What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-05-29 compared with 2023-05-18 · 232 added, 288 removed, 647 unchanged (45% of the section changed)

13 unchanged sentences

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.

and its subsidiaries (together, the Company) as of February 29, 2024 and February 28, 2023, and the related consolidated statements of operations and comprehensive loss, changes 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 29, 2024 and February 28, 2023, 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.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred net losses and negative cash flow from operating and investing activities since its inception that and has stated that these events or conditions indicate that a material uncertainty exists that raises substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

This matter is also described in the Critical Audit Matters section of our report.

Basis for Opinion

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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.

Going Concern Assessment

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

For the year ended February 29, 2024, the Company incurred a net loss of $21.1 million and the net cash flows used from operating activities was $18.0 million.

As of February 29, 2024, the Company’s available liquidity was $9.5 million, consisting of cash and cash equivalents of $6.9 million and an undrawn senior loan facility from a Canadian bank of $2.6 million.

Management estimates that current available liquidity and forecasted net cash flows will not be sufficient to meet the Company’s obligations, commitments and budgeted expenditures for the next twelve months from the consolidated financial statements issuance date.

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

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

In preparing this going concern 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 the estimation of amount and timing of future cash outflows and inflows.

This matter is also described in the Substantial Doubt About the Company’s Ability to Continue as a Going Concern section of our report.

The principal considerations for our determination that performing procedures relating to the going concern assessment is a critical audit matter are the significant judgment by management in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to the estimation of amount and timing of future cash outflows and inflows.

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 estimation of amount and timing of future cash outflows and inflows.

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;

These procedures included, among others, evaluating management’s assessment of whether the Company has sufficient cash resources for the next 12 months from the date of the issuance of the consolidated financial statements.

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

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

The evaluation of these assumptions considered (i) management’s historical accuracy in forecasting cash flows and settling 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.

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

/s/ PricewaterhouseCoopers LLP

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Consolidated Balance Sheets

(in United States dollars)

(in thousands of U.S.

dollars, except per share data)

February 29, 2024

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Prepaid expenses and other deposits (Note 6)

Assets held for sale (Note 6)

Total current assets

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Total current liabilities

Due to customer (Note 11)

Long-term debt (Note 13)

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Accumulated deficit

( 155,883,491 )

( 134,582,926 )

Accumulated other comprehensive loss

( 1,141,276 )

Total stockholders' equity

Total liabilities and stockholders' equity

Commitments and Contingencies (Note 22)

Going Concern (Note 1)

Commitments (Note 24)

See accompanying notes to the consolidated financial statements .

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Loss

(in United States dollars)

(in thousands of U.S.

dollars, except for share data)

February 29, 2024

6 unchanged sentences

Gain on disposition of land (Note 7)

( 16,683,492 )

Loss for legal settlement (Note 22)

Loss from equity-accounted investment (Note 11)

Interest and other financial expenses (Note 20)

Interest and other financial expenses (income) (Note 21)

Interest income

Foreign exchange (gain) loss

( 21,300,565 )

( 44,920,956 )

Other comprehensive loss -

Foreign exchange gain

Other comprehensive income (loss) -

Foreign currency translation adjustment

( 1,045,243 )

Comprehensive loss

$ ( 22,345,808 )

$ ( 45,010,399 )

Net loss per share

2 unchanged sentences

Basic and diluted

Going Concern (Note 1)

See accompanying notes to the consolidated financial statements.

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(in United States dollars)

(in thousands of U.S.

dollars, except for share data)

Year ended February 29, 2024

2 unchanged sentences

par value $0.0001

Comprehensive

Accumulated Deficit

Comprehensive Loss

Stockholders' Equity

Balance, February 28, 2023

$ ( 155,883 )

$ ( 89,661,970 )

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 15 and 18)

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

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

Stock options granted for services (Note 17)

Restricted stock units granted for services (Note 17)

Issuance of shares upon the exercise of stock options (Notes 15 and 18)

Stock options issued (Note 18)

Restricted stock units issued (Note 18)

Foreign currency translation

( 44,920,956 )

Balance, February 29, 2024

$ ( 176,970 )

$ ( 134,582,926 )

Going Concern (Note 1)

See accompanying notes to the consolidated financial statements.

