What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-01-11 compared with 2021-10-15 · 171 added, 138 removed, 451 unchanged (41% of the section changed)

1 unchanged sentence

Loop Industries, Inc.

Three and Six months ended August 31, 2021

Three and Nine months ended November 30, 2021

Index to the Unaudited Interim Condensed Consolidated Financial Statements

Condensed consolidated balance sheets as at August 31, 2021 and February 28, 2021 (Unaudited)

Condensed consolidated statements of operations and comprehensive loss for the three and six months ended August 31, 2021 and 2020 (Unaudited)

Condensed consolidated statement of changes in stockholders’ equity for the three and six months ended August 31, 2021 and 2020 (Unaudited)

Condensed consolidated statement of cash flows for the six months ended August 31, 2021 and 2020 (Unaudited)

Condensed consolidated balance sheets as at November 30, 2021 and February 28, 2021 (Unaudited)

Condensed consolidated statements of operations and comprehensive loss for the three and nine months ended November 30, 2021 and 2020 (Unaudited)

Condensed consolidated statement of changes in stockholders’ equity for the three and nine months ended November 30, 2021 and 2020 (Unaudited)

Condensed consolidated statement of cash flows for the nine months ended November 30, 2021 and 2020 (Unaudited)

Notes to the condensed consolidated financial statements (Unaudited)

35 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended August 31

Six Months Ended August 31

Three Months Ended

Nine Months Ended

Research and development (Note 14)

General and administrative (Note 15)

Write-down and impairment of property, plant and equipment

Depreciation and amortization (Notes 6 and 7)

Interest and other financial expenses (Note 19)

Interest expense and other financial (income) expenses (Note 19)

Interest income

7 unchanged sentences

Foreign currency translation adjustment

Comprehensive income (loss)

Comprehensive loss

$ ( 10,111,716 )

9 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended August 31, 2020

par value $0.0001

Three Months Ended November 30, 2020

Series A preferred stock

par value $0.0001

Accumulated Other

par value $0.0001

Number of Shares

1 unchanged sentence

Paid-in Capital

Capital - Warrants

Paid-in Capital - Warrants

Accumulated Deficit

Comprehensive (Loss)

Stockholders' Equity

Balance, May 31, 2020

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Balance, August 31, 2020

$ ( 62,297,485 )

$ ( 156,049 )

Issuance of common shares for cash, net of share issuance costs (Note 13)

Issuance of shares upon exercise of warrants (Note 18)

Issuance of shares upon the vesting of restricted stock units (Note 16)

Stock options issued for services (Note 16)

Stock options granted for services (Note 16)

Restricted stock units issued for services (Note 16)

2 unchanged sentences

( 14,170,993 )

Balance, August 31, 2020

Balance, November 30, 2020

$ 112,112,970

$ ( 76,468,478 )

Three Months Ended August 31, 2021

par value $0.0001

Three Months Ended November 30, 2021

Series A preferred stock

par value $0.0001

Accumulated Other

par value $0.0001

Number of Shares

1 unchanged sentence

Paid-in Capital

Capital - Warrants

Paid-in Capital - Warrants

Accumulated Deficit

Comprehensive (Loss)

Stockholders' Equity

Balance, May 31, 2021

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Balance, August 31, 2021

$ 149,008,231

Issuance of common shares and warrants for cash, net of share issuance costs (Note 13)

Issuance of warrants for financing facility (Notes 11 and 18)

$ ( 110,211,750 )

$ ( 153,488 )

Issuance of shares upon the vesting of restricted stock units (Note 16)

Issuance of shares upon exercise of warrants (Note 18)

Issuance of shares upon exercise of options (Note 16)

Stock options issued for services (Note 16)

3 unchanged sentences

( 10,098,243 )

Balance, August 31, 2021

Balance, November 30, 2021

$ 149,734,659

$ ( 120,309,993 )

$ ( 166,961 )

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Six Months Ended August 31, 2020

par value $0.0001

Nine Months Ended November 30, 2020

Series A preferred stock

par value $0.0001

Accumulated Other

par value $0.0001

Number of Shares

1 unchanged sentence

Paid-in Capital

Capital - Warrants

Paid-in Capital - Warrants

Accumulated Deficit

Comprehensive (Loss)

Stockholders' Equity

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Balance, February 29, 2020

1 unchanged sentence

$ ( 388,449 )

Issuance of common shares for cash, net of share issuance costs (Note 13)

Issuance of shares upon exercise of warrants (Note 16)

Warrant issued for services (Note 18)

5 unchanged sentences

( 23,151,431 )

Balance, August 31, 2020

Balance, November 30, 2020

$ 112,112,970

$ ( 76,468,478 )

Six Months Ended August 31, 2021

par value $0.0001

Nine Months Ended November 30, 2021

Series A preferred stock

par value $0.0001

Accumulated Other

par value $0.0001

Number of Shares

1 unchanged sentence

Paid-in Capital

Capital - Warrants

Paid-in Capital - Warrants

Accumulated Deficit

Comprehensive (Loss)

