What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-01-16 compared with 2023-10-16 · 81 added, 49 removed, 332 unchanged (28% of the section changed)

10 unchanged sentences

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) 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 relative to our current and future financial commitments, (vi) engineering, contracting, and building our manufacturing facilities, (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) our joint venture projects and our ability to recover certain expenditures in connection therewith, (x) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xi) disease epidemics and other health-related concerns and crises, which could result in reduced access to capital markets, supply chain disruptions and scrutiny, embargoing of goods produced in affected areas, government-imposed mandatory business closures and any resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, or market or other changes that could result in non-cash impairments of our intangible assets, and property, plant and equipment, (xii) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xiii) the outcome of any SEC investigations or class action litigation filed against us, (xiv) our ability to hire and/or retain qualified employees and consultants, (xv) other events or circumstances over which we have little or no control, and (xvi) other factors discussed in our subsequent filings with the SEC.

(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 relative to our current and future financial commitments, (vi) engineering, contracting, and building our manufacturing facilities, (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) the ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (x) our joint venture projects and our ability to recover certain expenditures in connection therewith, (xi) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xii) disease epidemics and other health-related concerns and crises, which could result in reduced access to capital markets, supply chain disruptions and scrutiny, embargoing of goods produced in affected areas, government-imposed mandatory business closures and any resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, or market or other changes that could result in non-cash impairments of our intangible assets, and property, plant and equipment, (xiii) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xiv) the outcome of any SEC investigations or class action litigation filed against us, (xv) our ability to hire and/or retain qualified employees and consultants, (xvi) other events or circumstances over which we have little or no control, and (xvii) other factors discussed in our subsequent filings with 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.

62 unchanged sentences

Multi-year supply agreement with L’Oréal Group, the global leader in the beauty industry, enabling L’Oréal Group to purchase production capacity and incorporate Loop ™ PET resin into its product packaging.

We also have a signed letter of intent with On AG, a sportswear brand and subsidiary of On Holding AG, to secure volumes of Loop™ PET resin from the Asian Infinite Loop™ manufacturing facility in Ulsan, South Korea, which Loop is planning to construct with its strategic partner SK Geo Centric.

We are pursuing amended supply agreements with existing customers and new agreements with additional customers that are located in North America, Europe, and Asia to sell the production volumes of our planned Infinite Loop ™ commercial facilities.

Strategic Partnership with SK Geo Centric

In June 2021, Loop and SK Geo Centric (“SKGC”) concluded a definitive agreement for SKGC to become a strategic investor in Loop, with SKGC acquiring a 10% stake in Loop at $12.00 per share for a total of $56.5 million.

Strategic Partnership with SKGC

In June 2021, Loop and SKGC concluded a definitive agreement for SKGC to become a strategic investor in Loop, with SKGC acquiring a 10% stake in Loop at $12.00 per share for a total of $56.5 million.

The transaction, which closed in July 2021, also included warrants for SKGC to purchase Loop common stock at $15.00 and $20.00 per share.

10 unchanged sentences

The JV Agreement outlines that the JV Company will have exclusive rights to commercialize Loop’s technology in the Asian market and Loop will receive an annual royalty fee for each of the commercial plants.

The first planned commercial manufacturing facility with Infinite Loop™ technology, located in Ulsan, South Korea, will have an annual capacity to supply 70,000 metric tons per year of Loop™ PET resin for packaging and polyester fiber applications, and is anticipated to break ground by the end of 2023 and to have construction completed by the end of 2025.

The first planned commercial manufacturing facility with Infinite Loop™ technology, located 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 is anticipated to break ground in the first half of 2024 and to have construction completed in 2026.

In addition to Infinite Loop™ Ulsan, the two partners have outlined plans which target a minimum of three additional commercial manufacturing facilities to be constructed throughout Asia by 2030.

32 unchanged sentences

We will continue to fulfill existing commitments related to ongoing sales contracts.

In the six-month period ended August 31, 2023, Loop reported revenues of $81 from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, including those with whom Loop is collaborating on product launches.