3 unchanged sentences

(in United States dollars)

(in thousands of U.S.

dollars, except for share data)

Year ended February 28, 2023

2 unchanged sentences

par value $0.0001

Comprehensive

Stockholders’

Additional Paid-in Capital

Accumulated Deficit

Comprehensive Loss

Stockholders' Equity

Balance, February 28, 2022

$ ( 134,582 )

$ ( 134,582,926 )

Issuance of shares upon the vesting of restricted stock units (Notes 15 and 18)

Expiration of warrants (Note 20)

( 9,886,986 )

Stock options issued for services (Note 17)

Restricted stock units issued for services (Note 17)

Stock options issued (Note 18)

Restricted stock units issued (Note 18)

Foreign currency translation

( 1,045,243 )

( 21,300,565 )

Balance, February 28, 2023

$ ( 155,883 )

$ ( 155,883,491 )

$ ( 1,141,276 )

Going Concern (Note 1)

See accompanying notes to the consolidated financial statements.

2 unchanged sentences

(in United States dollars)

(in thousands of U.S.

February 29, 2024

1 unchanged sentence

Cash Flows from Operating Activities

$ ( 21,300,565 )

$ ( 44,920,956 )

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Stock-based compensation (Note 18)

Write-down of inventory (Note 4)

Discount on due to customer (Note 11)

Gain on disposition of land (Note 7)

( 16,683,492 )

Payment of legal settlement, net (Note 23)

( 2,262,218 )

Loss for legal settlement (Note 22)

Loss from equity-accounted investment (Note 11)

Accretion and accrued interest (Notes 11, 13 and 21)

4 unchanged sentences

Accounts payable and accrued liabilities (Note 10)

( 4,562,512 )

( 2,089,679 )

Net cash used in operating activities

( 34,891,759 )

( 40,562,661 )

Cash Flows from Investing Activities

2 unchanged sentences

Additions to property, plant and equipment (Note 7)

( 4,815,847 )

Additions to intangible assets (Note 8)

Net cash used in investing activities

( 7,533,087 )

Net cash (used in) provided by investing activities

Cash Flows from Financing Activities

Customer deposits (Note 11)

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

Proceeds from issuance of long-term debt (Note 12)

Repayment of long-term debt (Note 13)

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes

Net change in cash, cash equivalents and restricted cash

( 13,470,741 )

Cash, cash equivalents and restricted cash, beginning of year

4 unchanged sentences

Interest received

Going Concern (Note 1)

See accompanying notes to the consolidated financial statements.

2 unchanged sentences

Notes to the Consolidated Financial Statements

(in United States dollars except where otherwise indicated)

The Company and Basis of Presentation

(in thousands of United States dollars except where otherwise indicated)

The Company and Basis of Presentation and Going Concern

Loop Industries, Inc.

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

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

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

8 unchanged sentences

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

Summary of Significant Accounting Policies

Liquidity Risk Assessment

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, 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.

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

(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’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.

All monetary amounts in these notes to the condensed consolidated financial statements are in thousands of U.S.

dollars unless otherwise specified, except for per share data.

Going Concern

These consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due.

In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the date of issuance of these consolidated financial statements.

Since its inception, the Company has been in the pre-commercialization stage with no material revenues from customers, and its ongoing operations and commercialization plans have been financed primarily by raising equity.

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

As at February 29, 2024, the Company’s available liquidity was $ 9,537 , consisting of cash and cash equivalents of $ 6,958 and an undrawn senior loan facility from a Canadian bank of $ 2,579 .

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

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

Based on its assessment, management estimates that current available liquidity and forecasted net cash flows will not be sufficient to meet the Company’s obligations, commitments and budgeted expenditures the next twelve months from the consolidated financial statements issuance date.

These events and conditions are material uncertainties that raise substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of accounting principles applicable to a going concern.

The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent on, among other factors, 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 and/or customers.

