What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-05-18 compared with 2022-05-27 · 328 added, 219 removed, 607 unchanged (47% of the section changed)

3 unchanged sentences

Index to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (FIRM ID -- 271 )

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated balance sheets as at February 28, 2023 and February 28, 2022

Consolidated statements of operations and comprehensive loss for the years ended February 28, 2023 and February 28, 2022

Consolidated statement of changes in stockholders’ equity for the years ended February 28, 2022 and February 28, 2021

Consolidated statement of cash flows for the years ended February 28, 2022 and February 28, 2021

Consolidated statements of changes in stockholders’ equity for the years ended February 28, 2023 and February 28, 2022

Consolidated statements of cash flows for the years ended February 28, 2023 and February 28, 2022

Notes to the consolidated financial statements

PricewaterhouseCoopers LLP

Montreal Canada

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Loop Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Loop Industries, Inc.

and its subsidiaries (together, the Company) as of February 28, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, change in stockholders’ equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the Audit Committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Liquidity Assessment

As described in notes 1 and 2 to the consolidated financial statements, the Company’s consolidated financial statements have been prepared on a going concern basis, 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.

For the year ended February 28, 2023, the Company incurred a net loss of $21.3 million and net cash used in operating activities was $34.9 million.

As of February 28, 2023, the accumulated deficit amounted to $155.9 million.

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) the 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.

The principal considerations for our determination that performing procedures relating to the liquidity assessment is a critical audit matter are the significant judgments made by management in estimating the future cash flow requirements of the Company based on budgets and forecasts and in developing the related assumptions.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s liquidity assessment and the development of assumptions included in the estimated future cash flows.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among other things, (i) evaluating management’s assessment of whether the Company has sufficient cash resources for a period of no less than 12 months from the date of the issuance of the consolidated financial statements;

(ii) testing the completeness and accuracy of the underlying data used in management’s estimation of future cash flow requirements;

(iii) evaluating the reasonableness of management’s assumptions related to the estimation of the amount and timing of future cash outflows and cash inflows;

and (iv) determining what future expenditures are committed and what could be considered discretionary.

The evaluation of these assumptions considered (i) management’s historical accuracy in forecasting cash flows and setting budgets;

and (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Additionally, these procedures included evaluating the sufficiency of the Company’s liquidity disclosure.

/s/ PricewaterhouseCoopers LLP

Montréal, Canada

We have served as the Company’s auditor since 2017.

2 unchanged sentences

(in United States dollars)

February 28, 2023

February 28, 2022

Current assets

Cash and cash equivalents

Restricted cash (Note 10)

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

Prepaid expenses and deposits (Note 4)

Inventories (Note 4)

Deposits on machinery and equipment (Note 5)

Prepaid expenses and other deposits (Note 5)

Assets held for sale (Note 6)

6 unchanged sentences

Accounts payable and accrued liabilities (Note 9)

Customer deposits (Note 10)

Current portion of long-term debt (Note 12)

15 unchanged sentences

Accumulated other comprehensive loss

( 1,141,276 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

Subsequent events (Note 22)

Commitments and Contingencies (Note 22)

See accompanying notes to the consolidated financial statements .

2 unchanged sentences

(in United States dollars)

Research and development (Notes 14 and 16)

General and administrative (Notes 15 and 16)

Contingency loss for legal settlement (Notes 21 and 22)

Loss from equity investment (Note 10)

Impairment of assets (Note 6)

February 28, 2023

February 28, 2022

Research and development (Note 15)

General and administrative (Note 16)

Depreciation and amortization (Notes 6 and 7)

Total expenses

Other (income) loss :

Gain on disposition of land (Note 6)

( 16,683,492 )

Loss for legal settlement (Note 22)

Loss from equity-accounted investment (Note 11)

Interest and other financial expenses (Note 20)

Interest income

Foreign exchange loss

Total expenses

Foreign exchange (gain) loss

( 21,300,565 )

2 unchanged sentences

Foreign currency translation adjustment

( 1,045,243 )

Comprehensive loss

7 unchanged sentences

Loop Industries, Inc.

Consolidated Statement of Changes in Stockholders’ Equity

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended February 28, 2023 and February 28, 2022

1 unchanged sentence

Year ended February 28, 2022

par value $0.0001

Preferred stock

par value $0.0001

Accumulated Other

Accumulated Deficit

Comprehensive Loss

Stockholders Equity

par value $0.0001

Comprehensive

Balance, February 28, 2021

2 unchanged sentences

Issuance of common shares for cash, net of share issuance costs (Note 14)

Issuance of warrants for financing facility (Notes 12 and 19)

Issuance of shares upon the vesting of restricted stock units (Notes 14 and 17)

Issuance of shares upon exercise of warrants (Notes 14 and 19)

Issuance of warrant for services (Note 18)

Expiration of warrants (Notes 16 and 18)

Issuance of shares upon exercise of options (Notes 14 and 17)

Stock options granted for services (Note 17)

8 unchanged sentences

Loop Industries, Inc.

