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What changed in Loop Industries, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Loop Industries, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+263 added−285 removedSource: 10-K (2023-05-18) vs 10-K (2022-05-27)

Top changes in Loop Industries, Inc.'s 2023 10-K

263 paragraphs added · 285 removed · 151 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

46 edited+64 added−46 removed28 unchanged
Biggest changeGlobal consumer packaged goods companies (“CPG companies”), apparel manufacturers, and retail brands have announced significant public commitments and targets to make the transition to a circular plastic economy, namely: · In January 2018, Danone’s evian® brand bottled spring water committed to a 100% recycled content package by 2025; · In 2018, Coca-Cola committed to an average recycled content of 50% across its packaging by 2030; · In September 2021, PepsiCo stated 11 European markets are moving key Pepsi-branded products to 100% rPET bottles by 2022, and in the U.S., all Pepsi-branded products will be converted to 100% rPET bottles by 2030.; · In 2020, L’OCCITANE en Provence committed to 100% recycled content plastic in their bottles by 2025; · In 2020, L’Oréal Group committed to using 100% recycled or biobased plastic in their packaging by 2030; · By 2025, Unilever targets increasing the use of post-consumer recycled plastic material in their packaging to at least 25%; · Colgate-Palmolive states a 2025 goal of using at least 25% post-consumer recycled plastic in packaging; · Nestlé aims to increase the amount of recycled PET used across their brands globally to 50% by 2025; · Adidas Group aims to replace all virgin polyester with recycled polyester in all adidas and Reebok products where a solution exists by 2024; · H&M is aiming to ensure that at least 25% of the plastic they use is from post-consumer recycled materials; · Walmart has an objective to use at least 17% post-consumer recycled content globally in their private brand plastic packaging and is taking action to eliminate problematic or unnecessary plastic packaging and move from single-use towards reuse models where relevant by 2025; · Ikea’s ambition is, that by 2030, all plastic used in their products will be based on renewable or recycled material; · Puma is aiming to increase the amount of recycled materials in their apparel and accessories products and by 2025, for 75% of the polyester used in Puma products will be from recycled sources; · By 2025, Lululemon aims to achieve at least 75% sustainable materials for their products, including fibres that are recycled, renewable, regenerative, sourced responsibly and are manufactured using low-resource processes; and · Nike has set a 2025 target of diverting 100% of its waste from landfills with at least 80% recycled back into their products and goods.
Biggest changeIn recent years we have seen major brands make significant commitments to close the loop on their plastic packaging by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging. 8 Table of Contents Global consumer packaged goods companies (“CPG companies”), apparel manufacturers, and retail brands have announced significant public commitments and targets to make the transition to a circular plastic economy, for example: · Adidas Group aims to replace all virgin polyester with recycled polyester in all of its Adidas products by 2024; · Danone, the provider of evian® brand bottled water, committed to a goal of using 100% recycled content packaging by 2025; · Coca-Cola committed to an average recycled content of 50% across its packaging by 2030; · PepsiCo stated 10 European markets are moving key Pepsi-branded products to 100% rPET bottles by 2022, and in the U.S., all Pepsi-branded products will be converted to 100% rPET bottles by 2030; · In 2020, L’OCCITANE committed to implementing 100% recycled content plastic in their bottles by 2025; · Nike has announced a 2025 target of diverting 100% of its waste from landfills, with at least 80% recycled back into its products and goods; · L’Oréal Group committed to using 100% recycled or biobased plastic in their packaging by 2030; · Ikea maintains its goal that, by 2030, all plastic used in its products will be based on renewable or recycled material; and · By 2025, Lululemon aims to achieve at least 75% sustainable materials for their products, including fibers that are recycled, renewable, regenerative, sourced responsibly and are manufactured using low-resource processes.
Some mechanical recycling processes involve remelting the PET flake which reduces the quality of the rPET output each time it is recycled relative to the specifications of virgin PET produced from fossil fuels. Each time the PET plastic is mechanically recycled, its quality and clarity are reduced.
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.
The engineering philosophy we have adopted is “design one, build many.” This approach allows for the basic design package, to be used as the base engineering platform for all future geographical expansion. We believe this approach allows for a quick execution, speed to market and lends itself well to modular construction.
The 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.
This allows for a simplified distillation purification process resulting in fewer, and more effective, steps to isolate the desired high purity DMT and MEG monomers suitable to produce virgin-quality PET required to meet food contact regulations as well as the quality and clarity requirements of global consumer product companies; 6 Table of Contents · Allowing the depolymerization of less costly and low-quality feedstocks, which cannot be effectively recycled today, such as carpet fiber, clothing and mixed plastics, and upcycling them into high-quality PET that can be used in food contact use; and · The GEN II technology uses only trace amounts of water, eliminates the need for a halogenated solvent and uses a catalyst at low concentration.
This allows for a simplified distillation purification process resulting in fewer, and more effective, steps to isolate the desired high purity DMT and MEG monomers suitable to produce virgin-quality PET required to meet food contact regulations as well as the quality and clarity requirements of global consumer product companies; · Allowing the depolymerization of less costly and low-quality feedstocks, which cannot be effectively recycled today, such as carpet fiber, clothing and mixed plastics, and upcycling them into high-quality PET that can be used in food contact use; and · The GEN II technology uses only trace amounts of water, eliminates the need for a halogenated solvent and uses a catalyst at low concentration.
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 pellet for new bottles or extruded into PET sheet for clamshells, trays, and cups.
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 has a number of challenges in meeting the quality specifications and growing volume requirements implied by commitments from major brands, mainly due to the cost and variety of acceptable PET feedstock.
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.
Our technology can use PET plastic bottles and packaging of any color, transparency or condition, carpet, clothing and other polyester textiles that may contain colors, dyes or additives, and even PET plastics that have been recovered from the ocean and degraded by exposure to sun and salt.
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.
Additionally, mechanically recycled PET manufactured for use in clear bottles or food containers requires predominantly clear and clean PET flakes separated from waste bales, and cannot accommodate darkly colored PET flakes, lower quality fiber feedstock, or materially contaminated feedstock, which may be cheaper.
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.
To protect our technology, we rely on a combination of patents, trademarks, trade secrets, confidentiality agreements and provisions as well as other contractual provisions to protect our proprietary rights, which are primarily our patents, brand names, product designs and marks.
To protect our technology and intellectual property rights, we rely on a combination of patents, trademarks, trade secrets, confidentiality agreements and provisions as well as other contractual provisions to protect our proprietary rights, which are primarily our patents, brand names, product designs and marks.
All employees are responsible for compliance with our Code of Ethics as well as our health and safety, and anti-harassment policies. These policies and practices help us foster a workplace environment that promotes inclusion and diversity. 12 Table of Contents To attract and retain highly capable and innovative employees, we have developed competitive compensation packages and benefits programs.
All employees are responsible for compliance with our Code of Ethics as well as our health and safety, and anti-harassment policies. These policies and practices help us foster a workplace environment that promotes inclusion and diversity. To attract and retain highly capable and innovative employees, we have developed competitive compensation packages and benefits programs.
In the last few years, governments in North America, Europe and Asia have been enacting and proposing laws and regulations mandating the use of minimum recycled content in packaging underlying the strength of this issue in the marketplace. Consumer brands are seeking a solution to their plastic challenge, and they are taking action.
In the last few years, governments in North America, Europe and Asia have been enacting and proposing laws and regulations mandating the use of minimum recycled content in packaging, which underlies the strength of this issue in the marketplace. Consumer brands are seeking a solution to their plastic challenge, and they are taking action.
Mechanical recycled PET plastic is produced principally through the conversion of bales of PET bottles. The materials have been collected and transported to a materials recovery facility (“MRF”), where they are sorted from other materials, baled, and sent to specific PET recycling facilities. The bales are broken and sorted to remove any non-PET materials.
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.
Technology Due Diligence Report Loop's strategic partners, Suez and Danone, among others, collectively engaged an independent, globally recognized third-party engineering firm to execute a thorough due diligence and technology validation report. We believe the final report, which was communicated in May 2022, validated and reinforced the quality, effectiveness, and scalability of Loop Industries’ technology.
Additionally, Loop’s strategic partners, Suez and Danone, among others, collectively engaged an independent, globally recognized third-party engineering firm to execute a thorough due diligence and technology validation report. We believe the final report, which was communicated in May 2022, validated and reinforced the quality, effectiveness, and scalability of our technology.
Our operations require various governmental permits and approvals. We are in the process of obtaining all necessary permits and approvals for the operation of our business; however, any of these permits or approvals may be subject to denial, revocation or modification under various circumstances.
We are in the process of obtaining all necessary permits and approvals for the operation of our business; however, any of these permits or approvals may be subject to denial, revocation or modification under various circumstances.
The monomers are filtered, purified and polymerized to create virgin-quality Loop ™ branded PET resin and polyester fiber suitable for use in food-grade packaging, thus enabling our customers to meet their sustainability objectives. Loop Industries is contributing to the global movement towards a circular economy by preventing plastic waste and recovering waste plastic for a more sustainable future for all.
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 are working with our partner Suez on acquiring the preferred project site, alignment of various levels of government support and additional steps for the project which include advancing permitting, site specific engineering, customer offtake contracts, feedstock and financing.
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.
Any patents that would ultimately grant from this application would be expected to expire on or around March 2040, not including any patent term extension. o Another aspect of the GEN II technology is the subject of an issued U.S. patent and a pending U.S. application, all expected to expire on or around March 2040.
Any patents that would ultimately be granted from this application would be expected to expire on or around March 2040, not including any patent term extensions. · Another aspect of the GEN II technology, which is the subject of an issued U.S. patent and a pending U.S. application, both expected to expire on or around March 2040.
This shift, from producing the monomer PTA to the monomer DMT, was a pivotal moment for Loop. We believe that GEN II requires less energy and fewer resource inputs than conventional PET production processes. We also believe it is an environmentally sustainable method for producing virgin-quality food-grade PET plastic by decoupling PET manufacturing from the fossil fuel industry.
We believe that GEN II requires less energy and fewer resource inputs than conventional PET production processes. We also believe it is an environmentally sustainable method for producing virgin-quality food-grade PET plastic by decoupling PET manufacturing from the fossil fuel industry.
As of February 28, 2022, we had 89 employees of which 32 work in research and development and 42 in engineering and operations. Corporate History We were originally incorporated in Nevada in March 2010 under the name Radikal Phones Inc. Loop Holdings, Inc. (“Loop Holdings”) was originally incorporated in Nevada in October 2014.
As of February 28, 2023, we had 75 employees of which 26 work in research and development, 35 in engineering and operations, and 14 in administrative functions. Corporate History We were originally incorporated under the name Radikal Phones Inc. in Nevada in March 2010. Loop Holdings, Inc. (“Loop Holdings”) was originally incorporated in Nevada in October 2014.
Internationally, we also have issued patents in Algeria and Bangladesh, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around June 2039, if granted, and not including any patent term extension. o Another aspect of the GEN II technology is the subject of a pending U.S. application.
Internationally, this patent family includes five issued or allowed patents in foreign jurisdictions, including Morocco, Algeria, Indonesia and Bangladesh, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around June 2039, if granted, not including any patent term extensions. · Another aspect of the GEN II technology, which is the subject of an issued U.S. patent and a pending U.S. application.
We are pursuing amended supply agreements with existing customers and new agreements with additional customers that are located in North America, Europe, and Asia to sell the production volumes of our planned Infinite Loop ™ commercial facilities. Turning PET Waste into Feedstock We use waste PET plastic and polyester fiber as feedstock.
We are pursuing amended supply agreements with existing customers and new agreements with additional customers that are located in North America, Europe, and Asia to sell the production volumes of our planned Infinite Loop ™ commercial facilities.
We believe that our ability to use many materials that mechanical recyclers cannot use is both an important advantage of Loop ™ PET resin over mechanically recycled PET resin and is additive to the number of PET waste streams that may be recycled.
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.
Unveiling of New evian Loop Bottle On September 20, 2021, Loop, in partnership with iconic global beverage brand evian, unveiled a new “evian Loop” prototype virgin-quality water bottle made from 100% recycled content. The monomers used to produce the evian Loop bottles were made at the Terrebonne Facility.
