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

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the "Company," "Loop," "we," or "our"), contains "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, ability to improve and expand our capabilities, competition, expected activities and expenditures as we pursue our business plan, the adequacy of our available cash resources, regulatory compliance, plans for future growth and future operations, the size of our addressable market, market trends, and the effectiveness of the Company's internal control over financial reporting. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under "Risk Factors." Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: (i) commercialization of our technology and products, (ii) our status of relationship with partners, (iii) development and protection of our intellectual property and products, (iv) industry competition, (v) our need for and ability to obtain additional funding relative to our current and future financial commitments, (vi) engineering, contracting and building our manufacturing facilities, (vii) our ability to scale, manufacture and sell our products in order to generate revenues, (viii) our proposed business model and our ability to execute thereon, (ix) adverse effects on the Company's business and operations as a result of increased regulatory, media or financial reporting scrutiny, practices, rumors, or otherwise, (x) disease epidemics and health-related concerns, such as the current outbreak of additional variants of coronavirus (COVID-19), which could result in (and, in the case of the COVID-19 outbreak, has resulted in some of the following) reduced access to capital markets, supply chain disruptions and scrutiny or embargoing of goods produced in affected areas, government-imposed mandatory business closures and resulting furloughs of our employees, government employment subsidy programs, travel restrictions or the like to prevent the spread of disease, and market or other changes that could result in noncash impairments of our intangible assets, and property, plant and equipment, (xi) the outcome of the ongoing SEC investigation or the class action litigation filed against us, (xii) our ability to hire and/or retain qualified employees and consultants and (xiii) other factors discussed in our subsequent filings with the SEC.

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

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

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






          3

  Table of Contents




Introduction


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

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

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. We believe plastic pollution and climate change continue to be the most persistently covered environmental issues by media and local and global environmental non-governmental organizations. Some of the main concerns associated with PET are the greenhouse gas ("GHG") emissions associated with its production from non-renewable hydrocarbons and the length of time it persists in landfills and the natural environment. There is an increasing demand for action to address the global plastic crisis, as evidenced by the March 2022 endorsement by 175 nations of a historic resolution at the UN Environmental Assembly to end plastic pollution and forge an international legally binding agreement by the end of 2024. In the last few years, governments in North America, Europe and Asia have been proposing and enacting 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 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.

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, 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 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 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;





          4

  Table of Contents




    ·   Puma is aiming to increase the amount of recycled materials in its apparel
        and accessories products and have announced a 2025 goal of having at least
        75% of the polyester used in Puma products be from recycled sources;
    ·   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; 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.



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. A California law enacted on September 24, 2020 requires that
        plastic bottles contain at least 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. Effective April 2022, a
        new £200/ton tax applies 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. Spain has also proposed a tax of €450 per ton on
        non-reusable plastic packaging with an anticipated start date of January
        2023. 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.



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.

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. The PET is then ground and put through a separation process which separates the PET from non-PET materials such as bottle caps and labels. 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. 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. 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. Therefore, mechanically recycled PET may need to be mixed with virgin PET from fossil fuels to maintain quality. Lower quality mechanically recycled PET is often downcycled to alternate uses such as polyester fibers which may be dyed and used in carpets or clothing. Additionally, mechanically recycled PET manufactured for use in clear bottles or food containers requires predominantly clear and clean PET flakes separated from waste bales, and cannot accommodate darkly colored PET flakes, lower quality fiber feedstock, or materially contaminated feedstock, which may be cheaper.

We believe the commercialization plans of Loop™ PET resin and polyester fiber may provide the ideal solution for global brands because Loop™ PET resin and polyester fiber contains 100% recycled PET and polyester fiber content. The Loop™ PET resin and polyester fiber is virgin-quality suitable for use in food-grade packaging. 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.

Proprietary Technology and Intellectual Property

We believe the power of our technology lies in its ability to use post-industrial and post-consumer waste PET plastic and polyester fiber feedstocks, which could end up in landfills, rivers, oceans and natural areas, to create Loop™ PET resin. 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.






