What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-13 compared with 2022-01-11 · 146 added, 218 removed, 174 unchanged (68% of the section changed)

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the “Company,” “Loop Industries,” “we,” or “our”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995.

This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the “Company,” “Loop,” “we,” or “our”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology.

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These risks and other factors include, but are not limited to, those listed under “Risk Factors.” Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things:

(i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our financial commitments, (vi) engineering, contracting and building our manufacturing facilities, (vii) our ability to scale, manufacture and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) adverse effects on the Company’s business and operations as a result of increased regulatory, media or financial reporting scrutiny, practices, rumors, or otherwise, (x) disease epidemics and health-related concerns, such as the current outbreak of additional variants of coronavirus (COVID-19), which could result in (and, in the case of the COVID-19 outbreak, has resulted in some of the following) reduced access to capital markets, supply chain disruptions and scrutiny or embargoing of goods produced in affected areas, government-imposed mandatory business closures and resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, and market or other changes that could result in noncash impairments of our intangible assets, and property, plant and equipment, (xi) the outcome of the current SEC investigation or recent class action litigation filed against us, (xii) our ability to hire and/or retain qualified employees and consultants and (xiii) other factors discussed in our subsequent filings with the SEC.

(i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our current and future financial commitments, (vi) engineering, contracting and building our manufacturing facilities, (vii) our ability to scale, manufacture and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) adverse effects on the Company’s business and operations as a result of increased regulatory, media or financial reporting scrutiny, practices, rumors, or otherwise, (x) disease epidemics and health-related concerns, such as the current outbreak of additional variants of coronavirus (COVID-19), which could result in (and, in the case of the COVID-19 outbreak, has resulted in some of the following) reduced access to capital markets, supply chain disruptions and scrutiny or embargoing of goods produced in affected areas, government-imposed mandatory business closures and resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, and market or other changes that could result in noncash impairments of our intangible assets, and property, plant and equipment, (xi) the outcome of the current SEC investigation or recent class action litigation filed against us, (xii) our ability to hire and/or retain qualified employees and consultants and (xiii) other factors discussed in our subsequent filings with the SEC.

Management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available.

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We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Loop Industries is a technology company whose mission is to accelerate the world’s shift towards sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels.

Loop is a technology company whose mission is to accelerate the world’s shift towards sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels.

Loop owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber, including plastic bottles and packaging, carpets and textiles of any color, transparency or condition and even ocean plastics that have been degraded by the sun and salt, to its base building blocks (monomers).

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Loop Industries is contributing to the global movement towards a circular economy by preventing plastic waste and recovering waste plastic for a more sustainable future for all.

The Company is in the planning stages 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.

Industry Background and Market Opportunity

The global annual market demand for PET plastic and polyester fiber will exceed $160 billion by 2022 as projected in the 2018 IHS Polymer Market Report.

The global annual market demand for PET plastic and polyester fiber is expected to exceed $160 billion by 2022 as projected in the 2018 IHS Polymer Market Report.

We believe plastic pollution and climate change continue to be the most persistently covered environmental issues by media and local and global environmental non-governmental organizations.

Some of the main concerns associated with PET are the greenhouse gas (“GHG”) emissions associated with its production from non-renewable hydrocarbons and the length of time it persists in landfills and the natural environment.

There is an increasing demand for action to address the global plastic crisis, which has been characterized by facts provided by leading academic and not-for-profit organizations.

In the last few years, governments in North America, Europe and Asia have been enacting and proposing laws and regulations mandating the use of minimum recycled content in packaging underlying the strength of this issue in the marketplace.

There is an increasing demand for action to address the global plastic crisis, as evidenced by the March 2022 endorsement by 175 nations of a historic resolution at the UN Environmental Assembly to end plastic pollution and forge an international legally binding agreement by the end of 2024.

In the last few years, governments in North America, Europe and Asia have been proposing and enacting laws and regulations mandating the use of minimum recycled content in packaging underlying the strength of this issue in the marketplace.

Consumer brands are seeking a solution to their plastic challenge, and they are taking action.

In recent years we have seen major brands make significant commitments to close the loop on their plastic packaging by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging.

Global consumer goods companies, apparel manufacturers, and retail brands have announced significant public commitments and targets to make the transition to a circular plastic economy, namely:

Global consumer packaged goods companies (“CPG companies”), apparel manufacturers, and retail brands have announced significant public commitments and targets to make the transition to a circular plastic economy, namely:

In January 2018, Danone’s evian® brand bottled spring water committed to a 100% recycled content package by 2025;

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Ikea’s ambition is, that by 2030, all plastic used in their products will be based on renewable or recycled material;

Puma is aiming to increase the amount of recycled materials in their apparel and accessories products and by 2025, 75% of the polyester used in Puma products will be from recycled sources;

By 2025, Lululemon aims to achieve at least 75% sustainable materials for their products, including fibers that are recycled, renewable, regenerative, sourced responsibly and are manufactured using low-resource processes;

Nike has set a 2025 target of diverting 100% of its waste from landfills with at least 80% recycled back into their products and goods.

There is a growing regulatory and policy environment to encourage a reduction in the production of virgin fossil fuel-based plastic and for minimum recycled content in packaging imposed by various governments:

In North America:

Canada has announced a zero-plastic waste by 2030 goal and is targeting all plastic packaging contain 50% recycled content by 2030.

Canada has announced a zero-plastic waste by 2030 goal and is targeting for all plastic packaging to contain 50% recycled content by 2030.

A California law enacted on September 24, 2020 requires that plastic bottles contain at least 15% post-consumer resin by 2022, 25% by 2025 and 50% by 2030.

starting January 2021, the European Union introduced a new tax of €800/ton on non-recycled plastic packaging.

Effective 2022, a new £200/ton tax will apply in the UK to plastic packaging produced or imported into the UK that does not contain at least 30% recycled plastic.

As of January 2021, the European Union introduced a new tax of €800/ton on non-recycled plastic packaging based on the amount of plastic packaging placed on each member state’s market.

Effective April 2022, a new £200/ton tax will apply in the UK to plastic packaging produced or imported into the UK that does not contain at least 30% recycled plastic.

Italy is introducing a tax of €450 per ton on virgin plastic used in manufacture or importation of single use plastic which is expected in January 2023.

