What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-15 compared with 2024-01-16 · 134 added, 290 removed, 123 unchanged (78% of the section changed)

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

(i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our current and future financial commitments, (vi) engineering, contracting, and building our manufacturing facilities, (vii) our ability to scale, manufacture, and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) the ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (x) our joint venture projects and our ability to recover certain expenditures in connection therewith, (xi) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xii) disease epidemics and other health-related concerns and crises, which could result in reduced access to capital markets, supply chain disruptions and scrutiny, embargoing of goods produced in affected areas, government-imposed mandatory business closures and any resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, or market or other changes that could result in non-cash impairments of our intangible assets, and property, plant and equipment, (xiii) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xiv) the outcome of any SEC investigations or class action litigation filed against us, (xv) our ability to hire and/or retain qualified employees and consultants, (xvi) other events or circumstances over which we have little or no control, and (xvii) other factors discussed in our subsequent filings with the SEC.

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

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as at the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are based upon information available to us as at the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

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Depolymerization is the opposite of polymerization.

DMT is an acronym for dimethyl terephthalate, which is a monomer used in the production of polyethylene terephthalate (“PET”).

MEG is an acronym for monoethylene glycol, which is a monomer used in the production of PET.

DMT is an acronym for dimethyl terephthalate, which is a monomer used in the production of polyethylene terephthalate (“PET”), as well as other products.

MEG is an acronym for monoethylene glycol, which is a monomer used in the production of PET, as well as other products.

Polymerization refers to a process of reacting monomer molecules together in a chemical reaction to form polymer chains or three-dimensional networks.

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PET is also used as a polyester fiber for a variety of applications including textiles, clothing and apparel.

rPET is an acronym for recycled polyethylene terephthalate.

rPET, rDMT and rMEG are acronyms for recycled PET, DMT and MEG.

All monetary amounts in this Quarterly Report on Form 10-Q are in thousands of U.S.

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

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

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

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

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

We also intend to leverage the Infinite Loop ™ Technology to expand into specialty chemicals and polymers through a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers.

Loop intends to produce and sell rDMT, rMEG and other specialty polymers directly to chemical companies as a simple drop-in supplement and circular alternative.

We believe this expanded product portfolio will enable the Infinite Loop ™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging and other applications.

This recent expansion in Loop’s product offering is non-reliant on green premiums or carbon and plastic credits, and we believe it addresses a global shortage in supply of DMT and high demand for low carbon MEG, and lowers capital intensity for commercial projects with the removal of polymerization equipment.

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

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

Supply Agreements with Global Consumer Brands

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

We believe Loop ™ PET resin provides the ideal solution for these brands because it is recyclable and is made from 100% recycled PET waste and polyester fiber, while being virgin-quality and suitable for use in food-grade packaging and polyester fiber.

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

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

Multi-year supply agreement with Danone SA (“Danone”), one of the world’s leading global food and beverage companies, enabling Danone to purchase 100% sustainable and upcycled Loop ™ branded PET for use in brands across its portfolio including evian®, Danone’s iconic natural spring water;

Multi-year supply agreement with L’OCCITANE en Provence (“L’OCCITANE”) to supply 100% recycled and sustainable Loop ™ PET resin and incorporate Loop ™ PET resin into its product packaging;

Multi-year supply agreement with L’Oréal Group, the global leader in the beauty industry, enabling L’Oréal Group to purchase production capacity and incorporate Loop ™ PET resin into its product packaging.

We also have a signed letter of intent with On AG, a sportswear brand and subsidiary of On Holding AG, to secure volumes of Loop™ PET resin from the Asian Infinite Loop™ manufacturing facility in Ulsan, South Korea, which Loop is planning to construct with its strategic partner SK Geo Centric (“SKGC”).

We are pursuing amended supply agreements with existing customers and new agreements with additional customers that are located in North America, Europe, and Asia to sell the production volumes of our planned Infinite Loop ™ commercial facilities.

Strategic Partnership with SKGC

In June 2021, Loop and SKGC concluded a definitive agreement for SKGC to become a strategic investor in Loop, with SKGC acquiring a 10% stake in Loop at $12.00 per share for a total of $56.5 million.

The transaction, which closed in July 2021, also included warrants for SKGC to purchase Loop common stock at $15.00 and $20.00 per share.

Concurrent with the strategic investment, Loop and SKGC entered into a memorandum of understanding (“MOU”) to form a joint venture with exclusivity to build sustainable PET plastic and polyester fiber manufacturing facilities throughout Asia.

SKGC is a global chemical company and member of the SK Group, one of South Korea’s largest conglomerates.

SKGC is a general energy and chemical leader in the global market and is growing into a technology-based global chemical company through continuous R&D efforts.

SKGC aims to achieve its “Green for Better Life” vision by establishing a plastics based circular economy through collaboration with various partners and stakeholders, such as Loop.

