Thu, 24 Oct 2019

Capital to Finance Next Phase of Growth Strategy in Place

MONTREAL, QC / ACCESSWIRE / October 8, 2019 / Loop Industries, Inc. (NASDAQ:LOOP) (the 'Company' or 'Loop'), a leading sustainable plastics technology innovator, today announced its consolidated financial results for the second quarter ended August 31, 2019 of its 2020 fiscal year, and provided an update on its continuing progress in implementing its business plan.

'The engineering work for our first facility in Spartanburg, South Carolina with our joint venture partner, Indorama Ventures, to produce Loop™ PET resin made from 100% recycled materials continues to progress. With our financing now in place we have turned our attention to identifying locations to deploy our Waste-to-Resin greenfield facilities as we continue to experience strong demand for our product.' said Daniel Solomita, Loop's Founder & Chief Executive Officer.

Results of Operations

The following tables summarize our operating results for the three-month period ended August 31, 2019 and 2018, in U.S. Dollars.

Three Months Ended August 31
2019 2018 $ Change
Revenues
$ - $ - $ -
Operating expenses
Research and development
Stock-based compensation
317,353 250,242 67,111
Other research and development
652,860 816,050 (163,190)
Total research and development
970,213 1,066,292 (96,079)
General and administrative
Stock-based compensation
485,975 755,229 (269,254)
Other general and administrative
1,232,638 1,639,169 (406,531)
Total general and administrative
1,718,613 2,394,398 (675,785)
Depreciation and amortization
201,403 110,589 90,814
Interest and other finance costs
622,183 13,443 608,740
Interest income
(192,259) (122) (192,137)
Foreign exchange (gain) loss
21,890 (46,190) 68,080
Total operating expenses
3,342,043 3,538,410 (196,367)
Net loss
$ (3,342,043) $ (3,538,410) $ 196,367

Second Quarter Ended August 31, 2019

The net loss for the three-month period ended August 31, 2019 decreased to $3.34 million, as compared to the net loss for the three-month period ended August 31, 2018 which was $3.54 million. The decrease of $0.20 million is primarily attributable to lower research and development expenses of $0.10 million, by lower general and administrative expenses of $0.68 million and by an increase in interest income of $0.19 million, offset by higher depreciation and amortization expenses of $0.09 million, by higher interest and other finance costs of $0.61 million and by a higher foreign exchange loss of $0.07 million.

Research and development expenses for the three-month period ended August 31, 2019 amounted to $0.97 million compared to $1.07 million for the three-month period ended August 31, 2018, representing a decrease of $0.10 million, or representing a decrease of $0.16 million excluding stock-based compensation. The decrease of $0.16 million was primarily attributable to lower legal and professional fees of $0.32 million and by higher research and development tax credits of $0.06 million offset by higher employee compensation costs of $0.20 million. The increase in non-cash stock-based compensation expense of $0.07 million is mainly attributable to the timing of stock awards provided to certain employees.

General and administrative expenses for the three-month period ended August 31, 2019 amounted to $1.72 million compared to $2.39 million for the three-month period ended August 31, 2018, representing a decrease of $0.68 million, or a decrease of $0.41 million excluding stock-based compensation. The decrease of $0.41 million was mainly attributable to lower legal and professional fees of $0.56 million offset by higher employee compensation costs of $0.08 million and by higher commercial insurance expenses of $0.06 million. Stock-based compensation expense for the three-month period ended August 31, 2019 amounted to $0.49 million compared to $0.76 million for the three-month period ended August 31, 2018, representing a decrease of $0.27 million, which was mainly attributable lower stock awards provided to executives.

Depreciation and amortization for the three-month period ended August 31, 2019 totaled $0.20 million compared to $0.11 million for the three-month period ended August 31, 2018, representing an increase of $0.09 million. This increase is mainly attributable to the addition of fixed assets at the Company's pilot plant and corporate offices.

Interest and other finance costs for the three-month period ended August 31, 2019 totaled $0.62 million compared to $0.01 million the three-month period ended August 31, 2018, representing an increase of $0.61 million. The increase is mainly attributable to an increase in accretion expense of $0.49 million, an increase in interest expense of $0.10 million and by an increase in amortization of deferred financing costs of $0.02 million.

Six Months Ended August 31, 2019

The following table summarizes our operating results for the six-month periods ended August 31, 2019 and 2018, in U.S. Dollars.

Six Months Ended August 31
2019 2018 $ Change
Revenues
$ - $ - $ -
Operating expenses
Research and development
Stock-based compensation
629,788 660,455 (30,667)
Other research and development
1,338,286 1,471,916 (133,630)
Total research and development
1,968,074 2,132,371 (164,297)
General and administrative
Stock-based compensation
1,104,230 1,530,686 (426,456)
Other general and administrative
2,517,013 3,219,262 (702,249)
Total general and administrative
3,621,243 4,749,948 (1,128,705)
Depreciation and amortization
365,739 211,658 154,081
Interest and other finance costs
1,124,064 26,481 1,097,583
Interest income
(192,291) (247) (192,044)
Foreign exchange (gain) loss
9,764 (52,271) 62,035
Total operating expenses
6,896,593 7,067,940 (171,347)
Net loss
$ (6,896,593) $ (7,067,940) $ 171,347

The net loss for the six-month period ended August 31, 2019 decreased by $0.17 million to $6.90 million, as compared to the net loss for the six-month period ended August 31, 2018 which was $7.07 million. The decrease of $0.17 million is primarily due to lower research and development expenses of $0.16 million, by lower general and administrative expenses of $1.13 million and by an increase in interest income of $0.19 million, offset by an increase in interest and other finance costs of $1.10 million, an increase in depreciation and amortization of $0.15 million and by an increase in the foreign exchange loss of $0.06 million.