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

1 unchanged sentence

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.

The Company is seeking to finalize the negotiation of previously announced financing initiatives on acceptable terms, although there is no assurance it will succeed.

These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations.

Such adjustments could be material.

Summary of Significant Accounting Policies

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.

This standard applies to all contracts with customers, except for contracts with customers 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.

15 unchanged sentences

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, 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.

Those estimates and assumptions include the going concern assessment, the net realizable value of inventories, estimates for depreciable lives of property, plant and equipment and intangible assets, recoverability of tax credits receivable, 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

24 unchanged sentences

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

Deferred financing costs, debt discounts, discount on due to customer and other transaction costs

Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing.

These fees are amortized as a component of interest expense over the terms of the respective financing agreements on a straight-line basis.

These fees are amortized as a component of interest expense over the terms of the respective financing agreements using the effective interest rate method.

Unamortized deferred financing fees are expensed in full when the associated debt is refinanced or repaid before maturity.

13 unchanged sentences

Property, plant and equipment

Property, plant and equipment 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 the following periods:

Property, plant and equipment are recorded at cost, net of accumulated amortization and impairment, and are amortized over their estimated useful lives at the time they are put to use, unless the useful life is indefinite, using the straight-line method over the following periods:

Office equipment and furniture

8 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.

Assets held for sale

Assets are classified as held for sale when they met the criteria set out in ASC 360-10-45-9 Long-lived assets classified as held for sale :

Management, having the authority to approve the action, commits to a plan to sell the asset;

The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;

An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated;

The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year;

The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

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 amortized cost in current assets.

Stock‑based compensation

8 unchanged sentences

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.

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

Inventories expensed during the year are classified as research and development expenses in the consolidated statement of operations and comprehensive loss.

The Company separates its inventories into three main categories:

1 unchanged sentence

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 work in process category includes goods that are in the production process at the balance sheet date and mainly comprises recycled 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.

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 a customer deposit which is restricted for use on a commercial project, as discussed in Note 11.

There was no restricted cash as at February 29, 2024.

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.

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

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.

9 unchanged sentences

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Net loss per share

Net earnings (loss) per share

The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share .

5 unchanged sentences

As at February 29, 2024, the potentially dilutive securities consisted of 2,772,000 outstanding stock options (2023 – 2,542,000 ), 4,368,897 outstanding restricted stock units (2023 – 3,888,618 ), and 7,089,400 outstanding warrants (2023 – 7,089,400 ).

Recently adopted accounting pronouncements

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

This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments.

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.

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.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-09—Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures.

The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures.

The updated standard is effective for our annual periods beginning after December 15, 2024.

Early adoption is permitted.

We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements, other than additional disclosures in our notes to the consolidated financial statements.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The updated standard is effective for our annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026.

Early adoption is permitted.

We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

The Company has determined that all other recently issued accounting pronouncements will not have a material impact on the Company’s consolidated financial statements or do not apply to its operations.

Sales Tax, Tax Credits and Other Receivables

Sales tax, research and development tax credits and other receivables as at February 29, 2024 and February 28, 2023 were as follows:

February 29, 2024

February 28, 2023

Investment tax credits

Research and development tax credits

Interest income receivable

Other receivables

14 unchanged sentences

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.

During the year ended February 29, 2024, the Company recorded investment tax credits of $ 56 (2023 – $ 837 ) as a reduction of research and development expenses and received $ 522 (2023 – $ 348 ) from taxation authorities for investment tax credits.

Inventories as at February 29, 2024 and February 28, 2023 were as follows:

Work in process

February 29, 2024

February 28, 2023

Finished goods

Work in process

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, 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.

Allowance for inventory write-down

As at February 29, 2024 and February 28, 2023, inventories included finished goods, work in process and raw materials.

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

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

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

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

As at February 29, 2024 and February 28, 2023, finished goods and work in process inventories were presented at their net realizable value, while raw materials were presented at average cost.

As at February 29, 2024, the Company recorded an allowance for inventory write-down of $ 817 (2023 – nil) on finished goods and work in process inventories related to inventory volumes not expected to be sold in the next twelve months.