In 2021, Loop, in partnership with iconic global beverage brand evian, unveiled a new “evian Loop” prototype virgin-quality water bottle made from 100% recycled content. The monomers used to produce the evian Loop bottles were made at the Terrebonne Facility. Evian began selling water bottles made from Loop ™ PET in South Korea in October 2022.
The 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 with our engineering partners Worley, BBA and Chemtex, all leading global engineering and construction companies.
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.
Additionally, due to the impact of the COVID-19 pandemic, we may experience delays in obtaining such permits or approvals. Failure to obtain or comply with the conditions of permits and approvals or to have the necessary approvals in place may adversely affect our operations and may subject us to penalties. See “Risk Factors” below for additional information.
Failure to obtain or comply with the conditions of permits and approvals or to have the necessary approvals in place may adversely affect our operations and may subject us to penalties. See “Risk Factors” below for additional information.
On November 20, 2017, Loop Industries, Inc. commenced trading on the Nasdaq Global Market under the trading symbol, “LOOP.” Corporate Information Our principal executive offices are located at 480 Fernand-Poitras Street, Terrebonne, Québec, Canada J6Y 1Y4. Our telephone number is (450) 951-8555.
On November 20, 2017, Loop Industries, Inc. commenced trading on the Nasdaq Global Market under the trading symbol, “LOOP.” Corporate Information Our principal executive offices are located at 480 Fernand-Poitras Street, Terrebonne, Québec, Canada J6Y 1Y4. Our telephone number is (450) 951-8555. Available Information Our website is www.loopindustries.com, and our investor relations web page can be found at http://www.loopindustries.com/en/investors/overview.
Terrebonne Facility As part of our plan for the commercialization of future Infinite Loop ™ manufacturing facilities, we enhanced our Terrebonne, Québec pilot plant to become a small-scale PET depolymerization production facility.
Terrebonne Facility As part of our plan for the commercialization of future Infinite Loop ™ manufacturing facilities, we enhanced our Terrebonne, Québec pilot plant to become a small-scale PET depolymerization production facility, incorporating all key pieces of depolymerization equipment that will be used in the full-scale commercial facilities.
Internationally, we also have an issued patent in Bangladesh, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted, and not including any patent term extension. o An additional aspect of the GEN II technology is claimed in an issued U.S. patent and an allowed U.S. application, all expected to expire on or around June 2039.
Internationally, this patent family has four issued or allowed patents in foreign jurisdictions, Bangladesh, Argentina, Taiwan and Brazil, and pending applications in Canada, China, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, South Korea, and various other countries, all expected to expire on or around September 2038, if granted, not including any patent term extensions. 12 Table of Contents · An additional aspect of the GEN II technology, as claimed in two issued U.S. patents and a pending U.S. application, all expected to expire on or around June 2039.
Internationally, we also have pending applications in Canada, Europe, India, Singapore, Papua New Guinea, Brazil, and South Africa.
Internationally, this patent family includes pending applications in Canada, Europe, India, Singapore, Papua New Guinea, Brazil, and South Africa.
Danone will purchase 100% sustainable and upcycled Loop ™ branded PET to be supplied from our planned Infinite Loop ™ manufacturing facility in Bécancour, Québec for use in brands across its portfolio including evian®, Danone’s iconic natural spring water; · Multi-year supply agreement with PepsiCo, one of the largest purchasers of recycled PET plastic, enabling PepsiCo to purchase production capacity and incorporate Loop ™ PET resin into its product packaging; · Multi-year supply agreement with L’OCCITANE en Provence to supply 100% recycled and sustainable Loop ™ PET resin and incorporate Loop ™ PET resin into its product packaging; and · Multi-year supply agreement with L’Oréal Group, the global leader in the beauty industry, enabling L’Oréal Group to purchase production capacity and incorporate Loop ™ PET resin into its product packaging.
We currently have agreements with some of the world’s leading brands to be supplied from our planned commercial facilities, including: · Multi-year supply agreement with Danone SA (“Danone”), one of the world’s leading global food and beverage companies, enabling Danone to purchase 100% sustainable and upcycled Loop ™ branded PET for use in brands across its portfolio including evian®, Danone’s iconic natural spring water; · Multi-year supply agreement with L’OCCITANE en Provence (“L’OCCITANE”) to supply 100% recycled and sustainable Loop ™ PET resin and incorporate Loop ™ PET resin into its product packaging; and · Multi-year supply agreement with L’Oréal Group, the global leader in the beauty industry, enabling L’Oréal Group to purchase production capacity and incorporate Loop ™ PET resin into its product packaging.
Loop also has pending applications in Cambodia, Canada, Indonesia, Taiwan, the U.S., and Vietnam. Government Regulation and Approvals As we seek to further develop and commercialize our technology, we will be subject to extensive and frequently developing federal, state, provincial and local laws and regulations. Compliance with current and future regulations, including food packaging regulations, could increase our operational costs.
Government Regulation and Approvals As we seek to further develop and commercialize our technology, we will be subject to extensive and frequently developing federal, state, provincial and local laws and regulations. Compliance with current and future regulations, including food packaging regulations, could increase our operational costs. Our operations require various governmental permits and approvals.
We are currently pursuing projects for future commercial production facilities in three regions: North America, Europe and Asia. The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop ™ PET resin and polyester fiber into their packaging and clothing.
The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop ™ PET resin and polyester fiber into their packaging and clothing.
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.
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.
On August 31, 2021, Loop also received a NOL from Health Canada, which states that the PET produced by Loop’s recycling process is suitable for use in the manufacture of water bottles and articles for contact with all food types under all conditions of use.
On August 31, 2021, Loop also received a NOL from Health Canada, which states that the PET produced by Loop’s recycling process is suitable for use in the manufacture of water bottles and articles for contact with all food types under all conditions of use. 13 Table of Contents Additional Information Human Capital Our employees are essential to our success, and we are committed to providing a safe, productive, discrimination-free and harassment-free work environment.
Due to the commitments by large global consumer brands to incorporate more recycled content into their product packaging, the regulatory requirements for minimum recycled content in packaging imposed by governments, the virgin-quality of Loop ™ branded PET resin and its marketability to extoll the sustainability credentials of consumer brands that incorporate it, we believe we will be able to sell Loop ™ branded PET resin at a premium price relative to virgin and mechanically recycled PET resin. 8 Table of Contents We currently have agreements with some of the world’s leading brands to be supplied from our planned commercial facilities, including: · A new multi-year supply agreement with Danone SA (“Danone”), one of the world’s leading global food and beverage companies announced on May 16, 2022.
Due to the commitments by large global consumer brands to incorporate more recycled content into their product packaging, the regulatory requirements for minimum recycled content in packaging imposed by governments, the virgin-quality of Loop ™ branded PET resin and its marketability to extol the sustainability credentials of consumer brands that incorporate it, we believe we will be able to sell Loop ™ branded PET resin at a premium price relative to virgin and mechanically recycled PET resin.
The Company is in the planning stages of pursuing the construction of Infinite Loop™ commercial scale facilities in Québec, Canada, and with strategic partners in Europe and South Korea.
The Company is presently in the planning stages of pursuing the construction of Infinite Loop™ commercial scale facilities.
Our Generation II technology (“GEN II”) is a methanolysis-based depolymerization technology that uses temperatures below 90 °C to depolymerize waste PET and polyester fiber.
We believe our technology can deliver high-purity profitable virgin-quality, 100% recycled PET resin suitable for use in food-grade packaging and polyester fiber. Our Generation II technology (“GEN II”) is a methanolysis-based depolymerization technology that uses temperatures below 90 °C to depolymerize waste PET and polyester fiber.
Internationally, we also have issued patents in China, the Eurasian Patent Organization, Europe, Japan, India, the Gulf Cooperation Council, and various other countries, and pending patent applications in Canada, Mexico, South Korea, and various other countries all expected to expire, if granted, on or around July 2036, not including any patent term extension. · The GEN II technology portfolio currently consists of four patent families: o The first family has two issued U.S. patents and a pending U.S. application, all expected to expire on or around September 2037.
Internationally, this patent family includes two issued patents in foreign jurisdictions, Bangladesh and South Africa, and pending applications in Canada, China, Korea, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, and various other countries, all expected to expire on or around March 2040, if granted, not including any patent term extensions.
Factors under consideration in determining project economics include the feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, PET bale index pricing, logistics, and ramp up, among others. Strategic Partnership with SK geo centric Loop and SK geo centric Co., Ltd.
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. 10 Table of Contents Recent developments Signature of Venture Agreement with SKGC On April 27, 2023, Loop and SKGC entered into a joint venture agreement (the “JV Agreement”) to deploy Loop’s depolymerization technology in the Asian market through multiple commercial manufacturing facilities.
Our engineering partners may also play a role in the future design of larger capacity facilities. 9 Table of Contents Our market strategy is to assist global consumer goods brands in meeting their public sustainability commitments by offering packaging or polyester fibers that are made with Loop co-branded, 100% recycled, virgin-quality PET or polyester fibers.
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 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.
In the past years, we have seen major brands make significant commitments to close the loop on their plastic use in two ways; by transitioning their packaging to recyclable materials, like PET, and by incorporating more recycled content into their packaging.
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. 5 Table of Contents Supply Agreements with Global Consumer Brands In the past years, we have seen major consumer brands make significant commitments to close the loop on their plastic use by transitioning their packaging to recyclable materials like PET, and by incorporating more recycled content into their packaging.
This initial volume is planned to be supplied in 2022 and manufactured using MEG and DMT monomers produced at the Terrebonne Facility. The Terrebonne Facility continues to support our customers and partners with R&D and analytical capabilities.
In addition to supplying customers with initial volumes of Loop ™ PET, the Terrebonne Facility continues to support our customers and partners with R&D and analytical capabilities.
That means consumer packaged goods companies will be able to choose to market packaging made from a 100% recycled Loop ™ branded PET resin and polyester fiber.
That means CPG companies will be able to market packaging made from a 100% recycled Loop ™ branded PET resin and polyester fiber. Commercialization Strategy Our objective is to achieve global expansion of Loop’s technology through a mix of fully owned manufacturing facilities, strategic partnerships, and licensing agreements.
We believe that 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.
We are targeting multi-year take or pay offtake agreements for planned Infinite Loop ™ production.
We have two technology areas, referred to as GEN I technology and the GEN II technology, with patent claims relating to our technology for depolymerizing PET. · The GEN I technology portfolio has three issued U.S. patents, all expected to expire on or around July 2035.
The GEN II technology portfolio currently consists of four patent families: · One family has two issued U.S. patents and a pending U.S. application, all expected to expire on or around September 2037.
We expect evian to begin selling water bottles made from Loop ™ PET initially in South Korea during the second half of 2022, and subsequently in other global markets. The waste plastic used to produce these bottles include polyester fibers from carpets and clothing which are considered unrecyclable and destined for landfill and other natural environments.
The waste plastic used to produce these bottles includes polyester fibers from carpets and clothing which are considered unrecyclable and destined for landfill and other natural environments. This initiative reflects evian’s commitment to its stated goal for circularity and 100% recycled content by 2025.
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Additionally, the Company has a joint venture to pursue the retrofitting of existing fossil fuel PET polymerization facilities with its recycling technology. 4 Table of Contents Industry Background and Market Opportunity The global annual market demand for PET plastic and polyester fiber is expected to exceed $160 billion by 2022 as projected in the 2018 IHS Polymer Market Report.
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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. 4 Table of Contents Background Industry Background We believe Loop's depolymerization technology offers a superior 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.
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In recent years we have seen major brands make significant commitments to close the loop on their plastic packaging by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging.
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Chemical recycling 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.
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There is a growing regulatory and policy environment to encourage a reduction in the production of virgin fossil fuel-based plastic and for minimum recycled content in packaging imposed by various governments: · In North America: Canada has announced a zero-plastic waste by 2030 goal and is targeting for all plastic packaging to contain 50% recycled content by 2030.
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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.
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A California law enacted on September 24, 2020 requires that plastic bottles contain at least 15% post-consumer resin by 2022, 25% by 2025 and 50% by 2030. · In Europe: As of January 2021, the European Union introduced a new tax of €800/ton on non-recycled plastic packaging based on the amount of plastic packaging placed on each member state’s market.
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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.
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Effective April 2022, a new £200/ton tax will apply in the UK to plastic packaging produced or imported into the UK that does not contain at least 30% recycled plastic. Italy is introducing a tax of €450 per ton on virgin plastic used in manufacture or importation of single use plastic which is expected in January 2023.
