Loop Industries, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Loop Industries, Inc. February 28, 2026 Index to the Consolidated Financial Statements Contents Page(s) Report of Independent Registered Public Accounting Firm (PCAOB ID: 271 ) F-1 Consolidated balance sheets as at February 28, 2026 and February 28, 2025 F-2 Consolidated statements of operations and comprehensive loss for the years ended February 28, 2026 and February 28, 2025 F-3 Consolidated statements of changes in stockholders ’ equity for the years ended February 28, 2026 and February 28, 2025 F-4 Consolidated statements of cash flows for the years ended February 28, 2026 and February 28, 2025 F-6 Notes to the consolidated financial statements F-7 42 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Loop Industries, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Loop Industries, Inc. and its subsidiaries (the Company) as of February 28, 2026 and 2025, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders’ (deficit) equity and of cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2026 and 2025, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt About the Company ’ s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company has incurred net losses, negative cash flows from operating activities and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. This matter is also described in the Critical Audit Matters section of our report. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Going Concern Assessment As described in note 1 to the consolidated financial statements, the Company’s consolidated financial statements have been prepared on a going concern basis. For the year ended February 28, 2026, the Company incurred a net loss of $12.3 million and net cash flows used in operating activities was $10.1 million. As of February 28, 2026, the Company’s available liquidity was $5.0 million, consisting of cash and cash equivalents of $2.4 million and an undrawn senior loan facility from a Canadian bank of $2.6 million. Management estimates that the Company’s available liquidity will not be sufficient to fund the Company's ongoing operations, obligations and commitments for the next twelve months from the consolidated financial statements 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 going concern assessment, management applies significant judgment in estimating future cash flows of the Company based on budgets and forecasts, which includes developing assumptions related to the estimation of amount and timing of future cash outflows and inflows. This matter is also described in the Substantial Doubt About the Company’s Ability to Continue as a Going Concern section of our report. The principal considerations for our determination that performing procedures relating to the going concern assessment is a critical audit matter are the significant judgment made by management in estimating the future cash flows of the Company based on budgets and forecasts, which includes developing assumptions related to the estimation of amount and timing of future cash outflows and inflows. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s estimation of amount and timing of future cash outflows and inflows. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, evaluating management’s assessment of whether the Company has sufficient liquidity for the next twelve months from the consolidated financial statements issuance date. This included (i) testing the completeness and accuracy of the underlying data used in management’s going concern assessment; and (ii) evaluating the reasonableness of management’s assumptions related to the estimation of the amount and timing of future cash outflows and inflows. The evaluation of these assumptions considered (i) management’s historical accuracy in forecasting cash flows and setting budgets; and (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Additionally, these procedures included evaluating the sufficiency of the Company’s going concern disclosure. /s/ PricewaterhouseCoopers LLP Montréal, Canada May 27, 2026 We have served as the Company’s auditor since 2017. F-1 Table of Contents Loop Industries, Inc. Consolidated Balance Sheets (in thousands of U.S. dollars, except per share data) As at February 28, February 28, 2026 2025 Assets Current assets Cash and cash equivalents $ 2,356 $ 12,973 Accounts receivable (Note 3) 755 639 Inventories (Note 4) - 82 Prepaid expenses (Note 5) 495 158 Total current assets 3,606 13,852 Equity method investments (Note 11) 1,478 1,281 Property, plant and equipment, net (Note 6) 1,699 1,737 Intangible assets, net (Note 7) 1,776 1,708 Total assets $ 8,559 $ 18,578 Liabilities and Stockholders' (Deficit) Equity Current liabilities Accounts payable and accrued liabilities (Note 9) $ 1,916 $ 3,545 Unearned revenue (Note 16) 234 102 Current portion of long-term debt (Note 13) 605 312 Total current liabilities 2,755 3,959 Due to customer (Note 10) 900 832 Series B Convertible Preferred stock (Note 12) 12,054 10,647 Long-term debt (Note 13) 2,430 2,773 Total liabilities 18,139 18,211 Stockholders' (Deficit) Equity Common stock par value $ 0.0001 ; 250,000,000 shares authorized; 48,337,555 shares issued and outstanding (2025 – 47,620,263 ) (Note 15) 5 5 Additional paid-in capital 195,934 193,529 Accumulated deficit ( 204,326 ) ( 192,027 ) Accumulated other comprehensive loss ( 1,193 ) ( 1,140 ) Total stockholders' (deficit) equity ( 9,580 ) 367 Total liabilities and stockholders' (deficit) equity $ 8,559 $ 18,578 Going Concern (Note 1) See accompanying notes to the consolidated financial statements . F-2 Table of Contents Loop Industries, Inc. Consolidated Statements of Operations and Comprehensive Loss (in thousands of U.S. dollars, except for share data) Years Ended February 28, February 28, 2026 2025 Revenues: Technology licensing $ - $ 10,395 Products 8 126 Services 506 368 Total revenues 514 10,889 Cost of Services Cost of Services 381 218 Total Cost of Services 381 218 Expenses: Research and development (Note 17) 3,472 6,646 General and administrative (Note 18) 6,405 9,228 Impairment of equipment (Note 6) - 8,460 Depreciation and amortization (Notes 6 and 7) 384 524 Total expenses 10,261 24,858 Other loss: Loss on equity method investment (Note 11) 763 687 Interest and other financial expenses (income) (Note 21) 1,703 618 Interest income ( 236 ) ( 238 ) Foreign exchange gain ( 59 ) ( 197 ) Total other loss 2,171 870 Net loss ( 12,299 ) ( 15,057 ) Other comprehensive loss Foreign currency translation adjustment ( 53 ) ( 70 ) Comprehensive loss $ ( 12,352 ) $ ( 15,127 ) Net loss per share Basic and diluted $ ( 0.26 ) $ ( 0.32 ) Weighted average common shares outstanding Basic and diluted 47,960,970 47,587,038 Going Concern (Note 1) See accompanying notes to the consolidated financial statements. F-3 Table of Contents Loop Industries, Inc. Consolidated Statements of Changes in Stockholders ’ (Deficit) Equity For the Years Ended February 28, 2026 and February 28, 2025 (in United States dollars) (in thousands of U.S. dollars, except for share data) Year ended February 28, 2026 Common stock Preferred stock Additional Accumulated par value $0.0001 par value $0.0001 Additional Paid-in Other Total Number of Number of Paid-in Capital - Accumulated Comprehensive Stockholders' Shares Amount Shares Amount Capital Warrants Deficit Loss (Deficit) Equity Balance, February 28, 2025 47,620,263 $ 5 1 $ - $ 193,529 $ - $ ( 192,027 ) $ ( 1,140 ) $ 367 Issuance of shares upon the settlement of restricted stock units (Notes 15 and 19) 126,857 - - - - - - - - Issuance of shares upon the exercise of stock options (Note 15) 80,000 - - - 64 - - - 64 Issuance of common stock under ATM Equity Offering (Note 15) 510,435 - - - 917 - - - 917 Stock options issued for services (Note 19) - - - - 1,159 - - - 1,159 Restricted stock units issued for services (Note 19) - - - - 294 - - - 294 Share issuance costs - - - - ( 29 ) - - - ( 29 ) Foreign currency translation - - - - - - - ( 53 ) ( 53 ) Net loss - - - - - - ( 12,299 ) - ( 12,299 ) Balance, February 28, 2026 48,337,555 $ 5 1 $ - $ 195,934 $ - $ ( 204,326 ) $ ( 1,193 ) $ ( 9,580 ) Going Concern (Note 1) See accompanying notes to the consolidated financial statements. F-4 Table of Contents Loop Industries, Inc. Consolidated Statements of Changes in Stockholders ’ (Deficit) Equity For the Years Ended February 28, 2026 and February 28, 2025 (continued) (in United States dollars) (in thousands of U.S. dollars, except for share data) Year ended February 28, 2025 Common stock Preferred stock Additional Accumulated par value $0.0001 par value $0.0001 Additional Paid-in Other Total Number of Number of Paid-in Capital - Accumulated Comprehensive Stockholders' Shares Amount Shares Amount Capital Warrants Deficit Loss (Deficit) Equity Balance, February 29, 2024 47,528,908 $ 5 1 $ - $ 171,792 $ 20,385 $ ( 176,970 ) $ ( 1,070 ) $ 14,142 Issuance of shares upon the settlement of restricted stock units (Notes 15 and 19) 91,355 - - - - - - - - Expiration of warrants - - - - 20,385 ( 20,385 ) - - - Stock options issued for services (Note 19) - - - - 555 - - - 555 Restricted stock units issued for services (Note 19) - - - - 797 - - - 797 Foreign currency translation - - - - - - - ( 70 ) ( 70 ) Net loss - - - - - - ( 15,057 ) - ( 15,057 ) Balance, February 28, 2025 47,620,263 $ 5 1 $ - $ 193,529 $ - $ ( 192,027 ) $ ( 1,140 ) $ 367 Going Concern (Note 1) See accompanying notes to the consolidated financial statements. F-5 Table of Contents Loop Industries, Inc. Consolidated Statements of Cash Flows (in United States dollars) (in thousands of U.S. dollars) February 28, February 28, 2026 2025 Cash Flows used in Operating Activities Net loss $ ( 12,299 ) $ ( 15,057 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization (Notes 6 and 7) 384 524 Stock-based compensation (Note 19) 1,453 1,352 Impairment of machinery & equipment (Note 6) - 8,460 Write-down of inventory (Note 4) 130 - Accrued interest and other financing costs (Note 21) 1,520 359 Loss on equity method investments (Note 11) 763 687 Changes in operating assets and liabilities: Accounts receivable and other (Note 3) ( 78 ) ( 322 ) Inventories (Note 4) ( 44 ) 14 Prepaid expenses (Note 5) ( 328 ) 410 Accounts payable and accrued liabilities (Note 9) ( 1,743 ) 1,350 Unearned revenue (Note 16) 132 102 Net cash used in operating activities ( 10,110 ) ( 2,121 ) Cash Flows used in Investing Activities Distribution from equity investment (Note 11) - 