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 or ☐ 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) (State or other jurisdiction of i ...

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 August 31, 2022 Nevada 27-2094706 (I.R.S. Employer Identification No.) (State or other jurisdiction of incorporation or organization) For the transition period from ___________ to __________ Commission File No. 000-54768 480 Fernand-Poitras Terrebonne, Québec, Canada J6Y 1Y4 (Address of principal executive o ...

Financial Data and Key Metrics Changes - The net loss for Q1 2023 increased to $18 million, up from $12.2 million in Q1 2022, primarily due to increased G&A expenses of $7.9 million, partially offset by lower R&D expenses of $1.4 million [13][14] - G&A expenses increased mainly due to stock-based compensation expenses of $8.4 million, with $7.74 million related to a performance milestone for restricted stock units [13][14] - Excluding the one-time performance milestone, the adjusted loss for the quarter would have been $10.3 million [14] Business Line Data and Key Metrics Changes - The company has seen an uptick in customer demand driven by government regulations for recycled content in packaging [7][8] - A five-year anchor agreement was signed with Danone for the Becancour facility, and the launch of the evian Loop bottle in South Korea is expected to be the first chemically recycled packaging sold in stores [8][9] - A supply agreement was established with a Swiss shoe manufacturer for 100% recycled polyester resin, indicating increased interest from fiber companies [9] Market Data and Key Metrics Changes - The North American project in Becancour is advancing with detailed engineering and financing plans, targeting to break ground later this year [11] - The South Korean project with SK Geo Centric is progressing well, with land purchased and site preparation underway [11] Company Strategy and Development Direction - The partnership with SK Geo Centric and SUEZ aims to build the first Infinite Loop manufacturing facility in Europe, with ground-breaking scheduled for 2023 [6][11] - The company is focused on commercializing its technology to address global challenges surrounding plastic waste and sustainability [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted that increased government regulatory requirements for recycled plastics are supporting demand for recycled PET and polyester fiber [15] - The economic outlook for the project remains strong despite inflationary pressures, with high demand for sustainable materials [35] Other Important Information - The cash balance at the end of the quarter was $32.4 million [14] - The company is working on securing feedstock agreements in both Europe and North America, with a wide pool of certified suppliers [25][24] Q&A Session Summary Question: Key developments for the Becancour project - Management indicated that detailed engineering is progressing and expects to have 100% of the facility contracted before breaking ground [20][22] Question: Feedstock planning and agreements - Management confirmed that each project has its own feedstock strategy, with contracts in place for North America and partnerships in Europe [23][25] Question: Timeline for financing completion - Management stated that discussions for financing are ongoing and have not changed dramatically despite market conditions [34][35] Question: Visibility from the Terrebonne facility for projections - Management emphasized that the operational data from the Terrebonne facility provides confidence in scaling up for the Becancour project [38][40] Question: Revenue from products sent to prospective customers - Management clarified that material sold for R&D purposes is netted in the R&D line, while products intended for sale will be booked as revenue [46][52] Question: Expected operating expenses and equity contributions - Management anticipates lower operating expenses moving forward, targeting a range of $5 million to $6 million per quarter [58][59]

Market Demand and Regulatory Environment - The global annual market demand for PET plastic and polyester fiber is projected to exceed $160 billion by 2022[99]. - Canada has set a goal for all plastic packaging to contain 50% recycled content by 2030, while California mandates 15% post-consumer resin in plastic bottles by 2022, increasing to 50% by 2030[107]. - The increasing regulatory environment and commitments from consumer goods companies are expected to drive demand for recycled PET (rPET) further[101]. Technology and Innovation - Loop Industries is developing Generation II technology, which uses methanolysis at temperatures below 90 °C, offering lower energy usage and reduced greenhouse gas emissions compared to conventional processes[110]. - The GEN II technology allows for the depolymerization of low-quality feedstocks, such as carpet fiber and mixed plastics, into high-quality PET suitable for food contact use[113]. - Loop's proprietary technology can produce virgin-quality Loop™ PET resin and polyester fiber from 100% recycled materials, meeting food-grade packaging standards[104]. - Loop's technology validation report, executed by a third-party engineering firm, confirmed the quality, effectiveness, and scalability of its technology[132]. - The GEN II technology portfolio includes multiple patent families with expiration dates ranging from June 2039 to March 2040, enhancing Loop's intellectual property position[115][119]. Strategic Partnerships and Projects - Loop has secured multi-year supply agreements with major brands including Danone, PepsiCo, L'OCCITANE, and L'Oréal Group for the use of Loop™ PET resin in their packaging[120]. - The Québec Project aims to support Canada's zero plastic waste goal by 2030, with initial site preparation costs of $1.14 million and a planned investment of up to $8.55 million for machinery[135][136]. - Loop's strategic partnership with SK geo centric aims to establish a joint venture for sustainable PET manufacturing in Asia, which accounts for approximately 60% of the world's population and 70% of global PET consumption[126]. - The partnership with Suez and SKGC intends to supply up to 70,000 M/T of virgin-quality, 100% recycled PET plastic and polyester fiber to the European market[139]. - The joint venture with Indorama aims to retrofit PET manufacturing facilities, increasing the capacity of the Spartanburg plant to 40,000 metric tons per year from an initial 20,700 metric tons due to customer demand[141]. Financial Performance and Outlook - The net loss for the three-month period ended May 31, 2022, was $18.01 million, an increase of $5.85 million compared to the same period in 2021, primarily due to increased general and administrative expenses[150]. - General and administrative expenses rose by $7.88 million in the same period, largely due to an increase in stock-based compensation of $8.45 million related to a performance milestone[151]. - Research and development expenses decreased by $1.84 million, attributed to a $1.31 million decrease in external engineering expenses and a $0.73 million decrease in machinery and equipment purchases[152]. - The company had cash and cash equivalents of $32.40 million as of May 31, 2022, but its liquidity position is subject to risks and uncertainties[153]. - The company plans to raise significant capital for the construction of the Infinite Loop™ manufacturing facility in Bécancour, Québec, and other commercial facilities in Europe, Asia, and Spartanburg, South Carolina[155]. - During the three months ended May 31, 2022, the company used $11.58 million in operating activities, a decrease from $12.41 million in the same period in 2021, mainly due to reduced operating expenses[159]. - The company invested $0.07 million in intangible assets during the three months ended May 31, 2022, focusing on patent technology[160]. Reporting and Disclosure - The company is classified as a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk[163]. - The company has opted out of certain regulatory requirements due to its size, which may impact the level of detail in financial disclosures[163]. - No specific financial performance metrics or user data were disclosed in the conference call[163]. - Future outlook and performance guidance were not provided in the available content[163]. - There are no mentions of new products, technologies, market expansion, or mergers and acquisitions in the provided information[163]. - The company did not disclose any strategic initiatives or changes in business strategy during the call[163]. - Overall, the content lacks detailed financial data and insights typically expected in earnings calls[163]. - The absence of specific performance indicators may limit investor insights into the company's operational health[163]. - The company’s reporting status may affect its visibility and attractiveness to potential investors[163]. - Further information may be required to assess the company's market position and future growth prospects[163].

Financial Performance - The net loss for the three-month period ended February 28, 2022, increased by $1.08 million to $14.27 million compared to the same period in 2021, primarily due to a contingency loss for legal settlement of $2.52 million and a loss from equity investment of $1.12 million [181]. - The net loss for the year ended February 28, 2022, was $44,920,956, compared to a net loss of $36,344,923 in the prior year, reflecting an increase in losses of approximately 23.6% [231]. - The company reported a net loss of $44.92 million for the year ended February 28, 2022, compared to a net loss of $36.34 million for the previous year, representing an increase in losses of approximately 23% [239]. - The company expects to incur additional net losses while developing and planning for commercialization, with no revenues reported to date [214]. - The company's loss before taxes increased to $44,920,956 in 2022, compared to $36,344,923 in 2021, with U.S. operations contributing a loss of $12,690,909 [354]. Expenses - Total expenses for the fiscal year ended February 28, 2022, were $44.92 million, an increase of $8.58 million compared to $36.34 million in the previous year, driven by increased research and development expenses of $9.05 million [191]. - Research and development expenses for the fiscal year ended February 28, 2022, totaled $27.74 million, an increase of $9.05 million from $18.69 million in the previous year [188]. - General and administrative expenses increased by $1.25 million for the year ended February 28, 2022, partially offset by a $1.73 million decrease in stock-based compensation expenses due to forfeitures of RSUs [193]. - General and administrative expenses rose to $12.79 million in 2022, compared to $11.54 million in 2021, reflecting an increase of 10.8% [341]. - Stock-based compensation expense for stock options amounted to $1.51 million in 2022, down from $2.21 million in 2021, indicating a decrease of 31.7% [343]. Cash Flow and Financing - Cash and cash equivalents on hand were $44.06 million as of February 28, 2022, with ongoing operations financed primarily by raising equity [197]. - Net cash used in operating activities was $42.98 million for the year ended February 28, 2022, compared to $22.49 million for the previous year, mainly due to increased operating expenses [206]. - The company raised $56.5 million through a private offering of common stock during the year ended February 28, 2022 [209]. - The company raised $56.05 million from the sale of common shares and exercise of warrants, net of share issuance costs, compared to $26.65 million in the previous year, marking a 110% increase in financing activities [239]. - The company is evaluating financing options to construct manufacturing plants in Canada, Europe, and Asia, which is critical for future revenue generation [246]. Investments and Assets - The company invested $4.82 million in property, plant, and equipment, primarily for the purchase of land in Bécancour, Québec, for the construction of its Infinite Loop™ manufacturing facility [207]. - Total assets rose to $59,220,199 as of February 28, 2022, compared to $43,403,513 as of February 28, 2021, marking an increase of about 36.3% [229]. - The accumulated deficit grew to $(134,582,926) as of February 28, 2022, compared to $(89,661,970) in the previous year, representing an increase of approximately 50% [229]. - The company has approximately 11,659,418 warrants outstanding as of February 28, 2022, with significant expirations in June 2022 and July 2024 [352]. Legal and Regulatory Matters - The company recorded a contingency loss for legal settlement of $2.52 million related to a class action lawsuit, which requires a total payment of $3.1 million to the plaintiff class [184]. - A contingency loss of $2,519,220 was recorded in 2022 related to the settlement of a class action lawsuit [368]. - The company agreed to pay $3.1 million to settle the Tremblay Class Action, with a total cash contribution of approximately $2.52 million from the company [371]. Research and Development - The company is pursuing the construction of Infinite Loop™ commercial scale facilities in Québec, Canada, and with strategic partners in Europe and South Korea, aiming for global expansion of its technology [175]. - The Infinite Loop manufacturing technology has a capacity of up to 70,000 M/T of PET resin output per year, with the basic design package completed in collaboration with leading engineering partners [179]. - Research and development expenses increased to $27.74 million for the year ended February 28, 2022, up from $18.69 million in 2021, representing a growth of 48.5% [340]. - Research and development expenses primarily include costs related to process development, testing of pre-production samples, and machinery expenditures at the Terrebonne Facility [266]. Strategic Plans - The company is targeting multi-year take or pay offtake agreements for planned Infinite Loop production, which may command premium pricing over virgin, petroleum-based PET resin [180]. - The company plans to continue driving the commercialization of its Infinite Loop™ solution, which is considered a key pillar for selling technology to commercial partners [221]. - The company is actively identifying and pursuing additional strategic partners and regions for new Infinite Loop™ projects to expand its market presence [221].

