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The following information and any forward-looking statements should be read in
conjunction with the unaudited financial information and the notes thereto
included in this Quarterly Report on Form 10-Q, including those risks identified
in the “Risk Factors” section of our most recent Annual Report on Form 10-K.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of
corporation (the “Company,” “Loop,” “we,” or “our”), contains “forward-looking
statements,” as defined in
Reform Act of 1995. In some cases, you can identify forward-looking statements
by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,”
“intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or
“continue” or the negative of such terms and other comparable terminology. 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. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Actual results may differ materially from the predictions
discussed in these forward-looking statements. The economic environment within
which we operate could materially affect our actual results. Forward-looking
statements are inherently subject to risks and uncertainties, some of which
cannot be predicted or quantified. 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 predictions
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) adverse effects on the
Company’s business and operations as a result of increased regulatory, media or
financial reporting scrutiny, practices, rumors, or otherwise, (x) disease
epidemics and health-related concerns, such as the current outbreak of
additional variants 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 ongoing
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
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
publicly available.
In addition, statements that “we believe” and similar statements reflect our
beliefs and opinions on the relevant subject. These statements are based upon
information available to us as at the date of this Form 10-Q, and while we
believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read
to indicate that we have conducted an exhaustive inquiry into, or review of, all
potentially available relevant information. These statements are inherently
uncertain, and investors are cautioned not to unduly rely upon these statements.
We caution readers not to place undue reliance on any such forward-looking
statements, which speak only as at the date made. We disclaim any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
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Introduction
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
suitable for use in food-grade packaging and polyester fiber, thus enabling our
customers to meet their sustainability objectives.
contributing to the global movement towards a circular economy by reducing
plastic waste and recovering waste plastic for a sustainable future.
The Company is in the planning stages of pursuing the construction of Infinite
Loop™ commercial scale facilities. Loop is currently engaged in discussions to
secure financing for its investments in the various planned manufacturing
facilities and the sequencing of the manufacturing facilities will be determined
in conjunction with the outcome of the company’s financing discussions.
Industry Background and Market Opportunity
The global annual market demand for PET plastic and polyester fiber is expected
to exceed
Report. We believe plastic pollution and climate change continue to be the most
persistently covered environmental issues by media and local and global
environmental non-governmental organizations. Some of the main concerns
associated with PET are the greenhouse gas (“GHG”) emissions associated with its
production from non-renewable hydrocarbons and the length of time it persists in
landfills and the natural environment. There is an increasing demand for action
to address the global plastic crisis, as evidenced by the
by 175 nations of a historic resolution at the
plastic pollution and forge an international legally binding agreement by the
end of 2024. In the last few years, governments in
minimum recycled content in packaging underlying the strength of this issue in
the marketplace. Consumer brands are seeking a solution to their plastic
challenge, and they are taking action. In recent years we have seen major brands
make significant commitments to close the loop on their plastic packaging by
transitioning their packaging to recyclable materials and by incorporating more
recycled content into their packaging.
Global consumer packaged goods companies (“CPG companies”), apparel
manufacturers, and retail brands have announced significant public commitments
and targets to make the transition to a circular plastic economy, namely:
· In January 2018 , Danone's evian® brand bottled spring water committed to a
100% recycled content package by 2025;
· In 2018, Coca-Cola committed to an average recycled content of 50% across
its packaging by 2030;
· In September 2021 , PepsiCo stated 10 European markets are moving key
Pepsi-branded products to 100% rPET bottles by 2022, and in the U.S. , all
Pepsi-branded products will be converted to 100% rPET bottles by 2030;
· In 2020, L'OCCITANE en Provence committed to 100% recycled content plastic
in their bottles by 2025;
· In 2020, L'Oréal Group committed to using 100% recycled or biobased
plastic in their packaging by 2030;
· By 2025, Unilever targets increasing the use of post-consumer recycled
plastic material in their packaging to at least 25%;
· Colgate-Palmolive states a 2025 goal of using at least 25% post-consumer
recycled plastic in packaging;
· Nestlé aims to increase the amount of recycled PET used across their
brands globally to 50% by 2025;
· Adidas Group aims to replace all virgin polyester with recycled polyester
in all adidas and Reebok products where a solution exists by 2024;
· H&M is aiming to ensure that at least 25% of the plastic they use is from
post-consumer recycled materials;
· Walmart has an objective to use at least 17% post-consumer recycled
content globally in their private brand plastic packaging and is taking
action to eliminate problematic or unnecessary plastic packaging and move
from single-use towards reuse models where relevant by 2025;
· Ikea's ambition is, that by 2030, all plastic used in their products will
be based on renewable or recycled material;
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· Puma is aiming to increase the amount of recycled materials in its apparel
and accessories products and have announced a 2025 goal of having at least
75% of the polyester used in Puma products be from recycled sources;
· By 2025, Lululemon aims to achieve at least 75% sustainable materials for
their products, including fibers that are recycled, renewable,
regenerative, sourced responsibly and are manufactured using low-resource
processes; and
· Nike has set a 2025 target of diverting 100% of its waste from landfills
with at least 80% recycled back into their products and goods.