Asia represents approximately 60% of the world’s population and 70% of global PET consumption and is the main hub for the polyester fiber supply chain for textiles.

The Asian market represents a prime opportunity for Loop’s growth and commercialization of its technology.

SKGC is well established with a deep understanding of the Asian market, and vast expertise in building and operating large-scale petrochemical facilities, making them a uniquely well-suited partner for Loop in helping to ensure the successful commercialization of Loop’s technology in this market.

On April 27, 2023, Loop and SKGC entered into a joint venture agreement (the “JV Agreement”) to deploy Loop’s depolymerization technology in the Asian market through multiple commercial manufacturing facilities.

Pursuant to the JV Agreement, Loop and SKGC agreed to form a new company (the “JV Company”), which will be headquartered in Singapore.

SKGC will contribute 51% and Loop will contribute 49% of the initial equity capital of the JV Company.

The JV Agreement outlines that the JV Company 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.

The first planned commercial manufacturing facility with Infinite Loop™ technology, located in Ulsan, South Korea, is expected to have an annual capacity to supply up to 70,000 metric tons per year of Loop™ PET resin for packaging and polyester fiber applications, and is anticipated to break ground in the first half of 2024 and to have construction completed in 2026.

In addition to Infinite Loop™ Ulsan, the two partners have outlined plans which target a minimum of three additional commercial manufacturing facilities to be constructed throughout Asia by 2030.

Loop and SKGC have partnered with SK ecoengineering, a subsidiary of the SK Group that brings considerable experience and proficiency as an EPC contractor, for the engineering and construction of the commercial manufacturing facilities.

Currently, the DMT market is largely dominated by few key players, leaving limited options for customers and high market concentration.

Additionally, the market is experiencing a global shortage of DMT, amplifying market challenges and creating a pressing need for alternative sources.

The introduction of Loop’s rDMT has the potential to shift the market dynamic by offering a sustainable alternative to traditional DMT produced from fossil fuels.

In parallel, low-carbon MEG is in high demand and customers are increasingly seeking alternative solutions, but market options are limited and costly.

As sustainability concerns intensify and regulatory pressures mount, the demand for low carbon MEG solutions is expected to continue to grow.

Loop’s rMEG has the potential to address a gap in the market and help fulfill customers’ needs by offering a lower carbon footprint recycled alternative to the current market options for MEG.

Strategic partnership with Ester Industries Ltd.

On May 1, 2024 Loop entered into an agreement with Ester, one of India's leading manufacturers of polyester films and specialty polymers, to form a 50/50 India joint venture (“India JV”).

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

Loop and Ester have a well-established working relationship, with Ester producing Loop ™ PET using monomers produced at Loop’s Terrebonne Facility for global brand companies over the last four years.

The India JV intends to leverage the complementary skill set of each partner by combining Loop's innovative technology and global customer relationships with Ester's nearly 40 years of specialized polymer production, operational proficiency, and local expertise, including sourcing of PET plastic and polyester fiber waste feedstocks.

The Infinite Loop ™ India facility is expected to produce 70,000 tonnes of rDMT and 23,000 tonnes of rMEG annually and Ester will toll convert the rDMT and rMEG into various grades of specialty polymers, offering chemical companies a simple drop-in supplement and circular alternative.

The rDMT and rMEG product offerings expected to be manufactured at the Infinite Loop ™ India facility represent a strategic product expansion in a low-cost manufacturing environment which we believe complements Loop's existing PET plastic and polyester fiber manufacturing business and will fuel growth by addressing the large and growing demand in the market.

We believe this expansion will enable the Infinite Loop ™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging.

The India facility will leverage the Infinite Loop ™ Technology and existing engineering package which should accelerate the lead-time towards groundbreaking, expected to occur by end of 2024.

Feedstock sourcing for the facility, in which there is abundant supply from textile waste in India, is well advanced and the partners have engaged an external firm to source and secure the land for the facility.

Construction is expected to be completed by the end of 2026, with commercial operations commencing in early 2027.

We believe the India JV offers attractive projected economic returns without the need for substantial sustainability-linked premium pricing.

Loop and Ester anticipate that initial funding required to finance the India JV for the purposes of construction, development and operationalization of the project along with initial working capital requirements for the business is expected to be $165 million.

Ester and Loop will each contribute 50% of the initial equity capital of the India JV.

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.

Loop and Ester will also enter into (i) a technology license agreement with Loop (the “Loop Technology License Agreement”), (ii) a service agreement with Ester, and (iii) a sales and marketing agreement with Loop, each on terms to be mutually agreed upon by the parties.

Pursuant to the Loop Technology License Agreement, the India JV will be granted an exclusive, subject to certain exceptions, license to exploit the Infinite Loop ™ Technology in India at a royalty rate to be set forth in the Loop Technology License Agreement.