Financial Data and Key Metrics Changes - At the end of Q3 2022, Loop Industries had $54.9 million in cash, having used $10.7 million during the quarter [19] - R&D expenses increased by $1.6 million compared to the prior quarter due to ongoing engineering work for the Infinite Loop projects [19] Business Line Data and Key Metrics Changes - The company is advancing customer contract negotiations with global consumer packaged goods (CPG) brands for multi-year volume allocations for the Quebec facility [11] - The engineering design of Infinite Loop manufacturing facilities is progressing on schedule, with a feasibility study phase initiated to obtain a more precise cost estimate [14][13] Market Data and Key Metrics Changes - The Asian market represents nearly 70% of the world's PET consumption and is the center of global polyester fiber manufacturing [17] - Loop and SK Geocentric plan to build a minimum of four facilities in Asia by 2030, with the first facility located in Ulsan, South Korea [18] Company Strategy and Development Direction - Loop Industries aims to address climate change through the decarbonization of plastic, focusing on providing 100% recycled content for PET plastic and polyester fiber [6][7] - The company is pursuing the construction of commercial-scale facilities in Quebec, Europe, and Asia, leveraging partnerships with SUEZ and SK Geocentric [9][15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing negotiations for government financing, which is critical for the Bécancour facility to meet Canada's 2030 plastic waste goals [23][24] - The company anticipates 2022 to be a transformational year focused on accelerating the commercialization of its technology and securing multi-year off-take commitments [20] Other Important Information - The Infinite Loop project in Bécancour is seen as essential infrastructure for Canada to meet its recycling objectives [12] - The company is finalizing site selection for the European facility in Normandy, France, with construction expected to break ground in 2023 [16] Q&A Session Summary Question: Status of Bécancour and conditions for next construction phase - Management is completing the engineering package by Q1 2022 and discussing various financing options, with government financing playing a significant role [23] Question: Timing for site selection with SUEZ - Site selection is imminent as the company has narrowed down options to three sites in France [25] Question: Groundbreaking in Asia with SK - The Asian facility is expected to break ground before Bécancour, with the engineering package being the gating item [26][27] Question: CapEx expectations for 2022 - Estimated CapEx for the Bécancour facility is $300 million, with ongoing discussions for financing [30] Question: Supply timeline for evian partnership - The resin has already been shipped to evian, and it is now on their schedule to produce the bottles [36] Question: Updates on land sale - There has been significant interest in the land for sale, with ongoing due diligence by potential buyers [46] Question: Customer off-take agreements - There is strong customer interest from beverage companies and polyester fiber users, with ongoing negotiations [48]

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, 2021 or ☐ 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 ...

[PART I. Financial Information](index=2&type=section&id=PART%20I.%20Financial%20Information) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) The development-stage company reported zero revenue and a significantly widened net loss of $20.55 million for the six-month period Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | August 31, 2021 | February 28, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $65,561,362 | $35,221,951 | | Total current assets | $71,287,965 | $37,595,568 | | Total assets | $78,477,043 | $43,403,513 | | **Liabilities & Equity** | | | | Total current liabilities | $6,149,799 | $9,062,981 | | Total liabilities | $9,472,395 | $10,578,989 | | Total stockholders' equity | $69,004,648 | $32,824,524 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Aug 31, 2021 | Three Months Ended Aug 31, 2020 | Six Months Ended Aug 31, 2021 | Six Months Ended Aug 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $0 | $0 | $0 | $0 | | Research and development | $5,284,797 | $2,749,222 | $13,922,632 | $4,229,810 | | General and administrative | $3,116,226 | $2,049,241 | $6,276,797 | $4,002,323 | | **Net Loss** | **($8,392,416)** | **($5,127,724)** | **($20,549,780)** | **($8,980,438)** | | **Loss per share (Basic & Diluted)** | **($0.19)** | **($0.13)** | **($0.47)** | **($0.22)** | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended Aug 31, 2021 | Six Months Ended Aug 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($22,400,420) | ($7,455,787) | | Net cash used in investing activities | ($5,101,573) | ($3,232,238) | | Net cash provided by (used in) financing activities | $57,954,883 | ($26,836) | | **Net increase (decrease) in cash** | **$30,339,411** | **($10,589,428)** | - The company owns **patented technology** to depolymerize low-value waste PET plastic and polyester fiber into its base monomers, which are then purified and re-polymerized to create **virgin-quality** Loop™ branded PET resin[24](index=24&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses its commercialization strategy, increased net loss from higher R&D and G&A costs, and improved liquidity from a strategic investment [Business Overview and Strategy](index=21&type=section&id=Business%20Overview%20and%20Strategy) The company is commercializing its proprietary PET recycling technology through strategic partnerships and has secured key regulatory approvals - The company's mission is to accelerate the world's shift toward sustainable PET plastic and polyester fiber, targeting a global market projected to exceed **$160 billion** by 2022[115](index=115&type=chunk)[116](index=116&type=chunk) - Loop's **Generation II (GEN II) technology** is a low-temperature methanolysis process that depolymerizes waste PET into high-purity monomers, which has been independently validated by Kemitek[124](index=124&type=chunk)[127](index=127&type=chunk) - The company has received key regulatory approvals for its PET resin, including a **No Objection Letter (NOL) from the FDA** and Health Canada, confirming its suitability for food-contact applications[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - Key strategic partnerships for commercialization include a joint venture with **SK geo centric for Asia**, a partnership with **SUEZ for Europe**, and a joint venture with **Indorama for North America**[148](index=148&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) The net loss widened significantly due to increased R&D expenses for a new facility and higher G&A costs from legal fees and insurance Comparison of Operating Results (Three Months Ended August 31) | Expense Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total research and development | $5,284,797 | $2,749,222 | $2,535,575 | | Total general and administrative | $3,116,226 | $2,049,241 | $1,066,985 | | **Net loss** | **($8,392,416)** | **($5,127,724)** | **($3,264,692)** | Comparison of Operating Results (Six Months Ended August 31) | Expense Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total research and development | $13,922,632 | $4,229,810 | $9,692,822 | | Total general and administrative | $6,276,797 | $4,002,323 | $2,274,474 | | **Net loss** | **($20,549,780)** | **($8,980,438)** | **($11,569,342)** | - The six-month increase in R&D expenses was primarily driven by a **$5.11 million increase in machinery and equipment purchases** and a $2.44 million increase in external engineering fees[186](index=186&type=chunk) - The six-month increase in G&A expenses was mainly due to a **$1.85 million rise in legal and professional fees** associated with the SEC investigation and class action suits, and a $0.95 million increase in D&O insurance costs[184](index=184&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was substantially improved by a $56.5 million strategic investment, ensuring sufficient funding for the next 12 months - As of August 31, 2021, the company had cash and cash equivalents of **$65.56 million**[187](index=187&type=chunk) - On July 29, 2021, the company closed a strategic equity investment from SK geo centric (SKGC) for total consideration of **$56.5 million**[188](index=188&type=chunk) Summary of Cash Flows (Six Months Ended August 31) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($22,400,420) | ($7,455,787) | | Net cash used in investing activities | ($5,101,573) | ($2,232,238) | | Net cash from (used by) financing activities | $57,954,883 | ($26,836) | - Management believes the company has **sufficient financial resources** to fund committed operating and capital expenditures for at least the next 12 months from the issuance date of the financial