368 Contributions to equity method investments (Note 11) ( 960 ) ( 1,954 ) Additions to intangible assets (Note 7) ( 211 ) ( 450 ) Net cash used in investing activities ( 1,171 ) ( 2,036 ) Cash Flows used in Financing Activities Proceeds from issuance of series B Convertible Preferred stock (Note 12) - 10,395 Proceeds from exercise of stock options (Note 15) 64 - Proceeds from ATM equity offering, net of issuance costs (Note 15) 889 - Repayment of long-term debt (Note 13) ( 275 ) ( 77 ) Net cash provided by financing activities 678 10,318 Effect of exchange rate changes ( 14 ) ( 146 ) Net change in cash and cash equivalents ( 10,617 ) 6,015 Cash and cash equivalents, beginning of year 12,973 6,958 Cash and cash equivalents, end of year $ 2,356 $ 12,973 Supplemental Disclosure of Cash Flow Information: Income tax paid $ - $ - Interest paid $ 183 $ 257 Interest received $ 236 $ 307 Going Concern (Note 1) See accompanying notes to the consolidated financial statements. F-6 Table of Contents Loop Industries, Inc. February 28, 2026 and February 28, 2025 Notes to the Consolidated Financial Statements (in thousands of United States dollars except where otherwise indicated) 1. The Company and Basis of Presentation and Going Concern The Company Loop Industries, Inc. (the “Company,” “Loop,” “we,” or “our”) is a technology company that owns patented and proprietary technology that depolymerizes no and low-value waste polyethylene terephthalate (“PET”) plastic and polyester fiber 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. The Company is currently in the pre-commercialization stage with limited revenues. Basis of presentation These audited consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and comprise the consolidated financial position and results of operations of Loop Industries, Inc. and its subsidiaries, Loop Innovations, LLC and Loop Canada Inc. All subsidiaries are, either directly or indirectly, wholly owned subsidiaries of Loop Industries, Inc. (collectively, the “Company”). The Company owns, through Loop Innovations, LLC, a 50 % interest in a joint venture, Indorama Loop Technologies, LLC, which is accounted for under the equity method. The Company also owns a 50 % interest in a joint venture, Ester Loop Infinite Technologies Private Limited ("India JV"), which is accounted for under the equity method. The Company owns a 10 % equity interest in Infinite Loop Europe SAS ("Infinite Loop Europe"), accounted for under the equity method, over which it has significant influence but not joint control; the remaining 90 % is owned by Reed Circular Economy ("RCE"). Intercompany balances and transactions are eliminated on consolidation. All monetary amounts in these notes to the condensed consolidated financial statements are in thousands of U.S. dollars unless otherwise specified, except for per share data. Going Concern These consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the date of issuance of these consolidated financial statements. Since its inception, the Company has been in the pre-commercialization stage with no recurring revenues, and its ongoing operations and commercialization plans have been financed primarily by raising equity and debt. The Company has recurring net losses, negative cash flow from operating activities since its inception, and a net capital deficiency. Management continuously monitors the Company's cash resources against its cash commitments to determine whether there is sufficient liquidity to fund its costs for at least twelve months from the consolidated financial statement issuance date. In preparing this going concern assessment in accordance with US GAAP, the Company included cash flows that meet the 'probable' threshold under ASC 205 - 40 in its going concern evaluation and has excluded forecasted cash flows that lack substantive support or binding commitments. Management has determined that current cash and cash equivalents on hand of $ 2,356 , together with the $ 2,566 available under its undrawn credit facility, will not be sufficient to fund the Company's ongoing operations, obligations and commitments for the next twelve months from the consolidated financial statements issuance date. These events and conditions are material uncertainties that raise substantial doubt upon the Company's ability to continue as a going concern and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The Company’s ability to continue as a going concern and execute upon management's plans to move to the next stage of its strategic development is dependent on, among other factors, whether the Company can obtain the necessary financing through a combination of the issuance of debt and/or equity, technology licensing and engineering services arrangements, and/or financing from government incentive programs. In particular, the Company will require capital sufficient to fund its equity contributions to the India JV for the construction of the planned Infinite Loop™ facility in India, as well as its ongoing cash requirements until Loop begins receiving returns from the India JV. While the Company is actively engaged in financing discussions, there is no assurance that the Company will be successful in attracting additional funding on terms acceptable to the Company. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material. 2. Summary of Significant Accounting Policies F- 7 Table of Contents Revenue recognition The Company recognizes revenue with customers in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606” ). This standard applies to all contracts with customers, except for contracts with customers that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five -step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company enters into contracts with customers to sell Loop™ PET resin. These contracts include a single performance obligation, which is the delivery of Loop™ PET resin, and the transaction price is a fixed rate per delivered volume. Revenue is recognized when control of the product transfers to the customer, which is when product is delivered to the customer location. Shipping and handling costs are accounted for as a fulfillment cost. The Company enters into licensing agreements with customers, or licensees, for the use of the Company’s proprietary technology. Licensing agreements may include various types of payments, including upfront fees, milestone payments, and royalties. Upfront licensing fees are generally recognized at a point in time, when the license is made available for the customer’s benefit and the customer can benefit from the technology independently. Milestone payments are recognized when the milestone is achieved and the payment is no longer subject to reversal. Royalties are recognized when the underlying transactions occur. The Company also enters into agreements to provide engineering services for Infinite Loop™ facilities. Engineering fees are recognized over time, as services are performed. When a reasonable estimate can be made, the Company measures progress toward complete satisfaction of the performance obligation using an input method based on the ratio of costs incurred to date to the total estimated costs to complete the engineering scope (a "cost-to-cost" measure of progress). Costs incurred consist primarily of internal engineering labor (including related employee compensation), subcontracted external engineering costs where applicable, and directly attributable expenses. Management believes that costs incurred faithfully depict the Company's performance in transferring control of the services to the customer. If circumstances exist whereby the Company cannot reasonably determine its progress towards satisfaction of the performance obligation, revenue is recognized over time as the work is performed, but only to the extent of costs incurred if the Company expects to at least recover those costs. Amounts invoiced in advance of performance are recorded as contract liabilities (presented as "Unearned revenue" on the Consolidated Balance Sheet), and amounts earned in advance of the right to invoice are recorded as contract assets. Cost of services Cost of services are costs that are directly related to providing the service that generates service revenue. Costs include internal engineering labor (including related employee compensation), subcontracted external engineering costs where applicable, and directly attributable expenses required to deliver the service. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include the going concern assessment, estimates for depreciable lives and recoverability of property, plant and equipment, intangible assets and equity method investments, assumptions made in the classification of convertible preferred securities, assumptions made in the revenue recognition for licensing and engineering service contracts, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards. Joint Ventures The Company accounts for investments in joint ventures in which it exercises significant influence but does not have a controlling financial interest using the equity method of accounting in accordance with ASC 323, Investments—Equity Method and Joint Ventures. Under the equity method, the Company's share of the investee’s net income or loss is recognized in the consolidated statements of operations and added to or deducted from the carrying value of the investment. Distributions received from joint ventures are recorded as reductions to the carrying amount of the investment. F- 8 Table of Contents The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. If an impairment is identified and deemed other-than-temporary, the investment is written down to its fair value. The Company assesses whether a joint venture is a variable interest entity (VIE) under ASC 810, Consolidation, and consolidates the entity if it is deemed to be the primary beneficiary. Convertible Preferred Stock The Company accounts for convertible preferred stock in accordance with applicable accounting guidance, including ASC 480, Distinguishing Liabilities from Equity and ASC 470, Debt. Instruments are classified as liabilities when they include contractual obligations that may require the issuer to settle in cash or other financial assets, or when redemption is outside the issuer’s control. Convertible preferred stock is classified as a liability when it contains redemption features or other settlement terms that result in an obligation for the Company, including mandatory or holder-initiated