What changed in this filing

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Item 1. Financial Statements

2022-07-13 compared with 2022-01-11 · 166 added, 328 removed, 294 unchanged (63% of the section changed)

1 unchanged sentence

Loop Industries, Inc.

Three and Nine months ended November 30, 2021

Three months ended May 31, 2022

Index to the Unaudited Interim Condensed Consolidated Financial Statements

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)

Condensed consolidated balance sheets as at May 31, 2022 and February 28, 2022 (Unaudited)

Condensed consolidated statements of operations and comprehensive loss for the three months ended May 31, 2022 and 2021 (Unaudited)

Condensed consolidated statement of changes in stockholders’ equity for the three months ended May 31, 2022 and 2021 (Unaudited)

Condensed consolidated statement of cash flows for the three months ended May 31, 2022 and 2021 (Unaudited)

Notes to the condensed consolidated financial statements (Unaudited)

7 unchanged sentences

Total current assets

Investment in joint venture (Note 10)

Investment in joint venture

Property, plant and equipment, net (Note 6)

15 unchanged sentences

Additional paid-in capital

Additional paid-in capital – Warrants (Note 18)

Additional paid-in capital – Warrants

Accumulated deficit

8 unchanged sentences

Three Months Ended

Nine Months Ended

Research and development (Note 13)

General and administrative (Note 15)

Write-down and impairment of property, plant and equipment

General and administrative (Notes 14)

Depreciation and amortization (Notes 6 and 7)

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

Interest and other financial expenses (Note 18)

Interest income

Foreign exchange loss (gain)

Foreign exchange loss

Total expenses

1 unchanged sentence

( 12,157,364 )

( 30,648,023 )

( 23,151,431 )

Other comprehensive income (loss)

Other comprehensive loss -

Foreign currency translation adjustment

2 unchanged sentences

$ ( 11,950,549 )

$ ( 30,808,394 )

$ ( 22,852,861 )

Loss per share

Net Loss per share

Basic and diluted

3 unchanged sentences

Loop Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended November 30, 2020

Series A preferred stock

par value $0.0001

Number of Shares

Paid-in Capital

Paid-in Capital - Warrants

Accumulated Deficit

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 granted for services (Note 16)

Restricted stock units issued for services (Note 16)

Foreign currency translation

( 14,170,993 )

Balance, November 30, 2020

$ 112,112,970

$ ( 76,468,478 )

Three Months Ended November 30, 2021

Series A preferred stock

par value $0.0001

Number of Shares

Paid-in Capital

Paid-in Capital - Warrants

Accumulated Deficit

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Balance, August 31, 2021

$ 149,008,231

$ ( 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)

Restricted stock units issued for services (Note 16)

Foreign currency translation

( 10,098,243 )

Balance, November 30, 2021

$ 149,734,659

$ ( 120,309,993 )

$ ( 166,961 )

See accompanying notes to the condensed consolidated financial statements.

Loop Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended November 30, 2020

Series A preferred stock

Condensed Consolidated Statement of Changes in Stockholders’ Equity

Three months ended May 31, 2021

Preferred stock

Accumulated Other

par value $0.0001

Comprehensive

Number of Shares

Paid-in Capital

Paid-in Capital - Warrants

Capital – Warrants

Accumulated Deficit

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Stockholders’ Equity

Balance, February 28, 2021

1 unchanged sentence

$ ( 89,661,970 )

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)

Issuance of shares upon the vesting of restricted stock units (Note 15)

Stock options issued for services (Note 15)

Restricted stock units issued for services (Note 16)

Restricted stock units issued (forfeited) for services (Note 15)

Foreign currency translation

1 unchanged sentence

( 12,157,364 )

Balance, November 30, 2020

Balance, May 31, 2021

$ 113,663,032

$ ( 101,819,334 )

Nine Months Ended November 30, 2021

Series A preferred stock

Three months ended May 31, 2022

Preferred stock

Accumulated Other

par value $0.0001

Comprehensive

Number of Shares

Paid-in Capital

Paid-in Capital - Warrants

Capital – Warrants

Accumulated Deficit

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Stockholders’ Equity

Balance, February 28, 2022

( 134,582,926 )

$ ( 89,661,970 )

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)

Issuance of shares upon the vesting of restricted stock units (Note 15)

Issuance of shares upon exercise of warrants (Note 16)