statements[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency exchange, commodity price fluctuations, and raw material price volatility - The company is exposed to **foreign exchange risk** as its Canadian subsidiary's operational costs are denominated in Canadian dollars, while financing is primarily in U.S. dollars[202](index=202&type=chunk)[204](index=204&type=chunk) - **Commodity price risk** exists as the demand for recycled PET can be negatively affected if crude oil prices decline, making virgin PET comparatively cheaper to produce[207](index=207&type=chunk) - The business faces **raw material price risk** from fluctuations in the price and availability of waste PET plastic and polyester fiber feedstock[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of August 31, 2021[211](index=211&type=chunk) - **No changes in internal control** over financial reporting occurred during the three-month period ended August 31, 2021, that materially affected, or were reasonably likely to materially affect, internal controls[212](index=212&type=chunk) [PART II. Other Information](index=33&type=section&id=PART%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending against an ongoing SEC investigation and multiple class-action lawsuits related to its technology and disclosures - The company received a subpoena from the **SEC on October 15, 2020**, initiating an investigation into its GEN I and GEN II technologies and certain partnerships which is ongoing[213](index=213&type=chunk) - The company and certain officers are defendants in **consolidated class-action lawsuits** in the Southern District of New York and a separate class action in Québec, alleging misleading statements[214](index=214&type=chunk)[216](index=216&type=chunk)[218](index=218&type=chunk) - Defendants served a **motion to dismiss** the consolidated U.S. complaint on April 27, 2021[217](index=217&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K were reported - **No material changes** to the risk factors set forth in the company's Annual Report on Form 10-K occurred during the six months ended August 31, 2021[221](index=221&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company disclosed several unregistered sales of equity securities, including a significant issuance to strategic partner SK geo centric - On July 29, 2021, the company issued **4,714,813 shares of common stock and warrants** to purchase 7,533,518 shares to SK geo centric Co., Ltd[222](index=222&type=chunk) - On August 26, 2021, the company issued a **warrant to purchase 17,180 shares** of common stock to Investissement Québec in connection with its financing facility[223](index=223&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[225](index=225&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[226](index=226&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The company did not report any other information for this item - None[227](index=227&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section indexes exhibits filed with the report, including agreements, certifications, and XBRL data files - The report includes an index of exhibits filed, such as the **Amendment to Joint Venture Agreements**, the **Securities Purchase Agreement with SK Global Chemical**, and certifications from the Principal Executive Officer and Principal Financial Officer[228](index=228&type=chunk)[232](index=232&type=chunk)

Market Demand and Trends - The global annual market demand for PET plastic and polyester fiber is nearly $130 billion, projected to exceed $160 billion by 2022[98]. - Major brands have committed to significant recycled content in their packaging, with targets such as Coca-Cola's 50% recycled content by 2030 and PepsiCo's 25% by 2025[101]. - The European Union has imposed a tax of €800/ton on non-recycled plastic packaging, effective January 1, 2021, to encourage recycling[100]. Technology and Innovation - Loop Industries' technology can depolymerize waste PET plastic and polyester fiber to create virgin-quality Loop™ PET resin suitable for food-grade packaging[97]. - Loop Industries' Generation II technology operates at temperatures below 90 °C, reducing energy usage and processing costs compared to conventional methods[106]. - The GEN II technology allows for the use of low-quality feedstocks, such as carpet fiber and mixed plastics, to produce high-quality PET suitable for food contact[108]. - Loop Industries has filed a report confirming that its GEN II technology produces monomers meeting purity specifications for PET resin production[107]. - Loop Industries has received a no-objection letter from the FDA confirming its tertiary recycling process, methanolysis, for producing food-contact compliant recycled PET[114]. - The Infinite Loop™ technology is designed to support global consumer brands' commitments to high levels of recycled content in packaging, positioning Loop Industries favorably in the market[121]. Partnerships and Agreements - The company is in the process of obtaining necessary governmental permits and approvals for its operations, which may be subject to delays due to the COVID-19 pandemic[112]. - Loop Industries has multi-year supply agreements with major brands including Danone, PepsiCo, L'OCCITANE, and L'Oréal Group for the use of Loop™ PET resin in their packaging[119]. - A joint venture with SK Global Chemical is planned to build sustainable PET manufacturing facilities in Asia, with SKGC owning 51% and Loop Industries 49%[126]. - The company has contracted for the sale of approximately 40% of the planned capacity from its Spartanburg facility, which is set to produce 40,000 metric tons/year of sustainable PET resin[135]. - The company is pursuing projects for future commercial production facilities in Canada, Europe, Asia, and the U.S.[122]. Financial Performance - The net loss for the three-month period ended May 31, 2021, increased by $8.30 million to $12.16 million compared to a net loss of $3.85 million for the same period in 2020[148]. - Research and development expenses rose by $7.16 million to a total of $8.64 million for the three-month period ended May 31, 2021, primarily due to increased external engineering and employee compensation expenses[149]. - Total expenses for the three-month period ended May 31, 2021, were $12.16 million, an increase of $8.30 million from $3.85 million in the same period in 2020[146]. - Cash and cash equivalents on hand as of May 31, 2021, were $18.04 million, with ongoing operations financed through new equity and debt capital[152]. - The company made investments of $4.92 million in property, plant, and equipment during the three months ended May 31, 2021, primarily for the purchase of land for the first Infinite Loop™ manufacturing facility[160]. - The company reported a net cash used in operating activities of $12.41 million for the three months ended May 31, 2021, compared to $4.98 million for the same period in 2020[159]. Strategic Initiatives - The company anticipates the Infinite Loop™ demonstration plant project to be largely completed by late 2021, with Loop™ branded PET resin expected to be delivered to customers in 2022[141]. - A strategic partnership with SKGC involves the purchase of 4,714,813 new treasury common shares at a price of $12 per share, totaling $56.5 million[154]. - The company has a long-term debt obligation to Investissement Québec for a financing facility of up to $3.81 million (CDN$4.6 million) for the expansion of its demonstration and training plant[157]. - The company is actively exploring options to finance its commercial projects amid potential changes in its liquidity position due to the global COVID-19 pandemic[153]. Operational Risks - The company operates through two entities, Loop Industries, Inc. in the U.S. and Loop Canada Inc. in Canada, exposing it to foreign currency exchange risks due to differing functional currencies[164]. - A significant portion of operational costs, including payroll and site costs, are denominated in Canadian dollars, which may lead to material impacts on operations and cash position due to fluctuations in exchange rates[165]. - The company engages in foreign exchange hedging activities to mitigate the impact of exchange rate fluctuations, but these activities carry their own risks and costs[167]. - The plastics manufacturing industry is highly competitive, with the cost of manufacturing recycled PET being influenced by crude oil prices, which could affect market penetration[168]. - The profitability of the company is dependent on the availability and price fluctuations of raw materials, which are influenced by economic conditions and demand from other industries[169]. - The company faces risks related to the quality and proximity of raw materials, which could impact product quality and operational efficiency[169]. - The ongoing global COVID-19 pandemic may disrupt access to raw materials, further complicating supply chain dynamics[169].

