Loop Industries, Inc. - Quarter Report: 2022 November (Form 10-Q)

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended November 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ___________ to __________

Commission File No. 000-54768

Loop Industries, Inc.

(Exact name of Registrant as specified in its charter)

Nevada

27-2094706

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

480 Fernand-Poitras Terrebonne, Québec, Canada J6Y 1Y4

(Address of principal executive offices zip code)

Registrant’s telephone number, including area code (450) 951-8555

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	LOOP	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As at January 11, 2023, there were 47,469,224 shares of the Registrant’s common stock, par value $0.0001 per share, outstanding.

LOOP INDUSTRIES, INC.

TABLE OF CONTENTS

		Page No.
PART I. Financial Information

Item 1.	Financial Statements	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17

PART II. Other Information

Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	20

	Signatures	21

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Loop Industries, Inc.

Three and Nine months ended November 30, 2022

Index to the Unaudited Interim Condensed Consolidated Financial Statements

Contents		Page(s)

Condensed consolidated balance sheets as at November 30, 2022 and February 28, 2022 (Unaudited)		F‑2

Condensed consolidated statements of operations and comprehensive loss for the three and nine months ended November 30, 2022 and 2021 (Unaudited)		F‑3

Condensed consolidated statement of changes in stockholders’ equity for the three and nine months ended November 30, 2022 and 2021 (Unaudited)		F‑4

Condensed consolidated statement of cash flows for the nine months ended November 30, 2022 and 2021 (Unaudited)		F‑6

Notes to the condensed consolidated financial statements (Unaudited)		F‑7

F-1

Table of Contents

Loop Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	As at
	November 30, 2022			February 28, 2022

Assets
Current assets
Cash and cash equivalents	$	21,524,993		$	44,061,427
Restricted cash (Note 21)		4,100,000			-
Sales tax, tax credits and other receivables (Note 3)		1,605,856			1,716,262
Inventories (Note 4)		426,278			-
Prepaid expenses and deposits (Note 5)		4,055,453			2,965,646
Assets held for sale (Note 6)		3,758,314			3,389,279
Total current assets		35,470,894			52,132,614
Investment in joint venture		380,922			380,922
Property, plant and equipment, net (Note 7)		2,677,982			5,692,862
Intangible assets, net (Note 8)		1,110,932			1,013,801
Total assets	$	39,640,730		$	59,220,199

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued liabilities (Note 10)	$	6,968,219		$	9,846,815
Customer deposits (Note 11)		1,000,000			-
Current portion of long-term debt (Note 12)		46,891			-
Total current liabilities		8,015,110			9,846,815
Long-term debt (Note 12)		3,242,231			3,378,403
Total liabilities		11,257,341			13,225,218

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; 47,439,587 shares issued and outstanding (February 28, 2022 – 47,388,056) (Note 14)		4,745			4,740
Additional paid-in capital		170,174,884			150,396,704
Additional paid-in capital – Warrants (Note 19)		20,463,464			30,272,496
Accumulated deficit		(161,307,104	)		(134,582,926	)
Accumulated other comprehensive loss		(952,600	)		(96,033	)
Total stockholders’ equity		28,383,389			45,994,981
Total liabilities and stockholders’ equity	$	39,640,730		$	59,220,199

See accompanying notes to the condensed consolidated financial statements.

F-2

Table of Contents

Loop Industries, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended November 30						Nine Months Ended November 30
	2022			2021			2022			2021

Revenue	$	24,924		$	-		$	160,352		$	-

Expenses
Research and development (Note 15)		4,581,552			6,835,304			15,133,191			20,757,937
General and administrative (Note 16)		3,182,927			3,091,255			18,230,255			9,368,052
Gain on disposition of assets (Note 6)		(6,703,558	)		-			(6,703,558	)		-
Depreciation and amortization (Notes 7 and 8)		133,902			135,035			410,544			407,806
Interest and other financial expenses (Note 20)		54,402			49,655			138,962			113,344
Interest income		(13,315	)		(23,654	)		(35,842	)		(41,828	)
Foreign exchange loss (gain)		(197,913	)		10,648			(289,022	)		42,712
Total expenses		1,037,997			10,098,243			26,884,530			30,648,023

Net Loss		(1,013,073	)		(10,098,243	)		(26,724,178	)		(30,648,023	)

Other comprehensive income (loss)
Foreign currency translation adjustment		(439,297	)		(13,473	)		(856,567	)		(160,371	)
Comprehensive income (loss)	$	(1,452,370	)	$	(10,111,716	)	$	(27,580,745	)	$	(30,808,394	)

Loss per share
Basic and Diluted	$	(0.02	)	$	(0.21	)	$	(0.56	)	$	(0.69	)

Weighted average common shares outstanding
Basic and Diluted		47,416,340			47,264,646			47,405,801			44,600,557

See accompanying notes to the condensed consolidated financial statements.

F-3

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Loop Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Three Months Ended November 30, 2021
	Common stock				Series A preferred stock
	par value $0.0001				par value $0.0001
	Number of Shares		Amount		Number of Shares		Amount		Additional Paid-in Capital			Additional Paid-in Capital - Warrants			Accumulated Deficit			Accumulated Other Comprehensive (Loss)			Total Stockholders’ Equity
Balance, August 31, 2021		47,160,164	$	4,717		1	$	-	$	149,008,231		$	30,356,938		$	(110,211,750	)	$	(153,488	)	$	69,004,648
Issuance of shares upon the vesting of restricted stock units (Note 17)		200,000		20		-		-		(20	)		-			-			-			-
Issuance of shares upon exercise of warrants (Note 19)		11,666		1		-		-		84,441			(84,442	)		-			-			-
Issuance of shares upon exercise of options (Note 17)		16,226		2		-		-		(2	)		-			-			-			-
Stock options issued for services (Note 17)		-		-		-		-		311,004			-			-			-			311,004
Restricted stock units issued for services (Note 17)		-		-		-		-		331,005			-			-			-			331,005
Foreign currency translation		-		-		-		-		-			-			-			(13,473	)		(13,473	)
Net loss		-		-		-		-		-			-			(10,098,243	)		-			(10,098,243	)
Balance, November 30, 2021		47,388,056	$	4,740		1	$	-	$	149,734,659		$	30,272,496		$	(120,309,993	)	$	(166,961	)	$	59,534,941

	Three Months Ended November 30, 2022
	Common stock				Series A preferred stock
	par value $0.0001				par value $0.0001
	Number of Shares		Amount		Number of Shares		Amount		Additional Paid-in Capital			Additional Paid-in Capital - Warrants		Accumulated Deficit			Accumulated Other Comprehensive (Loss)			Total Stockholders’ Equity
Balance, August 31, 2022		47,400,709	$	4,741		1	$	-	$	169,300,723		$	20,463,464	$	(160,294,031	)	$	(513,303	)	$	28,961,594
Issuance of shares upon the vesting of restricted stock units (Note 17)		38,878		4		-		-		(4	)		-		-			-			-
Stock options issued for services (Note 17)		-		-		-		-		551,363			-		-			-			551,363
Restricted stock units issued for services (Note 17)		-		-		-		-		322,802			-		-			-			322,802
Foreign currency translation		-		-		-		-		-			-		-			(439,297	)		(439,297	)
Net loss		-		-		-		-		-			-		(1,013,073	)		-			(1,013,073	)
Balance, November 30, 2022		47,439,587	$	4,745		1		-	$	170,174,884		$	20,463,464	$	(161,307,104	)	$	(952,600	)	$	28,383,389

See accompanying notes to the condensed consolidated financial statements.

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Loop Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Nine Months Ended November 30, 2021
	Common stock				Series A preferred stock
	par value $0.0001				par value $0.0001
	Number of Shares		Amount		Number of Shares		Amount		Additional Paid-in Capital			Additional Paid-in Capital - Warrants			Accumulated Deficit			Accumulated Other Comprehensive (Loss)			Total Stockholders’ Equity
Balance, February 28, 2021		42,413,691	$	4,242		1	$	-	$	113,662,677		$	8,826,165		$	(89,661,970	)	$	(6,590	)	$	32,824,524
Issuance of common shares and warrants for cash, net of share issuance costs (Note 14)		4,714,813		471		-		-		34,625,823			21,461,450			-			-			56,087,744
Issuance of warrants for financing facility (Note 19)		-		-		-		-		-			69,323			-			-			69,323
Issuance of shares upon the vesting of restricted stock units (Note 17)		231,660		24		-		-		(24	)		-			-			-			-
Issuance of shares upon exercise of warrants (Note 17)		11,666		1		-		-		84,441			(84,442	)		-			-			-
Issuance of shares upon exercise of options (Note 17)		16,226		2		-		-		(2	)		-			-			-			-
Stock options issued for services (Note 17)		-		-		-		-		1,203,975			-			-			-			1,203,975
Restricted stock units issued for services (Note 17)		-		-		-		-		157,769			-			-			-			157,769
Foreign currency translation		-		-		-		-		-			-			-			(160,371	)		(160,371	)
Net loss		-		-		-		-		-			-			(30,648,023	)		-			(30,648,023	)
Balance, November 30, 2021		47,388,056	$	4,740		1	$	-	$	149,734,659		$	30,272,496		$	(120,309,993	)	$	(166,961	)	$	59,534,941

	Nine Months Ended November 30, 2022
	Common stock				Series A preferred stock
	par value $0.0001				par value $0.0001
	Number of Shares		Amount		Number of Shares		Amount		Additional Paid-in Capital			Additional Paid-in Capital - Warrants			Accumulated Deficit			Accumulated Other Comprehensive (Loss)			Total Stockholders’ Equity
Balance, February 28, 2022		47,388,056	$	4,740		1	$	-	$	150,396,704		$	30,272,496		$	(134,582,926	)	$	(96,033	)	$	45,994,981
Issuance of shares upon the vesting of restricted stock units (Note 17)		51,531		5		-		-		(5	)		-			-			-			-
Expiration of warrants (Note 19)		-		-		-		-		9,809,032			(9,809,032	)		-			-			-
Stock options issued for services (Note 17)		-		-		-		-		1,180,963			-			-			-			1,180,963
Restricted stock units issued for services (Note 17)		-		-		-		-		8,788,190			-			-			-			8,788,190
Foreign currency translation		-		-		-		-		-			-			-			(856,567	)		(856,567	)
Net loss		-		-		-		-		-			-			(26,724,178	)		-			(26,724,178	)
Balance, November 30, 2022		47,439,587	$	4,745		1		-	$	170,174,884		$	20,463,464		$	(161,307,104	)	$	(952,600	)	$	28,383,389

See accompanying notes to the condensed consolidated financial statements.