Spain has also proposed a tax of €450 per ton on non-reusable plastic packaging with an anticipated start date of January 2023.

France has a stated goals of 100% plastics recycled by 2025 and 77% of beverage bottles to be collected.

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The growing regulatory environment combined with global consumer goods companies, apparel manufacturers, and retail brand commitments for 2025 and 2030 are expected to increase the demand for recycled PET (“rPET”) plastic further.

As explained by the International Bottled Water Association, currently, mechanical recycled PET plastic is produced principally through the conversion of bales of PET bottles.

Mechanical recycled PET plastic is produced principally through the conversion of bales of PET bottles.

The materials have been collected and transported to a materials recovery facility (“MRF”), where they are sorted from other materials, baled, and sent to specific PET recycling facilities.

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We believe our technology can deliver high-purity profitable virgin-quality, 100% recycled PET resin suitable for use in food-grade packaging and polyester fiber.

Our Generation I technology (“GEN I”) is a hydrolysis-based depolymerization technology which yielded purified terephthalic acid (“PTA”) and monoethylene glycol (“MEG”), two common monomers of PET.

As the Company evaluated the transition from the GEN I technology from pilot scale to commercial scale, several challenges involving PTA and MEG purification were identified.

Our Generation I technology (“GEN I”) is a hydrolysis-based depolymerization technology which yields purified terephthalic acid (“PTA”) and monoethylene glycol (“MEG”), two common monomers of PET.

As the Company evaluated the transition of the GEN I technology from pilot scale to commercial scale, several challenges involving PTA and MEG purification were identified.

To overcome the GEN I technology challenges, we embarked on the development of a second generation of our technology.

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The GEN II technology uses only trace amounts of water, eliminates the need for a halogenated solvent, and uses a catalyst at low concentration.

This shift, from producing the monomer PTA to the monomer DMT, was a pivotal moment for Loop Industries.

This shift, from producing the monomer PTA to the monomer DMT, was a pivotal moment for Loop.

We believe that GEN II requires less energy and fewer resource inputs than conventional PET production processes.

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The complete Kemitek report was filed with the SEC by the Company on December 14, 2020.

To protect our technology, we rely on a combination of patents, trademarks, trade secrets, confidentiality agreements and provisions as well as other contractual provisions to protect our proprietary rights, which are primarily our patents, brand names, product designs and marks.

To protect our technology and intellectual property rights, we rely on a combination of patents, trademarks, trade secrets, confidentiality agreements and provisions as well as other contractual provisions to protect our proprietary rights, which are primarily our patents, brand names, product designs and marks.

We have two technology areas, referred to as GEN I technology and the GEN II technology, with patent claims relating to our technology for depolymerizing PET.

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patents, all expected to expire on or around July 2035.

Internationally, we also have issued patents in China, the Eurasian Patent Organization, Europe, Japan, India, the Gulf Cooperation Council, and various other countries, and pending patent applications in Canada, Japan, South Korea, and various other countries all expected to expire, if granted, on or around July 2036, not including any patent term extension.

Internationally, the GEN I technology portfolio includes issued patents in China, the Eurasian Patent Organization, Europe, Japan, India, the Gulf Cooperation Council, and various other countries, and pending patent applications in Canada, Mexico, South Korea, and various other countries all expected to expire, if granted, on or around July 2036, not including any patent term extensions.

The GEN II technology portfolio currently consists of four patent families:

The first has two issued U.S.

patent and a pending U.S.

One family has two issued U.S.

patents and a pending U.S.

application, all expected to expire on or around September 2037.

Internationally, we also have an issued patent in Bangladesh, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted and not including any patent term extension.

An additional aspect of the GEN II technology is claimed in an issued U.S.

patent and a pending U.S.

Internationally, this patent family has issued patents in Bangladesh and in Argentina, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted, not including any patent term extensions.

An additional aspect of the GEN II technology, as claimed in an issued U.S.

patent, an allowed U.S.

application, and a pending U.S.

application, all expected to expire on or around June 2039.

Internationally, we also have an allowed patent application in Bangladesh and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around June 2039, if granted and not including any patent term extension.

A further additional aspect of the GEN II technology is the subject of a pending U.S.

Internationally, we also have pending applications in Brazil and South Africa.

Any patents that would ultimately grant from this application would be expected to expire on or around March 2040, not including any patent term extension.

Another further additional aspect of the GEN II technology is the subject of an allowed U.S.

application, a granted Bangladesh application, a pending U.S.

application, a pending International application, and pending applications in Canada, China, Korea, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, and various other countries.

Any patents that would ultimately grant from these applications would be expected to expire on or around March 2040, if granted and not including any patent term extension.

Loop owns registrations for its trademarks in Canada, the European Union, the United Kingdom, and the U.S.

Loop also has pending applications in Cambodia, Canada, Indonesia, Taiwan, the U.S., and Vietnam.

Government Regulation and Approvals

As we seek to further develop and commercialize our technology, we will be subject to extensive and frequently developing federal, state, provincial and local laws and regulations.

Compliance with current and future regulations, including food packaging regulations, could increase our operational costs.

Our operations require various governmental permits and approvals.

We are in the process of obtaining all necessary permits and approvals for the operation of our business;

however, any of these permits or approvals may be subject to denial, revocation or modification under various circumstances.

Additionally, due to the impact of the COVID-19 pandemic, we may experience delays in obtaining such permits or approvals.

Failure to obtain or comply with the conditions of permits and approvals or to have the necessary approvals in place may adversely affect our operations and may subject us to penalties.

See “Risk Factors” below for additional information.

We believe that if we are successful in addressing food packaging regulations in various countries and economic regions, that the regulatory environment may provide Loop™ PET resin a competitive advantage relative to mechanically recycled alternative resins and virgin PET.

Loop’s PET resin was subjected to independent testing by an external and certified laboratory, which confirmed the PET complies with FDA Regulation 21 CFR § 177.1630 on August 26, 2021, as well as EU Commission Regulation No 10/2011 on July 27, 2021.

These results attest that Loop’s PET is safe for use in food-contact applications, including but not limited to bottled water, carbonated drinks and food trays.

Demonstration of compliance with food-contact requirements follows the No Objection Letter (“NOL”) from the FDA previously granted to Loop in March 2021.