In the nine-month period ended November 30, 2023, Loop reported revenues of $108 from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, including those with whom Loop is collaborating on product launches.

In addition to supplying customers with initial volumes of Loop ™ PET, the Terrebonne Facility continues to support our customers and partners with R&D and analytical capabilities.

Recent Developments

Memorandum of Understanding (“MOU”) with Reed Management (“Reed”)

On January 16th, Loop announced that the Company signed a non-binding MOU with Reed, a European investment firm focused on high impact and technology-enabled infrastructure, for US$66 million in non-dilutive financing as part of a joint venture (the “JV”) to roll-out Loop’s technology in the European market.

Loop and Reed intend to form a strategic long-term partnership through the establishment of a 50/50 JV to commercialize Loop’s technology in Europe.

Reed intends to provide financing of €60 million (US$66 million) in non-dilutive capital.

Of this amount, US$33 million is to be provided to Loop as non-dilutive capital to fund Loop’s technology commercialization globally.

The remaining US$33 million is to be invested in the JV.

Under the terms of the MOU, Reed will provide capital as follows:

US$11 million equity investment in the JV to acquire from Loop exclusive rights to co-invest alongside Loop in commercialization projects using Loop’s technology in Europe through the planned JV between Loop and Reed;

US$22 million loan from the JV to Loop in two equal tranches – first tranche paid at closing and second tranche paid in the following 12 months with both tranches having a 10% PIK rate and 3-year term;

US$33 million commitment to cover initial costs to develop projects in Europe, including Loop’s equity contribution to the previously announced JV to construct an Infinite Loop™ plant in Saint-Avold, France;

Any subsequent capital injections in the JV will be funded on a 50/50 basis between Reed and Loop.

This intended partnership allows for Loop Industries to reduce the funding needs for its equity contributions to support the rollout of an increased number of facilities to be constructed in the European market using the Infinite Loop™ technology.

Loop Industries will receive royalty and engineering fees directly from the planned facilities in Europe.

The non-binding MOU is subject to customary due diligence and the fulfillment of certain pre-closing conditions.

The transaction is expected to close by the end of March 2024.

Ulsan ARC Groundbreaking Ceremony

Loop and SKGC announced on April 27 th , 2023 that they have signed a joint venture agreement to build Infinite Loop™ facilities in the Asian market.

1 unchanged sentence

The first planned facility in Asia will be part of SKGC’s Ulsan Advanced Recycling Cluster (“Ulsan ARC”) in South Korea.

A groundbreaking ceremony for the Ulsan ARC is scheduled to take place on Thursday November 9th, 2023.

Daniel Solomita, Loop’s Founder and CEO, will present Loop’s depolymerization technology and the Infinite Loop™ project at the ceremony which will include attendees ranging from central and local government officials, industry officials, environmental institutions, academic experts, customers and media.

Construction of the Infinite Loop™ Ulsan facility is anticipated to commence by the end of 2023 and to reach completion by the end of 2025.

Daniel Solomita, Loop’s Founder and CEO, participated in the groundbreaking ceremony of the Ulsan ARC which took place on November 15 th , 2023 in South Korea.

Solomita presented the Company’s sustainable plastics technology and its Infinite Loop™ manufacturing model at the event, which included attendees ranging from central and local government officials, industry officials, environmental institutions, academic experts, customers and media.

The Ulsan ARC groundbreaking ceremony is a key milestone in the lead-up towards breaking ground on the planned Infinite Loop™ manufacturing facility in the Ulsan ARC, which is expected to take place in the first half of 2024, with construction being completed by 2026.

Loop™ Branded PET Resin Compliant for Pharmaceutical Industry Packaging Applications

On December 13, 2023, Loop announced that its Loop™ branded PET resin has been tested and is compliant for use in packaging applications in the pharmaceutical industry.

The rigorous requirements and standards outlined by the United States Pharmacopeia (USP <661.1>, Plastic Materials of Construction ) and the European Pharmacopeia (Ph.Eur.

3.1.15, Polyethylene Terephthalate for Containers for Preparations not for Parenteral Uses ) ensure that materials used in pharmaceutical packaging maintain the highest levels of integrity and do not compromise the safety and efficacy of the enclosed products.