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Loop Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended November 30,
	2022			2021
Cash Flows from Operating Activities
Net loss	$	(26,724,178	)	$	(30,648,023	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization (Notes 7 and 8)		410,544			407,806
Stock-based compensation expense (Note 17)		9,969,153			1,361,744
Gain on disposition of assets (Note 6)		(6,703,558	)		-
Accretion and accrued interest expenses (Note 20)		117,504			82,393
Changes in operating assets and liabilities:
Sales tax and tax credits receivable (Note 3)		20,301			948,328
Inventory (Note 4)		(426,278	)		-
Prepaid expenses and deposits (Note 5)		(1,294,520	)		(1,394,272	)
Accounts payable and accrued liabilities (Note 10)		(2,652,171	)		(3,587,932	)
Customer deposits (Note 11)		1,000,000			-
Net cash used in operating activities		(26,283,203	)		(32,829,956	)

Cash Flows from Investing Activities
Proceeds from disposition of assets (Note 6)		8,559,490			-
Additions to property, plant and equipment (Notes 6 and 7)		(68,097	)		(5,022,255	)
Additions to intangible assets (Note 8)		(225,047	)		(348,017	)
Net cash used in investing activities		8,266,346			(5,370,272	)

Cash Flows from Financing Activities
Proceeds from sale of common shares and warrants, net of share issuance costs (Note 14)		-			56,087,746
Proceeds from issuance of long-term debt (Note 12)		-			1,868,954
Repayment of long-term debt		-			(41,041	)
Net cash (used) provided by financing activities		-			57,915,659

Effect of exchange rate changes		(419,577	)		(77,336	)
Net increase (decrease) in cash		(18,436,434	)		19,638,095
Cash and restricted cash, beginning of period		44,061,427			35,221,951
Cash and restricted cash, end of period	$	25,624,993		$	54,860,046

Supplemental Disclosure of Cash Flow Information:
Income tax paid	$	-		$	-
Interest paid	$	-		$	30,506
Interest received	$	35,842		$	23,654

See accompanying notes to the condensed consolidated financial statements.

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Loop Industries, Inc.

Three and Nine Months Ended November 30, 2022 and 2021

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. The Company, 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 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 development 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, 2022, filed with the SEC on May 27, 2022. 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 also owns, through Loop Innovations, LLC, a 50% interest in a joint venture, Indorama Loop Technologies, LLC, 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, 2022, 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- and nine-month periods ended November 30, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 28, 2023, or for any other period.

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.

2. Summary of Significant Accounting Policies

Liquidity Risk Assessment

Since its inception, the Company has been in the development stage with limited revenues from customers, and its ongoing operations and commercialization plans have been financed primarily by raising equity. The Company has incurred net losses and negative cash flow from operating activities since its inception and expects to incur additional net losses while it continues to develop and plan for commercialization. As at November 30, 2022, the Company’s available liquidity was $24.11 million, consisting of cash and cash equivalents of $21.52 million and an undrawn senior loan facility from a Canadian bank of $2.59 million. Additionally, the Company entered into an agreement on December 21, 2022 to sell its remaining land in Bécancour, Québec for $13.70 million (CDN $18.50 million) on or before February 24, 2023 as described in Note 22. Management actively monitors the Company’s cash resources against the Company’s short-term cash commitments to ensure the Company has sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is substantial doubt about the Company’s ability to continue as a going concern. In preparing this liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to: (i) estimation of amount and timing of future cash outflows and cash inflows and (ii) determining what future expenditures are committed and what could be considered discretionary. Based on this assessment, management believes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they become due for a period of no less than twelve months from the date of issuance of these consolidated financial statements.

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The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent on whether the Company can obtain the necessary financing through a combination of the issuance of debt, equity, and/or joint ventures and/or government incentive programs. The Company is working with its joint venture partners to put in place the financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the planned first Asian manufacturing facility in Ulsan, South Korea.However, there is no assurance that the Company will be successful in attracting additional funding. Even if additional financing is available, it may not be available on terms favorable to the Company. Failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on the Company’s current operation and on its ability to execute its business plan.

The Company has committed a portion of its cash resources for certain long lead equipment and may enter into additional commitments to move commercial projects ahead within targeted construction timeframes.

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 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.

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 of property, plant and equipment, intangible assets, analysis of impairments of long-lived assets and intangible assets as well as the carrying value of our joint venture investment, assets held for sale, accruals for potential liabilities, 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.

The COVID-19 pandemic, as well as supply chain and geo-political disruptions, inflation, and rising interest rates have affected business operations and planning for future commercial facilities to varying degrees for us and our customers, suppliers, vendors and other parties with whom we do business, and such disruptions are expected to continue for an indefinite period of time. The uncertain duration of these conditions has had and may continue to have an effect on our development and commercialization efforts.

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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 expense when it becomes probable that the performance condition will be met. Forfeitures on share-based payments are accounted for by recognizing forfeitures 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 the closing market price of its common stock on the date of grant.

The fair value of the stock options granted is estimated using the Black-Scholes-Merton Option Pricing (“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.

Restricted cash

Cash held by the Company restricted as to withdrawal or use is presented as restricted cash in the consolidated balance sheet. As at November 30, 2022, restricted cash comprised of cash in escrow for a legal settlement and cash restricted in use for a commercial project.

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.

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 monomers that have not yet been polymerized into Loop™ branded PET resin. The finished goods category includes goods that have completed the production process and mainly comprises Loop™ branded PET resin.

Research and development expenses

Research and development costs are charged to expense as costs are incurred in performing research and development activities. Research and development expenses relate primarily to process development and design, producing initial volumes of product for customers, testing of pre-production samples, machinery and equipment expenditures for use in the small-scale 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.

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Assets held for sale

Assets are classified as held for sale when they met the criteria set out in ASC 360-10-45-9 Long-lived assets classified as held for sale:

	·	Management, having the authority to approve the action, commits to a plan to sell the asset;
	·	The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;
	·	An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated;
	·	The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year;
	·	The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and
	·	Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

When the criteria are met, the assets are presented at the lesser of fair market value, net of selling costs, and cost in current assets.

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”). As a result, foreign currency exchange fluctuations may impact operating expenses. 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.

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 nine-month periods ended November 30, 2022 and 2021, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at November 30, 2022, the potentially dilutive securities consisted of 2,542,000 outstanding stock options (2021 – 1,570,000), 4,036,803 outstanding restricted stock units (2021 – 4,014,928), and 7,104,553 outstanding warrants (2021 – 11,659,418).

Recently adopted accounting pronouncements

In November 2021, the FASB issued ASU 2021-10, “Disclosures by Business Entities about Government Assistance”. This ASU provided guidance to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. Under the new guidance, an entity is required to provide the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy: (1) information about the nature of the transactions and the related accounting policy used to account for the transactions, (2) the line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item and, (3) significant terms and conditions of the transactions, including commitments and contingencies. This update is effective for fiscal years beginning after December 15, 2021. The adoption of this accounting guidance did not impact the disclosures in our Consolidated Financial Statements.

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In September 2022, the FASB issued ASU 2022-04, “Disclosure of Supplier Finance Program Obligations”. This ASU provided guidance to increase the transparency of supplier finance programs. The amendments in this ASU require that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs. This update is effective for fiscal years beginning after December 15, 2022. We are currently evaluating this accounting guidance, which may have disclosure impact only.

3. Sales Tax, Tax Credits and Other Receivables

Sales tax, tax credits and other receivables as at November 30, 2022 and February 28, 2022 were as follows:

	November 30, 2022		February 28, 2022
Sales tax	$	413,293	$	1,337,783
Investment tax credits		464,199		-
Research and development tax credits		413,028		313,599
Insurance reimbursement related to legal settlement (Note 21)		279,261		-
Other receivables		36,075		64,880
	$	1,605,856	$	1,716,262

4. Inventories

Inventories as at November 30, 2022 and February 28, 2022 were as follows:

	November 30, 2022		February 28, 2022
Work in process	$	278,781	$	-
Finished goods		112,731		-
Raw materials		34,767		-
	$	426,279	$	-

5. Prepaid Expenses and Deposits

Prepaid expenses as at November 30, 2022 and February 28, 2022 were as follows:

	November 30, 2022		February 28, 2022
Deposits on machinery and equipment	$	3,429,245	$	2,801,680
Insurance		545,000		-
Other		81,208		163,966
	$	4,055,453	$	2,965,646

As at November 30, 2022, the Company had $3,429,245 (February 28, 2022 – $2,801,680) of non-refundable cash deposits on machinery and equipment. $33,595 (February 28, 2022 – $672,713) of the prepayments are on machinery and equipment that will be used in connection with the research and development activities at the Terrebonne Facility and will be expensed, and classified as research and development expenses in the period the equipment is received. The remainder of non-refundable cash deposits on machinery and equipment of $3,395,650 (February 28, 2022 – $2,128,967) are non-refundable cash deposits on long-lead machinery and equipment that will be used in a planned Infinite Loop^™ manufacturing facility.

The deposit for insurance represents a pre-payment of the final three months of the Company’s directors and officers’ insurance annual premium.

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6. Assets held for sale

On May 27, 2021, we acquired land in Bécancour, Québec for cash of $4.4 million (CDN $5.9 million). The Company sold approximately two thirds of the land held for sale on September 15, 2022 for cash proceeds of $8,559,490 and a gain on disposition of the asset of $6,703,558.

The remaining land and cost of related land improvements have been classified as assets held for sale, with a carrying value at November 30, 2022 of $3,758,314, on the basis that management was committed to a plan to dispose of the excess land and at the balance sheet date, and considered the sale to be probable within one year. As disclosed in Note 22, the Company has entered into an agreement for the sale of the remaining land.

7. Property, Plant and Equipment

Property, plant and equipment as at November 30, 2022 and February 28, 2022 were as follows:

	As at November 30, 2022
	Cost		Accumulated depreciation, write-down and impairment			Net book value
Building	$	1,835,273	$	(296,320	)	$	1,538,953
Land		226,859		-			226,859
Building and Land Improvements		1,852,894		(1,084,060	)		768,834
Office equipment and furniture		278,906		(135,570	)		143,336
	$	4,193,932	$	(1,515,950	)	$	2,677,982

	As at February 28, 2022
	Cost		Accumulated depreciation, write-down and impairment			Net book value
Building	$	1,952,345	$	(266,434	)	$	1,685,911
Land		1,644,084		-			1,644,084
Building and Land Improvements		3,049,892		(858,342	)		2,191,550
Office equipment and furniture		298,141		(126,824	)		171,317
	$	6,944,462	$	(1,251,600	)	$	5,692,862

Depreciation expense for the three- and nine-month periods ended November 30, 2022 amounted to $111,055 and $347,543, respectively (2021– $114,799 and $351,589, respectively), and is recorded as an operating expense in the consolidated statements of operations and comprehensive loss.

During the three-month period ended May 31, 2021, the Company acquired a 19 million square foot parcel of land in Bécancour, Québec for $4.4 million (CDN $5.9 million). As detailed in Note 6, a portion of the land was sold in September 2022 and the remainder of the land as well as the related land improvements were classified as assets held for sale as at November 30, 2022.

8. Intangible Assets

Intangible assets as at November 30, 2022 and February 28, 2022 were $1,110,932 and $1,013,801, respectively.

During the nine-months periods ended November 30, 2022 and 2021, we made additions to intangible assets of $225,047 and $348,017, respectively.

Amortization expense for the three- and nine-month periods ended November 30, 2022 amounted to $22,848 and $63,001, respectively (2021 - $20,236 and $56,216, respectively), and is recorded as an operating expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

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9. Fair value of financial instruments

The following tables present the fair value of the Company’s financial liabilities as at November 30, 2022 and February 28, 2022:

	Fair Value as at November 30, 2022
	Carrying Amount		Fair Value		Level in the hierarchy
Financial liabilities measured at amortized cost:
Long-term debt	$	3,289,122	$	3,247,635	Level 2

	Fair Value as at February 28, 2022
	Carrying Amount		Fair Value		Level in the hierarchy
Financial liabilities measured at amortized cost:
Long-term debt	$	3,378,403	$	3,392,600	Level 2

The fair value of long-term debt is determined primarily based on discounted cash flow analyses using observable market inputs from debt with similar duration and credit default expectations (Level 2).

The fair value of cash and cash equivalents, restricted cash, other receivables, and trade accounts payable and certain accrued liabilities approximate their carrying values due to their short-term maturity.

10. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities as at November 30, 2022 and February 28, 2022 were as follows:

	November 30, 2022		February 28, 2022
Trade accounts payable	$	2,185,396	$	4,397,499
Accrued loss contingency for legal settlement (Note 21)		3,100,000		2,519,220
Accrued employee compensation		914,227		1,254,685
Accrued engineering fees		263,125		774,423
Accrued professional fees		302,582		526,685
Other accrued liabilities		202,889		374,303
	$	6,968,219	$	9,846,815

11. Customer Deposits

In October 2022, the Company received a cash deposit from a customer of $1,000,000 in relation to an executed capacity reservation agreement. The deposit is 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. The use of the deposit is designated for expenditures related to the Infinite Loop™ manufacturing facility in Bécancour Québec and is refundable in the event that the Infinite Loop™ manufacturing facility in Bécancour Québec is not constructed. As a result of the decision by management to no longer proceed with construction of the Infinite Loop manufacturing facility in Becancour Quebec as contemplated under the capacity reservation agreement with the customer, the cash deposit has been reflected as restricted cash as at November 30, 2022, with a corresponding financial liability of an equal amount.

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12. Long‑Term Debt

Long-term debt as of November 30, 2022 and February 28, 2022, was comprised of the following:

	November 30, 2022			February 28, 2022
Investissement Québec financing facility:
Principal amount	$	3,405,389		$	3,622,618
Unamortized discount		(280,473	)		(352,038	)
Accrued interest		164,206			107,823
Total Investissement Québec financing facility		3,289,122			3,378,403
Less: current portion of long-term debt		(46,891	)		-
Long-term debt, net of current portion	$	3,242,231		$	3,378,403

Investissement Québec financing facility

The Company recorded interest expense on the Investissement Québec loan for the three- and nine-month periods ended November 30, 2022 in the amount of $20,950 and $65,186 respectively (2021 – $21,704 and $44,098) and an accretion expense of $17,048 and $52,318 respectively (2021 – $16,723 and $38,295).

On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “the Financing Facility Amendment”). As per the Financing Facility Amendment, $37,015 (CDN $50,000) of the principal amount is repayable in monthly installments in the fiscal year ending February 29, 2024 and the remainder of the principal amount is repayable in 72 monthly installments. Under the original terms of the Financing Facility, the principal amount was repayable in 84 monthly installments beginning in March of 2023. The Financing Facility Amendment does not modify the interest rates, the repayment terms of accrued interest or any other terms of the Financing Facility. The Amendment did not meet the criteria of ASC 470, Debt for an extinguishment of debt as the Amendment did 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 Amendment.

Principal repayments due on the Company’s indebtedness over the next five years are as follows:

Years ending	Amount
February 28, 2023	$	-
February 29, 2024		37,018
February 28, 2025		561,392
February 28, 2026		561,392
February 28, 2027		561,392
Thereafter		1,684,195
Total	$	3,405,389

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 $2,591,057 (CDN $3,500,000) in aggregate principal amount and provides for a two-year term. The Credit Facility is secured by the Company’s Terrebonne, Québec property and is subject to a minimum equity covenant, tested quarterly. All borrowings under the Credit Facility will bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0%. The Company is subject to a guarantee of the liabilities of Loop Canada Inc. As at November 30, 2022 the $2,591,057 (CDN $3,500,000) Credit Facility was available and undrawn.

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13. 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.

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 (“RSUs”) 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 shareholders at the Company’s 2019 annual meeting, of an increase in the number of shares available for grant under the Plan. Such approval was granted by the Company’s shareholders at the Company’s 2019 annual meeting.

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 of PET plastic that is far simpler to purify. 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.

During the three-month period ended May 31, 2022, 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 fair value of $7,740,000 were earned and issuable to Mr. Solomita. This amount was reflected as stock-based compensation expense during the nine-month period ended November 30, 2022 based on the grant date fair value. The 1,000,000 vested RSUs are to be settled annually in shares of the Company’s common stock on October 15 of each year in five equal tranches of 200,000 units, unless Mr. Solomita and the Company elect to defer settlement before such date. On October 14, 2022, Mr. Solomita and the Company agreed to defer by one year the settlement of 400,000 RSUs that were set to settle on October 15, 2022.

14. Stockholders’ Equity

Common Stock

For the nine-month period ended November 30, 2022	Number of shares		Amount
Balance, February 28, 2022		47,388,056	$	4,740
Issuance of shares upon settlement of restricted stock units		51,531		5
Balance, November 30, 2022		47,439,587	$	4,745

For the nine-month period ended November 30, 2021	Number of shares		Amount
Balance, February 28, 2021		42,413,691	$	4,242
Issuance of shares upon settlement of restricted stock units		231,660		24
Issuance of shares for cash		4,714,813		471
Issuance of shares upon exercise of warrants		11,666		1
Issuance of shares upon exercise of options		16,226		2
Balance, November 30, 2021		47,388,056	$	4,740

During the nine-month period ended November 30, 2022, the Company recorded the following common stock transaction:

(i)	The Company issued 51,531 shares of the common stock to settle restricted stock units that vested in the period.

During the nine-month period ended November 30, 2021, the Company recorded the following common stock transactions:

(i)	The Company issued 231,660 shares of the common stock to settle restricted stock units that vested in the period.
(ii)	The Company issued 4,714,813 shares of its common stock, with warrants, at an aggregate offering price of $12.00 per share for total gross proceeds of $56,577,756 and net proceeds of $56,084,304.
(iii)	The Company issued 11,666 shares of its common stock upon the exercise of a warrant.
(iv)	The Company issued 16,226 shares of its common stock upon the exercise of stock options.

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15. Research and Development Expenses

Research and development expenses for the three-month periods ended November 30, 2022 and 2021 were as follows:

	November 30, 2022			November 30, 2021
Machinery and equipment expenditures	$	1,059,266		$	2,599,758
Employee compensation		1,994,594			1,786,765
External engineering		707,113			1,585,512
Plant and laboratory operating expenses		915,951			665,893
Tax credits		(299,793	)		97,480
Other		204,421			99,896
	$	4,581,552		$	6,835,304

Research and development expenses for the nine-month periods ended November 30, 2022 and 2021 were as follows:

	November 30, 2022			November 30, 2021
Machinery and equipment expenditures	$	4,132,575		$	7,707,882
Employee compensation		6,349,659			5,365,581
External engineering		2,913,567			5,040,342
Plant and laboratory operating expenses		2,365,643			2,064,403
Tax credits		(1,207,415	)		(54,911	)
Other		579,162			634,640
	$	15,133,191		$	20,757,937

16. General and Administrative Expenses

General and administrative expenses for the three-month periods ended November 30, 2022 and 2021 were as follows:

	November 30, 2022		November 30, 2021
Professional fees	$	1,278,478	$	650,164
Employee compensation		911,331		1,028,242
Insurance		709,952		1,193,554
Other		283,166		219,295
	$	3,182,927	$	3,091,255

General and administrative expenses for the nine-month periods ended November 30, 2022 and 2021 were as follows:

	November 30, 2022		November 30, 2021
Professional fees	$	3,840,844	$	3,138,611
Employee compensation⁽¹⁾		10,728,182		2,357,769
Insurance		2,883,333		3,121,353
Other		777,896		750,319
	$	18,230,255	$	9,368,052

(1)

Includes stock-based compensation expense. During the nine-month period ended November 30, 2022, the Company recorded a stock-based compensation expense of $7,740,000 related to the achievement of a performance milestone for 1,000,000 RSUs granted to the Company’s CEO (Note 13). During the nine-month period ended November 30, 2021, the Company recorded RSU forfeitures for an amount of $935,837 as a net reversal of stock-based compensation.

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17. Share-based Payments

Stock Options

During the three- and nine-month periods ended November 30, 2022, the Company granted 972,000 stock options with a weighted average exercise price of $2.68 (2021 – nil), no stock options were exercised (2021 – 17,081 with a weighted average exercise price of $0.80), no stock options were forfeited (2021 – nil), and no stock options expired (2021 – nil).

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. There were no new issuances of stock options for the three- and nine-month periods ended November 30, 2021. The principal components of the pricing model for the stock options granted in the three-month period ended November 30, 2022 were as follows:

Exercise price	$	2.68
Risk-free interest rate		3.88	%
Expected dividend yield		0	%
Expected volatility		73	%
Expected life	5 years

The total number of stock options outstanding as at November 30, 2022 was 2,542,000 (2021 – 1,570,000) with a weighted average exercise price of $5.27 (2021 - $6.87), of which 1,670,000 were exercisable (2021 – 1,286,667) with a weighted average exercise price of $6.84 (2021 – $7.48).

During the three-month periods ended November 30, 2022 and 2021, stock-based compensation expense attributable to stock options amounted to $551,363 and $311,004, respectively. During the nine-month periods ended November 30, 2022 and 2021, stock-based compensation expense attributable to stock options amounted to $1,180,963 and $1,203,975, respectively, and is included in operating expenses.

Restricted Stock Units

During the three-month period ended November 30, 2022, the Company granted no restricted stock units (“RSUs”) (2021 – 62,638 with a weighted average fair value of $13.64), settled 38,878 RSUs (2021 – 200,000) with a weighted average fair value of $13.08 (2021 – $0.80), and 53,037 RSUs were forfeited (2021 – 17,988) with a weighted average fair value of $13.40 (2021 – $8.73).

During the nine-month period ended November 30, 2022, the Company granted 151,605 restricted stock units (“RSUs”) (2021 – 349,580) with a weighted average fair value of $5.14 (2021 – $10.16), settled 51,531 RSUs (2021 – 231,660) with a weighted average fair value of $13.07 (2021 – $1.90), and 81,838 RSUs were forfeited (2021 – 313,512) with a weighted average fair value of $11.74 (2021 – $7.97).

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 closing share price at grant date multiplied by the number of restricted stock unit awards granted.

The total number of RSUs outstanding as at November 30, 2022 was 4,036,803 (2021 – 4,014,928), of which 1,563,497 were vested (2021 – 525,313).

During the three-month periods ended November 30, 2022 and 2021, stock-based compensation attributable to RSUs amounted to $322,802 and $331,005, respectively, and is included in expenses.

During the nine-month periods ended November 30, 2022 and 2021, stock-based compensation attributable to RSUs amounted to $8,788,190 and $157,769, respectively, and is included in operating expenses. During the nine-month period ended November 30, 2022, the Company recorded a stock-based compensation expense of $7,740,000 related to the achievement of a performance milestone for 1,000,000 RSUs granted to the Company’s CEO (Note 13). During the nine-month period ended November 30, 2021, the Company recorded a reversal of expenses for forfeitures for a total of $963,022

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Stock-Based Compensation Expenses

During the three-month periods ended November 30, 2022 and 2021, stock-based compensation included in research and development expenses amounted to $455,013 and $362,435, respectively, and in general and administrative expenses amounted to $419,152 and $279,574, respectively.

During the nine-month periods ended November 30, 2022 and 2021, stock-based compensation included in research and development expenses amounted to $1,170,554 and $1,152,506, respectively, and in general and administrative expenses amounted to $8,798,599 and $209,236, respectively. The amount recorded in general and administrative expenses for the nine-month period ended November 30, 2022 includes $7,740,000 related to the achievement of a performance milestone for 1,000,000 RSUs granted to the Company’s CEO (Note 13). Stock-based compensation included in general and administrative expenses in the nine-month period ended November 30, 2021 includes reversal of expenses for forfeitures for a total of $935,837.

18. 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) or such number of shares determined by the Administrator of the Plan, effective March 1, 2018. On March 1, 2022 and 2021, the Board of Directors opted to waive the annual share reserve increase. 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 Company’s Equity Incentive Plan units during the nine-month periods ended November 30, 2022 and 2021:

	2022			2021
	Number of units			Number of units
Outstanding, beginning of period		1,043,705			1,083,412
Share reserve increase		-			-
Units granted		(1,123,605	)		(349,580	)
Units forfeited		81,838			313,512
Units expired		-			-
Outstanding, end of period		1,938			1,047,344

19. Warrants

During the nine-month period ended November 30, 2022, warrants to purchase 4,554,865 shares of our common stock in aggregate with an exercise price of $11.00 expired. During the nine-month period ended November 30, 2021, the Company issued warrants to purchase 7,550,698 shares of our common stock in aggregate with a weighted average exercise price of $16.32. 25,000 warrants were exercised with a weighted average exercise price of $9.43 and no warrants were forfeited, nor expired in the nine-month period ended November 30, 2021. The table below summarizes the warrants granted during the nine-month period ended November 30, 2021:

Number of warrants		Exercise Price		Expiration date
	4,714,813	$	15.00	July 29, 2024
	2,357,407		20.00	(1)
	461,298		11.00	June 14, 2022
	17,180	$	11.00	August 26, 2024

(1)

Expiration date is the earlier of (A) the date that is the third anniversary of the start of construction of the JV’s first facility, (B) 18 months after the date both parties have approved the basic design package to be used for the JV facilities, provided that the agreements to form the JV have not been executed by that date, and (C) the third anniversary of the date that both parties approved the basic design package to be used for the JV facilities, provided that the start of construction of the JV’s first facility has not occurred as of such date.

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20. Interest and Other Financial Expenses

Interest and other finance costs for the three-month periods ended November 30, 2022 and 2021 are as follows:

	2022		2021
Interest on long-term debt	$	20,950	$	32,718
Accretion expense		17,048		16,937
Other		16,404		-
	$	54,402	$	49,655

Interest and other finance costs for the nine-month periods ended November 30, 2022 and 2021 are as follows:

	2022		2021
Interest on long-term debt	$	65,186	$	74,832
Accretion expense		52,318		38,512
Other		21,458		-
	$	138,962	$	113,344

21. Commitments and Contingencies

Agreement to purchase of machinery and equipment

In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment in connection with the construction of our first Infinite Loop^™ manufacturing facility for up to $8,546,000, subject to various terms and conditions, including fabrication timelines and equipment inspection. Pursuant to the agreement, the Company has paid cash deposits of $3,395,650.

Contingencies

On October 13, 2020, the Company and certain of its officers were named as defendants in a proposed class-action lawsuit filed in the United States District Court for the Southern District of New York, captioned Olivier Tremblay, Individually and on Behalf of All Others Similarly Situated v. Loop Industries, Inc., Daniel Solomita, and Nelson Gentiletti, Case No. 7:20-cv-08538-NSR (“Tremblay Class Action”). The complaint alleges that the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices. The complaint seeks unspecified damages on behalf of a class of purchasers of Loop’s securities between September 24, 2018 and October 12, 2020, inclusive.

On October 28, 2020, the Company and certain of its officers were named as defendants in a second proposed class-action lawsuit filed in the United States District Court for the Southern District of New York, captioned Michelle Bazzini, Individually and on Behalf of All Others Similarly Situated v. Loop Industries, Inc., Daniel Solomita, and Nelson Gentiletti, Case No. 7:20-cv-09031-NSR. The complaint allegations are similar in nature to those in the Tremblay Class Action.

On January 4, 2021, the United States District Court for the Southern District of New York consolidated the two proposed class-action lawsuits as In re Loop Industries, Inc. Securities Litigation, Master File No. 7:20-cv-08538-NSR. Sakari Johansson and John Jay Cappa were appointed as Co-Lead Plaintiffs and Glancy Prongay & Murray LLP and Pomerantz LLP were appointed as Co-Lead Counsel for the class.

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Plaintiffs served a consolidated amended complaint on February 18, 2021, which alleges that the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices. The consolidated amended complaint relies on the October 13, 2020 report published by a third party regarding the Company to support their allegations. Defendants served a motion to dismiss the consolidated amended complaint on April 27, 2021. Plaintiffs’ opposition to the motion to dismiss was served on May 27, 2021 and Defendants’ reply in support of the motion to dismiss was served on June 11, 2021.

On March 1, 2022, the Company and the current and former officer defendants entered into an agreement for the settlement of In re Loop Industries, Inc. Securities Litigation, and, on March 4, 2022, advised the Court of the agreement to settle. The agreement, which is subject to certain conditions, including court approval, requires the Company to pay $3.1 million to the plaintiff class. As a result, the Company recorded a contingency loss of $2,519,220 which was included in accounts payable and accrued liabilities at February 28, 2022 and expected to be the Company’s approximate total cash contribution to the settlement and outstanding legal fees related to the lawsuit, net of the Company’s D&O insurance carriers’ contribution.

On May 24, 2022, Lead Plaintiffs filed their motion for preliminary approval of the proposed class action settlement. On September 19, 2022, the Court entered an order preliminarily approving the settlement and providing for notice. The Court held a final settlement hearing on January 5, 2023 after which the Court entered an order and final judgment approving the class action settlement.

In October 2022, the Company made a payment in escrow of $3,100,000 for the settlement which is included in restricted cash in the Company’s consolidated balance sheet as of November 30, 2022. The Company received $558,521 from its D&O insurance carriers and an additional $279,261 was recorded as a receivable from the D&O insurance carriers. As of November 30, 2022, the amount included in accounts payable and accrued liabilities related to the settlement was $3,100,000.

The settlement agreement does not constitute an admission, concession, or finding of any fault, liability, or wrongdoing by the Company or any defendant.

On October 13, 2020, the Company, Loop Canada Inc. and certain of their officers and directors were named as defendants in a proposed securities class action filed in the Superior Court of Québec (District of Terrebonne, Province of Québec, Canada), in file no. 700-06-000012-205. The Application for authorization of a class action and for authorization to bring an action pursuant to section 225.4 of the Québec Securities Act (“the Application”) was filed by an individual shareholder on behalf of himself and a class of buyers who purchased our securities during the “Class Period” (not defined). Plaintiff alleged that throughout the Class Period, the defendants allegedly made false and/or misleading statements and allegedly failed to disclose material adverse facts concerning the Company’s technology, business model, operations and prospects, thus causing the Company’s stock price to be artificially inflated and thereby causing plaintiff to suffer damages. Plaintiff sought unspecified damages stemming from losses he claimed to have suffered as a result of the foregoing. On December 13, 2020, the Application was amended in order to add allegations regarding specific misrepresentations. The authorization hearing was held on February 24, 2022.

In a judgment dated July 29, 2022, the Superior Court of Québec dismissed the Application for authorization of a class action and for authorization to bring an action pursuant to section 225.4 of the Québec Securities Act. The period to appeal the judgment is now expired.

22. Subsequent Events

Entry into an agreement for the sale of an asset held for sale

On December 21, 2022, the Company entered an agreement to sell all of its land in Bécancour, Québec for cash proceeds of $13,695,588 (CDN $18,500,000). The sale is expected to close on or before February 24, 2023 subject to final due diligence and fulfillment of certain customary closing conditions. The land as well as the related land improvements were classified as assets held for sale on the Company’s consolidated balance sheet as at November 30, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information and any forward-looking statements should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q, including those risks identified in the “Risk Factors” section of our most recent Annual Report on Form 10-K.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the “Company,” “Loop,” “we,” or “our”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, ability to improve and expand our capabilities, competition, expected activities and expenditures as we pursue our business plan, the adequacy of our available cash resources, regulatory compliance, plans for future growth and future operations, the size of our addressable market, market trends, and the effectiveness of the Company’s internal control over financial reporting. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under “Risk Factors.” Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: (i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our current and future financial commitments, (vi) engineering, contracting and building our manufacturing facilities, (vii) our ability to scale, manufacture and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) adverse effects on the Company’s business and operations as a result of increased regulatory, media or financial reporting scrutiny, practices, rumors, or otherwise, (x) disease epidemics and health-related concerns, such as the current outbreak of additional variants of coronavirus (COVID-19), which could result in (and, in the case of the COVID-19 outbreak, has resulted in some of the following) reduced access to capital markets, supply chain disruptions and scrutiny or embargoing of goods produced in affected areas, government-imposed mandatory business closures and resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, and market or other changes that could result in noncash impairments of our intangible assets, and property, plant and equipment, (xi) the outcome of the ongoing SEC investigation or the class action litigation filed against us, (xii) our ability to hire and/or retain qualified employees and consultants and (xiii) other factors discussed in our subsequent filings with the SEC.

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

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as at the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

We caution readers not to place undue reliance on any such forward-looking statements, which speak only as at the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

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Introduction

Loop is a technology company whose mission is to accelerate the world’s shift toward sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels. Loop owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber, including plastic bottles and packaging, carpets and textiles of any color, transparency or condition and even ocean plastics that have been degraded by the sun and salt, to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop^™ branded PET resin suitable for use in food-grade packaging and polyester fiber, thus enabling our customers to meet their sustainability objectives. Loop Industries is contributing to the global movement towards a circular economy by reducing plastic waste and recovering waste plastic for a sustainable future.

The Company is in the planning stages of pursuing the construction of Infinite Loop™ commercial scale facilities. Loop is currently engaged in discussions to secure financing for its investments in the various planned manufacturing facilities and the sequencing of the manufacturing facilities will be determined in conjunction with the outcome of the company’s financing discussions.

Industry Background and Market Opportunity

The global annual market demand for PET plastic and polyester fiber is expected to exceed $160 billion by 2022 as projected in the 2018 IHS Polymer Market Report. We believe plastic pollution and climate change continue to be the most persistently covered environmental issues by media and local and global environmental non-governmental organizations. Some of the main concerns associated with PET are the greenhouse gas (“GHG”) emissions associated with its production from non-renewable hydrocarbons and the length of time it persists in landfills and the natural environment. There is an increasing demand for action to address the global plastic crisis, as evidenced by the March 2022 endorsement by 175 nations of a historic resolution at the UN Environmental Assembly to end plastic pollution and forge an international legally binding agreement by the end of 2024. In the last few years, governments in North America, Europe and Asia have been proposing and enacting laws and regulations mandating the use of minimum recycled content in packaging underlying the strength of this issue in the marketplace. Consumer brands are seeking a solution to their plastic challenge, and they are taking action. In recent years we have seen major brands make significant commitments to close the loop on their plastic packaging by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging.

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

	·	In January 2018, Danone’s evian® brand bottled spring water committed to a 100% recycled content package by 2025;
	·	In 2018, Coca-Cola committed to an average recycled content of 50% across its packaging by 2030;
	·	In September 2021, PepsiCo stated 10 European markets are moving key Pepsi-branded products to 100% rPET bottles by 2022, and in the U.S., all Pepsi-branded products will be converted to 100% rPET bottles by 2030;
	·	In 2020, L’OCCITANE en Provence committed to 100% recycled content plastic in their bottles by 2025;
	·	In 2020, L’Oréal Group committed to using 100% recycled or biobased plastic in their packaging by 2030;
	·	By 2025, Unilever targets increasing the use of post-consumer recycled plastic material in their packaging to at least 25%;
	·	Colgate-Palmolive states a 2025 goal of using at least 25% post-consumer recycled plastic in packaging;
	·	Nestlé aims to increase the amount of recycled PET used across their brands globally to 50% by 2025;
	·	Adidas Group aims to replace all virgin polyester with recycled polyester in all adidas and Reebok products where a solution exists by 2024;
	·	H&M is aiming to ensure that at least 25% of the plastic they use is from post-consumer recycled materials;
	·	Walmart has an objective to use at least 17% post-consumer recycled content globally in their private brand plastic packaging and is taking action to eliminate problematic or unnecessary plastic packaging and move from single-use towards reuse models where relevant by 2025;
	·	Ikea’s ambition is, that by 2030, all plastic used in their products will be based on renewable or recycled material;

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	·	Puma is aiming to increase the amount of recycled materials in its apparel and accessories products and have announced a 2025 goal of having at least 75% of the polyester used in Puma products be from recycled sources;
	·	By 2025, Lululemon aims to achieve at least 75% sustainable materials for their products, including fibers that are recycled, renewable, regenerative, sourced responsibly and are manufactured using low-resource processes; and
	·	Nike has set a 2025 target of diverting 100% of its waste from landfills with at least 80% recycled back into their products and goods.

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

	·	In North America: Canada has announced a zero-plastic waste by 2030 goal and is targeting for all plastic packaging to contain 50% recycled content by 2030. A California law enacted on September 24, 2020 requires that plastic bottles contain at least 25% by 2025 and 50% by 2030.
	·	In Europe: As of January 2021, the European Union introduced a new tax of €800/ton on non-recycled plastic packaging based on the amount of plastic packaging placed on each member state’s market. Effective April 2022, a new £200/ton tax applies in the UK to plastic packaging produced or imported into the UK that does not contain at least 30% recycled plastic. Italy is introducing a tax of €450 per ton on virgin plastic used in manufacture or importation of single use plastic which is expected in January 2023. Spain has also proposed a tax of €450 per ton on non-reusable plastic packaging with an anticipated start date of January 2023. France has a stated goals of 100% plastics recycled by 2025 and 77% of beverage bottles to be collected.
	·	In Asia: South Korea targets reducing plastic waste by 20% and increase recycling rates from 54% to 70% by 2025 and 30% renewable plastic by 2030.

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

Mechanical recycled PET plastic is produced principally through the conversion of bales of PET bottles. The materials have been collected and transported to a materials recovery facility (“MRF”), where they are sorted from other materials, baled, and sent to specific PET recycling facilities. The bales are broken and sorted to remove any non-PET materials. The PET is then ground and put through a separation process which separates the PET from non-PET materials such as bottle caps and labels. Clean PET flake is then further processed depending on its intended end market. It may become more highly refined PET pellet for new bottles or extruded into PET sheet for clamshells, trays, and cups. Recycled PET is also spun into fiber for carpet, clothing, fiber fill, or other materials.

We believe mechanically recycled PET has a number of challenges in meeting the quality specifications and growing volume requirements implied by commitments from major brands, mainly due to the cost and variety of acceptable PET feedstock. Some mechanical recycling processes involve remelting the PET flake which reduces the quality of the rPET output each time it is recycled relative to the specifications of virgin PET produced from fossil fuels. Each time the PET plastic is mechanically recycled, its quality and clarity are reduced. Therefore, mechanically recycled PET may need to be mixed with virgin PET from fossil fuels to maintain quality. Lower quality mechanically recycled PET is often downcycled to alternate uses such as polyester fibers which may be dyed and used in carpets or clothing. Additionally, mechanically recycled PET manufactured for use in clear bottles or food containers requires predominantly clear and clean PET flakes separated from waste bales, and cannot accommodate darkly colored PET flakes, lower quality fiber feedstock, or materially contaminated feedstock, which may be cheaper.

We believe the commercialization plans of Loop^™ PET resin and polyester fiber may provide the ideal solution for global brands because Loop^™ PET resin and polyester fiber contains 100% recycled PET and polyester fiber content. The Loop^™ PET resin and polyester fiber is virgin-quality suitable for use in food-grade packaging. That means consumer packaged goods companies will be able to choose to market packaging made from a 100% recycled Loop^™ branded PET resin and polyester fiber.

Proprietary Technology and Intellectual Property

We believe the power of our technology lies in its ability to use post-industrial and post-consumer waste PET plastic and polyester fiber feedstocks, which could end up in landfills, rivers, oceans and natural areas, to create Loop^™ PET resin. We believe our technology can deliver high-purity profitable virgin-quality, 100% recycled PET resin suitable for use in food-grade packaging and polyester fiber.

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Our Generation I technology (“GEN I”) is a hydrolysis-based depolymerization technology which yields purified terephthalic acid (“PTA”) and monoethylene glycol (“MEG”), two common monomers of PET. As the Company evaluated the transition of the GEN I technology from pilot scale to commercial scale, several challenges involving PTA and MEG purification were identified. To overcome the GEN I technology challenges, we embarked on the development of a second generation of our technology. Our Generation II technology (“GEN II”) is a methanolysis-based depolymerization technology that uses temperatures below 90 °C to depolymerize waste PET and polyester fiber. The low temperature offers several key advantages which the Company believes will improve its ability to commercialize the GEN II technology, including:

	·	Lower energy usage during depolymerization and therefore reduced processing cost and lower GHG emissions relative to higher temperature processes;
	·	Avoidance of side reactions with non-PET waste, which are inherent in waste PET feedstock streams, during depolymerization which may occur during higher temperature and higher pressure depolymerization processes. This allows for a simplified distillation purification process resulting in fewer, and more effective, steps to isolate the desired high purity DMT and MEG monomers suitable to produce virgin-quality PET required to meet food contact regulations as well as the quality and clarity requirements of global consumer product companies;
	·	Allowing the depolymerization of less costly and low-quality feedstocks, which cannot be effectively recycled today, such as carpet fiber, clothing and mixed plastics, and upcycling them into high-quality PET that can be used in food contact use; and
	·	The GEN II technology uses only trace amounts of water, eliminates the need for a halogenated solvent, and uses a catalyst at low concentration.

This shift, from producing the monomer PTA to the monomer DMT, was a pivotal moment for Loop. We believe that GEN II requires less energy and fewer resource inputs than conventional PET production processes. We also believe it is an environmentally sustainable method for producing virgin-quality food-grade PET plastic by decoupling PET manufacturing from the fossil fuel industry.

To independently validate that our GEN II technology can produce DMT and MEG monomers at mini-pilot and pilot scale, we commissioned Kemitek, a College Centre for Technology Transfer specialized in the fields of green chemistry and chemical process scale-up. Kemitek’s findings allowed them to confirm that our technology produces monomers that meet our purity specifications for the production of PET resin and polyester fiber. The complete Kemitek report was filed with the SEC by the Company on December 14, 2020.

To protect our technology and intellectual property rights, we rely on a combination of patents, trademarks, trade secrets, confidentiality agreements and provisions as well as other contractual provisions to protect our proprietary rights, which are primarily our patents, brand names, product designs and marks. We have two technology areas, referred to as GEN I technology and the GEN II technology, with patent claims relating to our technology for depolymerizing PET.

	·	The GEN I technology portfolio has three issued U.S. patents, all expected to expire on or around July 2035. Internationally, the GEN I technology portfolio includes issued patents in China, the Eurasian Patent Organization, Europe, Japan, India, the Gulf Cooperation Council, and various other countries, and pending patent applications in Canada, Mexico, South Korea, and various other countries all expected to expire, if granted, on or around July 2036, not including any patent term extensions.
	·	The GEN II technology portfolio currently consists of four patent families:

	o	One family has two issued U.S. patents and a pending U.S. application, all expected to expire on or around September 2037. Internationally, this patent family has issued patents in Bangladesh and in Argentina, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted, not including any patent term extensions.
	o	An additional aspect of the GEN II technology, as claimed in two issued U.S. patents and a pending U.S. application, all expected to expire on or around June 2039. Internationally, this patent family includes issued or allowed patents in Morocco, Algeria, and Bangladesh, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around June 2039, if granted, not including any patent term extensions.

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	o	Another aspect of the GEN II technology, which is the subject of an issued U.S. patent and a pending U.S. application. Internationally, this patent family includes pending applications in Canada, Europe, India, Singapore, Papua New Guinea, Brazil, and South Africa. Any patents that would ultimately grant from this application would be expected to expire on or around March 2040, not including any patent term extensions.

	o	Another aspect of the GEN II technology, which is the subject of an issued U.S. patent and a pending U.S. application, both expected to expire on or around March 2040. Internationally, this patent family includes an allowed application in Bangladesh and pending applications in Canada, China, Korea, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, and various other countries, all expected to expire on or around March 2040, if granted, not including any patent term extensions.

Loop owns registrations for its trademarks in Cambodia, Canada, the European Union, Taiwan, the United Kingdom, and the U.S. Loop also has pending applications in Canada, Japan, South Korea, the U.S., and Vietnam.

Supply Agreements with Global Consumer Brands

Consumer brands are seeking a solution to their plastic challenge and they are taking bold action. In the past years, we have seen major brands make significant commitments to close the loop on their plastic use in two ways; by transitioning their packaging to recyclable materials like PET, and by incorporating more recycled content into their packaging. We believe Loop^™ PET resin provides the ideal solution for these brands because it is recyclable and is made from 100% recycled PET waste and polyester fiber, while being virgin-quality and suitable for use in food-grade packaging and polyester fiber.

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

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

	·	Multi-year supply agreement with Danone SA (“Danone”), one of the world’s leading global food and beverage companies, enabling Danone to purchase 100% sustainable and upcycled Loop^™ branded PET for use in brands across its portfolio including evian®, Danone’s iconic natural spring water;
	·	Multi-year supply agreement with PepsiCo, one of the largest purchasers of recycled PET plastic, enabling PepsiCo to purchase production capacity and incorporate Loop^™ PET resin into its product packaging;
	·	Multi-year supply agreement with L’OCCITANE en Provence to supply 100% recycled and sustainable Loop^™ PET resin and incorporate Loop^™ PET resin into its product packaging; and
	·	Multi-year supply agreement with L’Oréal Group, the global leader in the beauty industry, enabling L’Oréal Group to purchase production capacity and incorporate Loop^™ PET resin into its product packaging.

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

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Turning PET Waste into Feedstock

We use waste PET plastic and polyester fiber as feedstock. Our technology can use PET plastic bottles and packaging of any color, transparency or condition, carpet, clothing and other polyester textiles that may contain colors, dyes or additives, and even PET plastics that have been recovered from the ocean and degraded by exposure to sun and salt. We believe that our ability to use many materials that mechanical recyclers cannot use is both an important advantage of Loop^™ PET resin over mechanically recycled PET resin and is additive to the number of PET waste streams that may be recycled. This also means we are creating a new market for materials that have persistently been leaking out of the waste management system and into our shared rivers, oceans and natural areas.

Commercialization Strategy

Our objective is to achieve global expansion of Loop’s technology through a mix of fully owned manufacturing facilities, strategic partnerships, and licensing agreements. We believe that industrial companies, some of which today may not be in the business of manufacturing PET resin or polyester fiber, will view involvement in Infinite Loop^™ projects as a significant growth opportunity, which may offer attractive economic returns either as Loop manufacturing partners or as licensees of the technology.

On December 22, 2022, we announced that we will for now focus our commercialization strategy on our planned joint venture projects with SK geo centric Co., Ltd (“SKGC”) in Asia and Europe. These projects have a lower requirement for Loop equity investment and higher return on capital, and leverage SKGC’s engineering and operational infrastructure. In addition, the joint venture projects will provide Loop with an annual technology licensing fee. SKGC is committed to commercializing Loop’s technology as the underpinning of its sustainable plastics strategy. Loop is working collaboratively with SKGC to put in place a financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the first Asian manufacturing facility in Ulsan, South Korea, which is planned to break ground in 2023.

The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop^™ PET resin and polyester fiber into their packaging and clothing. As countries around the globe continue to increase sustainability targets and recycled content mandates, our customers are increasing the use of sustainably produced materials into their products.

The Infinite Loop^™ manufacturing technology is the key pillar of our commercialization blueprint. We believe our technology is at the forefront of the global transition away from fossil fuels and petrochemicals and into the circular economy, where PET plastic and polyester fiber are produced by recycling waste plastic rather than depleting finite resources. The Infinite Loop^™ manufacturing technology allows for waste PET plastic and polyester fiber to be broken down into its base building blocks, monomers DMT and MEG, using Loop’s patented technology. Once the monomers are purified, they are then repolymerized into PET plastic or polyester fiber using INVISTA know how, which Loop licenses, and Chemtex Global Corporation’s engineering. The INVISTA polymerization process and the associated designs are historically proven in the commercial production of PET resin and polyester fiber.

We have completed our basic design package for the Infinite Loop^™ full-scale manufacturing facilities. The engineering philosophy we have adopted is “design one, build many.” This approach allows for the basic design package, to be used as the base engineering platform for all future geographical expansion. We believe this approach allows for a quick execution, speed to market and lends itself well to modular construction. The basic design package has a capacity of up to 70,000 M/T of PET resin output per year. Permitting, site and regulatory considerations may impact plant capacity.

Our market strategy is to assist global consumer goods brands in meeting their public sustainability commitments by offering packaging or polyester fibers that are made with Loop co-branded, 100% recycled, virgin-quality PET or polyester fibers. We believe that Loop^™ recycled PET resin and polyester fiber could command premium pricing over virgin, petroleum-based PET resin and provide attractive economic returns. We are targeting multi-year take or pay offtake agreements for planned Infinite Loop^™ production. Factors under consideration in determining project economics include the feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, PET bale index pricing, logistics, and ramp up, among others.

Strategic Partnership with SK geo centric

Loop and SKGC intend to form a joint venture with exclusivity to build sustainable PET plastic and polyester fiber manufacturing facilities throughout Asia, which accounts for approximately 60% of the world’s population and an estimated 70% of global PET consumption making it the largest market in terms of plastic manufacturing, consumption and waste. Under the terms of the Memorandum of Understanding (“MOU”) for the proposed joint venture, which was entered into in July, 2021, SKGC will own 51 percent of the joint venture and Loop will own 49 percent. Loop will also receive a recurring annual royalty fee as a percentage of revenue from each facility for the use of its technology. As of the date of the filing on this Quarterly Report on Form 10-Q, final joint venture agreements have not been entered into.

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In addition, on June 22, 2021, Loop and SKGC concluded a definitive agreement for SKGC to become a strategic investor in Loop. Under this agreement, SKGC purchased 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million. The equity investment transaction closed on July 29, 2021. SKGC was also granted warrants to acquire an additional 461,298 common shares at $11 per share with an expiration date of June 14, 2022, 4,714,813 common shares at a price of $15 per share with an expiration date of July 29, 2024, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility.

SKGC currently owns approximately 10% of Loop’s common shares. In conjunction with the equity investment, Mr. Jonghyuk Lee, Vice President of SKGC’s Green Business Division, was appointed to Loop’s Board of Directors. This appointment reflects SKGC’s strategic view of the importance of its investment in Loop, as part of its “Green for Better Life” global strategic vision.

As reported on July 8, 2021 SKGC signed a memorandum of understanding (“MOU”) with the city of Ulsan, South Korea to develop an industrial complex which is planned to include the first Infinite Loop^™ manufacturing facility in Asia. Discussions have been initiated regarding planning for the second facility in Asia as part of the objective of the two companies to build four Infinite Loop™ manufacturing facilities in Asia by 2030.

SKGC unveiled on August 31, 2021 its rebrand as SK geo centric, aligning with the company’s goal of transforming into a green company and focusing on eco-friendly products such as recyclable plastics. These announcements further reinforce Loop’s alignment as an important strategic partner for SK geo centric, as we move to commercialize our technology in Asia.

Loop and SKGC are collaborating closely with SK ecoengineering (“SKEE”), a subsidiary of SK group, on providing the engineering related to the construction of the planned Infinite Loop^™ manufacturing facility in Ulsan, South Korea. SKEE is an experienced EPC contractor with a proven track record in the construction of large scale projects internationally.

Infinite Loop^™ Europe

We announced on September 10, 2020 a strategic partnership with SUEZ GROUP (“Suez”), with the objective to build the first Infinite Loop^™ manufacturing facility in Europe. On June 16, 2022, Loop, together with Suez and SKGC, announced that SKGC will become an equal partner in the strategic partnership.

The expanded partnership intends to combine SKGC’s petrochemical manufacturing experience with SUEZ’s resource management expertise and Loop’s breakthrough proprietary technology to supply up to 70,000 M/T of virgin quality, 100% recycled PET plastic and polyester fiber to the European market. The planned Infinite Loop™ facility is contemplated to offer a solution to consumer goods companies which have committed to goals for significantly increased use of recycled content in their products and/or packaging and help to meet the growing demand for recycled PET resin and polyester fiber.

The three companies are re-evaluating the optimal location for the planned European Infinite Loop™ manufacturing facility. We are working with our partners Suez and SKGC on acquiring the preferred project site, alignment of various levels of government support and additional steps for the project which include advancing permitting, site specific engineering, customer offtake contracts, feedstock and financing.

Infinite Loop^™ Québec

We acquired a project site in Bécancour, Québec in May of 2021 for $4.4 million (CDN $5.9 million), a portion of which was sold on September 15, 2022 for net proceeds of $8.56 million (CDN $11.4 million). On December 22, 2022, we announced that our commercialization strategy will now focus on our planned projects with SKGC in Asia and Europe and that we had entered into an agreement to sell all of our remaining property in Bécancour, Quebec for $13.70 million (CDN $18.5 million). The sale transaction is expected to close on February 24, 2023, subject to final due diligence and fulfillment of certain customary closing conditions.

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Although the company is currently focusing on developing the planned joint venture facilities in Asia and Europe, a future facility in Quebec remains an option at the appropriate time, and possible alternative locations for such a facility are available. We are continuing to explore financing options to fully fund the project. Alternatives under exploration include incentive and financing programs supported by, or in partnership with, various levels of government. A future facility in Quebec would be aligned with the Government of Canada’s announced zero plastic waste goal by 2030.

Technology Due Diligence Report

Loop’s strategic partners, Suez and Danone, among others, collectively engaged an independent, globally recognized third-party engineering firm to execute a thorough due diligence and technology validation report. We believe the final report, which was communicated in May 2022, validated and reinforced the quality, effectiveness, and scalability of Loop Industries’ technology.

Unveiling of L’OCCITANE en Provence Almond Shower Oil Bottle

On October 11, 2022, Loop and L’OCCITANE en Provence (“L’OCCITANE”), a global manufacturer and retailer of sustainable beauty and wellness products, unveiled a new bottle for the brand’s Almond Shower Oil that was manufactured with 100% recycled Loop^™ PET resin produced using monomers from Loop’s Terrebonne Facility. Loop has partnered with L’OCCITANE to help meet the brand’s sustainability goal of using 100% recycled PET in its bottles by 2025. In partnership with the brand, a pilot project was executed where the bottle (excluding cap and label) was produced using 100% recycled Loop^™ PET resin and was successfully carried out on L’OCCITANE production lines. This initiative marks a significant step forward in the partnership between the two companies and sets the pathway to implement Loop’s technology across other products in the brand’s assortment. As part of this partnership with L’OCCITANE, Loop’s branding is featured prominently on the front of the packaging, with additional details speaking to Loop’s technology on the back label.

Unveiling of New evian Loop Bottle

On September 20, 2021, Loop, in partnership with iconic global beverage brand evian, unveiled a new “evian Loop” prototype virgin-quality water bottle made from 100% recycled content. The monomers used to produce the evian Loop bottles were made at the Terrebonne Facility. Evian began selling water bottles made from Loop^™ PET in South Korea in October 2022. The waste plastic used to produce these bottles include polyester fibers from carpets and clothing which are considered unrecyclable and destined for landfill and other natural environments. This initiative reflects evian’s commitment to its stated 2025 goals for circularity and 100% recycled content.

Loop continues to work toward new brand and market introductions with additional consumer goods brand companies.

Terrebonne Facility

As part of our plan for the commercialization of future Infinite Loop^™ manufacturing facilities, we enhanced our Terrebonne, Québec pilot plant to become a small-scale PET depolymerization production facility. In addition to our research and development activities, this facility is used to deliver initial production volumes to support co-branded market launch campaigns with partners and customers and will also be used to showcase the Infinite Loop^™ end-to-end technology and train operational teams in advance of the commissioning of the Infinite Loop^™ full-scale commercial facilities.

We completed the planned upgrades at the Terrebonne Facility which have given us the opportunity to support product campaigns with customers, such as the evian Loop bottle. In completing the upgrade of the Terrebonne facility to incorporate all key pieces of depolymerization equipment that will be used in the full-scale commercial facilities, we achieved a key milestone in proving the effectiveness of our process.

In the nine-month period ended November 30, 2022 Loop reported first revenues of $0.16 million from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, which included On AG. We previously entered into an agreement with On AG to supply Loop^™ PET to be utilized in polyester fiber by the brand, pursuant to which Loop^™ PET resin was delivered in the nine-month period ended November 30, 2022. In addition to supplying customers with initial volumes of Loop^™ PET, the Terrebonne Facility continues to support our customers and partners with R&D and analytical capabilities.

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On December 22, 2022, we announced that we have reduced hours of operation at the Terrebonne Facility in order to reduce operating costs and conserve liquidity. The primary purpose of the Terrebonne Facility was to demonstrate that Loop’s breakthrough depolymerization technology was scalable and to produce commercial quantities of virgin quality PET resin and polyester fiber for global brands. We believe the Terrebonne Facility has achieved this objective. We will continue to fulfill existing sales contracts.

Joint Venture with Indorama for Retrofit

In September 2018 we announced a joint venture with Indorama to retrofit certain PET manufacturing facilities. We entered into a Limited Liability Company Agreement (the “LLC Agreement”), a Marketing Agreement (the “Marketing Agreement”) and a License Agreement (the “License Agreement”), with Indorama through our wholly-owned subsidiary Loop Innovations, LLC (“Loop Innovations”). Each company has 50/50 equity interest in the joint venture. We are contributing to the 50/50 joint venture an exclusive worldwide royalty-free license to use our proprietary technology to produce 100% sustainably produced PET resin in addition to our equity cash contribution. In 2019, the joint venture decided to increase the capacity of the planned Spartanburg, South Carolina plant due to customer demand to 40,000 metric tons per year from the initially planned 20,700 metric tons per year. The joint venture made a decision over the summer of 2020 that due to the COVID-19 pandemic it would temporarily delay work on the project. Since then, no expenditures have been incurred by the joint venture. Both joint venture partners currently remain committed to the project and we continue to discuss the project timetable.

Human Capital

As of November 30, 2022, we had 81 employees of which 28 work in research and development, 38 in engineering and operations, and 15 in administrative functions.

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Results of Operations

The following table summarizes our operating results for the three-month periods ended November 30, 2022 and 2021, in U.S. Dollars.

	Three months ended November 30,
	2022			2021			Change
Revenues	$	24,924		$	-		$	24,924

Expenses
Research and development
Machinery and equipment expenditures		1,059,266			2,599,758			(1,540,492	)
External engineering		707,113			1,585,512			(878,399	)
Employee compensation		1,539,581			1,424,330			115,251
Stock-based compensation		455,013			362,435			92,578
Plant and laboratory operating expenses		915,951			665,893			250,058
Tax credits		(299,793	)		97,480			(397,273	)
Other		204,421			99,896			104,525
Total research and development		4,581,552			6,835,304			(2,253,752	)

General and administrative
Professional fees		1,278,478			650,164			628,314
Employee compensation		492,178			748,668			(256,490	)
Stock-based compensation		419,153			279,574			139,579
Insurance		709,952			1,193,554			(483,602	)
Other		283,166			219,295			63,871
Total general and administrative		3,182,927			3,091,255			91,672

Gain on disposition of assets		(6,703,558	)		-			(6,703,558	)
Depreciation and amortization		133,902			135,035			(1,133	)
Interest and other financial expenses		54,402			49,655			4,747
Interest income		(13,315	)		(23,654	)		10,339
Foreign exchange loss (gain)		(197,913	)		10,648			(208,561	)
Total expenses		1,037,997			10,098,243			(9,060,246	)
Net loss	$	(1,013,073	)	$	(10,098,243	)	$	9,085,170

Three Months Ended November 30, 2022 and 2021

Revenues

Revenues for the three-month period ended November 30, 2022 were $0.02 million. For the same period in 2021, there were no revenues. The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.

Research and Development

Research and development expense for the three-month period ended November 30, 2022 decreased $2.25 million to $4.58 million, as compared to $6.84 million for the same period in 2021. The decrease was primarily attributable to a $1.54 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $0.88 million decrease in external engineering costs for ongoing design work for our Infinite Loop^™ manufacturing process, and a $0.40 million increase in tax credits recorded as a reduction of research and development expenses.

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General and administrative expenses

General and administrative expenses for the three-month period ended November 30, 2022 increased $0.09 million to $3.18 million, as compared to $3.09 million for the same period in 2021. The increase was primarily attributable to a $0.63 million increase in expenses for legal and professional fees due to costs principally associated with the SEC investigation and class action suits described in “Part II, Item 1. Legal Proceedings” of our 10-Q and the Company’s commercialization plans, and a $0.14 million increase in stock-based compensation expenses. These increases were partially offset by a $0.48 million decrease in insurance costs, and a $0.26 million decrease in employee compensation costs.

Net Loss

The net loss for the three-month period ended November 30, 2022 decreased $9.09 million to $1.01 million, as compared to $10.10 million for the same period in 2021. The decrease is primarily due to a gain on disposition of assets of $6.70 million recorded in the three-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec, and the decreased research and development expenses of $2.25 million, partially offset by the increased general and administrative expenses of $0.09 million.

Nine Months Ended November 30, 2022 and 2021

The following table summarizes our operating results for the nine-month periods ended November 30, 2022 and 2021, in U.S. Dollars.

	Nine months ended November 30,
	2022			2021			Change
Revenues	$	160,352		$	-		$	160,352

Expenses
Research and development
Machinery and equipment expenditures		4,132,575			7,707,882			(3,575,307	)
External engineering		2,913,567			5,040,342			(2,126,775	)
Employee compensation		5,179,105			4,213,075			966,030
Stock-based compensation		1,170,554			1,152,506			18,048
Plant and laboratory operating expenses		2,365,643			2,064,403			301,240
Tax credits		(1,207,415	)		(54,911	)		(1,152,504	)
Other		579,162			634,640			(55,478	)
Total research and development		15,133,191			20,757,937			(5,624,746	)

General and administrative
Professional fees		3,840,844			3,138,611			702,233
Employee compensation		1,929,581			2,148,533			(218,952	)
Stock-based compensation		8,798,601			209,236			8,589,365
Insurance		2,883,333			3,121,353			(238,020	)
Other		777,896			750,319			27,577
Total general and administrative		18,230,255			9,368,052			8,862,203

Gain on disposition of assets		(6,703,558	)		-			(6,703,558	)
Depreciation and amortization		410,544			407,806			2,738
Interest and other financial expenses		138,962			113,344			25,618
Interest income		(35,842	)		(41,828	)		5,986
Foreign exchange loss (gain)		(289,022	)		42,712			(331,734	)
Total expenses		26,884,530			30,648,023			(3,763,493	)
Net loss	$	(26,724,178	)	$	(30,648,023	)	$	3,923,845

Revenues

Revenues for the nine-month period ended November 30, 2022 were $0.16 million. For the same period in 2021, there were no revenues. The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.