The NOL confirms Loop’s monomers can produce rPET of a purity suitable for food-contact use, provided it meets the applicable requirements of Title 21 of the Code of Federal Regulations.

The monomers used in the PET resin submitted for testing were produced at Loop’s small-scale production facility in Terrebonne, Québec (the “Terrebonne Facility”).

We have received from the European Chemicals Agency a confirmation of registration for our MEG on November 17, 2020, and for our DMT on December 7, 2020.

The registration under the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) Regulation (EC 1907/2006) confirms that our monomers are of a purity equal to what is currently recognized within Europe and entitles us to manufacture/import the monomers into Europe.

It should be noted that MEG and DMT are on the positive list for plastic materials, which means that the two monomers can be used as food contact materials.

On August 31, 2021, Loop also received a NOL from Health Canada, which states that the PET produced by Loop’s recycling process is suitable for use in the manufacture of water bottles and articles for contact with all food types under all conditions of use.

Internationally, this patent family includes issued or allowed patents in Morocco, Algeria, and Bangladesh, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around June 2039, if granted, not including any patent term extensions.

Another aspect of the GEN II technology, which is the subject of a pending U.S.

Internationally, this patent family includes pending applications in Canada, Europe, India, Singapore, Papua New Guinea, Brazil, and South Africa.

Any patents that would ultimately grant from this application would be expected to expire on or around March 2040, not including any patent term extensions.

Another aspect of the GEN II technology, which is the subject of an issued U.S.

patent and a pending U.S.

application, both expected to expire on or around March 2040.

Internationally, this patent family includes an allowed application in Bangladesh and pending applications in Canada, China, Korea, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, and various other countries, all expected to expire on or around March 2040, if granted, not including any patent term extensions.

Loop owns registrations for its trademarks in Cambodia, Canada, the European Union, Taiwan, the United Kingdom, and the U.S.

Loop also has pending applications in Canada, Indonesia, the U.S., and Vietnam.

Supply Agreements with Global Consumer Brands

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Due to the commitments by large global consumer brands to incorporate more recycled content into their product packaging, the regulatory requirements for minimum recycled content in packaging imposed by governments, the virgin-quality of Loop ™ branded PET resin and its marketability to extoll the sustainability credentials of consumer brands that incorporate it, we believe we will be able to sell Loop ™ branded PET resin at a premium price relative to virgin and mechanically recycled PET resin.

We currently have agreements with some of the world’s leading brands to be supplied from our planned commercial facility from our joint venture with Indorama Ventures Holdings LP (“Indorama”) in Spartanburg, South Carolina, including:

Multi-year supply agreement with Danone SA, one of the world’s leading global food and beverage companies.

Danone will purchase 100% sustainable and upcycled Loop™ branded PET for use in brands across its portfolio including evian®, Danone’s iconic natural spring water;

We currently have agreements with some of the world’s leading brands to be supplied from our planned commercial facilities, including:

A new multi-year supply agreement with Danone SA (“Danone”), one of the world’s leading global food and beverage companies announced on May 16, 2022.

Danone will purchase 100% sustainable and upcycled Loop ™ branded PET to be supplied from our planned Infinite Loop ™ manufacturing facility in Bécancour, Québec for use in brands across its portfolio including evian®, Danone’s iconic natural spring water;

Multi-year supply agreement with PepsiCo, one of the largest purchasers of recycled PET plastic, enabling PepsiCo to purchase production capacity and incorporate Loop ™ PET resin into its product packaging;

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Our technology can use PET plastic bottles and packaging of any color, transparency or condition, carpet, clothing and other polyester textiles that may contain colors, dyes or additives, and even PET plastics that have been recovered from the ocean and degraded by exposure to sun and salt.

We believe that our ability to use many materials that mechanical recyclers cannot use is an important advantage of Loop™ PET resin over mechanically recycled PET resin.

We believe that our ability to use many materials that mechanical recyclers cannot use is both an important advantage of Loop ™ PET resin over mechanically recycled PET resin and is additive to the number of PET waste streams that may be recycled.

This also means we are creating a new market for materials that have persistently been leaking out of the waste management system and into our shared rivers, oceans and natural areas.

Commercialization Strategy

Our objective is to achieve global expansion of the technology through a mix of fully owned facilities, strategic partnerships, and licensing agreements.

Our objective is to achieve global expansion of Loop’s technology through a mix of fully owned manufacturing facilities, strategic partnerships, and licensing agreements.

We believe that industrial companies, some of which today may not be in the business of manufacturing PET resin or polyester fiber, will view involvement in Infinite Loop ™ projects as a significant growth opportunity, which may offer attractive economic returns either as Loop manufacturing partners or as licensees of the technology.

We are currently pursuing projects for future commercial production facilities in four regions:

Canada, Europe, Asia and the U.S.

The Infinite Loop ™ greenfield manufacturing technology is the key pillar of our commercialization blueprint.

We believe our technology is at the forefront of the global transition away from fossil fuels and petrochemicals and into the circular economy, where PET plastic and polyester fiber are produced from recycled content.

The Infinite Loop™ technology is being engineered to support the commitment of global consumer brands to achieve a high level of recycled content in packaging.

Infinite Loop™ facilities could be located near large urban centers, where more plastic is being consumed and therefore more waste plastic feedstock is likely available.

We are progressing on the engineering of our full-scale commercial facilities with our engineering partner Worley, a leading global engineering, procurement and construction company.

The engineering philosophy we have adopted is “design one, build many.” This approach allows for the process design package, which has been completed, to be used as the base engineering platform for all future geographical expansion.

We believe this approach allows for a quick execution, speed to market and lends itself well to modular construction.

We entered into a know-how and engineering agreement (the “Chemtex Agreement”) with Chemtex Global Corporation (“Chemtex”) to license the PET resin and polyester fiber manufacturing know-how of INVISTA’s technology and licensing group, INVISTA Performance Technologies (IPT) (“INVISTA”).

The INVISTA know-how will be used for the polymerization of DMT and MEG monomer output from Loop’s depolymerization technology, the result of which is Loop ™ PET resin or polyester fiber made from 100% recycled content.

We are currently pursuing projects for future commercial production facilities in three regions:

North America, Europe and Asia.

The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop ™ PET resin and polyester fiber into their packaging and clothing.

As countries around the globe continue to increase sustainability targets and recycled content mandates, our customers are increasing the use of sustainably produced materials into their products.