Research and development expenses for the six-month period ended August 31, 2019 amounted to $1.97 million compared to $2.13 million for the six-month period ended August 31, 2018, representing a decrease of $0.16 million, or representing a decrease of $0.13 million excluding stock-based compensation. The decrease of $0.13 million was primarily attributable to lower legal and professional fees of $0.29 million offset by higher employee compensation costs of $0.17 million. The decrease in non-cash stock-based compensation expense of $0.03 million is mainly attributable to the timing of stock awards provided to certain employees.

General and administrative expenses for the six-month period ended August 31, 2019 amounted to $3.62 million compared to $4.75 million for the six-month period ended August 31, 2018, representing a decrease of $1.13 million, or a decrease of $0.70 million excluding stock-based compensation. The decrease of $0.70 million was mainly attributable to lower legal and professional fees of $1.15 million, offset by higher employee compensation costs of $0.34 million and by higher commercial insurance expenses totaling $0.09 million. Stock-based compensation expense for the six-month period ended August 31, 2019 amounted to $1.10 million compared to $1.53 million for the six-month period ended August 31, 2018, representing a decrease of $0.43 million, which was mainly attributable lower stock awards provided to executives.

Depreciation and amortization for the six-month period ended August 31, 2019 totaled $0.37 million compared to $0.21 million for the six-month period ended August 31, 2018, representing an increase of $0.16 million. This increase is mainly attributable to the addition of fixed assets at the Company's pilot plant and corporate offices.

Interest and other finance costs for the six-month period ended August 31, 2019 totaled $1.13 million compared to $0.03 million the six-month period ended August 31, 2018, representing an increase of $1.10 million. The increase is mainly attributable to an increase in accretion expense of $1.04 million, an increase in interest expense of $0.22 million and by an increase in amortization of deferred financing costs of $0.07 million, offset by a gain on conversion of the November 2018 Notes of $0.23 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Loop is a development stage company with no revenues, and our ongoing operations are being financed by raising new equity and debt capital. To date, we have been successful in raising capital to finance our ongoing operations, reflecting the potential for commercializing our branded resin and the progress made to date in implementing our business plans.

As at August 31, 2019, the Company had cash on hand of $37.9 million. On May 29, 2019, the Company entered into a Securities Purchase Agreement ('Purchase Agreement') with Northern Private Capital Fund I Limited Partnership ('Northern Capital') pursuant to which the Company issued to Northern Capital in a registered direct offering ('Offering') an aggregate of 4,093,567 shares of the Company's common stock at a per share purchase price of $8.55 per share, for aggregate net proceeds of approximately $34.6 million, after deducting offering expenses payable by the Company of approximately $400,000. Concurrently with the Offering and pursuant to the Purchase Agreement, the Company issued to Northern Capital options to purchase up to an additional 4,093,567 shares of the Company's common stock at an exercise price of $11.00 per share, which will vest on December 15, 2019, and are exercisable for three years following the closing date of the Offering and which would result in further total net proceeds of approximately $45 million. The proceeds from the Offering will be used to finance the start-up of its joint venture commercial operations, which is estimated to be between $15,000,000-$20,000,000, and further fund the development of its technology and new technologies and its ongoing pre-revenue operations.

On February 27, 2019, Loop entered into a Securities Purchase Agreement with a single institutional investor, pursuant to which the Company agreed to issue and sell to the Purchaser, in a registered direct offering ('Offering'), an aggregate of 600,000 shares ('Shares') of the Company's common stock at a per share purchase price of $8.55 per share, for aggregate net proceeds of approximately $4.2 million, after deducting placement agent fees and offering expenses payable by the Company of approximately $0.9 million. The Offering closed on March 1, 2019. The Company intends to use the net proceeds from the Offering for general corporate purposes and working capital.

As at August 31, 2019, we have a long-term debt obligation to a Canadian bank in connection with the purchase, in Fiscal 2018, of the land and building where our pilot plant and corporate offices are located, at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4. On January 24, 2018, the Company obtained a CDN$1,400,000 20-year term instalment loan (the 'Loan'), from a Canadian bank. The Loan bears interest at the bank's Canadian prime rate plus 1.5%. By agreement, the Loan is repayable in monthly payments of CDN $5,833 plus interest, until January 2021, at which time it will be subject be renewal. It includes an option allowing for the prepayment of the Loan without penalty.

Flow of Funds

Summary of Cash Flows

A summary of cash flows for the six-month period ended August 31, 2019 and 2018 was as follows:

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