There is a growing regulatory and policy environment to encourage a reduction in
the production of virgin fossil fuel-based plastic and for minimum recycled
content in packaging imposed by various governments:
· In North America : Canada has announced a zero-plastic waste by 2030 goal
and is targeting for all plastic packaging to contain 50% recycled content
by 2030. A California law enacted on September 24, 2020 requires that
plastic bottles contain at least 25% by 2025 and 50% by 2030.
· In Europe : As of January 2021 , the European Union introduced a new tax of
€800/ton on non-recycled plastic packaging based on the amount of plastic
packaging placed on each member state's market. Effective April 2022 , a
new £200/ton tax applies in the UK to plastic packaging produced or
imported into the UK that does not contain at least 30% recycled plastic.
Italy is introducing a tax of €450 per ton on virgin plastic used in
manufacture or importation of single use plastic which is expected in
January 2023 . Spain has also proposed a tax of €450 per ton on
non-reusable plastic packaging with an anticipated start date of January
2023 . France has a stated goals of 100% plastics recycled by 2025 and 77%
of beverage bottles to be collected.
· In Asia : South Korea targets reducing plastic waste by 20% and increase
recycling rates from 54% to 70% by 2025 and 30% renewable plastic by 2030.
The growing regulatory environment combined with global consumer goods
companies, apparel manufacturers, and retail brand commitments for 2025 and 2030
are expected to increase the demand for recycled PET (“rPET”) plastic further.
Mechanical recycled PET plastic is produced principally through the conversion
of bales of PET bottles. The materials have been collected and transported to a
materials recovery facility (“MRF”), where they are sorted from other materials,
baled, and sent to specific PET recycling facilities. The bales are broken and
sorted to remove any non-PET materials. The PET is then ground and put through a
separation process which separates the PET from non-PET materials such as bottle
caps and labels. Clean PET flake is then further processed depending on its
intended end market. It may become more highly refined PET pellet for new
bottles or extruded into PET sheet for clamshells, trays, and cups. Recycled PET
is also spun into fiber for carpet, clothing, fiber fill, or other materials.
We believe mechanically recycled PET has a number of challenges in meeting the
quality specifications and growing volume requirements implied by commitments
from major brands, mainly due to the cost and variety of acceptable PET
feedstock. Some mechanical recycling processes involve remelting the PET flake
which reduces the quality of the rPET output each time it is recycled relative
to the specifications of virgin PET produced from fossil fuels. Each time the
PET plastic is mechanically recycled, its quality and clarity are reduced.
Therefore, mechanically recycled PET may need to be mixed with virgin PET from
fossil fuels to maintain quality. Lower quality mechanically recycled PET is
often downcycled to alternate uses such as polyester fibers which may be dyed
and used in carpets or clothing. Additionally, mechanically recycled PET
manufactured for use in clear bottles or food containers requires predominantly
clear and clean PET flakes separated from waste bales, and cannot accommodate
darkly colored PET flakes, lower quality fiber feedstock, or materially
contaminated feedstock, which may be cheaper.
We believe the commercialization plans of Loop™ PET resin and polyester fiber
may provide the ideal solution for global brands because Loop™ PET resin and
polyester fiber contains 100% recycled PET and polyester fiber content. The
Loop™ PET resin and polyester fiber is virgin-quality suitable for use in
food-grade packaging. That means consumer packaged goods companies will be able
to choose to market packaging made from a 100% recycled Loop™ branded PET resin
and polyester fiber.
