Loop Industries, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information and any forward-looking statements should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q, including those risks identified in the “Risk Factors” section of our most recent Annual Report on Form 10-K. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the “Company,” “Loop,” “we,” or “our”), contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, ability to improve and expand our capabilities, competition, expected activities and expenditures as we pursue our business plan, the adequacy of our available cash resources, regulatory compliance, plans for future growth and future operations, the size of our addressable market, market trends, and the effectiveness of the Company’s internal control over financial reporting. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Actual results may differ materially from the projections discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. 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 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”). 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 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. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as at the date made. Except as required by law, we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 3 Table of Contents General As used in this Quarterly Report on Form 10-Q, the following terms are being provided so investors can better understand our business: Depolymerization refers to the chemical process of breaking down a polymer molecule into its constituent monomers or smaller subunits. 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”), 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. PET is an acronym for polyethylene terephthalate, which is a resin and a type of polyester showing excellent tensile and impact strength, chemical resistance, clarity, and processability, and reasonable thermal stability. PET is the material which is most commonly used for the production of polyester fiber and plastic packaging, including plastic bottles for water and carbonated soft drinks, containers for food and other consumer products; it is commonly identified by the number “1”, often inside an image of a triangle, on the packaging. PET is also used as a polyester fiber for a variety of applications including textiles, clothing and apparel. 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. dollars unless otherwise specified, except for per share data. Introduction 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 (“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. Loop is currently engaged in discussions to secure financing for its investments in the various planned manufacturing facilities and the sequencing of the manufacturing facilities will be determined in conjunction with the outcome of the Company’s financing discussions and discussions with our partners. 4 Table of Contents Background Industry Background We believe Loop’s depolymerization technology offers a complementary solution to mechanical recycling by enabling the use of a wider variety of PET feedstock, including complex and degraded plastics as well as polyester fiber, to produce virgin quality rPET with no degradation through continued recycling. Mechanically recycled PET plastic is produced principally through the conversion of bales of PET bottles. The materials have been collected and transported to a materials recovery facility, where they are sorted from other materials, baled, and sent to specific PET recycling facilities. The bales are broken and sorted to remove any non-PET materials. The PET is then ground and put through a separation process which separates the PET from the bottle cap and label materials. Clean PET flake is then further processed depending on its intended end market. It may become more highly refined PET pellets for new bottles or extruded into PET sheet for clamshells, trays, and cups. Recycled PET is also spun into fiber for carpet, clothing, fiber fill, or other materials. We believe mechanically recycled PET faces a number of challenges in meeting the quality specifications and growing volume requirements implied by commitments from major brands, mainly due to the cost and variety of acceptable PET feedstock. Some mechanical recycling processes involve remelting the PET flake which reduces the quality of the rPET output each time it is recycled relative to the specifications of virgin PET produced from fossil fuels. Each time PET plastic is mechanically recycled, its quality and clarity are reduced. Therefore, mechanically recycled PET may need to be mixed with virgin PET from fossil fuels to maintain quality. Lower quality mechanically recycled PET is often downcycled to alternate uses such as polyester fibers which may be dyed and used in carpets or clothing. Additionally, mechanically recycled PET manufactured for use in clear bottles or food containers requires predominantly clear and clean PET flakes separated from waste bales, and cannot accommodate colored or opaque PET flakes, lower quality fiber feedstock, or materially contaminated feedstock, which may be cheaper. Depolymerization is a process in which plastics are broken down into their constituent molecules through chemical reactions, rather than being physically melted down and reprocessed as in mechanical recycling. This approach, which we utilize, has several advantages over mechanical recycling, which can have limitations due to the complexity and diversity of plastics. One of the main limitations of mechanical recycling is that it is difficult to recycle plastics that have been contaminated or degraded. For example, if a plastic container has been exposed to heat or sunlight, it may become brittle and prone to breaking during the recycling process. Another limitation of mechanical recycling is that it is difficult to recycle certain types of plastics, such as multi-layered or composite plastics. These plastics are often used in food packaging or other products that require specialized properties like barrier protection or insulation. Depolymerization, however, can break down these degraded or complex plastics into their constituent molecules, which can then be purified and used to create new products. Loop’s depolymerization technology has the potential to create a closed-loop system for plastic waste, whereby plastics can be recycled an infinite number of times without degrading the quality of the material. This is because the constituent molecules can be broken down and reassembled without losing their original properties, which can reduce the need for new plastics to be produced. We believe Loop’s depolymerization technology offers a promising solution to the limitations of mechanical recycling by enabling the recirculation of more diverse and complex plastics, reducing waste and pollution, and creating a closed-loop system for plastic waste. Our depolymerization technology breaks down waste PET into DMT and MEG. The monomers are purified and then recombined into virgin quality PET plastic and polyester fiber. We use low value PET plastic and polyester fiber waste as feedstock. Our technology can process PET plastic bottles and packaging of any color, transparency or condition, carpet, clothing and other polyester textiles that may contain colors, dyes, or additives, and even PET plastics that have been recovered from the ocean and degraded by exposure to sun and salt. We believe that our ability to use many materials that mechanical recyclers cannot process is an important advantage of Loop ™ PET resin and further expands the range of PET waste streams that may be recycled. 