SEC Form 10-Q filed by Loop Industries Inc.

7/15/24 5:05:23 PM ET

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loop_10q.htm

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 May 31, 2024

☐	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. 001-38301

Loop Industries, Inc.

(Exact name of Registrant as specified in its charter)

Nevada		27-2094706
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

(Address of principal executive offices zip code)

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	LOOP	The Nasdaq Stock Market LLC

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

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

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

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

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

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

As at July 12, 2024, there were 47,538,745 shares of the Registrant’s common stock, par value $0.0001 per share, outstanding.

LOOP INDUSTRIES, INC.

TABLE OF CONTENTS

		Page No.
PART I. Financial Information

Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		14
Item 4.	Controls and Procedures		14

PART II. Other Information

Item 1.	Legal Proceedings		15
Item 1A.	Risk Factors		15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		16
Item 3.	Defaults Upon Senior Securities		16
Item 4.	Mine Safety Disclosures		16
Item 5.	Other Information		16
Item 6.	Exhibits		17

	Signatures		18

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Loop Industries, Inc.

Three months ended May 31, 2024

Index to the Unaudited Interim Condensed Consolidated Financial Statements

Contents		Page(s)

Condensed consolidated balance sheets as at May 31, 2024 (Unaudited) and February 29, 2024		F‑1

Condensed consolidated statements of operations and comprehensive loss for the three months ended May 31, 2024 and 2023 (Unaudited)		F‑2

Condensed consolidated statements of changes in stockholders’ equity for the three months ended May 31, 2024 and 2023 (Unaudited)		F‑3

Condensed consolidated statements of cash flows for the three months ended May 31, 2024 and 2023 (Unaudited)		F‑4

Notes to the condensed consolidated financial statements (Unaudited)		F‑5

Table of Contents

Loop Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands of U.S. dollars, except per share data)	As at
	May 31, 2024			February 29, 2024

Assets
Current assets
Cash and cash equivalents	$	5,291		$	6,958
Sales tax, tax credits and other receivables (Note 3)		242			351
Inventories (Note 4)		99			102
Prepaid expenses and other deposits (Note 5)		525			577
Total current assets		6,157			7,988
Investment in joint venture		381			381
Property, plant and equipment, net (Note 6)		10,533			10,636
Intangible assets, net (Note 7)		1,671			1,548
Total assets	$	18,742		$	20,553

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued liabilities (Note 9)	$	2,891		$	2,321
Current portion of long-term debt (Note 10)		244			100
Total current liabilities		3,135			2,421
Due to customer		784			770
Long-term debt (Note 10)		5,555			3,220
Total liabilities		9,474			6,411

Stockholders’ Equity
Series A Preferred stock par value $0.0001; 25,000,000 shares authorized; one share issued and outstanding		-			-
Common stock par value $0.0001; 250,000,000 shares authorized; 47,538,745 shares issued and outstanding (February 29, 2024 – 47,528,908) (Note 11)		5			5
Additional paid-in capital		172,162			171,792
Additional paid-in capital – Warrants		20,385			20,385
Accumulated deficit		(182,159	)		(176,970	)
Accumulated other comprehensive loss		(1,125	)		(1,070	)
Total stockholders’ equity		9,268			14,142
Total liabilities and stockholders’ equity	$	18,742		$	20,553

Going Concern (Note 1)

See accompanying notes to the condensed consolidated financial statements.

F-1

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Loop Industries, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands of U.S. dollars, except per share data)	Three Months Ended
	May 31, 2024			May 31, 2023
Revenue from contracts with customers	$	6		$	27

Expenses :
Research and development (Note 12)		2,237			4,490
General and administrative (Note 13)		2,911			2,465
Depreciation and amortization (Notes 6 and 7)		137			133
Total expenses		5,285			7,088

Other (income) loss :
Interest and other financial expenses		60			54
Interest income		(126	)		(99	)
Foreign exchange gain		(24	)		(15	)
Total other income		(90	)		(60	)
Net loss		(5,189	)		(7,001	)

Other comprehensive (loss) income -
Foreign currency translation adjustment		(55	)		20
Comprehensive loss	$	(5,244	)	$	(6,981	)
Net loss per share
Basic and diluted	$	(0.11	)	$	(0.15	)
Weighted average common shares outstanding
Basic and diluted		47,535,413			47,516,104

Going Concern (Note 1)

See accompanying notes to the condensed consolidated financial statements.

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Loop Industries, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited)

(in thousands of U.S. dollars, except for share data)	Three months ended May 31, 2024
	Common stock				Preferred stock						Additional					Accumulated Other
	par value $0.0001				par value $0.0001				Additional		Paid-in					Comprehensive			Total
	Number of Shares		Amount		Number of Shares		Amount		Paid-in Capital		Capital – Warrants		Accumulated Deficit			Income (Loss)			Stockholders’ Equity
Balance, February 29, 2024		47,528,908	$	5		1	$	-	$	171,792	$	20,385	$	(176,970	)	$	(1,070	)	$	14,142
Issuance of shares upon the vesting of restricted stock units (Note 14)		9,837		-		-		-		-		-		-			-			-
Stock options issued for services (Note 14)		-		-		-		-		146		-		-			-			146
Restricted stock units issued for services (Note 14)		-		-		-		-		224		-		-			-			224
Foreign currency translation		-		-		-		-		-		-		-			(55	)		(55	)
Net loss		-		-		-				-		-		(5,189	)		-			(5,189	)
Balance, May 31, 2024		47,538,745	$	5		1	$	-	$	172,162		20,385		(182,159	)		(1,125	)		9,268

Going Concern (Note 1)

(in thousands of U.S. dollars, except for share data)	Three months ended May 31, 2023
	Common stock				Preferred stock						Additional					Accumulated Other
	par value $0.0001				par value $0.0001				Additional		Paid-in					Comprehensive			Total
	Number of Shares		Amount		Number of Shares		Amount		Paid-in Capital		Capital – Warrants		Accumulated Deficit			Income (Loss)			Stockholders’ Equity
Balance, February 28, 2023		47,469,224	$	5		1	$	-	$	170,370	$	20,385	$	(155,883	)	$	(1,141	)	$	33,736
Issuance of shares upon the vesting of restricted stock units (Note 14)		51,963		-		-		-		-		-		-			-			-
Stock options issued for services (Note 14)		-		-		-		-		162		-		-			-			162
Restricted stock units issued for services (Note 14)		-		-		-		-		193		-		-			-			193
Foreign currency translation		-		-		-		-		-		-		-			20			20
Net loss		-		-		-		-		-		-		(7,001	)		-			(7,001	)
Balance, May 31, 2023		47,521,187	$	5		1	$	-	$	170,725	$	20,385	$	(162,884	)	$	(1,121	)	$	27,110

Going Concern (Note 1)

See accompanying notes to the condensed consolidated financial statements.

