☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR

15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the transition period from ~~________~~___________ to ~~________~~

__________

Commission File ~~Number:~~ No. 000-54768

~~LOOP INDUSTRIES, INC.~~

Loop Industries, Inc.

(Exact name of ~~registrant~~Registrant as specified in its charter)

Nevada

27-2094706

(State or other jurisdiction of

incorporation or organization)

~~(I.R.S. Employer~~

~~Identification No.)~~

(I.R.S. Employer Identification No.)

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

(Address of principal executive offices zip code)

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

Securities registered pursuant to Section 12(b) of the Act: None

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
~~480 Fernand Poitras Terrebonne, Quebec, Canada J6Y 1Y4~~ Common Stock
~~(Address of principal executive offices, including zip code)~~ LOOP

~~(450) 951-8555~~
~~(Registrant's telephone number, including area code)~~ Nasdaq Global Market

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(§232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x ☒ No ¨

☐

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

Large accelerated filer	¨ ☐		Accelerated filer	¨ ☒
Non-accelerated filer	¨ ☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	x ☒
			Emerging growth company	¨ ☐

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

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Securities~~ Exchange Act).

Yes ¨ ☐ No x

☒

As ~~of January 9, 2018, the registrant had 32,807,137~~at October 8, 2019, there were 39,032,528 shares of the Registrant’s common stock, ~~$0.0001~~ par value $0.0001 per share, outstanding.

LOOP INDUSTRIES, INC.

TABLE OF CONTENTS

Page No.

PART I . Financial Information

Item 1. Financial Statements 4

~~LOOP INDUSTRIES, INC.~~

~~QUARTERLY REPORT ON FORM 10-Q~~

~~FOR THE PERIOD ENDED November 30~~~~, 2017~~

~~Index~~
Item 2.
~~PAGE~~
~~PART I.~~
~~FINANCIAL INFORMATION~~
~~Item 1~~
~~Financial Statements (unaudited)~~
~~F-1~~
~~Item 2~~
Management’s Discussion and Analysis of Financial Condition and Results of Operations
5
20
Item 3
3.
Quantitative and Qualitative Disclosures About Market Risk
7
25
Item 4
4.
Controls and Procedures
8
26
PART II.
Other Information
~~OTHER INFORMATION~~
Item 1
1.
Legal Proceedings
9
27
Item 1A
1A.
Risk Factors
9
27
Item 2
2.
Unregistered Sales of Equity Securities and Use of Proceeds
9
27
Item 3
3.
Defaults Upon Senior Securities
9
27
Item 4
4.
Mine Safety Disclosures
9
27
Item 5
5.
Other Information
9
27
Item 6
6.
Exhibits
10
27
Signatures
29

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Loop Industries, Inc.

Three and Six months ended August 31, 2019

Index to the Unaudited Interim Condensed Consolidated Financial Statements

Contents			Page(s)
~~SIGNATURES~~			11
~~INDEX TO EXHIBITS~~			10

2Condensed consolidated balance sheets as at August 31, 2019 and February 28, 2019 (Unaudited) F-2

Condensed consolidated statements of operations and comprehensive loss for the three and six months ended August 31, 2019 and 2018 (Unaudited) F-3

Condensed consolidated statement of changes in stockholders’ equity for the three and six months ended August 31, 2019 and 2018 (Unaudited) F-4
Condensed consolidated statement of cash flows for the six months ended August 31, 2019 and 2018 (Unaudited) F-6
Notes to the condensed consolidated financial statements (Unaudited)
F-7

Loop Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	August 31, 2019	February 28, 2019

Assets
Current assets
Cash and cash equivalents	$37,931,040	$5,833,390
Sales tax, tax credits and other receivables (Note 3)	716,314	599,000
Prepaid expenses	248,712	226,521
Total current assets	38,896,066	6,658,911
Investment in joint venture (Note 8)	500,000	-
Property, plant and equipment, net (Note 4)	6,428,004	5,371,263
Intangible assets, net (Note 5)	200,351	127,672
Total assets	$46,024,421	$12,157,846

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities (Notes 7)	$1,511,976	$2,670,233
Convertible notes (Notes 6 and 10)	4,259,759	5,636,172
Warrants (Note 10)	-	219,531
Current portion of long-term debt (Notes 6 and 9)	52,651	53,155
Total current liabilities	5,824,386	8,579,091
Long-term debt (Notes 6 and 9)	917,012	952,363
Total liabilities	6,741,398	9,531,454

Stockholders' Equity
Series A Preferred stock, par value $0.0001; 25,000,000 shares authorized; one share issued and outstanding (Note 11)	-	-
Common stock, par value $0.0001: 250,000,000 shares authorized; 39,032,528 shares issued and outstanding (February 28, 2019 – 33, 805,706) (Note 11)	3,903	3,381
Additional paid-in capital	74,414,197	38,966,208
Additional paid-in capital – Warrants (Notes 10 and 11)	9,700,102	757,704
Additional paid-in capital – Beneficial conversion feature (Note 10)	1,200,915	1,200,915
Common stock issuable, 1,000,000 shares (Note 11)	-	800,000
Accumulated deficit	(45,708,185)	(38,811,592)
Accumulated other comprehensive loss	(327,909)	(290,224)
Total stockholders' equity	39,283,023	2,626,392
Total liabilities and stockholders' equity	$46,024,421	$12,157,846

See accompanying notes to the condensed consolidated financial statements.

Loop Industries, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended August 31		Six Months Ended August 31
	2019	2018	2019	2018

Revenue	$-	$-	$-	$-

Expenses -
Research and development, net (Note 12)	970,213	1,066,292	1,968,074	2,132,371
General and administrative (Note 12)	1,718,613	2,394,398	3,621,243	4,749,948
Depreciation and amortization (Notes 4 and 5)	201,403	110,589	365,739	211,658
Interest and other finance costs (Note 15)	622,183	13,443	1,124,064	26,481
Interest income	(192,259)	(122)	(192,291)	(247)
Foreign exchange (gain) loss	21,890	(46,190)	9,764	(52,271)
Total expenses	3,342,043	3,538,410	6,896,593	7,067,940

Net Loss	(3,342,043)	(3,538,410)	(6,896,593)	(7,067,940)

Other comprehensive loss -
Foreign currency translation adjustment	102,457	(59,321)	(37,685)	(111,589)
Comprehensive Loss	$(3,239,586)	$(3,597,731)	$(6,934,278)	$(7,179,529)

Loss per share
- Basic and Diluted	$(0.09)	$(0.10)	$(0.19)	$(0.21)

Weighted average common shares outstanding
- Basic and Diluted	38,383,156	33,805,706	36,548,832	33,768,516

See accompanying notes to the condensed consolidated financial statements.

Loop Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Three Months Ended August 31, 2019
	Common stock		Preferred stock
	par value $0.0001		par value $0.0001
	Number of Shares	Amount	Number of Shares	Amount	Additional Paid-in Capital	Additional Paid-in Capital - Warrants	Additional Paid-in Capital – Beneficial Conversion Feature	Common Stock Issuable	Accumulated Deficit	Accumulated Other Comprehensive (Loss)	Total Stockholders' Equity
Balance, May 31, 2019	34,875,032	$3,488	1	$-	$46,536,157	1,074,633	1,200,915	$800,000	$(42,366,142)	$(430,366)	$6,818,685

Issuance of common shares for cash, net of share issuance costs (Note 11)	4,093,567	409	-	-	26,092,669	8,663,769	-	-	-	-	34,756,847
Issuance of shares upon the vesting of restricted stock units	43,932	4			799,996			(800,000)			-
Issuance of shares upon the cashless exercise of stock options	4,565	1			(1)						-
Issuance of shares upon exercise of warrants	15,432	1			182,048	(38,300)					143,749
Stock options issued for services (Note 12)	-	-	-	-	498,198	-	-	-	-	-	498,198
Restricted stock units issued for services (Note 12)	-	-	-	-	305,130	-	-	-	-	-	305,130
Foreign currency translation	-	-	-	-	-	-	-	-	-	102,457	102,457
Net loss	-	-	-	-	-	-	-	-	(3,342,043)	-	(3,342,043)
Balance, August 31, 2019	39,032,528	$3,903	1	$-	$74,414,197	9,700,102	1,200,915	-	$(45,708,185)	$(327,909)	$39,283,023

F-4

	Three Months Ended August 31, 2018
	Common stock		Preferred stock
	par value $0.0001		par value $0.0001
	Number of Shares	Amount	Number of Shares	Amount	Additional Paid-in Capital	Additional Paid-in Capital - Warrants	Additional Paid-in Capital – Beneficial Conversion Feature	Common Stock Issuable	Accumulated Deficit	Accumulated Other Comprehensive (Loss)	Total Stockholders' Equity
Balance, May 31, 2018	33,805,706	$3,381	1	$-	$32,150,634	-	-	$800,000	$(24,804,711)	$(221,368)	$7,927,936
						-
Stock options issued for services (Note 12)	-	-	-	-	823,978	-	-	-	-	-	823,978
Restricted stock units issued for services (Note 12)	-	-	-	-	181,492	-	-	-	-	-	181,492
Foreign currency translation	-	-	-	-	-	-	-	-	-	(59,321)	(59,321)
Net loss	-	-	-	-	-	-	-	-	(3,538,410)	-	(3,538,410)
Balance, August 31, 2018	33,805,706	$3,381	1	$-	$33,156,104	-	-	$800,000	$(28,343,121)	$(280,689)	$5,335,675

F-5

	Six Months Ended August 31, 2019
	Common stock		Preferred stock
	par value $0.0001		par value $0.0001
	Number of Shares	Amount	Number of Shares	Amount	Additional Paid-in Capital	Additional Paid-in Capital - Warrants	Additional Paid-in Capital – Beneficial Conversion Feature	Common Stock Issuable	Accumulated Deficit	Accumulated Other Comprehensive (Loss)	Total Stockholders' Equity
Balance, February 28, 2019	33,805,706	$3,381	1	$-	$38,966,208	757,704	1,200,915	$800,000	$(38,811,592)	$(290,224)	$2,626,392

Issuance of common shares for cash, net of share issuance costs (Note 11)	4,693,567	469	-	-	30,359,394	8,663,769	-	-	-	-	39,023,632
Issuance of shares for legal settlement	150,000	15	-	-	(15)	-	-	-	-	-	-
Issuance of shares upon conversion of Convertible notes (Note 10)	319,326	32	-	-	2,372,549	316,929	-	-	-	-	2,689,510
Issuance of shares upon the vesting of restricted stock units	43,932	4			799,996			(800,000)			-
Issuance of shares upon the cashless exercise of stock options	4,565	1			(1)						-
Issuance of shares upon exercise of warrants	15,432	1			182,048	(38,300)					143,749
Stock options issued for services (Note 12)	-	-	-	-	1,073,711	-	-	-	-	-	1,073,711
Restricted stock units issued for services (Note 12)	-	-	-	-	660,307	-	-	-	-	-	660,307
Foreign currency translation	-	-	-	-	-	-	-	-	-	(37,685)	(37,685)
Net loss	-	-	-	-	-	-	-	-	(6,896,593)	-	(6,896,593)
Balance, August 31, 2019	39,032,528	$3,903	1	$-	$74,414,197	9,700,102	1,200,915	-	$(45,708,185)	$(327,909)	$39,283,023

	Six Months Ended August 31, 2018
	Common Stock		Preferred Stock
	par value $0.0001		par value $0.0001
	Number of Shares	Amount	Number of Shares	Amount	AdditionalPaid-in Capital	AdditionalPaid-in Capital - Warrants	AdditionalPaid-in Capital – Beneficial Conversion Feature	Common Stock Issuable	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Total Stockholders' Equity
Balance, February 28, 2018	33,751,088	$3,376	1	$-	$30,964,970	-	-	$800,000	$(21,275,181)	$(169,100)	$10,324,065

Issuance of shares upon cashless exercise of warrants	18,821	2	-	-	(2)	-	-	-	-	-	-
Issuance of shares upon vesting of restricted stock units	35,797	3	-	-	(3)	-	-	-	-	-	-
Stock options issued for services	-	-	-	-	1,802,003	-	-	-	-	-	1,802,003
Restricted stock units issued for services	-	-	-	-	389,136	-	-	-	-	-	389,136
Foreign currency translation	-	-	-	-	-	-	-	-	-	(111,589)	(111,589)
Net loss	-	-	-	-	-	-	-	-	(7,067,940)	-	(7,067,940)
Balance, August 31, 2018	33,805,706	$3,381	1	$-	$33,156,104	-	-	$800,000	$(28,343,121)	$(280,689)	$5,335,675

See accompanying notes to the condensed consolidated financial statements.