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Loop Industries accelerates sustainable PET plastic and polyester fiber production by depolymerizing waste into virgin-quality monomers using proprietary GEN II technology - Loop Industries' mission is to accelerate the world's shift toward sustainable PET plastic and polyester fiber, reducing dependence on fossil fuels by depolymerizing waste PET plastic and polyester fiber into virgin-quality Loop™ branded PET resin[27](index=27&type=chunk) - The global annual market demand for PET plastic and polyester fiber is nearly **$130 billion**, projected to exceed **$160 billion by 2022**, driven by increasing consumer and regulatory demand for recycled content[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Loop's Generation II (GEN II) technology is a methanolysis-based depolymerization process operating below **90 °C**, offering lower energy usage, avoidance of side reactions, ability to process diverse low-quality feedstocks, and minimal water usage without halogenated solvents[36](index=36&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) - Loop Industries has received a no-objection letter (NOL) from the US FDA (March 1, 2021) and REACH registration from the European Chemicals Agency for its DMT and MEG monomers (November/December 2020), confirming their suitability for food-contact applications[44](index=44&type=chunk)[45](index=45&type=chunk) - The company has multi-year supply agreements with global brands like Danone, PepsiCo, L'OCCITANE en Provence, and L'Oréal Group for Loop™ branded PET resin, anticipating premium pricing due to its **100% recycled**, virgin-quality nature[47](index=47&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) - Commercialization efforts include engineering full-scale facilities with Worley, adopting a 'design one, build many' approach, and pursuing global expansion through fully owned facilities (Québec Project), strategic partnerships (Suez in Europe), and joint ventures (Indorama in Spartanburg, SC)[51](index=51&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk)[57](index=57&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - The joint venture with Indorama for a Spartanburg, SC facility (initially **20,700 MT/year**, increased to **40,000 MT/year**) has contracted approximately **40%** of its planned capacity but experienced delays due to the COVID-19 pandemic[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - Loop is converting its Terrebonne, Québec pilot plant into an Infinite Loop™ demonstration and training facility, with significant investments in depolymerization reactors in FY2021, aiming for completion by late 2021 and product delivery by 2022[66](index=66&type=chunk)[68](index=68&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) Loop Industries faces significant risks including persistent net losses, uncertain commercialization, COVID-19 impacts, ongoing legal proceedings, and funding challenges - Loop Industries has incurred net losses since inception, with a net loss of **$36.34 million** for the year ended February 28, 2021, and has not generated revenue, expecting continued losses for the foreseeable future[86](index=86&type=chunk) - The company's limited operating history (business started in October 2014) makes it difficult to evaluate future success and viability, as it has not yet demonstrated commercial-scale manufacturing or sales and marketing capabilities[87](index=87&type=chunk)[88](index=88&type=chunk) - Additional funding through debt, equity, joint ventures, or government programs is likely required for profitable operations, and the inability to secure such financing on favorable terms could adversely affect the business[89](index=89&type=chunk) - The COVID-19 pandemic has disrupted business operations, caused delays in the Indorama joint venture, and may continue to impact access to capital markets, supply chains, manufacturing, and asset values[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - The company is a defendant in putative shareholder class-action lawsuits and subject to an SEC investigation, which could lead to significant legal costs, diversion of management attention, civil penalties, and reputational damage[108](index=108&type=chunk)[109](index=109&type=chunk) - Commercialization of Loop's technology may not be successful due to funding issues, regulatory approvals, competition, or collaborators' decisions, and failure to scale manufacturing processes could prevent meeting customer demand[96](index=96&type=chunk)[97](index=97&type=chunk)[100](index=100&type=chunk) - Reliance on strategic partners (e.g., Indorama, Suez, Chemtex, Worley) carries risks, including potential termination of agreements if milestones are not met, as exemplified by Coca-Cola's termination of a supply agreement[98](index=98&type=chunk)[99](index=99&type=chunk) - The plastics manufacturing industry is price-competitive, and if the cost to manufacture recycled PET is not competitive with virgin PET (especially with declining crude oil prices), market penetration and profitability could be adversely affected[103](index=103&type=chunk) - Mr. Daniel Solomita, CEO and Chairman, beneficially owns **77.0%** of the voting control (as of May 27, 2021) through common stock and Series A Preferred Stock, giving him control over stockholder matters and business decisions, potentially hindering changes in management or discouraging takeovers[130](index=130&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) [Item 2. Properties](index=24&type=section&id=Item%202.%20Properties) Loop Industries owns its Terrebonne pilot plant and corporate offices, and acquired a **19 million sq ft** parcel in Bécancour, Québec, for a planned manufacturing facility - Loop Industries owns a **31.9 thousand square foot** facility in Terrebonne, Québec, housing its pilot plant and corporate offices[142](index=142&type=chunk) - On May 27, 2021, the company acquired a **19 million square foot** parcel of land in Bécancour, Québec, for approximately **$4.8 million** (CDN **$5.9 million**) for a planned Infinite Loop™ manufacturing facility[143](index=143&type=chunk) - The new Bécancour site offers attractive logistics, access to rail, and lower environmental impact by recycling an industrial site, reducing construction costs and permitting time[57](index=57&type=chunk)[143](index=143&type=chunk) [Item 3. Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) Loop Industries faces an SEC investigation and multiple shareholder class-action lawsuits in New York and Québec, alleging false/misleading statements - Loop Industries received an SEC subpoena on October 15, 2020, requesting information regarding its GEN I and GEN II technologies, testing results, and partnerships[144](index=144&type=chunk) - The company is a defendant in consolidated shareholder class-action lawsuits (In re Loop Industries, Inc. Securities Litigation) in the Southern District of New York, alleging violations of Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934[145](index=145&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - A separate proposed securities class action was filed in the Superior Court of Québec, making similar allegations of false/misleading statements and failure to disclose material adverse facts concerning the company's technology and business model[150](index=150&type=chunk) - Management believes these lawsuits lack merit and intends to defend them vigorously; no amounts have been provided in the financial statements for these claims[151](index=151&type=chunk)[376](index=376&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Loop Industries, Inc PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Loop Industries' common stock trades on Nasdaq, with **42.43 million shares outstanding**, no dividends planned, and no equity repurchases in FY2021 - Loop Industries' common stock is traded on the Nasdaq Global Market under the symbol "LOOP"[157](index=157&type=chunk) Common Stock Outstanding and Holders (as of May 27, 2021) | Metric | Value | | :--------------------------------- | :------------------- | | Shares of Common Stock Outstanding | 42,433,320 | | Stockholders of Record | Approximately 52 | - The company has not declared any dividends and does not plan to in the foreseeable future, intending to retain future earnings for business development[159](index=159&type=chunk)[140](index=140&type=chunk) - On May 12, 2020, a warrant to acquire **25,000 shares** of common stock at a strike price of **$9.43 per share** was issued[159](index=159&type=chunk) - No equity securities were purchased by the registrant or affiliated purchasers during the fiscal year ended February 28, 2021[160](index=160&type=chunk) [Item 6. Selected Financial Data](index=26&type=section&id=Item%206.%20Selected%20Financial%20Data) As a "smaller reporting company," Loop Industries is not required to provide selected financial data - As a "smaller reporting company," Loop Industries is not required to provide selected financial data[161](index=161&type=chunk)[225](index=225&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Loop Industries, a development-stage company with no revenues, focuses on commercializing its PET depolymerization technology, reporting increased net losses and maintaining liquidity [Introduction](index=27&type=section&id=Introduction) Loop Industries advances sustainable PET plastic and polyester fiber production by depolymerizing waste into virgin-quality monomers, supporting a circular plastic economy - Loop Industries' core mission is to accelerate the shift to sustainable PET plastic and polyester fiber by depolymerizing waste into virgin-quality Loop™ branded PET resin[164](index=164&type=chunk) - The company's technology provides a solution for global brands to meet commitments for recyclable packaging and increased recycled content, contributing to a circular economy[165](index=165&type=chunk) [Commercialization Plan and Progress](index=27&type=section&id=Commercialization%20Plan%20and%20Progress) Loop Industries executes its Infinite Loop™ commercialization strategy, progressing engineering for global facilities through owned projects, partnerships, and a joint venture - Loop Industries is focused on commercializing its Infinite Loop™ manufacturing technology, which aims to produce PET plastic and polyester fiber from recycled content, supporting global brands' sustainability targets[166](index=166&type=chunk)[167](index=167&type=chunk) - The commercialization strategy includes global expansion through fully owned facilities, strategic partnerships, and licensing agreements, with an engineering philosophy of 'design one, build many' for rapid execution and modular construction[166](index=166&type=chunk)[168](index=168&type=chunk) - On September 2, 2020, Loop entered an agreement with Chemtex Global Corporation to license INVISTA's PET resin and polyester fiber manufacturing know-how for polymerization of DMT and MEG monomers[169](index=169&type=chunk) - The company is targeting an initial capacity of up to **70,000 metric tons/year** for Infinite Loop™ engineering design, integrating its depolymerization technology with INVISTA's polymerization technology[171](index=171&type=chunk) - Loop expects Infinite Loop™ recycled PET resin and polyester fiber to command premium pricing over virgin, petroleum-based PET, targeting multi-year take-or-pay offtake agreements[172](index=172&type=chunk) - For the Québec Project, Loop acquired a **19 million sq ft** land parcel in Bécancour on May 27, 2021, for **$4.8 million** (CDN **$5.9 million**), chosen for its logistics and reduced environmental