Issuance of shares upon exercise of options (Note 16)

Stock options issued for services (Note 15)

3 unchanged sentences

( 18,005,939 )

Balance, November 30, 2021

$ 149,734,659

$ ( 120,309,993 )

Balance, May 31, 2022

( 152,588,865 )

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended November 30,

Three Months Ended May 31,

Cash Flows from Operating Activities

4 unchanged sentences

Stock-based compensation expense (Note 15)

Write-down and impairment of property, plant and equipment

Accretion and accrued interest expenses (Note 18)

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

Changes in operating assets and liabilities:

2 unchanged sentences

( 1,326,519 )

( 1,075,291 )

Accounts payable and accrued liabilities (Note 9)

4 unchanged sentences

Cash Flows from Investing Activities

Investment in joint venture (Note 10)

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

( 5,022,255 )

Additions to property, plant and equipment (Note 6)

( 4,867,007 )

2 unchanged sentences

( 4,919,326 )

( 2,386,593 )

Cash Flows from Financing Activities

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)

Repayment of long-term debt (Note 10)

1 unchanged sentence

Effect of exchange rate changes

Net increase (decrease) in cash

Net decrease in cash

( 11,660,690 )

( 17,184,889 )

Cash, beginning of period

6 unchanged sentences

Loop Industries, Inc.

Three and Nine Months Ended November 30, 2021 and 2020

Three Months Ended May 31, 2022 and 2021

Notes to the Condensed Consolidated Financial Statements

The Company, Basis of Presentation

The Company and Basis of Presentation

Loop Industries, Inc.

(the “Company,” “Loop Industries,” “we,” or “our”) is a technology company that owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber to its base building blocks (monomers).

(the “Company,” “Loop,” “we,” or “our”) is a technology company that owns patented and proprietary technology that depolymerizes no and low-value waste 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 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

The accompanying unaudited interim condensed 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.

These unaudited interim condensed 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”) regarding interim financial reporting.

Certain information and note disclosures included in these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2021, filed with the SEC on June 1, 2021.

The unaudited interim condensed consolidated financial statements comprise the consolidated financial position and results of operations of Loop Industries, Inc.

4 unchanged sentences

Intercompany balances and transactions are eliminated on consolidation.

The condensed consolidated balance sheet as of February 28, 2021, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.

The condensed consolidated balance sheet as of February 28, 2022, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by US GAAP on an annual reporting basis.

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 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.

The results for the three months ended May 31, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 28, 2023, or for any other period.

The consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the continuing of operations, the realization of assets and the settlement of liabilities in the normal course of business.

Summary of Significant Accounting Policies

Liquidity Risk Assessment

From inception to May 31, 2022, the Company has been in the development stage with no revenues, and with its ongoing operations and commercialization plans financed primarily by raising equity.

The Company has incurred net losses and negative cash flow from operating activities since its inception and expects to incur additional net losses while it continues to develop and plan for commercialization.

As at May 31, 2022, the Company has cash and cash equivalents of $ 32.40 million.

Management actively monitors the Company’s cash resources against the Company’s short-term cash commitments to ensure the Company has sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date.

Management evaluates the Company’s liquidity to determine if there is substantial doubt about the Company’s ability to continue as a going concern.

In preparing this liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to:

(i) estimation of amount and timing of future cash outflows and cash inflows and (ii) determining what future expenditures are committed and what could be considered discretionary.

Based on this assessment, management believes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they become due for a period of no less than twelve months from the date of issuance of these consolidated financial statements.

The company is currently evaluating financing options to move to the next stage of its strategic development and construct manufacturing plants in Canada, Europe and Asia.

Our ability to successfully commercialize our business and generate future revenues depends 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 resources for certain long lead equipment in connection with the Bécancour project.

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

However, there is no assurance that the Company will be successful in attracting additional funding.

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 current operation and on our ability to execute our business plan.

Use of estimates

The preparation of financial statements in conformity with US GAAP requires management 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.

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 estimates for depreciable lives of property, plant and equipment, intangible assets, analysis of impairments of long-lived assets and intangible assets as well as the carrying value of our joint venture investment, assets held for sale, accruals for potential liabilities, 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 and the judgment in the assessment.

The COVID-19 pandemic has disrupted business operations for us and our customers, suppliers, vendors and other parties with whom we do business, and such disruptions are expected to continue for an indefinite period of time.

