What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-14 compared with 2024-10-15 · 103 added, 89 removed, 202 unchanged (49% 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) our ability to commercialize our technology and products, (ii) the status of our relationships with our 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) our ability to continue as a going concern, (vii) engineering, contracting, and building our manufacturing facilities, (viii) our ability to scale, manufacture, and sell our products in order to generate revenues, (ix) our proposed business model and our ability to execute it, (x) our ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (xi) our joint venture projects and our ability to recover certain expenditures in connection them, (xii) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xiii) public health issues, such as disease epidemics, which may lead to reduced access to capital markets, supply chain disruptions, and government-imposed business closures, (xiv) war, regional tensions, and economic or other conflicts that could impact market stability and our business;

(i) our ability to commercialize our technology and products, (ii) the status of our relationships with our 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) our ability to continue as a going concern, (vii) engineering, contracting, and building our manufacturing facilities, (viii) our ability to scale, manufacture, and sell our products and to license our technology in order to generate revenues, (ix) our proposed business model and our ability to execute it, (x) our ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (xi) our joint venture projects and our ability to recover certain expenditures in connection them, (xii) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xiii) public health issues, such as disease epidemics, which may lead to reduced access to capital markets, supply chain disruptions, and government-imposed business closures, (xiv) war, regional tensions, and economic or other conflicts that could impact market stability and our business;

(xv) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xvi) the outcome of any SEC investigations or class action litigation filed against us, (xvii) our ability to hire and/or retain qualified employees and consultants, (xviii) other events or circumstances over which we have little or no control, and (xix) other factors discussed in our subsequent filings with the Securities and Exchange Commission (the “SEC”).

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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 was signed following the completion by Reed of extensive operational, technical, ESG, and legal due diligence, Reed is to provide capital as follows:

€10M investment in a Convertible Preferred Security (“CPS”) to be issued by Loop, bearing 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.

On July 31, 2024, Reed and Societe Generale announced that Societe Generale has agreed to acquire 75% of Reed and provide funding for Reed initially amounting to €250 million, which can be further increased to €350 million.

This transaction, which is subject to customary closing conditions including regulatory approval, would secure Reed’s funding for its planned investments, including the financing package for Loop.

We are expecting that the remaining closing conditions will have been addressed, and that the financing will be completed in November 2024.

This is expected to provide the initial tranche of €10 million, with further amounts at future dates.

Although the Company anticipates its current liquidity position to be sufficient to cover expenses until the end of November 2024, in order to secure the Company’s liquidity in the event of timing delays in funding, certain insiders have committed to provide bridge financing of $2,000 if necessary.

On December 12, 2024, the Company entered into an Amended and Restated Share Purchase Agreement (the “Amended Agreement”) with Reed, a European investment firm focused on high impact and technology-enabled infrastructure majority-owned by the bank Societe General.

The Amended Agreement amends the original Share Purchase Agreement dated May 30, 2024 previously reported by the Company in a current report on Form 8-K filed on June 4, 2024.

To facilitate the closing of the transactions contemplated by the Amended Agreement and to develop Infinite Loop™ manufacturing facilities in Europe, a simplified joint-stock company is in the process of being incorporated under French law (“Infinite Loop Europe”), to be owned 90% by Reed and 10% by Loop.

On December 23, 2024, the Company closed the financing and licensing transactions contemplated by the Amended Agreement.

The Company issued and sold 1,044,430 shares of Series B Convertible Preferred Stock at $10.00 per share to Reed Circular Economy (“RCE”), an affiliate of Reed.

Additionally, the Company entered into a License Agreement with RCE, acting on behalf of Infinite Loop Europe (in process of incorporation), granting a non-transferable, royalty-bearing license to use Loop's proprietary depolymerization technology for one facility within Europe.

The Company received total cash proceeds of $20,790 (€20,000) on December 23, 2024.

The Company anticipates entering into a Securityholders Agreement with RCE to establish the framework for the governance, ownership, and operations of Infinite Loop Europe upon completion of its incorporation.