Stockholders' Equity

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Balance, February 28, 2021

4 unchanged sentences

Issuance of shares upon the vesting of restricted stock units (Note 16)

Issuance of shares upon exercise of warrants (Note 16)

Issuance of shares upon exercise of options (Note 16)

Stock options issued for services (Note 16)

3 unchanged sentences

( 30,648,023 )

Balance, August 31, 2021

Balance, November 30, 2021

$ 149,734,659

$ ( 120,309,993 )

$ ( 166,961 )

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended August 31,

Nine Months Ended November 30,

Cash Flows from Operating Activities

4 unchanged sentences

Stock-based compensation expense (Note 16)

Write-down and impairment of property, plant and equipment

Accretion and accrued interest expenses (Note 19)

Loss on revaluation of foreign exchange contracts (Note 19)

Loss (gain) on revaluation of foreign exchange contracts (Note 19)

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses (Note 4)

( 1,394,272 )

( 1,075,291 )

Accounts payable and accrued liabilities (Note 9)

5 unchanged sentences

Investment in joint venture (Note 10)

Deposits on machinery and equipment (Note 4)

( 1,305,010 )

Additions to property, plant and equipment (Notes 5 and 6)

6 unchanged sentences

Cash Flows from Financing Activities

Proceeds from sale of common shares and warrants, net of share issuance costs (Note 13)

Proceeds from sale of common shares and warrants, and exercise of warrants, net of share issuance costs (Note 13)

Proceeds from issuance of long-term debt (Note 11)

3 unchanged sentences

Net increase (decrease) in cash

( 10,589,428 )

Cash, beginning of period

6 unchanged sentences

Loop Industries, Inc.

Three and Six Months Ended August 31, 2021 and 2020

Three and Nine Months Ended November 30, 2021 and 2020

Notes to the Condensed Consolidated Financial Statements

3 unchanged sentences

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 development stage with no revenues.

The Company is in the process of pursuing the construction of Infinite Loop™ commercial scale facilities in Québec, Canada, and with strategic partners in Europe and South Korea.

Additionally, the company has a joint venture to pursue the retrofitting of existing fossil fuel PET polymerization facilities with its recycling technology.

Risks and uncertainties

Our ability to implement our business plan and generate future operating revenues depends in part on whether we can obtain the necessary financing through a combination of the issuance of debt, equity, and/or joint ventures and/or government incentive programs.

We have committed a portion of our cash on hand for certain long lead equipment in connection with the Bécancour project.

We expect to enter into additional commitments to move the project ahead within our targeted construction timeframes.

However, there is a risk that we may not be able to attract additional financing through debt or equity markets.

Even if additional financing is available, it may not be available on terms favorable to us.

Our failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on our ability to execute our business plan.

Basis of Presentation

10 unchanged sentences

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods.

The results for the three- and six-month periods ended August 31, 2021 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 28, 2022, or for any other period.

The results for the three- and nine-month periods ended November 30, 2021 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 28, 2022, or for any other period.

Summary of Significant Accounting Policies

5 unchanged sentences

The uncertain duration of these measures has had and may continue to have an effect on our development and commercialization efforts.

In particular, as previously disclosed, the situation in the United States and the continued travel restrictions and quarantine requirements between Canada and the United States have caused disruptions in our timetable of our joint venture with Indorama in the development of our Spartanburg facility and commercialization of our technology.

Although the Company continues to monitor the situation and may adjust the Company’s current policies as more information and public health guidance become available, the COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to assess whether there will be further impact on the development and commercialization of the Company’s technology which could have a material adverse effect on the Company’s results of operations and cash flows.

Although the Company continues to monitor the situation and may adjust the Company’s current policies as more information and public health guidance continues to evolve, the COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to assess whether there will be further impact on the development and commercialization of the Company’s technology which could have a material adverse effect on the Company’s results of operations and cash flows.

Stock‑based compensation

8 unchanged sentences

Research and development expenses

Research and development expenses relate primarily to process development and design, testing of preproduction samples, purchases of machinery and equipment for the small-scale production facility, compensation, and consulting fees, and are expensed as incurred.

Total research and development expenses recorded during the six-month periods ended August 31, 2021 and 2020 amounted to $ 13,922,632 and $4,229,810, respectively, and are net of government research and development tax credits and government grants from the federal and provincial taxation authorities accrued and recorded based on qualifying expenditures incurred during the fiscal periods.

Research and development expenses relate primarily to process development and design, testing of preproduction samples, purchases of machinery and equipment for the small-scale Terrebonne production facility (the “Terrebonne Facility”), compensation, and consulting fees, and are expensed as incurred.

