What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-01-12 compared with 2022-10-12 · 96 added, 97 removed, 277 unchanged (41% of the section changed)

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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 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 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 ongoing SEC investigation or the 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 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 toward 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).

The monomers are filtered, purified and polymerized to create virgin-quality Loop ™ branded PET resin and polyester fiber suitable for use in food-grade packaging, thus enabling our customers to meet their sustainability objectives.

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.

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, thus enabling our customers to meet their sustainability objectives.

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

The Company is in the planning stages of pursuing the construction of Infinite Loop™ commercial scale facilities.

Loop is currently engaged in discussions to secure financing for its investments in the various planned manufacturing facilities and the sequencing of the manufacturing facilities will be determined in conjunction with the outcome of the company’s financing discussions.

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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;

Puma is aiming to increase the amount of recycled materials in its apparel and accessories products and have announced a 2025 goal of having at least 75% of the polyester used in Puma products 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;

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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.

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

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.

Effective April 2022, a new £200/ton tax applies 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.

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The bales are broken and sorted to remove any non-PET materials.

The PET is then ground and put through a separation process which separates the PET from the bottle cap and label materials.

The PET is then ground and put through a separation process which separates the PET from non-PET materials such as bottle caps and labels.

Clean PET flake is then further processed depending on its intended end market.

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

Internationally, this patent family includes issued or allowed patents in Morocco, Argentina, 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 an allowed U.S.

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 an issued U.S.

patent and a pending U.S.

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

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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, the U.S., and Vietnam.

Loop also has pending applications in Canada, Japan, South Korea, the U.S., and Vietnam.

Supply Agreements with Global Consumer Brands

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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 Danone SA (“Danone”), one of the world’s leading global food and beverage companies, enabling Danone to purchase 100% sustainable and upcycled Loop ™ branded PET 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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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 three regions:

North America, Europe and Asia.

On December 22, 2022, we announced that we will for now focus our commercialization strategy on our planned joint venture projects with SK geo centric Co., Ltd (“SKGC”) in Asia and Europe.

These projects have a lower requirement for Loop equity investment and higher return on capital, and leverage SKGC’s engineering and operational infrastructure.

In addition, the joint venture projects will provide Loop with an annual technology licensing fee.

SKGC is committed to commercializing Loop’s technology as the underpinning of its sustainable plastics strategy.

Loop is working collaboratively with SKGC to put in place a financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the first Asian manufacturing facility in Ulsan, South Korea, which is planned to break ground in 2023.

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.

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

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.

We have completed our basic design package for the Infinite Loop ™ full-scale manufacturing facilities.

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.

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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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Strategic Partnership with SK geo centric

Loop and SK geo centric Co., Ltd.

(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% 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.

Loop and 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.

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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.

Infinite Loop ™ Bécancour, Québec

Our Infinite Loop ™ Québec project (the “Quebec 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 contain at least 50% recycled content 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 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.

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, 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.

Alternatives under exploration include incentive and financing programs supported by, or in partnership with, various levels of government.

The site offers attractive logistics being located on the St-Lawrence river and access to rail.

The site size exceeds our project needs and the Company has been pursuing a sale of the excess land that will not be needed for the construction of its manufacturing facility.

On September 15, 2022, the Company sold a portion of the excess land for net proceeds of $8.69 million (CDN $11.4 million).

Loop and SKGC are collaborating closely with SK ecoengineering (“SKEE”), a subsidiary of SK group, on providing the engineering related to the construction of the planned Infinite Loop ™ manufacturing facility in Ulsan, South Korea.

SKEE is an experienced EPC contractor with a proven track record in the construction of large scale projects internationally.

Infinite Loop ™ Europe

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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.

Infinite Loop ™ Québec

We acquired a project site in Bécancour, Québec in May of 2021 for $4.4 million (CDN $5.9 million), a portion of which was sold on September 15, 2022 for net proceeds of $8.56 million (CDN $11.4 million).

On December 22, 2022, we announced that our commercialization strategy will now focus on our planned projects with SKGC in Asia and Europe and that we had entered into an agreement to sell all of our remaining property in Bécancour, Quebec for $13.70 million (CDN $18.5 million).

The sale transaction is expected to close on February 24, 2023, subject to final due diligence and fulfillment of certain customary closing conditions.

Although the company is currently focusing on developing the planned joint venture facilities in Asia and Europe, a future facility in Quebec remains an option at the appropriate time, and possible alternative locations for such a facility are available.