Proprietary Technology and Intellectual Property
We believe the power of our technology lies in its ability to use
post-industrial and post-consumer waste PET plastic and polyester fiber
feedstocks, which could end up in landfills, rivers, oceans and natural areas,
to create Loop™ PET resin. We believe our technology can deliver high-purity
profitable virgin-quality, 100% recycled PET resin suitable for use in
food-grade packaging and polyester fiber.
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Our Generation I technology (“GEN I”) is a hydrolysis-based depolymerization
technology which yields purified terephthalic acid (“PTA”) and monoethylene
glycol (“MEG”), two common monomers of PET. As the Company evaluated the
transition of the
challenges involving PTA and MEG purification were identified. To overcome the
generation of our technology. Our Generation II technology (“GEN II”) is a
methanolysis-based depolymerization technology that uses temperatures below
90 °C to depolymerize waste PET and polyester fiber. The low temperature offers
several key advantages which the Company believes will improve its ability to
commercialize the GEN II technology, including:
· Lower energy usage during depolymerization and therefore reduced
processing cost and lower GHG emissions relative to higher temperature
processes;
· Avoidance of side reactions with non-PET waste, which are inherent in
waste PET feedstock streams, during depolymerization which may occur
during higher temperature and higher pressure depolymerization processes.
This allows for a simplified distillation purification process resulting
in fewer, and more effective, steps to isolate the desired high purity DMT
and MEG monomers suitable to produce virgin-quality PET required to meet
food contact regulations as well as the quality and clarity requirements
of global consumer product companies;
· Allowing the depolymerization of less costly and low-quality feedstocks,
which cannot be effectively recycled today, such as carpet fiber, clothing
and mixed plastics, and upcycling them into high-quality PET that can be
used in food contact use; and
· The GEN II technology uses only trace amounts of water, eliminates the
need for a halogenated solvent, and uses a catalyst at low concentration.
This shift, from producing the monomer PTA to the monomer DMT, was a pivotal
moment for Loop. We believe that
inputs than conventional PET production processes. We also believe it is an
environmentally sustainable method for producing virgin-quality food-grade PET
plastic by decoupling PET manufacturing from the fossil fuel industry.
To independently validate that our
monomers at mini-pilot and pilot scale, we commissioned Kemitek, a
Centre for Technology Transfer
chemical process scale-up. Kemitek’s findings allowed them to confirm that our
technology produces monomers that meet our purity specifications for the
production of PET resin and polyester fiber. The complete Kemitek report was
filed with the
To protect our technology and intellectual property rights, we rely on a
combination of patents, trademarks, trade secrets, confidentiality agreements
and provisions as well as other contractual provisions to protect our
proprietary rights, which are primarily our patents, brand names, product
designs and marks. We have two technology areas, referred to as
and the GEN II technology, with patent claims relating to our technology for
depolymerizing PET.
· The GEN I technology portfolio has three issued U.S. patents, all expected
to expire on or around July 2035 . Internationally, the GEN I technology
portfolio includes issued patents in China , the Eurasian Patent
Organization , Europe , Japan , India , the Gulf Cooperation Council , and
various other countries, and pending patent applications in Canada ,
Mexico , South Korea , and various other countries all expected to expire,
if granted, on or around July 2036 , not including any patent term
extensions.
· The GEN II technology portfolio currently consists of four patent
families:
o One family has two issued U.S. patents and a pending U.S. application,
all expected to expire on or around September 2037 . Internationally,
this patent family has issued patents in Bangladesh and in Argentina ,
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.
o An additional aspect of the GEN II technology, as claimed in two issued
U.S. patents and a pending U.S. application, all expected to expire on
or around June 2039 . Internationally, this patent family includes
issued or allowed patents in Morocco , Algeria , and Bangladesh , 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 June 2039 , if granted, not including any patent
term extensions.
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o Another aspect of the GEN II technology, which is the subject of
an issued U.S. patent and a pending U.S. application. Internationally,
this patent family includes pending applications in Canada , Europe ,
India , Singapore , Papua New Guinea , Brazil , and South Africa . Any
patents that would ultimately grant from this application would be
expected to expire on or around March 2040 , not including any patent
term extensions.
o Another aspect of the GEN II technology, which is the subject of an
issued U.S. patent and a pending U.S. application, both expected to
expire on or around March 2040 . Internationally, this patent family
includes an allowed application in Bangladesh and pending applications
in Canada , China , Korea , the Eurasian Patent Organization , Europe , 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
Union
applications in
Supply Agreements with Global Consumer Brands
Consumer brands are seeking a solution to their plastic challenge and they are
taking bold action. In the past years, we have seen major brands make
significant commitments to close the loop on their plastic use in two ways; by
transitioning their packaging to recyclable materials like PET, and by
incorporating more recycled content into their packaging. We believe Loop™ PET
resin provides the ideal solution for these brands because it is recyclable and
is made from 100% recycled PET waste and polyester fiber, while being
virgin-quality and suitable for use in food-grade packaging and polyester fiber.