Total research and development expenses recorded during the nine-month periods ended November 30, 2021 and 2020 amounted to $ 20,757,937 and $ 10,504,093 , respectively, and are net of government research and development tax credits and government grants from the federal and provincial taxation authorities accrued and recorded based on qualifying expenditures incurred during the fiscal periods.

Assets held for sale

25 unchanged sentences

Potential common shares are excluded from the computation if their effect is antidilutive.

For the six-month periods ended August 31, 2021 and 2020, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect.

As at August 31, 2021, the potentially dilutive securities consisted of 1,587,081 outstanding stock options (2020 – 1,587,081 ), 4,170,278 outstanding restricted stock units (2020 – 4,313,750 ), and 11,684,418 outstanding warrants (2020 – 4,884,331 ).

For the nine-month periods ended November 30, 2021 and 2020, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect.

As at November 30, 2021, the potentially dilutive securities consisted of 1,570,000 outstanding stock options (2020 – 1,587,081 ), 4,014,928 outstanding restricted stock units (2020 – 4,171,609 ), and 11,659,418 outstanding warrants (2020 – 4,693,802 ).

Recently issued accounting pronouncements not yet adopted

In November 2021, the FASB issued ASU 2021-10, “Disclosures by Business Entities about Government Assistance”.

This ASU provided guidance to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.

Under the new guidance, an entity is required to provide the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy:

(1) information about the nature of the transactions and the related accounting policy used to account for the transactions, (2) the line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item and, (3) significant terms and conditions of the transactions, including commitments and contingencies.

This update is effective for fiscal years beginning after December 15, 2021.

We do not expect this accounting guidance to materially impact our results of operations or financial position.

Sales Tax, Tax Credits and Other Receivables

Sales tax, research and development tax credits and other receivables as at August 31, 2021 and February 28, 2021 were as follows:

Sales tax, research and development tax credits and other receivables as at November 30, 2021 and February 28, 2021 were as follows:

Research and development tax credits

Other receivables

In the nine-month period ended November 30, 2021, the Company received 327,429 (2021 – nil) reimbursable research and development tax credits in cash.

Prepaid Expenses and Deposits

Prepaid expenses as at August 31, 2021 and February 28, 2021 were as follows:

Deposits on machinery and equipment

Non-refundable cash deposits on machinery and equipment that will be used in research and development activities will be expensed, and classified as research and development expenses, in the period the equipment is received.

During the six-month period ended August 31, 2020, the Company made non-refundable cash deposits on machinery and equipment of $ 1,305,010 which were classified as a cashflow from investing activities in the statement of cash flows as costs of machinery and equipment were previously capitalized.

Starting in the third quarter of fiscal 2021, the Company treats costs of machinery and equipment as research and development expenses in the period they are incurred.

Assets held for sale

Prepaid expenses and deposits as at November 30, 2021 and February 28, 2021 were as follows:

Cash deposits on machinery and equipment

The Company has paid $ 739,863 of non-refundable cash deposits on machinery and equipment, $638,273 of which will be used in connection with the Terrebonne Facility in research and development activities will be expensed, and classified as research and development expenses, in the period the equipment is received.

The Company also made $ 101,590 of non-refundable cash deposits on machinery and equipment that will be used in connection with the construction of our Infinite Loop ™ manufacturing facility in Bécancour, Québec which will be expensed in the period the equipment is received.

Asset held for sale

On May 27, 2021, we acquired land in Bécancour, Québec for cash of $ 4.8 million (CDN $5.9 million).

The site is part of our planning for an Infinite Loop ™ manufacturing facility.

We plan on using a portion of the land in connection with the construction of our Infinite Loop TM manufacturing facility and selling the excess land.

We are using a portion of the land in connection with the construction of our Infinite Loop ™ manufacturing facility and selling the excess land.

The portion of the land we are committed to selling meets all criteria under ASC 360 Property, plant and equipment to be classified as an asset held for sale.

The total purchase cost of the land has been allocated between the portion of land held for sale and the land to be used for the planned Infinite Loop™ manufacturing facility based on surface area.

The total purchase cost of the land has been allocated between the portion of land held for sale and the land being used for the Infinite Loop ™ manufacturing facility based on surface area.

Balance sheet line item

4 unchanged sentences

Property, Plant and Equipment

Property, plant and equipment as at August 31, 2021 and February 28, 2021 were as follows:

As at August 31, 2021

Property, plant and equipment as at November 30, 2021 and February 28, 2021 were as follows:

As at November 30, 2021

Accumulated depreciation, write-down and impairment

15 unchanged sentences

$ ( 7,294,942 )

During the six-month period ended August 31, 2021, the Company acquired a parcel of land in Bécancour, Québec for $4.8 million (CDN $5.9 million).

The Company intends to use a portion of the property for the construction of a commercial facility to manufacture Loop™ branded PET resin using its Infinite Loop™ technology.

The excess land is classified as held for sale, as described in Note 5.