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

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.

Those estimates and assumptions include the going concern assessment, estimates for depreciable lives of property, plant and equipment, intangible assets, analysis of impairments of long-lived assets and intangible assets as well as the carrying value of our joint venture investment, assets held for sale, accruals for potential liabilities, 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.

The COVID-19 pandemic, as well as supply chain and geo-political disruptions, have affected business operations and planning for future commercial facilities to varying degrees for us and our customers, suppliers, vendors and other parties with whom we do business, and such disruptions are expected to continue for an indefinite period of time.

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

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 where there are no performance conditions, recognized as compensation expense on the straight-line basis over the vesting period and where performance conditions exist, recognize compensation expense when it becomes probable that the performance condition will be met.

When performance conditions exist, the Company recognizes compensation expense when it becomes probable that the performance condition will be met.

Forfeitures on share-based payments are accounted for by recognizing forfeitures as they occur.

5 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 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.

Research and development costs are charged to expense as costs are incurred in performing research and development activities.

Research and development expenses relate primarily to process development and design, testing of pre-production samples, machinery and equipment expenditures for use in the small-scale production facility in Terrebonne, Québec (the “Terrebonne Facility”), compensation, and consulting and engineering fees.

Assets held for sale

25 unchanged sentences

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

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

For the three-month periods ended May 31, 2022 and 2021, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect.

As at May 31, 2022, the potentially dilutive securities consisted of 1,570,000 outstanding stock options (2021 – 1,587,081 ), 4,090,775 outstanding restricted stock units (2021 – 4,149,125 ), and 11,659,418 outstanding warrants (2021 – 4,133,720 ).

Recently adopted accounting pronouncements

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

3 unchanged sentences

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.

The adoption of this accounting guidance did not impact our Consolidated Financial Statements and disclosures.

Sales Tax, Tax Credits and Other Receivables

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

Sales tax, research and development tax credits and other receivables as at May 31, 2022 and February 28, 2022 were as follows:

February 28, 2022

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 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.

Prepaid expenses and deposits as at May 31, 2022 and February 28, 2022 were as follows:

February 28, 2022

Directors and officers insurance

Deposits on machinery and equipment

As at May 31, 2022, the Company had $ 2,728,910 (February 28, 2022 – $ 2,801,680 ) of non-refundable cash deposits on machinery and equipment.

$ 593,602 (February 28, 2022 – $ 672,713 ) of the prepayments are on machinery and equipment that will be used in connection with the research and development activities at the Terrebonne Facility and will be expensed, and classified as research and development expenses in the period the equipment is received.

The remainder of the prepayments of $ 2,135,308 (February 28, 2022 –$ 2,128,967 ) are non-refundable cash deposits on long-lead machinery and equipment that will be used in the planned Infinite Loop ™ manufacturing facility in Bécancour, Québec.

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 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.

On May 27, 2021, we acquired land in Bécancour, Québec for cash of $ 4.8 million (CDN $5.9 million) , for which a portion of the land is the site of our planned Infinite Loop ™ manufacturing facility.

The excess land has been classified as an asset held for sale, on the basis that management is committed to a plan to dispose of the excess land and believes the sale is probable within one year.

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.

1 unchanged sentence

Land held for sale

Assets held for sale

Asset held for sale

Infinite Loop ™ manufacturing facility

1 unchanged sentence

Property, Plant and Equipment

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

As at November 30, 2021

As at May 31, 2022

Accumulated depreciation, write-down and impairment

2 unchanged sentences

Building and Land Improvements

Machinery and equipment

( 6,514,252 )

Office equipment and furniture

5 unchanged sentences

Building and Land Improvements

Machinery and equipment

( 6,514,252 )

Office equipment and furniture

$ ( 1,251,600 )

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.

Depreciation expense for the three-month periods ended May 31, 2022 and 2021 amounted to $ 119,093 and $ 115,057 , respectively, and is recorded as an operating expense in the consolidated statements of operations and comprehensive loss.

During the three-month period ended May 31, 2021, the Company acquired a 19 million square foot parcel of land in Bécancour, Québec for $ 4.8 million (CDN $5.9 million).

The Company intended use for the site is to construct a commercial facility to manufacture Loop™ branded PET resin using its Infinite Loop™ technology.

Intangible Assets

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.