The Infinite Loop ™ manufacturing technology is the key pillar of our commercialization blueprint.

The Infinite Loop ™ manufacturing technology allows for waste PET plastic and polyester fiber to be broken down into its base building blocks, monomers DMT and MEG, using Loop’s patented technology.

Once the monomers are purified, they are then repolymerized into PET plastic or polyester fiber using INVISTA know how, which Loop licenses, and Chemtex Global Corporation’s engineering.

The INVISTA polymerization process and the associated designs are historically proven in the commercial production of PET resin and polyester fiber.

We continue to focus on the completion of the Infinite Loop ™ engineering design with an initial target capacity of up to 70,000 metric tons/year.

Permitting, site and regulatory considerations may impact plant capacity for the various projects.

The design includes the integration of our depolymerization technology with INVISTA’s polymerization technology in partnership with Worley.

We intend to use this design when evaluating Infinite Loop ™ facilities in various regions.

Worley has completed the pre-feasibility engineering as part of the planning phase for an Infinite Loop ™ manufacturing facility in the province of Québec.

Worley are proceeding with the feasibility phase of engineering and may also play a role in the future design of larger capacity facilities.

We have completed our basic design package for the Infinite Loop ™ full-scale manufacturing facilities with our engineering partners Worley, BBA and Chemtex, all leading global engineering and construction companies.

The engineering philosophy we have adopted is “design one, build many.” This approach allows for the basic design package, to be used as the base engineering platform for all future geographical expansion.

We believe this approach allows for a quick execution, speed to market and lends itself well to modular construction.

The basic design package has a capacity of up to 70,000 M/T of PET resin output per year.

Permitting, site and regulatory considerations may impact plant capacity.

Our engineering partners may also play a role in the future design of larger capacity facilities.

Our market strategy is to assist global consumer goods brands in meeting their public sustainability commitments by offering packaging or polyester fibers that are made with Loop co-branded, 100% recycled, virgin-quality PET or polyester fibers.

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We are targeting multi-year take or pay offtake agreements for planned Infinite Loop ™ production.

Factors under consideration in determining project economics include pre-feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, logistics, and ramp up, among others.

Factors under consideration in determining project economics include the feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, PET bale index pricing, logistics, and ramp up, among others.

Strategic Partnership with SK geo centric

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(formerly known as SK global chemical Co.

Ltd.) (“SKGC”) intend to form a joint venture with exclusivity to build sustainable PET plastic and polyester fiber manufacturing facilities throughout Asia, which accounts for approximately 60 percent of the world’s population and an estimated 70% of global PET consumption making it the largest market in terms of plastic manufacturing, consumption and waste.

Under the terms of the Memorandum of Understanding (“MOU”) for the proposed joint venture, SKGC will own 51 percent of the joint venture and Loop will own 49 percent.

Ltd.) (“SKGC”) intend to form a joint venture with exclusivity to build sustainable PET plastic and polyester fiber manufacturing facilities throughout Asia, which accounts for approximately 60% of the world’s population and an estimated 70% of global PET consumption making it the largest market in terms of plastic manufacturing, consumption and waste.

Under the terms of the Memorandum of Understanding (“MOU”) for the proposed joint venture, which was entered into in July, 2021, SKGC will own 51 percent of the joint venture and Loop will own 49 percent.

Loop will also receive a recurring annual royalty fee as a percentage of revenue from each facility for the use of its technology.

In addition, Loop and SKGC have concluded a definitive agreement for SKGC to become a strategic investor in Loop.

SKGC purchased 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million.

As of the date of the filing on this Annual Report on Form 10-Q, final joint venture agreements have not been entered into.

In addition, on June 22, 2021, Loop and SKGC concluded a definitive agreement for SKGC to become a strategic investor in Loop.

Under this agreement, SKGC purchased 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million.

The equity investment transaction closed on July 29, 2021.

SKGC was also granted warrants to acquire an additional 461,298 common shares at $11 per share within the next 12 months, 4,714,813 common shares at a price of $15 per share, within the next 3 years, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility.

SKGC owns approximately 10% of Loop’s common shares.

SKGC was also granted warrants to acquire an additional 461,298 common shares at $11 per share with an expiration date of June 14, 2022, 4,714,813 common shares at a price of $15 per share with an expiration date of July 29, 2024, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility.

SKGC currently owns approximately 10% of Loop’s common shares.

In conjunction with the equity investment, Mr.

Jonghyuk Lee, Vice President of SKGC’s Green Business Division, has been appointed to Loop’s Board of Directors.

Jonghyuk Lee, Vice President of SKGC’s Green Business Division, was appointed to Loop’s Board of Directors.

This appointment reflects SKGC’s strategic view of the importance of its investment in Loop, as part of its “Green for Better Life” global strategic vision.

As reported on July 8, 2021 SKGC signed a memorandum of understanding (“MOU”) with the city of Ulsan, South Korea to develop an industrial complex which is planned to include the first Infinite Loop ™ manufacturing facility in Asia.

SK global chemical unveiled on August 31, 2021 its rebrand as SK geo centric, aligning with the company’s goal of transforming into a green company and focusing on eco-friendly products such as recyclable plastics.

SKGC unveiled on August 31, 2021 its rebrand as SK geo centric, aligning with the company’s goal of transforming into a green company and focusing on eco-friendly products such as recyclable plastics.

These announcements further reinforce Loop’s alignment as an important strategic partner for SK geo centric, as we move to commercialize our technology in Asia.

Unveiling of New evian Loop Bottle

On September 20, 2021, Loop, in partnership with iconic global beverage brand evian, unveiled a new “evian Loop” prototype virgin-quality water bottle made from 100 percent recycled content.

On September 20, 2021, Loop, in partnership with iconic global beverage brand evian, unveiled a new “evian Loop” prototype virgin-quality water bottle made from 100% recycled content.

The monomers used to produce the evian Loop bottles were made at the Terrebonne Facility.

Evian plans to begin selling water bottles made from Loop™ PET initially in South Korea during 2022, and subsequently in other global markets.

We expect evian to begin selling water bottles made from Loop ™ PET initially in South Korea during the second half of 2022, and subsequently in other global markets.

The waste plastic used to produce these bottles include polyester fibers from carpets and clothing which are considered unrecyclable and destined for landfill and other natural environments.