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Research and Development

Research and development expense for the nine-month period ended November 30, 2022 decreased $5.62 million to $15.13 million, as compared to $20.76 million for the same period in 2021. The decrease was primarily attributable to a $3.58 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $2.13 million decrease in external engineering expenses for ongoing design work for our Infinite Loop^™ manufacturing process, and a $1.15 million increase in tax credits recorded as a reduction of research and development expenses. These decreases were partially offset by a $0.97 million increase in employee compensation expenses related increased headcount in our in-house engineering and commercial project teams.

General and administrative expenses

General and administrative expenses for the nine-month period ended November 30, 2022 increased $8.86 to $18.23 million, as compared to $9.37 million for the same period in 2021. The increase was primarily attributable to an increased stock-based compensation expense of $8.59 million, of which $7.74 million was related to the achievement of a performance milestone for 1,000,000 RSUs following the execution of a supply agreement with a customer and $0.94 million was attributable to RSU forfeitures in the same period in 2021 accounted for as a reversal of stock-based compensation, and increased professional fees of $0.70 million, mainly related to legal fees principally associated with the SEC investigation and class action suits described in “Part II, Item 1. Legal Proceedings” of our 10-Q and the Company’s commercialization plans. These increases were partially offset by decreased insurance costs of $0.24 million, and a $0.22 million decrease in employee compensation costs.

Net Loss

The net loss for the nine-month period ended November 30, 2022 decreased $3.92 million to $26.72 million, as compared to $30.65 million for the same period in 2021. The decrease is primarily due to a gain on disposition of assets of $6.70 million recorded in the nine-month period ended November 30, 2022 related to the Company’s sale of land in Bécancour, Québec, and the decreased research and development expenses of $5.62 million, partially offset by the increased general and administrative expenses of $8.86 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Since its inception, the Company has been in the development stage with limited revenues, with its ongoing operations and commercialization plans financed primarily by raising equity. To date, we have been successful in raising capital to finance our ongoing operations. Our liquidity position consists of cash and cash equivalents on hand of $25.62 million at November 30, 2022 and an undrawn senior loan facility from a Canadian bank of $2.59 million. Additionally, the Company entered into an agreement on December 21, 2022 to sell its land in Bécancour, Québec for $13.70 million (CDN $18.50 million) on or before February 24, 2023. Our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and the Risk Factors section included in Part I, Item 1A of our 2022 Annual Report on Form 10-K.

Management actively monitors the Company’s cash resources against the Company’s short-term cash commitments to ensure the Company has sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is substantial doubt about the Company’s ability to continue as a going concern. In preparing this liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts which includes developing assumptions related to: (i) estimation of amount and timing of future cash outflows and cash inflows and (ii) determining what future expenditures are committed and what could be considered discretionary. Management prepared the Company’s consolidated financial statements on a going concern basis in accordance with ASC 205-40, as management believes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they become due for a period of no less than 12 months from the date of issuance of these consolidated financial statements.

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Management continues to pursue our growth strategy and is evaluating our financing plans to continue to raise capital to finance the start-up of commercial operations and continue to fund our ongoing operations. We will require a significant amount of capital to fund our growth as we invest in our planned commercial facilities in Europe, Asia and North America, as well as additional research and development. In addition to our cash on hand, we may also raise additional capital through equity offerings or debt financings, government incentives, as well as through collaborations or strategic alliances to execute our growth strategy. Such financing will depend on many factors, including actual construction costs of the planned commercial facilities, potential delays in our supply chain, and our ability to secure customers, which may not be available on acceptable terms, if at all. If we are unable to raise additional capital when required, our business, financial condition and results of operations would be adversely affected.

In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment for up to $8.55 million which can be used in any Infinite Loop™ manufacturing facility. The payment of these amounts is based on certain milestones subject to various terms and conditions, including fabrication timelines, and equipment inspection. Pursuant to the agreement, the Company has paid a cash deposit of $3.40 million.

We have a long-term debt obligation to Investissement Québec in connection with a financing facility for the expansion of the Terrebonne Facility up to a maximum of $3.41 million (CDN $4.60 million). We received the first disbursement in the amount of $1.64 million (CDN $2.21 million) on February 21, 2020 and the second disbursement in the amount of $1.77 million (CDN $2.39 million) on August 26, 2021. There is a 36-month moratorium on both capital and interest repayments as of the first disbursement date. At the end of the 36-month moratorium, capital and interest will be repayable in 84 monthly installments. The loan bears interest at 2.36%. We have also agreed to issue to Investissement Québec warrants to purchase shares of our common stock in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $0.34 million (CDN $0.46 million). The warrants were issued at a price per share equal to the higher of (i) $11.00 per share and (ii) the ten-day weighted average closing price of Loop Industries 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 us without penalty. On February 21, 2020, upon the receipt of the first disbursement under this facility, we issued a warrant to purchase 15,153 shares of common stock at a price of $11.00 to Investissement Québec. On August 26, 2021, upon the receipt of the second disbursement under this facility, we issued a warrant to purchase 17,180 shares of common stock at a price of $11.00 to Investissement Québec. There is no remaining amount available under the financing facility after the second disbursement.

On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank. The Credit Facility allows for borrowings of up to $2,669,514 (CDN $3,500,000) in aggregate principal amount and provides for a two-year term. The Credit Facility is secured by the Company’s Terrebonne, Québec property and is subject to a minimum equity covenant, tested quarterly. All borrowings under the Credit Facility will bear interest at an annual rate equal to the bank’s Canadian prime rate (as defined in the Credit Facility) plus 1.0%. The Company is subject to a guarantee of the liabilities of Loop Canada Inc. As at November 30, 2022 the Credit Facility was undrawn.

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Flow of Funds

Summary of Cash Flows

A summary of cash flows for the nine-month periods ended November 30, 2022 and 2021 was as follows:

	Nine Months Ended November 30,
	2022			2021
Net cash used in operating activities	$	(26,283,203	)	$	(32,829,956	)
Net cash from (used in) investing activities		8,266,346			(5,370,272	)
Net cash from financing activities		-			57,915,659
Effect of exchange rate changes on cash		(419,577	)		(77,336	)
Net (decrease) increase in cash	$	(18,436,434	)	$	54,860,046

Net Cash Used in Operating Activities

During the nine-month period ended November 30, 2022, we used $26.28 million in operations compared to $32.83 million during the nine-month period ended November 30, 2021. As discussed above in the Results of Operations, the year-over-year decrease is mainly due to decreased operating expenses as we have completed the upgrade of the Terrebonne Facility and our basic design package for the Infinite Loop™ full-scale manufacturing facilities.

Net Cash (Used) Provided in Investing Activities

During the nine-month period ended November 30, 2022, the Company made investments of $0.07 million in property, plant and equipment as compared to $5.02 million for the nine-month period ended November 30, 2021. The amount of $5.02 was primarily in connection with the purchase for $4.82 million of a parcel of land in Bécancour, Québec.

During the nine-month period ended November 30, 2022, the Company made investments in intangible assets of $0.23 million as compared to $0.35 million for the nine-month period ended November 30, 2021, particularly in its patent technology in the United States and around the world.

Net Cash (Used) Provided by Financing Activities

During the nine-month period ended November 30, 2021, we raised $56.5 million through a private offering of common stock, together with warrants, in the net amount of $56.1 million. We also made payments totaling $0.04 million against our long-term debt, representing the loan agreement we entered into during the year ended February 28, 2018 to purchase the land and building of our small-scale production facility, research and development center and executive offices, which was fully repaid in January 2022.

On August 26, 2021, we received $1.87 million (CDN $2.39 million) in connection with the credit facility from Investissement Québec to finance capital expenses incurred for the expansion of the Terrebonne Facility. There is a moratorium on both capital and interest repayments until February 2023.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4. CONTROLS AND PROCEDURES

Management’s Evaluation of our Disclosure Controls and Procedures

A. Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of November 30, 2022.

B. Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three-month period ended November 30, 2022 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

SEC Investigation

As previously disclosed, we received a subpoena from the SEC in October 2020 requesting certain information from us, including information regarding testing, testing results and details of results from our GEN I and GEN II technologies, and certain of our partnerships and agreements. In March 2022, we received a second subpoena requesting additional information, including information concerning our reverse-merger in 2015, and communications with certain individuals and entities. There have been no additional information requests from the SEC relating to the Company’s business or technology.

The SEC informed us that its investigation does not mean that the SEC has concluded that anyone has violated the law and that the investigation does not mean that the SEC has a negative opinion of us. We cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation.

On September 30, 2022 the SEC filed a complaint (the “SEC complaint”) against several named defendants (“Defendants”), and also identified as a relief defendant Daniel Solomita, our Chief Executive Officer. The SEC complaint does not allege wrongdoing by the Company or Mr. Solomita. The SEC complaint identifies Mr. Solomita and an entity he owns as relief defendants because they purportedly received monies from the Defendants in 2015 that the SEC alleges were derived from the Defendants’ fraud. The SEC complaint does not allege that Mr. Solomita was aware of the alleged wrongdoing by the Defendants and does not allege that he was aware that any alleged monies received were derived from fraud.

Litigation

The information set forth under “Contingencies” in Note 21, Commitments and Contingencies, contained in the notes to the condensed consolidated financial statements of this Quarterly Report on Form 10-Q is incorporated by reference in answer to this Item.

From time to time, we may become involved in various lawsuits and legal proceedings or investigations which arise in the ordinary course of business. Except as noted above, we are not presently a party to any legal proceedings, government actions, administrative actions, investigations or claims that are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business, financial condition or operating results. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

It is possible that we may expend financial and managerial resources in the defense of our intellectual property rights in the future if we believe that our rights have been violated. It is also possible that we may expend financial and managerial resources to defend against claims that our products and services infringe upon the intellectual property rights of third parties.

ITEM 1A. RISK FACTORS

We are subject to various risks and uncertainties in the course of our business. Risk factors relating to us are set forth under “Risk Factors” in our Annual Report on Form 10-K, filed on May 27, 2022. No material changes to such risk factors have occurred during the nine months ended November 30, 2022.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following Exhibits, as required by Item 601 of Regulation SK, are attached or incorporated by reference, as stated below.

Exhibit Index

		Incorporated by Reference
Number	Description	Form	File No.	Filing Date	Exhibit No.
3.1	Articles of Incorporation, as amended to date	10-K	000-54768	May 30, 2017	3.1
3.2	By-laws, as amended to date	8-K	000-54768	April 10, 2018	3.1
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith
101.INS	XBRL Instance Document		Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document		Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document		Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document		Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document		Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document		Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Date: January 12, 2023	By:	/s/Daniel Solomita
	Name:	Daniel Solomita
	Title:	President and Chief Executive Officer, and Director (Principal Executive Officer)

Date: January 12, 2023	By:	/s/Nicolas Lafond
	Name:	Nicolas Lafond
	Title:	Interim Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)