redemption rights, even when the instrument ultimately settles in equity securities. Such instruments may also accrue fixed paid-in-kind (“PIK”) dividends, which are recognized through periodic accretion to the carrying amount of the liability. These instruments are initially recorded at fair value, net of issuance costs, and subsequently measured at amortized cost using the effective interest method. Periodic accretion of the carrying value and dividend accruals are recognized in the consolidated statement of operations as interest expense. The Company evaluates all convertible instruments for potential embedded features requiring separate accounting under ASC 815, Derivatives and Hedging. If applicable, bifurcated derivative components are measured at fair value, with changes recognized in earnings. Fair value of financial instruments The Company applies Financial Accounting Standards Board (“FASB”) Codification (“ASC”) 820, Fair Value Measurement , which defines fair value and establishes a framework for measuring fair value and making disclosures about fair value measurements. FASB ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of financial instruments and the characteristics specific to them. Financial instruments with readily available quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. There are three levels within the hierarchy that may be used to measure fair value: Level 1 – A quoted price in an active market for identical assets or liabilities. Level 2 – Significant pricing inputs that are observable, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Level 3 – Significant pricing inputs that are unobservable, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. The fair value of cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity. F- 9 Table of Contents Research and development expenses Research and development costs are charged to expense as they are incurred. Research and development expenses relate primarily to process development and design, customer trials and characterization studies, testing of pre-production samples, machinery and equipment expenditures for use in Terrebonne Facility, compensation, and consulting and engineering fees. Research and development costs are presented net of related tax credits and government grants. Government grants US GAAP for profit-oriented entities does not define government grants; nor is there specific guidance applicable to government grants. Under the Company’s accounting policy for government grants and consistent with non-authoritative guidance, grants are recognized on a systematic basis over the periods in which the entity recognizes the related costs. Grants that relate to the acquisition of an asset are recognized as a reduction of the cost of the asset and in the statement of operations and comprehensive loss as the asset is depreciated or amortized. A grant that is compensation for expenses or losses already incurred, or for which there are no future related costs, is recognized in the statement of operations and comprehensive loss in the period in which it becomes receivable. Low-interest loans or interest-free loans from a government are initially measured at fair value and an interest expense is recognized on the loan subsequently under the effective interest method, with the difference recognized as a government grant. Reimbursable tax credits are recognized when amounts can be reasonably estimated on a systematic basis over the periods in which the Company recognizes the related costs. The Company is currently eligible for reimbursable Provincial research and development tax credits and investment tax credits, which are related to costs associated with its Terrebonne Facility and recorded as a reduction of research and development expenses. Deferred financing costs, debt discounts, discount on due to customer and other transaction costs Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These fees are amortized as a component of interest expense over the terms of the respective financing agreements using the effective interest rate method. Unamortized deferred financing fees are expensed in full when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not be successful. Transaction costs associated with issuing equity are reflected as a reduction of accumulated paid-in-capital. Foreign currency translations and transactions The accompanying consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. Assets and liabilities of subsidiaries that have a functional currency other than that of the Company are translated to U.S. dollars at the exchange rate as at the balance sheet date. Income and expenses are translated at the average exchange rate of the period. The resulting translation adjustments are included in other comprehensive loss (“OCI”). The Company currently is not engaged in any currency hedging activities. For transactions and balances, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations and comprehensive loss, except for gains or losses arising from the translation of intercompany balances denominated in foreign currencies that forms part in the net investment in the subsidiary which are included in OCI. F- 10 Table of Contents Property, plant and equipment Property, plant and equipment are recorded at cost, net of accumulated amortization and impairment, and are amortized over their estimated useful lives at the time they are put to use, unless the useful life is indefinite, using the straight-line method over the following periods: Building (years) 30 Land Indefinite Office equipment and furniture (years) 8 Building and land improvements (years) 5 - 10 Costs related to repairs and maintenance of property, plant and equipment are expensed in the period in which they are incurred. Upon sale or disposal, the Company writes off the cost of the asset and the related amount of accumulated depreciation. The resulting gain or loss is included in the consolidated statement of operations and comprehensive loss. Management reviews the carrying values of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows. Stock ‑ based compensation The Company periodically issues stock options, warrants and restricted stock units to employees and non-employees in non-capital raising transactions for services and financing expenses. The Company accounts for stock options granted to employees based on the authoritative guidance provided by the FASB wherein the fair value of the award is measured on the grant date and recognized as compensation expense on the straight-line basis over the vesting period. When performance conditions exist, the Company recognizes compensation expenses when it becomes probable that the performance condition will be met. Forfeitures on share-based payments are recognized as they occur. The Company accounts for stock options and warrants granted to non-employees in accordance with the authoritative guidance of the FASB wherein the fair value of the stock compensation is based upon the measurement date determined as the earlier of the date at which either a) a commitment is reached with the counterparty for performance or b) the counterparty completes its performance. The Company estimates the fair value of restricted stock unit awards to employees and directors based on its intrinsic value at date of grant. The fair value of the stock options granted is estimated using the Black-Scholes model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends. Stock-based compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience. The assumptions used in the Black-Scholes model could materially affect stock-based compensation expenses recorded in the current and future periods. Inventories Inventories are stated at the lower of cost or net realizable value using the average cost method. Inventory cost includes direct labor, cost of raw materials and production overhead costs. Inventories expensed during the year are classified as research and development expenses in the consolidated statement of operations and comprehensive loss. The Company separates its inventories into three main categories: raw materials, work in process, and finished goods. The raw materials category includes goods used in the production process that have not yet entered the production process at the balance sheet date and mainly comprises chemicals and other process consumables. The work in process category includes goods that are in the production process at the balance sheet date and mainly comprises recycled monomers that have not yet been polymerized into Loop™ branded PET resin. The finished goods category includes goods that have completed the production process at the balance sheet date and mainly comprises Loop™ branded PET resin. F- 11 Table of Contents Intangible assets The Company’s intangible assets consist primarily of patent rights, recorded at cost, net of accumulated amortization and impairment, and are amortized using the straight-line method over 7 years. The Company evaluates finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset group might not be recoverable. The Company evaluates recoverability by comparing the carrying amount of the asset group to the estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of the asset group exceeds the estimated undiscounted future cash flows, the Company measures an impairment loss as the amount by which the carrying amount exceeds the asset group’s estimated fair value. Income taxes The Company calculates its provision for income tax on the basis of the tax laws enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income, in accordance with FASB ASC 740, Income Taxes . The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Net loss per share The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share . Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. The Company includes common stock issuable in its calculation. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation if their effect is antidilutive. For the years ended February 28, 2026 and February 28, 2025 , the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at February 28, 2026 , the potentially dilutive securities consisted of 6,243,138 outstanding stock options ( 2025 – 2,771,216 ), 4,261,512 outstanding restricted stock units ( 2025 – 4,466,958 ). Reclassifications Certain comparative figures have been reclassified to conform to the current year presentation, including the introduction of a cost of services line item within the Consolidated Statements of Operations and Comprehensive Loss causing reclassifications out of research and development employee compensation and external engineering expenses. These reclassifications had no impact on the previously reported net loss and comprehensive loss. F- 12 Table of Contents Recently adopted accounting pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 09—Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. The updated standard is effective for year ended February 28, 2026. The adoption of this updated standard for the year ended February 28, 2026 has been reflected within Note 22. In August 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023 - 05, Joint Venture Formations, which requires joint ventures to apply a new basis of accounting by measuring assets and liabilities at fair value upon formation. The amendments address diversity in practice by establishing requirements for recognition and measurement of net assets and liabilities on the formation date. The updated standard is effective for year ended February 28, 2026. The adoption of this updated standard for the year ended February 28, 2026 did not have an impact on the consolidated financial statements. Recently issued accounting pronouncements not yet adopted In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024 - 03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses, which requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements. The updated standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our financial statement disclosures. In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024 - 04, Debt—Debt with Conversion and Other Options (Subtopic 470 - 20 ): Induced Conversions of Convertible Debt Instruments, which clarifies the accounting for settlements of convertible debt instruments that occur on terms different from the original contractual conversion terms. The amendments introduce a "preexisting contract approach," requiring that, to qualify for induced conversion accounting, the inducement offer must preserve the form of consideration and provide an amount of consideration that is no less than what was issuable under the original conversion privileges. This guidance applies to convertible debt instruments with cash conversion features and to instruments that are not currently convertible but had substantive conversion features at issuance and at the time the inducement offer is accepted . The updated standard is effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted for entities that have adopted the amendments in ASU 2020 - 06. The updated standard will be effective for the first quarter ending May 31, 2026. The updated standard is potentially applicable to the future settlement or conversion of its Series B Convertible Preferred Stock (“Series B CPS”), which is classified as a liability and contains a substantive conversion feature (note 12 ). The standard is not expected to have an impact on the consolidated financial statements until such a transaction, if any, occurs. In January 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025 - 01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Clarifying the Effective Date. This update clarifies the effective date of ASU 2024 - 03, which requires public business entities to provide disaggregated disclosures of certain income statement expenses. Specifically, ASU 2025 - 01 confirms that the guidance in ASU 2024 - 03 is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our financial statement disclosures. 3. Accounts Receivable Accounts receivable as at February 28, 2026 and February 28, 2025 were as follows: February 28, February 28, 2026 2025 Accounts receivable from customers $ - $ 52 Accounts receivable from services to the India JV 401 368 Research and development tax credits 88 121 Sales tax 66 89 Other receivables 200 9 $ 755 $ 639 The Company is registered for the Canadian federal and provincial goods and services taxes. As such, the Company is obligated to collect from third parties and is entitled to claim sales taxes paid on its expenses and capital expenditures incurred in Canada. F- 13 Table of Contents In addition, Loop Canada Inc. is entitled to receive government assistance in the form of refundable and non-refundable research and development tax credits from the federal and provincial taxation authorities, based on qualifying expenditures incurred during the fiscal year. The refundable credits are from the provincial taxation authorities and are not dependent on its ongoing tax status or tax position and accordingly are not considered part of income taxes. The Company records refundable tax credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not, they will be received. During the year ended February 28, 2026 , the Company recorded tax credits of $ 122 ( 2025 – $ 85 ) as a reduction of research and development expenses and received $ 180 ( 2025 – $ 209 ) from taxation authorities for research and development tax credits, net of fees. The Company is also eligible for non-refundable research and development tax credits from the federal taxation authorities which can be used as a reduction of income tax expense in any given year to the extent the Company has taxable income. The Company has not had taxable income since inception and has not been able to use these non-refundable federal research and development tax credits. During the year ended February 28, 2026 , the Company was eligible for non-cash research and development tax credits in the amount of $ 297 ( 2025 – $ 347 ). These non-cash tax credits, which have an unlimited carry forward period are not recognized in the Company’s consolidated financial statements. As at February 28, 2026 , the carry forward balance of non-cash research and development tax credits was $ 3,062 ( 2025 - $ 2,671 ). Loop Canada Inc. is also eligible for refundable investment tax credits from the provincial taxation authorities based on qualifying expenditures for manufacturing equipment. The Company records refundable tax credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not, they will be received. During the year ended February 28, 2026 , the Company recorded investment tax credits of nil ( 2025 – $ 5 ) as a reduction of research and development expenses and received nil ( 2025 – $ 5 ) from taxation authorities for investment tax credits. 4. Inventories Inventories as at February 28, 2026 and February 28, 2025 were as follows: February 28, February 28, 2026 2025 Finished goods $ 516 $ 488 Work in process 337 318 Raw materials 15 14 Allowance for inventory write-down ( 868 ) ( 738 ) $ - $ 82 As at February 28, 2026 and February 28, 2025 , inventories included finished goods, work in process and raw materials. Finished goods inventories consist of bottle grade and fiber grade Loop™ PET resin which is intended to be sold to customers. Work in process inventories consist of recycled monomers (dimethyl terephthalate (“rDMT”) and monoethylene glycol (“rMEG”)), either purified or yet to be purified, resulting from the depolymerization of PET feedstock. These monomers are intended be polymerized into Loop™ PET resin in the future. Raw materials inventories consist of chemicals which are used as inputs in the PET depolymerization process. As at February 28, 2026 and February 28, 2025 , finished goods and work in process inventories were presented at lower of cost or net realizable value, while raw materials were presented at average cost. As at February 28, 2026 , the Company recorded an allowance for inventory write-down of $ 868 ( 2025 – $ 738 ) on finished goods and work in process inventories related to inventory volumes not expected to be sold in the next twelve months. 5. Prepaid Expenses Prepaid expenses as at February 28, 2026 and February 28, 2025 were as follows: February 28, February 28, 2026 2025 Insurance $ 286 $ 69 Utilities 32 29 Software 55 28 Other 122 32 $ 495 $ 158 F- 14 Table of Contents 6. Property, Plant and Equipment, net As at February 28, 2026 Accumulated depreciation, write-down and Cost impairment Net book value Machinery and equipment – pre-construction $ 8,460 $ ( 8,460 ) $ - Building 1,817 ( 490 ) 1,327 Land 225 - 225 Building and Land Improvements 1,843 ( 1,780 ) 63 Office equipment and furniture 274 ( 190 ) 84 $ 12,619 $ ( 10,920 ) $ 1,699 As at February 28, 2025 Accumulated depreciation, write-down and Cost impairment Net book value Machinery and equipment – pre-construction $ 8,460 $ ( 8,460 ) $ - Building 1,717 ( 406 ) 1,311 Land 212 - 212 Building and Land Improvements 1,741 ( 1,616 ) 125 Office equipment and furniture 259 ( 170 ) 89 $ 12,389 $ ( 10,652 ) $ 1,737 During the year ended February 28, 2025 the Company recorded an impairment charge for equipment of $ 8,460 . This impairment was due to the termination of the joint venture arrangement between the Company and SK Geo Centric Co. Ltd. under which they had intended to construct and operate an Infinite Loop™ manufacturing facility in Ulsan, South Korea. While the equipment may be utilized in a future commercial production facility, there are no active deployment plans for the use of this specific equipment, therefore the recoverability of the carrying value of the equipment is highly uncertain, and when tested for impairment, resulted in an impairment loss of $ 8,460 being recognized in the year ended February 28, 2025. Depreciation expense amounted to $ 137 for the year ended February 28, 2026 ( 2025 – $ 322 ). 7. Intangible Assets, net As at February 28, As at February 28, 2026 2025 Patents, at cost – beginning of year $ 2,446 $ 1,996 Additions in the year – patents 211 450 Patents, at cost – end of year 2,657 2,446 Patents, accumulated depreciation – beginning of year ( 581 ) ( 379 ) Amortization of patents ( 247 ) ( 202 ) Patents, accumulated depreciation – end of year ( 828 ) ( 581 ) Foreign exchange effect ( 53 ) ( 157 ) Patents, net – end of year $ 1,776 $ 1,708 On April 9, 2019, the first U.S. patent was issued for the Infinite Loop™ technology. During the year ending February 28, 2026 , th e Company continued to develop the Infinite Loop™ technology and filed various patents in jurisdictions around the world. F- 15 Table of Contents The Infinite Loop™ technology portfolio currently includes six patent families for which the Company has 15 issued U.S. patents and one pending U.S. application. Internationally, the Company also has issued or allowed patents in various foreign jurisdictions. All patents and patent applications, if granted are expected to expire between 2038 and 2044, not including any patent term extension. Amortization expense amounted to $ 247 for the year ended February 28, 2026 ( 2025 - $ 202 ). 