What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-12 compared with 2022-07-13 · 272 added, 107 removed, 353 unchanged (52% of the section changed)

1 unchanged sentence

Loop Industries, Inc.

Three months ended May 31, 2022

Three and Six months ended August 31, 2022

Index to the Unaudited Interim Condensed Consolidated Financial Statements

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)

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

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

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

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

Notes to the condensed consolidated financial statements (Unaudited)

1 unchanged sentence

Condensed Consolidated Balance Sheets

August 31, 2022

February 28, 2022

Current assets

1 unchanged sentence

Sales tax, tax credits and other receivables (Note 3)

Inventories (Note 4)

Prepaid expenses and deposits (Note 5)

19 unchanged sentences

Additional paid-in capital

Additional paid-in capital – Warrants

Additional paid-in capital – Warrants (Note 18)

Accumulated deficit

7 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended

Three Months Ended August 31

Six Months Ended August 31

Research and development (Note 14)

General and administrative (Notes 14)

General and administrative (Note 15)

Depreciation and amortization (Notes 7 and 8)

1 unchanged sentence

Interest income

Foreign exchange loss

Foreign exchange loss (gain)

Total expenses

1 unchanged sentence

( 8,392,416 )

Other comprehensive loss -

( 25,711,105 )

( 20,549,780 )

Other comprehensive income (loss)

Foreign currency translation adjustment

Comprehensive loss

Comprehensive income (loss)

$ ( 8,117,670 )

$ ( 8,746,129 )

Net Loss per share

$ ( 26,128,375 )

$ ( 20,696,678 )

Loss per share

Basic and Diluted

3 unchanged sentences

Loop Industries, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

Three months ended May 31, 2021

Preferred stock

Accumulated Other

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended August 31, 2021

Series A preferred stock

par value $0.0001

Comprehensive

Number of Shares

Capital – Warrants

Paid-in Capital

Paid-in Capital - Warrants

Accumulated Deficit

Stockholders’ Equity

Balance, February 28, 2021

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Balance, May 31, 2021

$ 113,663,032

$ ( 101,819,334 )

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

Issuance of warrants for financing facility (Note 11)

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

Stock options issued for services (Note 16)

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

Restricted stock units issued for services (Note 16)

Foreign currency translation

1 unchanged sentence

( 8,392,416 )

Balance, August 31, 2021

$ 149,008,231

$ ( 110,211,750 )

$ ( 153,488 )

Three Months Ended August 31, 2022

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, May 31, 2022

1 unchanged sentence

$ ( 152,588,865 )

Three months ended May 31, 2022

Preferred stock

Accumulated Other

$ ( 100,799 )

Expiration of warrants (Note 18)

( 9,809,032 )

Stock options issued for services (Note 16)

Restricted stock units issued for services (Note 16)

Foreign currency translation

( 7,705,166 )

Balance, August 31, 2022

$ 169,300,723

$ ( 160,294,031 )

$ ( 513,303 )

See accompanying notes to the condensed consolidated financial statements.

Loop Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Six Months Ended August 31, 2021

Series A preferred stock

par value $0.0001

Comprehensive

Number of Shares

Capital – Warrants

Paid-in Capital

Paid-in Capital - Warrants

Accumulated Deficit

Stockholders’ Equity

Accumulated Other Comprehensive (Loss)

Total Stockholders' Equity

Balance, February 28, 2021

$ 113,662,677

$ ( 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)

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

4 unchanged sentences

( 20,549,780 )

Balance, May 31, 2022

Balance, August 31, 2021

$ 149,008,231

$ ( 110,211,750 )

$ ( 153,488 )

Six Months Ended August 31, 2022

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, February 28, 2022

$ 150,396,704

$ ( 134,582,926 )

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

Expiration of warrants (Note 18)

( 9,809,032 )

Stock options issued for services (Note 16)

Restricted stock units issued for services (Note 16)

Foreign currency translation

( 25,711,105 )