Depreciation expense for the three- and six-month periods ended August 31, 2021 amounted to $ 121,733 and $ 236,790 , respectively (2020– $ 291,498 and $ 539,697 , respectively), and is recorded as an operating expense in the consolidated statements of operations and comprehensive loss.

On May 27, 2021, the Company acquired a parcel of land in Bécancour, Québec for $ 4.8 million (CDN $5.9 million).

The Company is using a portion of the property for the construction of a commercial facility to manufacture Loop™ branded PET resin using its Infinite Loop™ technology.

The excess land is classified as asset held for sale, as described in Note 5.

During the three-month period ended November 30, 2021, the Company incurred civil construction costs of $ 902,325 for site preparation on the Bécancour land for the planned commercial facility.

Depreciation expense for the three- and nine-month periods ended November 30, 2021 amounted to $ 114,799 and $ 351,589 , respectively (2020– $ 93,006 and $ 624,189 , respectively), and is recorded as an operating expense in the consolidated statements of operations and comprehensive loss.

Intangible Assets

Intangible assets as at August 31, 2021 and February 28, 2021 were $ 871,050 and $ 794,894 , respectively.

During the six-months periods ended August 31, 2021 and 2020, we made additions to intangible assets of $ 90,591 and $ 160,484 , respectively.

Amortization expense for the three- and six-month periods ended August 31, 2021 amounted to $ 19,036 and $ 35,980 , respectively (2020 - $ 11,088 and $ 18,864 , respectively), and is recorded as an operating expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

Intangible assets as at November 30, 2021 and February 28, 2021 were $ 1,081,447 and $ 794,894 , respectively.

During the nine-months periods ended November 30, 2021 and 2020, we made additions to intangible assets of $ 348,017 and $ 452,758 , respectively.

Amortization expense for the three- and nine-month periods ended November 30, 2021 amounted to $ 20,236 and $ 56,216 , respectively (2020 - $ 11,301 and $ 30,165 , respectively), and is recorded as an operating expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

Fair value of financial instruments

The following tables present the fair value of the Company’s financial liabilities as at August 31, 2021 and February 28, 2021:

Fair Value Measurements as at August 31, 2021

The following tables present the fair value of the Company’s financial liabilitiy, being long-term debt as at November 30, 2021 and February 28, 2021:

Fair Value as at November 30, 2021

Level in the hierarchy

Instruments measured at amortized cost:

Instruments carried at amortized cost:

Long-term debt

Fair Value Measurements at February 28, 2021

Fair Value at February 28, 2021

Level in the hierarchy

Instruments measured at amortized cost:

Instruments carried at amortized cost:

Long-term debt

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities as at August 31, 2021 and February 28, 2021 were as follows:

Accounts payable and accrued liabilities as at November 30, 2021 and February 28, 2021 were as follows:

Trade accounts payable

Accrued engineering fees

Accrued construction costs

Accrued employee compensation

Accrued engineering fees

Accrued professional fees

3 unchanged sentences

Each company has a 50/50 equity interest in Indorama Loop Technologies, LLC (“ILT”), which was specifically formed to operate and execute the joint venture.

Under the Joint Venture Agreement, Indorama Ventures is contributing manufacturing knowledge and Loop Industries is required to contribute its proprietary science and technology.

Under the Joint Venture Agreement, Indorama Ventures is contributing manufacturing knowledge and Loop Industries is required to contribute its proprietary technology.

Specifically, the Company is contributing an exclusive worldwide royalty-free license to ILT to use its proprietary technology to produce 100% sustainably produced PET resin and polyester fiber.

1 unchanged sentence

As such, the Company uses the equity method of accounting to account for its share of the investment in ILT.

There were no operations in ILT from the date of inception of September 24, 2018 to August 31, 2021 and, as at August 31, 2021, the carrying value of the equity investment was $ 1,500,000 , which is the total of the cash contributions we have made to ILT.

During the six-month period ended August 31, 2021, we made no contributions to ILT (2020 – $ 650,000 ).

There were no operations in ILT from the date of inception of September 24, 2018 to November 30, 2021 and, as at November 30, 2021, the carrying value of the equity investment was $ 1,500,000 , which is the total of the cash contributions we have made to ILT.

During the nine-month period ended November 30, 2021, we made no contributions to ILT (2020 – $ 650,000 ).

These contributions to ILT, which have been matched by Indorama Ventures, were used to fund engineering design costs which have been capitalized in ILT.

22 unchanged sentences

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 $ 1,894,877 (CDN$2,390,766) from Investissement Québec as the second disbursement of our financing facility, the balance of the total amount available under the financing facility of $ 3,645,875 (CDN$4,600,000) (the “Financing Facility”).

On August 26, 2021, the Company received $ 1,868,954 (CDN$2,390,766) 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.

3 unchanged sentences

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 three- and six-month periods ended August 31, 2021 in the amount of $ 11,512 and $ 22,394 respectively (2020 – $ 9,875 and $ 19,291 ) and an accretion expense of $ 11,046 and $ 21,573 respectively (2020 – $ 9,112 and $ 17,658 ).