8. Financial Instruments and Management of Financial Risk Carrying values and fair values The following table presents the fair value of the Company’s financial liabilities at February 28, 2026 and February 28, 2025 : Fair Value at February 28, 2026 Carrying Level in the Amount Fair Value hierarchy Financial liabilities measured at amortized cost: Series B Convertible Preferred Stock (Note 12) $ 12,054 $ 11,770 Level 2 Long-term debt (Note 13) $ 3,035 $ 2,873 Level 2 Due to customer (Note 10) $ 900 $ 897 Level 2 Fair Value as at February 28, 2025 Carrying Level in the Amount Fair Value hierarchy Financial liabilities measured at amortized cost: Series B Convertible Preferred Stock (Note 12) $ 10,647 $ 10,647 Level 2 Long-term debt (Note 13) $ 3,085 $ 3,085 Level 2 Due to customer (Note 10) $ 832 $ 832 Level 2 The fair value of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity. Currency Risk We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations. We operate mainly through two entities, 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, Québec, 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 equity 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 Canadian dollars. 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 materially from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected. F- 16 Table of Contents 9. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities as at February 28, 2026 and February 28, 2025 were as follows: February 28, February 28, 2026 2025 Accounts payable $ 729 $ 2,010 Accrued employee compensation 362 554 Accrued engineering fees 460 431 Accrued professional fees 250 276 Other accrued liabilities 115 274 $ 1,916 $ 3,545 10. Due to Customer In October 2022, the Company received a cash deposit from a customer of $ 1,000 in relation to an executed capacity reservation agreement. The deposit was intended to be credited against any future sales of Loop™ PET resin over a five -year period, commencing two years after the first delivery of Loop™ PET resin to the customer. Under the terms of the capacity reservation agreement, the cash deposit was designated for expenditures related to a planned Infinite Loop™ manufacturing facility and was refundable to the customer in the event that the Infinite Loop™ manufacturing facility was not constructed. Upon mutual agreement, the capacity reservation agreement with the customer was terminated on January 18, 2024. The customer and the Company agreed for the deposit to be refunded in full on July 1, 2027, with no restriction on the Company’s use of the funds. The amount bears no interest. The cause of the termination is related to the customer’s decision to abandon its plans to incorporate recycled PET in its products for technical reasons. In January 2024, the Company reclassified the customer deposit as a due to customer and established its fair value at $ 762 based on a discount rate of 8.20 %, which reflected a discount of $ 238 . The discount rate used was based on the external financing from a Canadian bank. The discount on due to customer is amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. During the year ended February 28, 2026 , the Company recorded an accretion expense of $ 68 ( 2025 – $ 62 ). 11. Equity Method Investments Joint Venture with Ester On May 1, 2024, the Company entered into an agreement with Ester Industries Ltd. (“Ester”), a manufacturer of polyester films and specialty polymers in India, to form a 50/50 joint venture based in India (“India JV”). The purpose of the India JV is to build and operate an Infinite Loop™ manufacturing facility in India which will produce lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop™ Technology. During the year ended February 28, 2025, Ester Loop Infinite Technologies Private Limited (“ELITe”) was incorporated as the India JV. ELITe meets the accounting definition of a joint venture where neither party has control of the joint venture entity and both parties have joint control over the decision-making process. As such, the Company uses the equity method of accounting to account for its share of the investment in ELITe. During the year ended February 28, 2026 , Loop and Ester each contributed $ 960 ( 2025 – $ 1,954 ) to ELITe. ELITe incurred losses of $ 1,526 , resulting in the Company recording its share of the loss on equity accounted investment of $ 763 ( 2025 – $ 687 ) for the respective periods. As at February 28, 2026 the carrying value of the Company's investment in ELITe was $ 1,465 ( 2025 – $ 1,267 ). The summarized financial information for ELITe is presented below, on a quarterly lag (in thousands). Year ended December 31, 2025 Balance sheet Assets $ 3,717 Liabilities 25 Equity 3,692 Year ended December 31, 2025 Results of Operations (1) Revenues $ - Pre-tax loss ( 1,382 ) Net loss $ ( 1,382 ) ( 1 ) The summarized financial information presented above includes only the financial information of ELITe for the periods during which it was considered a significant equity method investee and accounted for under the equity method. The summarized financial information has been prepared based on ELITe’s financial statements adjusted to conform with US GAAP. The adjustments primarily related to the capitalization of development and pre-construction costs. Under U.S. GAAP, such costs are expensed as incurred until a final investment decision is reached and construction of the related asset is probable. ELITe’s fiscal year end differs from the Company’s fiscal year end. The summarized financial information is based on ELITe’s most recent financial statements available and is presented on a consistent reporting lag. Management considered whether any material events occurred between December 31, 2025 and February 28, 2026 and concluded that no material intervening events requiring adjustment or disclosure occurred. Equity-Method Investment with Reed Circular Economy On September 23, 2025, Loop entered into a formal agree ment with Reed Circular Economy ("RCE"), an affiliate of Reed Management SAS, to establish the fra mework for the governance, ownership, and operations of Infinite Loop Europe SAS ("Infinite Loop Europe"). Under this agreement, and as previously announced, RCE and Loop hold their interests in Infinite Loop Europe on a 90/10 basis to pursue the non-exclusive development, financing, construction, ownership, operation, and commercialization of chemical upcycling plants using Loop's technology within Europe. The agreement provides Infinite Loop Europe with priority rights to evaluate European project opportunities, establishes financing arrangements between the shareholders, grants Loop options to participate in project equity, and confirms that Loop retains ownership of its intellectual property while granting Infinite Loop Europe limited use rights. There were no monetary transactions between Loop and Infinite Europe in the year ended Feb 28, 2026. F- 17 Table of Contents Infinite Loop Europe does not meet the accounting definition of a joint venture, as the Company does not have joint control over the entity. However, the Company has significant influence over Infinite Loop Europe and, accordingly, accounts for its investment using the equity method. In September 2025, Loop purchased 250 shares of Infinite Loop Europe for €0.25 ($ 0.305 ) ( 2025 – nil ). Infinite Loop Europe has not yet commenced operations. As at February 28, 2026, the carrying value of the Company's investment in Infinite Loop Europe was nominal. 12. Series B Convertible Preferred Stock On December 23, 2024 ( the “Issuance Date”), the Company issued and sold 1,044,430 shares of Series B CPS at $ 10.00 per share t o Reed Circular Economy (the “Holder”), an affiliate of Reed Societe Generale Group, for cash proceeds of $ 10,395 ( €10,000 ). The main features of the Series B CPS are as follows: ● Automatic conversion of the stated value ($ 10,395 on the Issuance Date) on the fifth anniversary of the Issuance Date into shares of the Company’s common stock at a conversion price of $ 4.75 per share; ● Accrues a cumulative fixed annual PIK dividend at a rate of 13 % of the stated value, which is added to the stated value of the Series B CPS on September 30 of each year; ● Redeemable in cash at any time, starting after the third anniversary of the Issuance Date by the Company (issuer call option); ● Redeemable in cash on the fifth anniversary of the Issuance Date at the option of the Holder (put feature); and ● Voting rights equal to the number of whole shares of the Company’s common stock (rounded to the nearest whole share) into which the stated value of Series B CPS would be convertible on a given date. The Series B CPS is classified as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity. Although the Series B CPS is mandatorily convertible into a fixed number of common shares after five years, it contains provisions that create obligations for the Company that meet the definition of a liability under US GAAP. Because the holder has the right to demand redemption for cash at maturity, and the issuer can redeem the instrument prior to conversion, the instrument is not solely within the Company’s control to avoid settlement in a form that would require asset transfer. Accordingly, liability classification is required under ASC 480 - 10 - 25 - 4. The Series B CPS is initially recognized at fair value, net of issuance costs, and is subsequently measured at amortized cost using the effective interest method. The PIK dividends are accrued over the term of the instrument and increase the carrying amount of the liability. Although the instrument includes voting rights on an as-converted basis, such rights do not affect the classification assessment under US GAAP. The Company has evaluated the instrument for any embedded features requiring bifurcation under ASC 815, such as derivative elements, and has concluded that separate accounting is not required. Changes in the carrying value of the instrument, including accrued PIK dividends, are recorded in “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. F- 18 Table of Contents The balance of Series B CPS as at February 28, 2026 and February 28, 2025 was as follows: February 28, February 28, 2026 2025 Stated value $ 11,439 $ 10,395 Accrued PIK dividends 615 252 Series B Convertible