Strategic Partnership with SK Geo Centric (“SKGC”)

The planned Infinite Loop ™ commercial manufacturing facility in Ulsan, South Korea, is expected to have an annual capacity to supply up to 70,000 metric tons per year of Loop ™ PET resin for packaging and polyester fiber applications, and was planned to break ground in the first half of 2024.

The timing of the facility is currently under review by the partners while they evaluate opportunities to reduce capital costs and carry out discussions with the Korean government for subsidies related to the facility.

Loop and SKGC are also evaluating the opportunity to build a monomer facility in order to capitalize on the large and growing market and attractive economics for DMT and MEG, including lower capital investment requirements for such a facility.

Infinite Loop ™ Europe

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

Product activations with evian, L’Occitane, On AG, and Garnier

Loop has collaborated with multiple customers in recent and upcoming launches for products and product packaging incorporating Loop™ PET manufactured from monomers produced at the Terrebonne Facility.

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

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

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

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

This initiative reflects evian’s commitment to its stated goal for circularity and 100% recycled content by 2025.

On October 11, 2022, Loop and L’OCCITANE, a global manufacturer and retailer of sustainable beauty and wellness products, unveiled a new bottle for the brand’s Almond Shower Oil that was manufactured with 100% recycled Loop™ PET resin produced using monomers from Loop’s Terrebonne Facility.

Loop has partnered with L’OCCITANE to help meet the brand’s sustainability goal of using 100% recycled PET in its bottles by 2025.

In partnership with the brand, a pilot project was executed where the bottle (excluding cap and label) was produced using 100% recycled Loop™ PET resin and was successfully carried out on L’OCCITANE production lines.

This initiative marks a significant step forward in the partnership between the two companies and sets the pathway to implement Loop’s technology across other products in the brand’s assortment.

As part of this partnership with L’OCCITANE, Loop’s branding is featured prominently on the front of the packaging, with additional details speaking to Loop’s technology on the back label.

We also entered into an agreement in May 2022 with On AG to supply Loop ™ PET to be utilized in polyester fiber by the brand, pursuant to which Loop ™ PET resin was delivered in the year ended February 28, 2023.

On April 19, 2023, Loop and Garnier, one of the world’s largest mass market beauty brands, launched the brand’s first Micellar Cleansing Water All-In-1 bottle made of Loop™ PET produced using monomers from Loop’s Terrebonne Facility (excluding cap and label).

The Loop logo, featured on the front of this packaging innovation, serves as an anchor to highlight Loop’s technology, the quality of materials and the bottle’s recyclability.

The inclusion of Loop branding on the packaging strongly supports Garnier's sustainability goals by promoting the infinitely recyclable potential of the product and brings awareness to PET plastic circularity.

This packaging innovation will first be distributed in Garnier’s largest market, the US, and the brand’s home market of France.

Agreement with Reed Management SAS (“Reed”)

On May 30, 2024, the Company and Reed, a European investment firm focused on high impact and technology-enabled infrastructure, entered into definitive binding agreements, subject to certain closing conditions, for an investment of €35 million from Reed to fund the global commercialization of the Infinite Loop™ Technology and have agreed to form a 50/50 joint venture for the European deployment of Loop’s technology.

Under the terms of the agreement, which has been signed following the completion by Reed of extensive operational, technical, ESG, and legal due diligence, Reed will provide capital as follows:

€10M investment in a Convertible Preferred Security to be issued by Loop, which contains a 13% PIK dividend rate and 5-year term;

€25M loan to Loop in two equal tranches – first tranche to support global deployment opportunities paid at closing and second tranche to support European deployment opportunities paid in the following 12 months with both tranches having a 13% PIK interest rate and 3-year term;

The closing of the transaction is subject to the fulfillment of certain closing conditions, principally the conditions that (i) Reed shall have successfully completed its first capital raising for its fund;

and (ii) Loop shall have received a binding financing commitment from a governmental agency.

The Company understands that Reed’s funding negotiations are progressing well.

The Company also believes that its process to obtain the government funding is advancing positively.

While there can be no assurance that the abovementioned closing conditions will be met, the Company currently anticipates that the transaction should close by the end of the second quarter of the current fiscal year.

Due to its current liquidity position, the Company is reviewing contingency plans for bridge financing in the event that the closing extends beyond the end of the second quarter.

Product activations

Loop has collaborated with multiple customers in recent and upcoming launches for products and product packaging incorporating Loop ™ PET manufactured from monomers produced at Loop’s small-scale production facility in Terrebonne, Québec (the “Terrebonne Facility”).

Most recently, Loop and On AG, the Swiss sportswear brand, collaborated to launch the Cloudeasy Cyclon shoe which was unveiled on May 21, 2024.