Key terms of the Series B Convertible Preferred Stock include:

13% PIK dividend rate

Convertible to Loop common stock at $4.75 per share or redeemable in cash

We believe the financing and licensing transactions mark a pivotal step in Loop’s commercialization strategy, enabling the deployment of its patented recycling technology across Europe and supporting capital investment in cost-effective manufacturing regions, including its joint venture in India with strategic partner Ester Industries Ltd.

Proceeds from these transactions are intended to be used to fund the Indian project and Loop’s operational cash flow needs.

Under the expected terms of the partnership with RCE, Loop retains the right to increase its equity stake in the European manufacturing facility, as well as potential future facilities, to a maximum of 50% for each facility.

The license is to build one Infinite Loop™ manufacturing facility in Europe.

Future facilities under this partnership would require the purchase of additional technology licenses from Loop.

We believe the license sale underscores the commercial readiness of Loop’s technology, validated by four years of successful operations at its Terrebonne facility, which supplies bottle-grade PET resin for consumer packaging and textile (“T2T”) polyester fiber to advance circular fashion for apparel brands.

Loop is committed to expanding the reach of its proven solution to the plastic waste global issue by partnering with well-financed, reliable customers through technology licenses and engineering services.

This strategy allows Loop to address global demand in regions where it does not plan to build facilities, driving further growth and value creation while focusing Loop’s internal resources and capital on direct equity investments.

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.

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 rPET, rDMT, rMEG and specialty polymers, using the Infinite Loop ™ Technology, in order to meet strong growth in demand from leading global brands in different sectors, including strong demand for T2T polyester fiber to enable circular fashion for apparel brands.

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.

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, including T2T polyester fiber grade rPET and bottle-grade rPET, offering chemical companies a simple drop-in supplement and circular alternative.

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.

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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.

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 the end of the current fiscal year.

Feedstock sourcing for the facility, in which there is abundant supply from textile waste in India, is well advanced.

Additionally, following the completion of a detailed land study by an external engineering firm, the India JV partners have identified the Gujarat province of India as the optimal location for the facility based on several key requirements such as infrastructure, proximity to a seaport for exports, renewable energy for a reduction in CO 2 emissions and close proximity to waste PET and polyester feedstocks.

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

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

We announced on September 10, 2020 a strategic partnership with SUEZ Group (“Suez”), with the objective to build the first Infinite Loop ™ manufacturing facility in Europe.

On June 16, 2022, Loop, together with Suez and SKGC, announced that the three companies will become equal participants in the strategic partnership.

The expanded partnership intends to combine SKGC’s petrochemical manufacturing experience with Suez's resource management expertise and Loop’s breakthrough proprietary technology to supply up to 70,000 M/T of virgin quality, 100% recycled PET plastic and polyester fiber to the European market.

The planned Infinite Loop ™ facility is designed to offer a solution to consumer goods companies which have committed to goals for significantly increased use of recycled content in their products and/or packaging and help to meet the growing demand for recycled PET resin and polyester fiber.

On February 16, 2023, the three companies announced that the Chemesis industrial platform in Saint-Avold, located in the Grand Est region of France, has been selected as the site for their planned manufacturing facility in Europe.

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.

The development of the India facility continues to progress well towards groundbreaking.

Following the completion of a detailed land study by an external engineering firm, the India JV partners have identified the Gujarat province of India as the optimal location for the facility based on several key requirements such as infrastructure, proximity to a seaport for exports, renewable energy for a reduction in CO 2 emissions and close proximity to waste PET and polyester feedstocks.

Additionally, feedstock sourcing for the facility, in which there is abundant supply from textile waste in India, is well advanced.

Two globally recognized firms have been engaged for two key mandates for the India JV.

A globally renowned engineering firm has been entrusted with the local engineering work, while a Big Four accounting firm has been appointed to lead the debt syndication process.

Groundbreaking is currently expected to occur in the second quarter of 2025, with construction completion expected by late 2026 and commercial operations projected to commence in 2027.