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Chemical recycling, however, can break down these degraded or complex plastics into their constituent molecules, which can then be purified and used to create new products. Chemical recycling 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.
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Spain has also proposed a tax of €450 per ton on non-reusable plastic packaging with an anticipated start date of January 2023.
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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.
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France has a stated goals of 100% plastics recycled by 2025 and 77% of beverage bottles to be collected. · In Asia: South Korea targets reducing plastic waste by 20% and increase recycling rates from 54% to 70% by 2025 and 30% renewable plastic by 2030. 5 Table of Contents The growing regulatory environment combined with global consumer goods companies, apparel manufacturers, and retail brand commitments for 2025 and 2030 are expected to increase the demand for recycled PET (“rPET”) plastic further.
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We believe chemical recycling 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. Our chemical recycling technology breaks down waste PET into DMT and MEG through depolymerization.
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We believe our technology can deliver high-purity profitable virgin-quality, 100% recycled PET resin suitable for use in food-grade packaging and polyester fiber. Our Generation I technology (“GEN I”) is a hydrolysis-based depolymerization technology which yielded purified terephthalic acid (“PTA”) and monoethylene glycol (“MEG”), two common monomers of PET.
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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.
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As the Company evaluated the transition from the GEN I technology from pilot scale to commercial scale, several challenges involving PTA and MEG purification were identified. To overcome the GEN I technology challenges, we embarked on the development of a second generation of our technology.
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We also have a signed letter of intent with On AG, a sportswear brand and subsidiary of On Holding AG, to secure volumes of Loop™ PET resin from the Asian Infinite Loop™ manufacturing facility in Ulsan, South Korea, which Loop is planning with its strategic partner SK Geo Centric.
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Internationally, we also have an allowed application in Bangladesh and pending applications in Canada, China, Korea, the Eurasian Patent Organization, Europe, the Gulf Cooperation Council, India, Japan, Mexico, and various other countries, all expected to expire on or around March 2040, if granted, and not including any patent term extension. 7 Table of Contents Loop owns registrations for its trademarks in Canada, the European Union, the United Kingdom, and the U.S.
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Strategic Partnership with SK Geo Centric In June 2021, Loop and SK Geo Centric (“SKGC”) concluded a definitive agreement for SKGC to become a strategic investor in Loop, with SKGC acquiring a 10% stake in Loop at $12.00 per share for a total of $56.5 million.
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Supply Agreements with Global Consumer Brands Consumer brands are seeking a solution to their plastic challenge and they are taking bold action.
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The transaction, which closed in July 2021, also included warrants for SKGC to purchase Loop common stock at $15.00 and $20.00 per share. Concurrent with the strategic investment, Loop and SKGC entered into a memorandum of understanding (“MOU”) to form a joint venture with exclusivity to build sustainable PET plastic and polyester fiber manufacturing facilities throughout Asia.
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This also means we are creating a new market for materials that have persistently been leaking out of the waste management system and into our shared rivers, oceans and natural areas. Commercialization Strategy Our objective is to achieve global expansion of Loop’s technology through a mix of fully owned manufacturing facilities, strategic partnerships, and licensing agreements.
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SKGC is a global chemical company and member of the SK Group, one of South Korea’s largest conglomerates. SKGC is a general energy and chemical leader in the global market and is growing into a technology-based global chemical company through continuous R&D efforts.
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(formerly known as SK global chemical Co. Ltd.) (“SKGC”) intend to form a joint venture with exclusivity to build sustainable PET plastic and polyester fiber manufacturing facilities throughout Asia, which accounts for approximately 60% of the world’s population and an estimated 70% of global PET consumption making it the largest market in terms of plastic manufacturing, consumption and waste.
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SKGC aims to achieve its “Green for Better Life” vision by establishing a plastics based circular economy through collaboration with various partners and stakeholders, such as Loop. Asia represents approximately 60% of the world’s population and 70% of global PET consumption and is the main hub for the polyester fiber supply chain for textiles.
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Under the terms of the Memorandum of Understanding (“MOU”) for the proposed joint venture, which was entered into in July, 2021, SKGC will own 51 percent of the joint venture and Loop will own 49 percent. Loop will also receive a recurring annual royalty fee as a percentage of revenue from each facility for the use of its technology.
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The Asian market represents a prime opportunity for Loop’s growth and commercialization of its technology.
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As of the date of the filing on this Annual Report on Form 10-K, final joint venture agreements have not been entered into. In addition, on June 22, 2022, Loop and SKGC concluded a definitive agreement for SKGC to become a strategic investor in Loop.
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SKGC is well established with a deep understanding of the Asian market, and vast expertise in building and operating large-scale petrochemical facilities, making them a uniquely well-suited partner for Loop in helping to ensure the successful commercialization of Loop’s technology in this market. 6 Table of Contents On April 27, 2023, Loop and SKGC entered into a joint venture agreement (the “JV Agreement”) to deploy Loop’s depolymerization technology in the Asian market through multiple commercial manufacturing facilities.
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Under this agreement, SKGC purchased 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million. The equity investment transaction closed on July 29, 2021.
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Pursuant to the JV Agreement, Loop and SKGC agreed to form a new company (the “JV Company”), which will be headquartered in Singapore. SKGC will contribute 51% and Loop will contribute 49% of the initial equity capital of the JV Company.
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SKGC was also granted warrants to acquire an additional 461,298 common shares at $11 per share with an expiration date of June 14, 2022, 4,714,813 common shares at a price of $15 per share with an expiration date of July 29, 2024, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility.
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The JV Agreement outlines that the JV Company will have exclusive rights to commercialize Loop’s technology in the Asian market and Loop will receive an annual royalty fee for each of the commercial plants.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we raise additional funds through strategic partnerships or licensing agreements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms that are not favorable to us. 21 Table of Contents Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity.
Biggest changeWe may also incur ongoing interest expense and be required to grant a security interest in our assets in connection with any debt issuance. If we raise additional funds through strategic partnerships or licensing agreements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms that are not favorable to us.
The profitability of our business also depends on the availability and proximity of these raw materials to our factories. The choice of raw materials to be used at our facility is determined primarily by the price and availability, the yield loss of lower quality raw materials, and the capabilities of the producer’s production facility.
The profitability of our business also depends on the availability and proximity of these raw materials to our factories. The choice of raw materials to be used at our facility is determined primarily by the price and availability, yield loss of lower quality raw materials, and the capabilities of the producer’s production facility.
Any negative change in the public’s perception of the prospects of companies in our industry could depress our stock price regardless of our results of operations. These factors may have a material adverse effect on the market price and liquidity of our common stock and affect our ability to obtain required financing.
Any negative change in the public’s perception of the prospects of companies in our industry could depress our stock price regardless of our results of operations. These factors may have a material adverse effect on the market price and liquidity of our common stock and affect our ability to obtain the required financing.
We have financed our operations primarily through sales of common stock and incurrence of debt and have devoted substantial efforts to research and development, as well as building our team. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter.
We have financed our operations primarily through sales of common stock and incurrence of debt and have devoted substantial efforts to research and development, as well as building our team. We expect to continue to incur significant expenses and operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter.
Daniel Solomita or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business which could adversely affect our financial results and impair our growth. We are subject to certain risks related to litigation filed by or against us and investigations we are subject to, and adverse results may harm our business.
Daniel Solomita or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business, which could adversely affect our financial results and impair our growth plans. We are subject to certain risks related to litigation filed by or against us and investigations we are subject to, and adverse results may harm our business.
Furthermore, while the SEC has informed us that the investigation should not be construed as an indication by the SEC or its staff that any violation of law has occurred, nor as a reflection upon any person, entity or security, publicity surrounding the foregoing, or any SEC enforcement action or settlement as a result of the SEC’s investigation, even if ultimately resolved favorably for us, could have an adverse impact on our reputation, business, financial condition, results of operations or cash position.
Furthermore, while the SEC has informed us that the investigation should not be construed as an indication by the SEC or its staff that any violation of law has occurred, nor as a reflection upon any person, entity or security, publicity surrounding the foregoing, or any SEC enforcement action or settlement as a result of the SEC’s investigation, even if ultimately resolved favorably for us, could have an adverse impact on our reputation, business, financial condition, or results of operations.
We and our potential future collaborators may spend many years and dedicate significant financial and other resources developing our technology that may never be successfully commercialized.
We and our potential future collaborators may spend many years and dedicate significant financial and other resources to developing our technology that may never be successfully commercialized.
These losses will occur as we do not have any revenues to offset the expenses associated with our business operations. We may not generate revenues from product sales for the next several years, if ever. If we are not able to develop our business as anticipated, we may not be able to generate revenues or achieve profitability.
These losses will occur as we do not have sufficient revenues to offset the expenses associated with our business operations. We may not generate revenues from product sales for the next several years, if ever. If we are not able to develop our business as anticipated, we may not be able to generate revenues or achieve profitability.
Daniel Solomita, our President and Chief Executive Officer, Chairman of the Board of Directors, and controlling shareholder, beneficially owns 19,210,000 shares of common stock, or 40.5% of our issued and outstanding shares of common stock and also holds one share of Series A Preferred Stock. The one share of Series A Preferred Stock issued to Mr.
Daniel Solomita, our President and Chief Executive Officer, Chairman of the Board of Directors, and controlling shareholder, beneficially owns 19,210,000 shares of common stock, or 40.4% of our issued and outstanding shares of common stock and also holds one share of Series A Preferred Stock. The one share of Series A Preferred Stock issued to Mr.
Legal Proceedings—SEC Investigation,” of this annual report, the SEC in October 2020 requesting certain information regarding testing, testing results and details of results from our GEN I and GEN II technologies and certain of our partnerships and agreements.
Legal Proceedings—SEC Investigation,” of this annual report, the SEC in October 2020 requested certain information regarding testing, testing results and details of results from our GEN I and GEN II technologies and certain of our partnerships and agreements.
Any intellectual property litigation and the failure to obtain necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations. We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could harm our business.
Any intellectual property litigation and the failure to obtain necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations. 18 Table of Contents We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could harm our business.
If we are not able to maintain regulatory compliance, are slow or unable to adopt new requirements or policies, or effect changes to existing requirements, our business may be adversely affected. 19 Table of Contents Our failure to protect our intellectual property and proprietary technology may significantly impair our competitive advantage.
If we are not able to maintain regulatory compliance, are slow or unable to adopt new requirements or policies, or effect changes to existing requirements, our business may be adversely affected. Our failure to protect our intellectual property and proprietary technology may significantly impair our competitive advantage.
Increases in raw material costs could have a material adverse effect on our business, financial condition or results of operations. Our feedstock supply strategy, including any hedging procedures, may be insufficient, and our results could be materially impacted if costs of materials increase.
Increases in raw material costs could have a material adverse effect on our business, financial condition or results of operations. Our feedstock supply strategy, including any hedging procedures, may be insufficient, and our results could be materially impacted if costs of materials increase. The loss of the services of Mr.
Our President and Chief Executive Officer and Chairman of the Board of Directors, Mr. Daniel Solomita, beneficially owns a majority of the total voting power of our capital stock, and accordingly, has control over stockholder matters, our business and management. As at May 25, 2022, Mr.
Our President and Chief Executive Officer and Chairman of the Board of Directors, Mr. Daniel Solomita, beneficially owns a majority of the total voting power of our capital stock, and accordingly, has control over stockholder matters, our business and management. As at May 17, 2023, Mr.
We cannot predict with certainty the cost of defense, of prosecution or of the ultimate outcome of litigation, investigations and other proceedings filed by or against us, including penalties or other civil or criminal sanctions, or remedies or damage awards, and adverse results in any litigation and other proceedings may materially harm our business, including the subpoena we received from the SEC in October 2020 requesting certain information regarding testing, testing results and details of results from our GEN I and GEN II technologies and certain of our partnerships and agreements.
We cannot predict with certainty the cost of defense, of prosecution or of the ultimate outcome of litigation, investigations and other proceedings filed by or against us or individuals to whom we may have indemnity and/or advancement obligations, including penalties or other civil or criminal sanctions, or remedies or damage awards, and adverse results in any litigation and other proceedings may materially harm our business, including the subpoena we received from the SEC in October 2020 requesting certain information regarding testing, testing results and details of results from our GEN I and GEN II technologies and certain of our partnerships and agreements.
The trading price for our common stock will be affected by a number of factors, including: · any change in the status of our Nasdaq listing; · the need for near-term financing to continue operations; · our ability to develop and commercialize our technology, relative to investor expectations; · general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors; · volatility in the financial and credit markets, including the recent volatility due, in part, to the current COVID-19 outbreak and geo-political events; · future issuances and/or sales of our securities; · announcements or the absence of announcements by us, or our competitors, regarding collaborations, new products, significant contracts, commercial relationships or capital commitments; · commencement of, or involvement in, litigation or investigations; · any major change in our board of directors or management; · changes in governmental regulations or in the status of our regulatory approvals; · announcements related to patents issued to us or our competitors and to litigation involving our intellectual property; · a lack of, or limited, or negative industry or security analyst coverage; · uncertainty regarding our ability to secure additional cash resources with which to operate our business; · short-selling or similar activities by third parties; · limited trading liquidity in our shares and any short positions held; and · other factors described elsewhere in these Risk Factors.
The trading price for our common stock will be affected by a number of factors, including: · any change in the status of our Nasdaq listing; · the need for near-term financing to continue operations; · our ability to develop and commercialize our technology, relative to investor expectations; · general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors; 20 Table of Contents · volatility in the financial and credit markets, including the recent volatility due, in part, to current geo-political events, inflation, economic uncertainty and the corresponding fiscal and monetary responses by central banks and governments; · future issuances and/or sales of our securities; · announcements or the absence of announcements by us, or our competitors, regarding collaborations, new products, significant contracts, commercial relationships or capital commitments; · commencement of, or involvement in, litigation or investigations; · any major change in our board of directors or management; · changes in governmental regulations or in the status of our regulatory approvals; · announcements related to patents issued to us or our competitors and to litigation involving our intellectual property; · a lack of, or negative security analyst coverage; · uncertainty regarding our ability to secure additional cash resources with which to operate our business; · short-selling or similar activities by third parties; · limited trading liquidity in our shares and any short positions held; and · other factors described elsewhere in these Risk Factors.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.
Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them. We intend to retain any future earnings to finance the development and expansion of our business.
Other than as noted below and though we have not received any indication from our strategic partners as to their indication to terminate, we cannot provide assurance that these strategic partners with whom we have entered into such agreements will not exercise their applicable termination rights, which are not within our control.
Though we have not received any indication from our strategic partners as to their indication to terminate, we cannot provide assurance that these strategic partners with whom we have entered into such agreements will not exercise their applicable termination rights, which are not within our control.
Any disruption that impedes our ability to optimize our process in a timely manner could reduce our revenues and materially harm our business. 17 Table of Contents The plastics manufacturing industry is extremely price-competitive because of the commodity-like nature of virgin PET resin and its correlation to the price of crude oil.
Any disruption that impedes our ability to optimize our process and provide support for our commercial projects in a timely manner could reduce our revenues and materially harm our business. 16 Table of Contents The plastics manufacturing industry is extremely price-competitive because of the commodity-like nature of virgin PET resin and its correlation to the price of crude oil.
We will require additional financing through a combination of the issuance of debt, equity, and/or joint ventures and/or government incentive programs in order to establish profitable operations, and such financing may not be forthcoming. We are pursuing financial incentives and financing for our proposed projects with various countries through various programs that involve federal, provincial, state and local governments.
We will require additional financing through a combination of the issuance of debt, equity, and/or joint ventures and/or government incentive programs in order to establish profitable operations, and such financing may not be forthcoming. We are pursuing financial incentives and financing for our proposed projects with several countries through multiple programs that involve various branches of government.
A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation.
Though not now, we may in the future become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation.
Stockholders may not be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities.
Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities.
If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources. 20 Table of Contents We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations.
If we are unable to assert that our internal controls over financial reporting are effective, or when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting as required by Section 404, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
If we are unable to attract government incentives and financing to our projects or investors to invest in our business, we may not be able to acquire additional financing through debt or equity markets. Even if additional financing is available, it may not be available on terms favorable to us.
If we are unable to attract government incentives and financing to our projects or investors to invest in our business, we may not be able to acquire additional financing through debt or equity markets.
We expect to continue to incur legal fees in relation to litigation, investigations and other proceedings. 18 Table of Contents We were named as a defendant in putative shareholder class action lawsuits and are subject to an SEC Investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.
We expect to continue to incur legal fees in relation to litigation, investigations and other proceedings. 17 Table of Contents We are subject to an SEC Investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. As described in “Item 3.
Our technology may never become successfully commercialized for any of the following reasons: · We may not be able to secure sufficient funding to progress our technology through development and commercial validation; · We or our future collaborators may be unable to obtain the requisite regulatory approvals for our technology; · Competitors may launch competing or more effective technology; · Our technology may not be commercially successful; · Current and future collaborators may be unable to fully develop and commercialize products containing our technology or may decide, for whatever reason, not to commercialize such products; and · We may be unable to secure adequate patent protection in the necessary jurisdictions. 16 Table of Contents If any of these things were to occur, it could have a material adverse effect on our business and our results of operations.
Our technology may never become successfully commercialized for any of the following reasons: · We may not be able to secure sufficient funding to progress our technology through development and commercial validation; · We or our future collaborators may be unable to obtain the requisite regulatory approvals for our technology; · Competitors may launch competing or more effective technology; · Our technology may not be commercially successful; · Current and future collaborators may be unable to fully develop and commercialize products containing our technology or may decide, for whatever reason, not to commercialize such products; and · We may be unable to secure adequate patent protection in the necessary jurisdictions.
Our research and development activities are performed from a single location in Terrebonne, Québec. Our continued innovation activities rely on an uninterrupted and fully functioning plant. Interruptions in operations at this location could result in our inability to provide the most efficient and effective technological solution to our customers.
Our continued innovation activities rely on an uninterrupted and fully functioning plant. Interruptions in operations at this location could result in our inability to provide the most efficient and effective technological solution to our customers.
If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected. Changes in tax legislation in the countries the Company has operations could adversely affect our results of operations and financial condition .
If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.
We mainly finance our operations through the sale and issuance of shares of common stock of Loop Industries, Inc. in U.S. dollars while our operations are concentrated in our wholly-owned subsidiary, Loop Canada.
(“Loop Canada”), which is based in Terrebonne, Québec, Canada and has a Canadian dollar functional currency. Our reporting currency is the U.S. dollar. We mainly finance our operations through the sale and issuance of shares of common stock of Loop Industries, Inc. in U.S. dollars while our operations are concentrated in our wholly-owned subsidiary, Loop Canada.
Our failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on our ability to execute our business plan or remain in business. The global COVID-19 pandemic has adversely affected, and may in the future adversely affect, our business, results of operations and financial condition.
Our failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on our ability to execute our business plan or remain in business. Conditions in the financial markets and economic conditions in general may adversely affect our ability to raise additional capital, execute our business plan or remain in business.
Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of our common stock is diluted to a level below a majority. Currently, Mr.
Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of our common stock is diluted to a level below a majority. Currently, Mr. Solomita’s beneficial ownership of 19,210,000 shares of common stock and 1 share of Series A Preferred Stock provides him with 75.7% of the voting control of the Company.
We may not be able to execute our business plan or stay in business without additional funding. Our ability to successfully commercialize our business and generate future revenues depends on whether we can obtain the financing necessary to implement our business plan.
Our ability to successfully commercialize our business and generate future revenues depends on whether we can obtain the necessary financing to implement our business plan, on acceptable terms.
Solomita, or the prospect of these sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. 21 Table of Contents Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of our company.
As a result, our business, financial condition or results of operations could be adversely affected. Disruption at, damage to or destruction of our Terrebonne Facility could impede our ability to continue innovating and refining our technological process, which would harm our business, financial condition and operating results.
Disruption at, damage to or destruction of our Terrebonne Facility could impede our ability to continue innovating and refining our technological process, and supporting our commercial projects, which would harm our business, financial condition and operating results. Our research and development activities are performed from a single location in Terrebonne, Québec.
We cannot guarantee that we will ever be successful in generating revenues in the future. If we are unable to generate revenues, we will not be able to earn profits or continue operations. Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability .
We cannot guarantee that we will ever be successful in generating revenues in the future. If we are unable to generate revenues, we will not be able to earn profits or continue operations. We may not be able to execute our business plan or stay in business without additional funding.
We are in the process of obtaining all necessary permits and approvals for the operation of our business; however, any of these permits or approvals may be subject to denial, revocation or modification under various circumstances. The requirements for such permits vary depending on the location where our regulated activities are operated.
Many federal, provincial, state and local regulations govern plants and facilities and licenses to be held by individuals. We are in the process of obtaining all necessary permits and approvals for the operation of our business; however, any of these permits or approvals may be subject to denial, revocation or modification under various circumstances.
We, however, have not yet tested our technology at the scale that will be required for large commercial use nor at a scale sufficient to conclude the success of our technology. Decreases in our ability to develop or apply new technology and know-how may affect our competitiveness. Our success depends partially on our ability to improve production processes and services.
We, however, have not yet tested our technology at the scale that will be required for large commercial use nor at a scale sufficient to conclude the success of our technology.
Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval.
Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which precludes us from taking certain actions without Mr. Solomita’s (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval.
We are subject to various federal, provincial, state and local laws and regulations and failure to secure and maintain permits could result in costs that have a material adverse effect on our business, results of operations and financial condition. Many federal, provincial, state and local regulations govern plants and facilities and licenses to be held by individuals.
If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on the trading price of our common stock. 19 Table of Contents We are subject to various federal, provincial, state and local laws and regulations and failure to secure and maintain permits could result in costs that have a material adverse effect on our business, results of operations and financial condition.
We operate mainly through two entities, Loop Industries, Inc., which is a Nevada corporation and has a U.S. dollar functional currency, and our wholly-owned subsidiary, Loop Canada Inc. (“Loop Canada”), which is based in Terrebonne, Québec, Canada and has a Canadian dollar functional currency. Our reporting currency is the U.S. dollar.
We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations. We operate mainly through two entities, Loop Industries, Inc., which is a Nevada corporation and has a U.S. dollar functional currency, and our wholly-owned subsidiary, Loop Canada Inc.
We also have various supply agreements with Danone, Pepsi, L’Oreal and L’OCCITANE en Provence for our planned commercial facilities. Termination of any of these agreements could have an adverse effect on our business. In particular, certain of our agreements with our strategic partners have termination rights related to the satisfaction of milestones, some of which we have not achieved.
We have various arrangements with SK Geo Centric and Suez to commercially scale our technology Asia and Europe respectively and with Chemtex and our external engineering partners. We also have various supply agreements with Danone, L’Oreal and L’OCCITANE en Provence for our planned commercial facilities. Termination of any of these agreements could have an adverse effect on our business.
We expect to continue to incur losses for the foreseeable future and may never achieve or maintain profitability. We have never generated material revenue and may never be profitable. Since our inception in 2010, we have incurred net losses. Our net loss for the year ended February 28, 2022 was $44.92 million and we have earned no revenues to date.
Since our inception in 2010, we have incurred net losses. Our net loss for the year ended February 28, 2023 was $21.30 million and we have earned limited revenues to date.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors. 23 Table of Contents Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.
We face business risks due to our relationships with strategic partners. We rely on our strategic partner relationships for the scaling, manufacturing and commercialization of our technology. We have various arrangements with Indorama, SK geo centric and Suez to commercially scale our technology in Spartanburg, Asia and Europe respectively and with Chemtex and our external engineering partners.
If any of these things were to occur, it could have an adverse effect on our ability to raise additional capital, execute our business plan or remain in business. We face business risks due to our relationships with strategic partners. We rely on our strategic partner relationships for the scaling, manufacturing and commercialization of our technology.
Our stock price may be volatile, and our stockholders could incur significant investment losses.
Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity. Our stock price may be volatile, and our stockholders could incur significant investment losses.
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In that case, you may lose all or part of your investment. RISK FACTORS SUMMARY This risk factor summary contains a high-level summary of risks associated with our business, but does not address all of the risks that we face.
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In that case, you may lose all or part of your investment. 14 Table of Contents RISKS RELATING TO OUR BUSINESS AND TECHNOLOGY We have incurred net losses since inception. We expect to continue to incur losses for the foreseeable future and may never achieve or maintain profitability. We have never generated material revenue and may never be profitable.
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Additional discussion of the risks summarized below, and other risks that we face, may be found immediately following this summary. · We have incurred net losses and have never generated revenue since inception and expect to continue to incur losses for the foreseeable future and may never achieve or maintain profitability. · Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. 13 Table of Contents · We may not be able to execute our business plan or stay in business without additional funding. · The global COVID-19 pandemic has adversely affected, and may in the future adversely affect, our business, results of operations and financial condition. · We are subject to certain risks related to litigation filed by or against us and investigations we are subject to, and adverse results may harm our business. · We have been named as a defendant in a putative shareholder class action lawsuits and are subject to an SEC Investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. · The macro-economic environment in the United States and abroad has adversely affected, and may in the future adversely affect, our ability to raise capital, which may potentially impact our ability to continue our operations. · Our technology may not be successful in developing commercial products and if we are unable to successfully scale our manufacturing processes, we may not meet customer demand. · We face business risks due to our relationships with strategic partners. · Decreases in our ability to develop or apply new technology and know-how or protect our intellectual property and proprietary technology or obtain or maintain trade secret protection may affect our competitiveness. · Disruption at, damage to or destruction of our Terrebonne Facility could impede our ability to continue innovating and refining our technological process, which would harm our business, financial condition and operating results. · The plastics manufacturing industry is extremely price-competitive because of the commodity-like nature of virgin PET resin and its correlation to the price of crude oil.
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The business environment in which we operate has been impacted by the effects of worldwide macroeconomic uncertainty. Economic activity continued to improve during 2022 as COVID-19 cases declined worldwide and restrictions were lifted.
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If our cost to manufacture recycled PET is not competitive with virgin PET or if the price of oil reduces significantly, it may adversely impact our ability to penetrate the market or be profitable. · We are vulnerable to fluctuations in the supply and price of raw materials. · The loss of the services of Mr.
Added
However, economic concerns remain as a result of the cumulative weight of uncertainty regarding the economic conditions domestically and in foreign countries, including global political hostilities and other financial crises. Inflation has become elevated, reflecting demand and supply imbalances, supply chain issues, higher energy prices, fiscal stimulus and broader price pressures.
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Daniel Solomita, our President and Chief Executive Officer, and Chairman of the Board of Directors, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business. · Our Terrebonne Facility and other planned facilities must operate under policies, procedures, and controls for the operation of a chemical manufacturing facility as required under various federal, provincial and local regulations and codes.
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Uncertainty surrounding the near-term direction of global markets, and the potential impact of these trends on the global economy, are expected to persist for the near term. Strategic risk, including threats to business models from rising interest rates and modest economic growth, remain high.
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Failure to comply with such regulations and codes may lead to disruption of operations at the Terrebonne Facility and the development of our technology, and financial sanctions. · If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the price of our common stock. · We are subject to various federal, provincial, state and local laws and regulations and failure to secure and maintain permits could result in costs that have a material adverse effect on our business, results of operations and financial condition. · Raising additional funds may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies. · Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity.
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It is difficult to predict the extent to which these challenging economic conditions will persist or whether recent progress in the economic recovery will instead shift to the potential for further decline.
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Our stock price may be volatile, and our stockholders could incur significant investment losses. · Our President and Chief Executive Officer and Chairman of the Board of Directors, Mr.
Added
If the economy does weaken in the future, it is uncertain how our business would be affected and whether we would be able successfully to mitigate any such effects on our business. Accordingly, these factors in the global economy could have an adverse effect on our ability to raise additional capital, execute our business plan or remain in business.
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Daniel Solomita, beneficially owns a majority of the total voting power of our capital stock, and accordingly, has control over stockholder matters, our business and management. · Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of our company. · Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them. 14 Table of Contents RISKS RELATING TO OUR BUSINESS AND TECHNOLOGY We have incurred net losses since inception.
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In recent months, multiple regional banks were either taken over by the Federal Deposit Insurance Corporation (FDIC) or entered receivership.
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Our business was started in October 2014 with the incorporation of Loop Holdings, Inc. and 8198381 Canada Inc., and the acquisition of our GEN I technology in October 2014. Our operations to date have been primarily limited to organizing and staffing our company, business planning, raising capital and developing our technology and our Terrebonne Facility.
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If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.
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We have not yet demonstrated the ability to manufacture a commercial-scale product or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.
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Weakness and volatility in capital markets and the economy, in general or as a result of bank failures or macroeconomic conditions such as rising inflation, could limit our access to capital markets and increase our costs of borrowing. 15 Table of Contents Our technology may not be successful in developing commercial products.
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In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research focus to a company that is also capable of supporting commercial activities. We may not be successful in such a transition.
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In particular, certain of our agreements with our strategic partners have termination rights related to the satisfaction of milestones, some of which we have not achieved.
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There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will almost certainly fail.
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As we remain a Smaller Reporting Company, our independent registered public accounting firm is not required to express an opinion as to the effectiveness of our internal control over financial reporting.
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The COVID-19 pandemic has been the source of disrupted business operations for us and our customers, suppliers, vendors and other parties with whom we do business, and such disruptions could continue into the future as a result of the ongoing pandemic.
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However, pursuant to Section 404, in the future, we may be required to furnish an attestation on internal control over financial reporting issued by our independent registered public accounting firm.
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In an effort to control the spread of COVID-19, governments and municipalities around the world instituted restrictive measures, including orders to shelter-in-place, travel restrictions, mandated business closures and social distancing.
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Despite our efforts, our independent registered public accounting firm may determine we have a material weakness or significant deficiency in our internal controls over financial reporting once such firm begins its Section 404 reviews in the future.
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The pandemic and resulting governmental restrictions and regulations adversely affected businesses, economies, and financial markets globally. 15 Table of Contents These measures have had and may continue to have negative effects on critical development and commercialization efforts.
Added
The requirements for such permits vary depending on the location where our regulated activities are operated.
Removed
For example, the situation globally and the continued travel restrictions between Canada and the United States have caused disruptions in our timetable of our joint venture with Indorama in the development of our Spartanburg facility and commercialization of our technology.
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Solomita, or the prospect of these sales, could adversely affect the market price of our common stock.
Removed
We cannot determine whether there will be further delays in light of the COVID-19 pandemic and further delays on the development and commercialization of our technology could have a material adverse effect on our results of operations and cash flows.
Added
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. Stockholders may not be able to sell shares when desired.
Removed
In addition, as a result of COVID-19 and the measures designed to contain the spread of the virus, we may experience further restrictions on the movement of employees, disruption of supply chains, shipping of raw materials, restrictions on manufacturing and decline in value of assets held by us, including property and equipment.
Removed
Additionally, our management team has, and may continue, to spend time, attention and resources monitoring the COVID-19 pandemic and seeking to manage its effects on our business and workforce.
Removed
Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, the COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to accurately forecast any effects on our results of operations for 2022 and beyond.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES On January 26, 2018, we completed the purchase of the land and building housing our Terrebonne Facility and corporate offices located at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4. The 33.2 thousand square foot facility includes 13.0 thousand square feet for our executive offices and 20.2 thousand square feet for our innovation and operational activities.
Biggest changeITEM 2. PROPERTIES Our Terrebonne Facility and corporate offices are located at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4. The 33.2 thousand square foot facility includes 13.0 thousand square feet for our executive offices and 20.2 thousand square feet for our innovation and operational activities.
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We believe that our existing facilities are adequate for our current needs. On May 27, 2021, we acquired a 19 million square foot parcel of land in Bécancour, Québec for approximately $4.8 million (CDN $ 5.9 million). The site is part of our planning for an Infinite Loop ™ manufacturing facility.
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We believe that our existing facilities are adequate for our current needs. 22 Table of Contents
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The location is near existing industrial infrastructure, which reduces project costs, permitting time and does not result in the destruction of wetlands or forest.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation.
Biggest changeWe 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.
ITEM 3. LEGAL PROCEEDINGS SEC Investigation 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.
ITEM 3. 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 subpoena requesting additional information, including information concerning our reverse-merger in 2015, and communications with certain individuals and entities. There have been no further information requests relating to the Company’s business or technology.
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.
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Litigation On October 13, 2020, the Company and certain of its officers were named as defendants in a proposed class action lawsuit filed in the United States District Court for the Southern District of New York, captioned Olivier Tremblay, Individually and on Behalf of All Other Similarly Situated v.
Added
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.
Removed
Loop Industries, Inc., Daniel Solomita, and Nelson Gentiletti , Case No. 7:20-cv-0838-NSR (“Tremblay Class Action”).
Added
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.
Removed
The complaint alleges that the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices.
Added
Litigation The information set forth under "Contingencies" in Note 22, Commitments and Contingencies, contained in the notes to the consolidated financial statements of this Annual Report on Form 10-K is incorporated by reference in answer to this Item.
Removed
The complaint seeks unspecified damages on behalf of a class of purchasers of Loop’s securities between September 24, 2018 and October 12, 2020. 24 Table of Contents On October 28, 2020, the Company and certain of its officers were named as defendants in a second proposed class action lawsuit filed in the United States District Court for the Southern District of New York, captioned Michelle Bazzini, Individually and on Behalf of All Other Similarly Situated v.
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Loop Industries, Inc., Daniel Solomita, and Nelson Gentiletti , Case No. 7:20-cv-09031-NSR. The complaint allegations are similar in nature to those in the Tremblay Class Action. On January 4, 2021, the United States District Court for the Southern District of New York consolidated the two proposed class-action lawsuits as In re Loop Industries, Inc.
Removed
Securities Litigation , Master File No. 7:20-cv-08538-NSR. Sakari Johansson and John Jay Cappa were appointed as Co-Lead Plaintiffs and Glancy Prongay & Murray LLP and Pomerantz LLP were appointed as Co-Lead Counsel for the class.
Removed
Plaintiffs served a consolidated amended complaint on February 18, 2021, which alleges that the defendants violated Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices.
Removed
The consolidated amended complaint relies on the October 13, 2020 report published by a third party regarding the Company to support their allegations. Defendants served a motion to dismiss the consolidated amended complaint on April 27, 2021.
Removed
Plaintiffs’ opposition to the motion to Dismiss was served on May 27, 2021 and Defendants’ reply in support of the motion to dismiss is due on June 11, 2021.
Removed
On March 1, 2022, the Company and the current and former officer defendants entered into an agreement for the settlement of the consolidated class action lawsuit, and, on March 4, 2022, advised the Court of the agreement to settle.
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The agreement, which is subject to certain conditions, including court approval, requires the Company to pay $3.1 million to the plaintiff class. The Company’s total cash contribution to the settlement and outstanding legal fees related to the lawsuit, combined, will be approximately $2.52 million. The remainder of the settlement will be paid by the Company’s D&O insurance carriers.
Removed
As explained in Note 22 in our consolidated financial statements, the Company recorded a contingency loss in relation to the settlement. The settlement agreement does not constitute an admission, concession, or finding of any fault, liability, or wrongdoing by the Company or any defendant.
Removed
On October 13, 2020, the Company, Loop Canada Inc. and certain of their officers and directors were named as defendants in a proposed securities class action filed in the Superior Court of Québec (District of Terrebonne, Province of Québec, Canada), in file no. 700-06-000012-205.
Removed
The Application for authorization of a class action and for authorization to bring an action pursuant to section 225.4 of the Québec Securities Act (“the Application”) was filed by an individual shareholder on behalf of himself and a class of buyers who purchased our securities during the “Class Period” (not defined).
Removed
Plaintiff alleges that throughout the Class Period, the defendants allegedly made false and/or misleading statements and allegedly failed to disclose material adverse facts concerning the Company’s technology, business model, operations and prospects, thus causing the Company’s stock price to be artificially inflated and thereby causing plaintiff to suffer damages.
Removed
Plaintiff seeks unspecified damages stemming from losses he claims to have suffered as a result of the foregoing. On December 13, 2020, the Application was amended in order to add allegations regarding specific misrepresentations. The authorization hearing was held on February 24, 2022 and the matter is currently under advisement.
Removed
Management believes that this case lacks merit and intends to defend it vigorously. No amounts have been provided for in the consolidated financial statements with respect to this claim. Management has not yet determined what effect this lawsuit may have on its financial position or results of operations as it is still in the preliminary stages.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated by reference from the section captioned “Executive Officers” contained in our proxy statement for the 2022 annual meeting of stockholders, to be filed with the Commission pursuant to Regulation 14A, not later than 120 days after February 28, 2022. 25 Table of Contents PART II
Biggest changeITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated by reference from the section captioned “Executive Officers” contained in our proxy statement for the 2023 annual meeting of stockholders, to be filed with the Commission pursuant to Regulation 14A, not later than 120 days after February 28, 2023. 23 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Registrant and Affiliated Purchasers We did not purchase any of our shares of common stock or other securities during the year ended February 28, 2022.
Biggest changeRecent Sales of Unregistered Securities None. Purchases of Equity Securities by the Registrant and Affiliated Purchasers We did not purchase any of our shares of common stock or other securities during the year ended February 28, 2023.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is currently traded on the Nasdaq Global Market under the symbol “LOOP.” Holders As at May 25, 2022, there were 47,400,709 shares of common stock issued and outstanding (excluding shares of common stock issuable upon conversion or conversion into shares of common stock of all of our currently outstanding Series A Preferred Stock) held by approximately 43 stockholders of record.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is currently traded on the Nasdaq Global Market under the symbol “LOOP.” Holders As at May 17, 2023, there were 47,521,187 shares of common stock issued and outstanding (excluding shares of common stock issuable upon conversion or conversion into shares of common stock of all of our currently outstanding Series A Preferred Stock) held by approximately 46 stockholders of record.
Removed
Recent Sales of Unregistered Securities As discussed further in Note 13 to the financial statements included in this Annual Report, in connection with the strategic partnership with SK geo centric Co., Ltd. (formerly known as SK global chemical Co.
Removed
Ltd.) (“SKGC”), on July 29, 2021, we issued 4,714,813 shares of our common stock and warrants to purchase 7,533,518 shares of our common stock to SKGC.
Removed
As discussed further in Note 11 to the financial statements included in this Annual Report, in connection with the Investissement Québec financing facility, on August 26, 2021, we issued a warrant to purchase 17,180 shares of our common stock to Investissement Québec.
Removed
On May 12, 2020, we issued to a service provider a warrant to acquire 25,000 shares of common stock at a strike price of $9.43 per share. Each issuance listed above was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and/or Rule 506 of Regulation D promulgated thereunder.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. SELECTED FINANCIAL DATA Pursuant to SEC Release No. 33-8876, we are permitted to use the scaled disclosure requirements applicable to a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, and therefore, we are not required to provide the information called for by this Item. 26 Table of Contents
Biggest changeITEM 6. SELECTED FINANCIAL DATA Pursuant to SEC Release No. 33-8876, we are permitted to use the scaled disclosure requirements applicable to a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, and therefore, we are not required to provide the information called for by this Item.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe believe we must execute on several areas of our operational strategic plan, namely: · Securing financing to fund our operations, including our planned commercial projects and continued growth; · Protecting our intellectual property; · Continuing to drive the commercialization of our Infinite Loop™ solution, which we believe is a key pillar of our ambition to sell our technology to potential commercial partners; · Working with our external engineering partners in their process design for the Québec and European and Asian project evaluations; · Executing on the project plan for the planned Québec Infinite Loop™ commercial facility; · Continuing to identify and secure feedstock to ensure our current Terrebonne Facility and potential commercial facilities can operate continuously and efficiently; · Continuing to execute brand and other partnerships and/or commercial agreements with customers and secure multi-year offtake agreements for the planned commercial facilities; · Identifying and evaluating financial options and incentives including various forms of debt, equity, strategic partnership, incentive and financing programs supported by, or in partnership with, governments to fund the commercial projects; · Identifying and pursuing additional strategic partners and regions for new Infinite Loop™ projects; and · Advance planning of our joint venture with Indorama for the planned Spartanburg facility.
Biggest changeThis entails the continuation of executing partnerships and/or commercial agreements with customers, including product activations using product manufactured at the Terrebonne Facility and multi-year offtake agreements for the planned commercial facilities; · Continuing to identify and secure feedstock to ensure our current Terrebonne Facility and potential commercial facilities can operate continuously and efficiently; · Working with our external engineering partners in their process design for the Asian and European project evaluations and executing on the project plan for the planned Ulsan, South Korea Infinite Loop™ commercial facility; · Securing financing to fund our operations, including our planned commercial projects and continued growth; · Identifying and pursuing additional strategic partners and regions for new Infinite Loop™ projects; and · Protecting our intellectual property.
In preparing this liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to: (i) estimation of amount and timing of future cash outflows and cash inflows and (ii) determining what future expenditures are committed and what could be considered discretionary.
In preparing this liquidity assessment, management applies significant judgment in estimating future cash flow requirements of the Company based on budgets and forecasts, which includes developing assumptions related to: (i) estimation of amount and timing of future cash outflows and inflows and (ii) determining what future expenditures are committed and what could be considered discretionary.
The engineering philosophy we have adopted is “design one, build many.” This approach allows for the basic design package, to be used as the base engineering platform for all future geographical expansion. We believe this approach allows for a quick execution, speed to market and lends itself well to modular construction.
The 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.
Based on this assessment, management believes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they become due for a period of no less than the next 12 months from the date of issuance of the annual consolidated financial statements.
Based on this assessment, management believes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations as they become due for a period of no less than twelve months from the date of issuance of the annual consolidated financial statements.
As countries around the globe continue to increase sustainability targets and recycled content mandates, our customers are increasing the use of sustainably produced materials into their products. The Infinite Loop ™ manufacturing technology is the key pillar of our commercialization blueprint.
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. 25 Table of Contents The Infinite Loop ™ manufacturing technology is the key pillar of our commercialization blueprint.
The monomers are filtered, purified and polymerized to create virgin-quality Loop ™ branded PET resin and polyester fiber suitable for use in food-grade packaging, thus enabling our customers to meet their sustainability objectives. Loop is contributing to the global movement towards a circular economy by preventing plastic waste and recovering waste plastic for a more sustainable future for all.
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.
The contingency loss for legal settlement of $2.52 million is related to the agreement for the settlement of the consolidated class action lawsuit filed in the Southern District of New York described in “Item 3. Legal Proceedings” entered into by the Company and the current and former officer defendants on March 1, 2022.
The contingency loss for legal settlement of $2.52 million in the year ended February 28, 2022 is related to the agreement for the settlement of the consolidated class action lawsuit filed in the Southern District of New York described in “Item 3. Legal Proceedings” entered into by the Company and the current and former officer defendants on March 1, 2022.
We received the first disbursement in the amount of $1.74 million (CDN$2.21 million) on February 21, 2020 and the second disbursement in the amount of $1.88 million (CDN$2.39 million) on August 26, 2021. There is a 36-month moratorium on both capital and interest repayments as of the first disbursement date.
We received the first disbursement in the amount of $1.62 million (CDN$2.21 million) on February 21, 2020 and the second disbursement in the amount of $1.76 million (CDN$2.39 million) on August 26, 2021. There is a 36-month moratorium on both capital and interest repayments as of the first disbursement date.
On February 21, 2020, upon the receipt of the first disbursement under this facility, we issued a warrant to purchase 15,153 shares of common stock at a price of $11.00 to Investissement Québec.
On 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.
The fair value of the stock options granted is estimated using the Black-Scholes-Merton Option Pricing (“Black-Scholes”) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends. Stock-based compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience.
The fair value of the stock options granted is estimated using the Black-Scholes model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends. Stock-based compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience.
Due to these advancements, management has determined that engineering design costs initially capitalized in ILT are now obsolete and no longer recoverable. Therefore, the Company recorded a loss of $1.12 million relating to its investment in ILT during the three-month period ended February 28, 2022. This amount represents the Company’s 50% portion of the engineering design costs capitalized in ILT.
Due to these advancements, management has determined that engineering design costs initially capitalized in ILT are now obsolete and no longer recoverable. Therefore, the Company recorded a loss of $1.12 million relating to its investment in ILT during the three-month period ended February 28, 2022.
When performance conditions exist, the Company recognizes compensation expense when it becomes probable that the performance condition will be met. Forfeitures on share-based payments are accounted for by recognizing forfeitures as they occur.
When performance conditions exist, the Company recognizes compensation expense when it becomes probable that the performance condition will be met. Forfeitures on share-based payments are recognized as they occur.
ITEM 7. 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 “Risk Factors” discussed elsewhere in this Report. Please refer to the Cautionary Note Regarding Forward-Looking Statements on page 4.
ITEM 7. 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 “Risk Factors” discussed elsewhere in this Report.
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 with our engineering partners Worley, BBA and Chemtex, all leading global engineering and construction companies.
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.
Consumer brands are seeking a solution to their plastic challenge, and they are taking bold action. In the past years, we have seen major brands make significant commitments to close the loop on their plastic use in two ways; by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging.
In the past years, we have seen major consumer brands make significant commitments to close the loop on their plastic use by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging.
The remainder of the settlement will be paid by the Company’s D&O insurance carriers. 28 Table of Contents The recognition of a loss from equity investment of $1.12 million in the three-month period ended February 28, 2022 is related to management’s determination that the capitalized costs in our joint venture with Indorama, Indorama Loop Technologies (“ILT”) were no longer recoverable.
The recognition of a loss from equity-accounted investment of $1.12 million in the three-month period ended February 28, 2022 is related to management’s determination that the capitalized costs in our joint venture with Indorama, Indorama Loop Technologies (“ILT”) were no longer recoverable.
The Company has incurred net losses and negative cash flow from operating activities since its inception and expects to incur additional net losses while it continues to develop and plan for commercialization. As at February 28, 2022, the Company has cash and cash equivalents of $44.06 million.
The Company has incurred net losses and negative cash flow from operating activities since its inception and expects to incur additional net losses while it continues to develop and plan for commercialization.
We have a long-term debt obligation to Investissement Québec in connection with a financing facility for the expansion of the Terrebonne Facility up to a maximum of $3.62 million (CDN$4.60 million).
Pursuant to the agreement, the Company has paid a cash deposit of $3.40 million. 30 Table of Contents We have a long-term debt obligation to Investissement Québec in connection with a financing facility for the expansion of the Terrebonne Facility up to a maximum of $3.38 million (CDN$4.60 million).
We also invested $0.59 million in our intellectual property as we developed, during the year ended February 28, 2021, our GEN II technology and filed various patents in various jurisdictions around the world which await approval.
During the year ended February 28, 2023, we also invested $0.36 million in intangible assets, as compared to $0.29 million for the year ended February 28, 2022, as we developed our GEN II technology and filed various patents in various jurisdictions around the world which await approval in certain jurisdictions.
Overview Loop is a technology company whose mission is to accelerate the world’s shift towards sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels.
Please refer to the Cautionary Note Regarding Forward-Looking Statements on page 4. 24 Table of Contents Overview Loop is a technology company whose mission is to accelerate the world’s shift towards sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels.
At the end of the 36-month moratorium, capital and interest will be repayable in 84 monthly installments. The loan bears interest at 2.36%. We have also agreed to issue to Investissement Québec warrants to purchase shares of our common stock in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $0.36 million (CDN$0.46 million).
We have also agreed to issue to Investissement Québec warrants to purchase shares of our common stock in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $0.36 million (CDN$0.46 million).
We are currently pursuing projects for future commercial production facilities in three regions: North America, Europe and Asia. The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop ™ PET resin and polyester fiber into their packaging and clothing.
The global expansion plan for our technology will allow our customers, mostly comprised of CPG brand companies and apparel companies, to expand the use of Loop ™ PET resin and polyester fiber into their packaging and clothing.
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.
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. 26 Table of Contents Results of Operations Fourth Quarter Ended February 28, 2023 The following table summarizes our operating results for the three-month periods ended February 28, 2023 and February 28, 2022, in U.S.
The recognition of a loss from equity investment of $1.12 million in the year ended February 28, 2022 is related to its investment in ILT as discussed in the fourth quarter results above.
Legal Proceedings” entered into by the Company and the current and former officer defendants on March 1, 2022. The recognition of a loss from equity-accounted investment of $1.12 million in the year ended February 28, 2022 is related to the Company’s investment in ILT as discussed in the fourth quarter results above.
We will require a significant amount of capital to fund our growth as we invest in the planned construction of our Infinite Loop™ manufacturing facility in Bécancour, Québec and our planned commercial facilities in Europe, Asia and Spartanburg, South Carolina, as well as additional research and development.
We will require a significant amount of capital to fund our growth as we invest in our planned commercial facilities in Europe, Asia and North America, as well as additional research and development.
CRITICAL ACCOUNTING 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.
Risks that may affect our ability to execute on this strategy include, but are not limited to, those listed under “Risk Factors” elsewhere in this Annual Report. 32 Table of Contents CRITICAL ACCOUNTING 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.
The $1.39 million decrease in general and administrative expenses for the three-month period ended February 28, 2022 was primarily attributable to the following: · $1.70 million decrease in expenses for legal and professional fees due to costs principally associated with the ongoing SEC investigation and class action suits described in “Item 3.
The decrease was primarily attributable to a $0.44 million decrease in insurance costs, a $0.40 million decrease in expenses for legal and professional fees due to costs principally associated with the SEC investigation and class action suits described in “Item 3.
The contingency loss for legal settlement of $2.52 million is related to the agreement for the settlement of the consolidated class action lawsuit filed in the Southern District of New York described above in Results of Operations, Fourth Quarter Ended February 28, 2022.
The decrease in net loss was partially offset by increased general and administrative expenses of $7.64 million. The contingency loss for legal settlement of $2.52 million in the year ended February 28, 2022 is related to the agreement for the settlement of the consolidated class action lawsuit filed in the Southern District of New York described in “Item 3.
Fiscal Year Ended February 28, 2022 The following table summarizes our operating results for the years ended February 28, 2022 and February 28, 2021, in U.S. Dollars.
This amount represents the Company’s 50% portion of the engineering design costs capitalized in ILT. 28 Table of Contents Fiscal Year Ended February 28, 2023 The following table summarizes our operating results for the years ended February 28, 2023 and February 28, 2022, in U.S. Dollars.
The $1.20 million decrease in research and development for the three-month period ended February 28, 2022 was primarily attributable to the following: · $1.98 million decrease in purchases of machinery and equipment at the Company’s Terrebonne Facility; and · $0.15 million decrease in external engineering expenses for ongoing design work for our Infinite Loop ™ manufacturing process.
The decrease was primarily attributable to a $1.91 million decrease in external engineering costs for ongoing design work for our Infinite Loop ™ manufacturing process, a $1.76 million decrease in purchases of machinery and equipment used at the Terrebonne facility, and a $0.37 million decrease in operating expenses at the Terrebonne facility plant and laboratories.
We made investments of $4.82 million in property, plant and equipment as compared to $1.74 million for the year ended February 28, 2021, primarily in connection with the purchase for $4.80 million of a parcel of Land in Bécancour, Québec for the construction of our first Infinite Loop™ manufacturing facility.
The investments in the year ended February 28, 2022 were primarily in connection with the purchase for $4.80 million of a parcel of land in Bécancour, Québec with the initial intention of constructing an Infinite Loop™ manufacturing facility.
Flow of Funds Summary of Cash Flows A summary of cash flows for the years ended February 28, 2022, and February 28, 2021 was as follows: February 28, 2022 February 28, 2021 Net cash used in operating activities $ (42,984,946 ) $ (22,490,636 ) Net cash used in investing activities (5,110,802 ) (2,977,364 ) Net cash provided by financing activities 56,994,801 26,598,668 Effect of exchange rate changes on cash (59,577 ) 373,612 Net change in cash $ 8,839,476 $ 1,504,280 Net Cash Used in Operating Activities During the year ended February 28, 2022, we used $42.98 million in operations compared to $22.49 million during the year ended February 28, 2021.
Flow of Funds Summary of Cash Flows A summary of cash flows for the years ended February 28, 2023, and February 28, 2022 was as follows: February 28, 2023 February 28, 2022 Net cash used in operating activities $ (34,891,759 ) $ (40,562,661 ) Net cash provided (used) in investing activities 21,278,798 (7,533,087 ) Net cash provided by financing activities 1,011,732 56,994,801 Effect of exchange rate changes on cash (869,512 ) (59,577 ) Net change in cash $ (13,470,741 ) $ 8,839,476 31 Table of Contents Net Cash Used in Operating Activities During the year ended February 28, 2023, we used $34.89 million in operations compared to $40.56 million during the year ended February 28, 2022.
During the year ended February 28, 2021 we made capital contributions to our joint venture with Indorama for a total of $0.65 million. 32 Table of Contents Net Cash Provided by Financing Activities During the year ended February 28, 2022, we raised $56.5 million through a private offering of common stock, together with warrants, in the net amount of $56.05 million.
Net Cash Provided by Financing Activities During the year ended February 28, 2022, we raised a net amount of $56.05 million through a private offering of common stock, together with warrants. We also repaid the remaining balance of a term loan from a Canadian bank in January 2022 included in payments made against our long-term debt totaling $0.94 million.
Our engineering partners may also play a role in the future design of larger capacity facilities. 27 Table of Contents Our market strategy is to assist global consumer goods brands in meeting their public sustainability commitments by offering packaging or polyester fibers that are made with Loop co-branded, 100% recycled, virgin-quality PET or polyester fibers.
Our market strategy is to assist global consumer goods brands in meeting their public sustainability commitments by offering packaging or polyester fibers that are made with Loop co-branded, 100% recycled, virgin-quality PET or polyester fibers. We believe that Loop ™ recycled PET resin and polyester fiber could command premium pricing over virgin, petroleum-based PET resin and provide attractive economic returns.
From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations.
The Company is subject to a guarantee of the liabilities of Loop Canada Inc. As at February 28, 2023, the Credit Facility was undrawn. From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations.
We also repaid the remaining balance of a term loan from a Canadian bank in January 2022 included in payments made against our long-term debt totaling $0.94 million. On August 26, 2021, we received $1.87 million (CDN$2.40 million) in connection with the credit facility from Investissement Québec to finance capital expenses incurred for the expansion of the Terrebonne Facility.
On August 26, 2021, we received $1.88 million (CDN$2.40 million) in connection with the credit facility from Investissement Québec to finance capital expenses incurred for the expansion of the Terrebonne Facility. There is a moratorium on both capital and interest repayments until February 2023.
We do not enter into these contracts for trading purposes or speculation, and our management believes all such contracts are entered into as hedges of underlying transactions. 31 Table of Contents The following table summarizes the exchange rates used: February 28, 2022 February 28, 2021 Period end Canadian $: US Dollar exchange rate $ 0.79 $ 0.79 Average period Canadian $: US Dollar exchange rate $ 0.80 $ 0.76 Expenditures are translated at the average exchange rate for the period presented.
The following table summarizes the exchange rates used: February 28, 2023 February 28, 2022 Period end Canadian $: US Dollar exchange rate $ 0.73 $ 0.79 Average period Canadian $: US Dollar exchange rate $ 0.76 $ 0.80 Expenditures are translated at the average exchange rate for the period presented.
Although our liquidity position consists of cash and cash equivalents on hand of $44.06 million at February 28, 2022, our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Annual Report on Form 10-K and the Risk Factors section included in Part I, Item 1A of this Annual Report on Form 10-K. 30 Table of Contents Management actively monitors the Company’s cash resources against the Company’s short-term cash commitments to ensure the Company has sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date.
Our liquidity position is subject to risks and uncertainties, including those discussed under “Cautionary Statements Regarding Forward-Looking Statements” in this Annual Report on Form 10-K and the Risk Factors section included in Part I, Item 1A of this Annual Report on Form 10-K.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. 33 Table of Contents Liquidity Assessment From inception to February 28, 2022, the Company has been in the development stage with no revenues, with its ongoing operations and commercialization plans financed primarily by raising equity.
Actual results could differ from those estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
If we are unable to raise additional capital when required, our business, financial condition and results of operations would be adversely affected.
If we are unable to raise additional capital when required, our business, financial condition and results of operations would be adversely affected. In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment for up to $8.55 million which can be used in any Infinite Loop™ manufacturing facility.
The increase is primarily due to a contingency loss for legal settlement of $2.52 million and a loss from equity investment of $1.12 million, partially offset by decreased general and administrative expenses of $1.39 million and decreased research and development expenses of $1.20 million.
The decrease is primarily due to a gain on disposition of land of $9.98 million related to the Company’s sale of land in Bécancour, Québec, decreased research and development expenses of $4.77 million, decreased general and administrative expenses of $1.23 million, as well as the contingency loss for legal settlement of $2.52 million and loss from equity-accounted investment of $1.12 million both recorded in the year ended February 28, 2022.
The assumptions used in the Black-Scholes model could materially affect stock-based compensation expenses recorded in the current and future periods. Research and development expenses Research and development expenses relate primarily to process development and design, testing of preproduction samples, purchases of machinery and equipment for the Terrebonne Facility, compensation, and consulting and engineering fees, and are expensed as incurred.
The assumptions used in the Black-Scholes model could materially affect stock-based compensation expenses recorded in the current and future periods.
Management evaluates the Company’s liquidity to determine if there is substantial doubt about the Company’s ability to continue as a going concern.
Management actively monitors the Company’s cash resources against the Company’s short-term cash commitments to ensure the Company has sufficient liquidity to fund its costs for at least twelve months from the financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is substantial doubt about the Company’s ability to continue as a going concern.
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.
We are targeting multi-year take or pay offtake agreements for planned Infinite Loop ™ production.
The $9.05 million increase in research and development for the year ended February 28, 2022 was primarily attributable to the following: · $3.40 million increase in purchases of machinery and equipment at the Company’s Terrebonne Facility; · $2.68 million increase in employee compensation expenses related to increased headcount to support the Company’s commercialization efforts and increased activity at the Terrebonne Facility; · $1.65 million increase in external engineering expenses for ongoing design work for our Infinite Loop ™ manufacturing process; · $0.80 million increase in plant and laboratory operating expenses; · $0.12 million increase in employee stock-based compensation expenses; and · $0.40 million increase in other research and development expenses.
The decrease was primarily attributable to a $5.33 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $4.03 million decrease in external engineering expenses for ongoing design work for our Infinite Loop ™ manufacturing process, and a $1.11 million increase in tax credits recorded as a reduction of research and development expenses.
The $0.23 million decrease in depreciation and amortization expenses for year ended February 28, 2022 is mainly attributable to the write-down of machinery and equipment described above. LIQUIDITY AND CAPITAL RESOURCES From inception to February 28, 2022, the Company has been in the development stage with no revenues, with its ongoing operations and commercialization plans financed primarily by raising equity.
LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company has been in the pre-commercialization stage with limited revenues, with its ongoing operations and commercialization plans financed primarily by raising equity. To date, we have been successful in raising capital to finance our ongoing operations.
Three months ended February 28, 2022 February 28, 2021 Change Revenues $ - $ - $ - Expenses Research and development Machinery and equipment expenditures 1,841,920 3,823,535 (1,981,615 ) External engineering 2,267,021 2,414,038 (147,017 ) Employee compensation 1,509,831 1,000,652 509,179 Stock-based compensation 384,228 362,321 21,907 Plant and laboratory operating expenses 584,730 466,724 118,006 Other 390,758 115,651 275,107 Total research and development 6,978,488 8,182,921 (1,204,433 ) General and administrative Professional fees 1,109,248 2,807,583 (1,698,335 ) Employee compensation 624,444 760,450 (136,006 ) Stock-based compensation 316,396 537,556 (221,160 ) Insurance 1,146,574 616,693 529,881 Other 227,725 91,720 136,005 Total general and administrative 3,424,387 4,814,002 (1,389,615 ) Contingency loss for legal settlement 2,519,220 - 2,519,220 Loss from equity investment 1,119,078 - 1,119,078 Depreciation and amortization 140,426 121,321 19,105 Interest and other financial expenses 35,994 55,980 (19,986 ) Interest income (12,167 ) (14,649 ) 2,482 Foreign exchange loss 67,506 33,928 33,578 Total expenses 14,272,932 13,193,503 1,079,429 Net loss $ (14,272,932 ) $ (13,193,503 ) $ (1,079,429 ) The net loss for the three-month period ended February 28, 2022 increased $1.08 million to $14.27 million, as compared to the net loss for the three-month period ended February 28, 2021 which was $13.19 million.