The upper of the Cloudeasy shoe is crafted with 100% recycled and infinitely recyclable yarn, using the Infinite Loop ™ Technology.

On AG is the first footwear company to launch a shoe using the Infinite Loop ™ Technology which enables fiber-to-fiber recycling.

The Cloudeasy Cyclon shoe is part of On AG’s monthly subscription service Cyclon ™ where customers receive, wear, and then return Cylon ™ products, which are then recycled.

Loop continues to pursue opportunities for new activations and marketing campaigns with additional consumer goods brand companies.

Terrebonne Facility

As part of our plan for the commercialization of future Infinite Loop ™ manufacturing facilities, we enhanced our Terrebonne, Québec pilot plant to become a small-scale PET depolymerization production facility, incorporating all key pieces of depolymerization equipment that will be used in the full-scale commercial facilities.

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

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

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

We believe the Terrebonne Facility has achieved this objective.

We will continue to fulfill existing commitments related to ongoing sales contracts.

In the nine-month period ended November 30, 2023, Loop reported revenues of $108 from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, including those with whom Loop is collaborating on product launches.

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

Recent Developments

Memorandum of Understanding (“MOU”) with Reed Management (“Reed”)

On January 16th, Loop announced that the Company signed a non-binding MOU with Reed, a European investment firm focused on high impact and technology-enabled infrastructure, for US$66 million in non-dilutive financing as part of a joint venture (the “JV”) to roll-out Loop’s technology in the European market.

Loop and Reed intend to form a strategic long-term partnership through the establishment of a 50/50 JV to commercialize Loop’s technology in Europe.

Reed intends to provide financing of €60 million (US$66 million) in non-dilutive capital.

Of this amount, US$33 million is to be provided to Loop as non-dilutive capital to fund Loop’s technology commercialization globally.

The remaining US$33 million is to be invested in the JV.

Under the terms of the MOU, Reed will provide capital as follows:

US$11 million equity investment in the JV to acquire from Loop exclusive rights to co-invest alongside Loop in commercialization projects using Loop’s technology in Europe through the planned JV between Loop and Reed;

US$22 million loan from the JV to Loop in two equal tranches – first tranche paid at closing and second tranche paid in the following 12 months with both tranches having a 10% PIK rate and 3-year term;

US$33 million commitment to cover initial costs to develop projects in Europe, including Loop’s equity contribution to the previously announced JV to construct an Infinite Loop™ plant in Saint-Avold, France;

Any subsequent capital injections in the JV will be funded on a 50/50 basis between Reed and Loop.

This intended partnership allows for Loop Industries to reduce the funding needs for its equity contributions to support the rollout of an increased number of facilities to be constructed in the European market using the Infinite Loop™ technology.

Loop Industries will receive royalty and engineering fees directly from the planned facilities in Europe.

The non-binding MOU is subject to customary due diligence and the fulfillment of certain pre-closing conditions.

The transaction is expected to close by the end of March 2024.

Ulsan ARC Groundbreaking Ceremony

Loop and SKGC announced on April 27 th , 2023 that they have signed a joint venture agreement to build Infinite Loop™ facilities in the Asian market.

The two companies plan to build four Infinite Loop™ manufacturing facilities throughout Asia by 2030.

The first planned facility in Asia will be part of SKGC’s Ulsan Advanced Recycling Cluster (“Ulsan ARC”) in South Korea.

Daniel Solomita, Loop’s Founder and CEO, participated in the groundbreaking ceremony of the Ulsan ARC which took place on November 15 th , 2023 in South Korea.

Solomita presented the Company’s sustainable plastics technology and its Infinite Loop™ manufacturing model at the event, which included attendees ranging from central and local government officials, industry officials, environmental institutions, academic experts, customers and media.

The Ulsan ARC groundbreaking ceremony is a key milestone in the lead-up towards breaking ground on the planned Infinite Loop™ manufacturing facility in the Ulsan ARC, which is expected to take place in the first half of 2024, with construction being completed by 2026.

Loop™ Branded PET Resin Compliant for Pharmaceutical Industry Packaging Applications

On December 13, 2023, Loop announced that its Loop™ branded PET resin has been tested and is compliant for use in packaging applications in the pharmaceutical industry.

The rigorous requirements and standards outlined by the United States Pharmacopeia (USP <661.1>, Plastic Materials of Construction ) and the European Pharmacopeia (Ph.Eur.

3.1.15, Polyethylene Terephthalate for Containers for Preparations not for Parenteral Uses ) ensure that materials used in pharmaceutical packaging maintain the highest levels of integrity and do not compromise the safety and efficacy of the enclosed products.

Test results executed by a worldwide leader in laboratory testing services confirm that Loop's PET resin has successfully met these requirements, opening new possibilities for sustainable packaging solutions in the pharmaceutical industry.