Intangible assets as at May 31, 2022 and February 28, 2022 were $ 1,067,398 and $ 1,013,801 , respectively.

During the three-month periods ended May 31, 2022 and 2021, we made additions to intangible assets of $ 69,247 and $ 52,319 , respectively.

Amortization expense for the three-month periods ended May 31, 2022 and 2021 amounted to $ 19,539 and $ 16,944 , 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 liabilitiy, being long-term debt as at November 30, 2021 and February 28, 2021:

Fair Value as at November 30, 2021

The following tables presents the fair value of the Company’s financial liabilities as at May 31, 2022 and February 28, 2022:

Fair Value as at May 31, 2022

Level in the hierarchy

Instruments carried at amortized cost:

Financial liabilities measured at amortized cost:

Long-term debt

Fair Value at February 28, 2021

Fair Value as at February 28, 2022

Level in the hierarchy

Instruments carried at amortized cost:

Financial liabilities measured at amortized cost:

Long-term debt

The fair value of cash, sales tax, tax credits and other receivables, and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity.

Accounts Payable and Accrued Liabilities

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

Accounts payable and accrued liabilities as at May 31, 2022 and February 28, 2022 were as follows:

February 28, 2021

Trade accounts payable

Accrued construction costs

Accrued loss contingency for legal settlement (Note 18)

Accrued employee compensation

2 unchanged sentences

Other accrued liabilities

Joint Venture

On September 15, 2018, the Company, through its wholly-owned subsidiary Loop Innovations, LLC, a Delaware limited liability company, entered into a Joint Venture Agreement (the “Joint Venture Agreement”) with Indorama Ventures Holdings LP, USA, an indirect subsidiary of Indorama Ventures Public Company Limited, to manufacture and commercialize sustainable polyester resin.

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 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.

ILT 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 in ILT.

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 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.

In conjunction with the SK strategic partnership described in Note 13, on June 18, 2021, the Company, Loop Innovations, LLC, a wholly-owned subsidiary of the Company (“Loop Innovations”), Indorama Ventures Holdings LP (“Indorama”) and Indorama Loop Technologies, LLC (the “Indorama Joint Venture Company”) amended (i) the Limited Liability Company Agreement between Loop Innovations, LLC and Indorama Ventures Holdings LP (the “LLC Agreement”), (ii) the Marketing Agreement between the Company and Indorama Loop Technologies, LLC (the “Marketing Agreement”) and (iii) the License Agreement between the Company and the Indorama Joint Venture Company (the “License Agreement”), each dated September 24, 2018 (collectively such amendments, the “Indorama Joint Venture Amendments”).

Under the Indorama Joint Venture Amendments, the Company, Indorama and the Indorama Joint Venture Company agreed to:

terminate Indorama’s right of first refusal under the LLC Agreement over any facility to produce products utilizing any waste-to-resin technology applying the PET depolymerization process of the Company;

amend the non-compete obligations under the LLC Agreement to solely apply to the Company;

limit the scope of the Company’s grant of intellectual property rights and the scope of the exclusivity rights of the Indorama Joint Venture Company for the retrofit of existing facilities under the License Agreement to North America and Europe;

limit the scope of the Indorama Joint Venture Company’s permitted marketing rights under the Marketing Agreement to North America and Europe.

Long‑Term Debt

Long-term debt as of May 31, 2022 and February 28, 2022, was comprised of the following:

February 28, 2022

Investissement Québec financing facility :

3 unchanged sentences

Total Investissement Québec financing facility

Principal amount

current portion

Total term loan, net of current portion

current portion of long-term debt

Long-term debt, net of current portion

Investissement Québec financing facility

On February 21, 2020, the Company received $ 1,727,043 (CDN$2,209,234) from Investissement Québec as the first disbursement of our financing facility, out of a maximum of $ 3,595,998 (CDN$4,600,000) (the “Financing Facility”).

The loan bears interest at 2.36 % and there is 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 $ 1,354,408 based on a discount rate of 5.45 %, which reflected a debt discount of $ 290,714 .

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, $ 35,960 (CDN$46,000) to Investissment 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 $ 1,868,954 (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.

The Company established the fair value of the loan for the first disbursement at $ 1,750,395 based on a discount rate of 3.95 %, which reflected a debt discount of $ 139,390 .

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 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).

