Loop Industries, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Loop Industries, Inc. February 28, 2025 Index to the Consolidated Financial Statements Contents Page(s) Report of Independent Registered Public Accounting Firm (PCAOB ID: 271 ) F-1 Consolidated balance sheets as at February 28, 2025 and February 29, 2024 F-2 Consolidated statements of operations and comprehensive loss for the years ended February 28, 2025 and February 29, 2024 F-3 Consolidated statements of changes in stockholders’ equity for the years ended February 28, 2025 and February 29, 2024 F-4 Consolidated statements of cash flows for the years ended February 28, 2025 and February 29, 2024 F-6 Notes to the consolidated financial statements F-7 43 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Loop Industries, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Loop Industries, Inc. and its subsidiaries (the Company) as of February 28, 2025 and February 29, 2024, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2025 and February 29, 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Liquidity risk assessment As described in Note 1 and 2 to the consolidated financial statements, the Company’s consolidated financial statements have been prepared on a going concern basis, as management has assessed and determined that the Company will be able to realize its assets and discharge its liabilities in the normal course of business as they become due for at least twelve months from the issuance date of these consolidated financial statements. For the year ended February 28, 2025, the Company incurred a net loss of $15.1 million and net cash used in operating activities was $2.1 million. As of February 28, 2025, the accumulated deficit amounted to $192.0 million. Management evaluates the Company’s liquidity to determine if there is substantial doubt about the Company’s ability to continue as a going concern. In preparing this liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to (i) the estimation of amount and timing of future cash outflows and cash inflows; and (ii) determining what future expenditures are committed and what could be considered discretionary. The principal considerations for our determination that performing procedures relating to the liquidity risk assessment is a critical audit matter are the significant judgments made by management in estimating the future cash flow requirements of the Company based on budgets and forecasts and in developing the related assumptions. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s liquidity risk assessment and the development of assumptions included in the estimated future cash flows. Additionally, these procedures included evaluating the sufficiency of the Company’s liquidity risk disclosure. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) evaluating management’s assessment of whether the Company has sufficient cash resources for at least twelve months from the issuance date of the consolidated financial statements; (ii) testing the completeness and accuracy of the underlying data used in management’s estimation of future cash flow requirements; (iii) evaluating the reasonableness of management’s assumptions related to the estimation of the amount and timing of future cash outflows and cash inflows; and (iv) determining what future expenditures are committed and what could be considered discretionary. The evaluation of these assumptions considered (i) management’s historical accuracy in forecasting cash flows and setting budgets; and (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit. /s/ PricewaterhouseCoopers LLP Montréal, Canada May 29, 2025 We have served as the Company’s auditor since 2017. F-1 Table of Contents Loop Industries, Inc. Consolidated Balance Sheets (in thousands of U.S. dollars, except per share data) As at February 28, 2025 February 29, 2024 Assets Current assets Cash and cash equivalents $ 12,973 $ 6,958 Accounts receivable (Note 3) 639 351 Inventories (Note 4) 82 102 Prepaid expenses (Note 5) 158 577 Total current assets 13,852 7,988 Investments in joint ventures (Note 11) 1,281 381 Property, plant and equipment, net (Note 6) 1,737 10,636 Intangible assets, net (Note 7) 1,708 1,548 Total assets $ 18,578 $ 20,553 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued liabilities (Note 9) $ 3,545 $ 2,321 Unearned revenue (Note 16) 102 - Current portion of long-term debt (Note 13) 312 100 Total current liabilities 3,959 2,421 Due to customer (Note 10) 832 770 Series B Convertible Preferred stock (Note 12) 10,647 - Long-term debt (Note 13) 2,773 3,220 Total liabilities 18,211 6,411 Stockholders' Equity Series A Preferred stock par value $ 0.0001 ; 25,000,000 shares authorized; one share issued and outstanding (Note 15) - - Common stock par value $ 0.0001 ; 250,000,000 shares authorized; 47,620,263 shares issued and outstanding (2024 – 47,528,908 ) (Note 15) 5 5 Additional paid-in capital 193,529 171,792 Additional paid-in capital – Warrants (Note 21) - 20,385 Accumulated deficit ( 192,027 ) ( 176,970 ) Accumulated other comprehensive loss ( 1,140 ) ( 1,070 ) Total stockholders' equity 367 14,142 Total liabilities and stockholders' equity $ 18,578 $ 20,553 See accompanying notes to the consolidated financial statements . F-2 Table of Contents Loop Industries, Inc. Consolidated Statements of Operations and Comprehensive Loss (in thousands of U.S. dollars, except for share data) Years Ended February 28, 2025 February 29, 2024 Revenues (Note 16) $ 10,889 $ 153 Expenses : Research and development (Note 17) 6,864 11,379 General and administrative (Note 18) 9,228 9,988 Impairment of equipment (Note 6) 8,460 - Depreciation and amortization (Notes 6 and 7) 524 535 Total expenses 25,076 21,902 Other loss (income) : Loss on equity accounted investment (Note 11) 687 - Interest and other financial expenses (income) (Note 22) 618 ( 41 ) Interest income ( 238 ) ( 558 ) Foreign exchange gain ( 197 ) ( 63 ) Total other loss (income) 870 ( 662 ) Net loss ( 15,057 ) ( 21,087 ) Other comprehensive income (loss) - Foreign currency translation adjustment ( 70 ) 71 Comprehensive loss $ ( 15,127 ) $ ( 21,016 ) Net loss per share Basic and diluted $ ( 0.32 ) $ ( 0.44 ) Weighted average common shares outstanding Basic and diluted 47,587,038 47,522,483 See accompanying notes to the consolidated financial statements. F-3 Table of Contents Loop Industries, Inc. Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended February 28, 2025 and February 29, 2024 (in United States dollars) (in thousands of U.S. dollars, except for share data) Year ended February 28, 2025 Common stock par value $0.0001 Preferred stock par value $0.0001 Additional Additional Paid-in Accumulated Other Total Number of Shares Amount Number of Shares Amount Paid-in Capital Capital - Warrants Accumulated Deficit Comprehensive Loss Stockholders' Equity Balance, February 29, 2024 47,528,908 $ 5 1 $ - $ 171,792 $ 20,385 $ ( 176,970 ) $ ( 1,070 ) $ 14,142 Issuance of shares upon the settlement of restricted stock units (Notes 15 and 19) 91,355 - - - - - - - - Expiration of warrants (Note 21) - - - - 20,385 ( 20,385 ) - - - Stock options issued for services (Note 19) - - - - 555 - - - 555 Restricted stock units issued for services (Note 19) - - - - 797 - - - 797 Foreign currency translation - - - - - - - ( 70 ) ( 70 ) Net loss - - - - - - ( 15,057 ) - ( 15,057 ) Balance, February 28, 2025 47,620,263 $ 5 1 $ - $ 193,529 $ - $ ( 192,027 ) $ ( 1,140 ) $ 367 See accompanying notes to the consolidated financial statements. F-4 Table of Contents Loop Industries, Inc. Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended February 28, 2025 and February 29, 2024 (continued) (in United States dollars) (in thousands of U.S. dollars, except for share data) Year ended February 29, 2024 Common stock par value $0.0001 Preferred stock par value $0.0001 Additional Additional Paid-in Accumulated Other Total Number of Shares Amount Number of Shares Amount Paid-in Capital Capital - Warrants Accumulated Deficit Comprehensive Loss Stockholders' Equity Balance, February 28, 2023 47,469,224 $ 5 1 $ - $ 170,370 $ 20,385 $ ( 155,883 ) $ ( 1,141 ) $ 33,736 Issuance of shares upon the settlement of restricted stock units (Notes 15 and 19) 51,963 - - - - - - - - Issuance of shares upon the exercise of stock options (Notes 15 and 19) 7,721 - - - - - - - - Stock options issued (Note 19) - - - - 644 - - - 644 Restricted stock units issued (Note 19) - - - - 778 - - - 778 Foreign currency translation - - - - - - - 71 71 Net loss - - - - - - ( 21,087 ) - ( 21,087 ) Balance, February 29, 2024 47,528,908 $ 5 1 $ - $ 171,792 $ 20,385 $ ( 176,970 ) $ ( 1,070 ) $ 14,142 See accompanying notes to the consolidated financial statements. F-5 Table of Contents Loop Industries, Inc. Consolidated Statements of Cash Flows (in United States dollars) (in thousands of U.S. dollars) February 28, 2025 February 29, 2024 Cash Flows from Operating Activities Net loss $ ( 15,057 ) $ ( 21,087 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization (Notes 6 and 7) 524 535 Stock-based compensation (Note 19) 1,352 1,422 Write-down of inventory (Note 4) - 817 Accrued interest and other financing costs (Note 22) 359 ( 159 ) Impairment of equipment (Note 6) 8,460 - Loss on equity accounted investment (Note 11) 687 - Customer deposits - ( 12 ) Changes in operating assets and liabilities: Sales tax and tax credits receivable (Note 3) ( 322 ) 731 Inventories (Note 4) 14 ( 187 ) Prepaid expenses (Note 5) 410 87 Accounts payable and accrued liabilities (Note 9) 1,350 ( 193 ) Unearned revenue (Note 16) 102 - Net cash (used in) operating activities ( 2,121 ) ( 18,046 ) Cash Flows from Investing Activities Investment in joint venture (Note 11) ( 1,954 ) - Distribution from equity investment (Note 11) 368 - Additions to property, plant and equipment (Note 6) - ( 5,162 ) Additions to intangible assets (Note 7) ( 450 ) ( 482 ) Net cash (used in) investing