Due to the commitments by large global consumer brands to incorporate more
recycled content into their product packaging, the regulatory requirements for
minimum recycled content in packaging imposed by governments, the virgin-quality
of Loop™ branded PET resin and its marketability to extoll the sustainability
credentials of consumer brands that incorporate it, we believe we will be able
to sell Loop™ branded PET resin at a premium price relative to virgin and
mechanically recycled PET resin.
We currently have agreements with some of the world’s leading brands to be
supplied from our planned commercial facilities, including:
· Multi-year supply agreement with Danone SA ("Danone"), one of the world's
leading global food and beverage companies, enabling Danone to purchase
100% sustainable and upcycled Loop™ branded PET for use in brands across
its portfolio including evian®, Danone's iconic natural spring water;
· Multi-year supply agreement with PepsiCo, one of the largest purchasers of
recycled PET plastic, enabling PepsiCo to purchase production capacity and
incorporate Loop™ PET resin into its product packaging;
· Multi-year supply agreement with L'OCCITANE en Provence to supply 100%
recycled and sustainable Loop™ PET resin and incorporate Loop™ PET resin
into its product packaging; and
· 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 are pursuing amended supply agreements with existing customers and new
agreements with additional customers that are located in
and
facilities.
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Turning PET Waste into Feedstock
We use waste PET plastic and polyester fiber as feedstock. Our technology can
use PET plastic bottles and packaging of any color, transparency or condition,
carpet, clothing and other polyester textiles that may contain colors, dyes or
additives, and even PET plastics that have been recovered from the ocean and
degraded by exposure to sun and salt. We believe that our ability to use many
materials that mechanical recyclers cannot use is both an important advantage of
Loop™ PET resin over mechanically recycled PET resin and is additive to the
number of PET waste streams that may be recycled. This also means we are
creating a new market for materials that have persistently been leaking out of
the waste management system and into our shared rivers, oceans and natural
areas.
Commercialization Strategy
Our objective is to achieve global expansion of Loop’s technology through a mix
of fully owned manufacturing facilities, strategic partnerships, and licensing
agreements. We believe that industrial companies, some of which today may not be
in the business of manufacturing PET resin or polyester fiber, will view
involvement in Infinite Loop™ projects as a significant growth opportunity,
which may offer attractive economic returns either as Loop manufacturing
partners or as licensees of the technology.
On
commercialization strategy on our planned joint venture projects with SK geo
centric Co., Ltd (“SKGC”) in
requirement for Loop equity investment and higher return on capital, and
leverage SKGC’s engineering and operational infrastructure. In addition, the
joint venture projects will provide Loop with an annual technology licensing
fee. 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
South Korea
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. As
countries around the globe continue to increase sustainability targets and
recycled content mandates, our customers are increasing the use of sustainably
produced materials into their products.
The Infinite Loop™ manufacturing technology is the key pillar of our
commercialization blueprint. We believe our technology is at the forefront of
the global transition away from fossil fuels and petrochemicals and into the
circular economy, where PET plastic and polyester fiber are produced by
recycling waste plastic rather than depleting finite resources. The Infinite
Loop™ manufacturing technology allows for waste PET plastic and polyester fiber
to be broken down into its base building blocks, monomers DMT and MEG, using
Loop’s patented technology. Once the monomers are purified, they are then
repolymerized into PET plastic or polyester fiber using INVISTA know how, which
Loop licenses, and
polymerization process and the associated designs are historically proven in the
commercial production of PET resin and polyester fiber.
We have completed our basic design package for the Infinite Loop™ full-scale
manufacturing facilities. The engineering philosophy we have adopted is “design
one, build many.” This approach allows for the basic design package, to be used
as the base engineering platform for all future geographical expansion. We
believe this approach allows for a quick execution, speed to market and lends
itself well to modular construction. The basic design package has a capacity of
up to 70,000 M/T of PET resin output per year. Permitting, site and regulatory
considerations may impact plant capacity.