The Company recorded interest expense on the Investissement Québec loan for the three- and nine-month periods ended November 30, 2021 in the amount of $ 21,704 and $ 44,098 respectively (2020 – $ 10,003 and $ 28,816 ) and an accretion expense of $ 16,723 and $ 38,295 respectively (2020 – $ 9,387 and $ 27,045 ).

The Company also agreed to issue to Investissement Québec warrants to purchase shares of common stock of the Company in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $ 359,600 (CDN$460,000).

5 unchanged sentences

The fair value of the First Disbursement Warrant was determined to be $ 77,954 and is included in “Additional paid-in capital – Warrants” in our Condensed Consolidated Balance Sheets.

The First Disbursement Warrant remains outstanding as at August 31, 2021.

In connection with the second disbursement of the Financing Facility, the Company issued a warrant (“Second Disbursement Warrant”) to acquire 17,180 shares of common stock at a strike price of $ 11.00 per share to Investissement Québec.

1 unchanged sentence

The fair value of the First Disbursement Warrant was determined to be $ 69,323 and is included in “Additional paid-in capital – Warrants” in our Condensed Consolidated Balance Sheets.

The Second Disbursement Warrant remains outstanding as at August 31, 2021.

The First and Second Disbursement Warrants remain outstanding as at November 30, 2021.

On January 24, 2018, the Company obtained a $ 1,109,614 (CDN$1,400,000) 20 -year term installment loan (the “Loan”), from a Canadian bank.

The Loan bears interest at the bank’s Canadian prime rate plus 1.5% .

By agreement, the Loan is repayable in monthly payments of $ 4,623 (CDN$5,833) plus interest, until January 2022, at which time the monthly repayment amount and interest rate are subject to renewal.

By agreement, the Loan is repayable in monthly payments of $ 4,560 (CDN$5,833) plus interest, maturing in January 2022.

It includes an option allowing for the prepayment of the Loan without penalty.

During the three- and six-month periods ended August 31, 2021, we repaid $ 13,870 and $ 27,740 respectively (2020 – $ 14,143 and $ 26,836 ) on the principal balance of the Loan and interest paid amounted to $ 10,543 and $ 19,496 and (2020 – $ 9,130 and $ 19,441 ).

During the three- and nine-month periods ended November 30, 2021, we repaid $ 13,680 and $ 41,041 respectively (2020 – $ 13,497 and $ 32,781 ) on the principal balance of the Loan and interest paid amounted to $ 11,010 and $ 30,506 and (2020 – $ 9,172 and $ 29,102 ).

The terms of the credit facility require the Company to comply with certain financial covenants.

As at August 31, 2021 and 2020, the Company was in compliance with its financial covenants.

As at November 30, 2021 and 2020, the Company was in compliance with its financial covenants.

Principal repayments due on the Company’s long-term debt over the next five years are as follows:

18 unchanged sentences

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 of PET plastic that is far simpler to purify.

During the quarters ended August 31, 2021 and 2020, no outstanding milestones were probable of being met based on the authoritative guidance provided by the FASB and, accordingly, the Company did not record any additional compensation expense.

During the quarters ended November 30, 2021 and 2020, no outstanding milestones were probable of being met based on the authoritative guidance provided by the FASB and, accordingly, the Company did not record any additional compensation expense.

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.

2 unchanged sentences

Stockholders’ Equity

For the period ended August 31, 2021

For the nine months ended November 30, 2021

Balance, February 28, 2021

1 unchanged sentence

Issuance of shares for cash

Balance, August 31, 2021

For the period ended August 31, 2020

Issuance of shares upon exercise of warrants

Issuance of shares upon exercise of options

Balance, November 30, 2021

For the nine months ended November 30, 2020

Balance, February 29, 2020

Issuance of shares for cash

Issuance of shares upon the exercise of warrants

Issuance of shares upon settlement of restricted stock units

Balance, August 31, 2020

During the six months ended August 31, 2021, the Company recorded the following common stock transactions:

Balance, November 30, 2020

During the nine months ended November 30, 2021, the Company recorded the following common stock transactions:

The Company issued 231,660 shares of the common stock to settle restricted stock units that vested in the period.

The Company issued 4,714,813 shares of its common stock, with warrants, at an aggregate offering price of $ 12.00 per share for total gross proceeds of $ 56,577,756 and net proceeds of $ 56,084,304 .

During the six months ended August 31, 2020, the Company recorded the following common stock transaction:

The Company issued 11,666 shares of its common stock upon the exercise of a warrant.

The Company issued 16,226 shares of its common stock upon the exercise of stock options.

During the nine months ended November 30, 2020, the Company recorded the following common stock transaction:

On September 23, 2020 and October 1, 2020, the Company sold 1,880,000 and 207,000 shares, respectively of its common stock at an offering price of $ 12.75 per share in a registered direct offering, for total gross proceeds of $ 26,609,250 .