Termination of Partnership with SK Geo Centric (“SKGC”)

Effective January 14, 2025, Loop and SKGC have mutually agreed to terminate their joint venture agreement executed by the parties on April 27, 2023 to construct and operate an Infinite Loop™ manufacturing facility in Ulsan, South Korea.

This joint decision reflected Loop’s strategy to focus capital deployment in low-cost jurisdictions and prioritize a licensing and engineering services model in higher cost countries, as well as a strategic restructuring and re-orientation within the SK Group.

Although SKGC currently intends to maintain its financial investment in Loop and continues to have the right to nominate a director on Loop’s Board of Directors (the “Board”), Mr.

Jonghyuk Lee resigned from the Board on January 13, 2025 with immediate effect, due to a change in his role within the restructured SKGC organization.

Suspension of European partnership with SUEZ Group (“Suez”) and SKGC

On September 10, 2020, we announced a strategic partnership with Suez, with the objective to build the first Infinite Loop™ manufacturing facility in Europe.

On June 16, 2022, Loop, together with Suez and SKGC, announced that the three companies would become equal participants in the strategic partnership.

The Company, Suez and SKGC have mutually agreed to suspend the project, and Loop will now continue to develop commercialization plans in Europe through its partnership with Reed as discussed above.

Product activations

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Permitting, site and regulatory considerations may impact plant capacity.

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 rPET, rDMT, rMEG and specialty polymers, using the Infinite Loop ™ Technology, in order to meet strong growth in demand from leading global brands in different sectors, including strong demand for T2T polyester fiber to enable circular fashion for apparel brands.

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.

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.

Loop anticipates receiving 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 are anticipated to 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 India facility will leverage the Infinite Loop ™ Technology and existing engineering package which should accelerate the lead-time towards groundbreaking.

Demand from leading global brands in different sectors continues to rise, including strong demand for textile-to-textile polyester fiber to enable circular fashion for apparel brands.

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.

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Human Capital

As of August 31, 2024, we had 50 employees of which 18 work in research and development, 20 in engineering and operations, and 12 in administrative functions.

As of November 30, 2024, we had 50 employees of which 21 work in research and development, 17 in engineering and operations, and 12 in administrative functions.

Results of Operations

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

Three months ended August 31,

The following table summarizes our operating results for the three-month periods ended November 30, 2024, and 2023, in thousands of U.S.

Three months ended November 30,

favorable / (unfavorable)

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Stock-based compensation

Machinery and equipment expenditures

Plant and laboratory operating expenses

Patent legal fees

Total research and development

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Depreciation and amortization

Impairment of assets

Interest and other financial expenses

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Total expenses

Second Quarter Ended August 31, 2024

Revenues for the three-month period ended August 31, 2024 decreased $31 to $23, as compared to $54 for the same period in 2023.

Third Quarter Ended November 30, 2024

Revenues for the three-month period ended November 30, 2024, increased $26 to $52, as compared to $26 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 three-month period ended August 31, 2024 decreased $93 to $1,945, as compared to $2,038 for the same period in 2023.

The decrease was primarily attributable to a $356 decrease in employee compensation, and a $250 decrease in plant and laboratory expenses at our Terrebonne Facility.

These decreases were partially offset by a $510 increase in external engineering costs for design work for our Infinite Loop ™ manufacturing process.

Research and development expense for the three-month period ended November 30, 2024, decreased $456 to $1,377, as compared to $1,833 for the same period in 2023.

The decrease was primarily attributable to a $392 decrease in employee compensation, including stock-based compensation, and a $176 decrease in external engineering costs for design work for our Infinite Loop ™ manufacturing process.

These decreases were partially offset by a $187 decrease in tax credits related to our scientific research and experimental development claim.

General and administrative expenses

General and administrative expenses for the three-month period ended August 31, 2024 decreased $248 to $2,595, as compared to $2,843 for the same period in 2023.

General and administrative expenses for the three-month period ended November 30, 2024, decreased $310 to $2,148, as compared to $2,458 for the same period in 2023.

The decrease was primarily attributable to a $192 decrease in insurance expenses which is mainly attributable to a favourable renewal of D&O insurance.