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. 5 Table of Contents Currently, the DMT market is largely dominated by a 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. Agreement with Reed Management SAS (“Reed”) 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 · 5-year term · 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. 6 Table of Contents Strategic partnership with Ester Industries Ltd. (“Ester”) 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 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 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 which is expected to be financed by a combination of debt and equity capital. 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. 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. 7 Table of Contents 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 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. Commercialization Strategy 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 ™ 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. We have completed our basic design package for the Infinite Loop ™ full-scale manufacturing facilities. The engineering philosophy we have adopted is “design one, build many.” This approach allows for the basic design package to be used as the base engineering platform for all future geographical expansion. 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 rDMT and 23,000 M/T of rMEG, or 70,000 M/T of PET resin output per year, or a combination thereof. Permitting, site and regulatory considerations may impact plant capacity. 8 Table of Contents 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. 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. We believe as countries around the globe continue to increase sustainability targets and recycled content mandates, our customers will increase 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. We are targeting multi-year take or pay offtake agreements for planned Infinite Loop ™ production. 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. 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, 2024, we had 50 employees of which 21 work in research and development, 17 in engineering and operations, and 12 in administrative functions. 9 Table of Contents Results of Operations The following table summarizes our operating results for the three-month periods ended November 30, 2024, and 2023, in thousands of U.S. Dollars. Three months ended November 30, 2024 2023 Change favorable / (unfavorable) Revenue from contracts with customers $ 52 $ 26 $ 26 Expenses Research and development External engineering 86 262 176 Employee compensation 770 1,107 337 Stock-based compensation 106 161 55 Machinery and equipment expenditures 41 4 (37 ) Plant and laboratory operating expenses 210 322 112 Patent legal fees 98 66 (32 ) Tax credits (34 ) (221 ) (187 ) Other 100 132 32 Total research and development 1,377 1,833 456 General and administrative Professional fees 595 720 125 Employee compensation 576 599 23 Stock-based compensation 224 236 12 Insurance 453 645 192 Other 300 258 (42 ) Total general and administrative 2,148 2,458 310 Depreciation and amortization 132 131 (1 ) Impairment of assets 8,460 - (8,460 ) Interest and other financial expenses 110 42 (68 ) Interest income (23 ) (166 ) (143 ) Foreign exchange loss (gain) (240 ) (28 ) 212 Total expenses 11,964 4,270 (7,694 ) Net loss $ (11,912 ) $ (4,244 ) $ (7,668 ) Third Quarter Ended November 30, 2024 Revenues 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 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. 10 Table of Contents General and administrative expenses 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. 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. Net Loss 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. Dollars. Nine months ended November 30, 2024 2023 Change Revenue from contracts with customers $ 81 $ 108 $ (27 ) Expenses Research and development External engineering 1,365 1,558 193 Employee compensation 2,647 3,611 964 Machinery and equipment expenditures 44 1,240 1,196 Stock-based compensation 367 476 109 Plant and laboratory operating expenses 677 1,238 561 Patent legal fees 246 254 8 Tax credits (69 ) (269 ) (200 ) Other 282 253 (29 ) Total research and development 5,559 8,361 2,802 General and administrative Professional fees 2,858 2,251 (607 ) Employee compensation 1,796 1,884 88 Stock-based compensation 695 664 (31 ) Insurance 1,421 2,058 637 Other 884 910 26 Total general and administrative 7,654 7,767 113 Depreciation and amortization 398 400 2 Impairment of assets 8,460 - (8,460 ) Interest and other financial expenses 289 140 (149 ) Interest income (155 ) (484 ) (329 ) Foreign exchange loss (gain) (184 ) (81 ) 103 Total expenses 22,021 16,103 (5,918 ) Net loss $ (21,940 ) $ (15,995 ) $ (5,945 ) 11 Table of Contents Revenues 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 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 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. 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. Net Loss 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 Liquidity 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. 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 $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. 12 Table of Contents 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. 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. 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. 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. We received the first disbursement in the amount of $1,577 on February 21, 2020 and the second disbursement in the amount of $1,706 on August 26, 2021. The loan can be repaid at any time by us without penalty. 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. There is no remaining amount available under the Financing Facility after the second disbursement. On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Financing Facility Amendment”). 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. 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. On February 21, 2020, upon the receipt of the first disbursement under this facility, we issued a warrant to purchase 15,153 shares of common stock at a price of $11.00 to Investissement Québec, which expired in February 2023. 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 expired in August 2024. 13 Table of Contents 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 $2,498 in aggregate principal amount and provides for a two-year term on amounts drawn. All borrowings under the Credit Facility bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0%. 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 nine months ended November 30, 2024 and 2023 was as follows, in thousands of U.S. Dollars: Nine Months Ended November 30, 2024 2023 Net cash used in operating activities $ (8,635 ) $ (14,762 ) Net cash used in investing activities (86 ) (5,453 ) Net cash provided by (used in) financing activities 2,312 (47 ) Effect of exchange rate changes on cash (226 ) 37 Net decrease in cash $ (6,635 ) $ (20,255 ) Net Cash Used in Operating Activities 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 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 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. 14 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).