# Loop Industries, Inc.: Form 10-Q for the period ended Aug 31, 2017 - Company: [Loop Industries, Inc.](/companies/loop.md) (CIK 1504678) - Form: 10-Q - Filed: 2017-10-11 - Accepted by EDGAR: Oct 10, 2017, 22:24 ET - Period: 2017-08-31 - Accession: 0001477932-17-004971 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1504678/000147793217004971/llpp_10q.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1504678/000147793217004971/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2017-08-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Research and development | 3 months, 2017-06-01 to 2017-08-31 | $950.8k | us-gaap:ResearchAndDevelopmentExpense | | Research and development | 6 months, 2017-03-01 to 2017-08-31 | $1.4m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 3 months, 2017-06-01 to 2017-08-31 | $2.2m | us-gaap:OperatingIncomeLoss | | Operating income | 6 months, 2017-03-01 to 2017-08-31 | $3.7m | us-gaap:OperatingIncomeLoss | | Net income | 3 months, 2017-06-01 to 2017-08-31 | −$2.2m | us-gaap:NetIncomeLoss | | Net income | 6 months, 2017-03-01 to 2017-08-31 | −$3.7m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2017-06-01 to 2017-08-31 | −$0.07 | us-gaap:EarningsPerShareBasicAndDiluted | | Diluted EPS | 6 months, 2017-03-01 to 2017-08-31 | −$0.11 | us-gaap:EarningsPerShareBasicAndDiluted | | Operating cash flow | 6 months, 2017-03-01 to 2017-08-31 | −$2.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 6 months, 2017-03-01 to 2017-08-31 | $168.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Cash and equivalents | at 2017-08-31 | $5.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2017-08-31 | $5.5m | us-gaap:AssetsCurrent | | Total assets | at 2017-08-31 | $7.5m | us-gaap:Assets | | Current liabilities | at 2017-08-31 | $902.5k | us-gaap:LiabilitiesCurrent | | Shareholders' equity | at 2017-08-31 | $6.6m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 7,287 characters. *The following information should be read in conjunction with the unaudited condensed interim consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the notes thereto included in our most recent Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or the SEC, on May 30, 2017.* *The following information and any forward-looking statements should be considered in light of factors discussed elsewhere 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.* ### Overview Our business develops technology and processes to promote the regeneration and reuse of materials to sustain a circular economy. Currently, the focus of our business is on the depolymerization of waste Poly Ethylene Terephthalate (PET) plastics and converting them into valuable chemicals, ready to be reintroduced into the manufacturing of virgin PET plastic. Our proprietary technology breaks down PET into its base chemicals, Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG), at a recovery rate of over 90% and under normal atmospheric pressure and at room temperature. Depolymerization presents two unique advantages in recycling resin-based products: (i) the ability to return a recovered resin to virgin-resin-like quality, and (ii) the potential to recover a valuable feedstock from products that are economically challenging to recycle. When plastic is mechanically recycled, even small levels of contamination can compromise the performance of the resin. However, because our depolymerization process breaks down plastics into monomer form, all contamination is removed. Our unique depolymerization process can be applied to all sorts of post-consumer PET, including degraded, colored or heavily contaminated PET that is not currently recyclable. We are a development-stage company and have not generated any revenues from our technology. Our depolymerization technology must be scaled-up before we can commercialize it and generate any revenues. We intend to sell LOOP™-branded PET resin to sustainably focused customers. During January 2016, we announced the successful completion of a pilot plant facility in Terrebonne, Canada with a production capacity of 2.5 metric tons per day of high purity PTA and MEG. We have applied to list our common stock on The NASDAQ Global Market under the symbol “LLPP.” ### Plan of Operation We are planning to and have begun taking steps to build a commercial scale facility with an installed capacity of approximately 20,000 metric tons (MT) per annum to supply our potential customers with LOOP™ branded PET resin of at least 50% recycled content. We are planning to finance any new facilities through additional sales of our common stock, government assistance, including grants and low-interest loans and debt financing. We are conducting qualification testing of our LOOP™ branded PET resin and negotiating long term supply contracts with potential customers. In addition, we are optimizing our manufacturing process to ensure a smooth transition from pilot scale to full scale commercial manufacturing facility. Our plan of operation also includes the development of the LOOP™ branded PET resin, by establishing co-marketing and co-branding initiatives with potential customers. LOOP™ branded PET resin will primarily focus on educating consumers on the importance of the circular economy and the Loop technology that can play a pivotal role in this new economy. 4 #### Table of Contents ### Results of Operations ### For the three months ended August 31, 2017 and August 31, 2016 We recorded no revenues for the three months ended August 31, 2017 and August 31, 2016. We realized a net loss of $2.2 million for the three months ended August 31, 2017 compared to a net loss of $0.8 million for the three months ended August 31, 2016. This net loss is mainly due to an increase in general and administrative expenses of $1.1 million for the three months ended August 31, 2017 compared to $0.3 million for the three months ended August 31, 2016. In addition, we incurred $1.0 million in research and development expenses for the period ended August 31, 2017 compared to $0.4 million for the period ended August 31, 2016 as we continue to scale our technology. ### For the six months ended August 31, 2017 and August 31, 2016 We recorded no revenues for the six months ended August 31, 2017 and August 31, 2016. We realized a net loss of $3.7 million for the six months ended August 31, 2017 compared to a net loss of $1.8 million for the six months ended August 31, 2016. This net loss is mainly due to an increase in general and administrative expenses of $2.0 million for the period ended August 