The pharmaceutical industry is increasingly recognizing the importance of adopting sustainable practices and materials to reduce its environmental impact.

Loop's 100% recycled virgin quality PET can help support pharmaceutical companies with a sustainable packaging alternative and address the growing demand for environmentally responsible choices in the industry.

Market Opportunity

The estimated global annual market demand for PET plastic and polyester fiber is approximately $180 billion.

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

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

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

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

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

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

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

Adidas Group aims to replace all virgin polyester with recycled polyester in all of its Adidas products by 2024;

Danone, the provider of evian® brand bottled water, committed to a goal of using 100% recycled content packaging by 2025;

Coca-Cola committed to an average recycled content of 50% across its packaging by 2030;

PepsiCo has set new goals to cut virgin plastic per serving by 50% across its global food & beverage portfolio by 2030 and plans to utilize 50% recycled content in its plastic packaging.

In the U.S., the company plans to increase its use of rPET in its bottled products in 2023, with an objective to roll out 100% rPET bottles in multiple U.S.

areas by 2030;

In 2020, L’OCCITANE committed to implementing 100% recycled content plastic in their bottles by 2025;

Nike has announced a 2025 target of diverting 100% of its waste from landfills, with at least 80% recycled back into its products and goods;

L’Oréal Group committed to using 100% recycled or biobased plastic in their packaging by 2030;

Ikea maintains its goal that, by 2030, all plastic used in its products will be based on renewable or recycled material;

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

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

North America:

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

California law requires that plastic bottles contain at least 25% post-consumer resin by 2025, and at least 50% by 2030.

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

Spain imposed a tax of €450 per ton on non-reusable plastic packaging, effective January 1, 2023.

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

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

France maintains its goal of having 100% plastics recycled by 2025 and 77% of beverage bottles to be collected.

South Korea continues to target reduction of plastic waste by 20%, an increase in recycling rates from 54% to 70% by 2025, and utilization of 30% renewable plastic by 2030.

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

Closed-loop circularity and keeping materials within their own cycle (bottle-to-bottle and fiber-to-fiber) is gaining increasing attention as the focus on sustainability intensifies.

Governments and regulators have considered or enacted heightened standards for recycled materials that discourage downcycling of bottles into polyester fiber.

Additionally, it is becoming increasingly difficult to secure inventory of post-consumer bottles due to the increased demand from the bottle industry as they strive to achieve their own sustainability goals.

A fiber-to-fiber recycling strategy addresses these problems and allows fashion brands and companies to secure volume and support the increasing demand of recycled polyester fiber in the textile industry.

We believe the commercialization plans of Loop ™ PET resin and polyester fiber may provide the ideal solution for global brands because Loop ™ PET resin and polyester fiber contains 100% recycled PET and polyester fiber content.

The Loop ™ PET resin and polyester fiber is virgin-quality and is suitable for use in food-grade packaging.

That means CPG companies will be able to market packaging made from a 100% recycled Loop ™ branded PET resin and polyester fiber.

Commercialization Strategy

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

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

On December 22, 2022, we announced a shift in our commercialization strategy which now focuses on our planned joint venture projects with SKGC in Asia and Europe.

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

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

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

Loop is working collaboratively with SKGC to put in place a financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the first Asian manufacturing facility in Ulsan, South Korea, which is anticipated to break ground in the first half of 2024 and to have construction completed in 2026.

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

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

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

Our objective is to achieve global expansion of the Infinite Loop ™ Technology through a mix of fully owned manufacturing facilities, strategic partnerships, and licensing agreements.

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

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

We believe our technology is at the forefront of the global transition away from fossil fuels and petrochemicals and into the circular economy, where PET plastic and polyester fiber are produced by recycling waste plastic rather than depleting finite resources.

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

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

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

Once the monomers are purified, they can be sold directly to chemical companies, used in the production of specialty polymers, or repolymerized into PET plastic or polyester fiber using INVISTA know how, which Loop licenses, and Chemtex Global Corporation’s engineering.

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

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

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

The basic design package has a capacity of up to 70,000 M/T of rDMT and 23,000 M/T of rMEG, or 70,000 M/T of PET resin output per year.

Permitting, site and regulatory considerations may impact plant capacity.

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

On May 1, 2024, we announced our strategic partnership with Ester to build and operate an Infinite Loop ™ manufacturing facility in India which will produce a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop ™ Technology.

Loop has a well-established working relationship with Ester, which has nearly 40 years of specialized polymer production, operational proficiency, and local expertise, including sourcing of PET plastic and polyester fiber waste feedstocks.

The India facility will leverage the Infinite Loop ™ Technology and existing engineering package which should accelerate the lead-time towards groundbreaking, expected to occur by end of 2024.

Construction is expected to be completed by the end of 2026, with commercial operations commencing in early 2027.