Preferred Stock $ 12,054 $ 10,647 13. Long-Term Debt February 28, February 28, 2026 2025 Investissement Québec financing facility: Principal amount $ 3,027 $ 3,099 Unamortized discount ( 101 ) ( 138 ) Accrued interest 109 124 Total Investissement Québec financing facility 3,035 3,085 Less: current portion of long-term debt ( 605 ) ( 312 ) Long-term debt, net of current portion $ 2,430 $ 2,773 Investissement Qu é bec financing facility On February 21, 2020, the Company received $ 1,530 ( CDN$2,209 ) from Investissement Québec as the first disbursement of our financing facility, out of a maximum of $ 3,186 ( CDN$4,600 ) (the “Financing Facility”). The loan interest rate was initially set at 2.36 % and there was a 36 -month moratorium on both capital and interest repayments starting on the date of the first disbursement, after which capital and interest is repayable in 84 monthly installments. The Company established the fair value of the loan for the first disbursement at $ 1,354 based on a discount rate of 5.45 %, which reflected a debt discount of $ 291 . The discount rate used was based on the external financing from a Canadian bank. The Company, under the loan agreement, was required to pay fees representing 1 % of the loan amount, $ 32 ( CDN$46 ) to Investissement Québec which we deferred and recorded as a reduction of the Financing Facility. Debt discount and deferred financing expenses are amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. On August 26, 2021, the Company received $ 1,656 ( CDN$2,391 ) from Investissement Québec as the second disbursement of the Financing Facility, the balance of the total amount available under the Financing Facility. The second disbursement bears the same interest rate and repayment terms as the first disbursement. The Company established the fair value of the loan for the first disbursement at $ 1,750 based on a discount rate of 3.95 %, which reflected a debt discount of $ 139 . The discount rate used was based on the external financing from a Canadian bank. There were no fees associated with the second disbursement. Debt discount and deferred financing expenses are amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. The Company recorded interest expense on the Investissement Québec loan for the year ended February 28, 2026 in the amount of $ 140 ( 2025 – $ 114 ) and an accretion expense of $ 45 ( 2025 – $ 45 ). F- 19 Table of Contents On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Financing Facility Amendment”). As per the Financing Facility Amendment, a total of $ 37 (CDN $ 50 ) of the principal amount was repayable in monthly installments in the fiscal year ended February 28, 2025 , with the remainder of the principal amount being repayable in 72 monthly installments. On February 28, 2024, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Second Financing Facility Amendment”). As per the Second Financing Facility Amendment, a total of $ 74 (CDN $ 100 ) of the principal amount was repayable in monthly installments in the fiscal year ended February 28, 2026 , with the remainder of the principal amount being repayable in 60 monthly installments. Pursuant to the Second Financing Facility Amendment the interest rate of the Financing Facility was increased from 2.36 % to 3.36 %. On February 5, 2025, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Third Financing Facility Amendment”). As per the Third Financing Facility Amendment, total annual principal repayments in monthly installments are of $ 287 (CDN $ 414 ) for the fiscal year ending February 28, 2026 and $ 495 (CDN $ 714 ) for the fiscal year ending February 28, 2027, with the remainder of the principal amount being repayable in 36 monthly installments. Pursuant to the Third Financing Facility Amendment the interest rate of the Financing Facility was increased from 3.36 % to 4.36 %. Under the original terms of the Financing Facility, the principal amount was repayable in 84 monthly installments beginning in March of 2023. The amendments do not modify the repayment terms of accrued interest or any of the other terms of the Financing Facility that are not mentioned above. The amendments did not meet the criteria of ASC 470, Debt for an extinguishment of debt as the amendments did not substantially modify the terms of the Financing Facility. The Company therefore applied modification accounting and no immediate gain or loss was recognized related to the amendments. Total repayments due on the Company’s indebtedness over the next five years are as follows: Years ending Amount February 28, 2027 $ 605 February 29, 2028 844 February 28, 2029 844 February 28, 2030 844 Thereafter - Total $ 3,137 Credit facility from a Canadian bank On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company (the "Borrower"), entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank. The Credit Facility allows for borrowings of up to CDN $ 3,500 in aggregate principal amount. The Credit Facility is secured by the Company's Terrebonne, Québec property and was initially subject to a minimum equity covenant, tested quarterly. On July 4, 2025, the Borrower, the Company and the Canadian bank executed an amendment to the Credit Facility, modifying the minimum equity covenant to include the balance of Series B Convertible Preferred Stock as at February 28, 2025 of $ 10,647 in the calculation of stockholders' equity. On October 10, 2025, the Borrower, the Company and the Canadian bank executed an amendment to the Credit Facility, which removed the minimum equity covenant tested quarterly for the duration of the term of the Credit Facility. All borrowings under the Credit Facility bear interest at an annual rate equal to the bank's Canadian prime rate plus 1.0 %. As at February 28, 2026, t he $ 2,566 (CDN $ 3,500 ) Credit Facility was available and undrawn. As at February 28, 2025, the credit facility was available and undrawn. 14. Related Party Transactions Employment Agreement On June 29, 2015, the Company entered into an employment agree ment with Mr. Daniel Solomita, the Company’s President and Chief Executive Officer (“CEO”). The employment agreement is for an indefinite term. F- 20 Table of Contents On July 13, 2018, the Company and Mr. Solomita entered into an amendment and restatement of the employment agreement which provided for a long-term incentive grant of 4,000,000 shares of the Company’s common stock, in tranches of one million shares each, upon the achievement of four performance milestones. This was modified to provide a grant of 4,000,000 restricted stock units covering 4,000,000 shares of the Company’s common stock while the performance milestones remained the same. The grant of the restricted stock units became effective upon approval by the Company’s stockholders at the Company’s 2019 annual meeting, of an increase in the number of shares available for grant under the 2017 Equity Incentive Plan (the “Plan”). Such approval was granted by the Company’s stockholders at the Company’s 2019 annual meeting. The restricted stock units vest upon the achievement of applicable performance milestones, as follows: i) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s securities are listed on an exchange or the OTCQX tier of the OTC Markets; ii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of DMT/MEG or a PET; iii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s first full-scale production facility is in commercial operation; and iv) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s second full-scale production facility is in commercial operation. During the year ended February 28, 2017, it became probable that the first milestone would be met. Accordingly, 1,000,000 performance incentive shares of common stock with a fair value of $ 800,000 were earned and issuable to Mr. Solomita. This amount was reflected as stock-based compensation expense during the year ended February 28, 2017 based on the grant date fair value. The 1,000,000 performance incentive shares of common stock were replaced by vested restricted stock units, of which 200,000 were settled in October 2019, 2020 and 2021, each. On April 30, 2020, the Company and Mr. Solomita entered into an amendment of Mr. Solomita’s employment agreement. The amendment clarified the milestones consistent with the shift in the Company’s business from the production of terephthalate to the production of dimethyl terephthalate, another proven monomer used to produce PET plastic. When a milestone becomes probable, the corresponding expense will be valued based on the grant date fair value on April 30, 2020, the date of the last modification of Mr. Solomita’s employment agreement. The closing price of the Company’s common stock on the Nasdaq on April 30, 2020 was $ 7.74 per share. The vested units are settled annually in tranches of 200,000 units on October 15 of each year, unless Mr. Solomita and the Company elect to defer settlement before such date. The unvested 2,000,000 RSUs would be forfeited if Mr. Solomita left the Company, except in the case of termination without cause or resignation for good reason, in which case he would receive 50 % of the unvested RSUs at the time of termination, or 100 % in the case of termination without cause or resignation for good reason within 24 months after a change in control. During the year ended February 28, 2023, Mr. Solomita met a performance milestone in relation to the signature of a supply agreement with a customer. Accordingly, 1,000,000 performance incentive RSUs with a total fair value of $ 7,740 were earned and issuable to Mr. Solomita. This amount was reflected as stock-based compensation expense during the year ended February 28, 2023. As at February 28, 2026 , 3,400,000 ( 2025 – 3,400,000 ) of Mr. Solomita’s RSUs were outstanding of which 1,400,000 were vested ( 2025 – 1,400,000 ). On October 12, 2023, Mr. Solomita and the Company agreed to defer by one year the settlement of 800,000 RSUs that would have otherwise settled on October 15, 2023. On October 9, 2024, Mr. Solomita and the Company agreed to defer by one year the settlement of 1,000,000 RSUs that would have otherwise settled on October 15, 2024. On October 14, 2025 Mr. Solomita and the Company agreed to defer by one year the settlement of 1,200,000 RSU's that would have otherwise settled on October 15, 2025. During the year ended February 28, 2026 , no outstanding milestones became probable of being met and, accordingly, no additional stock-based compensation expense was recorded. Engineering Service Agreement with ELITe The Company has entered into two Engineering Services Agreements with ELITe pursuant to which the Company provides engineering services to support the development and construction of the Infinite Loop™ India manufacturing facility. Revenue under these agreements is recognized as services are performed. During the year ended February 28, 2026, the Company recognized $ 506 in engineering services revenue from ELITe. 