activities ( 2,036 ) ( 5,644 ) Cash Flows from Financing Activities Proceeds from issuance of series B Convertible Preferred stock (Note 12) 10,395 - Repayment of long-term debt (Note 13) ( 77 ) ( 63 ) Net cash provided by (used in) financing activities 10,318 ( 63 ) Effect of exchange rate changes ( 146 ) 120 Net change in cash and cash equivalents 6,015 ( 23,633 ) Cash and cash equivalents, beginning of year 6,958 30,591 Cash and cash equivalents, end of year $ 12,973 $ 6,958 Supplemental Disclosure of Cash Flow Information: Income tax paid $ - $ - Interest paid $ 257 $ 118 Interest received $ 307 $ 488 See accompanying notes to the consolidated financial statements. F-6 Table of Contents Loop Industries, Inc. February 28, 2025 and February 29, 2024 Notes to the Consolidated Financial Statements (in thousands of United States dollars except where otherwise indicated) 1. The Company and Basis of Presentation The Company Loop Industries, Inc. (the “Company,” “Loop,” “we,” or “our”) is a technology company that owns patented and proprietary technology that depolymerizes no and low-value waste polyethylene terephthalate (“PET”) plastic and polyester fiber to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop ™ branded PET resin suitable for use in food-grade packaging and polyester fiber. The Company is currently in the pre-commercialization stage with limited revenues. Basis of presentation These consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) and comprise the consolidated financial position and results of operations of Loop Industries, Inc. and its subsidiaries, Loop Innovations, LLC and Loop Canada Inc. All subsidiaries are, either directly or indirectly, wholly owned subsidiaries of Loop Industries, Inc. (collectively, the “Company”). The Company owns, through Loop Innovations, LLC, a 50 % interest in a joint venture, Indorama Loop Technologies, LLC, which is accounted for under the equity method. The Company also owns a 50 % interest in a joint venture, Ester Loop Infinite Technologies Private Limited, which is accounted for under the equity method. Intercompany balances and transactions are eliminated on consolidation. The consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the continuing of operations, the realization of assets and the settlement of liabilities in the normal course of business. All monetary amounts in these notes to the consolidated financial statements are in thousands of U.S. dollars unless otherwise specified, except for per share data. 2. Summary of Significant Accounting Policies Liquidity risk assessment Since its inception, the Company has been in the pre-commercialization stage with its ongoing operations and commercialization plans 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 advance its commercialization efforts. As at February 28, 2025, the Company had cash and cash equivalents of $ 12,973 . On December 23, 2024, the Company received cash proceeds of $ 20,790 from the closing of transactions with Reed Societe Generale Group consisting of the issuance of Series B Convertible Preferred Stock and its first technology licensing agreement (see Notes 12 and 16 for additional details). 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 statements 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 liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to: (i) the estimation of amount and timing of future cash outflows and inflows, and (ii) determining what future expenditures are committed and what could be considered discretionary. Based on this assessment, management has determined that current available liquidity will be sufficient to meet the Company’s obligations, commitments and budgeted expenditures for at least twelve months from the issuance date of these consolidated financial statements. F-7 Table of Contents The Company’s ability to move to the next stage of its strategic development and construct manufacturing facilities 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. In particular, the Company will require capital sufficient to fund its equity contributions to the India JV for the construction of the planned Infinite Loop™ facility in India, as well as its ongoing cash requirements until Loop begins receiving returns from the India JV. 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. Revenue recognition The Company recognizes revenue with customers in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). This standard applies to all contracts with customers, except for contracts with customers that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company enters into contracts with customers to sell Loop ™ PET resin. These contracts include a single performance obligation, which is the delivery of Loop ™ PET resin, and the transaction price is a fixed rate per delivered volume. Revenue is recognized when control of the product transfers to the customer, which is when product is delivered to the customer location. Shipping and handling costs are accounted for as a fulfillment cost. The Company enters into licensing agreements with customers, or licensees, for the use of the Company’s proprietary technology. Licensing agreements may include various types of payments, including upfront fees, milestone payments, and royalties. Upfront licensing fees are generally recognized at a point in time, when the license is made available for the customer’s benefit and the customer can benefit from the technology independently. Milestone payments are recognized when the milestone is achieved and the payment is no longer subject to reversal. Royalties are recognized when the underlying transactions occur. The Company also enters into agreements to provide engineering services for Infinite Loop™ facilities. Engineering fees are recognized over time, as services are performed. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include the going concern assessment, estimates for depreciable lives and recoverability of property, plant and equipment and intangible assets, assumptions made in the classification of convertible preferred securities, assumptions made in the revenue recognition for licensing contracts, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards. Joint Ventures The Company accounts for investments in joint ventures in which it exercises significant influence but does not have a controlling financial interest using the equity method of accounting in accordance with ASC 323, Investments—Equity Method and Joint Ventures. Under the equity method, the Company's share of the investee’s net income or loss is recognized in the consolidated statements of operations and added to or deducted from the carrying value of the investment. Distributions received from joint ventures are recorded as reductions to the carrying amount of the investment. F-8 Table of Contents The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. If an impairment is identified and deemed other-than-temporary, the investment is written down to its fair value. The Company assesses whether a joint venture is a variable interest entity (VIE) under ASC 810, Consolidation, and consolidates the entity if it is deemed to be the primary beneficiary. Convertible Preferred Stock The Company accounts for convertible preferred stock in accordance with applicable accounting guidance, including ASC 480, Distinguishing Liabilities from Equity and ASC 470, Debt. Instruments are classified as liabilities when they include contractual obligations that may require the issuer to settle in cash or other financial assets, or when redemption is outside the issuer’s control. Convertible preferred stock is classified as a liability when it contains redemption features or other settlement terms that result in an obligation for the Company, including mandatory or holder-initiated redemption rights, even when the instrument ultimately settles in equity securities. Such instruments may also accrue fixed paid-in-kind (“PIK”) dividends, which are recognized through periodic accretion to the carrying amount of the liability. These instruments are initially recorded at fair value, net of issuance costs, and subsequently measured at amortized cost using the effective interest method. Periodic accretion of the carrying value and dividend accruals are recognized in the consolidated statement of operations as interest expense. The Company evaluates all convertible instruments for potential embedded features requiring separate accounting under ASC 815, Derivatives and Hedging. If applicable, bifurcated derivative components are measured at fair value, with changes recognized in earnings. Fair value of financial instruments The Company applies Financial Accounting Standards Board (“FASB”) Codification (“ASC”) 820, Fair Value Measurement , which defines fair value and establishes a framework for measuring fair value and making disclosures about fair value measurements. FASB ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of financial instruments and the characteristics specific to them. Financial instruments with readily available quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. There are three levels within the hierarchy that may be used to measure fair value: Level 1 – A quoted price in an active market for identical assets or liabilities. Level 2 – Significant pricing inputs that are observable, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Level 3 – Significant pricing inputs that are unobservable, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. The fair value of cash, cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity. F-9 Table of Contents Research and development expenses Research and development costs are charged to expense as they are incurred. Research and development expenses relate primarily to process development and design, customer trials and characterization studies, testing of pre-production samples, machinery and equipment expenditures for