We are continuing to explore financing options to fully fund the project.

Alternatives under exploration include incentive and financing programs supported by, or in partnership with, various levels of government.

A future facility in Quebec would be aligned with the Government of Canada’s announced zero plastic waste goal by 2030.

Technology Due Diligence Report

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

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.

Evian began selling water bottles made from Loop ™ PET in South Korea in October 2022.

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.

Terrebonne Facility Delivery of Loop ™ PET

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 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 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, such as the evian Loop bottle.

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.

In the quarter ended August 31, 2022 Loop reported first revenues of $0.14 million from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, which included On AG.

We previously entered into an agreement with On AG to supply Loop ™ PET to be utilized in polyester fiber by the brand, pursuant to which Loop ™ PET resin was delivered in the quarter ended August 31, 2022.

We completed the planned upgrades at the Terrebonne Facility which have given us the opportunity to support product campaigns with customers, such as the evian Loop bottle.

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 achieved a key milestone in proving the effectiveness of our process.

In the nine-month period ended November 30, 2022 Loop reported first revenues of $0.16 million from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, which included On AG.

We previously entered into an agreement with On AG to supply Loop ™ PET to be utilized in polyester fiber by the brand, pursuant to which Loop ™ PET resin was delivered in the nine-month period ended November 30, 2022.

In addition to supplying customers with initial volumes of Loop ™ PET, the Terrebonne Facility continues to support our customers and partners with R&D and analytical capabilities.

On December 22, 2022, we announced that we have reduced hours of operation at the Terrebonne Facility in order to reduce operating costs and conserve liquidity.

The primary purpose of the Terrebonne Facility was to demonstrate that Loop’s breakthrough depolymerization technology was scalable and to produce commercial quantities of virgin quality PET resin and polyester fiber for global brands.

We believe the Terrebonne Facility has achieved this objective.

We will continue to fulfill existing sales contracts.

Joint Venture with Indorama for Retrofit

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Human Capital

As of August 31, 2022, we had 92 employees of which 34 work in research and development, 41 in engineering and operations, and 17 in administrative functions.

As of November 30, 2022, we had 81 employees of which 28 work in research and development, 38 in engineering and operations, and 15 in administrative functions.

Results of Operations

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

Three months ended August 31,

The following table summarizes our operating results for the three-month periods ended November 30, 2022 and 2021, in U.S.

Three months ended November 30,

Research and development

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Total general and administrative

Gain on disposition of assets

Depreciation and amortization

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$ (10,098,243 )

Three Months Ended August 31, 2022 and 2021

First time revenues for the three-month period ended August 31, 2022 were $0.14 million compared to $0 for the same period in 2021.

The revenue resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.

Three Months Ended November 30, 2022 and 2021

Revenues for the three-month period ended November 30, 2022 were $0.02 million.

For the same period in 2021, there were no revenues.

The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.

Research and Development

Research and development expense for the three-month period ended August 31, 2022 decreased $1.53 million to $3.75 million, as compared to $5.28 million for the same period in 2021.

The decrease was primarily attributable to a $1.30 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $0.73 million increase in tax credits recorded as a reduction of research and development expenses, and a $0.12 million decrease in plant and laboratory operating expenses.

These decreases were partially offset by a $0.65 million increase in employee compensation expenses related to increased headcount in our in-house engineering and commercial project teams.

Research and development expense for the three-month period ended November 30, 2022 decreased $2.25 million to $4.58 million, as compared to $6.84 million for the same period in 2021.

The decrease was primarily attributable to a $1.54 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $0.88 million decrease in external engineering costs for ongoing design work for our Infinite Loop ™ manufacturing process, and a $0.40 million increase in tax credits recorded as a reduction of research and development expenses.

General and administrative expenses

General and administrative expenses for the three-month period ended August 31, 2022 increased $0.89 million to $4.01 million, as compared to $3.12 million for the same period in 2021.

The increase was primarily attributable to a $0.62 million 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 the Company’s commercialization plans;

and a $0.17 million increase in employee compensation expenses.

The net loss for the three-month period ended August 31, 2022 decreased $0.69 million to $7.71 million, as compared to $8.39 million for the same period in 2021.

The decrease is primarily due to the decreased research and development expenses of $1.53 million, partially offset by the increased general and administrative expenses of $0.89 million.