Our market strategy is to assist global consumer goods brands in meeting their
public sustainability commitments by offering packaging or polyester fibers that
are made with Loop co-branded, 100% recycled, virgin-quality PET or polyester
fibers. We believe that Loop™ recycled PET resin and polyester fiber could
command premium pricing over virgin, petroleum-based PET resin and provide
attractive economic returns. We are targeting multi-year take or pay offtake
agreements for planned Infinite Loop™ production. Factors under consideration in
determining project economics include the feasibility design engineering and
cost estimate work, timing and permitting of a facility, customer offtake
demand, commitment terms, and feedstock sources, quality, availability, PET bale
index pricing, logistics, and ramp up, among others.
Loop and SKGC intend to form a joint venture with exclusivity to build
sustainable PET plastic and polyester fiber manufacturing facilities throughout
estimated 70% of global PET consumption making it the largest market in terms of
plastic manufacturing, consumption and waste. Under the terms of the Memorandum
of Understanding (“MOU”) for the proposed joint venture, which was entered into
in July, 2021, 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. As of
the date of the filing on this Quarterly Report on Form 10-Q, final joint
venture agreements have not been entered into.
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In addition, on
for SKGC to become a strategic investor in Loop. Under this agreement, SKGC
purchased 4,714,813 new treasury common shares of Loop at a price of
share, for total consideration of
transaction closed on
an additional 461,298 common shares at
expiration date of
share, conditional upon the timing of construction of the first Asian
manufacturing facility.
SKGC currently owns approximately 10% of Loop’s common shares. In conjunction
with the equity investment, Mr.
Business Division, was appointed to Loop’s Board of Directors. This appointment
reflects SKGC’s strategic view of the importance of its investment in Loop, as
part of its “Green for Better Life” global strategic vision.
As reported on
with the city of
planned to include the first Infinite Loop™ manufacturing facility in
Discussions have been initiated regarding planning for the second facility in
manufacturing facilities in
SKGC unveiled on
the company’s goal of transforming into a green company and focusing on
eco-friendly products such as recyclable plastics. These announcements further
reinforce Loop’s alignment as an important strategic partner for SK geo centric,
as we move to commercialize our technology in
Loop and SKGC are collaborating closely with SK ecoengineering (“SKEE”), a
subsidiary of SK group, on providing the engineering related to the construction
of the planned Infinite Loop™ manufacturing facility in
is an experienced EPC contractor with a proven track record in the construction
of large scale projects internationally.
Infinite Loop™Europe
We announced on
(“Suez”), with the objective to build the first Infinite Loop™ manufacturing
facility in
announced that SKGC will become an equal partner in the strategic partnership.
The expanded partnership intends to combine SKGC’s petrochemical manufacturing
experience with SUEZ’s resource management expertise and Loop’s breakthrough
proprietary technology to supply up to 70,000 M/T of virgin quality, 100%
recycled PET plastic and polyester fiber to the European market. The planned
Infinite Loop™ facility is contemplated to offer a solution to consumer goods
companies which have committed to goals for significantly increased use of
recycled content in their products and/or packaging and help to meet the growing
demand for recycled PET resin and polyester fiber.
The three companies are re-evaluating the optimal location for the planned
European Infinite Loop™ manufacturing facility. We are working with our partners
Suez and SKGC on acquiring the preferred project site, alignment of various
levels of government support and additional steps for the project which include
advancing permitting, site specific engineering, customer offtake contracts,
feedstock and financing.
Infinite Loop™Québec
We acquired a project site in
(CDN
proceeds of
announced that our commercialization strategy will now focus on our planned
projects with SKGC in
to sell all of our remaining property in
(CDN
2023
closing conditions.
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Although the company is currently focusing on developing the planned joint
venture facilities in
option at the appropriate time, and possible alternative locations for such a
facility are available. We are continuing to explore financing options to fully
fund the project. Alternatives under exploration include incentive and financing
programs supported by, or in partnership with, various levels of government. A
future facility in
announced zero plastic waste goal by 2030.