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Loop continues to work toward new brand and market introductions with additional consumer goods brand companies.

Technology Due Diligence Report

Loop's strategic partners, Suez and Danone, among others, collectively engaged an independent, globally recognized third-party engineering firm to execute a thorough due diligence and technology validation report.

We believe the final report, which was communicated in May 2022, validated and reinforced the quality, effectiveness, and scalability of Loop Industries’ technology.

Infinite Loop ™ Bécancour, Québec

Our Infinite Loop™ Québec project is aligned with the Government of Canada’s announced zero plastic waste goal by 2030.

We believe the project could be critical infrastructure for customers to meet their 2025 and 2030 sustainability commitments and will assist the Government of Canada with achieving its Canada-wide zero plastic waste target and any proposed additional requirements, such as the requirement that all plastic packaging in Canada containing at least 50% recycled content by 2030.

The Québec Project is currently contemplated as wholly-owned and operated by Loop Industries which allows us to commercialize near our innovation and engineering teams located in Terrebonne, Québec and avoid various COVID-19 restrictions on international travel.

Our Infinite Loop ™ Québec project (the “Quebec Project”) is aligned with the Government of Canada’s announced zero plastic waste goal by 2030.

The Québec Project is currently contemplated as wholly-owned and operated by Loop which allows us to commercialize near our innovation and engineering teams located in Terrebonne, Québec.

We acquired the project site in Bécancour, Québec in May of 2021.

During the quarter ended November 30, 2021, we initiated site preparation on the Bécancour, Québec project land for the planned Infinite Loop™ manufacturing facility.

During the quarter, the Company invested $0.90 million in civil construction costs which included building access roads, landscaping and drainage to ready the site for full construction.

During the year ended February 28, 2022, we completed initial site preparation work on the Bécancour, Québec project land for the planned Infinite Loop ™ manufacturing facility.

During the third and fourth quarters, the Company invested $1.14 million in civil construction costs which included building access roads, landscaping and drainage to ready the site for full construction.

We are currently in the process of negotiating and entering into commercial contracts for the acquisition and fabrication of long lead item equipment to develop the project.

We have committed up to approximately $8.55 million in capital expenditures over the next 13 months for certain long lead item equipment to develop the Bécancour project, and expect to enter into additional commitments to move the project ahead within our targeted construction time frames.

We continue to work with existing and additional customers to sign definitive multi-year contracts for the Québec facility’s commercial output.

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 $8.55 million over the next 9 months, based on certain milestones subject to various terms and conditions, including securing financing for the Quebec Project.

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

On May 16, 2022, we announced a new multi-year agreement to supply Danone brands, including evian water, with Loop ™ branded PET resin made from 100% recycled content.

The resin is to be supplied from the planned Infinite Loop ™ Bécancour manufacturing facility.

We continue to work with existing and additional customers to sign definitive multi-year contracts for the Québec Project’s commercial output.

We are exploring financing options to fully fund the project.

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We announced on September 10, 2020 a strategic partnership with SUEZ GROUP (“Suez”), with the objective to build the first Infinite Loop ™ manufacturing facility in Europe.

With the combination of the Infinite Loop ™ technology and the resource management expertise of Suez, this partnership seeks to respond to growth in demand in Europe from global beverage and consumer goods brand companies for virgin quality PET resin made from 100 percent recycled content.

Together with Suez, we are advancing the project with the priorities being site selection, feedstock sourcing and customer contracts.

We are working with our partner on alignment of government support and finalizing the details of our site selection in Normandy, France in the near term.

On June 16, 2022, Loop, together with Suez and SKGC, announced that SKGC will become an equal partner in the strategic partnership.

The expanded partnership intends to combine SKGC's petrochemical manufacturing experience with SUEZ's resource management expertise and Loop's breakthrough proprietary technology to supply up to 70,000 M/T of virgin quality, 100% recycled PET plastic and polyester fiber to the European market.

The planned Infinite Loop™ facility is contemplated to offer a solution to consumer goods companies which have committed to goals for significantly increased use of recycled content in their products and/or packaging and help to meet the growing demand for recycled PET resin and polyester fiber.

The three companies are reevaluating the optimal location for the planned European Infinite Loop™ manufacturing facility.

We are working with our partners Suez and SKGC on acquiring the preferred project site, alignment of various levels of government support and additional steps for the project which include advancing permitting, site specific engineering, customer offtake contracts, feedstock and financing.

Joint Venture with Indorama for Retrofit

In September 2018 we announced a joint venture with Indorama to retrofit certain PET manufacturing facilities.

We entered into a Limited Liability Company Agreement between (the “LLC Agreement”), a Marketing Agreement (the “Marketing Agreement”) and a License Agreement (the “License Agreement”), with Indorama through our wholly-owned subsidiary Loop Innovations, LLC (“Loop Innovations”).

We entered into a Limited Liability Company Agreement (the “LLC Agreement”), a Marketing Agreement (the “Marketing Agreement”) and a License Agreement (the “License Agreement”), with Indorama through our wholly-owned subsidiary Loop Innovations, LLC (“Loop Innovations”).

Each company has 50/50 equity interest in the joint venture.

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Both joint venture partners currently remain committed to the project and we continue to discuss the project timetable.

In conjunction with the SK strategic partnership mentioned above, on June 18, 2021, the Company, Loop Innovations, Indorama and Indorama Loop Technologies, LLC (the “Indorama Joint Venture Company”) amended (i) the LLC Agreement, (ii) the Marketing Agreement and (iii) the License Agreement (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.

Terrebonne Facility

As part of our plan for the commercialization of future Infinite Loop ™ manufacturing facilities, we enhanced our Terrebonne, Québec pilot plant to become an Infinite Loop ™ small-scale production facility.

This facility is used to deliver initial production volumes to support co-branded market launch campaigns with partners and customers and will also be used to showcase the Infinite Loop ™ end-to-end technology and train operational teams in advance of the commissioning of the Infinite Loop™ full-scale commercial facilities.

We made significant investments in the Terrebonne Facility during the nine-month period ended November 30, 2021.

In particular, we installed and began operation of new distillation columns in this period.

We also advanced testing and production on the two installed depolymerization reactors which substantially increase Terrebonne Facility’s depolymerization capacity and confirm the design and scale-up factor for the feasibility engineering of the planned commercial-scale facilities.