The exercise price of the warrants is equal to the higher of (i) $ 11.00 per share and (ii) the ten-day weighted average closing price of Loop Industries shares of common stock on the Nasdaq stock market for the 10 days prior to the issue of the warrants.

The warrants can be exercised immediately upon grant and have a term of three years from the date of issuance.

The loan can be repaid at any time by the Company without penalty.

In connection with the first disbursement of the Financing Facility, the Company issued a warrant (“First Disbursement Warrant”) to acquire 15,153 shares of common stock at a strike price of $ 11.00 per share to Investissement Québec.

The Company determined the fair value of the warrants using the Black-Scholes pricing formula.

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.

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.

The Company determined the fair value of the warrants using the Black-Scholes pricing formula.

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 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 $ 4,560 (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 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 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:

The Company recorded interest expense on the Investissement Québec loan for the three-month period ended May 31, 2022 in the amount of $ 22,208 (2021 – $ 10,882 ) and an accretion expense of $ 17,586 (2021 – $ 10,526 ).

Principal repayments due on the Company’s bank indebtedness over the next five years are as follows:

February 28, 2023

10 unchanged sentences

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.

This was modified to provide a grant of 4,000,000 restricted stock units (“RSUs”) 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 shareholders at the Company’s 2019 annual meeting, of an increase in the number of shares available for grant under the Plan.

4 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 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.

1 unchanged sentence

The closing price of the Company’s common stock on the Nasdaq on April 30, 2020 was $ 7.74 per share.

During the three-month period ended May 31, 2022, 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 fair value of $ 7,740,000 were earned and issuable to Mr.

This amount was reflected as stock-based compensation expense during the three-month period ended May 31, 2022 based on the grant date fair value.

The 1,000,000 vested RSU’s are to be settled annually on October 15 of each year in five equal tranches of 200,000 units.

Stockholders’ Equity

For the nine months ended November 30, 2021

For the period ended May 31, 2022

Number of shares

Balance, February 28, 2022

Issuance of shares upon settlement of restricted stock units

Issuance of shares for cash

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, May 31, 2022

For the period ended May 31, 2021

Number of shares

Balance, February 28, 2021

Issuance of shares for cash

Issuance of shares upon the exercise of warrants

Issuance of shares upon settlement of restricted stock units

Balance, November 30, 2020

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

Balance, May 31, 2021

During the three months ended May 31, 2022, the Company recorded the following common stock transaction:

The Company issued 12,653 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 .

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.

On June 22, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and SK global chemical Co., Ltd, an accredited investor (the “Purchaser”).

Pursuant to the Purchase Agreement, the Company sold to the Purchaser the following securities on July 29, 2021 for an aggregate purchase price of $ 56.5 million (collectively, the “SKGC Investment”):

an aggregate of 4,714,813 shares (the “Shares”) of the Company’s common stock (the “Common Stock”);

warrants to purchase 4,714,813 shares of Common Stock for an exercise price of $ 15.00 (the “First Tranche Warrants”), with an expiration date of the third anniversary of the issue date;

warrants to purchase 2,357,407 shares of Common Stock for an exercise price of $ 20.00 (the “Second Tranche Warrants”), with an expiration date of 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;

warrants to purchase 461,298 shares of Common Stock for an exercise price of $ 11.00 , with an expiration date of June 14, 2022 (the “Third Tranche Warrants,” and together with First Tranche Warrants and the Second Tranche Warrants, the “Warrants”).

The Purchaser may exercise the First Tranche Warrant at any time beginning on January 29, 2022 and the Second Tranche Warrant at any time on or after the later to occur of (i) January 29, 2022 and (ii) the first business day following the First Plant Milestone (as defined in the Second Tranche Warrant) prior to its expiration date.

The Purchaser may exercise the Third Tranche Warrant at any time prior to June 14, 2022.

The table below summarizes the allocation of the aggregate purchase price, net of issuance costs, based on the relative fair-value of the components at the grant date:

First Tranche Warrants

Second Tranche Warrants

Third Tranche Warrants

The fair value of the warrants was determined using the Black-Scholes model.

After the closing of the SKGC Investment, the Purchaser owns approximately 10.0 % of the issued and outstanding Common Stock as of that date.

During the three months ended May 31, 2021, the Company recorded the following common stock transaction:

The Company issued 19,629 shares of the common stock to settle restricted stock units that vested in the period.