Consolidated Statement of Changes in Stockholders’ Equity

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended February 28, 2023 and February 28, 2022 (continued)

1 unchanged sentence

Year ended February 28, 2023

par value $0.0001

Preferred stock

par value $0.0001

Accumulated Other

Accumulated Deficit

Comprehensive Loss

Stockholders Equity

par value $0.0001

Comprehensive

Stockholders’

Balance, February 28, 2022

1 unchanged sentence

$ ( 134,582,926 )

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

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

Issuance of shares upon the vesting of restricted stock units (Notes 14 and 17)

Issuance of shares upon exercise of warrants (Notes 13 and 18)

Issuance of shares upon exercise of options (Notes 13 and 16)

Stock options granted for services (Note 16)

Restricted stock units granted for services (Note 16)

Expiration of warrants (Note 19)

( 9,886,986 )

Stock options issued for services (Note 17)

Restricted stock units issued for services (Note 17)

Foreign currency translation

1 unchanged sentence

( 1,045,243 )

( 21,300,565 )

Balance, February 28, 2023

1 unchanged sentence

$ ( 155,883,491 )

$ ( 1,141,276 )

See accompanying notes to the consolidated financial statements.

2 unchanged sentences

(in United States dollars)

February 28, 2023

February 28, 2022

Cash Flows from Operating Activities

4 unchanged sentences

Stock-based compensation (Note 17)

Contingency loss for legal settlement (Note 22)

Loss from equity investment (Note 10)

Write-down and impairment of assets (Note 6)

Accretion, and accrued interest (Note 19)

Changes in operating assets and liabilities:

Valued added tax and tax credits receivable

Gain on disposition of land (Note 6)

( 16,683,492 )

Prepaid expenses and deposits

Payment of legal settlement, net (Note 22)

( 2,262,218 )

Accounts payable and accrued liabilities

Loss for legal settlement (Note 22)

Loss from equity-accounted investment (Note 11)

Accretion and accrued interest (Notes 12 and 20)

Changes in operating assets and liabilities:

Sales tax and tax credits receivable (Note 3)

Inventories (Note 4)

Prepaid expenses and other deposits (Note 5)

Accounts payable and accrued liabilities (Note 9)

( 4,562,512 )

( 2,089,679 )

Net cash used in operating activities

2 unchanged sentences

Cash Flows from Investing Activities

Investment in joint venture (Note 10)

Proceeds from disposition of land (Note 6)

Deposits on machinery and equipment (Note 5)

Additions to property, plant and equipment (Note 6)

( 4,815,847 )

( 1,735,079 )

Additions to intangible assets (Note 7)

1 unchanged sentence

( 7,533,087 )

( 2,977,364 )

Cash Flows from Financing Activities

Customer deposits (Note 10)

Proceeds from sales of common shares and exercise of warrants, net of share issuance costs (Note 14)

3 unchanged sentences

Effect of exchange rate changes

Net change in cash

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Net change in cash, cash equivalents and restricted cash

( 13,470,741 )

Cash, cash equivalents and restricted cash, beginning of year

Cash, cash equivalents and restricted cash, end of year

Supplemental Disclosure of Cash Flow Information:

11 unchanged sentences

The monomers are filtered, purified and polymerized to create virgin-quality Loop™ branded PET resin suitable for use in food-grade packaging and polyester fiber.

The Company is currently in the development stage with no revenues.

The Company is currently in the pre-commercialization stage with limited revenues.

Basis of presentation

8 unchanged sentences

Liquidity Risk Assessment

From inception to February 28, 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.

Since its inception, the Company has been in the pre-commercialization stage with limited revenues from customers, and its ongoing operations and commercialization plans have been 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 February 28, 2022, the Company has cash and cash equivalents of $44.06 million.

As at February 28, 2023, the Company’s available liquidity was $ 32.16 million, consisting of cash and cash equivalents of $ 29.59 million and an undrawn senior loan facility from a Canadian bank of $2.57 million (CDN $3.50 million).

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

1 unchanged sentence

(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.

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

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

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

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

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

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

The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent 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 is working with its joint venture partners to put in place the financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the planned first Asian manufacturing facility in Ulsan, South Korea.

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 financial position and on its ability to execute its business plan.

The Company has committed a portion of its cash resources for certain long lead equipment and may enter into additional commitments to accelerate commercial projects within targeted construction timeframes.

Revenue recognition

The Company recognizes revenue with customers 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

1 unchanged sentence

Actual results could differ from those estimates.

Those estimates and assumptions include the going concern assessment, estimates for depreciable lives of property, plant and equipment, intangible assets, analysis of impairments of long-lived assets and intangible assets as well as the carrying value of our joint venture investment, assets held for sale, accruals for potential liabilities, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards.

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

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

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

Those estimates and assumptions include the going concern assessment, estimates for depreciable lives of property, plant and equipment, intangible assets, analysis of impairments of long-lived assets and intangible assets, recoverability tax credits receivable, accruals for potential liabilities, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards.

Fair value of financial instruments

5 unchanged sentences

A quoted price in an active market for identical assets or liabilities.

Significant pricing inputs are observable inputs, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

Significant pricing inputs are unobservable inputs, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Significant pricing inputs that are observable, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

Significant pricing inputs that are unobservable, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

1 unchanged sentence

The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values.

The fair value of cash and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity.