Loop will receive an annual technology license fee from the Infinite Loop ™ manufacturing facility in India.

We are also focused on our planned joint venture projects with SKGC in Asia and Europe to build and operate Infinite Loop ™ manufacturing facilities producing and selling Loop ™ PET resin and polyester fiber.

These projects leverage SKGC’s engineering and operational infrastructure.

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

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

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

The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies, apparel companies, and chemical companies, to integrate Loop ™ PET resin, polyester fiber, rDMT and rMEG into their products and packaging.

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

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

We believe that Loop ™ recycled PET resin and polyester fiber could command premium pricing over virgin, petroleum-based PET resin and provide attractive economic returns.

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

Proprietary Technology and Intellectual Property

We believe the power of our technology lies in its ability to use post-industrial and post-consumer waste PET plastic and polyester fiber feedstocks, which could end up in landfills, rivers, oceans and natural areas, to create Loop ™ PET resin.

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

Our Generation II technology (“GEN II”) is a methanolysis-based depolymerization technology that uses temperatures below 90 °C to depolymerize waste PET and polyester fiber.

The low temperature offers several key advantages which the Company believes will improve its ability to commercialize the GEN II technology, including;

Lower energy usage during depolymerization, and therefore reduced processing cost and lower GHG emissions relative to higher temperature processes;

Avoidance of side reactions with non-PET waste, which are inherent in waste PET feedstock streams, during depolymerization which may occur during higher temperature and higher pressure depolymerization processes.

This allows for a simplified distillation purification process resulting in fewer, and more effective, steps to isolate the desired high purity DMT and MEG monomers suitable to produce virgin-quality PET required to meet food contact regulations as well as the quality and clarity requirements of global consumer product companies;

Allowing the depolymerization of less costly and low-quality feedstocks, which cannot be effectively recycled today, such as carpet fiber, clothing and mixed plastics, and upcycling them into high-quality PET that can be used in food contact use;

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

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

We also believe it is an environmentally sustainable method for producing virgin-quality food-grade PET plastic by decoupling PET manufacturing from the fossil fuel industry.

To independently validate that our GEN II technology can produce DMT and MEG monomers at mini-pilot and pilot scale, we commissioned Kemitek, a College Centre for Technology Transfer specialized in the fields of green chemistry and chemical process scale-up.

Kemitek’s findings allowed them to confirm that our technology produces monomers that meet our purity specifications for the production of PET resin and polyester fiber.

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

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

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

Our technology was further validated in March 2023, when Loop and SKGC announced the successful completion of the technical due diligence conducted by SKGC.

Key parameters of Loop’s technology that were validated through SKGC’s comprehensive due diligence include the production yields, operational stability, quality of the output monomers and overall performance of Loop’s Terrebonne Facility.

The technical due diligence validated that the PET resin and polyester fiber produced using Loop’s technology is of virgin quality.

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

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

One family has three issued U.S.

patents, and two pending U.S.

applications, the last of which is expected to expire on or around September 2037, not including any patent term extensions.

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

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

patents and a pending U.S.

application, all expected to expire on or around June 2039, not including any patent term extensions.

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

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

patent and a pending U.S.

application, both expected to expire on or around March 2040, not including any patent term extensions.

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

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

patents and a pending U.S.

application, both expected to expire on or around March 2040, not including any patent term extensions.

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

We have also filed a U.S.

provisional application directed to another aspect of the GEN II technology.

Any patents that ultimately issue from this application are expected to expire on or around September 2044, not including any patent term adjustment or extensions.

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

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

Government Regulation and Approvals

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

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

Our operations require various governmental permits and approvals.

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

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

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

See “Risk Factors” below for additional information.

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

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

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

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

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

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

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

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

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

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

On December 13, 2023, Loop announced that its Loop™ branded PET resin has been tested and is compliant for use in packaging applications in the pharmaceutical industry.

The rigorous requirements and standards outlined by the United States Pharmacopeia (USP <661.1>, Plastic Materials of Construction ) and the European Pharmacopeia (Ph.Eur.

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.

Human Capital

As of November 30, 2023, we had 60 employees of which 22 work in research and development, 24 in engineering and operations, and 14 in administrative functions.

As of May 31, 2024, we had 54 employees of which 20 work in research and development, 21 in engineering and operations, and 13 in administrative functions.

Results of Operations

Three Months Ended November 30, 2023

The following table summarizes our operating results for the three-month periods ended November 30, 2023 and 2022, in thousands of U.S.

Three months ended November 30,

The following table summarizes our operating results for the three-month periods ended May 31, 2024 and 2023, in thousands of U.S.