Loop Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended August 31
	2019	2018
Cash Flows from Operating Activities
Net loss	$(6,896,593)	$(7,067,940)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	365,739	211,658
Stock-based compensation expense	1,734,018	2,191,139
Accrued interest	215,433	-
Loss on revaluation of warrants	8,483	-
Debt accretion	1,035,888	-
Deferred financing costs	66,327	-
Gain on conversion of convertible notes	(232,565)	-
Changes in operating assets and liabilities:
Sales tax, tax credits and other receivables	(123,194)	47,725
Prepaid expenses	(22,987)	359,072
Accounts payable and accrued liabilities	(1,385,978)	349,723
Net cash used in operating activities	(5,235,429)	(3,908,623)

Cash Flows from Investing Activities
Investment in joint venture	(500,000)	-
Additions to property, plant and equipment	(1,202,766)	(1,038,775)
Additions to intangible assets	(82,432)	(66,195)
Net cash used in investing activities	(1,785,198)	(1,104,970)

Cash Flows from Financing Activities
Proceeds from sale of common shares	40,273,751	-
Share issuance costs	(1,106,370)	-
Repayment of long-term debt	(26,326)	(26,808)
Net cash provided from (used in) financing activities	39,141,055	(26,808)

Effect of exchange rate changes	(22,778)	(191,846)
Net change in cash and cash equivalents	32,097,650	(5,232,247)
Cash and cash equivalents, beginning of period	5,833,390	8,149,713
Cash and cash equivalents, end of period	$37,931,040	$2,917,466

Supplemental Disclosure of Cash Flow Information:
Income tax paid	$-	$-
Interest paid	$30,497	$26,234

See accompanying notes to the condensed consolidated financial statements.

Loop Industries, Inc.

Three and Six Months Ended August 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. The Company, Basis of Presentation and Going Concern

The Company

Loop Industries, Inc. is a technology company who owns patented and proprietary technology that depolymerizes no and low value waste PET plastic and polyester fiber to its base building blocks (monomers). The monomers are filtered, purified and polymerized to create virgin-quality Loop™ branded PET plastic resin and polyester fiber suitable for use in food-grade packaging.

On November 20, 2017, Loop Industries Inc. commenced trading on the NASDAQ Global Market under its new trading symbol, “LOOP.” From April 10, 2017 to November 19, 2017, our common stock was quoted on the OTCQX tier of the OTC Markets Group Inc. under the symbol “LLPP.”

Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements of Loop Industries, Inc., its wholly-owned subsidiaries and joint venture (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The balance sheet information as at February 28, 2019 is derived from the Company’s audited consolidated financial statements and related notes for the fiscal year ended February 28, 2019, which is included in Item 8 of the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 8, 2019. These unaudited interim condensed consolidated financial statements should be read in conjunction with those financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair statement have been included. Operating results for the three and six months ended August 31, 2019 are not necessarily indicative of the results that may be expected for the year ending February 28, 2020.

Intercompany balances and transactions are eliminated on consolidation.

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for depreciable lives of property, plant and equipment, intangible assets, analysis of impairments of recorded intangible assets, accruals for potential liabilities and assumptions made in calculating the fair value of stock-based compensation and other stock instruments.

Foreign currency translations and transactions

The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. Assets and liabilities of subsidiaries that have a functional currency other than that of the Company are translated to U.S. dollars at the exchange rate as at the balance sheet date. Income and expenses are translated at the average exchange rate of the period. The resulting translation adjustments are included in other comprehensive income (loss) (“OCI”). As a result, foreign currency exchange fluctuations may impact operating expenses. The Company currently has not engaged in any currency hedging activities.

For transactions and balances, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations and comprehensive loss, except for gains or losses arising from the translation of intercompany balances denominated in foreign currencies that forms part in the net investment in the subsidiary which are included in OCI.

Stock-based compensation

The Company periodically issues stock options and restricted stock units to employees and directors. The Company accounts for stock options granted to employees based on the authoritative guidance provided by the FASB wherein the fair value of the award is measured on the grant date and where there are no performance conditions, recognized as compensation expense on the straight-line basis over the vesting period and where performance conditions exist, recognize 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.

The Company accounts for stock options granted to non-employees in accordance with the authoritative guidance of the FASB wherein the fair value of the stock compensation is based upon the measurement date determined as the earlier of the date at which either a) a commitment is reached with the counterparty for performance or b) the counterparty completes its performance.

The Company estimates the fair value of restricted stock unit awards to employees and directors based on the closing market price of its common stock on the date of grant.

The fair value of the stock options granted are 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 assumptions used in the Black-Scholes model could materially affect stock-based compensation expense recorded in the current and future periods.

Income taxes

The Company calculates its provision for income tax on the basis of the tax laws enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income, in accordance with FASB ASC 740, Income Taxes. The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Research and development expenses

Research and development expenses relate primarily to the development, design, testing of preproduction samples, prototypes and models, compensation, and consulting fees, and are expensed as incurred. Total research and development costs recorded during the six-month periods ended August 31, 2019 and 2018 amounted to $1,968,074 and $2,132,371, respectively (see Note 3), and are net of government research and development tax credits and government grants from the federal and provincial taxation authorities accrued and recorded based on qualifying expenditures incurred during the fiscal periods.

Net earnings (loss) per share

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

For the six-month periods ended August 31, 2019 and 2018, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at August 31, 2019, the potentially dilutive securities consisted of 1,657,081 outstanding stock options (August 31, 2018 – 2,205,290), 4,419,753 outstanding restricted stock units (August 31, 2018 – 99,498), 5,040,267 outstanding warrants (August 31, 2018 – 140,667) and nil outstanding issuable common stock (August 31, 2018 – 1,000,000).

Recently adopted accounting pronouncements

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the Tax Reform Act on items within accumulated other comprehensive income (loss) ("AOCI") to retained earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." Amendments in this update only relate to the reclassification of the income tax effects of the Tax Reform Act. Other accounting guidance that requires the effect of changes in tax laws or rates to be included in net income from continuing operations is not affected by this update. ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. ASU 2018-02 is applicable beginning March 1, 2019. The adoption of the standard had no impact on the consolidated financial statements of the Company.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this Update are effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of the standard had no impact on the consolidated financial statements of the Company.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements, which clarify certain amendments to guidance that may have been incorrectly or inconsistently applied by certain entities and includes Amendments to Subtopic 718-740, Compensation – Stock Compensation – Income Taxes. The guidance in paragraph 718-740-35-2, as amended by the amendments in ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, is unclear on whether an entity should recognize excess tax benefits (or tax deficiencies) for compensation expense that is taken on the entity’s tax return. The amendment to paragraph 718-740-35-2 in this Update clarifies that an entity should recognize excess tax benefits in the period in which the amount of deduction is determined. The amendments in this Update are effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of the standard had no impact on the consolidated financial statements of the Company.

In February 2016, the FASB issued ASU 2016-02, “Leases,” amended in July by ASU 2018-10, “Codification Improvements to Topic 842, Leases,” ASU 2018-11, “Targeted Improvements,” and ASU 2018-20, “Narrow-Scope Improvements for Lessors,” which requires lessees to recognize leases on the balance sheet while continuing to recognize expenses in the income statement in a manner similar to current accounting standards. For lessors, the new standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing, and uncertainty of cash flows arising from leases. This ASU may either be adopted on a modified retrospective approach at the beginning of the earliest comparative period, or through a cumulative-effect adjustment at the adoption date. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted these standards effective March 1, 2019. The adoption of the standard had no impact on the consolidated financial statements of the Company. The Company elected to apply the package of practical expedients that allows us not to reassess whether expired or existing contracts contain leases, the classification of these leases and whether previously capitalized initial direct costs would qualify for capitalization under Accounting Standards Codification (or “ASC”) 842. Furthermore, we elected to use hindsight in determining the lease term and assessing impairment of the right-of-use assets.

3. Sales Tax, Tax Credits and Other Receivables

Sales tax, research and development tax credits and other receivables as at August 31, 2019 and February 28, 2019 were as follows:

	August 31, 2019	February 28, 2019
Sales tax	$282,178	$82,992
Research and development tax credits	339,532	410,997
Other receivables	94,604	105,011
	$716,314	$599,000

The Company is registered for the Canadian federal and provincial goods and services taxes. As such, the Company is obligated to collect, and is entitled to claim sale taxes paid on its expenses and capital expenditures incurred in Canada.

In addition, Loop Canada Inc. is entitled to receive government assistance in the form of refundable and non-refundable research and development tax credits from the federal and provincial taxation authorities, based on qualifying expenditures incurred during the fiscal year. The refundable credits are from the provincial taxation authorities and are not dependent on its ongoing tax status or tax position and accordingly are not considered part of income taxes. The Company records refundable tax credits as a reduction of research and development expenses when the Company can reasonably estimate the amounts and it is more likely than not, they will be received. During the three and six months ended August 31, 2019, the Company recorded $52,258 and $107,983, respectively, (2018 – $76,503 and $76,503, respectively) as a reduction of research and development expenses. During the three- and six-month periods ended August 31, 2019, research and development tax credits received by the Company from taxation authorities amounted to $175,929 and $175,929, respectively (2018 – nil and nil, respectively).

4. Property, Plant and Equipment

	As at August 31, 2019
	Cost	Accumulated depreciation	Net book value
Land	$230,494	$-	$230,494
Building	1,864,676	(99,145)	1,765,531
Building Improvements	690,426	(160,918)	529,508
Machinery and equipment	4,907,358	(1,086,574)	3,820,784
Office equipment and furniture	137,132	(55,445)	81,687
	$7,830,086	$(1,402,082)	$6,428,004

	As at February 28, 2019
	Cost	Accumulated depreciation	Net book value
Land	$232,699	$-	$232,699
Building	1,882,665	(68,596)	1,814,069
Building Improvements	383,985	(119,889)	264,096
Machinery and equipment	3,834,338	(841,236)	2,993,102
Office equipment and furniture	117,088	(49,791)	67,297
	$6,450,775	$(1,079,512)	$5,371,263

Depreciation expense for the three and six-month periods ended August 31, 2019 amounted to $195,876 and $357,197, respectively (2018 – $89,080 and $173,670, respectively), and is recorded as an operating expense in the consolidated statements of operations and comprehensive loss.

5. Intangible Assets

On October 27, 2014, the Company entered into an Intellectual Property Assignment Agreement with Mr. Hatem Essaddam wherein the Company purchased a certain technique and method, which was used to develop the Generation I (“GEN I”) technology, for $445,050 allowing for the depolymerization of polyethylene terephthalate at ambient temperature and atmospheric pressure. The GEN I technology patent portfolio has two issued U.S. patents and an allowed U.S. application, all expected to expire on or around July 2035. Internationally, the Company has issued patents in Taiwan, South Africa, and in the members of the Gulf Cooperation Council, and pending patent applications in Argentina, Australia, Brazil, Canada, China, Eurasia, Europe, Israel, India, Japan, Korea, Mexico, and the Philippines, all expected to expire, if granted, on or around July 2036.