Deposits on Machinery and Equipment

As at February 28, 2023, the Company had $ 3,395 of non-refundable cash deposits on long-lead equipment that are intended to be used in a planned Infinite Loop ™ manufacturing facility.

During the year ended February 29, 2024, the Company made additional payments of $ 5,065 on the long-lead equipment and on December 20, 2023 ownership was transferred to the Company.

The total carrying amount of $ 8,460 related to the long-lead equipment is presented in property, plant and equipment as at February 29, 2024 (Note 7), with no amounts remaining as deposits.

Prepaid Expenses and Other Deposits

Prepaid expenses and other deposits as at February 29, 2024 and February 28, 2023 were as follows:

February 29, 2024

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

February 28, 2023

Property, Plant and Equipment, net

2 unchanged sentences

Net book value

$ ( 309,296 )

Machinery and equipment

Building and Land Improvements

( 1,165,795 )

Office equipment and furniture

$ ( 1,615,098 )

As at February 28, 2023

1 unchanged sentence

Net book value

$ ( 266,434 )

Building and Land Improvements

Office equipment and furniture

$ ( 1,251,600 )

In December 2021, the Company entered into an agreement for the purchase of long-lead equipment in connection with the construction of a planned Infinite Loop ™ manufacturing facility.

Pursuant to the agreement, the Company has paid $ 8,460 , and no additional amounts were owing as at February 29, 2024.

During the year ended February 29, 2024, the manufacturing of the long-lead equipment was completed and its ownership was transferred to the Company and is not currently in use.

The equipment is being held in storage with the intention to be used in the planned Infinite Loop ™ manufacturing facility in Ulsan, South Korea.

Pursuant to the joint venture agreement (the “Agreement”) entered into by the Company and SK Geo Centric Co.

(“SKGC”) on April 27, 2023, a new entity, owned 51 % by SKGC and 49 % by the Company, will be formed to build and operate the Infinite Loop ™ manufacturing facility in Ulsan.

As at February 29, 2024, the long-lead equipment was presented in machinery and equipment at cost, which represents the amount at which it is expected to be transferred to the new entity.

Depreciation expense amounted to $ 387 for the year ended February 29, 2024 (2023 – $ 459 ).

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, 2022, the Company acquired land in Bécancour, Québec for cash of $ 4,335 (CDN $5,900) and subsequently incurred civil construction costs of $ 1,074 in land improvements.

During the year ended February 28, 2023, the Company sold the land for cash net proceeds of $ 22,314 (CDN $29,900) and a gain on disposition of the asset of $ 16,683 .

3 unchanged sentences

Net proceeds of disposition

( 4,335,366 )

Cost of land improvements

( 1,074,453 )

Foreign exchange effect

1 unchanged sentence

Intangible Assets, net

As at February 29,

As at February 28,

Patents, at cost – beginning of year

9 unchanged sentences

During the year ending February 29, 2024, 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.

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

patents and five pending U.S.

applications.

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.

Internationally, the Company also has issued or allowed patents in many foreign jurisdictions, including Algeria, Brazil, Bangladesh, China, India, Indonesia, Japan, Morocco, South Korea, and Taiwan 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.

3 unchanged sentences

The following table presents the fair value of the Company’s financial liabilities at February 29, 2024 and February 28, 2023:

Fair Value as at February 28, 2023

Fair Value at February 29, 2024

Carrying Amount

2 unchanged sentences

Long-term debt

Fair Value at February 28, 2022

Due to customer

Fair Value as at February 28, 2023

Carrying Amount

2 unchanged sentences

Long-term debt

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.

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

Currency Risk

13 unchanged sentences

Accounts payable and accrued liabilities as at February 29, 2024 and February 28, 2023 were as follows:

February 29, 2024

February 28, 2023

Trade accounts payable

Accrued legal settlement (Note 22)

Accrued employee compensation

2 unchanged sentences

Other accrued liabilities

Customer Deposits

Customer Deposit & Due to Customer

In October 2022, the Company received a cash deposit from a customer of $ 1,000 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

The deposit was intended 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 was designated for expenditures related to a planned Infinite Loop ™ manufacturing facility and was refundable to the customer in the event that the Infinite Loop ™ manufacturing facility was not constructed.

As the cash deposit was restricted in its use, it was reflected as restricted cash as at February 28, 2023 and a corresponding contract liability was recognized in the consolidated balance sheet.

Upon mutual agreement, the capacity reservation agreement with the customer was terminated on January 18, 2024.

The customer and the Company agreed for the deposit to be refunded in full on July 1, 2027, with no restriction on the Company’s use of the funds.

The amount bears no interest.

The cause of the termination is related to the customer’s decision to abandon its plans to incorporate rPET in its products for technical reasons.

The Company reclassified the customer deposit as a due to customer and established its fair value at $ 762 based on a discount rate of 8.20 %, which reflected a discount of $ 238 .

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

The discount on due to customer is amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss.

During the year ended February 29, 2024, the Company recorded an accretion expense of $ 8 (2023 – nil).

Investment in Joint Venture

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

Each company has a 50/50 equity interest in Indorama Loop Technologies, LLC (“ILT”), which was specifically formed to operate and execute the joint venture.

Under the Joint Venture Agreement, Indorama Ventures is contributing manufacturing knowledge and Loop is required to contribute its proprietary technology.

Specifically, the Company contributed an exclusive worldwide royalty-free license to ILT to use its proprietary technology to produce 100% sustainably produced PET resin and polyester fiber.

ILT meets the accounting definition of a joint venture where neither party has control of the joint venture entity and both parties have joint control over the decision-making process in ILT.

3 unchanged sentences

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.

Due to these advancements, during the fourth quarter of fiscal 2022, the Company assessed that the value of the engineering design costs capitalized in ILT were obsolete and no longer recoverable.

Therefore, the Company recorded a loss of $ 1,119,078 on its investment in ILT during the year ended February 28, 2022, representing the Company’s 50 % portion of the impairment of engineering design costs capitalized in ILT.

As at February 29, 2024, the carrying value of the equity investment was $ 381 (2023 – $ 381 ), which represents 50 % of the cash balance in ILT.

To conform with the terms of the SK strategic partnership described in Note 14, on June 18, 2021, the Company, Loop Innovations, LLC, a wholly-owned subsidiary of the Company (“Loop Innovations”), Indorama Ventures Holdings LP (“Indorama”) and Indorama Loop Technologies, LLC (the “Indorama Joint Venture Company”) amended (i) the Limited Liability Company Agreement between Loop Innovations, LLC and Indorama Ventures Holdings LP (the “LLC Agreement”), (ii) the Marketing Agreement between the Company and Indorama Loop Technologies, LLC (the “Marketing Agreement”) and (iii) the License Agreement between the Company and the Indorama Joint Venture Company (the “License Agreement”), each dated September 24, 2018 (collectively such amendments, the “Indorama Joint Venture Amendments”).

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

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

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

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

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

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

10 unchanged sentences

On February 21, 2020, the Company received $ 1,628 (CDN$2,209) from Investissement Québec as the first disbursement of our financing facility, out of a maximum of $ 3,390 (CDN$4,600) (the “Financing Facility”).

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

The Company established the fair value of the loan for the first disbursement at $ 1,354 based on a discount rate of 5.45 %, which reflected a debt discount of $ 291 .

20 unchanged sentences

The First Disbursement Warrants expired in the year ended February 28, 2023 and the Second Disbursement Warrants remain outstanding as at February 29, 2024.

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.

As per the Financing Facility Amendment, a total of $ 37 (CDN $50) of the principal amount was repayable in monthly installments in the fiscal year ended February 29, 2024, with the remainder of the principal amount being repayable in 72 monthly installments.

On February 28, 2024, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Second Financing Facility Amendment”).

As per the Second Financing Facility Amendment, a total of $ 74 (CDN $100) of the principal amount is repayable in monthly installments in the fiscal year ending February 28, 2025, with the remainder of the principal amount being repayable in 60 monthly installments.