Technology Due Diligence Report
Loop’s strategic partners, Suez and Danone, among others, collectively engaged
an independent, globally recognized third-party engineering firm to execute a
thorough due diligence and technology validation report. We believe the final
report, which was communicated in
quality, effectiveness, and scalability of
Unveiling of L’OCCITANE en Provence Almond Shower Oil Bottle
On
manufacturer and retailer of sustainable beauty and wellness products, unveiled
a new bottle for the brand’s Almond Shower Oil that was manufactured with 100%
recycled Loop™ PET resin produced using monomers from Loop’s Terrebonne
Facility. Loop has partnered with L’OCCITANE to help meet the brand’s
sustainability goal of using 100% recycled PET in its bottles by 2025. In
partnership with the brand, a pilot project was executed where the bottle
(excluding cap and label) was produced using 100% recycled Loop™ PET resin and
was successfully carried out on L’OCCITANE production lines. This initiative
marks a significant step forward in the partnership between the two companies
and sets the pathway to implement Loop’s technology across other products in the
brand’s assortment. As part of this partnership with L’OCCITANE, Loop’s branding
is featured prominently on the front of the packaging, with additional details
speaking to Loop’s technology on the back label.
Unveiling of New evian Loop Bottle
On
evian, unveiled a new “evian Loop” prototype virgin-quality water bottle made
from 100% recycled content. The monomers used to produce the evian Loop bottles
were made at the Terrebonne Facility. Evian began selling water bottles made
from Loop™ PET in
produce these bottles include polyester fibers from carpets and clothing which
are considered unrecyclable and destined for landfill and other natural
environments. This initiative reflects evian’s commitment to its stated 2025
goals for circularity and 100% recycled content.
Loop continues to work toward new brand and market introductions with additional
consumer goods brand companies.
Terrebonne Facility
As part of our plan for the commercialization of future Infinite Loop™
manufacturing facilities, we enhanced our
become a small-scale PET depolymerization production facility. In addition to
our research and development activities, this facility is used to deliver
initial production volumes to support co-branded market launch campaigns with
partners and customers and will also be used to showcase the Infinite Loop™
end-to-end technology and train operational teams in advance of the
commissioning of the Infinite Loop™ full-scale commercial facilities.
We completed the planned upgrades at the Terrebonne Facility which have given us
the opportunity to support product campaigns with customers, such as the evian
Loop bottle. In completing the upgrade of the
all key pieces of depolymerization equipment that will be used in the full-scale
commercial facilities, we achieved a key milestone in proving the effectiveness
of our process.
In the nine-month period ended
manufactured at the Terrebonne Facility to several global consumer brands, which
included
Loop™ PET to be utilized in polyester fiber by the brand, pursuant to which
Loop™ PET resin was delivered in the nine-month period ended
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.
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On
the Terrebonne Facility in order to reduce operating costs and conserve
liquidity. The primary purpose of the Terrebonne Facility was to demonstrate
that Loop’s breakthrough depolymerization technology was scalable and to produce
commercial quantities of virgin quality PET resin and polyester fiber for global
brands. We believe the Terrebonne Facility has achieved this objective. We will
continue to fulfill existing sales contracts.
Joint Venture with Indorama for Retrofit
In
PET manufacturing facilities. We entered into a Limited Liability Company
Agreement (the “LLC Agreement”), a Marketing Agreement (the “Marketing
Agreement”) and a License Agreement (the “License Agreement”), with Indorama
through our wholly-owned subsidiary
Each company has 50/50 equity interest in the joint venture. We are contributing
to the 50/50 joint venture an exclusive worldwide royalty-free license to use
our proprietary technology to produce 100% sustainably produced PET resin in
addition to our equity cash contribution. In 2019, the joint venture decided to
increase the capacity of the planned
customer demand to 40,000 metric tons per year from the initially planned 20,700
metric tons per year. The joint venture made a decision over the summer of 2020
that due to the COVID-19 pandemic it would temporarily delay work on the
project. Since then, no expenditures have been incurred by the joint venture.
Both joint venture partners currently remain committed to the project and we
continue to discuss the project timetable.
Human Capital
As of
development, 38 in engineering and operations, and 15 in administrative
functions.
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Results of Operations
The following table summarizes our operating results for the three-month periods
ended
Three months ended November 30,
2022 2021 Change
Revenues $ 24,924 $ - $ 24,924
Expenses
Research and development
Machinery and equipment expenditures 1,059,266 2,599,758 (1,540,492 )
External engineering
707,113 1,585,512 (878,399 ) Employee compensation 1,539,581 1,424,330 115,251 Stock-based compensation 455,013 362,435 92,578 Plant and laboratory operating expenses 915,951 665,893 250,058 Tax credits (299,793 ) 97,480 (397,273 ) Other 204,421 99,896 104,525 Total research and development 4,581,552 6,835,304 (2,253,752 ) General and administrative Professional fees 1,278,478 650,164 628,314 Employee compensation 492,178 748,668 (256,490 ) Stock-based compensation 419,153 279,574 139,579 Insurance 709,952 1,193,554 (483,602 ) Other 283,166 219,295 63,871 Total general and administrative 3,182,927 3,091,255 91,672 Gain on disposition of assets (6,703,558 ) - (6,703,558 ) Depreciation and amortization 133,902 135,035 (1,133 ) Interest and other financial expenses 54,402 49,655 4,747 Interest income (13,315 ) (23,654 ) 10,339 Foreign exchange loss (gain) (197,913 ) 10,648 (208,561 ) Total expenses 1,037,997 10,098,243 (9,060,246 ) Net loss$ (1,013,073 ) $ (10,098,243 ) $ 9,085,170
Three Months Ended
Revenues
Revenues for the three-month period ended
For the same period in 2021, there were no revenues. 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
2022
the same period in 2021. The decrease was primarily attributable to a
million
facility, a
design work for our Infinite Loop™ manufacturing process, and a
increase in tax credits recorded as a reduction of research and development
expenses.
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General and administrative expenses
General and administrative expenses for the three-month period ended
30, 2022
for the same period in 2021. The increase was primarily attributable to a
million
principally associated with the
described in “Part II, Item 1. Legal Proceedings” of our 10-Q and the Company’s
commercialization plans, and a
compensation expenses. These increases were partially offset by a
decrease in insurance costs, and a
compensation costs.
Net Loss
The net loss for the three-month period ended
million
2021. The decrease is primarily due to a gain on disposition of assets of
million
the Company’s sale of land in
development expenses of
and administrative expenses of
Nine Months Ended
The following table summarizes our operating results for the nine-month periods
ended
Nine months ended November 30,
2022 2021 Change
Revenues $ 160,352 $ - $ 160,352
Expenses
Research and development
Machinery and equipment expenditures 4,132,575 7,707,882 (3,575,307 )
External engineering
2,913,567 5,040,342 (2,126,775 ) Employee compensation 5,179,105 4,213,075 966,030 Stock-based compensation 1,170,554 1,152,506 18,048
Plant and laboratory operating expenses 2,365,643 2,064,403 301,240
Tax credits
(1,207,415 ) (54,911 ) (1,152,504 ) Other 579,162 634,640 (55,478 ) Total research and development 15,133,191 20,757,937 (5,624,746 ) General and administrative Professional fees 3,840,844 3,138,611 702,233 Employee compensation 1,929,581 2,148,533 (218,952 ) Stock-based compensation 8,798,601 209,236 8,589,365 Insurance 2,883,333 3,121,353 (238,020 ) Other 777,896 750,319 27,577 Total general and administrative 18,230,255 9,368,052 8,862,203 Gain on disposition of assets (6,703,558 ) - (6,703,558 ) Depreciation and amortization 410,544 407,806 2,738 Interest and other financial expenses 138,962 113,344 25,618 Interest income (35,842 ) (41,828 ) 5,986 Foreign exchange loss (gain) (289,022 ) 42,712 (331,734 ) Total expenses 26,884,530 30,648,023 (3,763,493 ) Net loss$ (26,724,178 ) $ (30,648,023 ) $ 3,923,845 Revenues
Revenues for the nine-month period ended
For the same period in 2021, there were no revenues. The revenues resulted from
the delivery of initial volumes to customers of Loop™ PET resin produced using
monomers manufactured at the Terrebonne Facility.
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Research and Development
Research and development expense for the nine-month period ended
2022
for the same period in 2021. The decrease was primarily attributable to a
million
facility, a
design work for our Infinite Loop™ manufacturing process, and a
increase in tax credits recorded as a reduction of research and development
expenses. These decreases were partially offset by a
employee compensation expenses related increased headcount in our in-house
engineering and commercial project teams.