In addition to the $445,050 paid by the Company under the Intellectual Property Assignment Agreement, the Company is required to make four additional payments of CDN$200,000, totaling CDN$800,000, to Mr. Essaddam within sixty (60) days of attaining each of the following milestones:

●

the average production of 20 metric tonnes of terephthalic acid by the Company, as a result of the GEN I technology, for 20 operating days;

●

the average production of 30 metric tonnes of terephthalic acid by the Company, as a result of the GEN I technology, for 30 operating days;

●

the average production of 60 metric tonnes of terephthalic acid by the Company, as a result of the GEN I technology, for 60 operating days;

●

the average production of 100 metric tonnes of terephthalic acid by the Company, as a result of the GEN I technology, for 100 operating days.

Additionally, the Company is obligated to make royalty payments of up to CDN$25,700,000, based on the GEN I technology, payable as follows:

●

10% of gross profits on the sale of all products derived by the Company from the technology;

●

10% of any license fee paid to the Company in respect of any licensing or other right to use the technology that was granted to a third party by the Company; and

●

5% of any royalty or other similar payment made to the Company by a third party to whom a license or sub-license or other right to use the technology has been granted by the Company or by the third party.

The Company has no intention of commercializing the GEN I technology at this time.

During the year ended February 28, 2019, the Company finalized the development of its next generation technology, referred to as Generation II (“GEN II”), and has filed various patent applications in jurisdictions around the world. On April 9, 2019, a GEN II U.S. patent was issued and is expected to expire on or around September 2037.

Concurrent with the GEN II development, in June 2018, the Company transitioned to its newly constructed GEN II industrial pilot plant. The GEN II technology forms the basis for the commercialization of the Company into the future.

As a result of the strategic shift away from the GEN I technology, and the development of the GEN II technology during the year ended February 28, 2019, the Company considered the carrying value of its GEN I intangible asset to be impaired and wrote off the remaining balance of the intangible asset, which amounted to $298,694.

Amortization expense for the three- and six-month periods ended August 31, 2019 amounted to $5,527 and $8,545, respectively (2018 - $21,509 and $37,988, respectively), and is recorded as an operating expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

	August 31, 2019	February 28, 2019

Intangible assets, at cost - beginning of period	$127,672	$533,369
Intangible assets, accumulated depreciation – beginning of period	-	(200,629)
	127,672	332,740

Add: Additions in the period	82,432	153,477
Deduct: Amortization of intangibles	(8,545)	(59,851)
Deduct: Impairment of intangibles	-	(298,694)
Deduct: Foreign exchange effect	(1,208)	-
	$200,351	$127,672

6. Fair value of financial instruments

The following tables present the fair value of the Company’s financial liabilities as at August 31, 2019 and February 28, 2019:

	Fair Value Measurements as at August 31, 2019
	Carrying Amount	Fair Value	Level in the hierarchy
Instruments measured at fair value:	-	-	-

Instruments measured at amortized cost:
Long-term debt	969,663	969,663	Level 2
Convertible notes (Second Issuance)	$4,044,575	$4,900,000	Level 2

	Fair Value Measurements at February 28, 2019
	Carrying Amount	Fair Value	Level in the hierarchy
Instruments measured at fair value:
Warrants (First Issuance)	$219,531	$219,531	Level 3

Instruments measured at amortized cost:
Long-term debt	1,005,518	1,005,518	Level 2
Convertible notes (First Issuance)	2,495,636	2,650,000	Level 2
Convertible notes (Second Issuance)	$3,126,886	$3,150,000	Level 2

The Warrants under the First Issuance of Convertible Notes represent a Level 3 in the fair value hierarchy. The Warrants were valued using a Monte Carlo simulation using a volatility of 71.5%. The Company recorded a loss on revaluation from the date of issuance to February 28, 2019 of $65,167.

7. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities as at August 31, 2019 and February 28, 2019 were as follows:

	August 31, 2019	February 28, 2019
Trade accounts payable	$807,140	$1,784,362
Accrued liabilities	704,836	885,871
	$1,511,976	$2,670,233

Joint Venture

On September 15, 2018, the Company, through its wholly-owned subsidiary Loop Innovations, LLC, a Delaware limited liability company, entered into a Joint Venture Agreement (the “Agreement”) with Indorama Ventures Holdings LP, USA(“Indorama”), an indirect subsidiary of Indorama Ventures Public Company Limited, to retrofit Indorama’s existing PET manufacturing facilities. The joint venture will manufacture and commercialize sustainable LoopTMbranded PET resin and polyester fiber. The joint venture agreement details the establishment of an initial 20,700 metric tonnes facility. Due to market demand from existing and potential customers, the joint venture has decided to increase the capacity at the plant to 40,000 metric tonnes. Each company has a 50/50 equity interest in Indorama Loop Technologies, LLC (“ILT”), which was specifically formed to operate and execute the joint venture.

Under the Agreement, Indorama Venture is contributing manufacturing knowledge and Loop is required to contribute its proprietary science and technology.

Specifically, the Company is contributing an exclusive world-wide royalty-free license to ILT to use its proprietary technology to produce 100% sustainably produced PET resin and polyester fiber.

ILT meets the accounting definition of a joint venture where neither party has control of the joint venture entity and both parties have joint control over the decision-making process in ILT. As such, the Company uses the equity method of accounting to account for its share of the investment in ILT. There was no activity in ILT from the date of inception of September 24, 2018 to February 28, 2019 and, as at February 28, 2019, the carrying value of the equity investment was nil. On April 18, 2019, Loop Innovations, LLC, the Company’s wholly owned subsidiary, and Indorama Ventures Holdings LP, USA each contributed cash of $500,000 to ILT. As there were no other transactions during the six-month period ended August 31, 2019, the carrying value of the equity investment as at August 31, 2019 was $500,000.

9. Long-Term Debt

	August 31, 2019	February 28, 2019
Instalment loan	$969,663	$1,005,518
Less current portion	52,651	53,155
Non-current portion	$917,012	$952,363

Principal repayments due on the Instalment loan over the next five years are as follows:

Years ending February 28,	Amount
2020	$26,326
2021	52,651
2022	52,651
2023	52,651
2024	52,651
Thereafter	732,733
Total	$969,663

Interest paid on the instalment loan during the three- and six-month periods ended August 31, 2019 amounted to $13,993 and $27,062, respectively (2018 - $13,443 and $26,481, respectively). As at August 31, 2019, the Company was in compliance with its financial covenants.

10.

Convertible Notes

First Issuance

On November 13, 2018, the Company issued convertible promissory notes (the “November 2018 Notes”), together with related warrants to acquire an additional 50% of the shares issued upon the conversion of the November 2018 Notes (the “November 2018 Warrants”), for an aggregate purchase price of $2,450,000 (the “November 2018 Private Placement”). On January 3, 2019, the Company issued additional convertible promissory notes from this issuance (the “November 2018 Notes”), together with related warrants to acquire an additional 50% of the shares issued upon the conversion of the November 2018 Notes (the “November 2018 Warrants”), for an aggregate purchase price of $200,000 (the “November 2018 Private Placement”). The November 2018 Notes were converted on April 5, 2019.

The November 2018 Notes carried an interest rate of 8.00% per annum and had original maturity dates of May 13, 2019 and July 3, 2019 (the “November 2018 Maturity Date”), respectively, upon which date the outstanding principal amount of the November 2018 Notes and all accrued and unpaid interest would automatically convert into shares of the common stock of the Company at the price per share equal to the lesser of (i) $13.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day to the conversion of the November 2018 Notes (the “November 2018 Conversion Price”). The total number of shares of Common Stock to be issued upon automatic conversion at maturity would equal the outstanding principal amount of the November 2018 Notes and all accrued and unpaid interest on the November 2018 Notes, divided by the November 2018 Conversion Price.

The November 2018 Warrants are exercisable for an additional fifty percent (50%) of the shares of Common Stock issued upon the conversion of the November 2018 Notes (the “November 2018 Warrant Shares”). The per share purchase price (the “November 2018 Exercise Price”) for each of the November 2018 Warrant Shares purchasable under the November 2018 Warrants was originally to be equal to the lesser of (i) $15.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day of the conversion of the November 2018 Notes. The November 2018 Warrants were issued upon conversion of the November 2018 Notes. The November 2018 Warrants expire eighteen (18) months from the date of the conversion of the November 2018 Notes (the “November 2018 Expiration Date”). The Investors may exercise the November 2018 Warrants at any time prior to the November 2018 Expiration Date.

Due to the variable conversion price, the November 2018 Notes contain characteristics of a variable share-forward sales contracts (“VSF”) under the guidance of ASC 480-10. Management has determined that for the purpose of ‎the accounting for the November 2018 Notes, it is more likely than not that the November 2018 Conversion Price will be below $13.00, resulting in the issuance of a variable number of shares, the November 2018 Notes are classified as a liability, and accounted for at amortized cost.

Due to the variable number of warrants to be issued and the variable strike price of the November 2018 Warrants, these do not meet the “fixed-for-fixed” criteria under ASC 815-40. Accordingly, the November 2018 Warrants are classified as a derivative liability, initially measured at fair value and subsequently revalued at fair value through the income statement.The fair value was calculated using a Monte Carlo simulation.

The transaction costs related to this issuance were split pro-rata between the November 2018 Notes and the November 2018 Warrants. The portion relating to the November 2018 Notes were deferred and are being amortized over the life of the convertible notes. The portion relating to the November 2018 Warrants was immediately expensed.

The aggregate value of the November 2018 Notes and November 2018 Warrants as shown on the consolidated balance sheet are broken down as follows:

	August 31, 2019	February 28, 2019	Issue Date
November 2018 Convertible Notes – Liability	-	$2,495,636	$2,495,636
Accrued interest – Liability	-	60,793	-
Deferred financing costs	-	(26,557)	(63,738)
Total	-	2,529,872	2,431,898

November 2018 Warrants – Liability	-	$219,531	$154,364

On April 5, 2019, the Company and the Investors that purchased the "November 2018 Notes from the Company pursuant to the Note and Warrant Purchase Agreement dated as of November 13, 2018 or January 3, 2019, executed an Amendment, Surrender and Conversion Agreement (“Conversion Agreement”) whereby the parties agreed to convert the November 2018 Notes, and all accrued and unpaid interest, into shares of the common stock of the Company at a newly agreed conversion price per share equal to $8.55 (the “New Conversion Price”), replacing the previous formula which converted the November 2018 Notes and accrued and unpaid interest into shares of the common stock of the Company at the price per share equal to the lesser of (i) $13.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day to the conversion of the November 2018 Notes. The Conversion Agreement stipulates that the interest on the November 2018 Notes would be paid up to and including April 3, 2019. Pursuant to the 2018 Note Purchase Agreement, the Investors also received related warrants to acquire an additional 50% of the shares issued upon the conversion of the November 2018 Notes. As part of the Conversion Agreement, the exercise price of the November 2018 Warrants will also be the New Conversion Price, replacing the previous formula which established the conversion price for the November 2018 Warrants as the lesser of (i) $15.00 and (ii) the average closing price of the Company’s Common Stock on the Nasdaq stock market for the ten days preceding the day of the conversion of the November 2018 Notes. As a result of the Conversion Agreement, the Company issued 319,326 shares of common stock of the Company and issued 159,663 warrants. The November 2018 Warrants expire eighteen (18) months from the date of the conversion of the November 2018 Notes, on October 5, 2020.

The Company recorded an expense upon revaluation of the warrants for the period from March 1, 2019 to April 5, 2019 in the amount of $8,483 (2018 – nil) and is included in operating expenses. The Company recorded accretion interest expense on the November 2018 Notes from March 1, 2019 to April 5, 2019 in the amount of $154,364 and is included in operating expenses. The Company recorded interest expense on the November 2018 Notes for the period from March 1, 2019 to April 3, 2019 in the amount of $19,433 (2018 – nil). The value of the 159,633 warrants issued as part of the conversion was determined using the Black-Scholes pricing formula and amounted to $316,929 and is included in additional paid-in capital – warrants. Also, the conversion of the November 2018 Notes into common stock resulted in a gain of $232,565 and has been offset against operating expenses.