Test results executed by a worldwide leader in laboratory testing services confirm that Loop's PET resin has successfully met these requirements, opening new possibilities for sustainable packaging solutions in the pharmaceutical industry.

The pharmaceutical industry is increasingly recognizing the importance of adopting sustainable practices and materials to reduce its environmental impact.

Loop's 100% recycled virgin quality PET can help support pharmaceutical companies with a sustainable packaging alternative and address the growing demand for environmentally responsible choices in the industry.

Market Opportunity

43 unchanged sentences

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 first Asian manufacturing facility in Ulsan, South Korea, which is anticipated to break ground by the end of 2023 and to have construction completed by the end of 2025.

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 first Asian manufacturing facility in Ulsan, South Korea, which is anticipated to break ground in the first half of 2024 and to have construction completed in 2026.

The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop ™ PET resin and polyester fiber into their packaging and clothing.

36 unchanged sentences

The GEN II technology portfolio currently consists of four patent families:

One family has two issued U.S.

patents, one allowed U.S.

application, and a pending U.S.

application, all expected to expire on or around September 2037, not including any patent term extensions.

Internationally, this patent family has seven issued or allowed patents in foreign jurisdictions, including China, Bangladesh, Argentina, Taiwan, and Brazil, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted, not including any patent term extensions.

One family has three issued U.S.

patents, and two pending U.S.

applications, the last of which is expected to expire on or around September 2037, not including any patent term extensions.

Internationally, this patent family has nine issued or allowed patents in foreign jurisdictions, including China, Bangladesh, Argentina, Taiwan, and Brazil, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted, not including any patent term extensions.

An additional aspect of the GEN II technology, as claimed in two issued U.S.

10 unchanged sentences

Internationally, this patent family includes four issued or allowed patents in foreign jurisdictions, including Europe, Chile, Bangladesh and South Africa, and pending applications in Canada, China, Korea, the Eurasian Patent Organization, the Gulf Cooperation Council, India, Japan, Mexico, and various other countries, all expected to expire on or around March 2040, if granted, not including any patent term extensions.

Loop owns registrations for its trademarks in Cambodia, Canada, the European Union, Taiwan, the United Kingdom, and the U.S.

Loop also has pending applications in Canada, Japan, South Korea, the U.S., and Vietnam.

We have also filed a U.S.

provisional application directed to another aspect of the GEN II technology.

Any patents that ultimately issue from this application are expected to expire on or around September 2044, not including any patent term adjustment or extensions.

Loop owns registrations for its trademarks in Cambodia, Canada, China, the European Union, Japan Taiwan, the United Kingdom, Vietnam and the U.S.

Loop also has pending applications in Canada, China, South Korea, and the U.S.

Government Regulation and Approvals

16 unchanged sentences

On August 31, 2021, Loop also received a NOL from Health Canada, which states that the PET produced by Loop’s recycling process is suitable for use in the manufacture of water bottles and articles for contact with all food types under all conditions of use.

On December 13, 2023, Loop announced that its Loop™ branded PET resin has been tested and is compliant for use in packaging applications in the pharmaceutical industry.

The rigorous requirements and standards outlined by the United States Pharmacopeia (USP <661.1>, Plastic Materials of Construction ) and the European Pharmacopeia (Ph.Eur.

Human Capital

As of August 31, 2023, we had 70 employees of which 24 work in research and development, 32 in engineering and operations, and 14 in administrative functions.

As of November 30, 2023, we had 60 employees of which 22 work in research and development, 24 in engineering and operations, and 14 in administrative functions.

Results of Operations

Three Months Ended August 31, 2023

The following table summarizes our operating results for the three-month periods ended August 31, 2023 and 2022, in thousands of U.S.

Three months ended August 31,

Three Months Ended November 30, 2023

The following table summarizes our operating results for the three-month periods ended November 30, 2023 and 2022, in thousands of U.S.