The net loss for the three-month period ended August 31, 2024 increased $88 to $4,839, as compared to $4,750 for the same period in 2023.

The increase is primarily due to the $213 decrease in interest income and the $119 increase in foreign exchange, partially offset by the $248 decrease in general and administrative expenses.

Six Months Ended August 31, 2024

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

Six months ended August 31,

Impairment of assets

Impairment of assets expense increased by $8,460 for the three-month period ended November 30, 2024, reflecting an impairment charge for machinery and equipment of $8,460.

This impairment was due to the termination of the joint venture arrangement between the Company and SKGC under which they had intended to construct and operate an Infinite Loop™ manufacturing facility in Ulsan, South Korea.

The Company plans to utilize the equipment in a future commercial production facility.

However, the deployment plans for the use of this equipment are not fully developed at this time and therefore the carrying value of the equipment was considered to be impaired, resulting in an expense of $8,460 being recognized in the three-month period ended November 30, 2024.

The net loss for the three-month period ended November 30, 2024, increased $7,668 to $11,912, as compared to $4,244 for the same period in 2023.

The increase is primarily due to the impairment of equipment of $8,460, offset by the $456 decrease in research and development expenses and the $310 decrease in general and administrative expenses.

Nine Months Ended November 30, 2024

The following table summarizes our operating results for the nine-month periods ended November 30, 2024, and 2023, in thousands of U.S.

Nine months ended November 30,

Revenue from contracts with customers

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Plant and laboratory operating expenses

Patent legal fees

Total research and development

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Depreciation and amortization

Impairment of assets

Interest and other financial expenses

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Total expenses

Revenues for the six-month period ended August 31, 2024 decreased $52 to $29, as compared to $81 for the same period in 2023.

Revenues for the nine-month period ended November 30, 2024, decreased $27 to $81, as compared to $108 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 six-month period ended August 31, 2024 decreased $2,346 to $4,182, as compared to $6,528 for the same period in 2023.

Research and development expense for the nine-month period ended November 30, 2024, decreased $2,802 to $5,559, as compared to $8,361 for the same period in 2023.

The decrease was primarily attributable to a $1,196 decrease in purchases of machinery and equipment for the Terrebonne Facility, a $1,073 decrease in employee compensation expenses, including stock-based compensation, and a $561 decrease in plant and laboratory expenses to operate our Terrebonne Facility.

General and administrative expenses

General and administrative expenses for the six-month period ended August 31, 2024 increased $198 to $5,506, as compared to $5,308 for the same period in 2023.

The increase was primarily attributable to a $731 increase in professional fees, partially offset by a decrease in insurance expenses of $444.

The net loss for the six-month period ended August 31, 2024 decreased $1,723 to $10,028, as compared to $11,751 for the same period in 2023.

The decrease is primarily due to the decrease in research and development expenses of $2,346, partially offset by $198 increase in research and development expenses, a $186 decrease in interest income, and a $108 increase in foreign exchange.

General and administrative expenses for the nine-month period ended November 30, 2024, decreased $113 to $7,654, as compared to $7,767 for the same period in 2023.

The decrease was primarily attributable to a decrease in insurance expenses of $637, partially offset by a $607 increase in professional fees.

Impairment of assets

Impairment of assets expense increased by $8,460 for the nine-month period ended November 30, 2024, reflecting an impairment charge for machinery and equipment of $8,460.

The Company plans to utilize the equipment in a future commercial production facility.

The net loss for the nine-month period ended November 30, 2024, increased $5,945 to $21,940, as compared to $15,995 for the same period in 2023.

The increase is primarily due to the impairment of equipment of $8,460, which was offset by a decrease in research and development expenses of $2,802.

LIQUIDITY AND CAPITAL RESOURCES

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.

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 $1,395 and an undrawn senior loan facility from a Canadian bank of $1,008 at August 31, 2024.

Also, current liabilities exceeded current assets by $2,510 as at August 31, 2024.

Our liquidity position consists of cash and cash equivalents on hand of $323 and an undrawn senior loan facility from a Canadian bank of $127 at November 30, 2024.