Pursuant to the Second Financing Facility Amendment the interest rate of the Financing Facility was increased from 2.36 % to 3.36 %.

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.

The amendments do not modify the repayment terms of accrued interest or any of the other terms of the Financing Facility that are not mentioned above.

The amendments did not meet the criteria of ASC 470, Debt for an extinguishment of debt as the amendments did not 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 amendments.

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

6 unchanged sentences

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 allows for borrowings of up to $ 2,579 (CDN $3,500) in aggregate principal amount and provides for a two-year term on amounts drawn.

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 29, 2024.

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 29, 2024, the $ 2,579 (CDN $3,500) 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

6 unchanged sentences

This was modified to provide a grant of 4,000,000 restricted stock units covering 4,000,000 shares of the Company’s common stock while the performance milestones remained the same.

The grant of the restricted stock units became effective upon approval by the Company’s shareholders at the Company’s 2019 annual meeting, of an increase in the number of shares available for grant under the Plan.

Such approval was granted by the Company’s shareholders at the Company’s 2019 annual meeting.

The grant of the restricted stock units became effective upon approval by the Company’s stockholders at the Company’s 2019 annual meeting, of an increase in the number of shares available for grant under the 2017 Equity Incentive Plan (the “Plan”).

Such approval was granted by the Company’s stockholders at the Company’s 2019 annual meeting.

The restricted stock units vest upon the achievement of applicable performance milestones, as follows:

14 unchanged sentences

Solomita’s employment agreement.

The amendment clarified the milestones consistent with the shift in the Company’s business from the production of terephthalate to the production of dimethyl terephthalate, another proven monomer of PET plastic that is simpler to purify.

As at February 29, 2024, 3,400,000 (2023 – 3,400,000 ) of Mr.

9 unchanged sentences

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.

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

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

1 unchanged sentence

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.

On October 12, 2023, Mr.

Solomita and the Company agreed to defer by one year the settlement of 800,000 RSUs that were set to settle on October 15, 2023.

During the year ended February 29, 2024, no outstanding milestones were probable of being met and, accordingly, no additional stock-based compensation expense was recorded.

Stockholders’ Equity

Series A Preferred Stock

Solomita’s amended employment agreement of February 15, 2016 provides that the Company shall issue to Mr.

Solomita’s amended employment agreement of February 15, 2016 provided that the Company shall issue to Mr.

Solomita one share of the Company’s Series A Preferred Stock in exchange for Mr.

Solomita agreeing not to terminate his employment with the Company for a period of five years from the date of the agreement.

The agreement effectively provides Mr.

Solomita agreeing not to terminate his employment with the Company for a period of five years from the date of the amendment.

The amendment effectively provides Mr.

Solomita with a “change of control” provision over the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to less than a majority.

1 unchanged sentence

Solomita his one share of Series A Preferred Stock under the amendment, the Company created a “blank check” preferred stock.

Subsequently, the board of directors of the Company approved a Certificate of Designation creating the Series A Preferred Stock.

Subsequently, the Company issued one share of Series A Preferred Stock to Mr.

Subsequently, the Board of Directors of the Company approved a Certificate of Designation creating the Series A Preferred Stock, and the Company issued one share of Series A Preferred Stock to Mr.

The one share of Series A Preferred Stock issued to Mr.

Solomita holds a majority of the total voting power so long as Mr.

Solomita holds not less than 7.5% of the issued and outstanding shares of common stock of the Company, assuring Mr.

Solomita holds not less than 7.5% of the total number of outstanding shares of our common stock on February 12, 2016 (as adjusted for any stock splits and stock dividends effected after February 12, 2016), assuring Mr.

Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to a level below a majority.

2 unchanged sentences

Additionally, the one share of Series A Preferred Stock issued to Mr.

Solomita contains protective provisions, which precludes the Company from taking certain actions without Mr.

Solomita contains protective provisions, which preclude the Company from taking certain actions without Mr.

Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval.