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

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, customer trials and characterization studies, testing of pre-production samples, machinery and equipment expenditures for use in the 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.

Government grants

1 unchanged sentence

nor is there specific guidance applicable to government grants.

Under the Company’s accounting policy for government grants and consistent with non-authoritative guidance, grants are recognized on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.

Grants that relate to the acquisition of an asset are recognized as a reduction of the cost of the asset and in the statement of operations and comprehensive loss as the asset is depreciated or amortized.

A grant that is compensation for expenses or losses already incurred, or for which there are no future related costs, is recognized in the statement of operations and comprehensive loss in the period in which it becomes receivable.

Low-interest loans or interest-free loans from a government are initially measured at fair value and interest expense is recognized on the loan subsequently under the effective interest method, with the difference recognized as a government grant.

Low-interest loans or interest-free loans from a government are initially measured at fair value and an interest expense is recognized on the loan subsequently under the effective interest method, with the difference recognized as a government grant.

Reimbursable tax credits are recognized when amounts can be reasonably estimated on a systematic basis over the periods in which the Company recognizes the related costs.

The Company is currently eligible for reimbursable Provincial research and development tax credits and investment tax credits, which are related to costs associated with our Terrebonne Facility and recorded as a reduction of research and development expenses.

Deferred financing costs and other transaction costs

11 unchanged sentences

The resulting translation adjustments are included in other comprehensive income (loss) (“OCI”).

As a result, foreign currency exchange fluctuations may impact operating expenses.

The Company currently is not engaged in any currency hedging activities.

5 unchanged sentences

Office equipment and furniture

Machinery and equipment

Building and land improvements

7 unchanged sentences

Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows.

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.

Assets held for sale

6 unchanged sentences

Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

When the criteria are met, the assets are presented at the lesser of fair market value, net of selling costs, and cost in current assets.

When the criteria are met, the assets are presented at the lesser of fair market value, net of selling costs, and amortized cost in current assets.

Stock‑based compensation

1 unchanged sentence

The Company accounts for stock options granted to employees based on the authoritative guidance provided by the FASB wherein the fair value of the award is measured on the grant date and recognized as compensation expense on the straight-line basis over the vesting period.

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

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

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

Forfeitures on share-based payments are recognized as they occur.

The Company accounts for stock options and warrants granted to non-employees in accordance with the authoritative guidance of the FASB wherein the fair value of the stock compensation is based upon the measurement date determined as the earlier of the date at which either a) a commitment is reached with the counterparty for performance or b) the counterparty completes its performance.

The Company estimates the fair value of restricted stock unit awards to employees and directors based on the closing market price of its common stock on the date of grant.

The fair value of the stock options granted is estimated using the Black-Scholes-Merton Option Pricing (“Black-Scholes”) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends.

The Company estimates the fair value of restricted stock unit awards to employees and directors based on its intrinsic value at date of grant.

The fair value of the stock options granted is estimated using the Black-Scholes model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends.

Stock-based compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience.

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

Restricted cash

Cash held by the Company restricted as to withdrawal or use is presented as restricted cash in the consolidated balance sheet.

As at February 28, 2023, restricted cash comprised of a customer deposit which is restricted for use on a commercial project, as discussed in Note 10.

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 at the balance sheet date and mainly comprises Loop™ branded PET resin.

Intangible assets

Intangible assets are recorded at cost, net of accumulated amortization and impairment, and are amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method over 7 years.

The Company reviews the carrying value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an intangible asset might not be recoverable or a change in the remaining useful life of an intangible asset.

The Company reviews the carrying value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an intangible asset or asset group might not be recoverable or a change in the remaining useful life of an intangible asset.

If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified.

17 unchanged sentences

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which removes specific exceptions to the general principles in ASC 740, “Income Taxes,” and clarifies certain aspects of the existing guidance.

This update is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption being permitted as of the beginning of an interim or annual reporting period.

All amendments to this ASU must be adopted in the same period on a prospective basis, with certain exceptions.

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

Recently issued accounting pronouncements not yet adopted

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

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

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

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

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

We are currently evaluating this accounting guidance, which may have disclosure impact only.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”.

2 unchanged sentences

The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss.

This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies.

We are still evaluating the impact of this accounting guidance on our results of operations and financial position.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” which was amended in January 2021 by ASU 2021-01, “Reference Rate Reform - Scope” and provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

This update provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform.

This update is effective as of March 12, 2020, through December 31, 2022.

We are currently evaluating this accounting guidance and have not elected an adoption date.

The adoption of this accounting guidance for the year ended February 28, 2023 did not impact the disclosures in our Consolidated Financial Statements.

Recently issued accounting pronouncements not yet adopted

There were no new accounting pronouncements issued which could have a significant effect on the Company’s consolidated financial statements.

Sales Tax, Tax Credits and Other Receivables

Sales tax, research and development tax credits and other receivables as at February 28, 2023 and February 28, 2022 were as follows:

Investment tax credits

Research and development tax credits

7 unchanged sentences

During the year ended February 28, 2023, the Company recorded tax credits of $ 362,096 (2022 – $ 91,960 ) as a reduction of research and development expenses and received $ 249,593 (2022 – $ 216,300 ) from taxation authorities for research and development tax credits, net of fees.

During the year ended February 28, 2021, the Company recorded a $ 115,566 net expense included in research and development expenses due to adjustments made to prior year estimates of refundable tax credits.

This adjustment was related to a re-assessment by tax authorities, reducing our research and development tax credits and resulted in the Company repaying $ 93,249 during the year ended February 28, 2021 for research and development tax credits previously received by the Company from taxation authorities.

The Company is also eligible for non-refundable research and development tax credits from the federal taxation authorities which can be used as a reduction of income tax expense in any given year to the extent the Company has taxable income.

3 unchanged sentences

As at February 28, 2023, the carry forward balance of non-cash research and development tax credits was $ 1,979,978 (2022 - $ 1,589,580 ).

We received during the year ended February 28, 2021 a wage subsidy from the Canadian federal government related to a COVID-19 relief program that amounted to $ 259,273 (2022 - nil), of which $ 221,603 was recorded against research and development expenses and $ 37,670 against general and administrative expenses.

There were no government grants receivable at February 28, 2022 and 2021.

Loop Canada Inc.

is also eligible for refundable investment tax credits from the provincial taxation authorities based on qualifying expenditures for manufacturing equipment.

The Company records refundable tax credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not, they will be received.

During the year ended February 28, 2023, the Company recorded investment tax credits of $ 837,041 (2022 – nil ) as a reduction of research and development expenses and received $ 348,161 (2022 – nil ) from taxation authorities for investment tax credits.

Inventories as at February 28, 2023 and February 28, 2022 were as follows:

Work in process

Finished goods

Raw materials

As at February 28, 2023, inventories included work in process, finished goods and raw materials.

Work in process inventories consist of monomers (dimethyl terephthalate and monoethylene glycol), either purified or yet to be purified, resulting from the depolymerization of PET feedstock.

These monomers shall be polymerized into Loop ™ PET resin in the future.

The finished goods inventories consist of bottle grade and fiber grade Loop ™ PET resin which is intended to be sold to customers.

The raw materials inventories consist of chemicals which are used as inputs in the PET depolymerization process.

Prepaid Expenses and Deposits

As at February 28, 2022, the Company had $ 2,801,680 of non-refundable cash deposits on machinery and equipment.

$ 672,713 (2021 – $ 379,395 ) of the prepayments are on machinery and equipment that will be used in connection with the research and development activities at the Terrebonne Facility and will be expensed, and classified as research and development expenses in the period the equipment is received.

The remainder of the prepayments of $ 2,128,967 (2021 – nil) are non-refundable cash deposits on long-lead machinery and equipment that will be used in the planned Infinite Loop ™ manufacturing facility in Bécancour, Québec.

Asset held for sale

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

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

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

Balance sheet line item

Land held for sale

Asset held for sale

Infinite Loop ™ manufacturing facility

As at February 28, 2023, the Company had $ 3,395,650 (2022 – $ 2,801,680 ) of non-refundable cash deposits on long-lead machinery and equipment that are intended to be used in the first planned Infinite Loop ™ manufacturing facility.

Prepaid expenses and other deposits as at February 28, 2023 and February 28, 2022 were as follows:

February 28, 2023

The deposit for insurance represents a pre-payment of the final three months of the Company’s directors and officers’ insurance annual premium.

Property, Plant and Equipment, net

Property, Plant and Equipment

As at February 28, 2023

3 unchanged sentences

Building and Land Improvements

( 1,165,795 )

Office equipment and furniture

3 unchanged sentences

Net book value

Building and Land Improvements

Machinery and equipment

$ ( 266,434 )

Building and Land Improvements

Office equipment and furniture

1 unchanged sentence

Depreciation expense amounted to $ 458,927 for the year ended February 28, 2023 (2022 – $ 478,581 ).

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

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

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

During the year ended February 28, 2022, the Company incurred civil construction costs of $ 1,138,947 for site preparation on the Bécancour land for the planned commercial facility.

During the year ended February 28, 2021, the Company recorded write-down and impairment expenses of $ 5,043,119 , due to the decision to dedicate the Terrebonne Facility to brand activation, initial customer volumes and Infinite Loop™ demonstration, research and development activities, therefore foregoing any alternative future use of its machinery and equipment assets contained within the Terrebonne Facility.

As such, the carrying value of the machinery and equipment was written off resulting in an expense of $ 5,034,606 being recognized in the year ended February 28, 2021.

With the decision to dedicate the Terrebonne Facility to research and development activities, future costs associated with operating and maintaining the Terrebonne Facility are in the scope of ASC 730, Research and Development Costs, and are recognized as a research and development expense in the consolidated statements of operations and comprehensive loss in the period they are incurred.

Intangible Assets

As at February 28,

During the year ended February 28, 2022, we acquired land in Bécancour, Québec for cash of $ 4,335,366 (CDN $5,900,000) and incurred civil construction costs of $ 1,074,453 in land improvements.

As at February 28, 2022, $ 3,389,279 of the land was classified as an asset held for sale.

During the year ended February 28, 2023, the Company sold the land for cash net proceeds of $ 22,313,868 (CDN $29,900,000) and a gain on disposition of the asset of $ 16,683,492 .