          5

  Table of Contents



Our Generation I technology ("GEN I") is a hydrolysis-based depolymerization technology which yields purified terephthalic acid ("PTA") and monoethylene glycol ("MEG"), two common monomers of PET. As the Company evaluated the transition of 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. 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. The low temperature offers several key advantages which the Company believes will improve its ability to commercialize the GEN II technology, including:





    ·   Lower energy usage during depolymerization and therefore reduced
        processing cost and lower GHG emissions relative to higher temperature
        processes;
    ·   Avoidance of side reactions with non-PET waste, which are inherent in
        waste PET feedstock streams, during depolymerization which may occur
        during higher temperature and higher pressure depolymerization processes.
        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.



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.

To independently validate that our GEN II technology can produce DMT and MEG monomers at mini-pilot and pilot scale, we commissioned Kemitek, a College Centre for Technology Transfer specialized in the fields of green chemistry and chemical process scale-up. Kemitek's findings allowed them to confirm that our technology produces monomers that meet our purity specifications for the production of PET resin and polyester fiber. The complete Kemitek report was filed with the SEC by the Company on December 14, 2020.

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. 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. Internationally, the GEN I technology
        portfolio includes 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
        extensions.
    ·   The GEN II technology portfolio currently consists of four patent
        families:




       o   One 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 has issued patents in Bangladesh and in Argentina,
           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.
       o   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, this patent family includes
           issued or allowed patents in Morocco, 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, not including any patent
           term extensions.





          6

  Table of Contents




       o   Another aspect of the GEN II technology, which is the subject of
           an issued U.S. patent and a pending U.S. application. Internationally,
           this patent family includes pending applications in Canada, Europe,
           India, Singapore, Papua New Guinea, Brazil, and South Africa. Any
           patents that would ultimately grant from this application would be
           expected to expire on or around March 2040, not including any patent
           term extensions.

       o   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. Internationally, this patent family
           includes 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,
           not including any patent term extensions.



Loop owns registrations for its trademarks in Cambodia, Canada, the European Union, Taiwan, the United Kingdom, and the U.S. Loop also has pending applications in Canada, Japan, South Korea, the U.S., and Vietnam.

Supply Agreements with Global Consumer Brands

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 like PET, and by incorporating more recycled content into their packaging. We believe Loop™ PET resin provides the ideal solution for these brands because it is recyclable and is made from 100% recycled PET waste and polyester fiber, while being virgin-quality and suitable for use in food-grade packaging and polyester fiber.

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.

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 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 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.






          7

  Table of Contents



Turning PET Waste into Feedstock

We use waste PET plastic and polyester fiber as 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. 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. 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. We believe that industrial companies, some of which today may not be in the business of manufacturing PET resin or polyester fiber, will view involvement in Infinite Loop™ projects as a significant growth opportunity, which may offer attractive economic returns either as Loop manufacturing partners or as licensees of the technology.

On December 22, 2022, we announced that we will for now focus our commercialization strategy 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 return on capital, and leverage SKGC's engineering and operational infrastructure. In addition, the joint venture projects will provide Loop with an annual technology licensing fee. SKGC is committed to commercializing Loop's technology as the underpinning of its sustainable plastics strategy. Loop is working collaboratively with SKGC to put in place a financing plan for the rollout of large-scale manufacturing in Asia and Europe, including the first Asian manufacturing facility in Ulsan, South Korea, which is planned to break ground in 2023.

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

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

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. We are targeting multi-year take or pay offtake agreements for planned Infinite Loop™ production. Factors under consideration in determining project economics include the feasibility design engineering and cost estimate work, timing and permitting of a facility, customer offtake demand, commitment terms, and feedstock sources, quality, availability, PET bale index pricing, logistics, and ramp up, among others.

Strategic Partnership with SK geo centric

Loop and 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. 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. As of the date of the filing on this Quarterly Report on Form 10-Q, final joint venture agreements have not been entered into.






          8

  Table of Contents



In addition, on June 22, 2021, Loop and SKGC concluded a definitive agreement for SKGC to become a strategic investor in Loop. 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. 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.

SKGC currently owns approximately 10% of Loop's common shares. In conjunction with the equity investment, Mr. Jonghyuk Lee, Vice President of SKGC's Green Business Division, was appointed to Loop's Board of Directors. This appointment reflects SKGC's strategic view of the importance of its investment in Loop, as part of its "Green for Better Life" global strategic vision.

As reported on July 8, 2021 SKGC signed a memorandum of understanding ("MOU") with the city of Ulsan, South Korea to develop an industrial complex which is planned to include the first Infinite Loop™ manufacturing facility in Asia. Discussions have been initiated regarding planning for the second facility in Asia as part of the objective of the two companies to build four Infinite Loop™ manufacturing facilities in Asia by 2030.

SKGC unveiled on August 31, 2021 its rebrand as SK geo centric, aligning with the company's goal of transforming into a green company and focusing on eco-friendly products such as recyclable plastics. These announcements further reinforce Loop's alignment as an important strategic partner for SK geo centric, as we move to commercialize our technology in Asia.

Loop and SKGC are collaborating closely with SK ecoengineering ("SKEE"), a subsidiary of SK group, on providing the engineering related to the construction of the planned Infinite Loop™ manufacturing facility in Ulsan, South Korea. SKEE is an experienced EPC contractor with a proven track record in the construction of large scale projects internationally.





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 SKGC will become an equal partner in the strategic partnership.

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

The three companies are re-evaluating the optimal location for the planned European Infinite Loop™ manufacturing facility. We are working with our partners Suez and SKGC 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.





Infinite Loop™ Québec

We acquired a project site in Bécancour, Québec in May of 2021 for $4.4 million (CDN $5.9 million), a portion of which was sold on September 15, 2022 for net proceeds of $8.56 million (CDN $11.4 million). On December 22, 2022, we announced that our commercialization strategy will now focus on our planned projects with SKGC in Asia and Europe and that we had entered into an agreement to sell all of our remaining property in Bécancour, Quebec for $13.70 million (CDN $18.5 million). The sale transaction is expected to close on February 24, 2023, subject to final due diligence and fulfillment of certain customary closing conditions.






          9

  Table of Contents



Although the company is currently focusing on developing the planned joint venture facilities in Asia and Europe, a future facility in Quebec remains an option at the appropriate time, and possible alternative locations for such a facility are available. We are continuing to explore financing options to fully fund the project. Alternatives under exploration include incentive and financing programs supported by, or in partnership with, various levels of government. A future facility in Quebec would be aligned with the Government of Canada's announced zero plastic waste goal by 2030.

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.

Unveiling of L'OCCITANE en Provence Almond Shower Oil Bottle

On October 11, 2022, Loop and L'OCCITANE en Provence ("L'OCCITANE"), a global manufacturer and retailer of sustainable beauty and wellness products, unveiled a new bottle for the brand's Almond Shower Oil that was manufactured with 100% recycled Loop™ PET resin produced using monomers from Loop's Terrebonne Facility. Loop has partnered with L'OCCITANE to help meet the brand's sustainability goal of using 100% recycled PET in its bottles by 2025. In partnership with the brand, a pilot project was executed where the bottle (excluding cap and label) was produced using 100% recycled Loop™ PET resin and was successfully carried out on L'OCCITANE production lines. This initiative marks a significant step forward in the partnership between the two companies and sets the pathway to implement Loop's technology across other products in the brand's assortment. As part of this partnership with L'OCCITANE, Loop's branding is featured prominently on the front of the packaging, with additional details speaking to Loop's technology on the back label.

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. Evian began selling water bottles made from Loop™ PET in South Korea in October 2022. 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. This initiative reflects evian's commitment to its stated 2025 goals for circularity and 100% recycled content.

Loop continues to work toward new brand and market introductions with additional consumer goods brand companies.





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. In addition to our research and development activities, this facility is used to deliver initial production volumes to support co-branded market launch campaigns with partners and customers and will also be used to showcase the Infinite Loop™ end-to-end technology and train operational teams in advance of the commissioning of the Infinite Loop™ full-scale commercial facilities.

We completed the planned upgrades at the Terrebonne Facility which have given us the opportunity to support product campaigns with customers, such as the evian Loop bottle. In completing the upgrade of the Terrebonne facility to incorporate all key pieces of depolymerization equipment that will be used in the full-scale commercial facilities, we achieved a key milestone in proving the effectiveness of our process.