Also, current liabilities exceeded current assets by $7,085 as at November 30, 2024.

As disclosed above, on December 23, 2024, the Company received proceeds of $20,790 from the closing of transactions with Reed, consisting of the issuance of Series B Convertible Preferred Stock and its first technology licensing agreement.

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 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 this assessment, it is estimated that the Company has sufficient liquidity to cover expected cash outflows until end of November 2024, by which time management believes the financing with Reed will be completed, and that the remaining closing conditions will have been addressed.

This is expected to provide an initial amount of $11,080 (€10,000), with further amounts at future dates.

To secure the Company’s liquidity in the event of timing delays in funding, certain insiders have committed to provide bridge financing of $2,000 if necessary.

Notwithstanding, 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.

It 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 this assessment and considering the $20,790 proceeds received on December 23, 2024, management is comfortable that current available liquidity will be sufficient to meet the Company’s obligations, commitments and budgeted expenditures for no less than twelve months from the issuance date of the unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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 further technology licensing arrangements, government incentive programs, and/or the issuance of debt and/or equity.

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

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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 $3,283.

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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.

On September 18, 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 “Third Financing Facility Amendment”).

As per the Third Financing Facility Amendment, the Company will benefit from a partial capital moratorium period from September 1, 2024 to March 1, 2025 resulting in payments of $18 for this period.

Following the moratorium period, the principal amount will be repayable in 60 equal consecutive monthly installments until February 28, 2030.

Monthly capitalized interest payments will continue as scheduled.

The Third Financing Facility Amendment did not modify any other terms of the Financing Facility.

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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The Credit Facility allows for borrowings of up to $2,498 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 August 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 August 31, 2024, the Company borrowed $1,587 under the Credit Facility.

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 not in compliance as at November 30, 2024.

On December 12, 2024, the Company received a waiver from the bank, confirming they have no intention of demanding payment, provided that the Company receives capital injections of at least CDN $10,000 by December 31, 2024 and CDN $10,000 by January 31, 2025.

The Company received $20,790 from Reed on December 23 rd , 2024 which meets the requirements set forth in the waiver.

As at November 30, 2024, the Company borrowed $2,372 under the Credit Facility.

Flow of Funds

Summary of Cash Flows

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

Six Months Ended August 31,

A summary of cash flows for the nine months ended November 30, 2024 and 2023 was as follows, in thousands of U.S.

Nine Months Ended November 30,

Net cash used in operating activities

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Net Cash Used in Operating Activities

During the six-month period ended August 31, 2024, we used $6,775 in operations compared to $11,017 during the six-month period ended August 31, 2023.

During the nine-month period ended November 30, 2024, we used $8,635 in operations compared to $14,762 during the nine-month period ended November 30, 2023.

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, partially offset by increased legal costs related to our partnerships with Reed and Ester.

Net Cash Used in Investing Activities

During the six months ended August 31, 2024, we used $325 in investing activities compared to $5,290 during the six-month period ended August 31, 2023.

During the three-month period ended August 31, 2023, we made $5,065 in deposits on long-lead equipment for use in a commercial project.

During the six-month period ended August 31, 2024, we made investments in intangible assets of $325, as compared to $225 for the same period in 2023, particularly in our patent technology in the United States and around the world.

During the nine months ended November 30, 2024, we used $86 in investing activities compared to $5,453 during the nine-month period ended November 30, 2023.

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.

During the nine-month period ended November 30, 2024, we made investments in intangible assets of $454, as compared to $378 for the same period in 2023, particularly in our patent technology in the United States and around the world.

Also, during the nine-month period ended November 30, 2024 we received a cash distribution of $368 from our JV with Indorama.

Net Cash Provided by (Used in) Financing Activities

During the six months ended August 31, 2024, we borrowed $1,587 under the Credit Facility and we repaid $50 of long-term debt.

During the six months ended August 31, 2023, we repaid $32 of long-term debt.

During the nine months ended November 30, 2024, we borrowed $2,372 under the Credit Facility and we repaid $60 of long-term debt.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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What changed 10-Q

Item 2. Management’s Discussion and Analysis