Second Issuance

On January 15, 2019, the Company issued convertible promissory notes (the “January 2019 Notes”), together with related warrants to acquire an additional 50% of the shares issuable upon the conversion of the January 2019 Notes (the “January 2019 Warrants”), for an aggregate purchase price of $4,500,000 (the “January 2019 Private Placement”). On January 21, 2019, the Company issued additional convertible promissory notes from this issuance, together with related warrants to acquire an additional 50% of the shares issuable upon the conversion of the January 2019 Notes, for an aggregate purchase price of $400,000.

The January 2019 Notes carry an interest rate of 8.00% per annum and mature on January 15, 2020 and January 21, 2020 (the “January 2020 Maturity Date”), respectively. At the January 2020 Maturity Date, the outstanding principal amount of the January 2019 Notes shall automatically convert into shares of the common stock of the Company at the price per share equal to $8.10 (the “January 2020 Conversion Price”). The January 2020 Conversion Price may be adjusted in the event that the Company issues common shares in a private sale or offering at a lower price per share than $8.10 within 180 days of the closing date. The lower price would become the new conversion price of the January 2019 Notes, which would impact the number of shares that would be issued. The total number of shares of Common Stock to be issued upon automatic conversion shall equal the outstanding principal amount of the January 2019 Notes divided by the January 2020 Conversion Price.

With respect to accrued and unpaid interest at the January 2020 Maturity Date, the Investors have the option of receiving cash or common stock of the Company at that date. Upon the January 2020 Maturity Date, where the Investor elect’s payment of accrued and unpaid interest on the January 2019 Notes in common stock, the price per share shall be equal to the trading price of the common stock at the close of the market on the date immediately preceding the January 2020 Maturity Date.

The January 2019 Warrants are exercisable for an additional fifty percent (50%) of the shares of Common Stock issuable upon the conversion of the January 2019 Notes (the “January 2019 Warrant Shares”). The per share purchase price (the “January 2019 Exercise Price”) for each of the January 2019 Warrant Shares purchasable under the January 2019 Warrants shall be equal to 115% of the January 2020 Conversion Price. The January 2019 Warrants will be calculated and issued upon the closing date of the January 2019 Notes, based upon the initial $8.10 conversion price. As such, the Company issued 302,469 warrants at the closing dates of the January 2019 Notes. If the Investor elects to take accrued and unpaid interest on the January 2019 Notes in common stock, additional warrants will be issued to acquire 50% of the shares issued in connection with the accrued and unpaid interest (also referred to as the “January 2019 Warrants”). The January 2019 Warrants expire twenty-four (24) months from the date of their issuance (the “January 2019 Expiration Date”). The Investors may exercise the January 2019 Warrants at any time prior to the January 2019 Expiration Date.

A beneficial conversion feature (“BCF”) of a convertible note is normally characterized as the convertible portion feature that provides a rate of conversion that is below market value or “in-the-money” when issued. The BCF related to the issuance of the January 2019 Notes was recorded at the issuance date. The BCF was measured using the intrinsic value method and is shown as a discount to the carrying amount of the convertible note and is credited to additional paid-in capital. The intrinsic value of the BCF at the issuance date of the January 2019 Notes was determined to be $1,200,915.

In connection with the January 2019 Warrants issued along with the January 2019 Notes, they meet the requirements of the scope exemptions in ASC 815-10-15-74 and are thus classified as equity upon issuance. The Company determined the fair value of the warrants using the Black-Scholes pricing formula and is recognized as a discount on the carrying amount of the January 2019 Notes and is credited to additional paid-in capital. The fair value of the warrants at the issuance date was determined to be $757,704.

The allocated fair values of the BCF and the warrants was recorded as a debt discount from the face amount of the January 2019 Notes and such discount is being accreted over the expected term of the January 2019 Notes and is charged to interest expense.

The aggregate values of the January 2019 Warrants, the January 2019 Notes and the related BCF are as follows:

	August 31, 2019	February 28, 2019	Issue Date
January 2019 Convertible Notes – Liability	4,044,575	$3,126,886	$2,941,381
Accrued interest – Liability	245,011	49,011	-
Deferred financing costs	(29,827)	(69,597)	(79,539)
	4,259,759	3,106,300	2,861,842

January 2019 Beneficial Conversion Option – Equity	1,200,915	1,200,915	1,200,915

January 2019 Warrants – Equity	$719,404	$757,704	$757,704

The transaction costs relating to this issuance were split pro-rata between the January 2019 Notes, the BCF and the January 2019 Warrants. The portion relating to the January 2019 Notes were deferred and are being amortized over the life of the January 2019 Notes. The portion relating to the BCF and the January 2019 Warrants were recorded as share issuance expenses and offset against additional paid-in capital.

The Company recorded accretion interest expense on the January 2019 Notes for the three- and six-month periods ended August 31, 2019 of $488,325 and $917,689, respectively (2018 – nil and nil, respectively) and is included in operating expenses. The Company also recorded interest expense on the January 2019 Notes for the three- and six-months period ended August 31, 2019 in the amount of $98,000 and $196,000, respectively (2018 – nil and nil, respectively).

11.

Stockholders’ Equity

Series A Preferred Stock

Mr. Solomita’s amended employment agreement July 13, 2018 provides that the Company shall issue to Mr. Solomita one share of the Company’s Series A Preferred Stock in exchange for Mr. Solomita agreeing not to terminate his employment with the Company for a period of five years from the date of the agreement. The agreement effectively provides Mr. Solomita with a “change of control” provision over the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to less than a majority. In order to issue Mr. Solomita his one share of Series A Preferred Stock under the amendment, the Company created a “blank check” preferred stock. Subsequently, the board of directors of the Company approved a Certificate of Designation creating the Series A Preferred Stock. Subsequently, the Company issued one share of Series A Preferred Stock to Mr. Solomita.

The one share of Series A Preferred Stock issued to Mr. Solomita holds a majority of the total voting power so long as Mr. Solomita holds not less than 7.5% of the issued and outstanding shares of common stock of the Company, assuring Mr. Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of common stock of the Company is diluted to a level below a majority. Currently, Mr. Solomita's ownership of 18,600,000 shares of common stock and one share of Series A Preferred Stock provides him with 78.0% of the voting control of the Company.

Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which precludes the Company 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. More specifically, so long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class:

(a)

amend the Articles of Incorporation or, unless approved by the Board of Directors, including by the Series A Director, amend the Company’s Bylaws;

(b)

change or modify the rights, preferences or other terms of the Series A Preferred Stock, or increase or decrease the number of authorized shares of Series A Preferred Stock;

(c)

reclassify or recapitalize any outstanding equity securities, or, unless approved by the Board of Directors, including by the Series A Director, authorize or issue, or undertake an obligation to authorize or issue, any equity securities or any debt securities convertible into or exercisable for any equity securities (other than the issuance of stock-options or securities under any employee option or benefit plan);

(d)

authorize or effect any transaction constituting a Deemed Liquidation (as defined in this subparagraph) under the Articles, or any other merger or consolidation of the Company;

(e)

increase or decrease the size of the Board of Directors as provided in the Bylaws of the Company or remove the Series A Director (unless approved by the Board of Directors, including the Series A Director);

(f)

declare or pay any dividends or make any other distribution with respect to any class or series of capital stock (unless approved by the Board of Directors, including the Series A Director);

(g)

redeem, repurchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any outstanding shares of capital stock (other than the repurchase of shares of common stock from employees, consultants or other service providers pursuant to agreements approved by the Board of Directors under which the Company has the option to repurchase such shares at no greater than original cost upon the occurrence of certain events, such as the termination of employment) (unless approved by the Board of Directors, including the Series A Director);

(h)

create or amend any stock option plan of the Company, if any (other than amendments that do not require approval of the stockholders under the terms of the plan or applicable law) or approve any new equity incentive plan;

(i)

replace the President and/or Chief Executive Officer of the Company (unless approved by the Board of Directors, including the Series A Director);

(j)

transfer assets to any subsidiary or other affiliated entity (unless approved by the Board of Directors, including the Series A Director);

(k)

issue, or cause any subsidiary of the Company to issue, any indebtedness or debt security, other than trade accounts payable and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase or otherwise alter in any material respect the terms of any indebtedness previously approved or required to be approved by the holders of the Series A Preferred Stock (unless approved by the Board of Directors, including the Series A Director);

(l)

modify or change the nature of the Company’s business;

(m)

acquire, or cause a Subsidiary of the Company to acquire, in any transaction or series of related transactions, the stock or any material assets of another person, or enter into any joint venture with any other person (unless approved by the Board of Directors, including the Series A Director); or

(n)

sell, transfer, license, lease or otherwise dispose of, in any transaction or series of related transactions, any material assets of the Company or any Subsidiary outside the ordinary course of business (unless approved by the Board of Directors, including the Series A Director).

Common Stock

For the period ended August 31, 2019	Number of shares	Amount
Balance, February 28, 2019	33,805,706	$3,381
Issuance of shares for cash	4,693,567	469
Issuance of shares for services rendered	43,932	4
Issuance of shares upon the cashless exercise of stock options	4,565	1
Issuance of shares upon the exercise of warrants	15,432	1
Issuance of shares upon settlement of legal matter	150,000	15
Issuance of shares upon conversion of Convertible notes	319,326	32
Balance, August 31, 2019	39,032,528	$3,903

For the period ended August 31, 2018	Number of shares	Amount
Balance, February 28, 2018	33,751,088	$3,376
Cashless exercise of stock options	18,821	2
Issuance of shares upon vesting of restricted stock units	35,797	3
Balance, August 31, 2018	33,805,706	$3,381

During the six months ended August 31, 2019, the Company recorded the following common stock transactions:

(i) On March 1, 2019, the Company sold 600,000 shares of its common stock at an offering price of $8.55 per share in a registered direct offering, for gross proceeds of $5,130,000;
(ii) On March 8, 2019 and March 11, 2019, the Company issued 150,000 shares of its common stock in settlement of a legal matter;
(iii) On April 9, 2019, the Company converted Convertible notes with a face value of $2,650,000 plus accrued interest of $80,241 at a conversion price of $8.55, into 319,326 common shares.
(iv) On June 14, 2019, the Company sold 4,093,567 shares of its common stock at an offering price of $8.55 per share in a registered direct offering, for gross proceeds of $35,000,000;
(v) On June 21, 2019, the Company issued 7,043 shares of common stock upon the vesting of restricted stock units related to an employee.
(vi) On July 2, 2019 and July 3, 2019, the Company issued 23,547 shares of common stock upon the vesting of restricted stock units related to current and former Directors.
(vii) On July 12, 2019, the Company issued 4,565 shares of common stock upon the cashless exercise of stock options related to an employee.
(viii) On July 15, 2019, the Company issued 13,342 shares of common stock upon the vesting of restricted stock units related to a former Director.
(ix) On July 17, 2019, the Company issued 15,432 shares of common stock upon the exercise of warrants.

During the six months ended August 31, 2018, the Company recorded the following common stock transactions:

(i)

the Company issued 18,821 shares of common stock upon the cashless exercise options.

(ii)

the Company issued 35,797 shares of common stock upon the vesting of restricted stock units.

12. Share-based Payments

Stock Options

The following tables summarize the continuity of the Company’s stock options during the six-month periods ended August 31:

	2019		2018
	Number of stock options	Weighted average exercise price	Number of stock options	Weighted average exercise price
Outstanding, beginning of period	1,962,400	$7.53	2,374,581	$7.99
Granted	-	-	13,209	11.52
Exercised	(5,000)	0.80	(20,000)	0.80
Forfeited	(39,902)	9.67	(100,000)	5.25
Expired	(260,417)	13.59	(62,500)	4.80
Outstanding, end of period	1,657,081	$6.55	2,205,290	$8.29
Exercisable, end of period	958,748	$6.26	931,248	$6.98

	2019		2018
Exercise price	Number of stock options outstanding	Weighted average remaining life (yrs.)	Number of stock options outstanding	Weighted average remaining life (yrs.)
$0.80	577,081	6.25	582,081	7.25
$3.00	-	-	-	-
$5.25	380,000	7.99	380,000	8.99
$8.75	-	-	-	-
$11.52	-	-	13,209	9.86
$12.00	700,000	8.04	700,000	9.04
$13.49	-	-	250,000	9.13
$13.89	-	-	280,000	9.19
Outstanding, end of period	1,657,081	7.41	2,205,290	8.59
Exercisable, end of period	958,748	7.33	931,248	8.32

The Company applies the fair value method of accounting for stock-based compensation awards granted. Fair value is calculated based on a Black-Scholes option pricing model. The following table shows key inputs into the valuation model for the six months ended August 31:

	2018
Exercise price	$11.52
Risk-free interest rate	2.82%
Expected dividend yield	0%
Expected volatility	78%
Expected life	6.5 years

There were no new issuances of stock options for the six-month period ended August 31, 2019.