The company issued 192,529 shares of its common stock upon the exercise of warrants.

On October 15, 2020, the Company issued 200,000 shares of common stock to settle restricted stock units related to the President and Chief Executive Officer.

The Company issued 24,436 shares of its common stock to settle restricted stock units that vested in the period.

14 unchanged sentences

Research and Development Expenses

Research and development expenses for the three-month periods ended August 31, 2021 and 2020 were as follows:

Research and development expenses for the three-month periods ended November 30, 2021 and 2020 were as follows:

Machinery and equipment expenditures

2 unchanged sentences

Plant and laboratory operating expenses

Research and development expenses for the six-month periods ended August 31, 2021 and 2020 were as follows:

Research and development expenses for the nine-month periods ended November 30, 2021 and 2020 were as follows:

Machinery and equipment expenditures

2 unchanged sentences

Plant and laboratory operating expenses

During the six-month period ended August 31, 2021, we recorded research and development tax credits of $ 152,391 as a reduction of research and development expenses and an expense of $ 267,743 in the six-month period ended August 31, 2020.

The expense in the six-month period ended August 31, 2020 was due to a revision of research and development tax credits by Canadian tax authorities.

During the six-month period ended August 31, 2021, we recorded no government grants as a reduction of research and development expenses (2020 – $ 191,439 ).

During the nine-month period ended November 30, 2021, we recorded reimbursable research and development tax credits of $ 54,911 as a reduction of research and development expenses and an expense of $ 151,379 in the nine-month period ended November 30, 2020.

The expense in the nine-month period ended November 30, 2020 was due to a revision of research and development tax credits by Canadian tax authorities.

During the nine-month period ended November 30, 2021, we recorded no government grants as a reduction of research and development expenses (2020 – $ 200,738 ).

General and Administrative Expenses

General and administrative expenses for the three-month periods ended August 31, 2021 and 2020 were as follows:

General and administrative expenses for the three-month periods ended November 30, 2021 and 2020 were as follows:

Professional fees

Employee compensation

Directors and officers insurance

General and administrative expenses for the six-month periods ended August 31, 2021 and 2020 were as follows:

General and administrative expenses for the nine-month periods ended November 30, 2021 and 2020 were as follows:

Professional fees

Employee compensation (1)

Directors and officers insurance

______________

Includes stock-based compensation expense.

In the six-month period ended August 31, 2021, the Company recorded RSU forfeitures for an amount of $ 935,837 (2020 – $ 4,005 ) as a net reversal of stock-based compensation.

In the nine-month period ended November 30, 2021, the Company recorded RSU forfeitures for an amount of $ 935,837 (2020 – $ 4,005 ) as a net reversal of stock-based compensation.

Share-based Payments

Stock Options

During the three-month period ended August 31, 2021, the Company granted no stock options (2020 – nil), no stock options were forfeited (2020 – nil) or exercised (2020 – nil) and no stock options expired (2020 – nil).

During the six-month period ended August 31, 2021, the Company granted no stock options (2020 – nil), no stock options were forfeited (2020 – nil) or exercised (2020 – nil) and no stock options expired (2020 – nil).

During the three-month period ended November 30, 2021, the Company granted no stock options (2020 – nil), 17,081 options were exercised with a weighted average exercise price of $ 0.80 (2020 – nil), no stock options were forfeited (2020 – nil) and no stock options expired (2020 – nil).

During the nine-month period ended November 30, 2021, the Company granted no stock options (2020 – nil), 17,081 options were exercised with a weighted average exercise price of $ 0.80 (2020 – nil), no stock options were forfeited (2020 – nil) and no stock options expired (2020 – nil).

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.

There were no new issuances of stock options for the three- and six-month periods ended August 31, 2021 and 2020.

The total number of stock options outstanding as at August 31, 2021 was 1,587,081 (2020 – 1,587,081 ) with a weighted average exercise price of $ 6.81 (2020 - $ 6.81 ), of which 1,278,748 were exercisable (2020 – 1,083,748 ) with a weighted average exercise price of $ 7.30 (2020 – $ 7.05 ).

During the three-month periods ended August 31, 2021 and 2020, stock-based compensation expense attributable to stock options amounted to $ 343,653 and $ 553,540 , respectively, and is included in operating expenses.

During the six-month periods ended August 31, 2021 and 2020, stock-based compensation expense attributable to stock options amounted to $ 892,971 and $ 1,110,435 , respectively, and is included in operating expenses.

There were no new issuances of stock options for the three- and nine-month periods ended November 30, 2021 and 2020.

The total number of stock options outstanding as at November 30, 2021 was 1,570,000 (2020 – 1,587,081 ) with a weighted average exercise price of $ 6.87 (2020 - $ 6.81 ), of which 1,286,667 were exercisable (2020 – 986,248 ) with a weighted average exercise price of $7.48 (2020 – $8.18).