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Loop Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands of U.S. dollars)	Three Months Ended May 31,
	2024			2023
Cash Flows from Operating Activities
Net loss	$	(5,189	)	$	(7,001	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization (Notes 6 and 7)		137			133
Stock-based compensation expense (Note 14)		370			355
Accretion expense (Note 10)		28			17
Changes in operating assets and liabilities:
Sales tax and tax credits receivable (Note 3)		108			(83	)
Inventories (Note 4)		3			(144	)
Prepaid expenses (Note 5)		51			(90	)
Accounts payable and accrued liabilities (Note 9)		577			1,321
Customer deposits		-			(12	)
Net cash used in operating activities		(3,915	)		(5,504	)

Cash Flows from Investing Activities
Deposits on machinery and equipment		-			(2,023	)
Additions to intangible assets (Note 7)		(176	)		(99	)
Net cash used in investing activities		(176	)		(2,122	)

Cash Flows from Financing Activities
Borrowings under credit facility (Note 10)		2,517			-
Repayment of long-term debt (Note 10)		(25	)		(16	)
Net cash (used) provided by financing activities		2,492			(16	)

Effect of exchange rate changes		(68	)		21
Net decrease in cash		(1,667	)		(7,621	)
Cash, cash equivalents and restricted cash, beginning of period		6,958			30,591
Cash, cash equivalents and restricted cash, end of period	$	5,291		$	22,970

Supplemental Disclosure of Cash Flow Information:
Income tax paid	$	-		$	-
Interest paid	$	42		$	21
Interest received	$	195		$	99

Going Concern (Note 1)

See accompanying notes to the condensed consolidated financial statements.

F-4

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Loop Industries, Inc.

Three Months Ended May 31, 2024 and 2023

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. The Company, Basis of Presentation and Going Concern

The Company

Loop Industries, Inc. (the “Company,” “Loop,” “we,” or “our”) is a technology company that owns patented and proprietary technology that depolymerizes no and low-value waste polyethylene terephthalate (“PET”) plastic and polyester fiber to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop^™ branded PET resin suitable for use in food-grade packaging and polyester fiber. The Company is currently in the pre-commercialization stage with limited revenues.

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures included in these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2024, filed with the SEC on May 29, 2024. The unaudited interim condensed consolidated financial statements comprise the consolidated financial position and results of operations of Loop Industries, Inc. and its subsidiaries, Loop Innovations, LLC and Loop Canada Inc. All subsidiaries are, either directly or indirectly, wholly owned subsidiaries of Loop Industries, Inc. (collectively, the “Company”). The Company also owns, through Loop Innovations, LLC, a 50% interest in a joint venture, Indorama Loop Technologies, LLC, which is accounted for under the equity method.

Intercompany balances and transactions are eliminated on consolidation. The condensed consolidated balance sheet as of February 29, 2024, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by US GAAP on an annual reporting basis. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results for the three months ended May 31, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter, for the fiscal year ending February 28, 2025, or for any other period.

All monetary amounts in these notes to the condensed consolidated financial statements are in thousands of U.S. dollars unless otherwise specified, except for per share data.

Going Concern

These unaudited interim condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the date of issuance of these consolidated financial statements.

Since its inception, the Company has been in the pre-commercialization stage with no material revenues from customers, and its ongoing operations and commercialization plans have been financed primarily by raising equity and debt. Therefore, the Company has incurred net losses and negative cash flow from operating and investing activities since its inception and expects to incur additional net losses while it continues to develop and plan for commercialization. As at May 31, 2024, the Company’s balance of cash and cash equivalents was $5,291.

Management continuously monitors the Company’s cash resources against its short-term cash commitments to ensure there is sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is substantial doubt about its ability to continue as a going concern. In preparing this going concern assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to the estimation of amount and timing of future cash outflows and inflows. Based on its assessment, management estimates that current available liquidity and forecasted net cash flows will not be sufficient to meet the Company’s obligations, commitments and budgeted expenditures the next twelve months from the unaudited interim condensed consolidated financial statements issuance date. These events and conditions are material uncertainties that raise substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of accounting principles applicable to a going concern.

F-5

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The Company’s ability to move to the next stage of its strategic development and construct manufacturing plants is dependent on, among other factors, whether the Company can obtain the necessary financing through a combination of the issuance of debt, equity, and/or joint ventures, and/or government incentive programs and/or customers. However, there is no assurance that the Company will be successful in attracting additional funding. Even if additional financing is available, it may not be available on terms favorable to the Company. Failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on the Company’s financial position and on its ability to execute its business plan. The Company is seeking to finalize the negotiation of previously announced financing initiatives on acceptable terms (see Note 16 for additional details), however, there is no assurance it will succeed.

These unaudited interim condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include the going concern assessment, the net realizable value of inventories, estimates for depreciable lives of property, plant and equipment and intangible assets, recoverability of tax credits receivable, assumptions made in calculating the fair value of stock-based compensation and other equity instruments, and the assessment of performance conditions for stock-based compensation awards.

Net earnings (loss) per share

The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. The Company includes common stock issuable in its calculation. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation if their effect is antidilutive.

For the three-month periods ended May 31, 2024 and 2023, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at May 31, 2024, the potentially dilutive securities consisted of 2,971,216 outstanding stock options (2023 – 2,782,000), 4,399,060 outstanding restricted stock units (2023 – 4,306,655), and 7,089,400 outstanding warrants (2023 – 7,089,400).

Recently issued accounting pronouncements not yet adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. The updated standard is effective for our annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements, other than additional disclosures in our notes to the consolidated financial statements.