31, 2017 compared to $0.8 million for the period ended August 31, 2016. In addition, we incurred $1.4 million in research and development expenses for the period ended August 31, 2017 compared to $0.8 million for the period ended August 31, 2016 as we continue to scale our technology. Activity in the six months ended August 31, 2017 continues to focus on the development of plans for a commercial facility, continued testing and improvement of our depolymerization process as well as testing of various feedstocks used in the depolymerization process. On the commercial side, we have undertaken various marketing initiatives to raise awareness of the Loop depolymerization process. In addition, we have been working with potential future customers and other key stakeholders to ensure that the Loop™ branded PET resin meets customers’ needs and specifications once commercial production begins. ### Liquidity and Capital Resources As reflected in the accompanying unaudited interim condensed consolidated financial statements, we have no recurring source of revenue and during the six months ended August 31, 2017, we incurred a net loss of $3.7 million and used cash in operations of $2.3 million. As of August 31, 2017, we had cash on hand of $5.4 million and stockholders’ equity of $6.6 million. We estimate that the current funds on hand will be sufficient to continue operations through the next twelve months. However, we will need additional financing through either debt or equity to finalize the transition from pilot scale to a full scale commercial manufacturing facility. We are currently seeking additional funds, primarily through the issuance of debt and equity securities for cash and estimate that a significant amount of capital will be necessary to advance the development of our projects to the point at which they will become commercially viable. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we could obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing. ### Off-Balance Sheet Arrangements As of August 31, 2017, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC. 5 #### Table of Contents ## Market risk As filed, 151 characters. As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item. ## Controls and procedures As filed, 2,069 characters. ### Management’s Evaluation of our Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and the Chief Financial Officer, we are responsible for conducting an evaluation of the effectiveness of the design and operation of our internal controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the fiscal quarter covered by this report. Disclosure controls and procedures means that the material information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective as of August 31, 2017. ### Changes in Internal Control over Financial Reporting As described under “*Material Weakness Discussion and Remediation”* in our most recent Annual Report on Form 10-K, filed on May 30, 2017, we have undertaken a broad range of remedial procedures to address the weaknesses in our internal control over financial reporting. In particular, we have engaged third party Sarbanes-Oxley consultants and we continue to improve and document our internal controls and processes. We plan to test the effectiveness of these controls over the next two quarters to enable us to be compliant with the requirements under SOX 302 and 404. Other remediation procedures include: i) the formation of an audit committee, with the appointment of an audit committee chair; and ii) the development and communication of corporate policies, including the Whistle-Blower Policy, Insider Trading Policy, Global Anti-Corruption Policy and Related Party Transaction policy. 6 #### Table of Contents ## Risk factors As filed, 3,059 characters. We are subject to various risks and uncertainties in the course of our business. Risk factors relating to us are set forth under "Risk Factors" in our Annual Report on Form 10-K, filed on May 30, 2017. In addition to those Risk Factors, the following risk should also be noted. You should consider this risk factor together with the other risk factors and other matters described in our Annual Report on Form 10-K, in this Quarterly Report on Form 10-Q, and in our other filings with the SEC. **We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations.** We operated mainly through two entities, our company, Loop Industries, Inc., which is a Nevada corporation and has a U.S. dollar functional currency, and our wholly-owned subsidiary Loop Canada Inc. (“Loop Canada”), which is based in Terrebonne, Quebec, Canada and has a Canadian dollar functional currency. Our reporting currency is the U.S. dollar. We mainly finance our operations through the sale and issuance of shares of common stock of Loop Industries, Inc. in U.S. dollars while our operations are concentrated in our wholly-owned subsidiary, Loop Canada. Accordingly, we are exposed to foreign exchange risk as we maintain bank accounts in U.S. dollars and a significant portion of our operational costs (including payroll, site costs, costs of locally sourced supplies and income taxes) are denominated in the Canadian dollar. Significant fluctuations in U.S. dollar to Canadian dollar exchange rates could materially affect our result of operations, cash position and funding requirements. To the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected. From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. As part of our risk management program, we enter into foreign exchange forward contracts to lock in the exchange rates for future foreign currency transactions, which is intended to reduce the variability of our operating costs and future cash flows denominated in currencies that differs from our functional currencies. We do not enter into these contracts for trading purposes or speculation, and our management believes all such contracts are entered into as hedges of underlying transactions. Nonetheless, these instruments involve costs and risks of their own in the form of transaction costs, credit requirements and counterparty risk. If our hedging program is not successful, or if we change our hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates. Any hedging technique we implement may fail to be effective. If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on the trading price of our common stock. Filed Oct 11, 2017. Source: SEC EDGAR, the filing index for accession 0001477932-17-004971. Last ingested by Listed: Oct 24, 2026, 15:12 ET. No prices; not investment advice.