Research and Development Expenses

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

Machinery and equipment expenditures

Employee compensation

Research and development expenses for the three-month periods ended May 31, 2022 and 2021 were as follows:

External engineering

Plant and laboratory operating expenses

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

Machinery and equipment expenditures

Employee compensation

External engineering

Machinery and equipment expenditures

Plant and laboratory operating expenses

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 November 30, 2021 and 2020 were as follows:

Professional fees

Employee compensation

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

General and administrative expenses for the three-month periods ended May 31, 2022 and 2021 were as follows:

Professional fees

Employee compensation (1)

_________________

Includes stock-based compensation expense.

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.

During the three-month period ended May 31, 2022, the Company recorded a stock-based compensation expense of $ 7,740,000 related to the achievement of a performance milestone for 1,000,000 RSUs granted to the Company’s CEO, Daniel Solomita (Note 11).

During the three-month period ended May 31, 2021, the Company accounted for RSU forfeitures for an amount of $ 935,837 as a reversal of stock-based compensation.

Share-based Payments

Stock Options

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).

During the three-month period ended May 31, 2022, the Company granted no stock options (2021 – nil), no stock options were forfeited (2021 – nil) or exercised (2021 – nil) and no stock options expired (2021 – 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 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.

There were no new issuances of stock options for the three-month periods ended May 31, 2022 and 2021.

The total number of stock options outstanding as at May 31, 2022 was 1,570,000 (2021 – 1,587,081 ) with a weighted average exercise price of $ 6.87 (2021 – $ 6.81 ), of which 1,336,667 were exercisable (2021 – 1,229,998 ) with a weighted average exercise price of $ 7.65 (2021 – $ 7.25 ).

During the three-month periods ended May 31, 2022 and 2021, stock-based compensation expense attributable to stock options amounted to $ 317,140 and $ 549,318 , respectively, and is included in operating expenses.

Restricted Stock Units

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 ).

During the three-month period ended May 31, 2022, the Company granted 84,861 restricted stock units (“RSUs”) (2021 – 253,758 ) with a weighted average fair value of $ 6.00 (2021 – $ 8.85 ), settled 12,653 RSUs (2021 – 19,629 ) with a weighted average fair value of $ 13.04 (2021 – $ 9.02 ) and no RSUs were forfeited (2021 – 295,524 with a weighted average fair value of $ 7.93 ).

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 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 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 ).

The total number of RSUs outstanding as at May 31, 2022 was 4,090,775 (2021 – 4,149,125 ), of which 1,530,313 were vested (2021 – 696,327 ).

During the three-month periods ended May 31, 2022 and 2021, stock-based compensation attributable to RSUs amounted to $ 8,149,168 and ($ 533,961 ), respectively, and is included in operating expenses.

The net reversal in expenses attributable to RSUs in the three-month period ended May 31, 2021 was due to forfeitures accounted for in the period for a total of $ 935,837 .

Stock-Based Compensation Expense

During the three-month periods ended May 31, 2022 and 2021, stock-based compensation included in research and development expenses amounted to $ 396,495 and $ 395,545 , respectively, and in general and administrative expenses amounted to $ 8,069,813 and ($ 380,188 ), respectively.

The amount recorded in general and administrative expenses for the three-month period ended May 31, 2022 includes $ 7,740,000 related to the achievement of a performance milestone for 1,000,000 RSUs granted to the Company’s CEO, Daniel Solomita (Note 11).

The net reversal in stock-based compensation included in general and administrative expenses in the three-month period ended May 31, 2021 was due to forfeitures accounted for in the period for a total of $935,837.

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 nine-month periods ended November 30, 2021 and 2020:

Number of units

The following table summarizes the continuity of the Company’s Equity Incentive Plan units during the three-month periods ended May 31, 2022 and 2021:

Outstanding, beginning of period

Share reserve increase

Automatic share reserve increase

Units granted

2 unchanged sentences

Outstanding, end of period

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

Exercise Price

Expiration date

July 29, 2024

June 14, 2022

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 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 November 30, 2021 and 2020 are as follows:

Interest on long-term debt

Accretion expense

Loss (gain) on revaluation of foreign exchange contracts

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

Interest and Other Financial Expenses

Interest and other financial expenses for the three-month periods ended May 31, 2022 and 2021 are as follows:

Interest on long-term debt

Accretion expense

Loss (gain) on revaluation of foreign exchange contracts

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

Commitments and Contingencies

Agreement 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 9 months, subject to various terms and conditions.