15. Stockholders ’ Equity Series A Preferred Stock Mr. Solomita’s amended employment agreement of February 15, 2016 provided that the Company shall issue to Mr. Solomita one share of the Company’s Series A Preferred Stock in exchange for Mr. Solomita agreeing not to terminate his employment with the Company for a period of five years from the date of the amendment. The amendment effectively provides Mr. Solomita with a “change of control” provision over the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to less than a majority. In order to issue Mr. Solomita his one share of Series A Preferred Stock under the amendment, the Company created a “blank check” preferred stock. Subsequently, the Board of Directors of the Company approved a Certificate of Designation creating the Series A Preferred Stock, and the Company issued one share of Series A Preferred Stock to Mr. Solomita. F- 21 Table of Contents The one share of Series A Preferred Stock issued to Mr. Solomita holds a majority of the total voting power so long as Mr. Solomita holds not less than 7.5 % of the total number of outstanding shares of our common stock on February 12, 2016 ( as adjusted for any stock splits and stock dividends effected after February 12, 2016), assuring Mr. Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to a level below a majority. Mr. Solomita’s ownership as of February 28, 2026 of 20,015,516 shares of common stock and 1 share of Series A Preferred Stock provided him with 76.02 % of the voting control of the Company. Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which preclude the Company from taking certain actions without Mr. Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval. More specifically, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class: (a) amend the Articles of Incorporation or, unless approved by the Board of Directors, including by the Series A Director, amend the Company’s By-laws; (b) change or modify the rights, preferences or other terms of the Series A Preferred Stock, or increase or decrease the number of authorized shares of Series A Preferred Stock; (c) reclassify or recapitalize any outstanding equity securities, or, unless approved by the Board of Directors, including by the Series A Director, authorize or issue, or undertake an obligation to authorize or issue, any equity securities or any debt securities convertible into or exercisable for any equity securities (other than the issuance of stock-options or securities under any employee option or benefit plan); (d) authorize or effect any transaction constituting a Deemed Liquidation (as defined in this subparagraph) under the Articles, or any other merger or consolidation of the Company; (e) increase or decrease the size of the Board of Directors as provided in the By-laws of the Company or remove the Series A Director (unless approved by the Board of Directors, including the Series A Director); (f) declare or pay any dividends or make any other distribution with respect to any class or series of capital stock (unless approved by the Board of Directors, including the Series A Director); (g) redeem, repurchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any outstanding shares of capital stock (other than the repurchase of shares of common stock from employees, consultants or other service providers pursuant to agreements approved by the Board of Directors under which the Company has the option to repurchase such shares at no greater than original cost upon the occurrence of certain events, such as the termination of employment) (unless approved by the Board of Directors, including the Series A Director); (h) create or amend any stock option plan of the Company, if any (other than amendments that do not require approval of the stockholders under the terms of the plan or applicable law) or approve any new equity incentive plan; (i) replace the President and/or Chief Executive Officer of the Company (unless approved by the Board of Directors, including the Series A Director); (j) transfer assets to any subsidiary or other affiliated entity (unless approved by the Board of Directors, including the Series A Director); (k) issue, or cause any subsidiary of the Company to issue, any indebtedness or debt security, other than trade accounts payable and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase or otherwise alter in any material respect the terms of any indebtedness previously approved or required to be approved by the holders of the Series A Preferred Stock (unless approved by the Board of Directors, including the Series A Director); (l) modify or change the nature of the Company’s business; (m) acquire, or cause a Subsidiary of the Company to acquire, in any transaction or series of related transactions, the stock or any material assets of another person, or enter into any joint venture with any other person (unless approved by the Board of Directors, including the Series A Director); or (n) sell, transfer, license, lease or otherwise dispose of, in any transaction or series of related transactions, any material assets of the Company or any Subsidiary outside the ordinary course of business (unless approved by the Board of Directors, including the Series A Director). F- 22 Table of Contents Common Stock For the year ended February 28, 2026 Number of shares Amount Balance, February 28, 2025 47,620,263 $ 5 Issuance of shares upon settlement of restricted stock units 126,857 - Issuance of shares upon exercise of stock options 80,000 - Issuance of shares for cash 510,435 - Balance, February 28, 2026 48,337,555 $ 5 For the year ended February 28, 2025 Number of shares Amount Balance, February 29, 2024 47,528,908 $ 5 Issuance of shares upon settlement of restricted stock units 91,355 - Balance, February 28, 2025 47,620,263 $ 5 During the year ended February 28, 2026 , th e Company recorded the following common stock transactions: (i) The Company issued 126,857 shares of common stock to settle restricted stock units that vested in the period. (ii) The Company issued 80,000 shares of common stock to settle stock options exercised in the year. (iii) The Company issued 510,435 shares of common stock through its ATM Equity Offering program at an average offering price of $ 1.80 for gross proceed of $ 917 . During the year ended February 28, 2025 , the Company recorded the following common stock transactions: (i) The Company issued 91,355 shares of the common stock to settle restricted stock units. 16. Revenues Revenue for the years ended February 28, 2026 and February 28, 2025 were as follows: February 28, February 28, 2026 2025 Technology licensing $ - $ 10,395 Engineering services 506 368 Sales of PET 8 126 $ 514 $ 10,889 During the year ended February 28, 2026 , the Company recorded revenues of $ 506 ( 2025 – $ 368 ) for engineering fees, which were related to engineering services agreement between Loop and ELITe. Pursuant to the agreements, Loop is providing engineering services to support the development and construction of the Infinite Loop™ facility in India. As at February 28, 2026, the aggregate amount of the transaction price allocated to delivering the service contract that is unsatisfied was approximately $ 1,281 . The Company expects to recognize this remaining amount as engineering services are performed over the next 14 months. F- 23 Table of Contents During the year ended February 28, 2026 , the Company recorded revenues of $ 8 ( 2025 – 126 ) for sales of Loop™ PET resin. As at February 28, 2026 , unear ned revenue was $ 234 ( 2025 – $ 102 ), comprising of engineering services invoiced in advance $ 132 ( 2025 - nil ) and a payment received from a customer while the Company has not yet fulfilled its obligation to deliver PE T. During the year ended February 28, 2025 , the Company recorded revenues of $ 10,395 for technology licensing fees, which were related to the sale of a license to Reed Societe Generale Group. The Company entered into a license agreement with Reed Circular Economy (“RCE”), an affiliate of Reed Societe Generale Group, g ranting a non-transferable, royalty-bearing license to use Loop's proprietary depolymerization technology for one facility within Europe. Pursuant to the terms of the license agreement, the Company received an upfront royalty payment of $ 10,395 ( €10,000 ). 17. Research and Development Expenses Research and development expenses for the years ended February 28, 2026 and February 28, 2025 were as follows: February 28, February 28, 2026 2025 Employee compensation including stock-based compensation $ 2,367 $ 3,576 External engineering 96 1,477 Plant and laboratory operating expenses 836 869 Machinery and equipment expenditures 2 64 Other 171 660 $ 3,472 $ 6,646 18. General and Administrative Expenses General and administrative expenses for the years ended February 28, 2026 and February 28, 2025 were as follows: February 28, February 28, 2026 2025 Employee compensation including stock-based compensation $ 2,479 $ 2,823 Professional fees 1,512 3,428 Insurance 1,604 1,871 Other 810 1,106 $ 6,405 $ 9,228 19. Share-Based Payments Stock Op tions The following tables summarizes the continuity of the Company’s stock options during the years ended February 28, 2026 and February 28, 2025 : 2026 2025 Number of Weighted average Number of Weighted average stock options exercise price stock options exercise price Outstanding, beginning of year 2,771,216 $ 5.25 2,772,000 $ 5.10 Granted 3,931,922 1.14 199,216 2.89 Exercised ( 80,000 ) 0.80 - - Forfeited ( 180,000 ) 2.03 ( 200,000 ) 0.80 Expired ( 200,000 ) 0.80 - - Outstanding, end of year 6,243,138 $ 2.96 2,771,216 $ 5.25 Exercisable, end of year 2,781,727 $ 5.00 2,040,000 $ 6.12 F- 24 Table of Contents 2026 2025 Number of Weighted average Number of stock Weighted average stock options remaining options remaining Exercise price outstanding life (years) outstanding life (years) $ 0.80 - - 280,000 0.75 $ 1.02 1,000,000 6.85 - - $ 1.16 2,701,922 6.10 - - $ 1.72 130,000 6.63 - - $ 2.68 972,000 6.75 972,000 7.75 $ 2.89 199,216 8.02 199,216 9.02 $ 3.11 160,000 7.08 240,000 8.08 $ 5.25 380,000 1.49 380,000 2.49 $ 12.00 700,000 1.54 700,000 2.54 Outstanding, end of year 6,243,138 5.63 2,771,216 5.13 Exercisable, end of year 2,781,727 4.65 2,040,000 4.04 The Company applies the fair value method of accounting for stock-based compensation awards granted. Fair value is calculated based on a Black-Scholes option pricing model. The principal components of the pricing model for the stock options granted in the years ended February 28, 2026 and February 28, 2025 were as follows: 2026 2025 Exercise price $ 1.14 $ 2.89 Risk-free interest rate 3.56% - 4.11% 4.09 % Expected dividend yield 0 % 0 % Expected volatility 81% - 86% 73 % Expected life (years) 3.5 - 5.5 years 7 During the year ended February 28, 2026 , stock-based compensation expense attributable to stock options amounted to $ 1,159 ( 2025 – $ 555 ). Restricted Stock Units The following table summarizes the continuity of the restricted stock units (“RSUs”) during the years February 28, 2026 and February 28, 2025 : 2026 2025 Number of Weighted average Number of Weighted average units fair value price units fair value price Outstanding, beginning of year 4,466,958 $ 6.32 4,368,897 $ 6.53 Granted 328,081 1.33 213,046 2.10 Settled ( 126,857 ) 2.90 ( 91,355 ) 6.74 Forfeited ( 406,670 ) 2.97 ( 23,630 ) 4.88 Outstanding, end of year 4,261,512 $ 6.36 4,466,958 $ 6.32 Outstanding vested, end of year 1,846,828 $ 5.72 1,761,421 $ 5.86 The Company applies the fair value method of accounting for awards granted through the issuance of restricted stock units. Fair value is calculated based on the intrinsic value at grant date multiplied by the number of restricted stock unit awards granted. During the year ended February 28, 2026 , stock-based compensation attributable to RSUs amounted to $ 294 ( 2025 - $ 797 ). Stock-Based Compensation Expense During the year ended February 28, 2026 , stock-based compensation included in research and devel opment expenses amounted to $ 490 ( 2025 – $ 471 ), and in general and administrative expenses amounted to $ 963 ( 2025 – $ 881 ). F- 25 Table of Contents 20. Equity Incentive Plan On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”). The Plan permits the granting of warrants, stock options, stock appreciation rights and restricted stock units to employees, directors and consultants of the Company. A total of 3,000,000 shares of common stock were initially reserved for issuance under the Plan at July 6, 2017, with annual automatic share reserve increases, as defined in the Plan, amounting to the lessor of (i) 1,500,000 shares, (ii) 5 % of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Administrator of the Plan, effective March 1, 2018 . On March 1, 2023, 2024 and 2025, th e share reserve was increased by 1,500,000 shares. The Plan is administered by the Board of Directors who designates eligible participants to be included under the Plan, the number of awards granted, the share price pursuant to the awards and the vesting conditions and period. The awards, when granted, will have an exercise price of no less than the estimated fair value of shares at the date of grant and a life not exceeding 10 years from the grant date. However, where a participant, at the time of the grant, owns stock representing more than 10% of the voting power of the Company, the life of the options shall not exceed 5 years. The following table summarizes the continuity of the Plan units that were authorized for issuance as at and during the years ended February 28, 2026 and February 28, 2025 : 2026 2025 Number of units* Number of units* Authorized, beginning of period 2,159,612 848,244 Automatic share reserve increase 1,500,000 1,500,000 Units granted ( 4,260,003 ) ( 412,262 ) Units forfeited 586,670 223,630 Units expired 200,000 - Authorized, end of period 186,279 2,159,612 *The use of the term “units” in the table above describes a combination of stock options and RSUs. F- 26 Table of Contents 21. Interest and Other Financial Expenses Interest and other financial expenses for the years ended February 28, 2026 and February 28, 2025 are as follows: 2026 2025 Accrued dividends on convertible securities (Note 12) $ 1,408 $ 252 Interest on long-term debt (Note 13) 140 114 Interest on credit facility from a Canadian bank (Note 13) - 101 Accretion expense (Notes 10 and 13) 113 107 Other 42 44 $ 1,703 $ 618 22. Income Taxes The components of the Company’s loss before taxes are summarized below: February 28, February 28, 2026 2025 U.S. operations $ ( 5,500 ) $ ( 6,049 ) Foreign operations ( 6,799 ) ( 9,008 ) Loss before taxes $ ( 12,299 ) $ ( 15,057 ) F- 27 Table of Contents A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate, as computed on loss before taxes, is as follows: February 28, February 28, 2026 2025 Rate Amount Rate Amount Federal income tax at statutory rate % $ (2,583) % $ (3,162 ) Effect of Canadian foreign jurisdiction taxed at a different rate 2 (294) 3 ( 410 ) Non-deductible expenses - Accretion expenses and other - 27 (1) 77 Non-deductible expenses - Stock-based compensation (2 ) 216 (1) 207 Non-deductible expenses - Imputed interest income from intercompany loan (9 ) 1,130 (9) 1,357 Non-deductible expenses - Loss pick-up from equity method investments ( 1 ) 160 - - Tax credits related to research and development expenditures - Current year 2 (216) 2 ( 255 ) Tax credits related to research and development expenditures - True up prior year - (39) 1 (85) Non-Cash dividend related to the Series B CPS ( 2 ) 296 - - Effect of prior year true-up ( 2 ) 261 - 45 Change in valuation allowance (8 ) 1,041 (15) 2,226 Effective income tax expense % - $ - % - $ - Current % - $ - % - $ - Deferred % - $ - % - $ - The state and local taxes are not included within the rate reconciliation or the current and deferred breakdown above as the amounts relating to the year ended February 28, 2026 are nil ( 2025 - nil ). The Company has net operating loss carry forwards of approximately $ 32,689 ( 2025 – $ 36,285 ) for U.S. Federal income tax purposes expiring between 2035 and 2038, post 2018 net operating losses may be carried forward indefinitely. The Company has net operating loss carry forwards for Canadian Federal and Québec tax purposes of approximately $ 84,610 ( CDN$114,712 ), 2025 - $ 80,560 ( CDN$109,168 ), and $ 91,006 ( CDN$123,386 ), 2025 - $ 86,816 ( CDN$117,651 ), respectively, expiring between 2037 and 2046. Realization of future tax assets is dependent on future earnings, the timing and amount of which are uncertain. Accordingly, the net future tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $ 1,848 and $ 1,260 , respectively, for the years ended February 28, 2026 and February 28, 2025 . The Company has provided a full valuation allowance on the deferred tax assets as a result of the uncertainty regarding the probability of its realization. The Company has approximately $ 12,378 ( CDN$16,943 ), 2025 - $ 10,517 ( CDN$15,185 ) of research and development expenditures for Canadian Federal and Québec provincial purposes that are available to reduce taxable income in future years and have an unlimited carry forward period, the benefit of which has not been reflected in these financial statements. Research and development expenditures are subject to audit by the taxation authorities and accordingly, these amounts may vary. F- 28 Table of Contents The tax effect of temporary differences between US GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows: As at February 28, February 28, 2026 2025 Deferred tax assets Canada net operating loss carry forward $ 22,974 $ 20,703 U.S. net operating loss carry forward 6,865 7,620 Accrual and reserves 879 691 Intangibles 336 357 Property, plant and equipment 4,379 4,115 Research and development expenditures and credits 5,531 4,745 Basis in partnership 235 235 Other 959 1,828 Deferred tax assets 42,158 40,294 Deferred tax liabilities Intangibles ( 469 ) ( 453 ) Deferred tax liabilities $ ( 469 ) $ ( 453 ) Deferred tax assets, net 41,689 39,841 Valuation allowance ( 41,689 ) ( 39,841 ) Deferred tax assets, net $ - $ - Assessment of the amount of value assigned to the Company's deferred tax assets under the applicable accounting rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the likelihood that the Company will be able to realize the benefit of its deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of the Company's deferred tax assets is dependent on generating sufficient taxable income in future periods. Management does not believe that it is more likely than not that future taxable income will be sufficient to allow it to recover substantially all of the value assigned to its deferred tax assets. Accordingly, the Company has provided for a valuation allowance of the Company's deferred tax asset. The income taxes paid for federal, state, and Canadian foreign jurisdiction for the year ended February 28, 2026 were nil ( 2025:nil ). The tax years subject to examination by major tax jurisdiction include the years ending 2021 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2021 and forward for the Canadian jurisdiction. 23. Segment Reporting The Company manages its operations as a single reportable segment for the purpose of assessing performance and making operating and strategic decisions, which currently focuses on the commercialization of its technology. The accounting policies of the single reportable segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker, Daniel Solomita, President and Chief Executive Officer, or “CODM,” assesses performance and decides whether to allocate resources for the Company’s single reportable segment based on consolidated net loss. The CODM uses net loss to regularly monitor budget versus actual results which are used in assessing performance and in establishing management’s compensation. The CODM does not review assets in evaluating the results of the single reportable segment, therefore such information is not presented. The consolidated statement of operations provides the operating results for the single reportable segment. Significant segment expenses within the financial statement line items, Research and Development and General and administrative , are further presented in Note 17 and 18, respectively. Year ended February 28, February 28, 2026 2025 Research and development (See components in Note 17) 3,472 6,864 General and administrative (See components in Note 18) 6,405 9,228 F- 29 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.