Three months ended May 31,

favorable / (unfavorable)

Revenue from contracts with customers

Research and development

Employee compensation

Stock-based compensation

Machinery and equipment expenditures

External engineering

Plant and laboratory operating expenses

Total research and development

General and administrative

Employee compensation

Stock-based compensation

Professional fees

Total general and administrative

Gain on disposition of assets

Depreciation and amortization

Interest and other financial expenses

Interest income

Foreign exchange gain

Total expenses

Revenues for the three-month period ended November 30, 2023 increased $1 to $26, as compared to $25 for the same period in 2022.

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

Research and Development

Research and development expense for the three-month period ended November 30, 2023 decreased $2,749 to $1,833, as compared to $4,582 for the same period in 2022.

The decrease was primarily attributable to a $1,055 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $594 decrease in plant and laboratory operating expenses, a $445 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process, a $433 decrease in employee compensation expenses, and a $294 decrease in stock-based compensation expenses.

General and administrative expenses

General and administrative expenses for the three-month period ended November 30, 2023 decreased $725 to $2,458, as compared to $3,183 for the same period in 2022.

The decrease was primarily attributable to a $558 decrease in professional fees, and a $183 decrease in stock-based compensation expenses.

The net loss for the three-month period ended November 30, 2023 increased $3,231 to $4,244, as compared to $1,013 for the same period in 2022.

The increase is primarily due to a gain on disposition of assets of $6,704 recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec, partially offset by the $2,749 decrease in research and development expenses, and the decrease in general and administrative expenses of $725.

Nine months Ended November 30, 2023

The following table summarizes our operating results for the nine-month periods ended November 30, 2023 and 2022, in thousands of U.S.

Nine months ended November 30,

Revenue from contracts with customers

Research and development

Employee compensation

Stock-based compensation

Machinery and equipment expenditures

External engineering

Plant and laboratory operating expenses

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General and administrative

Professional fees

Employee compensation

Stock-based compensation

Professional fees

Total general and administrative

Gain on disposition of assets

Depreciation and amortization

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Total expenses

Revenues for the nine-month period ended November 30, 2023 decreased $52 to $108, as compared to $160 for the same period in 2022.

First Quarter Ended May 31, 2024

Revenues for the three-month period ended May 31, 2024 decreased $21 to $6, as compared to $27 for the same period in 2023.

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

Research and Development

Research and development expense for the nine-month period ended November 30, 2023 decreased $6,772 to $8,361, as compared to $15,133 for the same period in 2022.

The decrease was primarily attributable to a $2,893 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $2,263 decrease in employee compensation expenses, including stock-based compensation, a $1,356 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process, and a $1,128 decrease in plant and laboratory operating expenses, partially offset by a decrease in tax credits accounted for as a reduction of R&D expenses of $938.

Research and development expense for the three-month period ended May 31, 2024 decreased $2,253 to $2,237, as compared to $4,490 for the same period in 2023.

The decrease was primarily attributable to a $1,233 decrease in purchases of machinery and equipment used at the Terrebonne Facility, a $527 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process, a $271 decrease in employee compensation expenses, and a $199 decrease in plant and laboratory expenses at our Terrebonne Facility.

General and administrative expenses

General and administrative expenses for the nine-month period ended November 30, 2023 decreased $10,463 to $7,767, as compared to $18,230 for the same period in 2022.

The decrease was primarily attributable to a $8,135 decrease in stock-based compensation which is mostly related to a $7,740 expense recorded in relation to the achievement of a performance milestone for 1,000,000 RSUs in the nine-month period ended November 30, 2022, a $1,590 decrease in professional fees, and a $825 decrease in insurance costs.

The net loss for the nine-month period ended November 30, 2023 decreased $10,729 to $15,995, as compared to $26,724 for the same period in 2022.

The decrease is primarily due to the decrease in general and administrative expenses of $10,463, and the $6,772 decrease in research and development expenses, partially offset by a gain on disposition of assets of $6,704 recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec.

General and administrative expenses for the three-month period ended May 31, 2024 increased $446 to $2,911, as compared to $2,465 for the same period in 2023.

The increase was primarily attributable to a $636 increase in professional fees which is mainly attributable to legal costs related to our partnerships with Reed and Ester.

This increase was partially offset by a $211 decrease in insurance costs.

The net loss for the three-month period ended May 31, 2024 decreased $1,812 to $5,189, as compared to $7,001 for the same period in 2023.

The decrease was primarily due to the decrease of $2,253 in research and development expenses and partially offset by increased general and administrative expenses of $446.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has been in the pre-commercialization stage with limited revenues, with its ongoing operations and commercialization plans financed primarily by raising equity.

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

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.

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

Our liquidity position consists of cash and cash equivalents on hand of $9,366 at November 30, 2023 and an undrawn senior loan facility from a Canadian bank of $2,577.

Our liquidity position consists of cash and cash equivalents on hand of $5,291 at May 31, 2024.