18 unchanged sentences

Issuance of shares upon settlement of restricted stock units

Issuance of shares upon the exercise of stock options

Balance, February 29, 2024

3 unchanged sentences

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

1 unchanged sentence

The Company issued 51,963 shares of the common stock to settle restricted stock units that vested in the period.

The Company issued 7,721 shares of the common stock to settle stock options exercised in the period.

During the year ended February 28, 2023, the Company recorded the following common stock transactions:

The Company issued 81,168 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 .

The Company issued 11,666 shares of its common stock upon the exercise of a warrant.

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

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”).

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

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

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

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

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

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

The 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:

First Tranche Warrants

Second Tranche Warrants

Third Tranche Warrants

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

The principal components of the pricing model were as follows:

First Tranche Warrants

Second Tranche Warrants

Third Tranche Warrants

Exercise price

Risk-free interest rate

Expected dividend yield

Expected volatility

Expected life

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

Research and Development Expenses

2 unchanged sentences

February 28, 2023

Machinery and equipment expenditures

Employee compensation

Machinery and equipment expenditures

External engineering

Plant and laboratory operating expenses (1)

( 1,199,137 )

The amount for the year ended February 29, 2024 includes an inventory write-down of $ 817 (2023 – nil) on finished goods and work in process inventories related to inventory volumes not expected to be sold in the next twelve months (Note 4).

General and Administrative Expenses

2 unchanged sentences

February 28, 2023

Professional fees

Employee compensation (1)

Professional fees

Includes 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.

During the year ended February 28, 2023, the Company recorded a stock-based compensation expense of $ 7,740 related to the achievement of a performance milestone for 1,000,000 RSUs (Note 14).

Share-Based Payments

1 unchanged sentence

The following tables summarizes the continuity of the Company’s stock options during the years ended February 29, 2024 and February 28, 2023:

stock options

exercise price

stock options

exercise price

Number of stock options

Weighted average exercise price

Number of stock options

Weighted average exercise price

Outstanding, beginning of year

2 unchanged sentences

Exercise price

stock options outstanding

remaining life

stock options

remaining life

Number of stock options outstanding

Weighted average remaining life (years)

Number of stock options outstanding

Weighted average remaining life (years)

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.

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

The principal components of the pricing model for the stock options granted in the years ended February 29, 2024 and February 28, 2023 were as follows:

Exercise price

16 unchanged sentences

During the year ended February 29, 2024, stock-based compensation attributable to RSUs amounted to $ 778 (2023 - $ 8,770 ).

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 ).

During the year ended February 28, 2023, the Company recorded a stock-based compensation expense of $ 7,740 related to the achievement of a performance milestone for 1,000,000 RSUs.

Stock-Based Compensation Expense

During the year ended February 29, 2024, stock-based compensation included in research and development expenses amounted to $ 542 (2023 – $ 1,337 ), and in general and administrative expenses amounted to $ 880 (2023 – $ 8,749 ).

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 ).

The amount recorded in general and administrative expenses for the year ended February 28, 2023 includes $ 7,740 related to the achievement of a performance milestone for 1,000,000 RSUs.

Equity Incentive Plan

On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”).

On July 6, 2017, the Company adopted the Plan.

The Plan permits the granting of warrants, stock options, stock appreciation rights and restricted stock units to employees, directors and consultants of the Company.

A total of 3,000,000 shares of common stock were initially reserved for issuance under the Plan at July 6, 2017, with annual automatic share reserve increases, as defined in the Plan, amounting to the lessor of (i) 1,500,000 shares, (ii) 5 % of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) or such number of shares determined by the Administrator of the Plan, effective March 1, 2018.

On March 1, 2022 and 2021, the Board of Directors opted to waive the annual share reserve increase.

A total of 3,000,000 shares of common stock were initially reserved for issuance under the Plan at July 6, 2017, with annual automatic share reserve increases, as defined in the Plan, amounting to the lessor of (i) 1,500,000 shares, (ii) 5 % of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Administrator of the Plan, effective March 1, 2018.

On March 1, 2023, the share reserve was increased by 1,500,000 shares.