During the three-month periods ended November 30, 2021 and 2020, stock-based compensation expense attributable to stock options amounted to $ 311,004 and $ 551,720 , respectively, and is included in operating expenses.

During the nine-month periods ended November 30, 2021 and 2020, stock-based compensation expense attributable to stock options amounted to $ 1,203,975 and $ 1,662,155 , respectively, and is included in operating expenses.

Restricted Stock Units

During the three-month period ended August 31, 2021, the Company granted 33,184 restricted stock units (“RSUs”) (2020 – 38,648 ) with a weighted average fair value of $ 13.05 (2020 – $ 9.20 ), settled 12,031 RSUs (2020 – 18,305 ) with a weighted average fair value of $ 8.48 (2020 – $ 9.85 ) and no RSUs were forfeited (2020 – nil).

During the six-month period ended August 31, 2021, the Company granted 286,942 restricted stock units (“RSUs”) (2020 – 122,373 ) with a weighted average fair value of $ 9.41 (2020 – $ 8.86 ), settled 31,660 RSUs (2020 – 24,436 ) with a weighted average fair value of $ 8.82 (2020 – $ 9.78 ) and 295,524 RSUs were forfeited (2020 – 2,989 ) with a weighted average fair value of $ 7.93 (2020 – $ 8.78 ).

During the three-month period ended November 30, 2021, the Company granted 62,638 restricted stock units (“RSUs”) (2020 – 57,859 ) with a weighted average fair value of $ 13.64 (2020 – $ 12.96 ), settled 200,000 RSUs (2020 – 200,000 ) with a weighted average fair value of $ 0.80 (2020 – $ 0.80 ) and 17,988 RSUs were forfeited (2020 – nil) with a weighted average fair value of $ 8.73 (2020 – nil).

During the nine-month period ended November 30, 2021, the Company granted 349,580 restricted stock units (“RSUs”) (2020 – 180,232 ) with a weighted average fair value of $ 10.16 (2020 – $ 10.18 ), settled 231,660 RSUs (2020 – 224,436 ) with a weighted average fair value of $ 1.90 (2020 – $ 1.78 ) and 313,512 RSUs were forfeited (2020 – 2,989 ) with a weighted average fair value of $ 7.97 (2020 – $ 8.78 ).

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 closing share price at grant date multiplied by the number of restricted stock unit awards granted.

The total number of RSUs outstanding as at August 31, 2021 was 4,170,278 (2020 – 4,313,750 ), of which 725,313 were vested (2020 – 891,327 ).

During the three-month periods ended August 31, 2021 and 2020, stock-based compensation attributable to RSUs amounted to $ 379,165 and $ 312,390 , respectively, and is included in expenses.

During the six-month periods ended August 31, 2021 and 2020, stock-based compensation attributable to RSUs amounted to ($ 173,238 ) and $ 682,877 , respectively, and is included in operating expenses.

The net reversal in expenses attributable to RSUs in the three-month period ended August 31, 2021 is due to forfeitures recorded in the period for a total of $ 935,837 (2020 – $ 4,005 ).

The total number of RSUs outstanding as at November 30, 2021 was 4,014,928 (2020 – 4,171,609 ), of which 525,313 were vested (2020 – 691,327 ).

During the three-month periods ended November 30, 2021 and 2020, stock-based compensation attributable to RSUs amounted to $ 331,005 and $ 345,274 , respectively, and is included in operating expenses.

During the nine-month periods ended November 30, 2021 and 2020, stock-based compensation attributable to RSUs amounted to $ 157,769 and $ 1,028,152 , respectively, and is included in operating expenses.

During the nine-month period ended November 30, 2021, the Company recorded a reversal of expenses for forfeitures for a total of $ 963,022 (2020 – $ 4,005 ).

Stock-Based Compensation Expenses

During the three-month periods ended August 31, 2021 and 2020, stock-based compensation included in research and development expenses amounted to $ 394,527 and $ 352,282 , respectively, and in general and administrative expenses amounted to $ 313,282 and $ 513,649 , respectively.

During the six-month periods ended August 31, 2021 and 2020, stock-based compensation included in research and development expenses amounted to $ 790,072 and $ 704,289 , respectively, and in general and administrative expenses amounted to ($ 70,338 ) and $ 1,173,466 , respectively.

The net reversal in stock-based compensation included in general and administrative expenses in the six-month period ended August 31, 2021 is due to forfeitures recorded in the period for a total of $ 935,837 (2020 – $ 4,005 ).

During the three-month periods ended November 30, 2021 and 2020, stock-based compensation included in research and development expenses amounted to $ 362,435 and $ 350,393 , respectively, and in general and administrative expenses amounted to $ 279,574 and $ 546,601 , respectively.

During the nine-month periods ended November 30, 2021 and 2020, stock-based compensation included in research and development expenses amounted to $ 1,152,506 and $ 1,054,682 , respectively, and in general and administrative expenses amounted to $ 209,236 and $ 1,720,067 , respectively.