Six Months Ended August 31, 2022 and 2021

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

Six months ended August 31,

General and administrative expenses for the three-month period ended November 30, 2022 increased $0.09 million to $3.18 million, as compared to $3.09 million for the same period in 2021.

The increase was primarily attributable to a $0.63 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” of our 10-Q and the Company’s commercialization plans, and a $0.14 million increase in stock-based compensation expenses.

These increases were partially offset by a $0.48 million decrease in insurance costs, and a $0.26 million decrease in employee compensation costs.

The net loss for the three-month period ended November 30, 2022 decreased $9.09 million to $1.01 million, as compared to $10.10 million for the same period in 2021.

The decrease is primarily due to a gain on disposition of assets of $6.70 million recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec, and the decreased research and development expenses of $2.25 million, partially offset by the increased general and administrative expenses of $0.09 million.

Nine Months Ended November 30, 2022 and 2021

The following table summarizes our operating results for the nine-month periods ended November 30, 2022 and 2021, in U.S.

Nine months ended November 30,

Research and development

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Total general and administrative

Gain on disposition of assets

Depreciation and amortization

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Interest income

Foreign exchange loss

Foreign exchange loss (gain)

Total expenses

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$ (30,648,023 )

$ (5,161,325 )

First time revenues for the six-month period ended August 31, 2022 were $0.14 million compared to $0 for the same period in 2021.

The revenue resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.

Revenues for the nine-month period ended November 30, 2022 were $0.16 million.

For the same period in 2021, there were no revenues.

The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.

Research and Development

Research and development expense for the six-month period ended August 31, 2022 decreased $3.37 million to $10.55 million, as compared to $13.92 million for the same period in 2021.

Research and development expense for the nine-month period ended November 30, 2022 decreased $5.62 million to $15.13 million, as compared to $20.76 million for the same period in 2021.

The decrease was primarily attributable to a $3.58 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $2.13 million decrease in external engineering expenses for ongoing design work for our Infinite Loop ™ manufacturing process, and a $1.15 million increase in tax credits recorded as a reduction of research and development expenses.

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General and administrative expenses

General and administrative expenses for the six-month period ended August 31, 2022 increased $8.77 to $15.05 million, as compared to $6.28 million for the same period in 2021.

The increase was primarily attributable to an 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 and $0.94 million was attributable to RSU forfeitures in the same period in 2021 accounted for as a reversal of stock-based compensation, and a $0.25 million increase in insurance costs.

These increases were partially offset by decreased professional fees of $0.21 million, mainly related to legal fees principally associated with the SEC investigation and class action suits described in “Part II, Item 1.

Legal Proceedings” and the Company’s commercialization plans.

In the six-month period ended August 31, 2022, legal fees of $0.29 million were recorded as a reduction of the accrued loss contingency for legal settlement.

The net loss for the six-month period ended August 31, 2022 increased $5.16 million to $25.71 million, as compared to $20.55 million for the same period in 2021.

The increase is primarily due to the increased general and administrative expenses of $8.77 million, partially offset by the decreased research and development expenses of $3.37 million.

General and administrative expenses for the nine-month period ended November 30, 2022 increased $8.86 to $18.23 million, as compared to $9.37 million for the same period in 2021.

The increase was primarily attributable to an increased stock-based compensation expense of $8.59 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 and $0.94 million was attributable to RSU forfeitures in the same period in 2021 accounted for as a reversal of stock-based compensation, and increased professional fees of $0.70 million, mainly related to legal fees principally associated with the SEC investigation and class action suits described in “Part II, Item 1.

Legal Proceedings” of our 10-Q and the Company’s commercialization plans.

These increases were partially offset by decreased insurance costs of $0.24 million, and a $0.22 million decrease in employee compensation costs.

The net loss for the nine-month period ended November 30, 2022 decreased $3.92 million to $26.72 million, as compared to $30.65 million for the same period in 2021.

The decrease is primarily due to a gain on disposition of assets of $6.70 million recorded in the nine-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec, and the decreased research and development expenses of $5.62 million, partially offset by the increased general and administrative expenses of $8.86 million.

LIQUIDITY AND CAPITAL RESOURCES

From inception to August 31, 2022, the Company has been in the development stage with limited revenues, with its ongoing operations and commercialization plans financed primarily by raising equity.

Since its inception, the Company has been in the development stage with limited 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.

Our liquidity position consists of cash and cash equivalents on hand of $23.00 million at August 31, 2022, an undrawn senior loan facility from a Canadian bank of $2.67 million and the net proceeds of sale of land held for sale of $8.69 million subsequent to August 31, 2022 as described in Note 21 to the attached financial statements.

Our liquidity position consists of cash and cash equivalents on hand of $25.62 million at November 30, 2022 and an undrawn senior loan facility from a Canadian bank of $2.59 million.

Additionally, the Company entered into an agreement on December 21, 2022 to sell its land in Bécancour, Québec for $13.70 million (CDN $18.50 million) on or before February 24, 2023.

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.

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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.

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.

We will require a significant amount of capital to fund our growth as we invest in our planned commercial facilities in Europe, Asia and North America, 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.

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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, based on certain milestones subject to various terms and conditions, including fabrication timelines, equipment inspection and securing financing for our Infinite Loop™ manufacturing facility in Bécancour, Québec.

In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment for up to $8.55 million which can be used in any Infinite Loop™ manufacturing facility.

The payment of these amounts is based on certain milestones subject to various terms and conditions, including fabrication timelines, and equipment inspection.

Pursuant to the agreement, the Company has paid a cash deposit of $3.40 million.

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There is no remaining amount available under the financing facility after the second disbursement.

On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “the Financing Facility Amendment”).

As per the Financing Facility Amendment, $37,015 (CDN $50,000) of the principal amount is repayable in monthly installments in the fiscal year ending February 29, 2024 and the remainder of the principal amount is repayable in 72 monthly installments.

Under the original terms of the Financing Facility, the principal amount was repayable in 84 monthly installments beginning in March of 2023.

The Financing Facility Amendment does not modify the interest rates, the repayment terms of accrued interest or any other terms of the Financing Facility.

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.

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

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

As at November 30, 2022 the Credit Facility was undrawn.

Flow of Funds

Summary of Cash Flows

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

Six Months Ended August 31,

A summary of cash flows for the nine-month periods ended November 30, 2022 and 2021 was as follows:

Nine Months Ended November 30,

Net cash used in operating activities

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$ (32,829,956 )

Net cash used in investing activities

Net cash from (used by) financing activities

Net cash from (used in) investing activities

Net cash from financing activities

Effect of exchange rate changes on cash

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Net Cash Used in Operating Activities

During the six-month period ended August 31, 2022, we used $20.67 million in operations compared to $22.40 million during the six-month period ended August 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 six-month period ended August 31, 2022, the Company made investments of $0.06 million in property, plant and equipment as compared to $5.01 million for the six-month period ended August 31, 2021.

The amount of $5.01 was 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 the excess land was classified as available for sale.

For additional information on the land held for sale, please refer to Note 6 of the attached condensed consolidated financial statements.

During the six-month period ended August 31, 2022, the Company made investments in intangible assets of $0.14 million as compared to $0.09 million for the six-month period ended August 31, 2021, particularly in its patent technology in the United States and around the world.

During the nine-month period ended November 30, 2022, we used $26.28 million in operations compared to $32.83 million during the nine-month period ended November 30, 2021.

As discussed above in the Results of Operations, 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) Provided in Investing Activities

During the nine-month period ended November 30, 2022, the Company made investments of $0.07 million in property, plant and equipment as compared to $5.02 million for the nine-month period ended November 30, 2021.

The amount of $5.02 was primarily in connection with the purchase for $4.82 million of a parcel of land in Bécancour, Québec.

During the nine-month period ended November 30, 2022, the Company made investments in intangible assets of $0.23 million as compared to $0.35 million for the nine-month period ended November 30, 2021, particularly in its patent technology in the United States and around the world.

Net Cash (Used) Provided by Financing Activities

During the six-month period ended August 31, 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 $0.03 million against our long-term debt, representing the loan agreement we entered into during the year ended February 28, 2018 to purchase the land and building of our small-scale production facility, research and development center and executive offices.

On August 26, 2021, we received $1,894,877 (CDN$2,390,766) in connection with the credit facility from Investissement Québec to finance capital expenses incurred for the expansion of the Terrebonne Facility.

During the nine-month period 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, representing the loan agreement we entered into during the year ended February 28, 2018 to purchase the land and building of our small-scale production facility, research and development center and executive offices, which was fully repaid in January 2022.

On August 26, 2021, we received $1.87 million (CDN $2.39 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.

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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