Three months ended November 30,

Revenue from contracts with customers

11 unchanged sentences

Total general and administrative

Gain on disposition of assets

Depreciation and amortization

3 unchanged sentences

Total expenses

Revenues for the three-month period ended August 31, 2023 decreased $81 to $54, as compared to $135 for the same period in 2022.

Revenues for the three-month period ended November 30, 2023 increased $1 to $26, as compared to $25 for the same period in 2022.

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, 2023 decreased $1,713 to $2,038, as compared to $3,751 for the same period in 2022.

The decrease was primarily attributable to a $1,184 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $531 decrease in employee compensation expenses, and a $470 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process, partially offset by a decrease in tax credits accounted for as a reduction of R&D expenses of $817.

Research and development expense for the three-month period ended November 30, 2023 decreased $2,749 to $1,833, as compared to $4,582 for the same period in 2022.

The decrease was primarily attributable to a $1,055 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $594 decrease in plant and laboratory operating expenses, a $445 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process, a $433 decrease in employee compensation expenses, and a $294 decrease in stock-based compensation expenses.

General and administrative expenses

General and administrative expenses for the three-month period ended August 31, 2023 decreased $1,168 to $2,843, as compared to $4,011 for the same period in 2022.

The decrease was primarily attributable to a $564 decrease in professional fees, and a $362 decrease in insurance costs.

The net loss for the three-month period ended August 31, 2023 decreased $2,955 to $4,750, as compared to $7,705 for the same period in 2022.

The decrease is primarily due to the $1,713 decrease in research and development expenses, and the decrease in general and administrative expenses of $1,168.

Six Months Ended August 31, 2023

The following table summarizes our operating results for the six-month periods ended August 31, 2023 and 2022, in thousands of U.S.

Six months ended August 31,

General and administrative expenses for the three-month period ended November 30, 2023 decreased $725 to $2,458, as compared to $3,183 for the same period in 2022.

The decrease was primarily attributable to a $558 decrease in professional fees, and a $183 decrease in stock-based compensation expenses.

The net loss for the three-month period ended November 30, 2023 increased $3,231 to $4,244, as compared to $1,013 for the same period in 2022.

The increase is primarily due to a gain on disposition of assets of $6,704 recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec, partially offset by the $2,749 decrease in research and development expenses, and the decrease in general and administrative expenses of $725.

Nine months Ended November 30, 2023

The following table summarizes our operating results for the nine-month periods ended November 30, 2023 and 2022, in thousands of U.S.

Nine months ended November 30,

Revenue from contracts with customers

11 unchanged sentences

Total general and administrative

Gain on disposition of assets

Depreciation and amortization

3 unchanged sentences

Total expenses

Revenues for the six-month period ended August 31, 2023 decreased $54 to $81, as compared to $135 for the same period in 2022.

Revenues for the nine-month period ended November 30, 2023 decreased $52 to $108, as compared to $160 for the same period in 2022.

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, 2023 decreased $4,024 to $6,528, as compared to $10,552 for the same period in 2022.

The decrease was primarily attributable to a $1,837 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $1,536 decrease in employee compensation expenses, including stock-based compensation, a $909 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process, and a $534 decrease in plant and laboratory expenses to operate our Terrebonne Facility, partially offset by a decrease in tax credits accounted for as a reduction of R&D expenses of $861.

Research and development expense for the nine-month period ended November 30, 2023 decreased $6,772 to $8,361, as compared to $15,133 for the same period in 2022.

The decrease was primarily attributable to a $2,893 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $2,263 decrease in employee compensation expenses, including stock-based compensation, a $1,356 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process, and a $1,128 decrease in plant and laboratory operating expenses, partially offset by a decrease in tax credits accounted for as a reduction of R&D expenses of $938.

General and administrative expenses

General and administrative expenses for the six-month period ended August 31, 2023 decreased $9,739 to $5,308, as compared to $15,047 for the same period in 2022.

The decrease was primarily attributable to a $7,951 decrease in stock-based compensation which is mostly related to a $7,740 expense recorded in relation to the achievement of a performance milestone for 1,000,000 RSUs in the six-month period ended August 31, 2022, a $761 decrease in insurance costs, and a $744 decrease in professional fees.