impact, and is exploring financing options[173](index=173&type=chunk)[174](index=174&type=chunk) - In Europe, a strategic partnership with SUEZ GROUP was announced on September 10, 2020, to build the first Infinite Loop™ manufacturing facility, with site selection targeted for summer 2021[176](index=176&type=chunk) - The joint venture with Indorama (formed September 2018) aims to manufacture and commercialize Loop™ PET resin, with a planned Spartanburg, SC facility capacity increased to **40,000 metric tons per year**, though work was temporarily delayed in summer 2020 due to COVID-19[177](index=177&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) - The Terrebonne, Québec pilot plant is being converted into an Infinite Loop™ demonstration and training facility, with significant investments in two new depolymerization reactors in FY2021, expected to be largely completed by late 2021 and deliver product by 2022[182](index=182&type=chunk)[183](index=183&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Loop Industries reported no revenues, with net loss significantly increasing to **$36.34 million** in FY2021, driven by higher R&D and G&A expenses, including legal fees and D&O insurance Operating Results (Three Months Ended February 28, 2021 vs. February 29, 2020) | Metric | Feb 28, 2021 (USD) | Feb 29, 2020 (USD) | Change (USD) | | :---------------------------------- | :------------------ | :------------------ | :------------- | | Revenues | $ - | $ - | $ - | | Total expenses | $ 13,193,503 | $ 3,757,963 | $ 9,435,540 | | Net loss | $ (13,193,503) | $ (3,757,963) | $ (9,435,540) | | Research and development expenses | $ 8,182,921 | $ 1,470,929 | $ 6,711,992 | | General and administrative expenses | $ 4,814,002 | $ 1,768,364 | $ 3,045,638 | - The **$6.71 million** increase in Q4 research and development expenses was primarily due to a **$3.82 million** increase in machinery and equipment expenditures (expensed due to dedication of pilot plant to R&D), and a **$2.35 million** increase in external engineering for Infinite Loop™ design[189](index=189&type=chunk) - The **$3.05 million** increase in Q4 general and administrative expenses was mainly driven by a **$2.53 million** rise in legal and professional fees related to the SEC investigation and class action suits, and a **$0.27 million** increase in D&O insurance costs[191](index=191&type=chunk) Operating Results (Fiscal Year Ended February 28, 2021 vs. February 29, 2020) | Metric | Feb 28, 2021 (USD) | Feb 29, 2020 (USD) | Change (USD) | | :--------------------------------------- | :------------------ | :------------------ | :------------- | | Revenues | $ - | $ - | $ - | | Total expenses | $ 36,344,923 | $ 14,505,455 | $ 21,839,468 | | Net loss | $ (36,344,923) | $ (14,505,455) | $ (21,839,468) | | Research and development expenses | $ 18,687,014 | $ 4,717,175 | $ 13,969,839 | | General and administrative expenses | $ 11,540,340 | $ 7,215,420 | $ 4,324,920 | | Impairment of property, plant & equipment| $ 5,043,119 | $ 22,985 | $ 5,020,134 | - The **$13.97 million** increase in FY2021 research and development expenses was primarily due to a **$6.15 million** increase in machinery and equipment expenditures (expensed due to R&D dedication) and a **$5.51 million** increase in external engineering for Infinite Loop™ design[194](index=194&type=chunk) - The **$4.32 million** increase in FY2021 general and administrative expenses was mainly due to a **$3.42 million** rise in legal and professional fees and a **$1.31 million** increase in D&O insurance costs[194](index=194&type=chunk) - A **$5.04 million** impairment expense for property, plant, and equipment was recognized in FY2021 due to the decision to dedicate the pilot plant exclusively to research and development, foregoing alternative future use of its assets[194](index=194&type=chunk)[290](index=290&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Loop Industries, a development-stage company, relies on equity and debt financing, holding **$35.22 million** in cash as of FY2021, with management believing resources are sufficient for 12 months - Loop Industries is a development-stage company with no revenues, financing operations and commercialization through new equity and debt capital[196](index=196&type=chunk)[200](index=200&type=chunk) Cash and Cash Equivalents | Date | Amount (USD) | | :---------------- | :------------- | | Feb 28, 2021 | $35,221,951 | | Feb 29, 2020 | $33,717,671 | - In September 2020, a registered direct offering of common stock generated **$25.00 million** in net proceeds[198](index=198&type=chunk) - Accounts payable and accrued liabilities totaled **$9.06 million** as of February 28, 2021, including legal fees, engineering, and professional fees related to the SEC investigation, class action lawsuits, and commercialization design[201](index=201&type=chunk)[296](index=296&type=chunk) - The company has a short-term debt obligation to a Canadian bank for its Terrebonne property and a long-term financing facility from Investissement Québec (maximum **$3.63 million**, with **$1.74 million** received), with remaining funds available for disbursement[202](index=202&type=chunk)[203](index=203&type=chunk)[303](index=303&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) - Management believes the company has sufficient financial resources to fund committed operating and capital expenditures for at least the next **12 months**, but acknowledges potential impacts from the COVID-19 pandemic[197](index=197&type=chunk)[200](index=200&type=chunk) [Flow of Funds](index=35&type=section&id=Flow%20of%20Funds) Loop Industries saw net cash used in operating activities increase to **$22.49 million** in FY2021, while cash from financing decreased to **$26.60 million**, resulting in a **$1.50 million** net cash increase in FY2021 Summary of Cash Flows (Years Ended February 28, 2021 and February 29, 2020) | Cash Flow Activity | Feb 28, 2021 (USD) | Feb 29, 2020 (USD) | | :-------------------------------- | :------------------ | :------------------ | | Net cash used in operating activities | $ (22,490,636) | $ (9,092,549) | | Net cash used in investing activities | $ (2,977,364) | $ (3,388,985) | | Net cash provided by financing activities | $ 26,598,668 | $ 40,463,141 | | Net change in cash | $ 1,504,280 | $ 27,884,281 | - The increase in net cash used in operating activities in FY2021 was mainly due to increased operating expenses, including engineering fees, R&D machinery and equipment, and legal fees, as commercialization activities progressed[207](index=207&type=chunk) - Net cash used in investing activities in FY2021 included **$1.74 million** for capital asset investments (pilot plant, executive offices), **$0.59 million** for intellectual property development (GEN II technology patents), and **$0.65 million** in contributions to the Indorama joint venture[208](index=208&type=chunk) - Net cash provided by financing activities in FY2021 primarily came from a registered direct offering of common stock (**$25.00 million** net) and warrant exercises (**$1.65 million**)[210](index=210&type=chunk) [OUTLOOK](index=36&type=section&id=OUTLOOK) Loop Industries' FY2022 outlook focuses on IP protection, pilot plant upgrade, and commercialization of Infinite Loop™ through engineering, site selection, financing, and strategic partnerships - Loop Industries' strategic outlook for FY2022 includes[214](index=214&type=chunk) - Protecting intellectual property[215](index=215&type=chunk) - Upgrading the pilot plant into a demonstration and training facility for Loop™ PET resin[215](index=215&type=chunk) - Driving commercialization of the Infinite Loop™ solution, including Class IV pre-feasibility engineering for Québec and European projects[215](index=215&type=chunk) - Identifying and evaluating specific site locations and securing feedstock for commercial operations in Québec and Europe[215](index=215&type=chunk) - Exploring financial options, incentives, and strategic partnerships to fund commercial projects[215](index=215&type=chunk) - Completing engineering work and proceeding with construction for the Indorama joint venture's Spartanburg facility[215](index=215&type=chunk) - Continuing to execute brand and other commercial agreements with customers[215](index=215&type=chunk) - The company will continue to monitor the potential impacts of COVID-19 on its business[214](index=214&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=37&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Loop Industries' critical accounting policies involve significant management estimates, with ongoing COVID-19 uncertainty impacting development, and R&D costs (including dedicated pilot plant machinery) expensed as incurred - The preparation of financial statements requires management to make estimates and assumptions, including depreciable lives of assets, impairment analyses, joint venture carrying value, accruals for liabilities, and fair value of stock-based compensation[216](index=216&type=chunk)[249](index=249&type=chunk) - The COVID-19 pandemic continues to disrupt business operations and development efforts, particularly for the Indorama joint venture, making it difficult to forecast its impact on results of operations and cash flows[217](index=217&type=chunk)[218](index=218&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - Stock-based compensation for employees is measured at grant date fair value and recognized over the vesting period; for non-employees, it's based on the earlier of commitment or performance completion date. Fair value of stock options is estimated using the Black-Scholes-Merton Option Pricing model[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk) - Research and development expenses, including machinery and equipment purchases for the pilot plant dedicated solely to R&D activities (since Q3 FY2021), are expensed as incurred[223](index=223&type=chunk)[268](index=268&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," Loop Industries is not required to provide market risk disclosures - As a "smaller reporting company," Loop Industries is not required to provide quantitative and qualitative disclosures about market risk[225](index=225&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Loop Industries' consolidated financial statements, prepared under US GAAP, detailing financial position, operations, equity changes, and cash flows, with a **$36.34 million** net loss in FY2021 [Index to the Consolidated Financial Statements](index=38&type=section&id=Index%20to%20the%20Consolidated%20Financial%20Statements) This index lists the primary consolidated financial statements, including balance sheets, statements of operations, equity changes, cash flows, and accompanying notes - The index lists the consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity, statements of cash flows, and accompanying notes[227](index=227&type=chunk) [Consolidated Balance Sheets](index=41&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets increased to **$43.40 million** in FY2021, liabilities rose to **$10.58 million**, and stockholders' equity decreased to **$32.82 million** Consolidated Balance Sheet Summary (USD) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :---------------------------------- | :------------ | :------------ | | **Assets** | | | | Cash and cash equivalents | $35,221,951 | $33,717,671 | | Total current assets | $37,595,568 | $34,523,441 | | Investment in joint venture | $1,500,000 | $850,000 | | Property, plant and equipment, net | $3,513,051 | $7,260,254 | | Intangible assets, net | $794,894 | $202,863 | | **Total