Materials for the launch of the evian loop bottle to be introduced in South Korea in 2022 were produced at the Terrebonne Facility.

We have also previously entered into an agreement to acquire PET polymerization equipment from Chemtex to manufacture of Loop™ branded PET resin from the recycled monomers produced at the Terrebonne Facility and deliver Loop™ branded PET resin to customers.

As part of our plan for the commercialization of future Infinite Loop ™ manufacturing facilities, we enhanced our Terrebonne, Québec pilot plant to become a small-scale PET depolymerization production facility.

In addition to our research and development activities, this facility is used to deliver initial production volumes to support co-branded market launch campaigns with partners and customers and will also be used to showcase the Infinite Loop ™ end-to-end technology and train operational teams in advance of the commissioning of the Infinite Loop ™ full-scale commercial facilities.

We made purchases of $1.89 million in machinery and equipment for the facility in the quarter ended May 31, 2022.

We have completed the planned upgrades at the Terrebonne Facility which have increased its production capacity, giving us the opportunity to further support product campaigns with customers.

In completing the upgrade of the Terrebonne facility to incorporate all key pieces of depolymerization equipment that will be used in the full-scale commercial facilities, we have achieved a key milestone in proving the effectiveness of our process.

Materials for the marketing launch of the prototype evian Loop bottle to be introduced in the South Korean market in calendar 2022 were produced at the Terrebonne Facility.

Also, we have entered into an agreement with On AG to supply Loop ™ PET to be utilized in polyester fiber by the brand.

This initial volume is planned to be supplied in 2022 and manufactured using MEG and DMT monomers produced at the Terrebonne Facility.

The Terrebonne Facility continues to support our customers and partners with R&D and analytical capabilities.

We have also previously entered into an agreement to acquire PET polymerization equipment from Chemtex to manufacture Loop ™ branded PET resin from the recycled monomers produced at the Terrebonne Facility and deliver initial production volume of Loop ™ branded PET resin to customers.

In addition to the capital requirements for our commercialization, we continue to invest in strengthening our intellectual property portfolio, building a core competency in managing strategic relationships and continue enhancing our brand value with activities such as the co-branded marketing launch of an evian Loop bottle.

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Human Capital

Our employees are essential to our success and we are committed to providing a safe, productive, discrimination-free and harassment-free work environment.

All employees are responsible for compliance with our Code of Ethics as well as our health and safety, and anti-harassment policies.

These policies and practices help us foster a workplace environment that promotes inclusion and diversity.

To attract and retain highly capable and innovative employees, we have developed competitive compensation packages and benefits programs.

Our compensation packages include market-competitive pay, healthcare benefits, paid time off and family leave and flexible work schedules.

We also offer equity awards with multi-year vesting provisions to incentivize and reward our employees for long-term corporate performance and promote retention throughout the vesting period.

To support our employees this fiscal year and to promote their health and safety, we encouraged administrative and engineering employees to work remotely.

We provided emergency leave for employees to take care of a child or parent due to COVID-19 disruptions.

As of November 30, 2021, we had 84 employees of which 33 work in research and development and 37 in engineering and operations.

As of May 31, 2022, we had 99 employees of which 35 work in research and development and 46 in engineering and operations.

Results of Operations

The following table summarizes our operating results for the three-month periods ended November 30, 2021 and 2020, in U.S.

Three months ended November 30,

The following table summarizes our operating results for the three-month periods ended May 31, 2022 and 2021, in U.S.

Three months ended May 31,

Research and development

Stock-based compensation

External engineering

Employee compensation

Machinery and equipment expenditures

Plant and laboratory operating expenses

Total research and development

General and administrative

Stock-based compensation

Professional fees

Employee compensation

Total general and administrative

Write-down and impairment of property, plant and equipment

Depreciation and amortization

Interest and other financial expenses

Interest income

Foreign exchange loss (gain)

Total expenses

$ (10,098,243 )

$ (14,170,993 )

Third Quarter Ended November 30, 2021

The net loss for the three-month period ended November 30, 2021 decreased $4.07 million to $10.10 million, as compared to the net loss for the three-month period ended November 30, 2020 which was $14.17 million.

The decrease is primarily due to lower write-down and impairment of property, plant and equipment (“PP&E”) expenses of $5.03 million, offset by increased research and development expenses of $0.56 million and increased general and administrative expenses of $0.37 million.

The $5.03 million decrease in write-down and impairment of PP&E is related to the decision in the third quarter of fiscal 2021 to dedicate the Terrebonne Facility to brand activation, initial customer volumes and Infinite Loop ™ demonstration, research and development activities.

Although the machinery and equipment will continue to be utilized at the Terrebonne Facility as it is an integral part of supporting the commercialization of our technology, application of ASC 730, Research and Development Costs requires machinery and equipment assets to be written off and all future costs associated with the Terrebonne Facility to be recognized as a research and development expense in the consolidated statements of operations and comprehensive loss.

The $0.56 million increase in research and development for the three-month period ended November 30, 2021 was primarily attributable to the following:

$0.56 million increase in employee compensation expenses related to increased headcount to support the Company’s commercialization efforts;

$0.27 million increase in purchases of research and development machinery and equipment at the Company’s small-scale production plant;

$0.15 million increase in plant and laboratory operating expenses.

These increases were partially offset by a $0.64 million decrease in external engineering expenses as a larger proportion of ongoing design work for our Infinite Loop ™ manufacturing process was performed by our in-house engineering team before the start of the feasibility study phase of the engineering design by external engineering.

The $0.37 million increase in general and administrative expenses for the three-month period ended November 30, 2021 was primarily attributable to the following:

$0.71 million increase in insurance expenses mainly due to directors and officers (“D&O”) insurance upon extension of the Company’s policy;

$0.35 million increase in employee compensation expenses.

These increases were partially offset by a $0.51 million decrease in expenses for legal and professional fees due to costs principally associated with the SEC investigation and class action suits described in “Part II, Item 1.

Legal Proceedings” and a $0.27 million decrease in stock-based compensation expenses.

Nine Months Ended November 30, 2021

The following table summarizes our operating results for the nine-month periods ended November 30, 2021 and 2020, in U.S.

