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)

United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q Nevada 27-2094706 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 480 Fernand-Poitras Terrebonne, Québec, Canada J6Y 1Y4 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition perio ...

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, 2020 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. Registrant's telephone number, including area code (450) 951-8555 Securities registered pu ...

Technology and Innovation - Loop Industries' Generation II (GEN II) technology has improved monomer yields and reduced costs by shifting from producing purified terephthalic acid (PTA) to dimethyl terephthalate (DMT), resulting in a more environmentally sustainable process[90] - The company believes its technology can deliver virgin-quality PET resin suitable for food-grade packaging, addressing the global plastic crisis[89] - Loop Industries' proprietary technology allows the use of waste PET plastic and polyester fiber from various sources, including ocean-recovered materials[101] - The Infinite Loop™ technology aims to produce PET plastic and polyester fiber from 100% recycled content, supporting the transition to a circular economy[115] - The GEN I technology portfolio has three issued U.S. patents expected to expire around July 2035, while the GEN II technology portfolio consists of multiple patent families with expiration dates extending to March 2040[100] Financial Performance - The net loss for the three-month period ended May 31, 2020, increased to $3.85 million, compared to a net loss of $3.55 million for the same period in 2019, primarily due to increased research and development expenses[121] - Research and development expenses for the three-month period ended May 31, 2020, amounted to $1.48 million, an increase of $0.48 million from $1.00 million in the same period in 2019[122] - The company reported a net decrease in cash of $6.21 million for the three months ended May 31, 2020, compared to an increase of $1.14 million in the same period of 2019[132] - The company had cash and cash equivalents of $27.51 million as of February 29, 2020, to finance ongoing operations and commercialization plans[126] - For the three months ended May 31, 2020, the company used $4.98 million in operating activities, an increase from $2.01 million in the same period of 2019, primarily due to a $1.87 million prepayment of insurance premiums and a $0.72 million variation in accounts payable[133] Investments and Joint Ventures - The company made capital investments of $394,403 in its industrial pilot plant during the quarter ended May 31, 2020[92] - Loop Industries is focusing on securing long-term supply agreements for feedstock to ensure continuous operation of its first joint venture facility with Indorama Ventures in Spartanburg, South Carolina[102] - Loop Industries has established a joint venture with Indorama to retrofit existing PET manufacturing facilities, aiming to meet the growing demand for sustainable Loop™ PET resin and polyester fiber[105] - The joint venture with Indorama will establish a facility in Spartanburg, South Carolina, with an initial capacity of 20,700 metric tons per year, which is planned to be doubled to 40,000 metric tons due to customer demand[106][107] - The company has secured multi-year supply agreements with major brands including Danone, PepsiCo, Coca-Cola, L'OCCITANE, and L'Oréal for 100% sustainable Loop™ PET resin[108] Debt and Financing - The company has a long-term debt obligation of $1,015,449 (CDN$1,400,000) related to the purchase of land and building for its pilot plant, with monthly payments of $4,231 (CDN$5,833) plus interest[129] - A financing facility from Investissement Québec covers 63.45% of eligible expenses for the expansion of the pilot plant, with a maximum of $3,336,476 (CDN$4,600,000) and a 36-month moratorium on repayments[130] - The company repaid $0.01 million of long-term debt during the three months ended May 31, 2020[136] Market and Demand - The global annual market demand for PET plastic and polyester fiber is nearly $130 billion, projected to exceed $160 billion by 2022[86] - Loop Industries aims to supply its Loop™ PET resin at a premium price due to commitments from global consumer brands to incorporate more recycled content into their packaging[100] - The company is studying markets in the U.S., Canada, EU, and Asia to evaluate the size and location of future facilities, identifying material loss to divert waste effectively[103] Risks - The company is exposed to foreign currency exchange risks due to operations in Canada and financing in U.S. dollars, which could materially affect its results of operations[142] - The company faces commodity price risks as the demand for recycled PET fluctuates with crude oil prices, impacting its market penetration[144] - The company is subject to raw material price risks, which could adversely affect its business and financial condition due to fluctuations in availability and costs[145] Operational Activities - The company invested $0.39 million in property, plant, and equipment during the three months ended May 31, 2020, compared to $0.50 million in the same period of 2019, mainly for upgrading its GEN II industrial pilot plant[134] - The net cash used in investing activities was $1.19 million for the three months ended May 31, 2020, compared to $0.99 million in 2019[132] - The company continues to invest in research and development, particularly in the implementation of its GEN II technology as it moves towards commercialization[133] - The company is exploring joint venture structures and financing alternatives to increase equity participation in the Spartanburg project, which is strategically important for sustainability[113]

United States Securities and Exchange Commission Washington, D.C. 20549 Loop Industries, Inc. (Exact name of Registrant as specified in its charter) Nevada 27-2094706 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 29, 2020 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 Indicate by check mark ...

Technology and Innovation - Loop Industries' Generation II technology has improved monomer yields and reduced purification steps from 12 to 4, resulting in lower production costs[107] - Loop Industries' technology can utilize a wide range of waste materials, including ocean plastics, which are typically not accepted by other recyclers[127] - The Infinite Loop™ business model aims to supply global demand for 100% sustainable Loop™ PET plastic resin and polyester fiber, reducing logistics costs by locating facilities near feedstock sources[122] Production Capacity and Agreements - The joint venture with Indorama Ventures has increased the Spartanburg plant's capacity to 40,000 metric tons per year due to customer demand[118] - Loop Industries has contracted for the sale of the initial 20,700 metric tons expected output from the Spartanburg facility and is in discussions to contract the additional volume[119] - The expanded supply agreement with L'OCCITANE en Provence aims to transition to 100% sustainable PET plastic in all its bottles, utilizing Loop's sustainable PET resin[120] Financial Performance - For the three-month period ended November 30, 2019, the net loss increased by $0.94 million to $3.85 million compared to a net loss of $2.91 million for the same period in 2018[132] - Research and development expenses for the three-month period ended November 30, 2019 amounted to $1.28 million, an increase of $0.49 million from $0.79 million in the same period in 2018[133] - General and administrative expenses for the three-month period ended November 30, 2019 decreased by $0.14 million to $1.83 million compared to $1.97 million for the same period in 2018[134] - Total operating expenses for the nine-month period ended November 30, 2019 were $10.75 million, an increase of $0.77 million from $9.98 million in the same period in 2018[138] Cash Flow and Investments - As of November 30, 2019, the company had cash on hand of $35.5 million, following a capital raise of approximately $34.6 million from a registered direct offering[144] - The company reported net cash used in operating activities of $6.82 million for the nine months ended November 30, 2019, compared to $5.46 million for the same period in 2018[149] - The Company made investments of $1.7 million in property, plant, and equipment during the nine months ended November 30, 2019, compared to $1.4 million in the same period of 2018, primarily for upgrading its GEN II industrial pilot plant[151] - The Company raised net proceeds of $39.2 million through the sale of common stock during the nine months ended November 30, 2019[153] Financial Risks and Compliance - The Company is currently in a development stage with no revenues, relying on raising new equity and debt capital to finance ongoing operations[143] - As of November 30, 2019, the Company was in compliance with its financial covenants[154] - The Company had no off-balance sheet arrangements as of November 30, 2019[155] - The Company is exposed to foreign currency exchange risk due to operations in Canada, with significant operational costs in Canadian dollars[160] - Fluctuations in the U.S. dollar to Canadian dollar exchange rates could materially affect the Company's results of operations and cash position[161] Market Conditions - The plastics manufacturing industry is highly competitive, with the cost of manufacturing recycled PET potentially higher than virgin PET if crude oil prices decline[163] - The profitability of the Company depends on the availability and price fluctuations of raw materials, which could adversely affect financial results[164]

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, 2019 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 j ...

Financial Performance - The net loss for the three-month period ended May 31, 2019, was $3.56 million, an increase of $0.03 million compared to the same period in 2018[136]. - Research and development expenses for the three-month period ended May 31, 2019, were $1.0 million, a decrease of $0.07 million from $1.07 million in the same period in 2018[137]. - General and administrative expenses for the three-month period ended May 31, 2019, amounted to $1.90 million, down from $2.36 million in the same period in 2018, representing a decrease of $0.46 million[138]. - Net cash used in operating activities was $2.1 million for the three months ended May 31, 2019, compared to $2.2 million for the same period in 2018, reflecting a decrease of approximately 5.0%[146]. - The company had cash on hand of $7.0 million and raised approximately $34.6 million from a registered direct offering as of May 31, 2019[143]. - The company has a long-term debt obligation of CDN$1,400,000 related to the purchase of land and building for its pilot plant and corporate offices[144]. Investment and Joint Ventures - Loop Industries reported a capital asset investment of $943,891 during the three months ended May 31, 2019[110]. - The joint venture with Indorama Ventures Limited (IVL) aims to establish a facility with a production capacity of 20,700 metric tonnes of sustainable Loop™ PET plastic resin, fully subscribed by customers including Danone, PepsiCo, and Coca-Cola[115]. - The joint venture is evaluating increasing the facility's capacity to 40,000 metric tonnes, which may require an additional equity contribution of $15 million to $20 million from Loop Industries[119]. - The company made an initial contribution of $500,000 to Indorama Loop Technologies, LLC, a joint venture with Indorama Ventures Holdings LP, USA[148]. - The company entered into a Global Alliance Agreement with Thyssenkrupp Industrial Solutions in December 2018 to develop a fully integrated manufacturing facility for sustainable Loop™ PET plastic resin and polyester fiber[121]. Technology and Innovation - The Generation II technology is expected to be more cost-effective and environmentally sustainable, requiring less energy and fewer resources compared to conventional PET production processes[108]. - The Generation I technology portfolio includes two issued U.S. patents and a pending application expected to expire around July 2035, while the Generation II technology has an issued U.S. patent expected to expire around September 2037[116]. - The company aims to create a highly scalable recurring revenue licensing model for 100% sustainable Loop™ PET plastic resin and polyester fiber, transforming the plastic market[122]. - Loop Industries' technology diverts plastic waste from landfills and oceans, creating sustainable Loop™ PET plastic resin suitable for food-grade packaging[104]. Market and Demand - The global annual market demand for PET plastic and polyester fiber is nearly $130 billion, projected to exceed $160 billion by 2022[102]. - During the fiscal year 2019, the company announced multi-year supply agreements with major brands including Danone, PepsiCo, and Coca-Cola for sustainable Loop™ PET plastic resin[125][126]. Operational Challenges - The company is in the process of obtaining necessary permits and approvals for its operations, which may affect operational costs[112]. - The company is focused on securing long-term feedstock supply agreements to ensure continuous operation of its planned facilities[129]. - The company is exposed to foreign exchange risk due to operations in Canada, with significant operational costs denominated in Canadian dollars while financing is primarily in U.S. dollars[155]. - Significant fluctuations in the U.S. dollar to Canadian dollar exchange rates could materially affect the company's results of operations and cash position[156]. - The company faces commodity price risk as the demand for recycled PET is correlated with crude oil prices, which can impact manufacturing costs[158]. - Raw material prices are subject to fluctuations, which could adversely affect the company's profitability and operational results[159]. Strategic Partnerships - The company has secured key partners such as Thyssenkrupp Industrial Solutions to support its growth strategy[116]. - The company plans to continue investing in R&D and enhancing its Loop brand value through strategic relationships and innovation[133].

United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 28, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Liquidity and capital resources Commission File No. 000-54768 Loop Industries, Inc. (Exact name of Registrant as specified in its charter) Nevada 27 ...

[PART I. Financial Information](index=3&type=section&id=PART%20I.%20Financial%20Information) [ITEM 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Loop Industries' unaudited condensed consolidated financial statements, covering balance sheets, operations, equity, cash flows, and detailed accounting notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased, while total liabilities significantly increased, driven by reduced cash and new convertible notes | Metric | Nov 30, 2018 | Feb 28, 2018 | | :-------------------------------- | :----------- | :----------- | | Cash | $3,528,258 | $8,149,713 | | Total Assets | $9,428,530 | $13,395,563 | | Total Liabilities | $6,126,960 | $3,071,498 | | Convertible notes | $2,450,000 | - | | Total Stockholders' Equity | $3,301,570 | $10,324,065 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported no revenue, with net loss decreasing for both three and nine-month periods due to reduced research and development expenses | Metric | 3 Months Ended Nov 30, 2018 | 3 Months Ended Nov 30, 2017 | 9 Months Ended Nov 30, 2018 | 9 Months Ended Nov 30, 2017 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $ - | $ - | $ - | $ - | | Net Loss | $(2,913,761) | $(6,703,653) | $(9,981,702) | $(10,402,707) | | Research and development | $792,111 | $3,894,454 | $2,924,483 | $5,341,763 | | Loss per share (Basic and Diluted) | $(0.09) | $(0.20) | $(0.30) | $(0.32) | [Condensed Consolidated Statement of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity significantly decreased due to net loss and foreign currency adjustments, partially offset by increases in additional paid-in capital from warrants and RSUs | Metric | Nov 30, 2018 | Feb 28, 2018 | | :------------------------- | :----------- | :----------- | | Total Stockholders' Equity | $3,301,570 | $10,324,065 | | Accumulated Deficit | $(31,256,883) | $(21,275,181) | | Additional Paid-in Capital | $34,127,010 | $30,964,970 | - Net loss for the nine months ended November 30, 2018, was **$(9.98 million)**[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash and restricted cash decreased, primarily due to significant cash usage in operating and investing activities, partially offset by financing activities from convertible debt sales | Cash Flow Activity | 9 Months Ended Nov 30, 2018 | 9 Months Ended Nov 30, 2017 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(5,455,317) | $(4,175,443) | | Net cash used in investing activities | $(1,523,353) | $(273,550) | | Net cash provided by financing activities | $2,510,529 | $7,022,801 | | Net change in cash and restricted cash | $(4,521,455) | $2,523,281 | | Cash and restricted cash, end of period | $3,628,258 | $3,439,768 | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's nature, accounting policies, financial instruments, and significant transactions, including going concern status, recent pronouncements, and specific financial items [Note 1. Nature of the Company, Basis of Presentation and Going Concern](index=10&type=section&id=Note%201.%20Nature%20of%20the%20Company,%20Basis%20of%20Presentation%20and%20Going%20Concern) This note describes Loop Industries' business of depolymerizing waste plastic, its pre-revenue status, accumulated deficit, and going concern risks due to significant cash usage - Loop Industries is a technology company focused on depolymerizing waste polyester plastic into virgin-quality plastic for food-grade packaging[21](index=21&type=chunk) - The company is pre-revenue with an accumulated deficit of **$31.3 million**, incurred a **$10.0 million** net loss, and used **$5.5 million** cash in operations, raising substantial doubt about its going concern ability[24](index=24&type=chunk) - As of November 30, 2018, the company had **$3.5 million** cash on hand and relies on new equity capital for operations and commercialization, with no assurance of future financing[25](index=25&type=chunk)[26](index=26&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's significant accounting policies, including its reporting currency, research and development expense recognition, and the impact of recent accounting pronouncements - The company's financial statements are presented in **U.S. dollars**, its reporting currency[29](index=29&type=chunk) | Expense Category | 3 Months Ended Nov 30, 2018 | 3 Months Ended Nov 30, 2017 | 9 Months Ended Nov 30, 2018 | 9 Months Ended Nov 30, 2017 | | :------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $0.8 million | $3.9 million | $2.9 million | $5.3 million | - Recently adopted accounting pronouncements (ASU 2014-09, ASU 2016-01, ASU 2017-09) had no material impact, and recently issued pronouncements (ASU 2018-02, ASU 2018-07, ASU 2018-09) are not expected to have a material impact[35](index=35&type=chunk)[36](index=36&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [Note 3. Property, Plant and Equipment, Net](index=14&type=section&id=Note%203.%20Property,%20Plant%20and%20Equipment,%20Net) This note details the company's property, plant, and equipment, including machinery and equipment values and associated depreciation expenses | Asset Category | Nov 30, 2018 | Feb 28, 2018 | | :----------------------------- | :----------- | :----------- | | Property, plant and equipment, net | $5,033,774 | $4,036,903 | | Machinery and equipment | $3,380,317 | $2,189,195 | | Depreciation expense (9 months) | $309,000 | $233,000 | [Note 4. Intangible Assets, Net](index=14&type=section&id=Note%204.%20Intangible%20Assets,%20Net) This note provides information on the company's intangible assets and their associated amortization expenses | Asset Category | Nov 30, 2018 | Feb 28, 2018 | | :--------------------- | :----------- | :----------- | | Intangible assets, net | $404,667 | $332,740 | | Amortization expense (9 months) | $58,000 | $48,000 | [Note 5. Long-Term Debt](index=14&type=section&id=Note%205.%20Long-Term%20Debt) This note details the non-current portion of the company's long-term debt and interest paid during the period | Debt Category | Nov 30, 2018 | Feb 28, 2018 | | :-------------------- | :----------- | :----------- | | Non-current portion | $956,069 | $1,033,777 | | Interest paid (9 months) | $41,117 | $0 | [Note 6. Related Party Transactions](index=14&type=section&id=Note%206.%20Related%20Party%20Transactions) This note describes related party transactions, including the CEO's compensation expense and a long-term incentive grant of restricted stock units - The CEO's compensation expense for the nine months ended November 30, 2018, increased to **$522,000** from **$135,000** in the prior year due to an amended employment agreement[49](index=49&type=chunk) - A long-term incentive grant of **4 million** restricted stock units (RSUs) was provided to the CEO, with one of four performance milestones met, but no compensation expense was recorded as vesting was not probable[50](index=50&type=chunk) [Note 7. Stockholders' Equity](index=15&type=section&id=Note%207.%20Stockholders'%20Equity) This note details changes in common stock outstanding, shares issued from warrant exercises and RSU vesting, and capital raised from stock sales | Metric | Nov 30, 2018 | Feb 28, 2018 | | :-------------------------------- | :----------- | :----------- | | Common Stock Outstanding (shares) | 33,805,706 | 33,751,088 | | Shares issued upon cashless exercise of warrants (9 months 2018) | 18,821 | - | | Shares issued upon vesting of restricted stock units (9 months 2018) | 35,797 | - | - During the nine months ended November 30, 2017, the company raised **$7.28 million** from common stock sales through private placements and warrant exercises[52](index=52&type=chunk) [Note 8. Stock-based Compensation Plans](index=15&type=section&id=Note%208.%20Stock-based%20Compensation%20Plans) This note outlines shares available under the equity incentive plan, and details outstanding warrants, RSUs, and their associated expenses - As of November 30, 2018, **3,271,496 shares** were available for issuance under the 2017 Equity Incentive Plan[54](index=54&type=chunk) | Metric | Nov 30, 2018 | Nov 30, 2017 | | :-------------------------------- | :----------- | :----------- | | Warrants Outstanding | 2,345,957 | 2,684,582 | | Weighted average exercise price | $8.44 | $7.16 | | Warrant expense (9 months) | $2.6 million | $5.2 million | | Restricted Stock Units (RSUs) Outstanding | 99,498 | 34,102 | | RSU expense (9 months) | $0.6 million | $0.1 million | [Note 9. Convertible notes](index=18&type=section&id=Note%209.%20Convertible%20notes) This note details the issuance of **$2.45 million** in convertible promissory notes, their conversion terms, and classification as a liability and derivative liability - On November 13, 2018, the company issued **$2.45 million** in convertible promissory notes with an **8.00%** annual interest rate, maturing on May 13, 2019[58](index=58&type=chunk)[59](index=59&type=chunk) - The notes automatically convert into common stock at the lesser of **$13.00** or the 10-day average closing price, with related warrants issued to acquire an additional **50%** of converted shares at a variable exercise price[59](index=59&type=chunk)[60](index=60&type=chunk) - Due to variable conversion terms, the notes are classified as a liability at amortized cost, and the warrants as a derivative liability measured at fair value[61](index=61&type=chunk)[62](index=62&type=chunk) [Note 10. Joint venture](index=19&type=section&id=Note%2010.%20Joint%20venture) This note details the formation of Indorama Loop Technologies, LLC, a 50:50 joint venture with Indorama Holdings LP, and agreements with PepsiCo for Loop™ PET resin supply - Loop Industries formed a **50:50** joint venture, Indorama Loop Technologies, LLC (ILT), with Indorama Holdings LP, USA, on September 24, 2018, to manufacture Loop branded polyester resin[65](index=65&type=chunk)[66](index=66&type=chunk) - The company committed an initial capital contribution of **$0.5 million** and contributed an exclusive worldwide royalty-free license for its proprietary technology to ILT[66](index=66&type=chunk) - In October 2018, PepsiCo entered a multi-year agreement to purchase production capacity from the ILT facility and incorporate Loop™ PET resin into its product packaging by early 2020[67](index=67&type=chunk) [Note 11. Contingencies](index=19&type=section&id=Note%2011.%20Contingencies) This note addresses a legal claim seeking **2 million** shares of common stock and punitive damages, with management believing the case lacks merit - The company is defending a legal claim seeking **2 million** shares of common stock, punitive damages, and attorneys' fees for alleged breach of contract and promissory fraud, with trial delayed to May 8, 2019[68](index=68&type=chunk) - Management believes the case lacks merit and has not provided for any amounts, but an unfavorable outcome could lead to significant share dilution and legal fee reimbursement[68](index=68&type=chunk) [Note 12. Subsequent events](index=19&type=section&id=Note%2012.%20Subsequent%20events) This note reports the issuance of an additional **$0.2 million** in convertible promissory notes and related warrants in January 2019 - On January 3, 2019, the company issued an additional **$0.2 million** in convertible promissory notes and related warrants with identical characteristics to those described in Note 9[69](index=69&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 the company's financial condition and results, highlighting its pre-revenue status, net losses, cash usage, going concern doubts, and strategic developments like Generation II technology and joint ventures [CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS](index=20&type=section&id=CAUTIONARY%20STATEMENTS%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section cautions readers that the report contains forward-looking statements subject to risks and uncertainties, including commercialization, financing, and going concern, advising against undue reliance - Forward-looking statements cover market opportunity, strategies, capabilities, competition, expected activities, cash resources, regulatory compliance, future growth, market size, trends, and internal control effectiveness[72](index=72&type=chunk) - Risks include technology commercialization, partner relationships, intellectual property, financing needs, competition, regulatory compliance, CEO control, internal control weaknesses, and going concern ability[72](index=72&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, and the company disclaims any obligation to revise them for future events or circumstances[75](index=75&type=chunk) [Introduction and Prospective Future Growth](index=20&type=section&id=Introduction%20and%20Prospective%20Future%20Growth) Loop Industries aims to accelerate sustainable plastic production, targeting a **$130 billion** global polyester market, with key developments including Generation II technology, a joint venture with IVL, and agreements with PepsiCo and Coca-Cola - Loop Industries aims to decouple plastic from fossil fuels by depolymerizing waste polyester into virgin-quality plastic for food-grade packaging[78](index=78&type=chunk) - The global polyester market is estimated at **70 million metric tons** (approximately **$130 billion**) and is expected to grow **4%** annually[79](index=79&type=chunk) - The company activated its Generation II technology in June 2018, which is more streamlined, energy-efficient, and eliminates water in dimethyl terephthalate production[81](index=81&type=chunk) - A **50:50** joint venture with Indorama Ventures Public Company Limited (IVL) was formed in September 2018 for sustainable polyester resin, with commercial production planned for Q1 2020[82](index=82&type=chunk) - Multi-year agreements were secured with PepsiCo (October 2018) and Coca-Cola (November 2018) to supply Loop™ PET resin for product packaging by early 2020[84](index=84&type=chunk)[85](index=85&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) The company reported no revenue, with net loss decreasing for both periods due to reduced R&D expenses, while G&A expenses showed mixed trends due to employee costs and legal fees | Metric | 3 Months Ended Nov 30, 2018 | 3 Months Ended Nov 30, 2017 | 9 Months Ended Nov 30, 2018 | 9 Months Ended Nov 30, 2017 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $ - | $ - | $ - | $ - | | Net Loss | $(2,913,761) | $(6,703,653) | $(9,981,702) | $(10,402,707) | | Research and development expenses | $792,111 | $3,894,454 | $2,924,483 | $5,341,763 | | General and administrative expenses | $1,971,847 | $2,720,078 | $6,721,796 | $4,691,294 | - The decrease in research and development expenses was primarily due to lower non-cash stock-based compensation and reduced engineering fees[93](index=93&type=chunk)[96](index=96&type=chunk) - The increase in general and administrative expenses for the nine-month period was mainly driven by higher employee-related costs, legal fees, and consulting/accounting fees[97](index=97&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=24&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As a pre-revenue company, Loop Industries had **$3.5 million** cash on hand, with significant cash usage in operations and investing, necessitating further financing due to going concern doubts - As of November 30, 2018, the company had **$3.5 million** cash on hand[98](index=98&type=chunk) | Cash Flow Activity | 9 Months Ended Nov 30, 2018 | 9 Months Ended Nov 30, 2017 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(5,455,317) | $(4,175,443) | | Net cash used in investing activities | $(1,523,353) | $(273,550) | | Net cash provided by financing activities | $2,510,529 | $7,022,801 | - The company's pre-revenue status, **$31.3 million** accumulated deficit, and significant cash usage in operations raise substantial doubt about its going concern ability, requiring additional financing[101](index=101&type=chunk) [Off-Balance Sheet Arrangements](index=25&type=section&id=Off-Balance%20Sheet%20Arrangements) As of November 30, 2018, the company had no off-balance sheet arrangements - The company did not have any off-balance sheet arrangements as of November 30, 2018[106](index=106&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from foreign currency fluctuations between USD and CAD, which could adversely affect financial results and stock price, despite potential hedging activities [Foreign Currency Exchange Risk](index=25&type=section&id=Foreign%20Currency%20Exchange%20Risk) Loop Industries faces foreign currency exchange risk due to USD financing and CAD operational costs, where fluctuations could materially impact financial results, cash, and funding, despite potential hedging - The company is exposed to foreign exchange risk due to U.S. dollar financing and significant Canadian dollar operational costs of its subsidiary, Loop Canada Inc[109](index=109&type=chunk) - Significant fluctuations in USD to CAD exchange rates could materially affect the company's results, cash position, funding requirements, and stock price[110](index=110&type=chunk) - The company may engage in exchange rate hedging activities, such as foreign exchange forward contracts, but these involve costs and risks, and their effectiveness is not assured[111](index=111&type=chunk) [ITEM 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective, with the material weakness in stock-based compensation accounting remediated, and no other material changes occurred [Management's Evaluation of our Disclosure Controls and Procedures](index=26&type=section&id=Management's%20Evaluation%20of%20our%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective, and the material weakness in stock-based compensation accounting was remediated - The principal executive officer and principal financial officer concluded that disclosure controls and procedures and internal controls over financial reporting were effective as of November 30, 2018[113](index=113&type=chunk) - The previously reported material weakness in stock-based compensation accounting was remediated by expanding in-house expertise and engaging an external advisor[113](index=113&type=chunk) [Changes in Internal Control over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No other material changes in internal control over financial reporting occurred during the most recent quarter - No other changes in internal control over financial reporting occurred during the most recent quarter that materially affected, or were reasonably likely to materially affect, the company's internal control over financial reporting[114](index=114&type=chunk) [PART II. Other Information](index=3&type=section&id=PART%20II.%20Other%20Information) [ITEM 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a legal claim seeking **2 million** shares, punitive damages, and attorneys' fees for alleged breach of contract, with trial set for May 8, 2019 - A claim was filed against the company seeking damages for breach of contract and promissory fraud, asserting entitlement to **2 million** shares of common stock[116](index=116&type=chunk) - The trial date has been delayed to May 8, 2019, in the Los Angeles Superior Court[116](index=116&type=chunk) - Management believes the case lacks merit, but an unfavorable outcome could lead to the issuance of **2 million** additional shares, causing dilution and legal fee reimbursement[116](index=116&type=chunk) [ITEM 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The primary risk factor is the company's going concern status, as current liquidity raises substantial doubt about its ability to continue operations without additional capital, potentially leading to investor losses - The company's consolidated financial statements include going concern disclosures, indicating substantial doubt about its ability to continue as a going concern due to current liquidity[120](index=120&type=chunk)[121](index=121&type=chunk) - To fund operations and continue as a going concern, the company must raise additional equity or debt capital, with no assurance of success[122](index=122&type=chunk) - The financial statements do not include adjustments that might result if the company is unable to continue as a going concern, which could cause investors to suffer substantial losses[121](index=121&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds to report[123](index=123&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities to report[124](index=124&type=chunk) [ITEM 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[125](index=125&type=chunk) [ITEM 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information to report[126](index=126&type=chunk) [ITEM 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including corporate documents, various agreements, and principal officer certifications - Exhibits include Articles of Incorporation, By-laws, employment agreements, joint venture agreements, license agreements, marketing agreements, and certifications (302 and 906)[129](index=129&type=chunk) [Signatures](index=29&type=section&id=Signatures) The report was signed on January 9, 2019, by Daniel Solomita (CEO, President, Director) and Nelson Gentiletti (COO, CFO) - The report was signed on January 9, 2019, by Daniel Solomita (Chief Executive Officer, President, and Director) and Nelson Gentiletti (Chief Operating Officer and Chief Financial Officer)[132](index=132&type=chunk)