Three months ended February 28, 2023 February 28, 2022 Change Revenues $ 12,487 $ - $ 12,487 Expenses Research and development Machinery and equipment expenditures 83,467 1,841,920 (1,758,453 ) External engineering 359,297 2,267,021 (1,907,724 ) Employee compensation 1,289,096 1,509,831 (220,735 ) Stock-based compensation 166,614 384,228 (217,614 ) Plant and laboratory operating expenses 215,334 584,730 (369,396 ) Other 98,965 390,758 (291,793 ) Total research and development 2,212,773 6,978,488 (4,765,715 ) General and administrative Professional fees 704,458 1,109,248 (404,790 ) Employee compensation 545,734 624,444 (78,710 ) Stock-based compensation (49,581 ) 316,396 (365,977 ) Insurance 710,697 1,146,574 (435,877 ) Other 287,853 227,725 60,128 Total general and administrative 2,199,161 3,424,387 (1,225,226 ) Gain on disposition of land (9,979,933 ) - (9,979,933 ) Contingency loss for legal settlement - 2,519,220 (2,519,220 ) Loss from equity-accounted investment - 1,119,078 (1,119,078 ) Depreciation and amortization 139,570 140,426 (856 ) Interest and other financial expenses 49,794 35,994 13,800 Interest income (5,454 ) (12,167 ) 6,713 Foreign exchange loss (gain) (27,015 ) 67,506 (94,521 ) Total expenses (5,411,104 ) 14,272,932 (19,684,036 ) Net income (loss) $ 5,423,591 $ (14,272,932 ) $ 19,696,523 27 Table of Contents Revenues Revenues for the three-month period ended February 28, 2023 were $0.01 million.
Net Cash Used in Investing Activities During the year ended February 28, 2022, we used $5.11 million in investing activities.
Net Cash Used in Investing Activities During the year ended February 28, 2023, net cash provided from investing activities was $21.28 million. We made investments of $0.08 million in property, plant and equipment as compared to $4.82 million for the year ended February 28, 2022.
The increase over each year is mainly due to increased operating expenses as we move forward on our commercialization plan and to complete the upgrade of the Terrebonne Facility. As discussed above in the Results of Operations, the main increases in expenses were machinery and equipment, employee compensation, engineering fees and insurance.
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.
Years ended February 28, 2022 February 28, 2021 Change Revenues $ - $ - $ - Expenses Research and development Machinery and equipment expenditures 9,549,802 6,149,075 3,400,727 External engineering 7,307,363 5,655,997 1,651,366 Employee compensation 5,722,906 3,040,121 2,682,785 Stock-based compensation 1,536,734 1,417,004 119,730 Plant and laboratory operating expenses 2,649,133 1,852,615 796,518 Other 970,487 572,202 398,285 Total research and development 27,736,425 18,687,014 9,049,411 General and administrative Professional fees 4,247,859 4,613,717 (365,858 ) Employee compensation 2,772,977 2,131,597 641,380 Stock-based compensation 525,633 2,257,622 (1,731,989 ) Insurance 4,267,927 2,072,647 2,195,280 Other 978,043 464,757 513,286 Total general and administrative 12,792,439 11,540,340 1,252,099 Contingency loss for legal settlement 2,519,220 - 2,519,220 Loss from equity investment 1,119,078 - 1,119,078 Impairment of assets - 5,043,119 (5,043,119 ) Depreciation and amortization 548,232 775,675 (227,443 ) Interest and other financial expenses 154,319 81,996 72,323 Interest income (58,976 ) (93,043 ) 34,067 Foreign exchange loss 110,219 309,822 (199,603 ) Total expenses 44,920,956 36,344,923 8,576,033 Net loss $ (44,920,956 ) $ (36,344,923 ) $ (8,576,033 ) 29 The net loss for the year ended February 28, 2022 increased $8.58 million to $44.92 million, as compared to the net loss for the year ended February 28, 2021 which was $36.34 million.
Years ended February 28, 2023 February 28, 2022 Change Revenues $ 172,838 $ - $ 172,838 Expenses Research and development Machinery and equipment expenditures 4,216,042 9,549,802 (5,333,760 ) External engineering 3,272,864 7,307,363 (4,034,499 ) Employee compensation 6,468,202 5,722,906 745,296 Stock-based compensation 1,337,167 1,536,734 (199,567 ) Plant and laboratory operating expenses 2,580,977 2,649,133 (68,156 ) Tax credits (1,199,137 ) (91,960 ) (1,107,177 ) Other 669,849 1,062,447 (392,598 ) Total research and development 17,345,964 27,736,425 (10,390,461 ) General and administrative Professional fees 4,288,299 4,247,859 40,440 Employee compensation 2,475,317 2,772,977 (297,660 ) Stock-based compensation 8,749,019 525,633 8,223,386 Insurance 3,594,030 4,267,927 (673,897 ) Other 1,322,751 978,043 344,708 Total general and administrative 20,429,416 12,792,439 7,636,977 Gain on disposition of land (16,683,492 ) - (16,683,492 ) Contingency loss for legal settlement - 2,519,220 (2,519,220 ) Loss from equity-accounted investment - 1,119,078 (1,119,078 ) Depreciation and amortization 550,114 548,232 1,882 Interest and other financial expenses 188,756 154,319 34,437 Interest income (41,296 ) (58,976 ) 17,680 Foreign exchange loss (gain) (316,059 ) 110,219 (426,278 ) Total expenses 21,473,403 44,920,956 (23,447,553 ) Net loss $ (21,300,565 ) $ (44,920,956 ) $ 23,620,391 Revenues Revenues for the year ended February 28, 2023 were $0.17 million.
These decreases were partially offset by a $0.51 million increase in employee compensation expenses related to increased headcount to support the Company’s commercialization efforts, a $0.15 million increase in plant and laboratory operating expenses and a $0.28 million increase in other research and development expenses.
These decreases were partially offset by a $0.75 million increase in employee compensation expenses related to increased headcount in our in-house engineering and commercial project teams. General and administrative expenses General and administrative expenses for the year ended February 28, 2023 increased $7.64 million to $20.43 million, as compared to $12.79 million for the same period in 2022.
Removed
The Company is in the planning stages of pursuing the construction of Infinite Loop™ commercial scale facilities in Québec, Canada, and with strategic partners in Europe and South Korea. Additionally, the Company has a joint venture to pursue the retrofitting of existing fossil fuel PET polymerization facilities with its recycling technology.
Added
The Company is presently in the planning stages of pursuing the construction of Infinite Loop™ commercial scale facilities.
Removed
Results of Operations Fourth Quarter Ended February 28, 2022 The following table summarizes our operating results for the three-month periods ended February 28, 2022 and February 28, 2021, in U.S. Dollars.
Added
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.
Removed
The agreement, which is subject to certain conditions, including court approval, requires the Company to pay $3.1 million to the plaintiff class. The Company’s total cash contribution to the settlement and outstanding legal fees related to the lawsuit, combined, will be approximately $2.52 million.
Added
On December 22, 2022, we announced a shift in our commercialization strategy and will now focus on our planned joint venture projects with SK Geo Centric Co., Ltd (“SKGC”) in Asia and Europe. These projects have a lower requirement for Loop equity investment and higher expected return on capital, and leverage SKGC’s engineering and operational infrastructure.
Removed
Legal Proceedings”; · $0.22 million decrease in employee stock-based compensation; and · $0.14 million decrease in employee compensation expenses. These decreases were partially offset by a $0.53 million increase in insurance expenses mainly due to directors and officers (“D&O”) insurance upon extension of the Company’s policy and a $0.14 million increase in other general and administrative expenses.
Added
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.
Removed
The increase is primarily due to increased research and development expenses of $9.05 million, a contingency loss for legal settlement of $2.52 million, increased general and administrative expenses of $1.25 million and a loss from equity investment of $1.12 million, partially offset by decreased impairment of assets of $5.04 million, lower depreciation and amortization expenses of $0.23 million and a decreased foreign exchange loss of $0.20 million.
Added
Loop is working collaboratively with SKGC to put in place a financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the first Asian manufacturing facility in Ulsan, South Korea, which is anticipated to break ground in 2023 and to have construction completed by the end of 2025.
Removed
The $1.25 million increase in general and administrative expenses for the year ended February 28, 2022 was primarily attributable to the following: · $2.20 million increase in insurance expenses mainly due to D&O insurance renewal costs; · $0.64 million increase in employee compensation expenses; and · $0.51 million increase in other general and administrative expenses.
Added
For the same period in 2022, there were no revenues. The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.
Removed
These increases were partially offset by lower stock-based compensation expenses of $1.73 million which are mainly due to forfeitures of RSUs for $0.94 million and a $0.37 million decrease in expenses for legal and professional fees due to costs principally associated with the SEC investigation and class action suits described in “Item 3. Legal Proceedings”.
Added
Research and Development Research and development expenses for the three-month period ended February 28, 2023 decreased $4.77 million to $2.21 million, as compared to $6.98 million for the same period in 2022.
Removed
The $5.04 million decrease in write-down and impairment of assets is related to the decision in the third quarter of fiscal 2021 to dedicate the Terrebonne Facility to brand activation, initial customer volumes and Infinite Loop™ demonstration, and research and development activities.
Added
General and administrative expenses General and administrative expenses for the three-month period ended February 28, 2023 decreased $1.23 million to $2.20 million, as compared to $3.42 million for the same period in 2022.
Removed
Although the machinery and equipment will continue to be utilized at the Terrebonne Facility as it is an integral part of supporting the commercialization of our technology, application of ASC 730, Research and Development Costs requires machinery and equipment assets to be written off and all future costs associated with the Terrebonne Facility to be recognized as a research and development expense in the consolidated statements of operations and comprehensive loss.
Added
Legal Proceedings” and the Company’s commercialization plans, and a $0.37 million decrease in stock-based compensation expenses which is mainly due to RSU forfeitures in the three-month period ended February 28, 2023, accounted for as a reversal of stock-based compensation expense.
Removed
To date, we have been successful in raising capital to finance our ongoing operations.
Added
Net Loss The net loss for the three-month period ended February 28, 2023 decreased $19.70 million with a net income of $5.42 million in the period, as compared to a net loss of $14.27 million for the same period in 2022.
Removed
As the Company pursues its commercialization strategy and invests in the Bécancour, Québec project site and other projects, certain project site improvements and long lead capital commitments are being incurred and we expect to enter into additional commitments in the future, provided we obtain the required funding.
Added
For the same period in 2022, there were no revenues. The revenues resulted from the delivery of initial volumes to customers of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility.
Removed
In December 2021, the Company entered into an agreement for the purchase of long lead machinery and equipment in connection with the planned construction of our Infinite Loop™ manufacturing facility in Bécancour, Québec for up to $8.55 million over the next 9 months, based on certain milestones subject to various terms and conditions, including securing financing for our Infinite Loop™ manufacturing facility in Bécancour, Québec.
Added
Research and Development Research and development expenses for the year ended February 28, 2023 decreased $10.39 million to $17.35 million, as compared to $27.74 million for the same period in 2022.
Removed
Pursuant to the agreement, the Company has paid a cash deposit of $2.14 million. As part of our strategic partnership with SKGC, SKGC purchased 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million. The strategic equity investment closed on July 29, 2021.
Added
The increase was primarily attributable to an increased stock-based compensation expense of $8.22 million, of which $7.74 million was related to the achievement of a performance milestone for 1,000,000 RSUs following the execution of a supply agreement with a customer and $0.94 million was attributable to RSU forfeitures in the same period in 2022, which were accounted for as a reversal of stock-based compensation.
Removed
SKGC was also granted warrants to acquire an additional 461,298 common shares at $11 per share within the next 12 months, 4,714,813 common shares at a price of $15 per share, within the next 3 years, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility.
Added
The increase was partially offset by decreased insurance costs of $0.67 million, and a $0.30 million decrease in employee compensation costs. 29 Table of Contents Net Loss The net loss for the year ended February 28, 2023 decreased $23.62 million to $21.30 million, as compared to $44.92 million for the same period in 2022.
Removed
The size of this parcel of land exceeds that needed for the construction of the Infinite Loop™ manufacturing facility and a portion of the land is therefore available for sale. For additional information on the land held for sale, please refer to Note 5 of the attached condensed consolidated financial statements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Pursuant to SEC Release No. 33-8876, we are permitted to use the scaled disclosure requirements applicable to a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, and therefore, we are not required to provide the information called for by this Item. 34 Table of Contents
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Pursuant to SEC Release No. 33-8876, we are permitted to use the scaled disclosure requirements applicable to a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, and therefore, we are not required to provide the information called for by this Item. 33 Table of Contents

Other LOOP 10-K year-over-year comparisons