations, royalties for technology licensing, and exclusive sales and marketing responsibilities, as well as engineering services during project development[125][127][129] - The company is implementing a modular construction strategy to reduce capital expenditures, optimize operating expenses, and accelerate project timelines for global expansion[131] Recent Development – ATM Offering This section reports on the company's recent At-the-Market Offering Agreement to sell common stock - On July 3, 2025, Loop entered into an At the Market Offering Agreement to sell up to $15 million of common stock through Roth Capital Partners, LLC[133] Human Capital This section provides an overview of the company's employee count and departmental distribution - As of May 31, 2025, Loop had 44 employees: 18 in R&D, 17 in engineering and operations, and 9 in administrative functions[134] Results of Operations This section analyzes the company's financial performance, including revenues, expenses, and net loss for the period | Metric (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Change (favorable / (unfavorable)) | | :-------------------- | :------------------------------ | :------------------------------ | :--------------------------------- | | Revenues | $252 | $6 | $246 | | Research and development | $1,374 | $2,237 | $863 | | General and administrative | $1,649 | $2,911 | $1,262 | | Loss on equity accounted investment | $302 | $- | $(302) | | Interest and other financial expenses (income) | $419 | $60 | $(359) | | Net loss | $(3,447) | $(5,189) | $1,742 | - Revenues increased significantly by $246 thousand, driven by engineering fees ($244 thousand) and PET resin sales ($8 thousand)[139] - Net loss decreased by $1,742 thousand, primarily due to a $1,262 thousand decrease in G&A expenses and an $863 thousand decrease in R&D expenses, partially offset by a $359 thousand increase in interest and other financial expenses and a $302 thousand loss on equity accounted investment[144] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's cash position, funding needs, debt obligations, and compliance with financial covenants - As of May 31, 2025, the Company had $9,748 thousand in cash and cash equivalents[145] - Management believes current liquidity is sufficient for at least twelve months, but additional financing is required for strategic development and manufacturing facility construction, particularly for the India JV[146][147] - The Series B Convertible Preferred Stock, issued for $10,395 thousand, accrues a 13% cumulative fixed annual PIK dividend and is convertible to common stock at $4.75 per share or redeemable in cash[149] - The Investissement Québec financing facility's interest rate was increased to 4.36% and repayment terms were modified, with total annual principal repayments of $301 thousand for FY2026 and $519 thousand for FY2027[154] - The Company was not in compliance with the minimum equity covenant of its Canadian bank credit facility as of May 31, 2025[156] - An amendment on July 4, 2025, modified the covenant to include Series B Convertible Preferred Stock, bringing the Company into compliance[157] | Cash Flow Activity (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(3,082) | $(3,915) | | Net cash used in investing activities | $(115) | $(176) | | Net cash provided by (used in) financing activities | $(55) | $2,492 | | Net decrease in cash | $(3,225) | $(1,667) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing quantitative and qualitative disclosures about market risk as a smaller reporting company - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a 'smaller reporting company'[164] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of May 31, 2025, with no material changes in internal control - The Chief Executive Officer and Interim Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of May 31, 2025[166] - There were no material changes in internal control over financial reporting during the quarter ended May 31, 2025[167] PART II. Other Information This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and other relevant disclosures Item 1. Legal Proceedings This section details ongoing legal matters, including an SEC investigation and a complaint identifying the CEO as a relief defendant - The SEC investigation, initiated in October 2020, requested information regarding the Company's technologies and partnerships[168] - A second subpoena in March 2022 requested additional information, but no further requests have been made[168] - The SEC filed a complaint in September 2022 against other named defendants, identifying the CEO as a relief defendant for purportedly receiving monies from the defendants, but not alleging wrongdoing by the Company or the CEO[170] Item 1A. Risk Factors This section refers to existing risk factors and introduces an additional risk related to the recent At-the-Market (ATM) offering - No material changes to existing risk factors occurred during the three months ended May 31, 2025, as disclosed in the 2025 Annual Report[173] - An additional risk factor is the potential for dilution and a decrease in common stock price due to the sale or issuance of shares in the At-the-Market (ATM) offering of up to $15 million[174][175] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds occurred during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the period[176] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities occurred during the period[177] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[178] Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q1 2025 - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended May 31, 2025[179] Item 6. Exhibits This section lists all required exhibits, including corporate foundational documents and certifications - The exhibits include foundational corporate documents such as Articles of Incorporation, Certificate of Designation of Series B Convertible Preferred Stock, and By-laws, along with certifications required by the Sarbanes-Oxley Act[181]