During the three- and six-month periods ended August 31, 2019, stock-based compensation expense attributable to stock options amounted to $498,198 and $1,073,711, respectively (2018 - $823,978 and $1,801,085, respectively), and is included in operating expenses.

Restricted Stock Units

The following table summarizes the continuity of the restricted stock units (“RSUs”) during the six-month periods ended August 31, 2019 and 2018:

	2019		2018
	Number of units	Weighted average fair value price	Number of units	Weighted average fair value price
Outstanding, beginning of period	402,868	$8.77	34,102	$13.00
Granted	4,114,567	1.06	102,818	11.54
Issued as common stock	(43,932)	10.36	(35,797)	13.06
Forfeited	(53,750)	9.82	(1,625)	12.31
Outstanding, end of period	4,419,753	$1.56	99,498	$11.48
Outstanding vested, end of period	1,031,684	$1.12	-	$-

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

During the three- and six-month periods ended August 31, 2019, stock-based compensation attributable to RSUs amounted to $305,130 and $660,307, respectively (2018 - $181,492 and $389,145, respectively), and is included in operating expenses.

During the three- and six-month periods ended August 31, 2019, stock-based compensation included in Research and development expenses amounted to $317,353 and $629,788, respectively (2018 - $250,242 and $660,455, respectively), and in General and administrative expenses amounted to $485,975 and $1,104,230, respectively (2018 - $755,229 and $1,530,686, respectively).

13.

Equity Incentive Plan

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

The following table summarizes the continuity of the Company’s Equity Incentive Plan units during the six-month periods ended August 31, 2019 and 2018:

	2019	2018
	Number of units	Number of units
Outstanding, beginning of period	3,223,516	1,735,898
Share reserve increase	2,000,000	1,500,000
Units granted	(4,114,567)	(116,027)
Units forfeited	93,652	101,625
Units expired	260,417	50,000
Outstanding, end of period	1,463,018	3,271,496

14. Warrants

The following table summarizes the continuity of warrants during the six-month periods ended August 31, 2019 and 2018:

	2019		2018
	Number of warrants	Weighted average exercise price	Number of warrants	Weighted average exercise price
Outstanding, beginning of period	802,469	$10.74	140,667	$12.00
Issued	4,253,230	10.91	-	-
Exercised	(15,432)	9.32	-	-
Expired	-	-	-	-
Outstanding, end of period	5,040,267	$10.89	140,667	$12.00

The expiration dates of the warrants outstanding as at August 31, 2019 are as follows:

	2019
	Number of warrants	Weighted average exercise price
January 15, 2020	277,778	$9.32
January 21, 2020	9,259	9.32
August 25, 2020	200,000	11.00
October 5, 2020	159,663	8.55
February 25, 2021	300,000	12.00
June 14, 2022	4,093,567	11.00
Outstanding, end of period	5,040,267	$10.89

15.

Interest and Other Finance Costs

Interest and other finance costs for the three- and six-month periods ended August 31, 2019 and 2018 are as follows:

	Three Months Ended August 31		Six Months Ended August 31
	2019	2018	2019	2018
Interest on long-term debt	$13,993	$13,443	$27,062	$26,481
Interest on convertible notes	98,000	-	215,433	-
Accretion expense	488,325	-	1,035,888	-
Amortization of deferred finance costs	19,885	-	66,327	-
Revaluation of warrants	-	-	8,483	-
Gain on conversion of November 2018 Notes	-	-	(232,565)	-
Other	1,980	-	3,436	-
	$622,183	$13,443	$1,124,064	$26,481

16. Commitments

The Company has entered into multi-year supply agreements with PepsiCo, Coca-Cola’s Cross Enterprise Procurement Group and Danone SA that will enable them to purchase production capacity from the Company’s joint venture facility with IVL in the United States and incorporate Loop™ PET resin into its product packaging. Also, the Company has entered into a multi-year supply agreement with L’Occitane that will enable them to purchase production capacity from the Company’s first European production facility.

On July 24, 2019, the Company signed an agreement with Investissement Quebec providing it with a financing facility equal to 63.45% of all eligible expenses up to a maximum $4,600,000, upon which it can draw upon for eligible expenses incurred for the expansion of its Pilot Plant. There is a 36-month moratorium on both capital and interest repayments beginning as of the first disbursement date. At the end of the 36-month moratorium, capital and interest will be repayable in 84 monthly instalments. The loan will bear interest at 2.36%. The Company has also agreed to issue to Investissement Quebec warrants convertible into common shares in an amount equal to 10% of each disbursement up to a maximum amount of $460,000. The warrants will be 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 will have a term of three years from the date of issuance. The loan can be repaid at any time by the Company without penalty. No disbursements have yet been made under the agreement.

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

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

CAUTIONARY ~~NOTE~~STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Loop Industries, Inc., a Nevada corporation (the ~~“Company,” “we,”~~“Company”, “we”, “Loop” 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, ~~and~~ market trends, ~~and our prior restatement’s quantitative effects~~ and the effectiveness of ~~our~~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"~~“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” included in our most recent ~~Amended~~ Annual Report on Form ~~10-K/A~~10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) ~~on January 12, 2018~~ and the description of material changes thereto, if any, included in our Quarterly Reports on Form 10-Q ~~as amended to date,~~ or subsequent filings with the SEC. 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, ~~(iii)~~(iv) our need for and ability to obtain additional financing, ~~(iv)~~(v) industry competition, ~~(v)~~(vi) regulatory and other legal compliance, ~~(vi)~~(vii) the exercise of the control over us by Mr. Daniel Solomita, our President and Chief Executive Officer, Chairman of the Board of Directors, ~~and majority stockholder, (vii)~~(viii) other factors over which we have little or no control, ~~(viii) the development of~~(ix) building our manufacturing facility, ~~(ix) the risk that additional information may arise from our~~(x) and our ~~audit committee’s internal review following the restatement, (x) the risk that the process of preparing~~ability to sell our products in order to generate revenues, (xi) our proposed business model and ~~auditing the restated financial statements or other subsequent events would require us~~our ability to ~~make additional adjustments and the time and effort required to complete the restatement of its financial statements, (xi)~~execute thereon, (xii) whether the reassessment of our internal controls over financial reporting could lead us to conclude that there were deficiencies in its internal control over financial reporting that constitute material weaknesses, ~~(xii) our responses to potential comments from the Securities and Exchange Commission (“SEC”),~~ (xiii) adverse effects on the Company’s business and operations as a result of increased regulatory, media or financial reporting issues and practices, rumors or otherwise and (xiv) other factors discussed in our subsequent filings with the SEC.

~~Our management~~

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"~~“we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as ofat 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 ofat 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~~

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

Introduction

Loop ~~Industries, Inc.~~

~~Three and nine months ended November 30, 2017~~

~~Index to the Condensed Consolidated Financial Statements~~

~~Contents~~		~~Page(s)~~

~~Condensed consolidated balance sheets at November 30, 2017 (Unaudited) and February 28, 2017~~		~~F-2~~

~~Condensed consolidated statements of operations and comprehensive loss for the three and nine months ended November 30, 2017 and 2016 (Unaudited)~~		~~F-3~~

~~Condensed consolidated statement of changes in stockholders’ equity for the nine months ended November 30, 2017 (Unaudited)~~		~~F-4~~

~~Condensed consolidated statement of cash flows for the nine months ended November 30, 2017 and 2016 (Unaudited)~~		~~F-5~~

~~Notes to the condensed consolidated financial statements~~		~~F-6~~

~~F-1~~
~~Table of Contents~~

~~Loop Industries, Inc.~~

~~Condensed Consolidated Balance Sheets~~

~~(Unaudited)~~

As at

November 30,

February 28,

2017

2017

Assets

Current Assets

Cash

$ 3,400,973

$ 916,487

Restricted cash

38,795

-

Valued added tax and other receivables

148,905

259,297

Prepayments

15,518

-

Total current assets

3,604,191

1,175,784

Property and Equipment, net of accumulated depreciation of $734,699 and $497,244, respectively

1,659,781

1,566,969

Intellectual Property, net of accumulated amortization of $184,734 and $137,050, respectively

260,316

308,000

Total assets

$ 5,524,288

$ 3,050,753

Liabilities and Stockholders' Equity

Current Liabilities

Accounts payable and accrued liabilities

$ 1,162,216

$ 161,536

Accrued officer compensation

-

360,000

Advance from majority stockholder

72,880

391,695

Total current liabilities

1,235,096

913,231

Commitments and Contingencies

Stockholders' Equity

Series A Preferred stock par value $0.0001; 25,000,000 shares authorized; one share issued and outstanding

-

-

Common stock par value $0.0001: 250,000,000 shares authorized; 32,807,137 and 31,451,973 shares issued and outstanding, respectively

3,281

3,146

Additional paid-in capital

21,275,564

8,723,390

Common stock issuable, 1,000,000 shares at November 30 and February 28, 2017

800,000

800,000

Accumulated deficit

(17,640,510
)

(7,237,803
)
Accumulated other comprehensive loss

(149,143 )

(151,211 )
Total stockholders' equity

4,289,192

2,137,522

Total liabilities and stockholders' equity

$ 5,524,288

$ 3,050,753

~~See accompanying notes to the condensed consolidated financial statements.~~

~~F-2~~
~~Table of Contents~~

~~Loop Industries, Inc.~~

~~Condensed Consolidated Statements of Operations and Comprehensive Loss~~

~~(Unaudited)~~

Three months ended

Nine months ended

November 30,

November 30,

2017

2016

2017

2016

Revenue

$ -

$ -

$ -

$ -

Operating Expenses -

Research and development

3,894,454

368,403

5,341,763

1,217,600

General and administrative

2,720,078

277,951

4,691,294

1,034,007

Depreciation and amortization

98,755

102,244

281,016

290,396

Foreign exchange loss (gain)

(9,634 )

809

88,634

(2,880 )
Total operating expenses

6,703,653

749,407

10,402,707

2,539,123

Net Loss

(6,703,653 )

(749,407 )

(10,402,707 )

(2,539,123 )

Other comprehensive gain (loss) -

Foreign currency translation adjustment

155,354

(18,488 )

(2,068 )

(42,846 )
Comprehensive Loss

$ (6,548,299 )

$ (767,895 )

$ (10,404,775 )

$ (2,581,969 )

Loss per share

- Basic and Diluted

$ (0.20 )

$ (0.02 )

$ (0.32 )

$ (0.08 )

Weighted average common shares outstanding

- Basic and Diluted

32,793,181

31,390,807

32,183,343

31,001,702

~~See accompanying notes to the condensed consolidated financial statements.~~

~~F-3~~
~~Table of Contents~~

~~Loop Industries, Inc.~~

~~Condensed Consolidated Statement of Changes in Stockholders’ Equity~~

~~Nine months ended November 30, 2017~~

~~(Unaudited)~~

Accumulated

Common stock

Preferred stock

Other

par value $0.0001

par value $0.0001

Additional

Common

Comprehensive

Total

Number of

Number of

Paid-in

Stock

Accumulated

Income

Stockholders'

Shares

Amount

shares

Amount

Capital

Issuable

Deficit

(Loss)

Equity

Balance, February 29, 2016

29,910,800

$ 2,992

1

$ -

$ 3,918,356

$ 614,001

$ (3,123,802 )

$ 5,931

$ 1,417,478

Issuance of common shares for cash

1,275,340

128

3,825,888

3,826,016

Reclass. of common shares issuable to shares outstanding

204,667

20

613,981

(614,001 )