Balance, August 31, 2022

$ 169,300,723

$ ( 160,294,031 )

$ ( 513,303 )

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended May 31,

Six Months Ended August 31,

Cash Flows from Operating Activities

7 unchanged sentences

Sales tax and tax credits receivable (Note 3)

Prepaid expenses (Note 4)

Inventory (Note 4)

Prepaid expenses and deposits (Note 5)

( 1,146,544 )

1 unchanged sentence

( 2,798,922 )

( 2,957,577 )

Net cash used in operating activities

2 unchanged sentences

Cash Flows from Investing Activities

Additions to property, plant and equipment (Note 6)

Additions to property, plant and equipment (Notes 6 and 7)

( 5,010,982 )

3 unchanged sentences

Cash Flows from Financing Activities

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

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

Repayment of long-term debt (Note 11)

1 unchanged sentence

Effect of exchange rate changes

Net decrease in cash

( 11,660,690 )

Net increase (decrease) in cash

( 21,061,036 )

7 unchanged sentences

Loop Industries, Inc.

Three Months Ended May 31, 2022 and 2021

Three and Six Months Ended August 31, 2022 and 2021

Notes to the Condensed Consolidated Financial Statements

The Company and Basis of Presentation

The Company, Basis of Presentation

Loop Industries, Inc.

1 unchanged sentence

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 currently in the development stage with limited revenues.

Basis of Presentation

10 unchanged sentences

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

The results for the three 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 results for the three- and six-month periods ended August 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.

1 unchanged sentence

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.

From inception to August 31, 2022, the Company has been in the development stage with limited 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.

As at August 31, 2022, the Company’s available liquidity was $ 25.67 million, consisting of cash and cash equivalents of $ 23 .00 million and an undrawn senior loan facility from a Canadian bank.

Additionally, the Company sold a portion of excess land on September 15, 2022 for net cash proceeds of $ 8.69 million as described in Note 21.

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.

4 unchanged sentences

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.

The Company’s ability to successfully commercialize its business and generate future revenues depends on whether the Company can obtain the necessary financing through a combination of the issuance of debt, equity, and/or joint ventures and/or government incentive programs.

The Company has committed a portion of its cash resources for certain long lead equipment in connection with the Bécancour project.

The Company may enter into additional commitments to move the project ahead within its 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.

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

Failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on the Company’s current operation and on its ability to execute its business plan.

Revenue recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).

This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company enters into contracts with customers to sell Loop™ PET resin.

These contracts include a single performance obligation, which is the delivery of Loop™ PET resin, and the transaction price is a fixed rate per delivered volume.

Revenue is recognized when control of the product transfers to the customer, which is when product is delivered to the customer location.

Shipping and handling costs are accounted for as a fulfillment cost.

Use of estimates

14 unchanged sentences

The assumptions used in the Black-Scholes model could materially affect stock-based compensation expenses recorded in the current and future periods.

Inventories are stated at the lower of cost or net realizable value using the average cost method.

Inventory cost includes direct labor, cost of raw materials and production overhead.

The Company separates its inventories into three main categories:

raw materials, work in process, and finished goods.

The raw materials category includes goods used in the production process that have not yet entered the production process at the balance sheet date and mainly comprises chemicals and other process consumables.

The work in process category includes goods that are in the production process at the balance sheet date and mainly comprises monomers that have not yet been polymerized into Loop™ branded PET resin.

The finished goods category includes goods that have completed the production process and mainly comprises Loop™ branded PET resin.

Research and development expenses

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.

Research and development expenses relate primarily to process development and design, producing initial volumes of product for customers, 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.

Research and development costs are presented net of related tax credits and government grants.

Assets held for sale

25 unchanged sentences

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

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 ).

For the six-month periods ended August 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 August 31, 2022, the potentially dilutive securities consisted of 1,570,000 outstanding stock options (2021 – 1,587,081 ), 4,128,718 outstanding restricted stock units (2021 – 4,170,278 ), and 7,104,553 outstanding warrants (2021 – 11,684,418 ).