The table below summarizes the amounts related to the gain on disposition of land:

Gross proceeds of disposition

Transaction costs

Net proceeds of disposition

( 4,335,366 )

Cost of land improvements

( 1,074,453 )

Foreign exchange effect

Gain on disposition of land

Intangible Assets, net

Patents, at cost – beginning of year

Patents, accumulated depreciation – beginning of year

Patents, net – beginning of year

Additions in the year – patents

Patents, at cost – end of year

Patents, accumulated depreciation – beginning of year

Amortization of patents

Patents, accumulated depreciation – end of year

Foreign exchange effect

Patents, net – end of year

During the year ending February 28, 2022, the Company continued to develop its next Generation II (“GEN II”) technology and filed various patents in jurisdictions around the world.

On April 9, 2019, the first GEN II U.S.

patent was issued.

The GEN II technology portfolio currently consists of four patent families for which the company has four issued U.S.

patents, one allowed U.S.

application and three pending U.S.

During the year ending February 28, 2023, the Company continued to develop its next Generation II (“GEN II”) technology and filed various patents in jurisdictions around the world.

The GEN II technology portfolio currently consists of four patent families for which the company has six issued U.S.

patents and four pending U.S.

applications.

Internationally, the Company also has issued patents in Algeria, Bangladesh for certain aspects of the technology and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, Singapore, South Korea, and various other countries.

Internationally, the Company also has issued or allowed patents in Algeria, Bangladesh, and Morocco for certain aspects of the technology and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, Singapore, South Korea, and various other countries.

All patents and patent applications, if granted are expected to expire between 2037 and 2040, not including any patent term extension.

Amortization expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $ 76,214 for the year ended February 28, 2022 (2021 - $ 41,844 ).

Amortization expense amounted to $ 91,187 for the year ended February 28, 2023 (2022 - $ 76,214 ).

Financial Instruments and Management of Financial Risk

11 unchanged sentences

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 cash, restricted cash, customer deposits, other receivables, and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity.

Currency Risk

6 unchanged sentences

dollars while our operations are concentrated in our wholly-owned subsidiary, Loop Canada.

Additionally, we are planning a commercial development project in Bécancour, Québec which is expected to involve the purchase of various equipment primarily in Canadian dollars and U.S.

Accordingly, we are exposed to foreign exchange risk as we maintain bank accounts in U.S.

3 unchanged sentences

To the extent that fluctuations in currency exchange rates cause our results of operations to differ materially from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected.

From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations.

As part of our risk management program, we may enter into foreign exchange forward contracts to lock in the exchange rates for future foreign currency transactions, which is intended to reduce the variability of our operating costs and future cash flows denominated in currencies that differ from our functional currencies.

We do not enter into these contracts for trading purposes or speculation, and our management believes all such contracts are entered into as hedges of underlying transactions.

Nonetheless, these instruments involve costs and have risks of their own in the form of transaction costs, credit requirements and counterparty risk.

If our hedging program is not successful, or if we change our hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates.

Any hedging technique we implement may fail to be effective.

If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on the trading price of our common stock.

Accounts Payable and Accrued Liabilities

1 unchanged sentence

Trade accounts payable

Accrued loss contingency for legal settlement (Note 22)

Accrued legal settlement (Note 22)

Accrued employee compensation

2 unchanged sentences

Other accrued liabilities

Customer Deposits

In October 2022, the Company received a cash deposit from a customer of $ 1,000,000 in relation to an executed capacity reservation agreement.

The deposit is to be credited against any future sales of Loop™ PET resin over a five-year period, commencing two years after the first delivery of Loop™ PET resin to the customer.

Under the terms of the capacity reservation agreement, the cash deposit is designated for expenditures related to the first Infinite Loop™ manufacturing facility and is refundable to the customer in the event that the Infinite Loop™ manufacturing facility is not constructed.

As the cash deposit is restricted in its use, it has been reflected as restricted cash as at February 28, 2023.

A corresponding contract liability is recognized in the consolidated balance sheet.

The remaining $ 11,732 in customer deposits is related to a contract with a customer for the sale of Loop™ PET resin from the Terrebonne Facility.

Joint Venture

6 unchanged sentences

There were no operations in ILT from the date of inception of September 24, 2018 to February 28, 2023.

During the year ended February 28, 2022, we made no contributions to ILT (2021 – $ 650,000 ).

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

During the year ended February 28, 2023, we made no contributions to ILT (2022 – nil).

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

In the years ended February 28, 2021 and 2022, the Company achieved significant advancements in its engineering design independently from that which was accomplished in ILT.

8 unchanged sentences

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

Although the Company remains committed to the project, the joint venture made a decision in July 2020 that due to the COVID-19 situation it would delay work.

The joint venture made a decision in July 2020 that due to the COVID-19 situation it would delay work.

Since then, no expenditures have been incurred by the joint venture.

Long-Term Debt

February 28, 2023

February 28, 2022

Investissement Québec financing facility:

3 unchanged sentences

Total Investissement Québec financing facility

Principal amount

current portion

Total term loan, net of current portion

current portion of long-term debt

Long-term debt, net of current portion

1 unchanged sentence

On February 21, 2020, the Company received $ 1,623,362 (CDN$2,209,234) from Investissement Québec as the first disbursement of our financing facility, out of a maximum of $ 3,380,116 (CDN$4,600,000) (the “Financing Facility”).