-

Fair value of Warrants issued for services

135,673

135,673

Cancellation of shares issued for services and as a settlement

(200,000 )

(20 )

20

-

Issuance of common shares upon exercise of warrants for cash

200,000

20

159,980

160,000

Issuance of shares for services

23,166

2

69,496

69,498

Issuance of shares upon cash-less exercise of warrants

38,000

4

(4 )

-

Fair value of issuable shares for services-officer

800,000

800,000

Foreign currency translation

(157,142 )

(157,142 )
Net loss

(4,114,001
)

(4,114,001
)

Balance, February 28, 2017

31,451,973

3,146

1

-

8,723,390

800,000

(7,237,803
)

(151,211 )

2,137,522

Issuance of common shares for cash

1,141,394

114

6,114,610

6,114,724

Fair value of warrants issued for services

5,235,253

5,235,253

Fair value of restricted stock units issued for services

88,664

88,664

Issuance of shares upon exercise of warrants for cash

193,770

19

1,162,997

1,163,016

Issuance of shares upon cash-less exercise of warrants

20,000

2

(2 )

-

Share issuance costs

(49,348 )

(49,348 )
Foreign currency translation

2,068

2,068

Net loss

(10,402,707 )

(10,402,707 )

Balance, November 30, 2017

32,807,137

$ 3,281

1

$ -

$ 21,275,564

$
800,000

$
(17,640,510
)

$ (149,143 )

$ 4,289,192

~~See accompanying notes to the condensed consolidated financial statements.~~

~~F-4~~
~~Table of Contents~~

~~Loop Industries, Inc.~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Nine months ended
November 30,

2017

2016

Cash Flows from Operating Activities

Net loss

$ (10,402,707 )

$ (2,539,123 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense

233,332

242,712

Amortization expense

47,684

47,684

Fair value of warrants issued for services

5,235,253

106,053

Fair value of restricted stock units issued for services

88,664

-

Changes in operating assets and liabilities:

Valued added tax and other receivables

(2,831 )

89,427

Prepayments

(15,518 )

36,129

Accounts payable and accrued liabilities

1,000,680

(196,813 )
Accrued officer compensation

(360,000 )

135,000

Net Cash Used in Operating Activities

(4,175,443 )

(2,078,931 )

Cash Flows from Investing Activities

Purchases of property and equipment

(273,550 )

(412,921 )
Net Cash Used in Investing Activities

(273,550 )

(412,921 )

Cash Flows from Financing Activities

Proceeds from sales of common shares and exercise of warrants, net of share issuance costs (note 7)

7,228,393

3,826,016

Repayment of advances from majority stockholder

(205,592 )

(132,044 )
Net Cash Provided by Financing Activities

7,022,801

3,693,972

Effect of exchange rate changes

(50,527 )

(26,307 )
Net Change in Cash and Restricted Cash

2,523,281

1,175,813

Cash and Restricted Cash - beginning of period

916,487

422,586

Cash and Restricted Cash - end of period

$ 3,439,768

1,598,399

Comprises of:

Cash

3,400,973

1,598,399

Restricted cash

38,795

-

3,439,768

1,598,399

Supplemental disclosure of cash flow information:

Income tax paid

$ -

$ -

Non Cash Financing and Investing Activities

Reclass of value added tax and other receivables to advances from majority stockholder

$ 113,223

$ -

~~See accompanying notes to the condensed consolidated financial statements.~~

~~F-5~~
~~Table of Contents~~

~~Loop Industries, Inc.~~

~~Three and Nine months ended November 30, 2017 and 2016~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~Note 1 – The Company and Basis of Presentation~~

~~The Company~~

Loop Industries, Inc. (the Company) was incorporated on March 11, 2010 under the laws of the State of Nevada, under the name “Radikal Phones Inc.” We changed our name to “First American Group Inc.” on October 7, 2010, and then we subsequently changed our name to, “Loop Industries, Inc.”, effective July 21, 2015.

On June 29, 2015, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, and the holders of common stock of Loop Holdings, Inc. (“Loop Holdings”). Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 23,257,500 shares of common stock in consideration for all the issued and outstanding shares in Loop Holdings. The effect of the issuance was that Loop Holdings shareholders held approximately 78.1% of the issued and outstanding shares of common stock of the Company upon consummation of the Share Exchange Agreement.

Pursuant to a Stock Redemption Agreement dated June 29, 2015 entered into commensurate with the share exchange, the Company redeemed 25,000,000 shares of First American Group common stock from two stockholders’ for an aggregate redemption price of $16,000.

As the former owners and management of the Company had voting and operating control of the Company after the share exchange, the transaction has been accounted for as a recapitalization with Loop Holdings deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer. No step-up in basis or intangible assets or goodwill was recorded and the aggregate cost of $60,571 representing the net liabilities assumed of $35,243, $16,000 cost of the redeemed shares and closing costs of $9,328 has been reflected as a cost of the transaction. The consolidated financial statements reflect the historical results of the Company prior to the Share Exchange, and that of the combined company following the Share Exchange.

~~The Company engages in the designing, prototyping and building a closed loop plastics recycling business that leverages a proprietary de-polymerization technology.~~

All references to shares of common stock in this Report on Form 10-Q give retroactive effect to a one-for-four (1:4) reverse split of the Company’s issued and outstanding shares of common stock, which reverse split took effect on the OTCQB on September 21, 2015.

On May 24, 2016, 9449507 Canada Inc. was incorporated to carry on the Company’s depolymerization business. On November 11, 2016, the shares of 9449507 Canada Inc., which were wholly owned by Mr. Solomita, were transferred to Loop Industries, Inc. On December 23, 2016, 9449507 Canada Inc. changed its legal name to Loop Canada Inc. On December 31, 2016, all employees, assets, liabilities, and operations pertaining to the Company’s depolymerization business, were transferred to Loop Canada Inc. from 8198381 Canada Inc., a company wholly owned by Mr. Solomita.

~~On March 9, 2017, Loop Holdings, a wholly-owned subsidiary of the Company, merged with and into the Company, with the Company being the surviving entity as a result of the merger.~~

~~On September 1, 2017, 9449710 Canada Inc. was incorporated, to assist in the depolymerisation business, and~~ is a ~~wholly-owned subsidiary of Loop Canada Inc.~~

~~On November 20, 2017, Loop Industries Inc. commenced trading on the NASDAQ Global Market under its new trading symbol, “LOOP”.~~

~~F-6~~
~~Table of Contents~~

~~Basis of Presentation~~

The accompanying unaudited interim condensed consolidated financial statements of Loop Industries, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The balance sheet information as of February 28, 2017 is derived from the Company’s audited consolidated financial statements and related notes for the fiscal year ended February 28, 2017, which is included in Item 8 of the Company’s 2017 Amended Annual Report on Form 10-K/A filed with the Securities and Exchange Commission (SEC) on January 12, 2018. These unaudited interim condensed consolidated financial statements should be read in conjunction with those consolidated financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine months ended November 30, 2017 are not necessarily indicative of the results that may be expected for the year ending February 28, 2018.

~~Intercompany balances and transactions have been eliminated in consolidation.~~

~~Liquidity~~

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has no recurring source of revenue and during the nine months ended November 30, 2017, the Company incurred a net loss of $10,402,707 and used cash in operations of $4,175,443. As of November 30, 2017, the Company had cash on hand of $3,400,973 and stockholders’ equity of $4,289,192.

Subsequent to November 30, 2017 and as more fully explained in note 8 – Subsequent Events, the Board approved the issuance of up to 1,100,000 shares of the common stock of the Company at $12.00 per share. At January 11, 2018, the Company had sold 612,667shares for aggregate gross proceeds of $7.4 million. As a result, management estimates that the current funds on hand will be sufficient to continue operations for the next twelve months. Management may consider seeking additional funds, primarily through the issuance of debt and equity securities for cash to advance the development of our projects to the point at which they will become commercially viable.

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company could obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing.

~~Note 2 – Summary of Significant Accounting Policies~~

~~Use of Estimates~~

The preparation of financial statements in conformity with generally accepted accounting principles requires management 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for depreciable lives of property and equipment, analysis of impairments of recorded intellectual property, accruals for potential liabilities and assumptions made in calculating the fair value of certain stock instruments.

~~Foreign Currency Translations and Transactions~~

The accompanying consolidated financial statements are presented in United States dollars, the functional currency of the Company. Capital accounts of foreign subsidiaries are translated into US Dollars from foreign currency at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date. Income and expenses are translated at the average exchange rate of the period. As a result, currency exchange fluctuations may impact our revenue and the costs of our operations. We currently do not engage in any currency hedging activities.

~~F-7~~
~~Table of Contents~~

~~The following table summarizes the exchange rates used:~~

Nine Months Ended
November 30,

2017

2016

Period end Canadian $: US Dollar exchange rate

$ 0.78

$ 0.74

Average period Canadian $: US Dollar exchange rate

$ 0.77

$ 0.77

~~Restricted cash~~

In December 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash which requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance must be applied retrospectively to all periods presented. Management adopted this ASU beginning March 1, 2017. All prior periods have been adjusted to conform to the current period presentation, which resulted in no changes to the statement of cash flows for the nine months ended November 30, 2016.

~~As at November 30, 2017, the Company’s restricted cash consists of term deposits, held as collateral for the revolving credit facility (Note 5).~~

~~Value added tax, tax credits and other receivables~~

The Company is registered for the Canadian Federal and Provincial Goods and Services Taxes. As a registrant, the company is obligated to collect, and is entitled to claim sale taxes paid on its expenses and capital expenditures incurred in Canada. As at the Balance Sheet date of November 30 and February 28, 2017, the computed net recoverable sale taxes amounted to $128,905 and $198,830, respectively.

~~Research and Development Costs~~

Research and development expenses relate primarily to the development, design, testing of preproduction samples, prototypes and models, compensation, and consulting fees, and are expensed as incurred. Total research and development costs recorded amounted to $3,894,454 and $368,403 for the three months ended November 30, 2017 and 2016, respectively, and to $5,341,763 and $1,217,600 for the nine months ended November 30, 2017 and 2016, respectively. Research and development costs are net of $4,472 of grants received and research and development tax credit of $127,713 claimed during the period ended November 30, 2017.

~~Net Loss per Share~~

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

For the three and nine months ended November 30, 2017 and 2016, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. The potentially dilutive securities consisted of 1,000,000 common shares issuable, 2,684,582 outstanding warrants and 34,102 outstanding restricted stock units as of November 30, 2017 and 2,035,004 outstanding warrants as of November 30, 2016.

~~F-8~~
~~Table of Contents~~

~~Stock Compensation~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation–Stock Compensation (Topic 718)~~, which is intended to simplify accounting for share-based payment transactions. The ASU changed several aspects of the accounting for share-based payment award transactions, including accounting for income taxes, forfeitures and minimum statutory tax withholding requirements. Management adopted this ASU beginning March 1, 2017, with an immaterial impact to the Company's consolidated net loss and cash flows.

The Company accounts for stock compensation in accordance with ASC Subtopic 718-10. Stock compensation expense for a given warrant is recognized over the requisite service period. The Company accounts for forfeitures on share-based payments by recognizing forfeiture awards as they occur

~~The Company determines the fair value of restricted stock units awarded to employees and directors based on the closing market price of the Company's common stock on the date of grant.~~

~~Recently Issued Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. On August 12, 2015, FASB delayed the required implementation to fiscal years beginning after December 15, 2017 but now permitted organizations such the Company to adopt earlier. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. As the Company does not currently have any revenues from contracts with customers, the adoption of ASU 2014-09 on March 1, 2018 will not to have an impact, on transition.

~~In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02,~~ ~~Leases~~. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.