use in the production facility in Terrebonne, Québec (the “Terrebonne Facility”), compensation, and consulting and engineering fees. Research and development costs are presented net of related tax credits and government grants. Government grants US GAAP for profit-oriented entities does not define government grants; nor is there specific guidance applicable to government grants. Under the Company’s accounting policy for government grants and consistent with non-authoritative guidance, grants are recognized on a systematic basis over the periods in which the entity recognizes the related costs. Grants that relate to the acquisition of an asset are recognized as a reduction of the cost of the asset and in the statement of operations and comprehensive loss as the asset is depreciated or amortized. A grant that is compensation for expenses or losses already incurred, or for which there are no future related costs, is recognized in the statement of operations and comprehensive loss in the period in which it becomes receivable. Low-interest loans or interest-free loans from a government are initially measured at fair value and an interest expense is recognized on the loan subsequently under the effective interest method, with the difference recognized as a government grant. Reimbursable tax credits are recognized when amounts can be reasonably estimated on a systematic basis over the periods in which the Company recognizes the related costs. The Company is currently eligible for reimbursable Provincial research and development tax credits and investment tax credits, which are related to costs associated with its Terrebonne Facility and recorded as a reduction of research and development expenses. Deferred financing costs, debt discounts, discount on due to customer and other transaction costs Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These fees are amortized as a component of interest expense over the terms of the respective financing agreements using the effective interest rate method. Unamortized deferred financing fees are expensed in full when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not be successful. Transaction costs associated with issuing equity are reflected as a reduction of accumulated paid-in-capital. Foreign currency translations and transactions The accompanying consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. Assets and liabilities of subsidiaries that have a functional currency other than that of the Company are translated to U.S. dollars at the exchange rate as at the balance sheet date. Income and expenses are translated at the average exchange rate of the period. The resulting translation adjustments are included in other comprehensive income (loss) (“OCI”). The Company currently is not engaged in any currency hedging activities. For transactions and balances, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations and comprehensive loss, except for gains or losses arising from the translation of intercompany balances denominated in foreign currencies that forms part in the net investment in the subsidiary which are included in OCI. F-10 Table of Contents Property, plant and equipment Property, plant and equipment are recorded at cost, net of accumulated amortization and impairment, and are amortized over their estimated useful lives at the time they are put to use, unless the useful life is indefinite, using the straight-line method over the following periods: Building 30 years Land Indefinite Office equipment and furniture 8 years Building and land improvements 5 - 10 years Costs related to repairs and maintenance of property, plant and equipment are expensed in the period in which they are incurred. Upon sale or disposal, the Company writes off the cost of the asset and the related amount of accumulated depreciation. The resulting gain or loss is included in the consolidated statement of operations and comprehensive loss. Management reviews the carrying values of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows. Stock‑based compensation The Company periodically issues stock options, warrants and restricted stock units to employees and non-employees in non-capital raising transactions for services and financing expenses. The Company accounts for stock options granted to employees based on the authoritative guidance provided by the FASB wherein the fair value of the award is measured on the grant date and recognized as compensation expense on the straight-line basis over the vesting period. When performance conditions exist, the Company recognizes compensation expenses when it becomes probable that the performance condition will be met. Forfeitures on share-based payments are recognized as they occur. The Company accounts for stock options and warrants granted to non-employees in accordance with the authoritative guidance of the FASB wherein the fair value of the stock compensation is based upon the measurement date determined as the earlier of the date at which either a) a commitment is reached with the counterparty for performance or b) the counterparty completes its performance. The Company estimates the fair value of restricted stock unit awards to employees and directors based on its intrinsic value at date of grant. The fair value of the stock options granted is estimated using the Black-Scholes model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends. Stock-based compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience. The assumptions used in the Black-Scholes model could materially affect stock-based compensation expenses recorded in the current and future periods. Inventories Inventories are stated at the lower of cost or net realizable value using the average cost method. Inventory cost includes direct labor, cost of raw materials and production overhead costs. Inventories expensed during the year are classified as research and development expenses in the consolidated statement of operations and comprehensive loss. The Company separates its inventories into three main categories: raw materials, work in process, and finished goods. The raw materials category includes goods used in the production process that have not yet entered the production process at the balance sheet date and mainly comprises chemicals and other process consumables. The work in process category includes goods that are in the production process at the balance sheet date and mainly comprises recycled monomers that have not yet been polymerized into Loop ™ branded PET resin. The finished goods category includes goods that have completed the production process at the balance sheet date and mainly comprises Loop ™ branded PET resin. F-11 Table of Contents Intangible assets Intangible assets are recorded at cost, net of accumulated amortization and impairment, and are amortized using the straight-line method over 7 years, unless the useful life is deemed to be indefinite. The Company reviews the carrying value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an intangible asset or asset group might not be recoverable or a change in the remaining useful life of an intangible asset. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. If the carrying value of assets is determined not to be recoverable, the Company records an impairment loss equal to the excess of the carrying value over the fair value of the assets. The Company’s estimate of fair value is based on the best information available, in the absence of quoted market prices. The Company generally calculates fair value as the present value of estimated future cash flows that the Company expects to generate from the asset. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. Income taxes The Company calculates its provision for income tax on the basis of the tax laws enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income, in accordance with FASB ASC 740, Income Taxes . The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Net loss per share The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share . Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. The Company includes common stock issuable in its calculation. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation if their effect is antidilutive. For the years ended February 28, 2025 and February 29, 2024, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at February 28, 2025, the potentially dilutive securities consisted of 2,771,216 outstanding stock options (2024 – 2,772,000 ), 4,466,958 outstanding restricted stock units (2024 – 4,368,897 ), and nil outstanding warrants (2024 – 7,089,400 ). Recently adopted accounting pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for our annual period ending February 28, 2025. The adoption of this accounting guidance for the year ended February 28, 2025 resulted in the inclusion of Note 24. Segment Reporting in our consolidated financial statements. F-12 Table of Contents Recently issued accounting pronouncements not yet adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. The updated standard is effective for our annual period beginning after December 15, 2024 and all joint ventures formed on or after January 1, 2025, which for the Company will be the annual period ending February 28, 2026. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our annual financial statement disclosures. In August 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-05, Joint Venture Formations, which requires joint ventures to apply a new basis of accounting by measuring assets and liabilities at fair value upon formation. The amendments address diversity in practice by establishing requirements for recognition and measurement of net assets and liabilities on the formation date. The updated standard is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our consolidated financial statements and related disclosures. In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements. The updated standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our financial statement disclosures. In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the accounting for settlements of convertible debt instruments that occur on terms different from the original contractual conversion terms. The amendments introduce a "preexisting contract approach," requiring that, to qualify for induced conversion accounting, the inducement offer must preserve the form of consideration and provide an amount of consideration that is no less than what was issuable under the original conversion privileges. This guidance applies to convertible debt instruments with cash conversion features and to instruments that are not currently convertible but had substantive conversion features at issuance and at the time the inducement offer is accepted. The updated standard is effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted for entities that have adopted the amendments in ASU 2020-06. Management is currently evaluating the impact that the updated standard will have on our consolidated financial statements and related disclosures. In January 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies the effective date of ASU 2024-03, which requires public business entities to provide disaggregated disclosures of certain income statement expenses. Specifically, ASU 2025-01 confirms that the guidance in ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Management is currently evaluating the impact that the updated standard will have on our financial statement disclosures. 3. Accounts Receivable Accounts receivable as at February 28, 2025 and February 29, 2024 were as follows: February 28, 2025 February 29, 2024 Accounts receivable from customers $ 420 $ 43 Research and development tax credits 121 160 Sales tax 89 75 Interest income receivable - 70 Other receivables 9 3 $ 639 $ 351 The Company is registered for the Canadian federal and provincial goods and services taxes. As such, the Company is obligated to collect from third parties and is entitled to claim sales taxes paid on its expenses and capital expenditures incurred in Canada. F-13 Table of Contents In addition, Loop Canada Inc. is entitled to receive government assistance in the form of refundable and non-refundable research and development tax credits from the federal and provincial taxation authorities, based on qualifying expenditures incurred during the fiscal year. The refundable credits are from the provincial taxation authorities and are not dependent on its ongoing tax status or tax position and accordingly are not considered part of income taxes. The Company records refundable tax credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not, they will be received. During the year ended February 28, 2025, the Company recorded tax credits of $ 85 (2024 – $ 263 ) as a reduction of research and development expenses and received $ 209 (2024 – $ 510 ) from taxation authorities for research and development tax credits, net of fees. The Company is also eligible for non-refundable research and development tax credits from the federal taxation authorities which can be used as a reduction of income tax expense in any given year to the extent the Company has taxable income. The Company has not had taxable income since inception and has not been able to use these non-refundable federal research and development tax credits. During the year ended February 28, 2025, the Company was eligible for non-cash research and development tax credits in the amount of $ 347 (2024 – $ 432 ). These non-cash tax credits, which have an unlimited carry forward period are not recognized in the Company’s consolidated financial statements. As at February 28, 2025, the carry forward balance of non-cash research and development tax credits was $ 2,671 (2024 - $ 2,519 ). Loop Canada Inc. is also eligible for refundable investment tax credits from the provincial taxation authorities based on qualifying expenditures for manufacturing equipment. The Company records refundable tax credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not, they will be received. During the year ended February 28, 2025, the Company recorded investment tax credits of $ 5 (2024 – $ 56 ) as a reduction of research and development expenses and received $ 5 (2024 – $ 522 ) from taxation authorities for investment tax credits. 4. Inventories Inventories as at February 28, 2025 and February 29, 2024 were as follows: February 28, 2025 February 29, 2024 Finished goods $ 488 $ 552 Work in process 318 333 Raw materials 14 34 Allowance for inventory write-down ( 738 ) ( 817 ) $ 82 $ 102 As at February 28, 2025 and February 29, 2024, inventories included finished goods, work in process and raw materials. Finished goods inventories consist of bottle grade and fiber grade Loop ™ PET resin which is intended to be sold to customers. Work in process inventories consist of recycled monomers (dimethyl terephthalate (“rDMT”) and monoethylene glycol (“rMEG”)), either purified or yet to be purified, resulting from the depolymerization of PET feedstock. These monomers are intended be polymerized into Loop ™ PET resin in the future. Raw materials inventories consist of chemicals which are used as inputs in the PET depolymerization process. As at February 28, 2025 and February 29, 2024, finished goods and work in process inventories were presented at their net realizable value, while raw materials were presented at average cost. As at February 28, 2025, the Company recorded an allowance for inventory write-down of $ 738 (2024 – $ 817 ) on finished goods and work in process inventories related to inventory volumes not expected to be sold in the next twelve months. 5. Prepaid Expenses Prepaid expenses as at February 28, 2025 and February 29, 2024 were as follows: February 28, 2025 February 29, 2024 Insurance $ 69 $ 449 Utilities 29 31 Software 28 35 Other 32 62 $ 158 $ 577 F-14 Table of Contents 6. Property, Plant and Equipment, net As at February 28, 2025 Cost Accumulated depreciation, write-down and impairment Net book value Machinery and equipment – pre-construction $ 8,460 $ ( 8,460 ) $ - Building 1,717 ( 406 ) 1,311 Land 212 - 212 Building and Land Improvements 1,741 ( 1,616 ) 125 Office equipment and furniture 259 ( 170 ) 89 $ 12,389 $ ( 10,652 ) $ 1,737 As at February 29, 2024 Cost Accumulated depreciation, write-down and impairment Net book value Machinery and equipment – pre-construction $ 8,460 $ - $ 8,460 Building 1,827 ( 371 ) 1,456 Land 226 - 226 Building and Land Improvements 1,853 ( 1,472 ) 381 Office equipment and furniture 275 ( 162 ) 113 $ 12,641 $ ( 2,005 ) $ 10,636 During the year ended February 28, 2025 the Company recorded an impairment charge for equipment of $ 8,460 . This impairment was due to the termination of the joint venture arrangement between the Company and SK Geo Centric Co. Ltd. (“SKGC”) under which they had intended to construct and operate an Infinite Loop™ manufacturing facility in Ulsan, South Korea. While the equipment may be utilized in a future commercial production facility, the deployment plans for the use of this equipment are not fully developed at this time, therefore the recoverability of the carrying value of the equipment was tested for impairment, resulting in an impairment loss of $ 8,460 being recognized in the year ended February 28, 2025. Depreciation expense amounted to $ 322 for the year ended February 28, 2025 (2024 – $ 387 ). 7. Intangible Assets, net As at February 28, As at February 29, 2025 2024 Patents, at cost – beginning of year $ 1,996 $ 1,514 Additions in the year – patents 450 482 Patents, at cost – end of year 2,446 1,996 Patents, accumulated depreciation – beginning of year ( 379 ) ( 231 ) Amortization of patents ( 202 ) ( 148 ) Patents, accumulated depreciation – end of year ( 581 ) ( 379 ) Foreign exchange effect ( 157 ) ( 69 ) Patents, net – end of year $ 1,708 $ 1,548 On April 9, 2019, the first U.S. patent was issued for the Infinite Loop™ technology. During the year ending February 28, 2025, the Company continued to develop the Infinite Loop™ technology and filed various patents in jurisdictions around the world. F-15 Table of Contents The Infinite Loop™ technology portfolio currently consists of four patent families for which the Company has 10 issued U.S. patents and four pending U.S. applications. Internationally, the Company also has issued or allowed patents in various foreign jurisdictions. All patents and patent applications, if granted are expected to expire between 2038 and 2044, not including any patent term extension. Amortization expense amounted to $ 202 for the year ended February 28, 2025 (2024 - $ 148 ). 8. Financial Instruments and Management of Financial Risk Carrying values and fair values The following table presents the fair value of the Company’s financial liabilities at February 28, 2025 and February 29, 2024: Fair Value at February 28, 2025 Carrying Amount Fair Value Level in the hierarchy Financial liabilities measured at amortized cost: Long-term debt (Note 13) $ 3,085 $ 3,085 Level 2 Due to customer (Note 10) $ 832 $ 832 Level 2 Fair Value as at February 29, 2024 Carrying Amount Fair Value Level in the hierarchy Financial liabilities measured at amortized cost: Long-term debt (Note 13) $ 3,320 $ 3,377 Level 2 Due to customer (Note 10) $ 770 $ 770 Level 2 The fair value of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity. Currency Risk We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations. We operate mainly through two entities, Loop Industries, Inc., which is a Nevada corporation and has a U.S. dollar functional currency, and our wholly-owned subsidiary, Loop Canada Inc. (“Loop Canada”), which is based in Terrebonne, Québec, Canada and has a Canadian dollar functional currency. Our reporting currency is the U.S. dollar. We mainly finance our operations through the sale and issuance of equity in U.S. dollars while our operations are concentrated in our wholly-owned subsidiary, Loop Canada. Accordingly, we are exposed to foreign exchange risk as we maintain bank accounts in U.S. dollars and a significant portion of our operational costs (including payroll, site costs, costs of locally sourced supplies and income taxes) are denominated in Canadian dollars. Significant fluctuations in U.S. dollar to Canadian dollar exchange rates could materially affect our result of operations, cash position and funding requirements. To the extent that fluctuations in currency exchange rates cause our results of operations to differ materially from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected. F-16 Table of Contents 9. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities as at February 28, 2025 and February 29, 2024 were as follows: February 28, 2025 February 29, 2024 Accounts payable $ 2,010 $ 602 Accrued employee compensation 554 801 Accrued engineering fees 431 511 Accrued professional fees 276 274 Other accrued liabilities 274 133 $ 3,545 $ 2,321 10. Due to Customer In October 2022, the Company received a cash deposit from a customer of $ 1,000 in relation to an executed capacity reservation agreement. The deposit was intended to be credited against any future sales of Loop ™ PET resin over a five-year period, commencing two years after the first delivery of Loop ™ PET resin to the customer. Under the terms of the capacity reservation agreement, the cash deposit was designated for expenditures related to a planned Infinite Loop ™ manufacturing facility and was refundable to the customer in the event that the Infinite Loop ™ manufacturing facility was not constructed. Upon mutual agreement, the capacity reservation agreement with the customer was terminated on January 18, 2024. The customer and the Company agreed for the deposit to be refunded in full on July 1, 2027, with no restriction on the Company’s use of the funds. The amount bears no interest. The cause of the termination is related to the customer’s decision to abandon its plans to incorporate recycled PET in its products for technical reasons. The Company reclassified the customer deposit as a due to customer and established its fair value at $ 762 based on a discount rate of 8.20 %, which reflected a discount of $ 238 . The discount rate used was based on the external financing from a Canadian bank. The discount on due to customer is amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. During the year ended February 28, 2025, the Company recorded an accretion expense of $ 62 (2024 – $ 8 ). 11. Investments in Joint Ventures Joint venture with Indorama On September 15, 2018, the Company, through its wholly-owned subsidiary Loop Innovations, LLC, a Delaware limited liability company, entered into a Joint Venture Agreement (the “Joint Venture Agreement”) with Indorama Ventures Holdings LP, USA (“Indorama”), an indirect subsidiary of Indorama Ventures Public Company Limited, to manufacture and commercialize sustainable polyester resin. Each company has a 50/50 equity interest in Indorama Loop Technologies, LLC (“ILT”), which was specifically formed to operate and execute the joint venture. ILT meets the accounting definition of a joint venture where neither party has control of the joint venture entity and both parties have joint control over the decision-making process in ILT. As such, the Company uses the equity method of accounting to account for its share of the investment in ILT. There were no operations in ILT from the date of inception of September 24, 2018 to February 28, 2025. All contributions to ILT, which have been matched by Indorama Ventures, were used to fund engineering design costs which were capitalized in ILT. During the year ended February 28, 2025, we made no contributions to ILT (2024 – nil). As at February 29, 2024, the carrying value of the equity investment was $ 381 , which represented 50 % of the cash balance in ILT. On October 9, 2024, ILT distributed a total of $ 735 in cash to the Company and Indorama, of which $ 368 was received by the Company. The carrying value of the Company’s investment ILT was $ 13 after the distribution and as of February 28, 2025. Joint Venture with Ester On May 1, 2024, the Company entered into an agreement with Ester Industries Ltd. (“Ester”), a manufacturer of polyester films and specialty polymers in India, to form a 50/50 joint venture based in India (“India JV”). The purpose of the India JV is to build and operate an Infinite Loop™ manufacturing facility in India which will produce lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop™ Technology. During the year ended February 28, 2025, Ester Loop Infinite Technologies Private Limited (“ELITe”) was incorporated to form the India JV. F-17 Table of Contents Subject to the terms of the relevant governing documents, Ester will be the exclusive producer of specialty polymers for the India JV, and the Company will be the exclusive seller and marketing agent of the India JV’s products. Ester and the Company are contracted to work in collaboration on all financing activities for the India JV pursuant to the terms of the agreement. Pursuant to the terms of the relevant governing documents, Loop and Ester parties are required to obtain debt for a minimum of 60% of the total installed cost of the Infinite Loop™ manufacturing facility in India and will each contribute 50% of the initial equity capital of the India JV. ELITe meets the accounting definition of a joint venture where neither party has control of the joint venture entity and both parties have joint control over the decision-making process. As such, the Company uses the equity method of accounting to account for its share of the investment in ELITe. During the year ended February 28, 2025, Loop and Ester each contributed $ 1,954 (2024 – nil) to ELITe to fund preliminary project costs for the planned Infinite Loop™ facility in India, which are mainly engineering costs. ELITe incurred losses of $ 1,374 (2024 – nil) during the year ended February 28, 2025, resulting in the Company recording a loss on equity accounted investment of $ 687 (2024 – nil) for the period. As a result, the value of the carrying value of the Company’s investment in ELITe was $ 1,268 (2024 – nil) as at February 28, 2025. 12. Series B Preferred Stock On December 23, 2024 (the “Issuance Date”), the Company issued and sold 1,044,430 shares of Series B Convertible Preferred Stock (“Series B CPS”) at $ 10.00 per share to Reed Circular Economy (the “Holder”), an affiliate of Reed Societe Generale Group, for cash proceeds of $ 10,395 (€10,000). The main features of the Series B CPS are as follows: · Automatic conversion of the stated value ($ 10,395 on the Issuance Date) on the fifth anniversary of the Issuance Date into shares of the Company’s common stock at a conversion price of $ 4.75 per share; · Accrues a cumulative fixed annual PIK dividend at a rate of 13 % of the stated value, which is added to the stated value of the Series B CPS on September 30 of each year; · Redeemable in cash at any time, starting after the third anniversary of the Issuance Date by the Company (issuer call option); · Redeemable in cash on the fifth anniversary of the Issuance Date at the option of the Holder (put feature); and · Voting rights equal to the number of whole shares of the Company’s common stock (rounded to the nearest whole share) into which the stated value of Series B CPS would be convertible on a given date. The Series B CPS is classified as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity. Although the Series B CPS is mandatorily convertible into a fixed number of common shares after five years, it contains provisions that create obligations for the Company that meet the definition of a liability under US GAAP. Because the holder has the right to demand redemption for cash at maturity, and the issuer can redeem the instrument prior to conversion, the instrument is not solely within the Company’s control to avoid settlement in a form that would require asset transfer. Accordingly, liability classification is required under ASC 480-10-25-4. The Series B CPS is initially recognized at fair value, net of issuance costs, and is subsequently measured at amortized cost using the effective interest method. The PIK dividends are accrued over the term of the instrument and increase the carrying amount of the liability. Although the instrument includes voting rights on an as-converted basis, such rights do not affect the classification assessment under US GAAP. The Company has evaluated the instrument for any embedded features requiring bifurcation under ASC 815, such as derivative elements, and has concluded that separate accounting is not required. Changes in the carrying value of the instrument, including accrued PIK dividends, are recorded in “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. F-18 Table of Contents The balance of Series B CPS as at February 28, 2025 and February 29, 2024 was as follows: February 28, 2025 February 29, 2024 Stated value at issuance $ 10,395 $ - Accrued PIK dividends 252 - Series B Convertible Preferred Stock $ 10,647 $ - 13. Long-Term Debt February 28, 2025 February 29, 2024 Investissement Québec financing facility: Principal amount $ 3,099 $ 3,353 Unamortized discount ( 138 ) ( 191 ) Accrued interest 124 158 Total Investissement Québec financing facility 3,085 3,320 Less: current portion of long-term debt ( 312 ) ( 100 ) Long-term debt, net of current portion $ 2,773 $ 3,220 Investissement Québec financing facility On February 21, 2020, the Company received $ 1,530 (CDN$2,209) from Investissement Québec as the first disbursement of our financing facility, out of a maximum of $ 3,186 (CDN$4,600) (the “Financing Facility”). The loan’s interest rate was initially set at 2.36 % and there was a 36-month moratorium on both capital and interest repayments starting on the date of the first disbursement, after which capital and interest is repayable in 84 monthly installments. The Company established the fair value of the loan for the first disbursement at $ 1,354 based on a discount rate of 5.45 %, which reflected a debt discount of $ 291 . The discount rate used was based on the external financing from a Canadian bank. The Company, under the loan agreement, was required to pay fees representing 1% of the loan amount, $ 32 (CDN$46) to Investissement Québec which we deferred and recorded as a reduction of the Financing Facility. Debt discount and deferred financing expenses are amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. On August 26, 2021, the Company received $ 1,656 (CDN$2,391) from Investissement Québec as the second disbursement of the Financing Facility, the balance of the total amount available under the Financing Facility. The second disbursement bears the same interest rate and repayment terms as the first disbursement. The Company established the fair value of the loan for the first disbursement at $ 1,750 based on a discount rate of 3.95 %, which reflected a debt discount of $ 139 . The discount rate used was based on the external financing from a Canadian bank. There were no fees associated with the second disbursement. Debt discount and deferred financing expenses are amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. The Company recorded interest expense on the Investissement Québec loan for the year ended February 28, 2025 in the amount of $ 114 (2024 – $ 84 ) and an accretion expense of $ 45 (2024 – $ 71 ). The Company also agreed to issue to Investissement Québec warrants to purchase shares of common stock of the Company in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $ 319 (CDN$460). The exercise price of the warrants is equal to the higher of (i) $ 11.00 per share and (ii) the ten-day weighted average closing price of Loop shares of common stock on the Nasdaq stock market for the 10 days prior to the issue of the warrants. The warrants can be exercised immediately upon grant and have a term of three years from the date of issuance. The loan can be repaid at any time by the Company without penalty. In connection with the first disbursement of the Financing Facility, the Company issued a warrant (“First Disbursement Warrant”) to acquire 15,153 shares of common stock at a strike price of $ 11.00 per share to Investissement Québec. The Company determined the fair value of the warrants using the Black-Scholes pricing formula. The fair value of the First Disbursement Warrant was determined to be $ 78 and is included in “Additional paid-in capital – Warrants” in our Condensed Consolidated Balance Sheets. In connection with the second disbursement of the Financing Facility, the Company issued a warrant (“Second Disbursement Warrant”) to acquire 17,180 shares of common stock at a strike price of $ 11.00 per share to Investissement Québec. The Company determined the fair value of the warrants using the Black-Scholes pricing formula. The fair value of the First Disbursement Warrant was determined to be $ 69 and is included in “Additional paid-in capital – Warrants” in our Condensed Consolidated Balance Sheets. The First Disbursement Warrants expired in the year ended February 28, 2023 and the Second Disbursement Warrants expired in the year ended February 28, 2025. F-19 Table of Contents 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 (CDN $50) of the principal amount was repayable in monthly installments in the fiscal year ended February 29, 2024, with the remainder of the principal amount being repayable in 72 monthly installments. On February 28, 2024, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Second Financing Facility Amendment”). As per the Second Financing Facility Amendment, a total of $ 74 (CDN $100) of the principal amount was repayable in monthly installments in the fiscal year ended 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 %. On February 5, 2025, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Third Financing Facility Amendment”). As per the Second Financing Facility Amendment, total annual principal repayments in monthly installments are of $ 287 (CDN $414) for the fiscal year ending February 28, 2026 and $ 495 (CDN $714) for the fiscal year ending February 28, 2027, with the remainder of the principal amount being repayable in 36 monthly installments. Pursuant to the Third Financing Facility Amendment the interest rate of the Financing Facility was increased from 3.36 % to 4.36 %. Under the original terms of the Financing Facility, the principal amount was repayable in 84 monthly installments beginning in March of 2023. The amendments do not modify the repayment terms of accrued interest or any of the other terms of the Financing Facility that are not mentioned above. The amendments did not meet the criteria of ASC 470, Debt for an extinguishment of debt as the amendments did not substantially modify the terms of the Financing Facility. The Company therefore applied modification accounting and no immediate gain or loss was recognized related to the amendments. Total repayments due on the Company’s indebtedness over the next five years are as follows: Years ending Amount February 28, 2026 $ 312 February 28, 2027 519 February 29, 2028 797 February 28, 2029 797 February 28, 2030 798 Thereafter - Total $ 3,223 Credit facility from a Canadian bank On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank. The Credit Facility allows for borrowings of up to $ 2,424 (CDN $3,500) in aggregate principal amount. 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 February 28, 2025. All borrowings under the Credit Facility will bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0 %. As at February 28, 2025, the $ 2,424 (CDN $3,500) Credit Facility was available and undrawn. 14. Related Party Transactions Employment Agreement On June 29, 2015, the Company entered into an employment agreement with Mr. Daniel Solomita, the Company’s President and Chief Executive Officer (“CEO”). The employment agreement is for an indefinite term. F-20 Table of Contents On July 13, 2018, the Company and Mr. Solomita entered into an amendment and restatement of the employment agreement which provided for a long-term incentive grant of 4,000,000 shares of the Company’s common stock, in tranches of one million shares each, upon the achievement of four performance milestones. This was modified to provide a grant of 4,000,000 restricted stock units covering 4,000,000 shares of the Company’s common stock while the performance milestones remained the same. The grant of the restricted stock units became effective upon approval by the Company’s stockholders at the Company’s 2019 annual meeting, of an increase in the number of shares available for grant under the 2017 Equity Incentive Plan (the “Plan”). Such approval was granted by the Company’s stockholders at the Company’s 2019 annual meeting. The restricted stock units vest upon the achievement of applicable performance milestones, as follows: i) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s securities are listed on an exchange or the OTCQX tier of the OTC Markets; ii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of DMT/MEG or a PET; iii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s first full-scale production facility is in commercial operation; and iv) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s second full-scale production facility is in commercial operation. During the year ended February 28, 2017, it became probable that the first milestone would be met. Accordingly, 1,000,000 performance incentive shares of common stock with a fair value of $ 800,000 were earned and issuable to Mr. Solomita. This amount was reflected as stock-based compensation expense during the year ended February 28, 2017 based on the grant date fair value. The 1,000,000 performance incentive shares of common stock were replaced by vested restricted stock units, of which 200,000 were settled in October 2019, 2020 and 2021, each. On April 30, 2020, the Company and Mr. Solomita entered into an amendment of Mr. Solomita’s employment agreement. The amendment clarified the milestones consistent with the shift in the Company’s business from the production of terephthalate to the production of dimethyl terephthalate, another proven monomer used to produce PET plastic. When a milestone becomes probable, the corresponding expense will be valued based on the grant date fair value on April 30, 2020, the date of the last modification of Mr. Solomita’s employment agreement. The closing price of the Company’s common stock on the Nasdaq on April 30, 2020 was $ 7.74 per share. The vested units are settled annually in tranches of 200,000 units on October 15 of each year, unless Mr. Solomita and the Company elect to defer settlement before such date. The unvested 2,000,000 RSUs would be forfeited if Mr. Solomita left the Company, except in the case of termination without cause or resignation for good reason, in which case he would receive 50% of the unvested RSUs at the time of termination, or 100% in the case of termination without cause or resignation for good reason within 24 months after a change in control . During the year ended February 28, 2023, Mr. Solomita met a performance milestone in relation to the signature of a supply agreement with a customer. Accordingly, 1,000,000 performance incentive RSUs with a total fair value of $ 7,740 were earned and issuable to Mr. Solomita. This amount was reflected as stock-based compensation expense during the year ended February 28, 2023. As at February 28, 2025, 3,400,000 (2024 – 3,400,000 ) of Mr. Solomita’s RSUs were outstanding of which 1,400,000 were vested (2024 – 1,400,000 ). On October 12, 2023, Mr. Solomita and the Company agreed to defer by one year the settlement of 800,000 RSUs that would have otherwise settled on October 15, 2023. On October 9, 2024, Mr. Solomita and the Company agreed to defer by one year the settlement of 1,000,000 RSUs that would have otherwise settled on October 15, 2024. During the year ended February 28, 2025, no outstanding milestones became probable of being met and, accordingly, no additional stock-based compensation expense was recorded. 15. Stockholders’ Equity Series A Preferred Stock Mr. Solomita’s amended employment agreement of February 15, 2016 provided that the Company shall issue to Mr. Solomita one share of the Company’s Series A Preferred Stock in exchange for Mr. Solomita agreeing not to terminate his employment with the Company for a period of five years from the date of the amendment. The amendment effectively provides Mr. Solomita with a “change of control” provision over the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to less than a majority. In order to issue Mr. Solomita his one share of Series A Preferred Stock under the amendment, the Company created a “blank check” preferred stock. Subsequently, the Board of Directors of the Company approved a Certificate of Designation creating the Series A Preferred Stock, and the Company issued one share of Series A Preferred Stock to Mr. Solomita. F-21 Table of Contents The one share of Series A Preferred Stock issued to Mr. Solomita holds a majority of the total voting power so long as Mr. Solomita holds not less than 7.5% of the total number of outstanding shares of our common stock on February 12, 2016 (as adjusted for any stock splits and stock dividends effected after February 12, 2016), assuring Mr. Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to a level below a majority. Mr. Solomita’s ownership as of February 28, 2025 of 19,108,722 shares of common stock and 1 share of Series A Preferred Stock provided him with 74.2% of the voting control of the Company . Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which preclude the Company from taking certain actions without Mr. Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval. More specifically, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class: (a) amend the Articles of Incorporation or, unless approved by the Board of Directors, including by the Series A Director, amend the Company’s By-laws; (b) change or modify the rights, preferences or other terms of the Series A Preferred Stock, or increase or decrease the number of authorized shares of Series A Preferred Stock; (c) reclassify or recapitalize any outstanding equity securities, or, unless approved by the Board of Directors, including by the Series A Director, authorize or issue, or undertake an obligation to authorize or issue, any equity securities or any debt securities convertible into or exercisable for any equity securities (other than the issuance of stock-options or securities under any employee option or benefit plan); (d) authorize or effect any transaction constituting a Deemed Liquidation (as defined in this subparagraph) under the Articles, or any other merger or consolidation of the Company; (e) increase or decrease the size of the Board of Directors as provided in the By-laws of the Company or remove the Series A Director (unless approved by the Board of Directors, including the Series A Director); (f) declare or pay any dividends or make any other distribution with respect to any class or series of capital stock (unless approved by the Board of Directors, including the Series A Director); (g) redeem, repurchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any outstanding shares of capital stock (other than the repurchase of shares of common stock from employees, consultants or other service providers pursuant to agreements approved by the Board of Directors under which the Company has the option to repurchase such shares at no greater than original cost upon the occurrence of certain events, such as the termination of employment) (unless approved by the Board of Directors, including the Series A Director); (h) create or amend any stock option plan of the Company, if any (other than amendments that do not require approval of the stockholders under the terms of the plan or applicable law) or approve any new equity incentive plan; (i) replace the President and/or Chief Executive Officer of the Company (unless approved by the Board of Directors, including the Series A Director); (j) transfer assets to any subsidiary or other affiliated entity (unless approved by the Board of Directors, including the Series A Director); (k) issue, or cause any subsidiary of the Company to issue, any indebtedness or debt security, other than trade accounts payable and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase or otherwise alter in any material respect the terms of any indebtedness previously approved or required to be approved by the holders of the Series A Preferred Stock (unless approved by the Board of Directors, including the Series A Director); (l) modify or change the nature of the Company’s business; (m) acquire, or cause a Subsidiary of the Company to acquire, in any transaction or series of related transactions, the stock or any material assets of another person, or enter into any joint venture with any other person (unless approved by the Board of Directors, including the Series A Director); or (n) sell, transfer, license, lease or otherwise dispose of, in any transaction or series of related transactions, any material assets of the Company or any Subsidiary outside the ordinary course of business (unless approved by the Board of Directors, including the Series A Director). F-22 Table of Contents Common Stock For the year ended February 28, 2025 Number of shares Amount Balance, February 29, 2024 47,528,908 $ 5 Issuance of shares upon settlement of restricted stock units 91,355 - Balance, February 28, 2025 47,620,263 $ 5 For the year ended February 29, 2024 Number of shares Amount Balance, February 28, 2023 47,469,224 $ 5 Issuance of shares upon settlement of restricted stock units 51,963 - Issuance of shares upon the exercise of stock options 7,721 - Balance, February 29, 2024 47,528,908 $ 5 During the year ended February 28, 2025, the Company recorded the following common stock transactions: (i) The Company issued 91,355 shares of the common stock to settle restricted stock units. During the year ended February 29, 2024, the Company recorded the following common stock transactions: (i) The Company issued 51,963 shares of the common stock to settle restricted stock units. (ii) The Company issued 7,721 shares of the common stock to settle stock options exercised in the period. 16. Revenues Revenue for the years ended February 28, 2025 and February 29, 2024 were as follows: February 28, 2025 February 29, 2024 Technology licensing $ 10,395 $ - Engineering services 368 - Sales of PET 126 153 $ 10,889 $ 153 During the year ended February 28, 2025, the Company recorded revenues of $ 10,395 (2024 – nil) for technology licensing fees, which were related to the sale of a license to Reed Societe Generale Group. The Company entered into a license agreement with Reed Circular Economy (“RCE”), an affiliate of Reed Societe Generale Group, granting a non-transferable, royalty-bearing license to use Loop's proprietary depolymerization technology for one facility within Europe. Pursuant to the terms of the license agreement, the Company received an upfront royalty payment of $ 10,395 (€10,000). F-23 Table of Contents During the year ended February 28, 2025, the Company recorded revenues of $ 368 (2024 – nil) for engineering fees, which were related to an engineering services agreement between Loop and ELITe. Pursuant to the agreement, Loop is providing engineering services and support the local engineering firm for the planned Infinite Loop™ facility in India. During the year ended February 28, 2025, the Company recorded revenues of $ 126 (2024 – $ 153 ) for sales of Loop™ PET resin. As at February 28, 2025, unearned revenue was $ 102 (2023 – nil), comprised of a payment received from a customer while the Company has not yet fulfilled its obligation to deliver PET. 17. Research and Development Expenses Research and development expenses for the years ended February 28, 2025 and February 29, 2024 were as follows: February 28, 2025 February 29, 2024 Employee compensation $ 3,788 $ 5,133 External engineering 1,493 2,353 Plant and laboratory operating expenses (1) 870 2,318 Machinery and equipment expenditures 64 1,142 Other 649 433 $ 6,864 $ 11,379 (1) The amount for the year ended February 29, 2024 includes an inventory write-down of $ 817 on finished goods and work in process inventories related to inventory volumes not expected to be sold in the next twelve months (Note 4). 18. General and Administrative Expenses General and administrative expenses for the years ended February 28, 2025 and February 29, 2024 were as follows: February 28, 2025 February 29, 2024 Employee compensation $ 2,823 $ 3,223 Professional fees 3,428 2,928 Insurance 1,871 2,680 Other 1,106 1,157 $ 9,228 $ 9,988 19. Share-Based Payments Stock Options The following tables summarizes the continuity of the Company’s stock options during the years ended February 28, 2025 and February 29, 2024: 2025 2024 Number of stock options Weighted average exercise price Number of stock options Weighted average exercise price Outstanding, beginning of year 2,772,000 $ 5.10 2,542,000 $ 5.27 Granted 199,216 2.89 240,000 3.11 Exercised - - ( 10,000 ) 0.80 Forfeited ( 200,000 ) 0.80 - - Expired - - - - Outstanding, end of year 2,771,216 $ 5.25 2,772,000 $ 5.10 Exercisable, end of year 2,040,000 $ 6.12 1,810,000 $ 6.53 F-24 Table of Contents 2025 2024 Exercise price Number of stock options outstanding Weighted average remaining life (years) Number of stock options outstanding Weighted average remaining life (years) $ 0.80 280,000 0.75 480,000 1.75 $ 2.68 972,000 7.75 972,000 8.75 $ 2.89 199,216 9.02 - - $ 3.11 240,000 8.08 240,000 9.08 $ 5.25 380,000 2.49 380,000 3.50 $ 12.00 700,000 2.54 700,000 3.54 Outstanding, end of year 2,771,216 5.13 2,772,000 5.53 Exercisable, end of year 2,040,000 4.04 1,810,000 4.55 The Company applies the fair value method of accounting for stock-based compensation awards granted. Fair value is calculated based on a Black-Scholes option pricing model. The principal components of the pricing model for the stock options granted in the years ended February 28, 2025 and February 29, 2024 were as follows: 2025 2024 Exercise price $ 2.89 $ 3.11 Risk-free interest rate 4.09 % 3.61 % Expected dividend yield 0 % 0 % Expected volatility 73 % 73 % Expected life 7 years 6.5 years During the year ended February 28, 2025, stock-based compensation expense attributable to stock options amounted to $ 555 (2024 – $ 644 ). Restricted Stock Units The following table summarizes the continuity of the restricted stock units (“RSUs”) during the years February 28, 2025 and February 29, 2024: 2025 2024 Number of units Weighted average fair value price Number of units Weighted average fair value price Outstanding, beginning of year 4,368,897 $ 6.53 3,888,618 $ 7.09 Granted 213,046 2.10 585,364 2.93 Settled ( 91,355 ) 6.74 ( 51,963 ) 8.66 Forfeited ( 23,630 ) 4.88 ( 53,122 ) 5.56 Outstanding, end of year 4,466,958 $ 6.32 4,368,897 $ 6.53 Outstanding vested, end of year 1,761,421 $ 5.86 1,635,241 $ 6.22 The Company applies the fair value method of accounting for awards granted through the issuance of restricted stock units. Fair value is calculated based on the intrinsic value at grant date multiplied by the number of restricted stock unit awards granted. During the year ended February 28, 2025, stock-based compensation attributable to RSUs amounted to $ 797 (2024 - $ 778 ). Stock-Based Compensation Expense During the year ended February 28, 2025, stock-based compensation included in research and development expenses amounted to $ 471 (2024 – $ 542 ), and in general and administrative expenses amounted to $ 881 (2024 – $ 880 ). F-25 Table of Contents 20. Equity Incentive Plan On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”). The Plan permits the granting of warrants, stock options, stock appreciation rights and restricted stock units to employees, directors and consultants of the Company. A total of 3,000,000 shares of common stock were initially reserved for issuance under the Plan at July 6, 2017, with annual automatic share reserve increases, as defined in the Plan, amounting to the lessor of (i) 1,500,000 shares, (ii) 5 % of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Administrator of the Plan, effective March 1, 2018. On March 1, 2023 and 2024, the share reserve was increased by 1,500,000 shares. The Plan is administered by the Board of Directors who designates eligible participants to be included under the Plan, the number of awards granted, the share price pursuant to the awards and the vesting conditions and period. The awards, when granted, will have an exercise price of no less than the estimated fair value of shares at the date of grant and a life not exceeding 10 years from the grant date. However, where a participant, at the time of the grant, owns stock representing more than 10 % of the voting power of the Company, the life of the options shall not exceed 5 years. The following table summarizes the continuity of the Plan units that were authorized for issuance as at and during the years ended February 28, 2025 and February 29, 2024: 2025 2024 Number of units* Number of units* Authorized, beginning of period 848,244 120,486 Automatic share reserve increase 1,500,000 1,500,000 Units granted ( 412,262 ) ( 825,364 ) Units forfeited 223,630 53,122 Units expired - - Authorized, end of period 2,159,612 848,244 *The use of the term “units” in the table above describes a combination of stock options and RSUs. 21. Warrants The following table summarizes the continuity of warrants during the years ended February 28, 2025 and February 29, 2024: 2025 2024 Number of warrants Weighted average exercise price Number of warrants Weighted average exercise price Outstanding, beginning of year 7,089,400 $ 16.65 7,089,400 $ 16.65 Issued - - - - Exercised - - - - Expired ( 7,089,400 ) 16.65 - - Outstanding, end of year - $ - 7,089,400 $ 16.65 F-26 Table of Contents 22. Interest and Other Financial Expenses Interest and other financial expenses for the years ended February 28, 2025 and February 29, 2024 are as follows: 2025 2024 Accrued dividends on convertible securities (Note 12) $ 252 $ - Interest on long-term debt (Note 13) 114 84 Interest on credit facility from a Canadian bank (Note 13) 101 - Accretion expense (Notes 10 and 13) 107 79 Discount on due to customer (Note 10) - ( 238 ) Other 44 34 $ 618 $ ( 41 ) 23. Income Taxes The components of the Company’s loss before taxes are summarized below: February 28, 2025 February 29, 2024 U.S. operations $ ( 6,049 ) $ ( 6,012 ) Foreign operations ( 9,008 ) ( 15,075 ) Loss before taxes $ ( 15,057 ) $ ( 21,087 ) F-27 Table of Contents A reconciliation from the statutory U.S. income tax rate and the Company’s effective income tax rate, as computed on loss before taxes, is as follows: February 28, 2025 February 29, 2024 Statutory Federal rate 21 % 21 % Federal income tax at statutory rate $ ( 3,162 ) $ ( 4,427 ) Effect of foreign jurisdiction ( 410 ) ( 937 ) Non-deductible expenses 1,641 1,435 Tax credits related to research and development expenditures ( 340 ) ( 367 ) Change in valuation allowance and other items 2,271 4,296 Effective income tax expense $ - $ - Current $ - $ - Deferred $ - $ - The Company has net operating loss carry forwards of approximately $ 36,285 (2024 – $ 37,472 ) for U.S. Federal income tax purposes expiring between 2035 and 2038, post 2018 net operating losses may be carried forward indefinitely. The Company has net operating loss carry forwards for Canadian Federal and Québec tax purposes of approximately $ 80,560 (CDN$109,168), 2024 - $ 83,073 (CDN$112,797), and $ 86,816 (CDN$117,651), 2024 - $ 89,532 (CDN$121,572), respectively, expiring between 2037 and 2045 . Realization of future tax assets is dependent on future earnings, the timing and amount of which are uncertain. Accordingly, the net future tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $ 1,260 and $ 4,905 , respectively, for the years ended February 28, 2025 and February 29, 2024. The Company has provided a full valuation allowance on the deferred tax assets as a result of the uncertainty regarding the probability of its realization. The Company has approximately $ 10,517 (CDN$15,185), 2024 - $ 9,506 (CDN$12,903) of research and development expenditures for Canadian Federal and Québec provincial purposes that are available to reduce taxable income in future years and have an unlimited carry forward period, the benefit of which has not been reflected in these financial statements. Research and development expenditures are subject to audit by the taxation authorities and accordingly, these amounts may vary. F-28 Table of Contents The tax effect of temporary differences between US GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows: As at February 28, 2025 February 29, 2024 Deferred tax assets Canada net operating loss carry forward $ 20,703 $ 22,765 U.S. net operating loss carry forward 7,620 7,869 Accrual and reserves 691 616 Intangibles 357 304 Property, plant and equipment 4,115 1,914 Research and development expenditures and credits 4,745 4,428 Basis in partnership 235 235 Other 1,828 859 Deferred tax assets 40,294 38,990 Deferred tax liabilities Intangibles ( 453 ) ( 409 ) Deferred tax liabilities ( 453 ) ( 409 ) Deferred tax assets, net 39,841 38,581 Valuation allowance ( 39,841 ) ( 38,581 ) Deferred tax assets, net $ - $ - Assessment of the amount of value assigned to the Company's deferred tax assets under the applicable accounting rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the likelihood that the Company will be able to realize the benefit of its deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of the Company's deferred tax assets is dependent on generating sufficient taxable income in future periods. Management does not believe that it is more likely than not that future taxable income will be sufficient to allow it to recover substantially all of the value assigned to its deferred tax assets. Accordingly, the Company has provided for a valuation allowance of the Company's deferred tax assets. The tax years subject to examination by major tax jurisdiction include the years ended February 28, 2019 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years ended February 28, 2019 and forward for the Canadian jurisdiction. 24. Segment Reporting The Company manages its operations as a single reportable segment for the purpose of assessing performance and making operating and strategic decisions, which currently focuses on the commercialization of its technology. The accounting policies of the single reportable segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker, or “CODM,” assesses performance decides whether to allocate resources for the Company’s single reportable segment based on consolidated net loss. The CODM uses net loss to regularly monitor budget versus actual results which are used in assessing performance and in establishing management’s compensation. The CODM does not review assets in evaluating the results of the single reportable segment, therefore such information is not presented. The consolidated statement of operations provides the operating results for the single reportable segment. Significant segment expenses within the financial statement line items, Research and Development and General and administrative , are further presented in Note 17 and 18, respectively. Year ended February 28, 2025 February 29, 2024 Research and development (See components in Note 17) 6,864 11,379 General and administrative (See components in Note 18) 9,228 9,988 F-29 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.