assets** | **$43,403,513** | **$42,836,558** | | **Liabilities** | | | | Accounts payable and accrued liabilities | $8,124,865 | $2,082,698 | | Total current liabilities | $9,062,081 | $2,134,824 | | Long-term debt | $1,516,008 | $2,238,026 | | **Total liabilities** | **$10,578,989** | **$4,372,850** | | **Stockholders' Equity** | | | | Total stockholders' equity | $32,824,524 | $38,463,708 | | **Total liabilities and stockholders' equity** | **$43,403,513** | **$42,836,558** | [Consolidated Statements of Operations and Comprehensive Loss](index=42&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The consolidated statements of operations show no revenue, with net loss significantly increasing to **$36.34 million** in FY2021, driven by higher R&D and G&A expenses and asset impairment Consolidated Statements of Operations and Comprehensive Loss (USD) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :--------------------------------------- | :------------ | :------------ | | Revenue | $ - | $ - | | Research and development expenses | $18,687,014 | $4,717,175 | | General and administrative expenses | $11,540,340 | $7,215,420 | | Write-down and impairment of property, plant and equipment | $5,043,119 | $22,985 | | Depreciation and amortization | $775,675 | $807,447 | | Interest and other financial expenses | $81,996 | $2,223,304 | | Interest income | $(93,043) | $(500,478) | | Foreign exchange loss (gain) | $309,822 | $19,602 | | Total expenses | $36,344,923 | $14,505,455 | | **Net loss** | **$(36,344,923)** | **$(14,505,455)** | | Comprehensive loss | $(35,963,064) | $(14,603,680) | | Basic and diluted loss per share | $(0.89) | $(0.38) | | Weighted average common shares outstanding | 40,983,752 | 37,936,094 | [Consolidated Statement of Changes in Stockholders' Equity](index=43&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity decreased to **$32.82 million** in FY2021, primarily due to a **$36.34 million** net loss, partially offset by common stock issuances and warrant exercises Changes in Stockholders' Equity (FY2021 vs. FY2020, USD) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :--------------------------------------- | :------------ | :------------ | | Balance, beginning of year | $38,463,708 | $2,626,392 | | Issuance of common shares for cash, net | $24,996,628 | $39,072,648 | | Issuance of shares upon exercise of warrants | $1,652,626 | $143,749 | | Stock options granted for services | $2,212,078 | $2,178,948 | | Restricted stock units granted for services | $1,378,106 | $1,290,443 | | Net loss | $(36,344,923) | $(14,505,455) | | Foreign currency translation adjustment | $381,859 | $(98,225) | | **Balance, end of year** | **$32,824,524** | **$38,463,708** | - As of February 28, 2021, **42,413,691 shares** of common stock were issued and outstanding, up from **39,910,774** in the prior year[232](index=232&type=chunk)[339](index=339&type=chunk) - The CEO, Daniel Solomita, holds one share of Series A Preferred Stock, granting him majority voting power (**77.0%** as of May 27, 2021) and protective provisions over certain company actions[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) [Consolidated Statements of Cash Flows](index=47&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show **$22.49 million** used in operations and **$2.98 million** in investing, offset by **$26.60 million** from financing, resulting in a **$1.50 million** net cash increase in FY2021 Consolidated Statements of Cash Flows (USD) | Cash Flow Activity | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(22,490,636) | $(9,092,549) | | Net cash used in investing activities | $(2,977,364) | $(3,388,985) | | Net cash provided by financing activities | $26,598,668 | $40,463,141 | | Effect of exchange rate changes | $373,612 | $(97,326) | | Net change in cash | $1,504,280 | $27,884,281 | | Cash and cash equivalents, beginning of year | $33,717,671 | $5,833,390 | | **Cash and cash equivalents, end of year** | **$35,221,951** | **$33,717,671** | - Cash used in operating activities increased due to higher operating expenses, including engineering fees, R&D machinery, and legal fees[207](index=207&type=chunk)[243](index=243&type=chunk) - Cash used in investing activities included **$1.74 million** for property, plant, and equipment additions, **$0.59 million** for intangible assets, and **$0.65 million** for joint venture investments in FY2021[208](index=208&type=chunk)[243](index=243&type=chunk) - Cash provided by financing activities in FY2021 primarily stemmed from **$26.65 million** in proceeds from common stock sales and warrant exercises[210](index=210&type=chunk)[243](index=243&type=chunk) [Notes to the Consolidated Financial Statements](index=48&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail Loop Industries' accounting policies, financial items, and significant estimates, covering assets, liabilities, equity, expenses, legal matters, and subsequent events [1. The Company and Basis of Presentation](index=48&type=section&id=1.%20The%20Company%20and%20Basis%20of%20Presentation) Loop Industries is a technology company focused on depolymerizing waste PET plastic, with consolidated financial statements prepared under US GAAP, including subsidiaries and a joint venture - Loop Industries is a technology company focused on depolymerizing waste PET plastic and polyester fiber into virgin-quality Loop™ branded PET resin[246](index=246&type=chunk) - The consolidated financial statements are prepared under US GAAP and include wholly-owned subsidiaries and a **50%** equity-method accounted joint venture (Indorama Loop Technologies, LLC)[247](index=247&type=chunk) [2. Summary of Significant Accounting Policies](index=48&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines Loop Industries' significant accounting policies, emphasizing management estimates, COVID-19 uncertainty, fair value measurement, government grants, asset depreciation, R&D expensing, stock-based compensation, and income taxes - Financial statements rely on management estimates for depreciable lives, asset impairment, joint venture carrying value, liabilities, and fair value of stock-based compensation[249](index=249&type=chunk) - The COVID-19 pandemic continues to cause disruptions and uncertainty, potentially impacting development and commercialization efforts, particularly for the Indorama joint venture[250](index=250&type=chunk)[251](index=251&type=chunk) - Fair value measurements are categorized into a three-level hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs)[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)[260](index=260&type=chunk) - Government grants are recognized systematically over periods matching related expenses or as a reduction of asset cost; low-interest loans are initially measured at fair value with interest expense recognized under the effective interest method[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - Property, plant, and equipment are recorded at cost and amortized using the straight-line method over estimated useful lives (e.g., building **30 years**, machinery **3-8 years**); carrying values are reviewed for impairment[265](index=265&type=chunk)[267](index=267&type=chunk) - Research and development expenses, including machinery and equipment for the dedicated pilot plant (since Q3 FY2021), are expensed as incurred[268](index=268&type=chunk) - Intangible assets are recorded at cost and amortized over **7 years**, with carrying values reviewed for impairment[269](index=269&type=chunk)[270](index=270&type=chunk) - Stock-based compensation for employees and non-employees is measured at fair value (Black-Scholes model for options) and recognized as expense over vesting periods or upon performance completion[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk) - Income taxes are accounted for using the asset and liability approach, with a full valuation allowance provided for deferred tax assets due to uncertainty of realization[276](index=276&type=chunk)[364](index=364&type=chunk) - Basic and diluted loss per share calculations are the same due to the antidilutive effect of potential dilutive securities (stock options, restricted stock units, warrants)[277](index=277&type=chunk)[278](index=278&type=chunk) [3. Sales Tax, Tax Credits and Other Receivables](index=53&type=section&id=3.%20Sales%20Tax%2C%20Tax%20Credits%20and%20Other%20Receivables) Loop Industries' receivables totaled **$1.76 million** in FY2021, primarily from sales tax and R&D tax credits, with **$259,273** in COVID-19 wage subsidies also received Sales Tax, Tax Credits and Other Receivables (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------------- | :------------ | :------------ | | Sales tax | $1,155,504 | $180,971 | | Research and development tax credits | $435,467 | $447,843 | | Other receivables | $172,864 | $35,730 | | **Total** | **$1,763,835** | **$664,544** | - Loop Canada Inc. is entitled to refundable and non-refundable R&D tax credits; refundable credits reduce R&D expenses, while non-refundable federal credits (totaling **$272,206** in FY2021) are not recognized due to the company's lack of taxable income[285](index=285&type=chunk)[287](index=287&type=chunk) - In FY2021, the company received **$259,273** in wage subsidies from the Canadian federal government as part of a COVID-19 relief program[286](index=286&type=chunk) [4. Property, Plant and Equipment](index=54&type=section&id=4.%20Property%2C%20Plant%20and%20Equipment) Net property, plant, and equipment decreased to **$3.51 million** in FY2021, primarily due to a **$5.04 million** impairment write-down of machinery and equipment for the dedicated R&D pilot plant Property, Plant and Equipment, Net Book Value (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------- | :------------ | :------------ | | Building | $1,752,756 | $1,717,159 | | Land | $241,578 | $264,868 | | Building Improvements | $1,330,758 | $519,816 | | Machinery and equipment | $0 | $4,658,730 | | Office equipment and furniture | $187,959 | $99,681 | | **Total Net Book Value** | **$3,513,051** | **$7,260,254** | - A write-down and impairment expense of **$5,043,119** was recorded in FY2021 for machinery and equipment, following the decision to dedicate the pilot plant exclusively to R&D, rendering its assets without alternative future use[290](index=290&type=chunk) - Depreciation expense for the year ended February 28, 2021, was **$733,831**[289](index=289&type=chunk) [5. Intangible Assets](index=55&type=section&id=5.%20Intangible%20Assets) Loop Industries' net intangible assets, primarily GEN II technology patents, increased to **$794,894** in FY2021, reflecting continued global patent development and filings Intangible Assets, Net (USD) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------------- | :------------ | :------------ | | Patents, net – beginning of period | $202,864 | $127,672 | | Additions in the year – patents | $623,811 | $99,972 | | Amortization of patents | $(41,844) | $(22,631) | | Foreign exchange effect | $10,063 | $(2,150) | | **Patents, net – end of period** | **$794,894** | **$202,863** | - The company continued to develop its GEN II technology, filing various patents globally, with two issued U.S. patents and numerous pending international applications, expected to expire between September 2037 and March 2040[292](index=292&type=chunk) - Amortization expense for intangible assets was **$41,844** for the year ended February 28, 2021[293](index=293&type=chunk) [6. Fair value of financial instruments](index=56&type=section&id=6.%20Fair%20value%20of%20financial%20instruments) Loop Industries' long-term debt had a carrying amount of **$2.45 million** and fair value of **$2.46 million** in FY2021, classified as Level 2 fair value measurements Fair Value Measurements of Financial Liabilities (USD) | Financial Liability | Carrying Amount (Feb 28, 2021) | Fair Value (Feb 28, 2021) | Level in the hierarchy | | :-------------------------------- | :------------------------------ | :------------------------- | :--------------------- | | Long-term debt | $2,454,123 | $2,464,540 | Level 2 | - The fair value of cash and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturity[256](index=256&type=chunk) [7. Accounts Payable and Accrued Liabilities](index=56&type=section&id=7.%20Accounts%20Payable%20and%20Accrued%20Liabilities) Accounts payable and accrued liabilities significantly increased to **$8.12 million** in FY2021, driven by higher trade payables, professional fees, and engineering fees Accounts Payable and Accrued Liabilities (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :--------------------------------------- | :------------ | :------------ | | Trade accounts payable | $5,082,736 | $814,081 | | Accrued engineering fees | $535,359 | $ - | | Accrued employee compensation and payroll taxes | $970,154 | $873,242 | | Accrued professional fees | $1,270,628 | $133,038 | | Other accrued liabilities | $265,988 | $262,337 | | **Total** | **$8,124,865** | **$2,082,698** | [8. Joint Venture](index=56&type=section&id=8.%20Joint%20Venture) Loop Industries holds a **50%** equity interest in Indorama Loop Technologies, LLC, a joint venture for sustainable polyester resin, with **$1.50 million** contributed by FY2021, despite COVID-19 delays - Loop Industries has a **50/50** equity interest in Indorama Loop Technologies, LLC (ILT), a joint venture with Indorama Ventures Holdings LP, formed in September 2018[297](index=297&type=chunk) - Loop contributes an exclusive world-wide royalty-free license for its proprietary technology to ILT, in addition to cash contributions[298](index=298&type=chunk) - As of February 28, 2021, the carrying value of Loop's equity investment in ILT was **$1.50 million**, with **$650,000** contributed in FY2021[299](index=299&type=chunk) - The joint venture temporarily delayed work in July 2020 due to the COVID-19 pandemic, with no expenditures incurred since then, but both partners remain committed[300](index=300&type=chunk) [9. Long-term Debt](index=57&type=section&id=9.%20Long-term%20Debt) Loop Industries' long-term debt, net of current portion, was **$1.52 million** in FY2021, including a **$1.74 million** Investissement Québec facility and a Canadian bank term loan Long-term Debt (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------------- | :------------ | :------------ | | Investissement Québec financing facility | $1,516,008 | $1,356,228 | | Term loan, net of current portion | $ - | $881,798 | | **Long-term debt, net of current portion** | **$1,516,008** | **$2,238,026** | - The Investissement Québec financing facility provided **$1.74 million** (CDN**$2.21 million**) in February 2020, bearing **2.36%** interest with a **36-month** moratorium on capital and interest repayments[303](index=303&type=chunk) - The company issued a warrant to Investissement Québec to purchase **15,153 shares** of common stock at **$11.00 per share** in connection with the first disbursement of the financing facility[304](index=304&type=chunk) - A term loan from a Canadian bank for **$1.10 million** (CDN**$1.40 million**) obtained in January 2018, with a principal balance of **$938,116** as of February 28, 2021, is repayable monthly until January 2022[306](index=306&type=chunk) Principal Repayments on Bank Indebtedness (USD) | Years ending | Amount | | :---------------- | :------- | | February 28, 2022 | $938,116 | | February 28, 2023 | $ - | | February 28, 2024 | $248,798 | | February 29, 2025 | $248,798 | | February 28, 2026 | $248,794 | | Thereafter | $995,222 | | **Total** | **$2,679,728** | [10. Convertible Notes](index=58&type=section&id=10.%20Convertible%20Notes) Loop Industries' November 2018 and January 2019 convertible notes were fully converted into common stock in FY2020, with all associated warrants either exercised or expired by FY2021 - The November 2018 Notes, initially classified as a liability due to a variable conversion price, were converted on April 5, 2019, into **319,326 common shares** at **$8.55 per share**, along with **159,663 warrants**[308](index=308&type=chunk)[311](index=311&type=chunk)[315](index=315&type=chunk) - The January 2019 Notes, with an **8.00%** interest rate, were converted at their January 2020 maturity date into **612,758 common shares** at **$8.10 per share**; **$312,000** in accrued interest was paid in cash, and **$80,000** was paid in common stock[317](index=317&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[341](index=341&type=chunk) - A beneficial conversion feature of **$1,200,915** and warrants valued at **$757,704** were recognized at the issue date of the January 2019 Notes, recorded as a debt discount and credited to additional paid-in capital[322](index=322&type=chunk)[323](index=323&type=chunk) - All November 2018 Warrants were exercised by November 30, 2020, and the remaining January 2019 Warrants expired on January 15, 2021[315](index=315&type=chunk)[321](index=321&type=chunk) [11. Related Party Transactions](index=61&type=section&id=11.%20Related%20Party%20Transactions) Loop Industries' CEO, Daniel Solomita, has an employment agreement with **4 million** RSUs tied to performance milestones, with **3.6 million** outstanding and **600,000** vested as of FY2021 - Mr. Daniel Solomita, President and CEO, has an employment agreement with a long-term incentive grant of **4,000,000** restricted stock units (RSUs) tied to four performance milestones[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - Milestones include: company securities listed on an exchange, contract for **25,000 M/T** of DMT/MEG or PET, first full-scale production facility in commercial operation, and second full-scale production facility in commercial operation[331](index=331&type=chunk) - As of February 28, 2021, **3,600,000** of Mr. Solomita's RSUs were outstanding, with **600,000** vested (settled annually in **200,000 unit** tranches)[334](index=334&type=chunk) - No additional compensation expense was recorded in FY2021 as no outstanding milestones were probable of being met[334](index=334&type=chunk) [12. Stockholders' Equity](index=62&type=section&id=12.%20Stockholders%27%20Equity) Stockholders' equity details common stock and Series A Preferred Stock, with CEO Daniel Solomita holding **77.0%** voting power, and common shares outstanding increasing to **42.41 million** in FY2021 - Mr. Daniel Solomita holds one share of Series A Preferred Stock, which provides him with a majority of the total voting power (**77.0%** as of May 27, 2021) and control over the company[335](index=335&type=chunk)[336](index=336&type=chunk) - The Series A Preferred Stock includes protective provisions requiring Mr. Solomita's approval for actions such as amending articles of incorporation, changing preferred stock rights, increasing/decreasing the board size, or replacing the CEO[337](index=337&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk) Common Stock Transactions (FY2021) | Transaction | Number of shares | | :--------------------------------------- | :---------------- | | Balance, February 29, 2020 | 39,910,774 | | Issuance of shares for cash | 2,087,000 | | Issuance of shares upon the exercise of warrants | 190,529 | | Issuance of shares upon settlement of restricted stock units | 225,388 | | **Balance, February 28, 2021** | **42,413,691** | - In FY2021, the company sold **2,087,000 shares** of common stock in a registered direct offering for gross proceeds of **$26,609,250**[341](index=341&type=chunk) [13. Research and development expenses](index=65&type=section&id=13.%20Research%20and%20development%20expenses) R&D expenses significantly increased to **$18.69 million** in FY2021, driven by higher external engineering costs and expensed machinery and equipment for the dedicated R&D pilot plant Research and Development Expenses (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------------- | :------------ | :------------ | | External engineering | $5,655,997 | $149,333 | | Employee compensation | $4,457,125 | $3,531,973 | | Machinery and equipment expenditures | $6,149,075 | $ - | | Demonstration plant operating expenses | $1,852,615 | $901,687 | | Other | $572,202 | $134,182 | | **Total** | **$18,687,014** | **$4,717,175** | - The significant increase in R&D expenses was largely due to a **$5.51 million** rise in external engineering for Infinite Loop™ design and a **$6.15 million** increase in expensed machinery and equipment for the dedicated R&D pilot plant[194](index=194&type=chunk)[342](index=342&type=chunk) [14. General and administrative expenses](index=65&type=section&id=14.%20General%20and%20administrative%20expenses) G&A expenses increased to **$11.54 million** in FY2021, primarily due to higher professional fees related to legal matters and increased D&O insurance costs General and Administrative Expenses (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------------- | :------------ | :------------ | | Professional fees | $4,613,717 | $1,193,884 | | Employee compensation | $4,389,219 | $4,516,171 | | Directors and officers insurance | $2,072,647 | $761,876 | | Other | $464,757 | $743,489 | | **Total** | **$11,540,340** | **$7,215,420** | - The increase in G&A expenses was mainly due to a **$3.42 million** rise in legal and professional fees related to the SEC investigation and class-action suits, and a **$1.31 million** increase in D&O insurance costs[194](index=194&type=chunk)[343](index=343&type=chunk) [15. Share-Based Payments](index=65&type=section&id=15.%20Share-Based%20Payments) Stock-based compensation expense totaled **$3.59 million** in FY2021, with **1.59 million** stock options and **4.21 million** RSUs outstanding as of year-end Stock Options Continuity (FY2021 vs. FY2020) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------- | :------------ | :------------ | | Outstanding, beginning of year | 1,587,081 | 1,962,400 | | Granted | - | - | | Exercised | - | (75,000) | | Forfeited | - | (39,902) | | Expired | - | (260,417) | | **Outstanding, end of year** | **1,587,081** | **1,587,081** | | Weighted average exercise price | $6.81 | $6.81 | | Exercisable, end of year | 1,181,248 | 986,248 | - Stock-based compensation expense from stock options amounted to **$2,212,078** in FY2021[346](index=346&type=chunk) Restricted Stock Units (RSUs) Continuity (FY2021 vs. FY2020) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------- | :------------ | :------------ | | Outstanding, beginning of year | 4,218,802 | 402,868 | | Granted | 239,611 | 4,114,567 | | Settled | (225,388) | (244,884) | | Forfeited | (22,505) | (53,750) | | **Outstanding, end of year** | **4,210,520** | **4,218,802** | | Weighted average fair value price | $1.98 | $1.60 | | Outstanding vested, end of year | 691,327 | 831,684 | - Stock-based compensation attributable to RSUs amounted to **$1,378,106** in FY2021[348](index=348&type=chunk) [16. Equity Incentive Plan](index=67&type=section&id=16.%20Equity%20Incentive%20Plan) The 2017 Equity Incentive Plan allows for granting various equity awards, with **1.08 million** units outstanding as of FY2021, after the Board waived the annual share reserve increase - The 2017 Equity Incentive Plan permits granting warrants, stock options, stock appreciation rights, and restricted stock units to employees, directors, and consultants[349](index=349&type=chunk) - Initially, **3,000,000 shares** were reserved, with annual automatic increases, but the Board waived the increase for FY2021[349](index=349&type=chunk) Equity Incentive Plan Units Continuity (FY2021 vs. FY2020) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------- | :------------ | :------------ | | Outstanding, beginning of year | 1,300,518 | 3,223,516 | | Share reserve increase | - | 2,000,000 | | Units granted | (239,611) | (4,114,567) | | Units forfeited | 22,505 | 93,652 | | Units expired | - | 97,917 | | **Outstanding, end of year** | **1,083,412** | **1,300,518** | [17. Warrants](index=67&type=section&id=17.%20Warrants) Loop Industries had **4.13 million** warrants outstanding as of FY2021, with a weighted average exercise price of **$10.99**, and most expiring in June 2022 Warrants Continuity (FY2021 vs. FY2020) | Metric | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------- | :------------ | :------------ | | Outstanding, beginning of year | 5,059,331 | 802,469 | | Issued | 25,000 | 4,272,294 | | Exercised | (190,529) | (15,432) | | Expired | (760,082) | - | | **Outstanding, end of year** | **4,133,720** | **5,059,331** | | Weighted average exercise price | $10.99 | $10.89 | Warrants Outstanding by Expiration Date (Feb 28, 2021) | Expiration Date | Number of warrants | Weighted average exercise price | | :---------------- | :----------------- | :------------------------------ | | May 12, 2022 | 25,000 | $9.43 | | June 14, 2022 | 4,093,567 | $11.00 | | February 21, 2023 | 15,153 | $11.00 | | **Total** | **4,133,720** | **$10.99** | [18. Interest and Other Finance Costs](index=68&type=section&id=18.%20Interest%20and%20Other%20Finance%20Costs) Interest and other finance costs significantly decreased to **$81,996** in FY2021 from **$2.22 million** in FY2020, primarily due to the conversion of convertible notes Interest and Other Finance Costs (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :-------------------------------- | :------------ | :------------ | | Interest on long-term debt | $77,756 | $57,450 | | Interest on convertible notes | $ - | $362,426 | | Accretion expense | $36,847 | $1,892,185 | | Amortization of deferred finance costs | $ - | $96,155 | | Revaluation of warrants | $ - | $8,483 | | Gain on conversion of November 2018 Notes | $ - | $(232,565) | | Other | $(32,607) | $39,170 | | **Total** | **$81,996** | **$2,223,304** | - The significant decrease in finance costs was mainly due to the conversion of convertible notes in FY2020, eliminating associated interest and accretion expenses[195](index=195&type=chunk)[353](index=353&type=chunk) [19. Income Taxes](index=68&type=section&id=19.%20Income%20Taxes) Loop Industries reported a **$36.34 million** loss before taxes in FY2021, with no effective tax expense due to a full valuation allowance on deferred tax assets and significant NOL carryforwards Loss Before Taxes (USD) | Category | Feb 28, 2021 | Feb 29, 2020 | | :---------------- | :------------ | :------------ | | U.S. operations | $(7,126,988) | $(4,220,000) | | Foreign operations | $(29,217,935) | $(10,285,455) | | **Loss before taxes** | **$(36,344,923)** | **$(14,505,455)** | - The company had no effective income tax expense in FY2021 due to a full valuation allowance on deferred tax assets[356](index=356&type=chunk) - Net operating loss (NOL) carryforwards include approximately **$22.04 million** for U.S. Federal purposes (post-2018 NOLs carry forward indefinitely) and **$34.72 million** (CDN**$43.95 million**) for Canadian Federal and Québec tax purposes (expiring between 2037 and 2041)[361](index=361&type=chunk) - Approximately **$3.68 million** (CDN**$4.66 million**) in R&D expenditures are available to reduce future taxable income, with an unlimited carry forward period[363](index=363&type=chunk) - The valuation allowance on deferred tax assets increased by **$8.86 million** in FY2021, reflecting management's assessment of uncertainty regarding future taxable income[361](index=361&type=chunk)[364](index=364&type=chunk) [20. Legal Settlement](index=70&type=section&id=20.%20Legal%20Settlement) Loop Industries settled a 2017 legal claim in 2019 by issuing **150,000** common shares and **500,000** warrants, resulting in a **$4.04 million** expense, with all warrants expired by FY2021 - In February 2019, Loop Industries settled a legal claim by issuing **150,000 common shares** and **500,000 warrants** to plaintiffs[366](index=366&type=chunk)[367](index=367&type=chunk) - An expense of **$4,041,627** was recorded in connection with the settlement, based on the fair value of the issued shares and warrants[368](index=368&type=chunk) - All Plaintiff Warrants expired during the year ended February 28, 2021[368](index=368&type=chunk) [21. Commitments and Contingencies](index=72&type=section&id=21.%20Commitments%20and%20Contingencies) Loop Industries has commercial commitments, faces an SEC investigation and class-action lawsuits, and experienced a supply agreement termination by Coca-Cola due to unmet production milestones - Loop Industries entered a **$4.3 million** know-how and engineering agreement with Chemtex Global Corporation on September 2, 2020, for the design of two Infinite Loop™ facilities, with **$900,000** paid in FY2021[369](index=369&type=chunk) - Coca-Cola Cross Enterprise Procurement Group terminated its supply agreement with Loop Industries in October 2020 due to the company's failure to satisfy its first production milestone by July 2020[370](index=370&type=chunk) - The company is defending against consolidated shareholder class-action lawsuits in New York and a proposed securities class action in Québec, alleging false/misleading statements and failure to disclose material adverse facts[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk) - Management believes these legal cases lack merit and intends to defend them vigorously; no amounts have been provided in the consolidated financial statements for these claims[376](index=376&type=chunk) [22. Subsequent Events](index=72&type=section&id=22.%20Subsequent%20Events) On May 27, 2021, Loop Industries acquired a **19 million sq ft** land parcel in Bécancour, Québec, for **$4.8 million** for a planned Infinite Loop™ manufacturing facility - On May 27, 2021, Loop Industries acquired a **19 million square foot** parcel of land in Bécancour, Québec, for **$4.8 million** (CDN **$5.9 million**) for a planned Infinite Loop™ manufacturing facility[377](index=377&type=chunk) - The new site offers attractive logistics, proximity to industrial infrastructure, and lower environmental impact, leading the company to forgo a previously identified **2 million square foot** site[377](index=377&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Financial Disclosure](index=73&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Financial%20Disclosure) No changes in or disagreements with accountants on financial disclosure were reported - There were no changes in or disagreements with accountants on financial disclosure[378](index=378&type=chunk) [Item 9A. Controls and Procedures](index=73&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management assessed disclosure controls and internal control over financial reporting as effective as of FY2021, with no material changes, and no attestation report required for a smaller reporting company - Management, including the CEO and CFO, determined that the company's disclosure controls and procedures were effective as of February 28, 2021[379](index=379&type=chunk) - Management also determined that the company's internal control over financial reporting was effective as of February 28, 2021, based on the COSO framework[380](index=380&type=chunk) - An attestation report from the registered public accounting firm was not included, as permitted for smaller reporting companies[381](index=381&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal year[382](index=382&type=chunk) - The effectiveness of internal controls is subject to inherent limitations, providing reasonable, not absolute, assurances[383](index=383&type=chunk) [Item 9B. Other Information](index=73&type=section&id=Item%209B.%20Other%20Information) No other information is reported under this item - No other information is reported under this item[384](index=384&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=75&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement, including the Code of Ethics - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement[388](index=388&type=chunk) - The Board of Directors adopted a Code of Ethics on January 25, 2017, available on the company's website, with no waivers granted to date[389](index=389&type=chunk) [Item 11. Executive Compensation](index=75&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2021 Proxy Statement, including an amendment to CEO Daniel Solomita's employment agreement - Information on executive compensation is incorporated by reference from the 2021 Proxy Statement[390](index=390&type=chunk) - An amendment to CEO Daniel Solomita's employment agreement on April 30, 2020, clarified milestones consistent with the company's shift to dimethyl terephthalate production[391](index=391&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=75&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information for beneficial owners and management is incorporated by reference from the 2021 Proxy Statement - Information on security ownership of certain beneficial owners and management is incorporated by reference from the 2021 Proxy Statement[392](index=392&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=75&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions require Audit Committee approval, with additional information on director independence incorporated by reference from the 2021 Proxy Statement - All related party transactions are subject to approval by the Audit Committee, which reviews material facts and ensures terms are no less favorable than those with unaffiliated third parties[393](index=393&type=chunk) - Additional information on director independence and related party transactions is incorporated by reference from the 2021 Proxy Statement[394](index=394&type=chunk) [Item 14. Principal Accounting Fees and Services](index=75&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the Proxy Statement's section on the ratification of the independent registered public accounting firm[395](index=395&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=76&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits filed as part of the Form 10-K, with financial statement schedules omitted and a comprehensive exhibit index provided - Financial statements are provided under Item 8, and all financial statement schedules are omitted as not required or information is provided elsewhere[397](index=397&type=chunk) - The exhibit index includes various corporate documents, agreements (e.g., Share Exchange, Intellectual Property Assignment, Employment, Joint Venture, Chemtex), and certifications (e.g., Sarbanes-Oxley Act)[398](index=398&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk) [Item 16. Form 10-K Summary](index=79&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K Summary is provided - No Form 10-K Summary is provided[403](index=403&type=chunk) [Signatures](index=80&type=section&id=Signatures) The Form 10-K is duly signed by the CEO, CFO, and other directors on May 28, 2021, confirming compliance with the Securities Exchange Act of 1934 - The report is signed by Daniel Solomita (CEO, President, and Director) and Drew Hickey (CFO), along with other directors, on May 28, 2021[408](index=408&type=chunk)[410](index=410&type=chunk)