Our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and the Risk Factors section included in Part I, Item 1A of our 2024 Annual Report on Form 10-K.

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

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

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

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

Management prepared the Company’s consolidated financial statements on a going concern basis in accordance with ASC 205-40, as management believes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they become due for a period of no less than 12 months from the date of issuance of these unaudited interim condensed consolidated financial statements.

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

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

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

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

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

In December 2021, the Company entered into an agreement for the purchase of long-lead equipment for up to $8,546 which can be used in any Infinite Loop™ manufacturing facility.

As of November 30, 2023, the Company has paid an aggregate of $8,460 in cash deposits.

This amount, along with engineering and development costs that have been and may continue to be incurred, is currently expected to be recovered from the JV Company when construction begins on the Infinite Loop™ Ulsan facility.

The total estimated recoverable amount of $16,000 has not been recognized in the interim unaudited financial statements included in this Quarterly Report.

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.

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.

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.

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

We have a long-term debt obligation to Investissement Québec in connection with a financing facility (the “Financing Facility”) for the expansion of the Terrebonne Facility up to a maximum of $3,390.

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The loan can be repaid at any time by us without penalty.

The loan bears interest at a rate of 2.36% and there was a 36-month moratorium on both capital and interest repayments as of the first disbursement date.

The loan’s interest rate was initially set at 2.36% and there was a 36-month moratorium on both capital and interest repayments as of the first disbursement date.

Under the original terms of the Financing Facility, at the end of the 36-month moratorium, capital and interest was repayable in 84 monthly installments.

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 $37 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.

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

There is no remaining amount available under the Financing Facility after the second disbursement.

As per the Financing Facility Amendment, a total of $37 of the principal amount was repaid in monthly installments in the fiscal year ended February 29, 2024 and the remainder of the principal amount is repayable in 72 monthly installments.

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

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

As per the Second Financing Facility Amendment, a total of $74 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%.

The Second Financing Facility Amendment did not modify the repayment terms of accrued interest or any of the other terms of the Financing Facility that are not mentioned above.

Under the terms of the Financing Facility, Investissement Québec was also issued warrants to purchase shares of our common stock in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $339.

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On August 26, 2021, upon the receipt of the second disbursement under this facility, we issued a warrant to purchase 17,180 shares of common stock at a price of $11.00 to Investissement Québec, which remains outstanding.

There is no remaining amount available under the Financing Facility after the second disbursement.

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 $2,577 in aggregate principal amount and provides for a two-year term.

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

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

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

As at November 30, 2023, the Credit Facility was undrawn.

The Credit Facility allows for borrowings of up to $2,567 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 May 31, 2024.

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

As at May 31, 2024, the Company borrowed $2,517 under the Credit Facility.

Flow of Funds

Summary of Cash Flows

A summary of cash flows for the three months ended November 30, 2023 and 2022 was as follows, in thousands of U.S.

Three Months Ended November 30,

A summary of cash flows for the three months ended May 31, 2024 and 2023 was as follows, in thousands of U.S.

Three Months Ended May 31,

Net cash used in operating activities

Net cash provided from (used in) investing activities

Net cash used by financing activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net (decrease) increase in cash

Net decrease in cash

Net Cash Used in Operating Activities

During the nine-month period ended November 30, 2023, we used $14,762 in operations compared to $25,012 during the same period in 2022.

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

During the three-month period ended May 31, 2024, we used $3,915 in operations compared to $5,504 during the three-month period ended May 31, 2023.

Net Cash Used in Investing Activities

During the nine-month period ended November 30, 2023, we used $5,453 in investing activities compared to cash provided from investing activities of $6,995 during the same period in 2022.

During the nine-month period ended November 30, 2023, we made $5,065 in deposits on long-lead equipment for use in a commercial project, as compared to $1,271 for the same period in 2022.

During the nine-month period ended November 30, 2023, we made investments in intangible assets of $378, as compared to $225 for the same period in 2022, particularly in our patent technology in the United States and around the world.

During the nine-month period ended November 30, 2022, we sold land in Bécancour, Québec for cash proceeds of $8,559.

Net Cash (Used) Provided by Financing Activities

During the three months ended November 30, 2023, we repaid $47 of long-term debt.

During the three months ended May 31, 2024, we used $176 in investing activities compared to $2,122 during the three-month period ended May 31, 2023.

During the three months ended May 31, 2024, we made investments in intangible assets of $176, particularly in our patent technology in the United States and around the world.

During the three months ended May 31, 2023, we made $2,023 in deposits on machinery and equipment for use in a commercial project, and we made investments in intangible assets of $99.

Net Cash Provided by (Used in) Financing Activities

During the three months ended May 31, 2024, we borrowed $2,517 under the Credit Facility and we repaid $25 of long-term debt.

During the three months ended May 31, 2023, we repaid $16 of long-term debt.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis