Loop Industries, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Loop Industries, Inc. Three months ended May 31, 2025 Index to the Unaudited Interim Condensed Consolidated Financial Statements Contents Page(s) Condensed consolidated balance sheets as at May 31, 2025 (Unaudited) and February 28, 2025 F‑1 Condensed consolidated statements of operations and comprehensive loss for the three months ended May 31, 2025 and 2024 (Unaudited) F‑2 Condensed consolidated statements of changes in stockholders’ equity for the three months ended May 31, 2025 and 2024 (Unaudited) F‑3 Condensed consolidated statements of cash flows for the three months ended May 31, 2025 and 2024 (Unaudited) F‑4 Notes to the condensed consolidated financial statements (Unaudited) F‑5 3 Table of Contents Loop Industries, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands of U.S. dollars, except per share data) As at May 31, 2025 February 28, 2025 Assets Current assets Cash and cash equivalents $ 9,748 $ 12,973 Accounts receivable (Note 3) 974 639 Inventories 86 82 Prepaid expenses (Note 4) 507 158 Total current assets 11,315 13,852 Investments in joint ventures (Note 9) 979 1,281 Property, plant and equipment, net (Note 5) 1,787 1,737 Intangible assets, net (Note 6) 1,840 1,708 Total assets $ 15,921 $ 18,578 Liabilities and Stockholders’ Equity Current liabilities Accounts payable and accrued liabilities (Note 8) $ 3,513 $ 3,545 Unearned revenue 102 102 Current portion of long-term debt (Note 11) 409 312 Total current liabilities 4,024 3,959 Due to customer 848 832 Series B Convertible Preferred stock (Note 10) 10,987 10,647 Long-term debt (Note 11) 2,786 2,773 Total liabilities 18,645 18,211 Stockholders’ Equity Series A Preferred stock par value $ 0.0001 ; 25,000,000 shares authorized; one share issued and outstanding - - Common stock par value $ 0.0001 ; 250,000,000 shares authorized; 47,718,350 shares issued and outstanding (February 28, 2025 – 47,528,908 ) (Note 11) 5 5 Additional paid-in capital 193,904 193,529 Accumulated deficit ( 195,474 ) ( 192,027 ) Accumulated other comprehensive loss ( 1,159 ) ( 1,140 ) Total stockholders’ equity ( 2,724 ) 367 Total liabilities and stockholders’ equity $ 15,921 $ 18,578 See accompanying notes to the condensed consolidated financial statements . F-1 Table of Contents Loop Industries, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (in thousands of U.S. dollars, except per share data) Three Months Ended May 31, 2025 May 31, 2024 Revenues (Note 13) $ 252 $ 6 Expenses : Research and development (Note 14) 1,374 2,237 General and administrative (Note 15) 1,649 2,911 Depreciation and amortization (Notes 5 and 6) 100 137 Loss on equity accounted investment (Note 9) 302 - Total expenses 3,425 5,285 Other loss (income) : Interest and other financial expenses 419 60 Interest income ( 100 ) ( 126 ) Foreign exchange gain ( 45 ) ( 24 ) Total other loss (income) 274 ( 90 ) Net loss ( 3,447 ) ( 5,189 ) Other comprehensive (loss) income : Foreign currency translation adjustment ( 19 ) ( 55 ) Comprehensive loss $ ( 3,466 ) $ ( 5,244 ) Net loss per share Basic and diluted $ ( 0.07 ) $ ( 0.11 ) Weighted average common shares outstanding Basic and diluted 47,664,134 47,535,413 See accompanying notes to the condensed consolidated financial statements. F-2 Table of Contents Loop Industries, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) (in thousands of U.S. dollars, except for share data) Three months ended May 31, 2025 Common stock par value $0.0001 Preferred stock par value $0.0001 Additional Accumulated Other Total Number of Shares Amount Number of Shares Amount Paid-in Capital Accumulated Deficit Comprehensive Income (Loss) Stockholders’ Equity Balance, February 28, 2025 47,620,263 $ 5 1 $ - $ 193,529 $ ( 192,027 ) $ ( 1,140 ) $ 367 Issuance of shares upon the vesting of restricted stock units (Note 16) 98,087 - - - - - - - Stock options issued for services (Note 16) - - - - 486 - - 486 Restricted stock units issued for services (Note 16) - - - - ( 111 ) - - ( 111 ) Foreign currency translation - - - - - - ( 19 ) ( 19 ) Net loss - - - - - ( 3,447 ) - ( 3,447 ) Balance, May 31, 2025 47,718,350 $ 5 1 $ - $ 193,904 $ ( 195,474 ) $ ( 1,159 ) ( 2,724 ) (in thousands of U.S. dollars, except for share data) Three months ended May 31, 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 Income (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 vesting of restricted stock units (Note 16) 9,837 - - - - - - - - Stock options issued for services (Note 16) - - - - 146 - - - 146 Restricted stock units issued for services (Note 16) - - - - 224 - - - 224 Foreign currency translation - - - - - - - ( 55 ) ( 55 ) Net loss - - - - - - ( 5,189 ) - ( 5,189 ) Balance, May 31, 2024 47,538,745 $ 5 1 $ - $ 172,162 20,385 ( 182,159 ) ( 1,125 ) 9,268 See accompanying notes to the condensed consolidated financial statements. F-3 Table of Contents Loop Industries, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands of U.S. dollars) Three Months Ended May 31, 2025 2024 Cash Flows from Operating Activities Net loss $ ( 3,447 ) $ ( 5,189 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization (Notes 5 and 6) 100 137 Stock-based compensation expense (Note 16) 375 370 Accrued interest and other financing costs (Notes 10 and 11) 369 28 Loss on equity accounted investment (Note 9) 302 - Changes in operating assets and liabilities: Accounts receivable (Note 3) ( 297 ) 108 Inventories - 3 Prepaid expenses (Note 4) ( 343 ) 51 Accounts payable and accrued liabilities (Note 8) ( 141 ) 577 Net cash used in operating activities ( 3,082 ) ( 3,915 ) Cash Flows from Investing Activities Additions to intangible assets (Note 6) ( 115 ) ( 176 ) Net cash used in investing activities ( 115 ) ( 176 ) Cash Flows from Financing Activities Borrowings under credit facility - 2,517 Repayment of long-term debt (Note 11) ( 55 ) ( 25 ) Net cash (used) provided by financing activities ( 55 ) 2,492 Effect of exchange rate changes 27 ( 68 ) Net decrease in cash ( 3,225 ) ( 1,667 ) Cash and cash equivalents, beginning of period 12,973 6,958 Cash and cash equivalents, end of period $ 9,748 $ 5,291 Supplemental Disclosure of Cash Flow Information: Income tax paid $ - $ - Interest paid $ 50 $ 42 Interest received $ 100 $ 195 See accompanying notes to the condensed consolidated financial statements. F-4 Table of Contents Loop Industries, Inc. Three Months Ended May 31, 2025 and 2024 Notes to the Condensed Consolidated Financial Statements (Unaudited) 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 unaudited interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures included in these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2025, filed with the SEC on May 29, 2025, as amended by the Amendment No. 1 on Form 10-K/A filed with the SEC on May 30, 2025. The unaudited interim condensed consolidated financial statements 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 condensed consolidated balance sheet as of February 28, 2025, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by US GAAP on an annual reporting basis. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results for the three months ended May 31, 2025 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 28, 2026, or for any other period. All monetary amounts in these notes to the condensed consolidated financial statements are in thousands of U.S. dollars unless otherwise specified, except for per share data. 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 May 31, 2025, the Company had cash and cash equivalents of $ 9,748 . 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 unaudited interim condensed consolidated financial statements. F-5 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 (as defined under Note 9 below) for the construction of the planned Infinite Loop™ facility in India, as well as its ongoing cash requirements. 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. 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. Net earnings (loss) per share The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share . Basic earnings (loss) per share is computed by dividing the net income (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 earnings (loss) per share is computed by dividing the net income (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 three-month periods ended May 31, 2025 and 2024, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at May 31, 2025, the potentially dilutive securities consisted of 5,573,138 outstanding stock options (2024 – 2,971,216 ), 3,981,121 outstanding restricted stock units (2024 – 4,399,060 ), and nil outstanding warrants (2024 – 7,089,400 ). Recently adopted accounting pronouncements 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. The adoption of this accounting guidance for the three-month period ended May 31, 2025 did not impact the disclosures in our interim condensed consolidated financial statements. 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 is 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 consolidated financial statements and related disclosures. F-6 Table of Contents 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 consolidated financial statements and related 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 consolidated financial statements and related disclosures. 3. Accounts Receivable Accounts receivable as at May 31, 2025 and February 28, 2025 were as follows: May 31, 2025 February 28, 2025 Accounts receivable from customers $ 667 $ 420 Research and development tax credits 159 121 Sales tax 94 89 Other receivables 54 9 $ 974 $ 639 4. Prepaid Expenses Prepaid expenses as at May 31, 2025 and February 28, 2025 were as follows: May 31, 2025 February 28, 2025 Insurance $ 373 $ 69 Utilities 32 29 Software 24 28 Other 78 32 $ 507 $ 158 5. Property, Plant and Equipment, Net As at May 31, 2025 Cost Accumulated depreciation, write-down and impairment Net book value Machinery and equipment $ 8,460 $ ( 8,460 ) $ - Building 1,802 ( 441 ) 1,361 Land 223 - 223 Building and Land Improvements 1,827 ( 1,714 ) 113 Office equipment and furniture 271 ( 181 ) 90 $ 12,583 ( 10,796 ) 1,787 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 Depreciation expense amounted to $ 35 for the three-month period ended May 31, 2025 (2024 – $ 91 ). F-7 Table of Contents 6. Intangible Assets, Net Intangible assets as at May 31, 2025 and February 28, 2025 were $ 1,840 and $ 1,708 respectively. During the three-month periods ended May 31, 2025 and 2024, we capitalized additions relating to patent application costs to intangible assets of $ 115 and $ 176 , respectively. Amortization expense for the three-month period ended May 31, 2025 amounted to $ 66 (2024 – $ 46 ). 7. Fair Value of Financial Instruments The following tables presents the fair value of the Company’s financial liabilities as at May 31, 2025 and February 28, 2025: Fair Value at May 31, 2025 Carrying Amount Fair Value Level in the hierarchy Financial liabilities measured at amortized cost: Long-term debt (Note 11) $ 3,195 $ 3,195 Level 2 Due to customer $ 848 $ 848 Level 2 Fair Value at February 28, 2025 Carrying Amount Fair Value Level in the hierarchy Financial liabilities measured at amortized cost: Long-term debt (Note 11) $ 3,085 $ 3,085 Level 2 Due to customer $ 832 $ 832 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. 8. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities as at May 31, 2025 and February 28, 2025 were as follows: May 31, 2025 February 28, 2025 Accounts payable $ 2,033 $ 2,010 Accrued employee compensation 471 554 Accrued engineering fees 458 431 Accrued professional fees 320 276 Other accrued liabilities 231 274 $ 3,513 $ 3,545 9. Investments in Joint Ventures 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 as the India JV. F-8 Table of Contents 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 three-month period ended May 31, 2025, Loop and Ester made no contributions (2024 – nil) to ELITe. During the three-month period ended May 31, 2025, ELITe incurred losses of $ 604 (2024 – nil), resulting in the Company recording its share of the loss on equity accounted investment of $ 302 (2024 – nil) for the period. As at May 31, 2025, the carrying value of the Company’s investment in ELITe was $ 979 (2024 – nil). 10. Series B Convertible Preferred Stock The balance of Series B Convertible Preferred Stock as at May 31, 2025 and February 28, 2025 was as follows: May 31, 2025 February 28, 2025 Stated value at issuance $ 10,395 $ 10,395 Accrued PIK dividends 592 252 Series B Convertible Preferred Stock $ 10,987 $ 10,647 During the three-month period ended May 31, 2025, the company recorded PIK dividends of $ 340 (2024 – nil), which were recorded in “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. 11. Long‑Term Debt Long-term debt as of May 31, 2025 and February 28, 2025, was comprised of the following: May 31, 2025 February 28, 2025 Investissement Québec financing facility: Principal amount $ 3,202 $ 3,099 Unamortized discount ( 133 ) ( 138 ) Accrued interest 126 124 Total Investissement Québec financing facility 3,195 3,085 Less: current portion of long-term debt ( 409 ) ( 312 ) Long-term debt, net of current portion $ 2,786 $ 2,773 Investissement Québec financing facility The Company recorded interest expense on the Investissement Québec loan for the three-month period ended May 31, 2025 in the amount of $ 36 (2024 – $ 30 ) and an accretion expense of $ 11 (2024 – $ 14 ). During the three-month period ended May 31, 2025, the Company made repayments of $ 55 (2024 – $ 25 ) on the Investissement Québec loan. Total repayments due on the Company’s indebtedness over the next five years are as follows: Years ending Amount February 28, 2026 $ 273 February 28, 2027 545 February 29, 2028 837 February 28, 2029 837 February 28, 2030 836 Thereafter - Total $ 3,328 F-9 Table of Contents 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 $ 2,544 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 May 31, 2025. All borrowings under the Credit Facility bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0%. As at May 31, 2025, the $ 2,544 Credit Facility was available and undrawn. As at May 31, 2024, the Company had borrowings of $ 2,517 under the Credit Facility. On July 4, 2025, the Company and the Canadian Bank executed an amendment to the Credit Facility, modifying the minimum equity covenant to include the balance of Series B Convertible Preferred Stock as at February 28, 2025 of $ 10,647 in the calculation of stockholders’ equity. The Company was in compliance with the minimum equity covenant following this amendment. 12. Stockholders’ Equity Common Stock For the period ended May 31, 2025 Number of shares Amount Balance, February 28, 2025 47,620,263 $ 5 Issuance of shares upon settlement of restricted stock units 98,087 - Balance, May 31, 2025 47,718,350 $ 5 For the period ended May 31, 2024 Number of shares Amount Balance, February 29, 2024 47,528,908 $ 5 Issuance of shares upon settlement of restricted stock units 9,837 - Balance, May 31, 2024 47,538,745 $ 5 During the three months ended May 31, 2025, the Company recorded the following common stock transactions: (i) The Company issued 98,087 shares of the common stock to settle restricted stock units that vested in the period. During the three months ended May 31, 2024, the Company recorded the following common stock transactions: (i) The Company issued 9,837 shares of the common stock to settle restricted stock units that vested in the period. 13. Revenues Revenue for the three-month periods ended May 31, 2025 and 2024 were as follows: May 31, 2025 May 31, 2024 Engineering services $ 244 $ - Sales of PET 8 6 $ 252 $ 6 During the three-month period ended May 31, 2025, the Company recorded revenues of $ 244 (2024 – nil) for engineering fees, which were related to an engineering services agreement between Loop and ELITe. Pursuant to the agreement, Loop provides engineering services for the planned Infinite Loop™ facility in India. During the three-month period ended May 31, 2025, the Company recorded revenues of $ 8 (2024 – $ 6 ) for sales of Loop™ PET resin. As at May 31, 2025, unearned revenue was $ 102 (2024 – nil), comprised of a payment received from a customer while the Company has not yet fulfilled its obligation to deliver PET. F-10 Table of Contents 14. Research and Development Expenses Research and development expenses for the three-month periods ended May 31, 2025 and 2024 were as follows: May 31, 2025 May 31, 2024 Employee compensation $ 1,014 $ 1,144 External engineering 5 628 Plant and laboratory operating expenses 231 270 Other 124 195 $ 1,374 $ 2,237 15. General and Administrative Expenses General and administrative expenses for the three-month periods ended May 31, 2025 and 2024 were as follows: May 31, 2025 May 31, 2024 Employee compensation $ 632 $ 876 Insurance 453 492 Professional fees 361 1,255 Other 203 288 $ 1,649 $ 2,911 16. Share-based Payments Stock Options The following table summarizes the continuity of the Company’s stock options during the three-month periods ended May 31, 2025 and 2024: 2025 2024 Number of stock options Weighted average exercise price Number of stock options Weighted average exercise price Outstanding, beginning of period 2,771,216 $ 5.25 2,772,000 $ 5.10 Granted 2,801,922 1.16 199,216 2.89 Exercised - - - - Forfeited - - - - Expired - - - - Outstanding, end of period 5,573,138 $ 3.19 2,971,216 $ 4.95 Exercisable, end of period 2,711,727 $ 4.98 1,890,000 $ 6.39 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 three-month period ended May 31, 2025 and 2024 were as follows: 2025 2024 Exercise price $ 1.16 2.89 Risk-free interest rate 3.68 % – 3.72 % 4.09 % Expected dividend yield 0 % 0 % Expected volatility 81 % – 82 % 73 % Expected life 3.5 – 5.0 years 7 years The weighted-average grant-date fair value of options granted during the periods ended May 31, 2025 and 2024 was $ 0.62 and $ 2.03 , respectively. A summary of the Company’s nonvested shares as of May 31, 2025, and changes during the period ended May 31, 2025 were as follows: Number of stock options Weighted-average grant-date fair value Nonvested, beginning of period 731,216 $ 1.88 Granted 2,270,000 0.64 Exercised - - Forfeited - - Vested ( 139,805 ) 2.09 Nonvested, end of period 2,861,411 $ 0.89 During the three-month periods ended May 31, 2025 and 2024, stock-based compensation expense attributable to stock options amounted to $ 486 and $ 146 , respectively. F-11 Table of Contents Restricted Stock Units The following table summarizes the continuity of the restricted stock units during the three-month periods ended May 31, 2025 and 2024: 2025 2024 Number of units Weighted average fair value price Number of units Weighted average fair value price Outstanding, beginning of period 4,466,958 $ 6.32 4,368,897 $ 6.53 Granted - - 40,000 2.85 Settled ( 98,087 ) 3.41 ( 9,837 ) 8.31 Forfeited ( 387,750 ) 2.87 - - Outstanding, end of period 3,981,121 $ 6.73 4,399,060 $ 6.49 Outstanding vested, end of period 1,689,255 $ 6.02 1,727,575 $ 6.07 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 three-month periods ended May 31, 2025 and 2024, stock-based compensation attributable to RSUs amounted to $( 111 ), which includes $( 268 ) for forfeitures recorded in the period, and $ 224 , respectively. Stock-Based Compensation Expense During the three-month periods ended May 31, 2025 and 2024, stock-based compensation included in research and development expenses amounted to $ 312 and $ 129 , respectively, and in general and administrative expenses amounted to $ 63 and $ 241 , respectively. 17. 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, 2025, the share reserve was increased by 1,500,000 shares (2024 – 1,500,000 ). 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 units that were authorized for issuance under the Plan as at and during the three-month periods ended May 31, 2025 and 2024: 2025 2024 Number of units* Number of units* Authorized, beginning of period 2,159,612 848,244 Automatic share reserve increase 1,500,000 1,500,000 Units granted ( 2,801,922 ) ( 239,216 ) Units forfeited 387,750 - Units expired - - Authorized, end of period 1,245,440 2,109,028 *The use of the term “units” in the table above describes a combination of stock options and RSUs. F-12 Table of Contents