Stock-based compensation included in general and administrative expenses in the nine-month period ended November 30, 2021 includes reversal of expenses for forfeitures for a total of $ 935,837 (2020 – $ 4,005 ).

Equity Incentive Plan

6 unchanged sentences

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 Company’s Equity Incentive Plan units during the six-month periods ended August 31, 2021 and 2020:

The following table summarizes the continuity of the Company’s Equity Incentive Plan units during the nine-month periods ended November 30, 2021 and 2020:

Number of units

6 unchanged sentences

Outstanding, end of period

During the six-month period ended August 31, 2021, the Company issued warrants to purchase 7,550,698 shares of our common stock.

No warrants were exercised, were forfeited, nor expired in the six-month period ended August 31, 2021.

The table below summarizes the warrants granted during the six-month period ended August 31, 2021:

During the nine-month period ended November 30, 2021, the Company issued warrants to purchase 7,550,698 shares of our common stock.

25,000 warrants were exercised with a weighted average exercise price of $ 9.43 and no warrants were forfeited, nor expired in the nine-month period ended November 30, 2021.

The table below summarizes the warrants granted during the nine-month period ended November 30, 2021:

Number of warrants

4 unchanged sentences

August 26, 2024

_______________

Expiration date is the earlier of (A) the date that is the third anniversary of the First Plant Milestone (as defined in the Second Tranche Warrants), (B) the expiration of the JV Negotiation Period (as defined in the Second Tranche Warrants), provided that the Joint Venture Transaction Agreements (as defined in the Second Tranche Warrants) have not been executed by the expiration of the JV Negotiation Period and (C) the third anniversary of the BDP Date (as defined in the Second Tranche Warrants), provided that the First Plant Milestone has not occurred as of such date.

During the six-month period ended August 31, 2020, the Company issued, in exchange for consulting services, a warrant to purchase 25,000 shares of our common stock at the price of $ 9.43 per share expiring May 12, 2022 and warrants to issue 200,000 shares of our common stock with an exercise price of $ 11.00 expired.

No warrants were exercised or forfeited in the six-month period ended August 31, 2021.

During the nine-month period ended November 30, 2020, the Company issued, in exchange for consulting services, a warrant to purchase 25,000 shares of our common stock at the price of $ 9.43 per share expiring May 12, 2022 and warrants to issue 200,000 shares of our common stock with an exercise price of $ 11 .00 expired.

During the nine-month periods ended November 30, 2020, 159,664 warrants were exercised at the price of $ 8.55 per share and 30,864 warrants were exercised at the price of $ 9.32 per share.

No warrants were forfeited in the nine-month period ended November 30, 2020.

Interest and Other Finance Costs

Interest and other finance costs for the three-month periods ended August 31, 2021 and 2020 are as follows:

Interest and other finance costs for the three-month periods ended November 30, 2021 and 2020 are as follows:

Interest on long-term debt

1 unchanged sentence

Loss (gain) on revaluation of foreign exchange contracts

Interest and other finance costs for the six-month periods ended August 31, 2021 and 2020 are as follows:

Interest and other finance costs for the nine-month periods ended November 30, 2021 and 2020 are as follows:

Interest on long-term debt

1 unchanged sentence

Loss (gain) on revaluation of foreign exchange contracts

There were no foreign exchange contracts outstanding as of November 30, 2021.

Commitments and Contingencies

Commercial Commitments

On September 2, 2020, the Company entered into a know-how and engineering agreement (the “Chemtex Agreement”) with Chemtex Global Corporation (“Chemtex”) to license the PET plastic and polyester polymer for fiber manufacturing know-how of INVISTA’s technology and licensing group, INVISTA Performance Technologies (IPT) (“INVISTA”).

The total amount of the Chemtex Agreement is $ 4,300,000 and covers the know-how and design of two Infinite Loop™ facilities.

Payment terms are based on the completion of certain milestones and total $ 2,150,000 for each facility.

As at August 31, 2021, the cumulative amount paid was $ 900,000 and during the six-month period ended August 31, 2021, no additional amount was paid by the Company related to this agreement and included in research and development expenses.

Contingencies

23 unchanged sentences

On December 13, 2020, the Application was amended in order to add allegations regarding specific misrepresentations.

The authorization hearing is scheduled on February 24, 2022.

Management believes that these cases lack merit and intends to defend them vigorously.

1 unchanged sentence

Management has not yet determined what effect these lawsuits may have on its financial position or results of operations as they are still in the preliminary stages.

Subsequent event

Commitment to purchase of machinery and equipment

In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment in connection with the construction of our Infinite Loop™ manufacturing facility in Bécancour, Québec for up to $8,546,000 over the next 13 months , subject to various terms and conditions.

Pursuant to the agreement, the Company has paid a cash deposit of $ 2,136,500 .

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

What changed 10-Q

Item 1. Financial Statements