Nine months ended November 30,

Research and development

Stock-based compensation

External engineering

Employee compensation

Machinery and equipment expenditures

Stock-based compensation

Plant and laboratory operating expenses

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General and administrative

Stock-based compensation

Professional fees

Employee compensation

Stock-based compensation

Directors and officers insurance

Total general and administrative

Write-down and impairment of property, plant and equipment

Depreciation and amortization

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$ (5,848,575 )

The net loss for the nine-month period ended November 30, 2021 increased $7.50 million to $30.65 million, as compared to the net loss for the nine-month period ended November 30, 2020 which was $23.15 million.

The increase is primarily due to increased research and development expenses of $10.25 million and increased general and administrative expenses of $2.64 million, offset by lower write-down and impairment of property, plant and equipment (“PP&E”) expenses of $5.04 million, lower depreciation and amortization expenses of $0.25 million and a decrease in foreign exchange loss of $0.23 million.

The $10.25 million increase in research and development for the nine-month period ended November 30, 2021 was primarily attributable to the following:

$5.38 million increase in purchases of research and development machinery and equipment.

Starting in Q3 of fiscal 2021, the Company expensed research and development machinery and equipment in accordance with ASC 730, Research and Development Costs, and no longer capitalized these costs.

The timing of this accounting treatment is related to management’s decision to dedicate the Terrebonne Facility to brand activation, initial customer volumes and Infinite Loop ™ demonstration, research and development activities;

$2.17 million increase in employee compensation expenses related to increased headcount to support the Company’s commercialization efforts;

$1.80 million increase in external engineering expenses for ongoing design work for our Infinite Loop ™ manufacturing process;

$0.68 million increase in plant and laboratory operating expenses.

The $2.64 million increase in general and administrative expenses for the nine-month period ended November 30, 2021 was primarily attributable to the following:

$1.67 million increase in insurance expenses mainly due to directors and officers (“D&O”) insurance upon extension of the Company’s policy;

$1.33 million increase in expenses for legal and professional fees due to costs principally associated with the SEC investigation and class action suits described in “Part II, Item 1.

Legal Proceedings”;

$0.78 million increase in employee compensation expenses.

These increases were partially offset by lower stock-based compensation expenses of $1.51 million which are mainly due to forfeitures of RSUs recorded in the nine-month period ended November 30, 2021 for a total of $0.94 million.

The $0.25 million decrease in depreciation and amortization expenses for the nine-month period ended November 30, 2021 is mainly attributable to the write-down of machinery and equipment assets related to the decision in the third quarter of fiscal 2021 to dedicate the the Terrebonne Facility to brand activation, initial customer volumes and Infinite Loop ™ demonstration, research and development activities.

First Quarter Ended May 31, 2022

The net loss for the three-month period ended May 31, 2022 increased $5.85 million to $18.01 million, as compared to the net loss for the three-month period ended May 31, 2021 which was $12.16 million.

The increase is primarily due to increased general and administrative expenses of $7.88 million, partially offset by lower research and development expenses of $1.84 million.

The $7.88 million increase in general and administrative expenses for the three-month period ended May 31, 2022 was primarily attributable to increased stock-based compensation expense of $8.45 million, of which $7.74 million was related to the achievement of a performance milestone for 1,000,000 RSUs following the execution of a supply agreement with a customer.

The increase in stock-based compensation for the three-month period ended May 31, 2022 was also attributable to RSU forfeitures for an amount of $0.94 million accounted for as a reversal of stock-based compensation in the three-month period ended May 31, 2021.

These increases were partially offset by decreased professional fees of $0.83 million.

The $1.84 million decrease in research and development expenses for the three-month period ended May 31, 2022 was primarily attributable to the following:

$1.31 million decrease in external engineering expenses for our basic design package for the Infinite Loop™ full-scale manufacturing facilities, which was completed in the three-month period ended May 31, 2022;

$0.73 million decrease in purchases of machinery and equipment used at the Terrebonne facility.

LIQUIDITY AND CAPITAL RESOURCES

We are a development stage company with no revenues, and our ongoing operations and commercialization plans have been financed primarily by raising new equity capital.

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

To date, we have been successful in raising capital to finance our ongoing operations.

As at November 30, 2021, we had cash and cash equivalents on hand of $54.86 million.

Management actively monitors the Company’s cash balance and short term cash commitments to ensure current operations are funded.

As part of our strategic partnership with SKGC, SKGC purchased 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million.

The strategic equity investment closed on July 29, 2021.

SKGC was also granted options to acquire an additional 461,298 common shares at $11 per share within the next 12 months, 4,714,813 common shares at a price of $15 per share, within the next 3 years, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility.

The company has outstanding warrants to purchase 4,554,865 shares of our common stock in aggregate at $11 per share that expire on June 14, 2022.

If fully exercised, the warrant proceeds would provide the company with $50.10 million of additional liquidity.

There is no assurance that these warrants will be exercised before their expiration.

Although our liquidity position consists of cash and cash equivalents on hand of $32.40 million at May 31, 2022, our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and the Risk Factors section included in Part I, Item 1A of our 2022 Annual Report on Form 10-K.

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.

Management prepared the Company’s consolidated financial statements on a going concern basis in accordance with ASC 205-40, as 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 12 months from the date of issuance of these consolidated financial statements.

Management continues to pursue our growth strategy and is evaluating our financing plans to continue to raise capital to finance the start-up of commercial operations and continue to fund our ongoing operations.

Although our liquidity position consists of cash and cash equivalents on hand of $54.86 million, our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and the Risk Factors section included in Part I, Item 1A of our 2021 Annual Report on Form 10-K.

As reflected in the accompanying consolidated financial statements, we are a development stage company, we have not yet begun commercial operations and we do not have any sources of revenue.

As the Company pursues its commercialization strategy and invests in the Bécancour, Québec project site and other project sites, certain project site improvements and long lead item capital commitments are being incurred and we expect to enter into additional commitments in the future.

Management believes that the Company has sufficient financial resources to fund committed operating and capital expenditures and other working capital needs for at least, but not limited to, the 12-month period from the date of issuance of the November 30, 2021 consolidated financial statements.

There can be no assurance that any future financing will be available or, if available, that it will be on terms that are satisfactory to us.

We have a short-term debt obligation to a Canadian bank in connection with the purchase, in the year ended February 28, 2018, of the land and building where our small-scale production facility, research and development center and corporate offices are located at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4.