Recently adopted accounting pronouncements

4 unchanged sentences

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

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

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

Sales Tax, Tax Credits and Other Receivables

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

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

August 31, 2022

February 28, 2022

Investment tax credits

Research and development tax credits

Other receivables

Inventories as at August 31, 2022 and February 28, 2022 were as follows:

August 31, 2022

February 28, 2022

Work in process

Finished goods

Raw materials

Prepaid Expenses and Deposits

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

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

August 31, 2022

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.

As at August 31, 2022, the Company had $ 3,917,877 (February 28, 2022 – $ 2,801,680 ) of non-refundable cash deposits on machinery and equipment.

$ 510,727 (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 $ 3,407,150 (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

Assets 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 excess land has been classified as an asset held for sale, with a carrying value at August 31, 2022 of $ 3,282,515 , on the basis that management was committed to a plan to dispose of the excess land and at the balance sheet date, and considered the sale to be probable within one year.

As disclosed in Note 21, the Company sold approximately two thirds of the land held for sale on September 15, 2022 for cash proceeds of $ 8,694,989 .

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.

5 unchanged sentences

Property, Plant and Equipment

As at May 31, 2022

Property, plant and equipment as at August 31, 2022 and February 28, 2022 were as follows:

As at August 31, 2022

Accumulated depreciation, write-down and impairment

2 unchanged sentences

Building and Land Improvements

( 1,020,106 )

Office equipment and furniture

7 unchanged sentences

$ ( 1,251,600 )

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.

Depreciation expense for the three- and six-month periods ended August 31, 2022 amounted to $ 117,486 and $ 236,488 , respectively (2021– $ 121,733 and $ 236,790 , 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.

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

Intangible Assets

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.

Intangible assets as at August 31, 2022 and February 28, 2022 were $ 1,081,704 and $ 1,013,801 , respectively.

During the six-months periods ended August 31, 2022 and 2021, we made additions to intangible assets of $ 141,404 and $ 90,591 , respectively.

Amortization expense for the three- and six-month periods ended August 31, 2022 amounted to $ 20,615 and $ 40,153 , respectively (2021 - $ 19,036 and $ 358,904 , 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 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

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

Fair Value as at August 31, 2022

Carrying Amount

Level in the hierarchy

2 unchanged sentences

Fair Value as at February 28, 2022

Carrying Amount

Level in the hierarchy

1 unchanged sentence

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.

The fair value of long-term debt is determined primarily based on discounted cash flow analyses using observable market inputs from debt with similar duration and credit default expectations (Level 2).

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

Accounts Payable and Accrued Liabilities

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

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

August 31, 2022

February 28, 2022

6 unchanged sentences

Long‑Term Debt

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

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

August 31, 2022

February 28, 2022

7 unchanged sentences

Investissement Québec financing facility

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:

The Company recorded interest expense on the Investissement Québec loan for the three- and six-month periods ended August 31, 2022 in the amount of $ 22,028 and $ 44,237 respectively (2021 – $ 11,512 and $ 22,394 ) and an accretion expense of $ 17,684 and $ 35,270 respectively (2021 – $ 11,046 and $ 21,573 ).

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

February 28, 2023

3 unchanged sentences

February 28, 2027

Credit facility from a Canadian bank

On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank.

The Credit Facility allows for borrowings of up to $ 2,669,514 (CDN $3,500,000) in aggregate principal amount and provides for a two-year term.

The Credit Facility is secured by the Company’s Terrebonne, Québec property and is subject to a minimum equity covenant, tested quarterly.

All borrowings under the Credit Facility will bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0 %.

The Company is subject to a guarantee of the liabilities of Loop Canada Inc.

As at August 31, 2022 the Credit Facility was undrawn.

Related Party Transactions

18 unchanged sentences

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.