~~Note 3 – Property and Equipment~~

Estimated

Useful

November 30,

February 28,

Life

2017

2017

(years)

Machinery and Equipment

5 - 7

$ 1,845,256

$ 1,590,187

Office equipment and furniture

5 - 8

166,877

131,607

Leasehold improvements

3

382,347

342,419

2,394,480

2,064,213

Less: accumulated depreciation

(734,699 )

(497,244 )
Property and equipment, net

$ 1,659,781

$ 1,566,969

Depreciation expense amounted to $82,859 and $86,349 for the three months ended November 30, 2017 and 2016, respectively and to $233,332 and $242,712 for the nine months ended November 30, 2017 and 2016, respectively.

~~F-9~~
~~Table of Contents~~

~~Note 4 – Intellectual Property~~

On October 27, 2014, the Company entered into an intellectual property agreement with Mr. Hatem Essaddam wherein the Company purchased for cash of $445,050, a certain technique and method for the depolymerization of polyethylene terephthalate at ambient temperature and atmospheric pressure. The Company is using such intellectual property as part of their research and development activities. The technology is being amortized using the straight-line method over the 7 years estimated useful life of the patents.

In addition to the $445,050 paid by the Company under the Intellectual Property Assignment Agreement, the Company is required to make additional payments totaling CDN$800,000 to Mr. Essaddam within sixty (60) days of each of the following milestones (the “Milestones”) having been met, as follows:

	~~(i)~~	~~CDN$200,000 when an average of twenty (20) metric tons per day of terephthalic acid is produced by the Company for twenty (20) operating days;~~

	~~(ii)~~	~~CDN$200,000 when an average of thirty (30) metric tons per day of terephthalic acid is produced by the Company for thirty (30) operating days;~~

	~~(iii)~~	~~CDN$200,000 when an average of sixty (60) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days; and~~

	~~(iv)~~	~~CDN$200,000 when an average of one hundred (100) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days.~~

~~As of November 30, 2017, the Company is still in its test pilot program, none of the Milestones have been met, and accordingly no additional payments have been made.~~

~~Additionally, the Company is obligated to make royalty payments to Mr. Essaddam of up to CDN$25,700,000, payable as follows:~~

	~~(a)~~	~~10% of gross profits on the sale of all products derived by the Company from the technology assigned to the Company under the agreement;~~

	~~(b)~~	~~10% of any license fee paid to the Company in respect of any licensing or other right to use the technology assigned to the Company and granted to a third party by the Assignee;~~

	~~(c)~~	~~5% of any royalty or other similar payment made to the Company by a third party to whom a license or other right to use the technology assigned to the Company has been granted by the Company; and~~

	~~(d)~~	~~5% of any royalty or other similar payment made to the Company by a third party in respect of a sub-license or other right to use the technology assigned to the Company granted by the third party.~~

~~F-10~~
~~Table of Contents~~

~~As of November 30, 2017, the Company has not made any royalty payments under the Intellectual Property Assignment Agreement.~~

Amortization expense amounted to $15,895 and $15,895 for the three months ended November 30, 2017 and 2016, respectively and to $47,684 and $47,684 for the nine months ended November 30, 2017 and 2016, respectively.

~~Note 5 – Credit facility~~

On September 12, 2017, the Company entered into a credit facility consisting of a CDN$50,000 credit card facility, secured by a CDN$50,000 Guaranteed Investment Certificate bearing interest at 0.45%, annually, maturing on October 1, 2018.

~~Note 6 – Related Party Transactions~~

~~Advances from Major Shareholder~~

Mr. Daniel Solomita, the Company’s major stockholder and CEO, or companies controlled by him, previously made advances to the Company. The advances were unsecured, non-interest bearing with no formal terms of repayment. During the period ended November 30, 2017, the Company repaid to Mr. Solomita or companies controlled by him, as applicable, an aggregate amount of $249,762 and netted against the advances an aggregate amount of $113,223 representing value added taxes and other receivables owed to Mr. Solomita. The amounts due to these entities as of February 28, 2017 were $391,695.

~~Employment Agreement and Accrued Compensation due to Major Shareholder~~

The Company entered into an employment agreement with Daniel Solomita, the Company’s President and Chief Executive Officer for an indefinite term. During the term, the officer shall receive monthly salary of $15,000. Compensation expense under this agreement for the nine month period ended November 30, 2017 and 2016 amounted to $135,000. As at February 28, 2017, accrued compensation $360,000 was due to Mr. Solomita. As at November 30, 2017, the total accrued compensation due to Mr. Solomita was paid.

~~In addition, as previously disclosed, the Company agreed to grant the Mr. Solomita 4 million shares of the Company’s common stock, if certain milestones were met.~~

Effective April 10, 2017, the Company achieved the first milestone by becoming qualified to trade on the OTCQX and began trading that same date. Therefore, management determined it was probable that the first performance condition would be achieved at February 28, 2017 and the officer’s entitlement to 1,000,000 shares with a fair value of $800,000, in aggregate, had vested. The performance conditions for the remaining 3,000,000 shares of common stock are not considered probable therefore the stock based compensation expense associated with the grant has not been recognized.

~~F-11~~
~~Table of Contents~~

~~Note 7 – Stockholders’ Equity~~

~~Common Stock~~

On May 4, 2017, the Board of Directors approved the issuance and sale of 1,123,266 common shares of the Company’s common stock, par value $0.0001 per share at an offering price of $5.25 per share, for gross proceeds of $5,897,188.

On September 7, 2017, the Board of Directors approved the issuance and sale of 18,128 common shares of the Company’s common stock, par value $0.0001 per share at an offering price of $12.00 per share, for gross proceeds of $217,536. In addition, the Company reclassified the stock subscriptions in the amount of $54,780, in aggregate, to common stock and paid-in capital.

~~The shares issued to investors were not registered under the Securities Act of 1933, as amended (the “Act”), in reliance upon the private offering safe harbor provision of Rule 506 Regulation D.~~

~~Equity Incentive Plan~~

On July 6, 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”). The Plan permits the granting of options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants of the Company. A total of 3,000,000 shares of common stock were reserved for issuance under the Plan with an automatic share reserve increase, as defined in the Plan, effective commencing March 1, 2018. The Plan is administered by the Board of Directors who designates eligible participants to be included under the Plan, the number of awards granted, the share price pursuant to the awards and the vesting conditions and period. The awards, when granted, will have an exercise price of no less than the estimated fair value of shares at the date of grant and a life not exceeding 10 years from the grant date. However, where a participant, at the time of the grant, owns stock representing more than 10% of the voting power of the Company, the life of the option will not exceed 5 years.

~~Stock Options~~

On October 19, 2017, the Company’s former Chief Financial Officer, terminated her employment and pursuant to the separation agreement of October 25, 2017, forfeited all vested and unvested warrants, being 100,000 vested and 450,000 unvested warrants. All requisite services were rendered for stock compensation costs recognized, amounting to $505,986, until the date of termination. The warrants were originally granted on April 3, 2017 with an exercise price of $5.25 and had an aggregate fair value of $2,524,995, as determined by a Black-Scholes option pricing model.

On November 8, 2017, the Company issued to its new Chief Financial Officer, Mr. Frank Zitella, under the Plan, a warrant to purchase up to 200,000 shares of common stock at an exercise price $13.89 per share, which vests in 1/3 increments over a period of three years, commencing on November 8, 2018, and having a contractual life of 10 years. This warrant has a grant date fair value of $1,928,840 as determined by a Black Scholes option pricing model and will be amortized over the vesting period. In addition, the Company issued to its Chief Financial Officer a warrant to purchase up to 80,000 additional shares of common stock at an exercise price of $13.89 that will vest when certain milestones are achieved. This warrant has a grand date fair value of $771,536 as determined by a Black Scholes option pricing model and amortization will commence when it is probable that the milestones will be achieved.

~~The warrants grant date fair value were determined by a Black Scholes option pricing model with the following assumptions:~~

~~Risk-free interest rate~~	~~2.10%~~
~~Expected dividend yield~~	0%
~~Expected volatility~~	~~80%~~
~~Expected life~~	~~6 years~~

~~F-12~~
~~Table of Contents~~

During the three months ended August 31, 2017, the Company issued three warrants to two employees, not covered under the Plan, to purchase up to 530,000 shares of common stock, in aggregate, at an exercise price of $5.25 per share. The warrants to purchase up to an aggregate of 100,000 and 380,000 shares of common stock, respectively, each vest quarterly in equal amounts over 24 and 48 months, respectively, beginning on July 24, 2017 and June 13, 2017, respectively, and each have a contractual life of 10 years. These warrants collectively have a grant date fair value of $4,786,142 as determined by a Black Scholes option pricing model and will be amortized over the vesting period. In addition, a warrant to purchase up to 50,000 additional shares of our common stock will vest when certain milestones are achieved. This warrant had a grant date fair value of $479,885 as determined by a Black Scholes option pricing model and amortization will commence when it is probable that the milestones will be achieved.

~~The warrants grant date fair value were determined by a Black Scholes option pricing model with the following assumptions:~~

~~Risk-free interest rate~~	~~1.46 to 1.74%~~
~~Expected dividend yield~~	0%
~~Expected volatility~~	~~82 to 94%~~
~~Expected life~~	~~3 to 5 years~~

During the three months ended November 30, 2017, the Company issued three warrants to three employees, under the Plan, to purchase up to 950,000 shares of common stock, in aggregate, at exercise prices ranging from $12.00 to $13.49 per share. The warrants to purchase up to an aggregate of 950,000 shares of common stock vest 200,000 and 100,000 warrants immediately, respectively, and, the balance, monthly in equal amounts over 60 and 24 months, respectively, beginning September 14, 2017 and October 16, 2017, respectively, and each have a contractual life of 10 years. These warrants collectively have a grant date fair value of $10,412,575, in aggregate, as determined by a Black Scholes option pricing model and will be amortized over the vesting period.

~~The warrants grant date fair value were determined by a Black Scholes option pricing model with the following assumptions:~~

~~Risk-free interest rate~~	~~1.50 to 2.15%~~
~~Expected dividend yield~~	0%
~~Expected volatility~~	~~80 to 94%~~
~~Expected life~~	~~3 to 6 years~~

During the period ended August 31, 2017, the Company amended the terms of warrants to purchase up to 702,081 shares of our common stock which were originally issued on December 1, 2015 to three employees. The amendment extended the expiry date of the warrants to November 30, 2025 from November 30, 2017. As a result of the modification, we recognized additional compensation expense of $63,677.

Amortization of these costs amounted to $4,314,880 and $32,348 for the three months period ended November 30, 2017 and 2016, respectively, and to $5,235,253 and $106,053 for the nine months period ended November 30, 2017 and 2016, respectively, and are included in operating expenses. As of November 30, 2017 and 2016, the unamortized balance of these costs was $15,844,331 and $424,142. The aggregate intrinsic value of the warrants outstanding as of November 30, 2017 was $20,251,990 calculated as the difference between the closing market price of $14.70 and the exercise price of the Company’s warrants as of November 30, 2017.

~~F-13~~
~~Table of Contents~~

~~The table below summarizes the Company’s warrant activities:~~

Number of
Warrant
Shares

Exercise Price Range Per
Share

Weighted
Average
Exercise
Price

Balance, February 28, 2017

1,647,670

$0.80 to $6.00

$ 2.91

Granted

2,310,000

$5.25 to $13.89

$ 9.23

Forfeited

(515,418 )

$0.80 to $5.25

$ 4.95

Exercised

(213,770 )

$0.80 to $6.00

$ 5.52

Expired

(543,900 )

$5.25 to $6.00

$ 5.86

Balance, November 30, 2017

2,684,582

$0.80 to $13.89

$ 7.16

Earned and exercisable, November 30, 2017

966,250

$0.80 to $13.49

$ 4.90

Unvested, November 30, 2017

1,718,332

$0.80 to $13.89

$ 8.42

As at November 30, 2017, 20,000 shares of the Company’s common stock were issued as a result of a cashless exercise of 22,919 warrants with an exercise price of $0.80 and a fair value of $0.55. In addition, the Company issued 193,770 shares of its common stock upon the exercise of warrants at an offering price of $6.00 per share, resulting in proceeds of $1,163,016.