On January 24, 2018, the Company obtained a $1,094,434 (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.

We also have a long-term debt obligation to Investissement Québec in connection with a financing facility for the expansion of the Terrebonne Facility up to a maximum of $3,595,997 (CDN$4,600,000).

We received the first disbursement in the amount of $1,727,043 (CDN$2,209,234) on February 21, 2020 and the second disbursement in the amount of $1,868,954 (CDN$2,390,766) on August 26, 2021.

We will require a significant amount of capital to fund our growth as we invest in the planned construction of our Infinite Loop™ manufacturing facility in Bécancour, Québec and our planned commercial facilities in Europe, Asia and Spartanburg, South Carolina, as well as additional research and development.

In addition to our cash on hand, we may also raise additional capital through equity offerings or debt financings, government incentives, as well as through collaborations or strategic alliances to execute our growth strategy.

Such financing will depend on many factors, including actual construction costs of the planned commercial facilities, potential delays in our supply chain, and our ability to secure customers, which may not be available on acceptable terms, if at all.

If we are unable to raise additional capital when required, our business, financial condition and results of operations would be adversely affected.

As the Company pursues its commercialization strategy and invests in the Bécancour, Québec project site and other projects, certain project site improvements and long lead capital commitments are being incurred and we expect to enter into additional commitments in the future, provided we obtain the required funding.

In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment in connection with the planned construction of our Infinite Loop™ manufacturing facility in Bécancour, Québec for up to $8.55 million over the next 9 months, based on certain milestones subject to various terms and conditions, including securing financing for our Infinite Loop™ manufacturing facility in Bécancour, Québec.

Pursuant to the agreement, the Company has paid a cash deposit of $2.14 million.

We have a long-term debt obligation to Investissement Québec in connection with a financing facility for the expansion of the Terrebonne Facility up to a maximum of $3.64 million (CDN$4.60 million).

We received the first disbursement in the amount of $1.75 million (CDN$2.21 million) on February 21, 2020 and the second disbursement in the amount of $1.89 million (CDN$2.39 million) on August 26, 2021.

There is a 36-month moratorium on both capital and interest repayments as of the first disbursement date.

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The loan bears interest at 2.36%.

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

The warrants were issued at a price per share 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.

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Summary of Cash Flows

A summary of cash flows for the nine months ended November 30, 2021 and 2020 was as follows:

Nine Months Ended November 30,

A summary of cash flows for the three months ended May 31, 2022 and 2021 was as follows:

Three Months Ended May 31,

Net cash used in operating activities

2 unchanged sentences

Net cash used in investing activities

Net cash from financing activities

Net cash used by financing activities

Effect of exchange rate changes on cash

Net increase in cash

Net (decrease) increase in cash

$ (11,660,690 )

$ (17,184,889 )

Net Cash Used in Operating Activities

During the nine-month period ended November 30, 2021, we used $32.83 million in operations compared to $14.54 million during the nine-month period ended November 30, 2020.

The increase over each year is mainly due to increased spending on upgrades to the Terrebonne Facility, engineering and operating expenses as we advance on commercialization activities of Loop’s technology, the reduction of accounts payable and accrued liabilities of $3.59 compared to an increase of $1.69 in the nine-month period ended November 30, 2021 and D&O insurance payments in the amount of $3.77 million compared to $1.43 in the nine-month period ended November 30, 2020.

As discussed above in the Results of Operations, the main increases in expenses were engineering fees, research and development machinery and equipment, employee compensation and professional fees.

During the three-month period ended May 31, 2022, we used $11.58 million in operations compared to $12.41 million during the three-month period ended May 31, 2021.

The year-over-year decrease is mainly due to decreased operating expenses as we have completed the upgrade of the Terrebonne Facility and our basic design package for the Infinite Loop™ full-scale manufacturing facilities.

Net Cash Used in Investing Activities

During the nine months ended November 30, 2021, the Company made investments of $5.02 million in property, plant and equipment as compared to $1.58 million for the nine months ended November 30, 2020, primarily in connection with the purchase for $4.82 million of a parcel of Land in Bécancour, Québec for the construction of our first Infinite Loop™ manufacturing facility.

The size of this parcel of land exceeds that needed for the construction of the Infinite Loop™ manufacturing facility and a portion of the land is therefore available for sale.

For additional information on the land held for sale, please refer to Note 5 of the attached interim condensed consolidated financial statements.

During the nine months ended November 30, 2021, the Company made investments in intangible assets of $0.35 million as compared to $0.16 million for the nine months ended November 30, 2020, particularly in its GEN II patent technology in the United States and around the world.

During the nine months ended November 30, 2020, the Company also made an additional contribution of $0.65 million to Indorama Loop Technologies, LLC, the joint venture with Indorama Ventures Holdings LP, USA.

Net Cash Provided by Financing Activities

During the nine months ended November 30, 2021, we raised $56.5 million through a private offering of common stock, together with warrants, in the net amount of $56.1 million.

We also made payments totaling $0.04 million against our long-term debt.

On August 26, 2021, we received $1.87 million (CDN$2.40 million) in connection with the credit facility from Investissement Québec to finance capital expenses incurred for the expansion of the Terrebonne Facility.

There is a moratorium on both capital and interest repayments until February 2023.

During the nine months ended November 30, 2020, the Company sold 2,087,000 shares of its common stock in an underwritten offering at an offering price of $12.75 for total net proceeds of $25.00 million.

In the same period, the Company also received net proceeds of $1.65 million upon the exercise of warrants for 190,529 shares of its common stock.

During the nine months ended November 30, 2020, we repaid $0.03 million of long-term debt.

During the three months ended May 31, 2022, we made investments in intangible assets of $0.07 million, particularly in our patent technology in the United States and around the world.

During the three months ended May 31, 2021, we made investments of $4.92 million in property, plant and equipment, primarily in connection with the purchase for $4.90 million of a parcel of Land in Bécancour, Québec for the construction of our first Infinite Loop™ manufacturing facility.

During the three months ended May 31, 2021, we made investments in intangible assets of $0.05 million, particularly in its patent technology in the United States and around the world.

Net Cash (Used) Provided by Financing Activities

During the three months ended May 31, 2021, we repaid $0.01 million of long-term debt.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

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 2. Management’s Discussion and Analysis