This amount was reflected as stock-based compensation expense during the six-month period ended August 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 period ended May 31, 2022

For the period ended August 31, 2022

Number of shares

1 unchanged sentence

Issuance of shares upon settlement of restricted stock units

Balance, May 31, 2022

For the period ended May 31, 2021

Balance, August 31, 2022

For the period ended August 31, 2021

Number of shares

1 unchanged sentence

Issuance of shares upon settlement of restricted stock units

Balance, May 31, 2021

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

Issuance of shares for cash

Balance, August 31, 2021

During the six-month period ended August 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.

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

During the six-month period ended August 31, 2021, the Company recorded the following common stock transactions:

The Company issued 31,660 shares of the common stock to settle restricted stock units that vested in the period.

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

Research and Development Expenses

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

External engineering

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

August 31, 2022

August 31, 2021

Machinery and equipment expenditures

Employee compensation

External engineering

Plant and laboratory operating expenses

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

August 31, 2022

August 31, 2021

Machinery and equipment expenditures

Employee compensation

External engineering

Plant and laboratory operating expenses

General and Administrative Expenses

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

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

August 31, 2022

August 31, 2021

Professional fees

Employee compensation

_________________

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

August 31, 2022

August 31, 2021

Professional fees

Employee compensation (1)

Includes stock-based compensation expense.

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.

During the six-month period ended August 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 (Note 12).

During the six-month period ended August 31, 2021, the Company recorded RSU forfeitures for an amount of $ 935,837 as a net reversal of stock-based compensation.

Share-based Payments

Stock Options

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).

During the three-month period ended August 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).

During the six-month period ended August 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-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.

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

The total number of stock options outstanding as at August 31, 2022 was 1,570,000 (2021 – 1,587,081 ) with a weighted average exercise price of $ 6.87 (2021 - $ 6.81 ), of which 1,361,667 were exercisable (2021 – 1,278,748 ) with a weighted average exercise price of $ 7.73 (2021 – $ 7.30 ).

During the three-month periods ended August 31, 2022 and 2021, stock-based compensation expense attributable to stock options amounted to $ 312,460 and $ 343,653 , respectively, and is included in operating expenses.

During the six-month periods ended August 31, 2022 and 2021, stock-based compensation expense attributable to stock options amounted to $ 629,600 and $ 892,971 , respectively, and is included in operating expenses.

Restricted Stock Units

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 ).

During the three-month period ended August 31, 2022, the Company granted 66,744 restricted stock units (“RSUs”) (2021 – 33,184 ) with a weighted average fair value of $ 4.05 (2021 – $ 13.05 ), settled no RSUs (2021 – 12,031 , weighted average fair value of $ 8.48 ), and 28,801 RSUs were forfeited (2021 – nil) with a weighted average fair value of $ 8.68 (2021 – nil).

During the six-month period ended August 31, 2022, the Company granted 151,605 restricted stock units (“RSUs”) (2021 – 286,942 ) with a weighted average fair value of $ 5.14 (2021 – $ 9.41 ), settled 12,653 RSUs (2021 – 31,660 ) with a weighted average fair value of $ 13.04 (2021 – $ 8.82 ), and 28,801 RSUs were forfeited (2021 – 295,524 ) with a weighted average fair value of $ 8.68 (2021 – $ 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 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.

The total number of RSUs outstanding as at August 31, 2022 was 4,128,718 (2021 – 4,170,278 ), of which 1,563,497 were vested (2021 – 725,313 ).

During the three-month periods ended August 31, 2022 and 2021, stock-based compensation attributable to RSUs amounted to $ 316,220 and $ 379,165 , respectively, and is included in expenses.

During the six-month periods ended August 31, 2022 and 2021, stock-based compensation attributable to RSUs amounted to $ 8,465,388 and ($ 173,238 ), respectively, and is included in operating expenses.

The net reversal in expenses attributable to RSUs in the six-month period ended August 31, 2021 is due to forfeitures recorded in the period for a total of $ 935,837 .

Stock-Based Compensation Expenses

During the three-month periods ended August 31, 2022 and 2021, stock-based compensation included in research and development expenses amounted to $ 319,046 and $ 394,527 , respectively, and in general and administrative expenses amounted to $ 309,633 and $ 313,282 , respectively.

During the six-month periods ended August 31, 2022 and 2021, stock-based compensation included in research and development expenses amounted to $ 715,541 and $ 790,072 , respectively, and in general and administrative expenses amounted to $ 8,379,448 and ($ 70,338 ), respectively.

The amount recorded in general and administrative expenses for the six-month period ended August 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 (Note 12).

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

Equity Incentive Plan

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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 three-month periods ended May 31, 2022 and 2021:

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

Number of units

Outstanding, beginning of period

Automatic share reserve increase

Share reserve increase

Units granted

2 unchanged sentences

Outstanding, end of period

During the six-month period ended August 31, 2022, warrants to purchase 4,554,865 shares of our common stock in aggregate with an exercise price of $ 11 .00 expired.

During the six-month period ended August 31, 2021, the Company issued warrants to purchase 7,550,698 shares of our common stock in aggregate with a weighted average exercise price of $ 16.32 .

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

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

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

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 start of construction of the JV’s first facility, (B) 18 months after the date both parties have approved the basic design package to be used for the JV facilities, provided that the agreements to form the JV have not been executed by that date, and (C) the third anniversary of the date that both parties approved the basic design package to be used for the JV facilities, provided that the start of construction of the JV’s first facility has not occurred as of such date.

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 and other finance costs for the three-month periods ended August 31, 2022 and 2021 are as follows:

Interest on long-term debt

Accretion expense

Interest and other finance costs for the six-month periods ended August 31, 2022 and 2021 are as follows:

Interest on long-term debt

Accretion expense

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 .

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 , subject to various terms and conditions, including fabrication timelines and equipment inspection.

Pursuant to the agreement, the Company has paid cash deposits of $ 3,407,150 .

Contingencies

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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 .

As at August 31, 2022, the amount included in accounts payable and accrued liabilities related to the settlement was $ 2,231,606 .

The accrued loss contingency for legal settlement was reduced by legal costs incurred in the six-month period ended August 31, 2022 of $ 287,614 .

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.

On September 19, 2022, the Court entered an order preliminarily approving the settlement and providing for notice.

The Court scheduled the settlement hearing for January 5, 2023.

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

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The Application for authorization of a class action and for authorization to bring an action pursuant to section 225.4 of the Québec Securities Act (“the Application”) was filed by an individual shareholder on behalf of himself and a class of buyers who purchased our securities during the “Class Period” (not defined).

Plaintiff alleges that throughout the Class Period, the defendants allegedly made false and/or misleading statements and allegedly failed to disclose material adverse facts concerning the Company’s technology, business model, operations and prospects, thus causing the Company’s stock price to be artificially inflated and thereby causing plaintiff to suffer damages.

Plaintiff seeks unspecified damages stemming from losses he claims to have suffered as a result of the foregoing.

Plaintiff alleged that throughout the Class Period, the defendants allegedly made false and/or misleading statements and allegedly failed to disclose material adverse facts concerning the Company’s technology, business model, operations and prospects, thus causing the Company’s stock price to be artificially inflated and thereby causing plaintiff to suffer damages.

Plaintiff sought unspecified damages stemming from losses he claimed to have suffered as a result of the foregoing.

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

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.

The authorization hearing was held on February 24, 2022.

In a judgment dated July 29, 2022, the Superior Court of Québec dismissed the Application for authorization of a class action and for authorization to bring an action pursuant to section 225.4 of the Québec Securities Act.

The period to appeal the judgment ends on October 26, 2022.

Subsequent Events

Sale of asset held for sale

On September 15, 2022, the Company sold approximately two thirds of the land classified as an asset held for sale for cash proceeds of $ 8,694,989 (CDN $ 11,400,000 ).

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