General and administrative expenses
General and administrative expenses for the nine-month period ended
2022
same period in 2021. The increase was primarily attributable to an increased
stock-based compensation expense of
related to the achievement of a performance milestone for 1,000,000 RSUs
following the execution of a supply agreement with a customer and
was attributable to RSU forfeitures in the same period in 2021 accounted for as
a reversal of stock-based compensation, and increased professional fees of
million
investigation and class action suits described in “Part II, Item 1. Legal
Proceedings” of our 10-Q and the Company’s commercialization plans. These
increases were partially offset by decreased insurance costs of
and a
Net Loss
The net loss for the nine-month period ended
million
2021. The decrease is primarily due to a gain on disposition of assets of
million
Company’s sale of land in
development expenses of
and administrative expenses of
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Since its inception, the Company has been in the development stage with limited
revenues, with its ongoing operations and commercialization plans financed
primarily by raising equity. 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
senior loan facility from a Canadian bank of
Company entered into an agreement on
24, 2023
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 2022 Annual Report on Form 10-K.
Management actively monitors the Company’s cash resources against the Company’s
short-term cash commitments to ensure the Company has sufficient liquidity to
fund its costs for at least twelve months from the financial statement issuance
date. Management evaluates the Company’s liquidity to determine if there is
substantial doubt about the Company’s ability to continue as a going concern. In
preparing this liquidity assessment, management applies significant judgment in
estimating future cash flow requirements of the Company based on budgets and
forecasts which includes developing assumptions related to: (i) estimation of
amount and timing of future cash outflows and cash inflows and (ii) determining
what future expenditures are committed and what could be considered
discretionary. Management prepared the Company’s consolidated financial
statements on a going concern basis in accordance with ASC 205-40, as management
believes that the Company will be able to realize its assets and discharge its
liabilities in the normal course of operations as they become due for a period
of no less than 12 months from the date of issuance of these consolidated
financial statements.
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Management continues to pursue our growth strategy and is evaluating our
financing plans to continue to raise capital to finance the start-up of
commercial operations and continue to fund our ongoing operations. We will
require a significant amount of capital to fund our growth as we invest in our
planned commercial facilities in
additional research and development. In addition to our cash on hand, we may
also raise additional capital through equity offerings or debt financings,
government incentives, as well as through collaborations or strategic alliances
to execute our growth strategy. Such financing will depend on many factors,
including actual construction costs of the planned commercial facilities,
potential delays in our supply chain, and our ability to secure customers, which
may not be available on acceptable terms, if at all. If we are unable to raise
additional capital when required, our business, financial condition and results
of operations would be adversely affected.
In
lead machinery and equipment for up to
Infinite Loop™ manufacturing facility. The payment of these amounts is based on
certain milestones subject to various terms and conditions, including
fabrication timelines, and equipment inspection. Pursuant to the agreement, the
Company has paid a cash deposit of
We have a long-term debt obligation to Investissement Québec in connection with
a financing facility for the expansion of the Terrebonne Facility up to a
maximum of
in the amount of
second disbursement in the amount of
26, 2021
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
bears interest at 2.36%. We have also agreed to issue to Investissement Québec
warrants to purchase shares of our common stock in an amount equal to 10% of
each disbursement up to a maximum aggregate amount of
million
(i)
Industries
prior to the issue of the warrants. The warrants can be exercised immediately
upon grant and have a term of three years from the date of issuance. The loan
can be repaid at any time by us without penalty. On
receipt of the first disbursement under this facility, we issued a warrant to
purchase 15,153 shares of common stock at a price of
Québec. On
this facility, we issued a warrant to purchase 17,180 shares of common stock at
a price of
available under the financing facility after the second disbursement.
On
agreement to amend the existing Financing Facility which modifies the repayments
of the principal amount (the “the Financing Facility Amendment”). As per the
Financing Facility Amendment,
repayable in monthly installments in the fiscal year ending
and the remainder of the principal amount is repayable in 72 monthly
installments. Under the original terms of the Financing Facility, the principal
amount was repayable in 84 monthly installments beginning in March of 2023. The
Financing Facility Amendment does not modify the interest rates, the repayment
terms of accrued interest or any other terms of the Financing Facility.
On
entered into an Operating Credit Facility (the “Credit Facility”) with a
Canadian bank. The Credit Facility allows for borrowings of up to
(CDN
The Credit Facility is secured by the Company’s
is subject to a minimum equity covenant, tested quarterly. All borrowings under
the Credit Facility will bear interest at an annual rate equal to the bank’s
Canadian prime rate (as defined in the Credit Facility) plus 1.0%. The Company
is subject to a guarantee of the liabilities of
30, 2022
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