In the nine-month period ended November 30, 2022 Loop reported first revenues of $0.16 million from the sale of Loop™ PET resin produced from monomers manufactured at the Terrebonne Facility to several global consumer brands, which included On AG. We previously entered into an agreement with On AG to supply Loop™ PET to be utilized in polyester fiber by the brand, pursuant to which Loop™ PET resin was delivered in the nine-month period ended November 30, 2022. 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.






         10

  Table of Contents



On December 22, 2022, we announced that we have reduced hours of operation at the Terrebonne Facility in order to reduce operating costs and conserve liquidity. The primary purpose of the Terrebonne Facility was to demonstrate that Loop's breakthrough depolymerization technology was scalable and to produce commercial quantities of virgin quality PET resin and polyester fiber for global brands. We believe the Terrebonne Facility has achieved this objective. We will continue to fulfill existing sales contracts.

Joint Venture with Indorama for Retrofit

In September 2018 we announced a joint venture with Indorama to retrofit certain PET manufacturing facilities. We entered into a Limited Liability Company Agreement (the "LLC Agreement"), a Marketing Agreement (the "Marketing Agreement") and a License Agreement (the "License Agreement"), with Indorama through our wholly-owned subsidiary Loop Innovations, LLC ("Loop Innovations"). Each company has 50/50 equity interest in the joint venture. We are contributing to the 50/50 joint venture an exclusive worldwide royalty-free license to use our proprietary technology to produce 100% sustainably produced PET resin in addition to our equity cash contribution. In 2019, the joint venture decided to increase the capacity of the planned Spartanburg, South Carolina plant due to customer demand to 40,000 metric tons per year from the initially planned 20,700 metric tons per year. The joint venture made a decision over the summer of 2020 that due to the COVID-19 pandemic it would temporarily delay work on the project. Since then, no expenditures have been incurred by the joint venture. Both joint venture partners currently remain committed to the project and we continue to discuss the project timetable.





Human Capital


As of November 30, 2022, we had 81 employees of which 28 work in research and development, 38 in engineering and operations, and 15 in administrative functions.






         11

  Table of Contents




Results of Operations



The following table summarizes our operating results for the three-month periods ended November 30, 2022 and 2021, in U.S. Dollars.





                                                  Three months ended November 30,
                                                  2022              2021           Change
Revenues                                  $     24,924     $           -     $     24,924

Expenses

Research and development Machinery and equipment expenditures 1,059,266 2,599,758 (1,540,492 ) External engineering

                           707,113         1,585,512         (878,399 )
Employee compensation                        1,539,581         1,424,330          115,251
Stock-based compensation                       455,013           362,435           92,578
Plant and laboratory operating expenses        915,951           665,893          250,058
Tax credits                                   (299,793 )          97,480         (397,273 )
Other                                          204,421            99,896          104,525
Total research and development               4,581,552         6,835,304       (2,253,752 )

General and administrative
Professional fees                            1,278,478           650,164          628,314
Employee compensation                          492,178           748,668         (256,490 )
Stock-based compensation                       419,153           279,574          139,579
Insurance                                      709,952         1,193,554         (483,602 )
Other                                          283,166           219,295           63,871
Total general and administrative             3,182,927         3,091,255           91,672

Gain on disposition of assets               (6,703,558 )               -       (6,703,558 )
Depreciation and amortization                  133,902           135,035           (1,133 )
Interest and other financial expenses           54,402            49,655            4,747
Interest income                                (13,315 )         (23,654 )         10,339
Foreign exchange loss (gain)                  (197,913 )          10,648         (208,561 )
Total expenses                               1,037,997        10,098,243       (9,060,246 )
Net loss                                  $ (1,013,073 )   $ (10,098,243 )   $  9,085,170

Three Months Ended November 30, 2022 and 2021





Revenues


Revenues for the three-month period ended November 30, 2022 were $0.02 million. For the same period in 2021, 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.





Research and Development


Research and development expense for the three-month period ended November 30, 2022 decreased $2.25 million to $4.58 million, as compared to $6.84 million for the same period in 2021. The decrease was primarily attributable to a $1.54 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $0.88 million decrease in external engineering costs for ongoing design work for our Infinite Loop™ manufacturing process, and a $0.40 million increase in tax credits recorded as a reduction of research and development expenses.






         12

  Table of Contents



General and administrative expenses

General and administrative expenses for the three-month period ended November 30, 2022 increased $0.09 million to $3.18 million, as compared to $3.09 million for the same period in 2021. The increase was primarily attributable to a $0.63 million increase in expenses for legal and professional fees due to costs principally associated with the SEC investigation and class action suits described in "Part II, Item 1. Legal Proceedings" of our 10-Q and the Company's commercialization plans, and a $0.14 million increase in stock-based compensation expenses. These increases were partially offset by a $0.48 million decrease in insurance costs, and a $0.26 million decrease in employee compensation costs.





Net Loss


The net loss for the three-month period ended November 30, 2022 decreased $9.09 million to $1.01 million, as compared to $10.10 million for the same period in 2021. The decrease is primarily due to a gain on disposition of assets of $6.70 million recorded in the three-month period ended November 30, 2022 related to the Company's sale of land in Bécancour, Québec, and the decreased research and development expenses of $2.25 million, partially offset by the increased general and administrative expenses of $0.09 million.

Nine Months Ended November 30, 2022 and 2021

The following table summarizes our operating results for the nine-month periods ended November 30, 2022 and 2021, in U.S. Dollars.





                                                   Nine months ended November 30,
                                                   2022              2021           Change
Revenues                                  $     160,352     $           -     $    160,352

Expenses

Research and development Machinery and equipment expenditures 4,132,575 7,707,882 (3,575,307 ) External engineering

                          2,913,567         5,040,342       (2,126,775 )
Employee compensation                         5,179,105         4,213,075          966,030
Stock-based compensation                      1,170,554         1,152,506           18,048

Plant and laboratory operating expenses 2,365,643 2,064,403 301,240 Tax credits

                                  (1,207,415 )         (54,911 )     (1,152,504 )
Other                                           579,162           634,640          (55,478 )
Total research and development               15,133,191        20,757,937       (5,624,746 )

General and administrative
Professional fees                             3,840,844         3,138,611          702,233
Employee compensation                         1,929,581         2,148,533         (218,952 )
Stock-based compensation                      8,798,601           209,236        8,589,365
Insurance                                     2,883,333         3,121,353         (238,020 )
Other                                           777,896           750,319           27,577
Total general and administrative             18,230,255         9,368,052        8,862,203

Gain on disposition of assets                (6,703,558 )               -       (6,703,558 )
Depreciation and amortization                   410,544           407,806            2,738
Interest and other financial expenses           138,962           113,344           25,618
Interest income                                 (35,842 )         (41,828 )          5,986
Foreign exchange loss (gain)                   (289,022 )          42,712         (331,734 )
Total expenses                               26,884,530        30,648,023       (3,763,493 )
Net loss                                  $ (26,724,178 )   $ (30,648,023 )   $  3,923,845




Revenues


Revenues for the nine-month period ended November 30, 2022 were $0.16 million. For the same period in 2021, 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.






         13

  Table of Contents




Research and Development


Research and development expense for the nine-month period ended November 30, 2022 decreased $5.62 million to $15.13 million, as compared to $20.76 million for the same period in 2021. The decrease was primarily attributable to a $3.58 million decrease in purchases of machinery and equipment used at the Terrebonne facility, a $2.13 million decrease in external engineering expenses for ongoing design work for our Infinite Loop™ manufacturing process, and a $1.15 million increase in tax credits recorded as a reduction of research and development expenses. These decreases were partially offset by a $0.97 million increase in employee compensation expenses related increased headcount in our in-house engineering and commercial project teams.

General and administrative expenses

General and administrative expenses for the nine-month period ended November 30, 2022 increased $8.86 to $18.23 million, as compared to $9.37 million for the same period in 2021. The increase was primarily attributable to an increased stock-based compensation expense of $8.59 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 2021 accounted for as a reversal of stock-based compensation, and increased professional fees of $0.70 million, mainly related to legal fees principally associated with the SEC investigation and class action suits described in "Part II, Item 1. Legal Proceedings" of our 10-Q and the Company's commercialization plans. These increases were partially offset by decreased insurance costs of $0.24 million, and a $0.22 million decrease in employee compensation costs.