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In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for our annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

3. Sales Tax, Tax Credits and Other Receivables

Sales tax, research and development tax credits and other receivables as at May 31, 2024 and February 29, 2024 were as follows:

	May 31, 2024		February 29, 2024
Sales tax	$	89	$	75
Research and development tax credits		145		160
Interest income receivable		-		70
Other receivables		8		46
	$	242	$	351

4. Inventories

Inventories as at May 31, 2024 and February 29, 2024 were as follows:

	May 31, 2024			February 29, 2024
Finished goods	$	549		$	552
Work in process		322			333
Raw materials		31			34
Allowance for inventory write-down		(803	)		(817	)
	$	99		$	102

As at May 31, 2024 and February 29, 2024, inventories included finished goods, work in process and raw materials. Finished goods inventories consist of bottle grade and fiber grade Loop^™ PET resin which is intended to be sold to customers. Work in process inventories consist of recycled monomers (dimethyl terephthalate (“rDMT”) and monoethylene glycol (“rMEG”)), either purified or yet to be purified, resulting from the depolymerization of PET feedstock. These monomers are intended be polymerized into Loop^™ PET resin in the future. Raw materials inventories consist of chemicals which are used as inputs in the PET depolymerization process. As at May 31, 2024 and February 29, 2024, finished goods and work in process inventories were presented at their net realizable value, while raw materials were presented at average cost. As at May 31, 2024, the Company recorded an allowance for inventory write-down of $803 (February 29, 2024 – $817) on finished goods and work in process inventories related to inventory volumes not expected to be sold in the next twelve months.

5. Deposits and Prepaid Expenses

Prepaid expenses and other deposits as at May 31, 2024 and February 29, 2024 were as follows:

	May 31, 2024		February 29, 2024
Insurance	$	399	$	449
Other		126		128
	$	525	$	577

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6. Property, Plant and Equipment

	As at May 31, 2024
	Cost		Accumulated depreciation, write-down and impairment			Net book value
Machinery and equipment⁽¹⁾	$	8,460	$	-		$	8,460
Building		1,818		(385	)		1,433
Land		225		-			225
Building and Land Improvements		1,844		(1,535	)		309
Office equipment and furniture		273		(167	)		106
	$	12,620		(2,087	)		10,533

(1)	The equipment, which is being held in storage with the intention to be used in a commercial facility, is presented in machinery and equipment at cost and is currently not being amortized.

	As at February 29, 2024
	Cost		Accumulated depreciation, write-down and impairment			Net book value
Machinery and equipment	$	8,460	$	-		$	8,460
Building		1,827		(371	)		1,456
Land		226		-			226
Building and Land Improvements		1,853		(1,472	)		381
Office equipment and furniture		275		(162	)		113
	$	12,641	$	(2,005	)	$	10,636

Depreciation expense amounted to $91 for the three-month period ended May 31, 2024 (2023 – $101).

7. Intangible Assets

Intangible assets as at May 31, 2024 and February 29, 2024 were $1,671 and $1,548, respectively.

During the three-month periods ended May 31, 2024 and 2023, we made additions relating to patent application costs to intangible assets of $176 and $99, respectively.

Amortization expense for the three-month period ended May 31, 2024 amounted to $46 (2023 – $32).

8. Fair Value of Financial Instruments

The following tables presents the fair value of the Company’s financial liabilities as at May 31, 2024 and February 29, 2024:

	Fair Value at May 31, 2024
	Carrying Amount		Fair Value		Level in the hierarchy
Financial liabilities measured at amortized cost:
Long-term debt	$	5,799	$	5,862	Level 2
Due to customer	$	784	$	784	Level 2

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	Fair Value at February 29, 2024
	Carrying Amount		Fair Value		Level in the hierarchy
Financial liabilities measured at amortized cost:
Long-term debt	$	3,320	$	3,377	Level 2
Due to customer	$	770	$	770	Level 2

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

9. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities as at May 31, 2024 and February 29, 2024 were as follows:

	May 31, 2024		February 29, 2024
Trade accounts payable	$	1,466	$	602
Accrued employee compensation		546		801
Accrued engineering fees		-		511
Accrued professional fees		706		274
Other accrued liabilities		173		133
	$	2,891	$	2,321

10. Long‑Term Debt

Long-term debt as of May 31, 2024 and February 29, 2024, was comprised of the following:

	May 31, 2024			February 29, 2024
Investissement Québec financing facility:
Principal amount	$	3,318		$	3,353
Unamortized discount		(187	)		(191	)
Accrued interest		151			158
Total Investissement Québec financing facility		3,282			3,320
Less: current portion of long-term debt		(244	)		(100	)
		3,038			3,220
Credit facility		2,517			-
Long-term debt, net of current portion	$	5,555		$	3,220

Investissement Québec financing facility

The Company recorded interest expense on the Investissement Québec loan for the three-month period ended May 31, 2024 in the amount of $30 (2023 – $21) and an accretion expense of $14 (2023 – $17). During the three-month period ended May 31, 2024, the Company made repayments of $25 (2023 – $16) on the Investissement Québec loan.

Credit facility from a Canadian bank

On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank. The Credit Facility allows for borrowings of up to $2,567 in aggregate principal amount and provides for a two-year term on amounts drawn. The Credit Facility is secured by the Company’s Terrebonne, Québec property and is subject to a minimum equity covenant, tested quarterly with which the Company was in compliance as at May 31, 2024. All borrowings under the Credit Facility bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0%. As at May 31, 2024, the Company borrowed $2,517 under the Credit Facility.

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

Years ending	Amount
February 28, 2025	$	74
February 28, 2026		679
February 28, 2027		3,196
February 29, 2028		679
February 28, 2029		679
Thereafter		679
Total	$	5,986

11. Stockholders’ Equity

Common Stock

For the period ended May 31, 2024	Number of shares		Amount
Balance, February 29, 2024		47,528,908	$	5
Issuance of shares upon settlement of restricted stock units		9,837		-
Balance, May 31, 2024		47,538,745	$	5

For the period ended May 31, 2023	Number of shares		Amount
Balance, February 28, 2023		47,469,224	$	5
Issuance of shares upon settlement of restricted stock units		51,963		-
Balance, May 31, 2023		47,521,187	$	5

During the three months ended May 31, 2024, the Company recorded the following common stock transaction:

(i)	The Company issued 9,837 shares of the common stock to settle restricted stock units that vested in the period.

During the three months ended May 31, 2023, the Company recorded the following common stock transaction:

(i)	The Company issued 51,963 shares of the common stock to settle restricted stock units that vested in the period.

12. Research and Development Expenses

Research and development expenses for the three-month periods ended May 31, 2024 and 2023 were as follows:

	May 31, 2024		May 31, 2023
Employee compensation	$	1,144	$	1,446
Machinery and equipment expenditures		3		1,236
External engineering		628		1,155
Plant and laboratory operating expenses		270		469
Other		192		184
	$	2,237	$	4,490

13. General and Administrative Expenses

General and administrative expenses for the three-month periods ended May 31, 2024 and 2023 were as follows:

	May 31, 2024		May 31, 2023
Employee compensation	$	876	$	833
Insurance		492		703
Professional fees		1,255		619
Other		288		310
	$	2,911	$	2,465

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14. Share-based Payments

Stock Options

The following table summarizes the continuity of the Company’s stock options during the three-month periods ended May 31, 2024 and 2023:

	2024				2023
	Number of stock options		Weighted average exercise price		Number of stock options		Weighted average exercise price
Outstanding, beginning of period		2,772,000	$	5.10		2,542,000	$	5.27
Granted		199,216		2.89		240,000		3.11
Exercised		-		-		-		-
Forfeited		-		-		-		-
Expired		-		-		-		-
Outstanding, end of period		2,971,216	$	4.95		2,782,000	$	5.08
Exercisable, end of period		1,890,000	$	6.39		1,670,000	$	6.84

The Company applies the fair value method of accounting for stock-based compensation awards granted. Fair value is calculated based on a Black-Scholes option pricing model. The principal components of the pricing model for the stock options granted in the three-month period ended May 31, 2024 and 2023 were as follows:

	2024			2023
Exercise price	$	2.89			3.11
Risk-free interest rate		4.09	%		3.84	%
Expected dividend yield		0	%		0	%
Expected volatility		73	%		79	%
Expected life	7 years			3 years

During the three-month periods ended May 31, 2024 and 2023, stock-based compensation expense attributable to stock options amounted to $146 and $162, respectively.

Restricted Stock Units

The following table summarizes the continuity of the restricted stock units during the three-month periods ended May 31, 2024 and 2023:

	2024					2023
	Number of units			Weighted average fair value price		Number of units			Weighted average fair value price
Outstanding, beginning of period		4,368,897		$	6.53		3,888,618		$	7.09
Granted		40,000			2.85		470,000			2.87
Settled		(9,837	)		8.31		(51,963	)		8.66
Forfeited		-			-		-			-
Outstanding, end of period		4,399,060		$	6.49		4,306,655		$	6.61
Outstanding vested, end of period		1,727,575		$	6.07		1,568,497		$	6.31

The Company applies the fair value method of accounting for awards granted through the issuance of restricted stock units. Fair value is calculated based on the intrinsic value at grant date multiplied by the number of restricted stock unit awards granted.

During the three-month periods ended May 31, 2024 and 2023, stock-based compensation attributable to RSUs amounted to $224 and $193, respectively.

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Stock-Based Compensation Expense

During the three-month periods ended May 31, 2024 and 2023, stock-based compensation included in research and development expenses amounted to $129 and $159, respectively, and in general and administrative expenses amounted to $241 and $196, respectively.

15. Equity Incentive Plan

On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”). The Plan permits the granting of warrants, stock options, stock appreciation rights and restricted stock units to employees, directors and consultants of the Company. A total of 3,000,000 shares of common stock were initially reserved for issuance under the Plan at July 6, 2017, with annual automatic share reserve increases, as defined in the Plan, amounting to the lessor of (i) 1,500,000 shares, (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Administrator of the Plan, effective March 1, 2018. On March 1, 2024, the share reserve was increased by 1,500,000 shares (2023 – 1,500,000). The Plan is administered by the Board of Directors who designates eligible participants to be included under the Plan, the number of awards granted, the share price pursuant to the awards and the vesting conditions and period. The awards, when granted, will have an exercise price of no less than the estimated fair value of shares at the date of grant and a life not exceeding 10 years from the grant date. However, where a participant, at the time of the grant, owns stock representing more than 10% of the voting power of the Company, the life of the options shall not exceed 5 years.

The following table summarizes the continuity of the Company’s Equity Incentive Plan units that were authorized for issuance as at and during the three-month periods ended May 31, 2024 and 2023:

	2024			2023
	Number of units*			Number of units*
Authorized, beginning of period		848,244			120,486
Automatic share reserve increase		1,500,000			1,500,000
Units granted		(239,216	)		(710,000	)
Units forfeited		-			-
Units expired		-			-
Authorized, end of period		2,109,028			910,486

*The use of the term “units” in the table above describes a combination of stock options and RSUs.

16. Contractual agreements

Agreement with Reed Management SAS (“Reed”)

On May 30, 2024, the Company and Reed, a European investment firm focused on high impact and technology-enabled infrastructure, entered into definitive binding agreements, subject to certain closing conditions, for an investment of €35 million from Reed to fund the global commercialization of the Infinite Loop™ Technology and have agreed to form a 50/50 joint venture for the European deployment of Loop’s technology.

Under the terms of the agreement, which has been signed following the completion by Reed of extensive operational, technical, ESG, and legal due diligence, Reed will provide capital as follows:

	·	€10M investment in a Convertible Preferred Security to be issued by Loop, which contains a 13% PIK dividend rate and 5-year term; and
	·	€25M loan to Loop in two equal tranches – first tranche to support global deployment opportunities paid at closing and second tranche to support European deployment opportunities paid in the following 12 months with both tranches having a 13% PIK interest rate and 3-year term;

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The closing of the transaction is subject to the fulfillment of certain closing conditions, principally the conditions that (i) Reed shall have successfully completed its first capital raising for its fund; and (ii) Loop shall have received a binding financing commitment from a governmental agency.

Strategic partnership with Ester Industries Ltd. (“Ester”)

On May 1, 2024, the Company entered into an agreement with Ester, a manufacturer of polyester films and specialty polymers in India, to form a 50/50 joint venture based in India ("India JV"). The purpose of the India JV is to build and operate an Infinite Loop^™ manufacturing facility in India which will produce lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop^™ Technology. To date, no amounts have been contributed by the Company to the India JV.

Subject to the terms of the relevant governing documents, Ester will be the exclusive producer of specialty polymers for the India JV, and the Company will be the exclusive seller and marketing agent of the India JV’s products. Ester and the Company will work in collaboration on all financing activities for the India JV pursuant to the terms of the agreement. Pursuant to the terms of the relevant governing documents, Loop and Ester parties will endeavor to obtain debt for a minimum of 60% of the total installed cost of the Infinite Loop™ manufacturing facility in India and will each contribute 50% of the initial equity capital of the India JV.

Agreement with SK Geo Centric Co. Ltd. (“SKGC”)

On April 27, 2023, the Company and SKGC entered into an agreement to build Infinite Loop^™ manufacturing facilities in Asia. Pursuant to the agreement, the Company and SKGC agreed to form a new entity, which will be headquartered in Singapore. To date, no amounts have been contributed by the Company to the new entity.

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

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

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the “Company,” “Loop,” “we,” or “our”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, ability to improve and expand our capabilities, competition, expected activities and expenditures as we pursue our business plan, the adequacy of our available cash resources, regulatory compliance, plans for future growth and future operations, the size of our addressable market, market trends, and the effectiveness of the Company’s internal control over financial reporting. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Actual results may differ materially from the projections discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under “Risk Factors.” Additional factors that could materially affect these forward-looking statements and/or projections include, among other things: (i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our current and future financial commitments, (vi) engineering, contracting, and building our manufacturing facilities, (vii) our ability to scale, manufacture, and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) the ability to obtain the necessary approvals or satisfy any closing conditions in respect of any of our proposed partnerships, (x) our joint venture projects and our ability to recover certain expenditures in connection therewith, (xi) adverse effects on the Company’s business and operations as a result of increased regulatory, media, or financial reporting scrutiny, practices, rumors, or otherwise, (xii) disease epidemics and other health-related concerns and crises, which could result in reduced access to capital markets, supply chain disruptions and scrutiny, embargoing of goods produced in affected areas, government-imposed mandatory business closures and any resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, or market or other changes that could result in non-cash impairments of our intangible assets, and property, plant and equipment, (xiii) the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates, (xiv) the outcome of any SEC investigations or class action litigation filed against us, (xv) our ability to hire and/or retain qualified employees and consultants, (xvi) other events or circumstances over which we have little or no control, and (xvii) other factors discussed in our subsequent filings with the Securities and Exchange Commission (the “SEC”).

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

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

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

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General

As used in this Quarterly Report on Form 10-Q, the following terms are being provided so investors can better understand our business:

Depolymerization refers to the chemical process of breaking down a polymer molecule into its constituent monomers or smaller subunits. Depolymerization is the opposite of polymerization.

DMT is an acronym for dimethyl terephthalate, which is a monomer used in the production of polyethylene terephthalate (“PET”), as well as other products.

MEG is an acronym for monoethylene glycol, which is a monomer used in the production of PET, as well as other products.

Polymerization refers to a process of reacting monomer molecules together in a chemical reaction to form polymer chains or three-dimensional networks.

PET is an acronym for polyethylene terephthalate, which is a resin and a type of polyester showing excellent tensile and impact strength, chemical resistance, clarity, and processability, and reasonable thermal stability. PET is the material which is most commonly used for the production of polyester fiber and plastic packaging, including plastic bottles for water and carbonated soft drinks, containers for food and other consumer products; it is commonly identified by the number “1”, often inside an image of a triangle, on the packaging. PET is also used as a polyester fiber for a variety of applications including textiles, clothing and apparel.

rPET, rDMT and rMEG are acronyms for recycled PET, DMT and MEG.

All monetary amounts in this Quarterly Report on Form 10-Q are in thousands of U.S. dollars unless otherwise specified, except for per share data.

Introduction

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

We also intend to leverage the Infinite Loop^™ Technology to expand into specialty chemicals and polymers through a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers. Loop intends to produce and sell rDMT, rMEG and other specialty polymers directly to chemical companies as a simple drop-in supplement and circular alternative. We believe this expanded product portfolio will enable the Infinite Loop^™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging and other applications. This recent expansion in Loop’s product offering is non-reliant on green premiums or carbon and plastic credits, and we believe it addresses a global shortage in supply of DMT and high demand for low carbon MEG, and lowers capital intensity for commercial projects with the removal of polymerization equipment.

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

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Background

Industry Background

We believe Loop’s depolymerization technology offers a complementary solution to mechanical recycling by enabling the use of a wider variety of PET feedstock, including complex and degraded plastics as well as polyester fiber, to produce virgin quality rPET with no degradation through continued recycling.

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

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

Depolymerization is a process in which plastics are broken down into their constituent molecules through chemical reactions, rather than being physically melted down and reprocessed as in mechanical recycling. This approach, which we utilize, has several advantages over mechanical recycling, which can have limitations due to the complexity and diversity of plastics.

One of the main limitations of mechanical recycling is that it is difficult to recycle plastics that have been contaminated or degraded. For example, if a plastic container has been exposed to heat or sunlight, it may become brittle and prone to breaking during the recycling process. Another limitation of mechanical recycling is that it is difficult to recycle certain types of plastics, such as multi-layered or composite plastics. These plastics are often used in food packaging or other products that require specialized properties like barrier protection or insulation. Depolymerization, however, can break down these degraded or complex plastics into their constituent molecules, which can then be purified and used to create new products.

Loop’s depolymerization technology has the potential to create a closed-loop system for plastic waste, whereby plastics can be recycled an infinite number of times without degrading the quality of the material. This is because the constituent molecules can be broken down and reassembled without losing their original properties, which can reduce the need for new plastics to be produced.

We believe Loop’s depolymerization technology offers a promising solution to the limitations of mechanical recycling by enabling the recirculation of more diverse and complex plastics, reducing waste and pollution, and creating a closed-loop system for plastic waste.

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Our depolymerization technology breaks down waste PET into DMT and MEG. The monomers are purified and then recombined into virgin quality PET plastic and polyester fiber. We use low value PET plastic and polyester fiber waste as feedstock. Our technology can process PET plastic bottles and packaging of any color, transparency or condition, carpet, clothing and other polyester textiles that may contain colors, dyes, or additives, and even PET plastics that have been recovered from the ocean and degraded by exposure to sun and salt. We believe that our ability to use many materials that mechanical recyclers cannot process is an important advantage of Loop^™ PET resin and further expands the range of PET waste streams that may be recycled. This also means we are creating a new market for materials that have persistently been leaking out of the waste management system and into shared rivers, oceans and natural areas.

Currently, the DMT market is largely dominated by few key players, leaving limited options for customers and high market concentration. Additionally, the market is experiencing a global shortage of DMT, amplifying market challenges and creating a pressing need for alternative sources. The introduction of Loop’s rDMT has the potential to shift the market dynamic by offering a sustainable alternative to traditional DMT produced from fossil fuels.

In parallel, low-carbon MEG is in high demand and customers are increasingly seeking alternative solutions, but market options are limited and costly. As sustainability concerns intensify and regulatory pressures mount, the demand for low carbon MEG solutions is expected to continue to grow. Loop’s rMEG has the potential to address a gap in the market and help fulfill customers’ needs by offering a lower carbon footprint recycled alternative to the current market options for MEG.

Strategic partnership with Ester Industries Ltd. (“Ester”)

On May 1, 2024 Loop entered into an agreement with Ester, one of India's leading manufacturers of polyester films and specialty polymers, to form a 50/50 India joint venture (“India JV”). The purpose of the India JV is to build and operate an Infinite Loop^™ manufacturing facility in India which will produce a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop^™ Technology.

Loop and Ester have a well-established working relationship, with Ester producing Loop^™ PET using monomers produced at Loop’s Terrebonne Facility for global brand companies over the last four years. The India JV intends to leverage the complementary skill set of each partner by combining Loop's innovative technology and global customer relationships with Ester's nearly 40 years of specialized polymer production, operational proficiency, and local expertise, including sourcing of PET plastic and polyester fiber waste feedstocks.

The Infinite Loop^™ India facility is expected to produce 70,000 tonnes of rDMT and 23,000 tonnes of rMEG annually and Ester will toll convert the rDMT and rMEG into various grades of specialty polymers, offering chemical companies a simple drop-in supplement and circular alternative.

The rDMT and rMEG product offerings expected to be manufactured at the Infinite Loop^™ India facility represent a strategic product expansion in a low-cost manufacturing environment which we believe complements Loop's existing PET plastic and polyester fiber manufacturing business and will fuel growth by addressing the large and growing demand in the market. We believe this expansion will enable the Infinite Loop^™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging.

The India facility will leverage the Infinite Loop^™ Technology and existing engineering package which should accelerate the lead-time towards groundbreaking, expected to occur by end of 2024. Feedstock sourcing for the facility, in which there is abundant supply from textile waste in India, is well advanced and the partners have engaged an external firm to source and secure the land for the facility. Construction is expected to be completed by the end of 2026, with commercial operations commencing in early 2027.

We believe the India JV offers attractive projected economic returns without the need for substantial sustainability-linked premium pricing. Loop and Ester anticipate that initial funding required to finance the India JV for the purposes of construction, development and operationalization of the project along with initial working capital requirements for the business is expected to be $165 million. Ester and Loop will each contribute 50% of the initial equity capital of the India JV.

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Subject to the terms of the relevant governing documents, Ester will be the exclusive producer of specialty polymers for the India JV, and Loop will be the exclusive seller and marketing agent of the India JV’s products. Ester and Loop will work in collaboration on all financing activities for the India JV pursuant to the terms of the agreement.

Loop and Ester will also enter into (i) a technology license agreement with Loop (the “Loop Technology License Agreement”), (ii) a service agreement with Ester, and (iii) a sales and marketing agreement with Loop, each on terms to be mutually agreed upon by the parties. Pursuant to the Loop Technology License Agreement, the India JV will be granted an exclusive, subject to certain exceptions, license to exploit the Infinite Loop^™ Technology in India at a royalty rate to be set forth in the Loop Technology License Agreement.

Strategic Partnership with SK Geo Centric (“SKGC”)

The planned Infinite Loop^™ commercial manufacturing facility in Ulsan, South Korea, is expected to have an annual capacity to supply up to 70,000 metric tons per year of Loop^™ PET resin for packaging and polyester fiber applications, and was planned to break ground in the first half of 2024. The timing of the facility is currently under review by the partners while they evaluate opportunities to reduce capital costs and carry out discussions with the Korean government for subsidies related to the facility. Loop and SKGC are also evaluating the opportunity to build a monomer facility in order to capitalize on the large and growing market and attractive economics for DMT and MEG, including lower capital investment requirements for such a facility.

Infinite Loop^™ Europe

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

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

On February 16, 2023, the three companies announced that the Chemesis industrial platform in Saint-Avold, located in the Grand Est region of France, has been selected as the site for their planned manufacturing facility in Europe. We are working with our partners Suez and SKGC on acquiring the project site, alignment of various levels of government support and additional steps for the project which include advancing permitting, site specific engineering, customer offtake contracts, feedstock and financing.

Agreement with Reed Management SAS (“Reed”)

Under the terms of the agreement, which has been signed following the completion by Reed of extensive operational, technical, ESG, and legal due diligence, Reed will provide capital as follows:

	·	€10M investment in a Convertible Preferred Security to be issued by Loop, which contains a 13% PIK dividend rate and 5-year term; and
	·	€25M loan to Loop in two equal tranches – first tranche to support global deployment opportunities paid at closing and second tranche to support European deployment opportunities paid in the following 12 months with both tranches having a 13% PIK interest rate and 3-year term;

The Company understands that Reed’s funding negotiations are progressing well. The Company also believes that its process to obtain the government funding is advancing positively. While there can be no assurance that the abovementioned closing conditions will be met, the Company currently anticipates that the transaction should close by the end of the second quarter of the current fiscal year. Due to its current liquidity position, the Company is reviewing contingency plans for bridge financing in the event that the closing extends beyond the end of the second quarter.

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Product activations

Loop has collaborated with multiple customers in recent and upcoming launches for products and product packaging incorporating Loop^™ PET manufactured from monomers produced at Loop’s small-scale production facility in Terrebonne, Québec (the “Terrebonne Facility”).

Most recently, Loop and On AG, the Swiss sportswear brand, collaborated to launch the Cloudeasy Cyclon shoe which was unveiled on May 21, 2024. The upper of the Cloudeasy shoe is crafted with 100% recycled and infinitely recyclable yarn, using the Infinite Loop^™ Technology. On AG is the first footwear company to launch a shoe using the Infinite Loop^™ Technology which enables fiber-to-fiber recycling. The Cloudeasy Cyclon shoe is part of On AG’s monthly subscription service Cyclon^™ where customers receive, wear, and then return Cylon^™ products, which are then recycled.

Loop continues to pursue opportunities for new activations and marketing campaigns with additional consumer goods brand companies.

Commercialization Strategy

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

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

We have completed our basic design package for the Infinite Loop^™ full-scale manufacturing facilities. The engineering philosophy we have adopted is “design one, build many.” This approach allows for the basic design package to be used as the base engineering platform for all future geographical expansion. We believe this approach allows for quick execution, speed to market, and lends itself well to modular construction. The basic design package has a capacity of up to 70,000 M/T of rDMT and 23,000 M/T of rMEG, or 70,000 M/T of PET resin output per year. Permitting, site and regulatory considerations may impact plant capacity.

On May 1, 2024, we announced our strategic partnership with Ester to build and operate an Infinite Loop^™ manufacturing facility in India which will produce a unique product offering of lower carbon footprint rDMT, rMEG and specialty polymers, using the Infinite Loop^™ Technology. Loop has a well-established working relationship with Ester, which has nearly 40 years of specialized polymer production, operational proficiency, and local expertise, including sourcing of PET plastic and polyester fiber waste feedstocks. The rDMT and rMEG product offerings expected to be manufactured at the Infinite Loop^™ India facility represent a strategic product expansion in a low-cost manufacturing environment which we believe complements Loop's existing PET plastic and polyester fiber manufacturing business and will fuel growth by addressing the large and growing demand in the market. We believe this expansion will enable the Infinite Loop^™ Technology to reach new markets and cater to a broader range of customers across multiple industries including electronics, automotive, textile, cosmetics and packaging.

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We are also focused on our planned joint venture projects with SKGC in Asia and Europe to build and operate Infinite Loop^™ manufacturing facilities producing and selling Loop^™ PET resin and polyester fiber. These projects leverage SKGC’s engineering and operational infrastructure. In addition, the joint venture projects will provide Loop with an annual technology licensing fee. SKGC is committed to commercializing Loop’s technology as the underpinning of its sustainable plastics strategy. Loop is working collaboratively with SKGC to put in place a financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the planned Asian manufacturing facility in Ulsan, South Korea.

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

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

Human Capital

As of May 31, 2024, we had 54 employees of which 20 work in research and development, 21 in engineering and operations, and 13 in administrative functions.

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Results of Operations

The following table summarizes our operating results for the three-month periods ended May 31, 2024 and 2023, in thousands of U.S. Dollars.

	Three months ended May 31,
	2024			2023			Change favorable / (unfavorable)
Revenue from contracts with customers	$	6		$	27		$	(21	)

Expenses
Research and development
Machinery and equipment expenditures		3			1,236			1,233
External engineering		628			1,155			527
Employee compensation		1,015			1,286			271
Stock-based compensation		129			160			31
Plant and laboratory operating expenses		270			469			199
Other		192			184			(8	)
Total research and development		2,237			4,490			2,253

General and administrative
Professional fees		1,255			619			(636	)
Employee compensation		635			637			2
Stock-based compensation		241			196			(45	)
Insurance		492			703			211
Other		288			310			22
Total general and administrative		2,911			2,465			(446	)

Depreciation and amortization		137			133			(4	)
Interest and other financial expenses		60			54			(6	)
Interest income		(126	)		(99	)		27
Foreign exchange gain		(24	)		(15	)		9
Total expenses		5,195			7,028			1,833
Net loss	$	(5,189	)	$	(7,001	)	$	1,812

First Quarter Ended May 31, 2024

Revenues

Revenues for the three-month period ended May 31, 2024 decreased $21 to $6, as compared to $27 for the same period in 2023. The revenues resulted from the delivery of initial volumes to customers of Loop^™ PET resin produced using monomers manufactured at the Terrebonne Facility.

Research and Development

Research and development expense for the three-month period ended May 31, 2024 decreased $2,253 to $2,237, as compared to $4,490 for the same period in 2023. The decrease was primarily attributable to a $1,233 decrease in purchases of machinery and equipment used at the Terrebonne Facility, a $527 decrease in external engineering costs for design work for our Infinite Loop^™ manufacturing process, a $271 decrease in employee compensation expenses, and a $199 decrease in plant and laboratory expenses at our Terrebonne Facility.

General and administrative expenses

General and administrative expenses for the three-month period ended May 31, 2024 increased $446 to $2,911, as compared to $2,465 for the same period in 2023. The increase was primarily attributable to a $636 increase in professional fees which is mainly attributable to legal costs related to our partnerships with Reed and Ester. This increase was partially offset by a $211 decrease in insurance costs.

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Net Loss

The net loss for the three-month period ended May 31, 2024 decreased $1,812 to $5,189, as compared to $7,001 for the same period in 2023. The decrease was primarily due to the decrease of $2,253 in research and development expenses and partially offset by increased general and administrative expenses of $446.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Since its inception, the Company has been in the pre-commercialization stage with no material revenues, and its ongoing operations and commercialization plans have been financed primarily by raising equity and debt. Therefore, the Company has incurred net losses and negative cash flow from operating and investing activities since its inception and expects to incur additional net losses while it continues to develop and plan for commercialization. To date, we have been successful in raising capital to finance our ongoing operations. Our liquidity position consists of cash and cash equivalents on hand of $5,291 at May 31, 2024. Our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and the Risk Factors section included in Part I, Item 1A of our 2024 Annual Report on Form 10-K.

Management continuously monitors the Company’s cash resources against its short-term cash commitments to ensure there is sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is substantial doubt about its ability to continue as a going concern. In preparing this going concern assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to the estimation of amount and timing of future cash outflows and inflows. Based on its assessment, management estimates that current available liquidity and forecasted net cash flows will not be sufficient to meet the Company’s obligations, commitments and budgeted expenditures the next twelve months from the consolidated financial statements issuance date. These events and conditions are material uncertainties that raise substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of accounting principles applicable to a going concern.

We have a long-term debt obligation to Investissement Québec in connection with a financing facility (the “Financing Facility”) for the expansion of the Terrebonne Facility up to a maximum of $3,390. We received the first disbursement in the amount of $1,628 on February 21, 2020 and the second disbursement in the amount of $1,762 on August 26, 2021. The loan can be repaid at any time by us without penalty. The loan’s interest rate was initially set at 2.36% and there was a 36-month moratorium on both capital and interest repayments as of the first disbursement date. Under the original terms of the Financing Facility, at the end of the 36-month moratorium, capital and interest was repayable in 84 monthly installments. There is no remaining amount available under the Financing Facility after the second disbursement.

On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Financing Facility Amendment”). As per the Financing Facility Amendment, a total of $37 of the principal amount was repaid in monthly installments in the fiscal year ended February 29, 2024 and the remainder of the principal amount is repayable in 72 monthly installments. The Financing Facility Amendment did not modify the interest rates, the repayment terms of accrued interest or any other terms of the Financing Facility.

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On February 28, 2024, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modified the repayments of the principal amount (the “Second Financing Facility Amendment”). As per the Second Financing Facility Amendment, a total of $74 of the principal amount is repayable in monthly installments in the fiscal year ending February 28, 2025, with the remainder of the principal amount being repayable in 60 monthly installments. Pursuant to the Second Financing Facility Amendment the interest rate of the Financing Facility was increased from 2.36% to 3.36%. The Second Financing Facility Amendment did not modify the repayment terms of accrued interest or any of the other terms of the Financing Facility that are not mentioned above.

Under the terms of the Financing Facility, Investissement Québec was also issued warrants to purchase shares of our common stock in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $339. The warrants were issued at a price per share equal to the higher of (i) $11.00 per share and (ii) the ten-day weighted average closing price of Loop Industries shares of common stock on the Nasdaq stock market for the 10 days prior to the issue of the warrants. The warrants can be exercised immediately upon grant and have a term of three years from the date of issuance. On February 21, 2020, upon the receipt of the first disbursement under this facility, we issued a warrant to purchase 15,153 shares of common stock at a price of $11.00 to Investissement Québec, which expired in February 2023. On August 26, 2021, upon the receipt of the second disbursement under this facility, we issued a warrant to purchase 17,180 shares of common stock at a price of $11.00 to Investissement Québec, which remains outstanding.

Flow of Funds

Summary of Cash Flows

A summary of cash flows for the three months ended May 31, 2024 and 2023 was as follows, in thousands of U.S. Dollars:

	Three Months Ended May 31,
	2024			2023
Net cash used in operating activities	$	(3,915	)	$	(5,504	)
Net cash used in investing activities		(176	)		(2,122	)
Net cash provided by (used in) financing activities		2,492			(16	)
Effect of exchange rate changes on cash		(68	)		21
Net decrease in cash	$	(1,667	)	$	(7,621	)

Net Cash Used in Operating Activities

During the three-month period ended May 31, 2024, we used $3,915 in operations compared to $5,504 during the three-month period ended May 31, 2023. As discussed above in the Results of Operations, the year-over-year decrease is mainly due to decreased operating expenses as we have completed the upgrade of the Terrebonne Facility and our basic design package for the Infinite Loop^™ full-scale manufacturing facilities, partially offset by increased legal costs related to our partnerships with Reed and Ester.

Net Cash Used in Investing Activities

During the three months ended May 31, 2024, we used $176 in investing activities compared to $2,122 during the three-month period ended May 31, 2023. During the three months ended May 31, 2024, we made investments in intangible assets of $176, particularly in our patent technology in the United States and around the world. During the three months ended May 31, 2023, we made $2,023 in deposits on machinery and equipment for use in a commercial project, and we made investments in intangible assets of $99.

Net Cash Provided by (Used in) Financing Activities

During the three months ended May 31, 2024, we borrowed $2,517 under the Credit Facility and we repaid $25 of long-term debt. During the three months ended May 31, 2023, we repaid $16 of long-term debt.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Management’s Evaluation of our Disclosure Controls and Procedures

A. Evaluation of Disclosure Controls and Procedures

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

As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of May 31, 2024.

B. Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended May 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

SEC Investigation

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

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

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

Litigation

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

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

ITEM 1A. RISK FACTORS

We are subject to various risks and uncertainties in the course of our business. Risk factors relating to us are set forth under “Risk Factors” in our Annual Report on Form 10-K, filed on May 29, 2024. No material changes to such risk factors have occurred during the three months ended May 31, 2024.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended May 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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ITEM 6. EXHIBITS

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

Exhibit Index

		Incorporated by Reference
Number	Description	Form	File No.	Filing Date	Exhibit No.
3.1	Articles of Incorporation, as amended to date	10-K	001-38301	May 29, 2024	3.1
3.2	By-laws, as amended to date	8-K	001-38301	April 10, 2018	3.1
10.1*	Share Purchase Agreement, dated May 30, 2024 by and between Loop Industries, Inc. and Reed Management SAS.	8-K	001-38301	June 4, 2024	10.1
10.2*+	Joint Venture Agreement, dated May 1, 2024, by and among Ester Industries Limited and Loop Industries, Inc.		Filed herewith
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith
101.INS	XBRL Instance Document		Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document		Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document		Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document		Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document		Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document		Filed herewith
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)		Filed herewith

* Annexes, schedules and certain exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Loop hereby undertakes to furnish supplemental copies of any of the omitted annexes, schedules and exhibits upon request by the SEC.

+ Portions of this document (indicated by “[***]”) have been omitted because such information is not material and is the type of information that the registrant treats as private or confidential.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized..

Date: July 15, 2024	By:	/s/ Daniel Solomita
	Name:	Daniel Solomita
	Title:	President and Chief Executive Officer, and Director (Principal Executive Officer)

Date: July 15, 2024	By:	/s/ Fady Mansour
	Name:	Fady Mansour
	Title:	Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)

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Date	Price Target	Rating	Analyst
12/29/2022		Buy → Neutral	H.C. Wainwright
10/28/2021	$19.50	Outperform	Raymond James
10/7/2021	$23.00	Neutral → Buy	HC Wainwright & Co.

SEC Form 10-Q filed by Loop Industries Inc.

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SEC Filings

Loop Industries Inc. filed SEC Form 8-K: Results of Operations and Financial Condition, Regulation FD Disclosure, Financial Statements and Exhibits