The loan bears interest at 2.36 % and there is a 36-month moratorium on both capital and interest repayments starting on the date of the first disbursement, after which capital and interest is repayable in 84 monthly installments.

The loan bears interest at a rate of 2.36 % and there is a 36-month moratorium on both capital and interest repayments starting on the date of the first disbursement, after which capital and interest is repayable in 84 monthly installments.

The Company established the fair value of the loan for the first disbursement at $ 1,354,408 based on a discount rate of 5.45 %, which reflected a debt discount of $ 290,714 .

The discount rate used was based on the external financing from a Canadian bank.

The Company, under the loan agreement, was required to pay fees representing 1% of the loan amount, $ 36,226 (CDN$46,000) to Investissment Québec which we deferred and recorded as a reduction of the Financing Facility.

The Company, under the loan agreement, was required to pay fees representing 1 % of the loan amount, $ 33,801 (CDN$46,000) to Investissement Québec which we deferred and recorded as a reduction of the Financing Facility.

Debt discount and deferred financing expenses are amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss.

5 unchanged sentences

Debt discount and deferred financing expenses are amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss.

The Company recorded interest expense on the Investissement Québec loan for the year ended February 28, 2022 in the amount of $ 65,908 respectively (2021 – $ 39,599 ) and an accretion expense of $ 55,332 (2021 – $ 36,847 ).

The Company recorded interest expense on the Investissement Québec loan for the year ended February 28, 2023 in the amount of $ 86,028 (2022 – $ 65,908 ) and an accretion expense of $ 69,507 (2022 – $ 55,332 ).

The Company also agreed to issue to Investissement Québec warrants to purchase shares of common stock of the Company in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $338,012 (CDN$460,000).

8 unchanged sentences

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

The First and Second Disbursement Warrants remain outstanding as at February 28, 2022.

On January 24, 2018, the Company obtained a $ 1,102,536 (CDN$1,400,000) 20 -year term instalment loan (the “Loan”), from a Canadian bank.

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

By agreement, the Loan was repayable in monthly payments of $ 4,594 (CDN$5,833) plus interest.

In January 2022, the Company repaid the remaining balance of the Loan in full.

During the year ended February 28, 2022, we repaid $ 937,156 (2021 – $ 50,585 ) on the principal balance of the Loan and interest paid amounted to $ 32,791 (2021 – $ 38,157 ).

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

The First Disbursement Warrants expired in the year ended February 28, 2023 and the Second Disbursement Warrants remain outstanding as at February 28, 2023.

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, a total of $ 36,740 (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.

The Amendment did not meet the criteria of ASC 470, Debt for an extinguishment of debt as the Amendment did substantially modify the terms of the Financing Facility.

The Company therefore applied modification accounting and no immediate gain or loss was recognized related to the Amendment.

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

February 29, 2024

3 unchanged sentences

February 29, 2028

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 $ 2,571,827 (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, with which the Company was in compliance as at February 28, 2023.

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 February 28, 2023, the $ 2,571,827 (CDN $3,500,000) Credit Facility was available and undrawn.

On January 24, 2018, the Company obtained a $ 1,028,731 (CDN$1,400,000) 20-year term instalment loan (the “Loan”), from a Canadian bank.

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

By agreement, the Loan was repayable in monthly payments of $ 4,286 (CDN$5,833) plus interest.

In January 2022, we repaid the remaining balance of the Loan in full.

During the year ended February 28, 2022, we repaid $ 937,156 on the principal balance of the Loan and interest paid amounted to $ 32,791 .

Related Party Transactions

27 unchanged sentences

Solomita’s RSUs were outstanding of which 1,400,000 were vested (2022 – 400,000 ).

The vested units are settled annually in tranches of 200,000 units.

The unvested 3,000,000 RSUs would be forfeited if Mr.

Solomita left the Company, except in the case of termination without cause or resignation for good reason, in which case he would receive 50% of the unvested RSUs at the time of termination, or 100% in the case of termination without cause or resignation for good reason within 24 months after a change in control .

During the years ended February 28, 2022 and February 28, 2021, no outstanding milestones were probable of being met and, accordingly, the Company did not record any additional stock-based compensation expense.

When a milestone becomes probable, the corresponding expense will be valued based on the grant date fair value on April 30, 2020, the date of the last modification of Mr.

1 unchanged sentence

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

The vested units are settled annually in tranches of 200,000 units on October 15 of each year, unless Mr.

Solomita and the Company elect to defer settlement before such date.

The unvested 2,000,000 RSUs would be forfeited if Mr.

During the year ended February 28, 2023, Mr.

Solomita met a performance milestone in relation to the signature of a supply agreement with a customer.

Accordingly, 1,000,000 performance incentive RSUs with a fair value of $ 7,740,000 were earned and issuable to Mr.

This amount was reflected as stock-based compensation expense during the year ended February 28, 2023.

On October 14, 2022, Mr.