The net loss for the six-month period ended August 31, 2023 decreased $13,960 to $11,751, as compared to $25,711 for the same period in 2022.

The decrease is primarily due to the decrease in general and administrative expenses of $9,739, and the $4,024 decrease in research and development expenses.

General and administrative expenses for the nine-month period ended November 30, 2023 decreased $10,463 to $7,767, as compared to $18,230 for the same period in 2022.

The decrease was primarily attributable to a $8,135 decrease in stock-based compensation which is mostly related to a $7,740 expense recorded in relation to the achievement of a performance milestone for 1,000,000 RSUs in the nine-month period ended November 30, 2022, a $1,590 decrease in professional fees, and a $825 decrease in insurance costs.

The net loss for the nine-month period ended November 30, 2023 decreased $10,729 to $15,995, as compared to $26,724 for the same period in 2022.

The decrease is primarily due to the decrease in general and administrative expenses of $10,463, and the $6,772 decrease in research and development expenses, partially offset by a gain on disposition of assets of $6,704 recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

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 $13,365 at August 31, 2023 and an undrawn senior loan facility from a Canadian bank of $2,587.

Our liquidity position consists of cash and cash equivalents on hand of $9,366 at November 30, 2023 and an undrawn senior loan facility from a Canadian bank of $2,577.

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 2023 Annual Report on Form 10-K.

10 unchanged sentences

In December 2021, the Company entered into an agreement for the purchase of long-lead equipment for up to $8,546 which can be used in any Infinite Loop™ manufacturing facility.

As of August 31, 2023, the Company has paid an aggregate of $8,460 in cash deposits.

As of November 30, 2023, the Company has paid an aggregate of $8,460 in cash deposits.

This amount, along with engineering and development costs that have been and may continue to be incurred, is currently expected to be recovered from the JV Company when construction begins on the Infinite Loop™ Ulsan facility.

19 unchanged sentences

The Company is subject to a guarantee of the liabilities of Loop Canada Inc.

As at August 31, 2023, the Credit Facility was undrawn.

As at November 30, 2023, the Credit Facility was undrawn.

Flow of Funds

Summary of Cash Flows

A summary of cash flows for the three months ended August 31, 2023 and 2022 was as follows, in thousands of U.S.

Three Months Ended August 31,

A summary of cash flows for the three months ended November 30, 2023 and 2022 was as follows, in thousands of U.S.

Three Months Ended November 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided from (used in) investing activities

Net cash used by financing activities

2 unchanged sentences

Net Cash Used in Operating Activities

During the six-month period ended August 31, 2023, we used $11,017 in operations compared to $19,408 during the same period in 2022.

During the nine-month period ended November 30, 2023, we used $14,762 in operations compared to $25,012 during the same period in 2022.

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 and our basic design package for the Infinite Loop™ full-scale manufacturing facilities.

Net Cash Used in Investing Activities

During the six-month period ended August 31, 2023, we used $5,290 in investing activities compared to $1,470 during the same period in 2022.

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, as compared to $1,271 for the same period in 2022.

During the three-month period ended August 31, 2023, we made investments in intangible assets of $225, as compared to $141 for the same period in 2022, particularly in our patent technology in the United States and around the world.

During the nine-month period ended November 30, 2023, we used $5,453 in investing activities compared to cash provided from investing activities of $6,995 during the same period in 2022.

During the nine-month period ended November 30, 2023, we made $5,065 in deposits on long-lead equipment for use in a commercial project, as compared to $1,271 for the same period in 2022.

During the nine-month period ended November 30, 2023, we made investments in intangible assets of $378, as compared to $225 for the same period in 2022, particularly in our patent technology in the United States and around the world.

During the nine-month period ended November 30, 2022, we sold land in Bécancour, Québec for cash proceeds of $8,559.

Net Cash (Used) Provided by Financing Activities

During the three months ended August 31, 2023, we repaid $32 of long-term debt.

During the three months ended November 30, 2023, we repaid $47 of long-term debt.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis