Loop Industries(LOOP) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited interim condensed consolidated financial information for Loop Industries, Inc. Item 1. Financial Statements This section presents the unaudited interim condensed consolidated financial statements of Loop Industries, Inc. for the three and six months ended August 31, 2025 and 2024, prepared in conformity with US GAAP. It includes the balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity (deficit), statements of cash flows, and accompanying notes detailing the company's financial position, performance, and significant accounting policies. Condensed Consolidated Balance Sheets This section presents the company's financial position at specific points in time. Condensed Consolidated Balance Sheets (in thousands of U.S. dollars) | Metric | August 31, 2025 | February 28, 2025 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $7,310 | $12,973 | | Total current assets | $8,800 | $13,852 | | Total assets | $13,290 | $18,578 | | Total current liabilities | $3,901 | $3,959 | | Series B Convertible Preferred stock | $11,328 | $10,647 | | Total liabilities | $18,758 | $18,211 | | Total stockholders' equity (deficit) | $(5,468) | $367 | - The company's total assets decreased from $18,578 thousand as of February 28, 2025, to $13,290 thousand as of August 31, 2025, primarily driven by a decrease in cash and cash equivalents[11] - Stockholders' equity shifted from a positive balance of $367 thousand to a deficit of $(5,468) thousand, indicating a deterioration in the company's equity position[11] Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance over specific periods. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands of U.S. dollars) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :---------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenues | $0 | $23 | $252 | $29 | | Research and development expenses | $843 | $1,945 | $2,217 | $4,182 | | General and administrative expenses | $1,871 | $2,595 | $3,519 | $5,506 | | Total expenses | $2,853 | $4,669 | $6,278 | $9,954 | | Net loss | $(3,204) | $(4,839) | $(6,651) | $(10,028) | | Basic and diluted net loss per share | $(0.07) | $(0.10) | $(0.14) | $(0.21) | - Revenues for the three months ended August 31, 2025, were $0, down from $23 thousand in the prior year, while six-month revenues increased significantly to $252 thousand from $29 thousand, primarily due to engineering services[14][158] - Net loss decreased for both the three-month period (from $(4,839) thousand to $(3,204) thousand) and the six-month period (from $(10,028) thousand to $(6,651) thousand) year-over-year, driven by reduced R&D and G&A expenses[14][155][163] Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) This section outlines changes in the company's equity over specific periods. - Total stockholders' equity (deficit) decreased from $367 thousand at February 28, 2025, to $(5,468) thousand at August 31, 2025, primarily due to a net loss of $(6,651) thousand[18] - During the six months ended August 31, 2025, the company issued 126,857 shares upon settlement of restricted stock units and 116,358 shares for cash under its ATM Equity Offering, contributing to additional paid-in capital[18][58] Condensed Consolidated Statements of Cash Flows This section reports on the company's cash inflows and outflows from operating, investing, and financing activities. Condensed Consolidated Statements of Cash Flows (in thousands of U.S. dollars) | Cash Flow Activity | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :---------------------------------- | :---------------------------- | :---------------------------- | | Net cash used in operating activities | $(5,604) | $(6,775) | | Net cash used in investing activities | $(133) | $(325) | | Net cash provided by (used in) financing activities | $51 | $1,537 | | Net decrease in cash | $(5,663) | $(5,563) | | Cash and cash equivalents, end of period | $7,310 | $1,395 | - Net cash used in operating activities decreased to $(5,604) thousand for the six months ended August 31, 2025, from $(6,775) thousand in the prior year, mainly due to decreased operating expenses[21][181] - Net cash provided by financing activities significantly decreased to $51 thousand in 2025 from $1,537 thousand in 2024, as 2024 included $1,587 thousand in borrowings under a credit facility[21][183] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and additional information for the financial statements. 1. The Company, Basis of Presentation and Liquidity Risk Assessment This note describes the company's business, financial statement preparation, and liquidity assessment. - Loop Industries, Inc. is a technology company in the pre-commercialization stage, owning patented technology for depolymerizing waste PET plastic and polyester fiber into virgin-quality PET resin[24] - The company has recurring net losses and negative cash flow from operating activities, with available liquidity of $9,857 thousand as of August 31, 2025, which management deems sufficient for at least twelve months[28][29] - Future strategic development and manufacturing facility construction depend on securing additional funding through technology licensing, engineering services, government incentives, and/or debt/equity issuance[30] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements. - The financial statements are prepared in conformity with US GAAP and SEC regulations for interim reporting, with estimates and assumptions affecting reported amounts[25][32] - Basic and diluted loss per share calculations are the same due to the antidilutive effect of potential dilutive securities, which included 5,493,138 stock options and 4,256,532 restricted stock units as of August 31, 2025[33] - The company is evaluating the impact of recently issued accounting pronouncements, including ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Expense Disaggregation), ASU 2024-04 (Convertible Debt), ASU 2025-01 (Effective Date Clarification), and ASU 2025-05 (Credit Losses)[35][36][37][38][39] 3. Accounts Receivable and Other This note details the composition and changes in accounts receivable and other current assets. Accounts Receivable and Other (in thousands of U.S. dollars) | Category | August 31, 2025 | February 28, 2025 | | :-------------------------- | :-------------- | :---------------- | | Accounts receivable from customers | $616 | $420 | | Other receivables | $286 | $219 | | Total | $902 | $639 | - Accounts receivable from customers increased by $196 thousand, and other receivables increased by $67 thousand, contributing to a total increase of $263 thousand in Accounts Receivable and Other from February 28, 2025, to August 31, 2025[40][41] 4. Prepaid Expenses This note provides a breakdown of the company's prepaid expenses. Prepaid Expenses (in thousands of U.S. dollars) | Category | August 31, 2025 | February 28, 2025 | | :---------- | :-------------- | :---------------- | | Insurance | $336 | $69 | | Utilities | $32 | $29 | | Software | $44 | $28 | | Other | $90 | $32 | | Total | $502 | $158 | - Prepaid expenses significantly increased from $158 thousand to $502 thousand, primarily driven by a substantial increase in prepaid insurance from $69 thousand to $336 thousand[42] 5. Property, Plant and Equipment, Net This note presents the company's net property, plant, and equipment and related depreciation. Property, Plant and Equipment, Net (in thousands of U.S. dollars) | Category | August 31, 2025 Net Book Value | February 28, 2025 Net Book Value | | :-------------------------- | :----------------------------- | :----------------------------- | | Machinery and equipment | $0 | $0 | | Building | $1,347 | $1,311 | | Land | $223 | $212 | | Building and Land Improvements | $95 | $125 | | Office equipment and furniture | $89 | $89 | | Total | $1,754 | $1,737 | - Net property, plant and equipment remained relatively stable, increasing slightly from $1,737 thousand to $1,754 thousand, with machinery and equipment fully depreciated[43] - Depreciation expense for the three and six months ended August 31, 2025, was $36 thousand and $70 thousand, respectively, a decrease from $79 thousand and $170 thousand in the prior year[43] 6. Intangible Assets, Net This note details the company's intangible assets and related amortization. - Intangible assets, net, increased from $1,708 thousand at February 28, 2025, to $1,800 thousand at August 31, 2025[45] - Additions to intangible assets, primarily patent application costs, were $133 thousand for the six months ended August 31, 2025, a decrease from $325 thousand in the prior year[45] - Amortization expense for the three and six months ended August 31, 2025, was $61 thousand and $126 thousand, respectively, an increase from $50 thousand and $96 thousand in the prior year[45] 7. Fair Value of Financial Instruments This note describes the fair value measurements of the company's financial instruments. Fair Value of Financial Liabilities (in thousands of U.S. dollars) | Financial Liability | August 31, 2025 Carrying Amount | February 28, 2025 Carrying Amount | | :---------------------------------- | :------------------------------ | :------------------------------ | | Series B Convertible Preferred stock | $11,328 | $10,647 | | Long-term debt | $3,128 | $3,085 | | Due to customer | $865 | $832 | - The fair value of Series B Convertible Preferred Stock, long-term debt, and due to customer are approximated by their carrying amounts and are classified as Level 2 in the fair value hierarchy[46] 8. Accounts Payable and Accrued Liabilities This note provides a breakdown of the company's accounts payable and accrued liabilities. Accounts Payable and Accrued Liabilities (in thousands of U.S. dollars) | Category | August 31, 2025 | February 28, 2025 | | :-------------------------- | :-------------- | :---------------- | | Trade accounts payable | $1,601 | $2,010 | | Accrued employee compensation | $602 | $554 | | Accrued engineering fees | $455 | $431 | | Accrued professional fees | $338 | $276 | | Other accrued liabilities | $339 | $274 | | Total | $3,335 | $3,545 | - Total accounts payable and accrued liabilities decreased from $3,545 thousand to $3,335 thousand, primarily due to a reduction in trade accounts payable[47] 9. Investments in Joint Ventures This note details the company's equity investments in joint ventures and their financial impact. - Loop Industries formed a 50/50 joint venture, Ester Loop Infinite Technologies Private Limited ('India JV'), with Ester Industries Ltd. in India to build and operate an Infinite Loop™ manufacturing facility[48] - The India JV incurred losses of $86 thousand and $689 thousand for the three and six months ended August 31, 2025, respectively, resulting in Loop recording its share of the loss as $43 thousand and $345 thousand[50] - The carrying value of Loop's investment in the India JV decreased from $1,267 thousand at February 28, 2025, to $923 thousand at August 31, 2025[50] 10. Series B Convertible Preferred Stock This note describes the terms and balance of the company's Series B Convertible Preferred Stock. Series B Convertible Preferred Stock (in thousands of U.S. dollars) | Category | August 31, 2025 | February 28, 2025 | | :-------------------------- | :-------------- | :---------------- | | Stated value at issuance | $10,395 | $10,395 | | Accrued PIK dividends | $933 | $252 | | Total | $11,328 | $10,647 | - The balance of Series B Convertible Preferred Stock increased from $10,647 thousand to $11,328 thousand, primarily due to $681 thousand in accrued PIK dividends for the six months ended August 31, 2025[51] 11. Long-Term Debt This note outlines the company's long-term debt obligations and repayment schedules. Long-Term Debt (in thousands of U.S. dollars) | Category | August 31, 2025 | February 28, 2025 | | :---------------------------------- | :-------------- | :---------------- | | Total Investissement Québec financing facility | $3,128 | $3,085 | | Less: current portion of long-term debt | $(464) | $(312) | | Long-term debt, net of current portion | $2,664 | $2,773 | - The company's long-term debt, net of current portion, decreased slightly from $2,773 thousand to $2,664 thousand[52] - Total repayments due on indebtedness over the next five years are $191 thousand (FY2026), $546 thousand (FY2027), $838 thousand (FY2028), $838 thousand (FY2029), and $837 thousand (FY2030)[54] - A credit facility from a Canadian bank was undrawn as of August 31, 2025, and its minimum equity covenant was amended in October 2025 to be removed for the duration of the term[55][57] 12. Stockholders' Equity (Deficit) - Common Stock This note details transactions affecting the company's common stock and overall equity. Common Stock Transactions | Period Ended August 31, 2025 | Number of shares | | :--------------------------------------- | :--------------- | | Balance, February 28, 2025 | 47,620,263 | | Issuance of shares upon settlement of restricted stock units | 126,857 | | Issuance of shares for cash (ATM Equity Offering) | 116,358 | | Balance, August 31, 2025 | 47,863,478 | | Period Ended August 31, 2024 | Number of shares | | :--------------------------------------- | :--------------- | | Balance, February 29, 2024 | 47,528,908 | | Issuance of shares upon settlement of restricted stock units | 91,355 | | Balance, August 31, 2024 | 47,620,263 | - During the six months ended August 31, 2025, the company issued 126,857 shares from RSU settlements and 116,358 shares through its ATM Equity Offering, increasing total outstanding shares to 47,863,478[58][61] 13. Revenues This note provides a breakdown of the company's revenue streams. Revenues (in thousands of U.S. dollars) | Category | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :----------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Engineering services | $0 | $0 | $244 | $0 | | Sales of PET | $0 | $23 | $8 | $29 | | Total | $0 | $23 | $252 | $29 | - Total revenues for the six months ended August 31, 2025, significantly increased to $252 thousand from $29 thousand in the prior year, primarily driven by $244 thousand in engineering services revenue[59][158] 14. Research and Development Expenses This note details the components of the company's research and development expenditures. Research and Development Expenses (in thousands of U.S. dollars) | Category | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Employee compensation | $629 | $993 | $1,643 | $2,138 | | External engineering | $9 | $651 | $14 | $1,279 | | Plant and laboratory operating expenses | $148 | $197 | $379 | $467 | | Other | $57 | $104 | $181 | $298 | | Total | $843 | $1,945 | $2,217 | $4,182 | - Research and development expenses decreased by $1,102 thousand for the three-month period and $1,965 thousand for the six-month period ended August 31, 2025, primarily due to significant reductions in external engineering expenses and employee compensation[60][152][159] 15. General and Administrative Expenses This note outlines the components of the company's general and administrative expenditures. General and Administrative Expenses (in thousands of U.S. dollars) | Category | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Employee compensation | $671 | $816 | $1,303 | $1,692 | | Insurance | $423 | $476 | $876 | $968 | | Professional fees | $612 | $1,007 | $973 | $2,262 | | Other | $165 | $296 | $367 | $584 | | Total | $1,871 | $2,595 | $3,519 | $5,506 | - General and administrative expenses decreased by $724 thousand for the three-month period and $1,987 thousand for the six-month period ended August 31, 2025, mainly due to reduced professional fees and employee compensation[63][153][160] 16. Share-based Payments This note describes the company's share-based compensation arrangements and related expenses. Stock Options Continuity (Number of stock options) | Period | Outstanding, beginning | Granted | Forfeited | Outstanding, end | | :-------------------------------- | :--------------------- | :------ | :-------- | :--------------- | | Three months ended Aug 31, 2025 | 5,573,138 | 0 | (80,000) | 5,493,138 | | Three months ended Aug 31, 2024 | 2,971,216 | 0 | (200,000) | 2,771,216 | | Six months ended Aug 31, 2025 | 2,771,216 | 2,801,922 | (80,000) | 5,493,138 | | Six months ended Aug 31, 2024 | 2,772,000 | 199,216 | (200,000) | 2,771,216 | Restricted Stock Units Continuity (Number of units) | Period | Outstanding, beginning | Granted | Settled | Forfeited | Outstanding, end | | :-------------------------------- | :--------------------- | :------ | :------ | :-------- | :--------------- | | Three months ended Aug 31, 2025 | 3,981,121 | 310,770 | (28,770) | (6,589) | 4,256,532 | | Three months ended Aug 31, 2024 | 4,399,060 | 144,276 | (81,518) | 0 | 4,461,818 | | Six months ended Aug 31, 2025 | 4,466,958 | 310,770 | (126,857) | (394,339) | 4,256,532 | | Six months ended Aug 31, 2024 | 4,368,897 | 184,276 | (91,355) | 0 | 4,461,818 | - Stock-based compensation expense for stock options increased significantly for the six-month period to $651 thousand in 2025 from $295 thousand in 2024, while RSU compensation decreased to $4 thousand in 2025 from $437 thousand in 2024, including a $(291) thousand forfeiture adjustment[66][69] 17. Equity Incentive Plan This note details the company's equity incentive plan and authorized share reserve. - The 2017 Equity Incentive Plan allows for granting warrants, stock options, stock appreciation rights, and restricted stock units to employees, directors, and consultants[71] - The share reserve under the plan was increased by 1,500,000 shares on March 1, 2025, and March 1, 2024[71] Equity Incentive Plan Authorized Units Continuity (Number of units) | Category | 2025 | 2024 | | :-------------------------- | :--------- | :--------- | | Authorized, beginning of period | 2,159,612 | 848,244 | | Automatic share reserve increase | 1,500,000 | 1,500,000 | | Units granted | (3,112,692) | (383,492) | | Units forfeited | 474,339 | 200,000 | | Authorized, end of period | 1,021,259 | 2,164,752 | 18. Subsequent Event This note reports on significant events that occurred after the balance sheet date. - On September 23, 2025, Loop entered into a Securityholders Agreement with Reed Circular Economy (RCE) to establish Infinite Loop Europe SAS, a 90/10 joint venture (RCE/Loop) for developing chemical upcycling plants in Europe[74] - The agreement grants Infinite Loop Europe priority rights for European projects, outlines financing, provides Loop options for project equity, and confirms Loop's IP ownership with limited use rights for the JV[74] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Loop Industries' financial condition and results of operations for the three and six months ended August 31, 2025. It covers the company's business overview, commercialization strategy, recent developments, detailed analysis of revenues and expenses, and an assessment of liquidity and capital resources, highlighting the company's pre-commercialization stage and reliance on external funding. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This section warns readers about the inherent uncertainties and risks associated with forward-looking statements in the report. - The report contains forward-looking statements regarding market opportunity, strategies, funding, commercialization, and partnerships, which are subject to risks and uncertainties[76] - Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially due to various factors including commercialization ability, funding, competition, and regulatory scrutiny[76][79] General This section defines key technical terms relevant to the company's business. - Key terms defined include Depolymerization (breaking down polymers), DMT (dimethyl terephthalate), MEG (monoethylene glycol), Polymerization (forming polymer chains), PET (polyethylene terephthalate), and rPET/rDMT/rMEG (recycled versions)[80][81][82][83] Introduction This section introduces Loop Industries' core business, technology, and commercialization strategy. - Loop Industries is a technology company focused on accelerating the shift to sustainable PET plastic and polyester fiber by depolymerizing waste into virgin-quality Loop™ branded PET resin[85] - The company's commercialization strategy involves direct investments with strategic partners to operate facilities and licensing its Infinite Loop™ technology[86] - Loop is executing its strategy through a 50/50 joint venture in India with Ester Industries Ltd. and a technology license to Reed Management SAS for a facility in Europe[88] Background This section provides context on the industry, competitive landscape, and the company's technology and partnerships. Industry Background and Competitive Landscape This section discusses the market for PET and polyester fiber, current recycling challenges, and the need for advanced depolymerization technologies. - The global PET and polyester fiber markets are heavily dependent on fossil fuels, with virgin material often preferred or required for quality specifications[89][90] - Mechanical recycling, the most common method, faces challenges such as impurity contamination, feedstock limitations, and material degradation (downcycling), which limit its ability to produce high-quality, infinitely recyclable PET[93][94][95] - Depolymerization technologies, like Loop's, are needed to process a wider range of PET and polyester fiber waste and yield high-quality material, offering advantages over existing methods in handling contaminated feedstock and scalability[97][98] Infinite Loop™ Technology This section describes Loop's proprietary depolymerization technology and its capabilities. - Loop's depolymerization technology breaks down waste PET and polyester fiber into base monomers (DMT and MEG) at low temperature and no added pressure, then purifies and recombines them into virgin-quality PET resin[99] - The technology can recycle a wide range of contaminated feedstocks, including colored plastic bottles and polyester textiles, creating a closed-loop system for infinite recycling without quality degradation[99][100][101] - The Terrebonne Facility has successfully operated for five years, demonstrating the technology's effectiveness and supplying virgin-quality PET resin to customers[102] Agreements with Reed Societe Generale Group This section details the financing and licensing agreements with Reed Management SAS. - Loop closed financing and licensing transactions with Reed Management SAS, issuing 1,044,430 shares of Series B Convertible Preferred Stock to Reed Circular Economy (RCE) and granting a non-transferable, royalty-bearing license for one European facility[104] - The Series B Convertible Preferred Stock has a 13% PIK dividend rate, a 5-year term, and is convertible to common stock at $4.75 per share or redeemable in cash[107][178] - A Securityholders Agreement established Infinite Loop Europe SAS (90% RCE, 10% Loop) for European development, with RCE providing a €10 million shareholder loan to fund the first royalty tranche[108][109] Joint Venture with Ester This section describes the 50/50 joint venture with Ester Industries Ltd. in India. - Loop formed a 50/50 India joint venture with Ester Industries Ltd. to build and operate an Infinite Loop™ manufacturing facility with a planned capacity of 70,000 tons per year of Loop™ PET resin and polyester fiber[112][114] - The India JV will integrate a continuous polymerization line for improved efficiency and lower operating costs, with total estimated investment cost of approximately $176 million[115][124] - Loop generated $0.2 million in engineering services revenue from the India JV and executed a new $1.5 million agreement to support construction, with groundbreaking expected by end of fiscal year 2026 and commercial operations in calendar 2027[119][124] Commercialization Strategy This section outlines Loop's approach to global expansion through direct investments and technology licensing. - Loop's commercialization strategy combines direct investments with strategic partners in low-cost manufacturing regions and technology licensing to achieve global expansion of its Infinite Loop™ Technology[125][129][133] - Revenue generation from direct investments is expected from facility profits and royalties, while licensing will generate up-front and recurring royalties, with Loop retaining exclusive sales and marketing rights for JV products[131][132][133] - The company aims to provide engineering services for all project phases and implement a modular construction strategy to reduce costs, improve timelines, and enable scalable global expansion[135][137] Recent Developments This section highlights key business updates and strategic initiatives. Offtake Agreement with Leading Sports Apparel Company This section reports on a new multi-year agreement to supply Twist™ circular polyester resin. - In September 2025, Loop entered a multi-year offtake agreement to supply its Twist™ circular polyester resin from the planned India facility to a leading sports apparel company[139] Offtake Agreement with Taro Plast This section details an agreement to supply Loop™ DMT for specialty polymer applications. - In September 2025, Loop signed an offtake agreement with Taro Plast S.p.A. to supply Loop™ DMT for specialty polymer applications, expanding its product offering beyond bottle-grade and fiber-grade PET resin[140] Strategic Alliance with Shinkong This section describes a partnership with Shinkong Synthetic Fibers Corporation for high-performance yarns. - In August 2025, Loop formed a strategic alliance with Shinkong Synthetic Fibers Corporation, where Shinkong will convert Loop's Twist™ polyester resin into high-performance yarns for its global customer network[141] Strategic Alliance with Hyosung TNC This section announces a collaboration with Hyosung TNC to convert Twist™ polyester resin into performance yarns. - In September 2025, Loop announced a strategic alliance with Hyosung TNC to convert Twist™ polyester resin into performance yarns under Hyosung's regen™ brand, expanding access to circular polyester[142][143] Launch of Twist™ This section introduces Loop's new branded circular polyester resin made from textile waste. - During the quarter ended August 31, 2025, Loop launched Twist™, a new branded circular polyester resin made entirely from textile waste, repositioning its fiber-grade PET resin for the textile-to-textile recycling market[144] At-The-Market Offering This section reports on the company's ATM Equity Offering for common stock sales. - On July 3, 2025, Loop entered an At the Market Offering Agreement to sell up to $15 million of common stock through Roth Capital Partners, LLC[145] - As of August 31, 2025, the company sold 116,358 shares for net proceeds of approximately $186,557, with $14.8 million remaining capacity[146] Human Capital This section provides information on the company's employee count and departmental distribution. - As of August 31, 2025, Loop had 42 employees: 18 in R&D, 15 in engineering and operations, and 9 in administrative functions[147] Results of Operations This section analyzes the company's financial performance for the reported periods. Second Quarter Ended August 31, 2025 This section provides a detailed analysis of the company's operating results for the three months ended August 31, 2025. Operating Results (Three Months Ended August 31, in thousands of U.S. Dollars) | Metric | 2025 | 2024 | Change (favorable / (unfavorable)) | | :---------------------------------- | :--- | :--- | :--------------------------------- | | Revenues | $0 | $23 | $(23) | | Research and development | $843 | $1,945 | $1,102 | | General and administrative | $1,871 | $2,595 | $724 | | Loss on equity accounted investment | $43 | $0 | $(43) | | Interest and other financial expenses | $419 | $119 | $(300) | | Net loss | $(3,204) | $(4,839) | $1,635 | - Net loss decreased by $1,635 thousand to $(3,204) thousand, primarily due to a $1,102 thousand decrease in R&D expenses and a $724 thousand decrease in G&A expenses, partially offset by a $300 thousand increase in interest and other financial expenses[155] - The increase in interest and other financial expenses was mainly due to $341 thousand in accrued PIK dividends on Series B Convertible Preferred Stock[154] Six Months Ended August 31, 2025 This section provides a detailed analysis of the company's operating results for the six months ended August 31, 2025. Operating Results (Six Months Ended August 31, in thousands of U.S. Dollars) | Metric | 2025 | 2024 | Change (favorable / (unfavorable)) | | :---------------------------------- | :--- | :--- | :--------------------------------- | | Revenues | $252 | $29 | $223 | | Research and development | $2,217 | $4,182 | $1,965 | | General and administrative | $3,519 | $5,506 | $1,987 | | Loss on equity accounted investment | $345 | $0 | $(345) | | Interest and other financial expenses | $837 | $179 | $(658) | | Net loss | $(6,651) | $(10,028) | $3,377 | - Net loss decreased by $3,377 thousand to $(6,651) thousand, driven by a $1,987 thousand decrease in G&A and a $1,965 thousand decrease in R&D, partially offset by a $658 thousand increase in interest expenses and a $345 thousand loss on equity accounted investment[163] - Revenues increased by $223 thousand to $252 thousand, primarily from $244 thousand in engineering fees[158] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's ability to meet its short-term and long-term financial obligations and its funding sources. Liquidity This section assesses the company's current cash position and its sufficiency for future operations. - Loop Industries is in a pre-commercialization stage with recurring net losses and negative operating cash flow, financing operations primarily through equity and debt[165] - As of August 31, 2025, available liquidity was $9,857 thousand, consisting of $7,310 thousand in cash and $2,547 thousand from an undrawn credit facility[165] - Management assesses current liquidity as sufficient for at least twelve months, but future strategic development and facility construction depend on securing additional funding[166][167] Sale and issuance of Series B CPS This section details the issuance of Series B Convertible Preferred Stock and its key terms. - On December 23, 2024, Loop issued 1,044,430 shares of Series B Convertible Preferred Stock to Reed Circular Economy for $10,395 thousand in cash proceeds[168] - Key features include automatic conversion to common stock at $4.75 per share on the fifth anniversary, a 13% cumulative fixed annual PIK dividend, and issuer/holder redemption options[169][178] Investissement Québec financing facility This section describes the company's long-term debt agreement with Investissement Québec. - Loop has a long-term debt obligation with Investissement Québec for the Terrebonne Facility expansion, with a maximum of $3,347 thousand[170] - The financing facility has been amended multiple times, modifying principal repayment schedules and increasing the interest rate from 2.36% to 4.36% by February 5, 2025[170][171][172][173] Credit facility from a Canadian bank This section outlines the terms of the company's operating credit facility with a Canadian bank. - Loop Canada, Inc. has an Operating Credit Facility with a Canadian bank for up to $2,547 thousand, secured by the Terrebonne property[175] - The credit facility's minimum equity covenant was amended in July 2025 to include Series B Convertible Preferred Stock and was subsequently removed in October 2025 for the term's duration[176][177] Flow of Funds This section summarizes the company's cash flow activities from operations, investing, and financing. Summary of Cash Flows (Six Months Ended August 31, in thousands of U.S. Dollars) | Cash Flow Activity | 2025 | 2024 | | :---------------------------------- | :----- | :----- | | Net cash used in operating activities | $(5,604) | $(6,775) | | Net cash used in investing activities | $(133) | $(325) | | Net cash provided by (used in) financing activities | $51 | $1,537 | | Net decrease in cash | $(5,663) | $(5,563) | - Net cash used in operating activities decreased by $1,171 thousand due to lower operating expenses, while net cash used in investing activities decreased by $192 thousand due to fewer intangible asset additions[181][182] - Net cash provided by financing activities decreased significantly by $1,486 thousand, primarily because 2024 included $1,587 thousand in credit facility borrowings, whereas 2025 saw $187 thousand from ATM equity offering and $136 thousand in debt repayments[183] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Loop Industries, Inc. is not required to provide quantitative and qualitative disclosures about market risk. - Loop Industries, Inc. is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a 'smaller reporting company' under SEC regulations[184] Item 4. Controls and Procedures This section details management's evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting. Management's Evaluation of our Disclosure Controls and Procedures This section presents management's assessment of the effectiveness of the company's disclosure controls and procedures. - As of August 31, 2025, management, including the CEO and Interim CFO, concluded that the company's disclosure controls and procedures were effective[186] - Disclosure controls are designed to ensure timely recording, processing, summarizing, and reporting of information required under the Exchange Act[185] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the period. - There were no changes in internal control over financial reporting during the quarter ended August 31, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[187] PART II. Other Information This section provides additional legal, risk, and administrative information not covered in the financial statements. Item 1. Legal Proceedings This section outlines the company's involvement in legal matters, including an ongoing SEC investigation and general litigation considerations. SEC Investigation This section details the ongoing SEC investigation into Loop Industries. - Loop Industries received SEC subpoenas in October 2020 and March 2022, requesting information on its GEN I and GEN II technologies, partnerships, and reverse-merger[189] - The SEC investigation does not imply wrongdoing by the company, and its CEO, Daniel Solomita, is identified as a relief defendant in a separate SEC complaint, not accused of wrongdoing[190][191] Litigation This section discusses the company's general litigation status and potential future legal expenditures. - The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business, beyond the SEC investigation[192] - Future expenditures may be required for defending intellectual property rights or against infringement claims[193] Item 1A. Risk Factors This section updates the risk factors previously disclosed in the company's 2025 Annual Report, specifically adding a new risk related to the At-The-Market (ATM) Equity Offering. - No material changes to existing risk factors occurred during the three months ended August 31, 2025, as outlined in the 2025 Annual Report[194] - A new risk factor highlights that the sale or issuance of common stock through the ATM Equity Offering may cause dilution and could negatively impact the stock price[195][197] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item states that there were no unregistered sales of equity securities or use of proceeds to report during the period. - There were no unregistered sales of equity securities or use of proceeds to report for the period[198] Item 3. Defaults Upon Senior Securities This item indicates that there were no defaults upon senior securities during the reporting period. - There were no defaults upon senior securities during the reporting period[199] Item 4. Mine Safety Disclosures This item states that mine safety disclosures are not applicable to the company. - Mine safety disclosures are not applicable to Loop Industries, Inc.[200] Item 5. Other Information This section reports on significant events not covered elsewhere, including a change in the Interim Chief Financial Officer and an amendment to the company's credit facility. - Nicolas Lafond resigned as Interim Chief Financial Officer, effective October 17, 2025, and Mike De Notaris was appointed as his successor, assuming responsibilities as Principal Financial Officer and Principal Accounting Officer[201][202] - On October 10, 2025, an amendment to the Credit Agreement with CIBC removed the quarterly tested minimum equity covenant and clarified the inclusion of the $10.65 million convertible preferred share instrument in equity calculation[204][205] - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended August 31, 2025[207] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, agreements, and certifications. - The exhibit index includes corporate documents (Articles of Incorporation, By-laws, Certificate of Designation), key agreements (ATM Offering Agreement, Credit Agreement Amendment), and certifications (Sarbanes-Oxley Act Section 302 and 906)[210] Signatures This section contains the required signatures for the Form 10-Q, confirming its submission by authorized officers. - The report is duly signed by Daniel Solomita, President and Chief Executive Officer, and Nicolas Lafond, Interim Chief Financial Officer, on October 15, 2025[212][213]