Solomita and the Company agreed to defer by one year the settlement of 400,000 RSUs that were set to settle on October 15, 2022.

During the year ended February 28, 2022, no outstanding milestones were probable of being met and, accordingly, the Company did not record any additional stock-based compensation expense.

Stockholders’ Equity

34 unchanged sentences

For the year ended February 28, 2023

Number of shares

Balance, February 28, 2022

Issuance of shares upon settlement of restricted stock units

Issuance of shares for cash

Issuance of shares upon exercise of warrants

Issuance of shares upon exercise of options

Balance, February 28, 2023

For the year ended February 28, 2022

Number of shares

Balance, February 28, 2021

Issuance of shares for cash

Issuance of shares upon the exercise of warrants

Issuance of shares upon settlement of restricted stock units

Issuance of shares for cash

Issuance of shares upon exercise of warrants

Issuance of shares upon exercise of options

Balance, February 28, 2022

1 unchanged sentence

The Company issued 81,168 shares of the common stock to settle restricted stock units that vested in the period.

During the year ended February 28, 2022, the Company recorded the following common stock transactions:

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

The Company issued 4,714,813 shares of its common stock, with warrants, at an aggregate offering price of $ 12.00 per share for total gross proceeds of $ 56,577,756 and net proceeds of $ 56,049,167 .

1 unchanged sentence

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

During the year ended February 28, 2021, the Company recorded the following common stock transactions:

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

The company issued 190,529 shares of its common stock upon the exercise of warrants.

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

The Company issued 25,388 shares of its common stock to settle restricted stock units that vested in the period.

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

5 unchanged sentences

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

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

Please see Note 18 for further details related to outstanding warrants.

The Third Tranche Warrants expired June 14, 2022.

Further details related to outstanding warrants are included in Note 19.

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

15 unchanged sentences

Research and development expenses for the years ended February 28, 2023 and February 28, 2022 were as follows:

February 28, 2023

February 28, 2022

Machinery and equipment expenditures

2 unchanged sentences

Plant and laboratory operating expenses

( 1,199,137 )

General and Administrative Expenses

General and administrative expenses for the years ended February 28, 2023 and February 28, 2022 were as follows:

February 28, 2023

February 28, 2022

Professional fees

1 unchanged sentence

Includes stock-based compensation expense.

In the year ended February 28, 2022, the Company accounted for RSU forfeitures for an amount of $ 935,837 (2021 – $ 4,005 ), which was recorded as a reversal of stock-based compensation expense.

During the year ended February 28, 2023, 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 13).

During the year period ended February 28, 2022, the Company recorded RSU forfeitures for an amount of $ 935,837 as a reversal of stock-based compensation.

Share-Based Payments

2 unchanged sentences

stock options

average exercise price

exercise price

stock options

Weighted average exercise price

exercise price

Outstanding, beginning of year

3 unchanged sentences

stock options outstanding

average remaining life (years)

Number of stock options outstanding

Weighted average remaining life (years)

remaining life

stock options

remaining life

Outstanding, end of year

2 unchanged sentences

Fair value is calculated based on a Black-Scholes option pricing model.

There were no new issuances of stock options for the years ended February 28, 2022 and February 28, 2021.

There were no new issuances of stock options for the years ended February 28, 2022.

The principal components of the pricing model for the stock options granted in the year ended February 28, 2023 were as follows:

Exercise price

Risk-free interest rate

Expected dividend yield

Expected volatility

Expected life

During the year ended February 28, 2023, stock-based compensation expense attributable to stock options amounted to $ 1,316,084 (2022 – $ 1,513,211 ).

1 unchanged sentence

The following table summarizes the continuity of the restricted stock units (“RSUs”) during the years February 28, 2023 and February 28, 2022:

Number of units

Weighted average fair value price

Number of units

Weighted average fair value price

Outstanding, beginning of year

2 unchanged sentences

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

Fair value is calculated based on the intrinsic value at grant date multiplied by the number of restricted stock unit awards granted.

During the year ended February 28, 2023, stock-based compensation attributable to RSUs amounted to $ 8,770,102 (2022 - $ 549,155 ).

During the year ended February 28, 2022, the Company recorded a reversal of expenses for forfeitures for a total of $ 963,022 (2021 – $ 4,005 ).

During the year ended February 28, 2023, the Company recorded a reversal of expenses for RSU forfeitures in the amount of $ 288,413 (2022 - $ 963,022 ).

Stock-Based Compensation Expense

During the years ended February 28, 2022 and February 28, 2021, stock-based compensation included in research and development expenses amounted to $ 1,536,734 and $ 1,417,004 respectively, and in general and administrative expenses amounted to $ 525,632 and $ 2,257,622 respectively.

During the year ended February 28, 2023, stock-based compensation included in research and development expenses amounted to $ 1,337,167 (2022 – $ 1,536,734 ), and in general and administrative expenses amounted to $ 8,749,019 (2022 – $ 525,632 ).

The amount recorded in general and administrative expenses for the year ended February 28, 2023 includes $ 7,740,000 related to the achievement of a performance milestone for 1,000,000 RSUs granted to the Company’s CEO (Note 13).

During the year ended February 28, 2023, the Company recorded a reversal of stock-based compensation for forfeitures included in research and development expenses of $ 79,096 (2022 – $ 27,185 ), and in general and administrative expenses of $ 209,317 (2022 – $ 935,837 ).

Equity Incentive Plan

7 unchanged sentences

The following table summarizes the continuity of the Company’s Equity Incentive Plan units during the years ended February 28, 2023 and February 28, 2022:

Number of units*

Outstanding, beginning of year

1 unchanged sentence

Units granted

( 1,123,605 )

Units forfeited

1 unchanged sentence

Outstanding, end of year

*The use of the term “units” in the table above describes a combination of stock options and RSUs.

The following table summarizes the continuity of warrants during the years February 28, 2023 and February 28, 2022:

Number of warrants

Weighted average

exercise price

Number of warrants

Weighted average

exercise price

2 unchanged sentences

The expiration dates of the warrants outstanding as at February 28, 2023 are as follows:

Number of warrants

exercise price

June 14, 2022

February 21, 2023

Weighted average exercise price

July 29, 2024

February 21, 2023

August 26, 2024

Outstanding, end of year

2 unchanged sentences

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 Finance Costs

Interest and Other Financial Expenses

Interest and other finance costs for the years ended February 28, 2023 and February 28, 2022 are as follows:

2 unchanged sentences

The components of the Company’s loss before taxes are summarized below:

February 28, 2023

February 28, 2022

$ ( 8,406,384 )

8 unchanged sentences

income tax rate and the Company’s effective income tax rate, as computed on loss before taxes, is as follows:

February 28, 2023

February 28, 2022

Statutory Federal rate

3 unchanged sentences

Effect of foreign jurisdiction

( 1,803,016 )

( 1,433,653 )

Non-deductible expenses

2 unchanged sentences

Effective income tax expense

On March 27, 2020, the US government signed the Coronavirus Aid, Relief and Economic Security (“CARES”) Act into law, a relief package to provide support to individuals, businesses and government organizations during the COVID-19 pandemic.

The income tax provisions contained in the CARES Act are not likely to have an impact for the Company.

The Company has net operating loss carry forwards of approximately $ 38,122,411 (2022 – $ 30,316,049 ) for U.S.

8 unchanged sentences

The tax effect of temporary differences between US GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:

February 28, 2023

February 28, 2022

Deferred tax assets

7 unchanged sentences

Deferred tax liabilities

Property, plant and equipment

Accrual and reserves

Research and Development and Investment tax credits

Unrealized foreign exchange

Deferred tax liabilities

10 unchanged sentences

Management does not believe that it is more likely than not that future taxable income will be sufficient to allow it to recover substantially all of the value assigned to its deferred tax assets.

Accordingly, the Company has provided for a valuation allowance of the Company’s deferred tax asset.

Accordingly, the Company has provided for a valuation allowance of the Company’s deferred tax assets.

The tax years subject to examination by major tax jurisdiction include the years ended February 28, 2019 and forward by the U.S.

2 unchanged sentences

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 first Infinite Loop ™ manufacturing facility 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 $ 3,395,650 .

Contingencies

On October 13, 2020, the Company and certain of its officers were named as defendants in a proposed class-action lawsuit filed in the United States District Court for the Southern District of New York, captioned Olivier Tremblay, Individually and on Behalf of All Other Similarly Situated v.

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

1 unchanged sentence

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

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

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

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

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

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

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

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

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

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

As discussed in Note 22, On March 1, 2022, the Company and the current and former officer defendants entered into an agreement for the settlement of the consolidated class action lawsuit, and recorded a contingency loss of $ 2,519,220 in the year ended February 28, 2022.

On March 1, 2022, the Company and the current and former officer defendants entered into an agreement for the settlement of In re Loop Industries, Inc.

Securities Litigation, and, on March 4, 2022, advised the Court of the agreement to settle.

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

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 and expected to be the Company’s approximate total cash contribution to the settlement and outstanding legal fees related to the lawsuit, net of the Company’s D&O insurance carriers’ contribution.

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

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

The Court held a final settlement hearing on January 5, 2023 after which the Court entered an order and final judgment approving the class action settlement.

In October 2022, the Company made a payment in escrow of $ 3,100,000 for the settlement and received $ 837,782 from its D&O insurance carriers.

As at February 28, 2023 the Company no longer has any amount related to the class action settlement included in accounts payable and accrued liabilities.

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

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

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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 is now expired.

Subsequent Events

On March 1, 2022, the Company and the current and former officer defendants entered into an agreement for the settlement of the Tremblay Class Action described in Note 21 above, and, on March 4, 2022, advised the Court of the agreement to settle.

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

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

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

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

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

On April 27, 2023, the Company and SK Geo Centric, Ltd (“SKGC”) entered into an agreement to deploy the Company’s depolymerization technology in the Asian market through multiple commercial manufacturing facilities.

Pursuant to the agreement, the Company and SKGC agreed to form a new entity, which will be headquartered in Singapore.

SKGC will contribute 51% and Loop will contribute 49% of the initial equity capital of the new entity.

The agreement outlines that the new entity will have exclusive rights to commercialize Loop’s technology in the Asian market and Loop will receive an annual royalty fee for each of the commercial plants.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data