On March 1, 2022, the Board of Directors opted to waive the annual share reserve increase.

The Plan is administered by the Board of Directors who designates eligible participants to be included under the Plan, the number of awards granted, the share price pursuant to the awards and the vesting conditions and period.

1 unchanged sentence

However, where a participant, at the time of the grant, owns stock representing more than 10 % of the voting power of the Company, the life of the options shall not exceed 5 years.

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

The following table summarizes the continuity of the Company’s Equity Incentive Plan units that were authorized for issuance as at and during the years ended February 29, 2024 and February 28, 2023:

Number of units*

Outstanding, beginning of year

Share reserve increase

Authorized, beginning of period

Automatic share reserve increase

Units granted

2 unchanged sentences

Units expired

Outstanding, end of year

Authorized, end of period

*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:

Weighted average

exercise price

Weighted average

exercise price

The following table summarizes the continuity of warrants during the years ended February 29, 2024 and February 28, 2023:

Weighted average exercise price

Outstanding, beginning of year

( 4,570,018 )

Outstanding, end of year

5 unchanged sentences

Warrant granted to SK Geo Centric, Ltd.

in the transaction described in Note 14:

(“SKGC”) pursuant to the securities purchase agreement entered into by the Company and SKGC on June 22, 2021:

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.

1 unchanged sentence

Interest and other finance costs for the years ended February 29, 2024 and February 28, 2023 are as follows:

Interest on long-term debt

Accretion expense

Interest on long-term debt (Note 13)

Accretion expense (Notes 11 and 13)

Discount on due to customer (Note 11)

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

1 unchanged sentence

February 28, 2023

$ ( 8,406,384 )

$ ( 12,690,909 )

Foreign operations

( 12,894,181 )

( 32,230,047 )

Loss before taxes

$ ( 21,300,565 )

$ 44,920,956 )

A reconciliation from the statutory U.S.

4 unchanged sentences

Federal income tax at statutory rate

$ ( 4,473,117 )

$ ( 9,433,405 )

Effect of foreign jurisdiction

27 unchanged sentences

Valuation allowance

( 33,675,981 )

( 29,329,193 )

Deferred tax assets, net

8 unchanged sentences

Internal Revenue Service and most state jurisdictions, and the years ended February 28, 2019 and forward for the Canadian jurisdiction.

Commitments and Contingencies

Agreement to purchase of machinery and equipment

In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment in connection with the construction of our 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

Legal Settlement

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 Others Similarly Situated v.

1 unchanged sentence

7:20-cv-08538-NSR (“Tremblay Class Action”).

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

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

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

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 Others Similarly Situated v.

1 unchanged sentence

7:20-cv-09031-NSR.

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

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

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

3 unchanged sentences

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.

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

Defendants served a motion to dismiss the consolidated amended complaint on April 27, 2021.

2 unchanged sentences

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.

The agreement, which was 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 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.

5 unchanged sentences

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.

and certain of their officers and directors were named as defendants in a proposed securities class action filed in the Superior Court of Québec (District of Terrebonne, Province of Québec, Canada), in file no.

700-06-000012-205.

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 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.

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 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.

Contractual agreement

Agreement with SKGC

On April 27, 2023, the Company and SKGC entered into an agreement to build Infinite Loop ™ manufacturing facilities in Asia.

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

To date, no amounts have been contributed by the Company to the new entity.

Subsequent Events

Strategic partnership with Ester Industries Ltd.

On May 1, 2024, Loop entered into an agreement with Ester, a manufacturer of polyester films and specialty polymers in India, to form a 50/50 joint venture based in India ("India JV").

The purpose of the India JV is to build and operate an Infinite Loop ™ manufacturing facility in India which will produce lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop ™ Technology.

Subject to the terms of the relevant governing documents, Ester will be the exclusive producer of specialty polymers for the India JV, and Loop will be the exclusive seller and marketing agent of the India JV’s products.

Ester and Loop will work in collaboration on all financing activities for the India JV pursuant to the terms of the Agreement and will each contribute 50% of the initial equity capital of the India JV .

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 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