Net Loss


The net loss for the nine-month period ended November 30, 2022 decreased $3.92 million to $26.72 million, as compared to $30.65 million for the same period in 2021. The decrease is primarily due to a gain on disposition of assets of $6.70 million recorded in the nine-month period ended November 30, 2022 related to the Company's sale of land in Bécancour, Québec, and the decreased research and development expenses of $5.62 million, partially offset by the increased general and administrative expenses of $8.86 million.

LIQUIDITY AND CAPITAL RESOURCES





Liquidity


Since its inception, the Company has been in the development 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. Our liquidity position consists of cash and cash equivalents on hand of $25.62 million at November 30, 2022 and an undrawn senior loan facility from a Canadian bank of $2.59 million. Additionally, the Company entered into an agreement on December 21, 2022 to sell its land in Bécancour, Québec for $13.70 million (CDN $18.50 million) on or before February 24, 2023. Our liquidity position is subject to risks and uncertainties, including those discussed under "Cautionary Statements Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q and the Risk Factors section included in Part I, Item 1A of our 2022 Annual Report on Form 10-K.

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. 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. Management prepared the Company's consolidated financial statements on a going concern basis in accordance with ASC 205-40, as 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 12 months from the date of issuance of these consolidated financial statements.






         14

  Table of Contents



Management continues to pursue our growth strategy and is evaluating our financing plans to continue to raise capital to finance the start-up of commercial operations and continue to fund our ongoing operations. 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. In addition to our cash on hand, we may also raise additional capital through equity offerings or debt financings, government incentives, as well as through collaborations or strategic alliances to execute our growth strategy. Such financing will depend on many factors, including actual construction costs of the planned commercial facilities, potential delays in our supply chain, and our ability to secure customers, which may not be available on acceptable terms, if at all. 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 payment of these amounts is based on certain milestones subject to various terms and conditions, including fabrication timelines, and equipment inspection. Pursuant to the agreement, the Company has paid a cash deposit of $3.40 million.

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 $3.41 million (CDN $4.60 million). We received the first disbursement in the amount of $1.64 million (CDN $2.21 million) on February 21, 2020 and the second disbursement in the amount of $1.77 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. 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 $0.34 million (CDN $0.46 million). The warrants were issued at a price per share equal to the higher of (i) $11.00 per share and (ii) the ten-day weighted average closing price of Loop Industries shares of common stock on the Nasdaq stock market for the 10 days prior to the issue of the warrants. The warrants can be exercised immediately upon grant and have a term of three years from the date of issuance. The loan can be repaid at any time by us without penalty. 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 August 26, 2021, upon the receipt of the second disbursement under this facility, we issued a warrant to purchase 17,180 shares of common stock at a price of $11.00 to Investissement Québec. There is no remaining amount available under the financing facility after the second disbursement.

On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the "the Financing Facility Amendment"). As per the Financing Facility Amendment, $37,015 (CDN $50,000) of the principal amount is repayable in monthly installments in the fiscal year ending February 29, 2024 and the remainder of the principal amount is repayable in 72 monthly installments. Under the original terms of the Financing Facility, the principal amount was repayable in 84 monthly installments beginning in March of 2023. The Financing Facility Amendment does not modify the interest rates, the repayment terms of accrued interest or any other terms of the Financing Facility.

On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the "Credit Facility") with a Canadian bank. The Credit Facility allows for borrowings of up to $2,669,514 (CDN $3,500,000) in aggregate principal amount and provides for a two-year term. The Credit Facility is secured by the Company's Terrebonne, Québec property and is subject to a minimum equity covenant, tested quarterly. All borrowings under the Credit Facility will bear interest at an annual rate equal to the bank's Canadian prime rate (as defined in the Credit Facility) plus 1.0%. The Company is subject to a guarantee of the liabilities of Loop Canada Inc. As at November 30, 2022 the Credit Facility was undrawn.






         15

  Table of Contents

© Edgar Online, source Glimpses