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

Contingencies

1 unchanged sentence

Loop Industries, Inc., Daniel Solomita, and Nelson Gentiletti , Case No.

7:20-cv-0838 (“Tremblay Class Action”).

The allegations in the complaint claim that the defendants allegedly violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices.

Plaintiff seeks unspecified damages on behalf of a class of purchasers of Loop’s securities between September 24, 2018 and October 12, 2020.

7:20-cv-0838-NSR (“Tremblay Class Action”).

The complaint alleges that the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices.

The complaint seeks unspecified damages on behalf of a class of purchasers of Loop’s securities between September 24, 2018 and October 12, 2020.

On October 28, 2020, the Company and certain of its officers were named as defendants in a second proposed class-action lawsuit filed in the United States District Court for the Southern District of New York, captioned Michelle Bazzini, Individually and on Behalf of All Other Similarly Situated v.

Loop Industries, Inc., Daniel Solomita, and Nelson Gentiletti , Case No.

7:20-cv-09031-UA.

The allegations in this complaint are similar in nature to those made in the Tremblay Class Action.

On January 4, 2021, the United States District Court for the Southern District of New York rendered a stipulation and order granting the consolidation of the two class-action lawsuits filed in New York as In re Loop Industries, Inc.

7:20-cv-09031-NSR.

The complaint allegations are similar in nature to those in the Tremblay Class Action.

On January 4, 2021, the United States District Court for the Southern District of New York consolidated the two proposed class-action lawsuits as In re Loop Industries, Inc.

Securities Litigation , Master File No.

7:20-cv-08538.

Sakari Johansson and John Jay Cappa have been appointed as Co-Lead Plaintiffs and Glancy Prongay & Murray LLP and Pomerantz LLP have been appointed as Co-Lead Counsel for the class.

Plaintiffs served a consolidated amended complaint on February 18, 2021 which alleges defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices.

7:20-cv-08538-NSR.

Sakari Johansson and John Jay Cappa were appointed as Co-Lead Plaintiffs and Glancy Prongay & Murray LLP and Pomerantz LLP were appointed as Co-Lead Counsel for the class.

Plaintiffs served a consolidated amended complaint on February 18, 2021, which alleges that the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices.

The consolidated amended complaint relies on the October 13, 2020 report published by a third party regarding the Company to support their allegations.

1 unchanged sentence

Plaintiffs’ opposition to the motion to dismiss was served on May 27, 2021 and Defendants’ reply in support of the motion to dismiss was served on June 11, 2021.

On March 1, 2022, the Company and the current and former officer defendants entered into an agreement for the settlement of the Tremblay Class Action, and, on March 4, 2022, advised the Court of the agreement to settle.

The agreement, which is subject to certain conditions, including court approval, requires the Company to pay $ 3.1 million to the plaintiff class.

The Company’s total cash contribution to the settlement and outstanding legal fees related to the lawsuit, combined, will be approximately $ 2.52 million.

The remainder of the settlement will be paid by the Company’s D&O insurance carriers.

As a result, the Company recorded a contingency loss of $ 2,519,220 which was included in accounts payable and accrued liabilities at February 28, 2022.

As at May 31, 2022, the amount included in accounts payable and accrued liabilities related to the settlement was $ 2,230,759 .

The accrued loss contingency for legal settlement was reduced by legal costs incurred in the three-month period ended May 31, 2022 of $ 288,461 .

On May 24, 2022, Lead Plaintiffs filed their motion for preliminary approval of the proposed class action settlement.

The motion is pending before the Court.

The settlement agreement does not constitute an admission, concession, or finding of any fault, liability, or wrongdoing by the Company or any defendant.

On October 13, 2020, the Company, Loop Canada Inc.

5 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.

No amounts have been provided for in the consolidated financial statements with respect to these claims.

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 .

The authorization hearing was held on February 24, 2022 and the matter is currently under advisement.

Management believes that this case lacks merit and intends to defend it vigorously.

No amounts have been provided for in the consolidated financial statements with respect to this claim.

Management has not yet determined what effect this lawsuit may have on its financial position or results of operations as it is still in the preliminary stages.

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