~~The following table summarizes information concerning outstanding and exercisable warrants as of November 30, 2017:~~

Warrants Outstanding

Warrants Exercisable

Range of Exercise Prices

Number
Outstanding

Average Remaining Contractual Life (in years)

Weighted Average Exercise Price

Number Exercisable

Average Remaining Contractual Life (in years)

Weighted Average Exercise Price

$
0.80

912,082

6.21

$ 0.80

594,582

6.32

$ 0.80

$
3.00

12,500

0.50

$ 3.00

12,500

0.50

$ 3.00

$
5.25

530,000

9.74

$ 5.25

36,250

9.74

$ 5.25

$
12.00

700,000

9.79

$ 12.00

216,668

9.79

$ 12.00

$
13.49

250,000

9.88

$ 13.49

106,250

9.88

$ 13.49

$
13.89

280,000

9.94

$ 13.89

-

-

$ -

Total

2,684,582

966,250

~~F-14~~
~~Table of Contents~~

~~Restricted Stock Units~~

During the period ended November 30, 2017, the Company issued, under the Plan, four restricted stock unit awards to directors of the Company to purchase up to 34,102 shares of common stock, in aggregate. The restricted stock units vest upon completion of services, on May 31, 2018. These restricted stock units have a grant date fair value of $443,326, based on the closing market price of the Company's common stock on the date of grant, reduced by the present value of the estimated future dividends during the vesting period in which the restricted stock rights holder will not participate. The weighted average grant date fair value of the restricted stock units is $13.00 and no dividends are expected during the vesting period.

Amortization of these costs amounted to $88,665 for the three months period ended November 30, 2017, and are included in operating expenses. As of November 30, 2017, the unamortized balance of these costs was $354,661.

~~Note 8 – Subsequent Events~~

~~Common Stock~~

On January 9, 2018, the Board of Directors approved plans to issue and sell in a private placement up to 1,100,000 shares of common stock, par value $0.0001 per share, of the Company (the “Shares”) at an offering price of $12.00 per share and to issue warrants to investors to purchase up to a number of shares of Common Stock equal to 25% of the Shares purchased (the “Private Placement”).

~~At January 11, 2018, the Company had sold 612,667 Shares and 104,167 warrants for gross proceeds of $7.4 million.~~

In connection with the Private Placement, the Company agreed to file a registration statement to register the Shares (the “Resale Registration Statement”). The warrants will only vest if the Company does not file the Resale Registration Statement covering the shares sold in the Private Placement within 60 days of the closing of the Private Placement. The Company also granted holders of the Shares piggyback registration rights for certain registration statements. Additionally, for a period of 90 days following the closing of the Private Placement, in the event the Company issues shares of common stock or any securities of the Company that would entitle the holder thereof to acquire common stock for a consideration per share less than $12.00 per share (subject to certain customary exceptions, including but not limited to issuances pursuant to existing equity incentive plans and strategic partnerships or relationships), certain investors would be entitled to additional shares of common stock equal to the quotient of the aggregate price paid by the investor for the total number of shares purchased divided by the price per share that was issued for consideration per share less than $12.00 per share less the number of shares purchased by such investor in the Private Placement.

The Shares and warrants were not registered under the Securities Act of 1933, as amended (the “Act”), in reliance upon the private offering safe harbor provision of Rule 506 Regulation D, Section 4(a)(2) of the Act or Regulation S.

~~Promise to Purchase a Land and Building~~

On December 11, 2017, the Company entered into a promise to purchase land and building for consideration of $2,153,123, in aggregate. An amount of $77,590, was deposited in escrow on the date of the agreement. Subject to satisfactory due diligence, in its sole discretion, the Company has until February 9, 2018 to proceed to the execution of the deed of sale.

~~F-15~~
~~Table of Contents~~

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

The following information should be read in conjunction with the unaudited condensed interim consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the notes thereto included in our most recent Amended Annual Report on Form 10-K/A, which was filed with the Securities and Exchange Commission, or the SEC, on January 12, 2018.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified in the “Risk Factors” section of our most recent Amended Annual Report on Form 10-K/A and refer to the Cautionary Note Regarding Forward-Looking Statements on page 1.

~~Introduction~~

~~Loop Industries, Inc. (the “Company”, “Loop”) is an innovative~~ technology company ~~focused on sustainability. Our~~whose mission is to accelerate the world’s shift toward sustainable PET plastic and polyester fiber and away from ~~its~~our dependence on fossil ~~fuels, essentially enabling a truly circular economy.~~

~~Our~~fuels. Loop owns patented ~~FDA approved~~and proprietary technology ~~decouples plastic from fossil fuels, depolymerizing~~that depolymerizes no and low value waste PET plastic and polyester fiber, ~~into~~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; purified terephthalic acid and mono ethylene glycol.~~blocks (monomers). The ~~resulting~~ monomers are ~~then~~filtered, purified and polymerized ~~into~~to create virgin-quality Loop™ branded PET ~~plastic used in food-grade plastic packaging such as water and soda bottles~~resin and polyester fiber suitable for ~~textile applications.~~

~~Loop’s~~use in food-grade packaging, thus enabling our customers to meet their sustainability objectives. Loop is contributing to the global movement toward a circular economy by raising awareness about the importance of preventing and recovering waste plastic from the environment to ensure plastic stays in the economy for a more sustainable future for all.

Proprietary Technology and Intellectual Property

The power of our technology ~~allows~~lies in its ability to divert and recover what is currently considered plastic waste from landfills, rivers, oceans and natural areas for ~~low value~~use as feedstock to create new, sustainable, infinitely recyclable Loop™ PET plastic resin and polyester fiber. We believe our technology can deliver a cost-effective and profitable virgin quality PET plastic resin suitable for use in food-grade packaging.

Our Generation I technology process yielded polyethylene terephthalate (“PTA”) and monoethylene glycol (“MEG”), two common monomers of PET plastic, through depolymerization. While monomers were of excellent purity and strong yield, we continued to challenge ourselves to drive down cost and eliminate inputs. It was during this process that we realized we could eliminate water and chlorinated solvents from the purification process, reduce the number of reagents from five to two and reduce the number of purification steps from 12 to four, if we shifted from the production of PTA to the production of dimethyl terephthalate (“DMT”), another proven monomer of PET plastic that is far simpler to purify. Since June 2018, when we transitioned to our Generation II technology and our newly built industrial pilot plant, we continue to see consistently high monomer yields, excellent purity and improved conversion costs.

This shift, from producing the monomer PTA to the monomer DMT was a pivotal moment for Loop. The Generation II technology is more cost-effective, easier to commercialize, more economical for our customers and requires less energy and fewer resource inputs than conventional PET production processes. We believe it to be one of the most environmentally sustainable methods for producing virgin quality food-grade PET plastic in the world.

To protect our technology, we rely on a combination of patent and trademark laws, trade secrets, confidentiality provisions and other contractual provisions to protect our proprietary rights, which are primarily our patents, brand names, product designs and marks.

We have two patent groups, referred to as GEN I technology and the GEN II technology, with claims relating to our proprietary technology for depolymerization of PET.

●

The GEN I portfolio has two issued U.S. patents and a pending U.S. application expected to expire on or around July 2035. Internationally, we also have an issued patent in Taiwan, an allowed application in the members of the Gulf Cooperation Council, and pending patent applications in Argentina, Australia, Brazil, Canada, China, Eurasia, Europe, Israel, India, Japan, Korea, Mexico, the Philippines, and South Africa, all expected to expire on or around July 2036 if granted.

●

The GEN II technology portfolio has an issued U.S. patent and a pending U.S. application expected to expire on or around September 2037; as well as a PCT application and non-PCT applications in Argentina, Bangladesh, Bolivia, Bhutan, members of the Gulf Cooperation Council, Iraq, Pakistan, Taiwan, Uruguay, and Venezuela, all expected to expire on or around September 2037 if granted. Additionally, we have three pending provisional applications directed to additional aspects of the GEN II technology. Any patents that would ultimately grant from these provisional applications would be expected to expire no ~~value~~earlier than 2039, if granted.

In connection with the continued transitioned to its newly constructed GEN II industrial pilot plant. the Company made capital asset investments of $1,202,766 during the six months ended August 31, 2019.

Government Regulation and Approvals

As we seek to further develop and commercialize our business, we will be subject to extensive and frequently developing federal, state, provincial and local laws and regulations. Compliance with current and future regulations could increase our operational costs.

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. 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.

The use of mechanically recycled PET for food grade applications in certain countries is highly inadvisable for a variety of reasons including the perception of contamination from mechanically recycled sources. We believe that means that Loop™ PET plastic resin and polyester fiber has a distinct advantage in these markets, which represent nearly three billion people or approximately 38% of the global population. Since our product is not mechanically recycled PET, we expect that demand from PET manufacturers and global consumer goods companies in these regions for 100% Loop™ branded PET plastic resin and polyester fiber will be a significant part of our strategy going forward.

Prospective Future Growth

We plan to continue to allocate available capital to strengthen our intellectual property portfolio, build a core competency in managing strategic relationships and continue enhancing our Loop™ brand value. Our research and development innovation hub in Terrebonne, Quebec, Canada will continue to push forward the development of our technology. We are investing in building a strong management team to integrate best in class processes and practices while maintaining our entrepreneurial culture.

During the three months ended August 31, 2019, we continued executing our corporate strategy where Loop focused on developing three major streams of revenue. These revenue streams are expected to be from the sale of Loop™ PET resin and polyester fiber to customers from our joint venture with Indorama Ventures Holdings and our Waste-to-Resin (“WtR™”) facilities, and license fees from WtR™ facilities.

In September 2018, in connection with the first of these streams, we announced a joint venture with Indorama Ventures Holdings to retrofit Indorama’s existing PET manufacturing facilities. The joint venture will manufacture and commercialize sustainable Loop™ branded PET resin and polyester fiber to meet the growing global demand from beverage and consumer packaged goods companies. The joint venture agreement details the establishment of an initial 20,700 metric tonnes facility in the southeastern United States (Spartanburg, South Carolina). Due to market demand from existing and potential customers, the joint venture has decided to increase the capacity at the plant to 40,000 metric tonnes.The initial 20,700 metric tonnes production capacity is fully subscribed by customers, which include Danone, PepsiCo and Coca-Cola’s Cross Enterprise Procurement Group, and certain potential customers have demonstrated interest in entering into commercial contracts for the remaining capacity. We expect the facility to be commissioned by the end of calendar year 2020.

Also during the three months ended August 31, 2019, the Company executed an agreement with Investissement Quebec providing it with a financing from which we can draw a total equal to 63.45% of all eligible expenses incurred for the expansion of our Pilot Plant up to a maximum CDN $4,600,000. There is a 36-month moratorium on both capital and interest repayments beginning as of the first disbursement date. At the end of the 36-month moratorium, capital and interest will be repayable in 84 monthly instalments. The loan will bear interest at 2.36%. The Company has also agreed to issue to Investissement Quebec warrants convertible into common shares in an amount equal to 10% of each disbursement up to a maximum amount of CDN $460,000. The warrants will be 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 will have a term of three years from the date of issuance. The loan can be repaid at any time by the Company without penalty. No disbursements have yet been made under the agreement.

We are also in the process of identifying additional facilities suitable for retrofit. The partnership with IVL, which we believe to be one of the world’s largest global integrated PET plastic resin manufacturer, helps bring Loop™ PET sustainable plastic resin and polyester fiber to market more quickly and further emboldens the confidence of our customers to sign multi-year supply agreements and term sheets with us.

To drive our WtR™ solution, which is a key pillar of our commercialization blueprint, December 2018 saw us enter into a Global Alliance Agreement with Thyssenkrupp Industrial Solutions (“tkIS”) aimed at transforming the future of sustainable PET plastic resin manufacturing by combining our breakthrough depolymerization technology with tkIS’s PET Melt-To-Resin® technology. As one of the world’s leading PET and polyester engineering companies, we believe tkIS is perfectly positioned to help us commercialize our WtR™ solution—a fully integrated and reimagined manufacturing facility for sustainable Loop™ PET plastic resin and polyester fiber. During the six months ended August 31, 2019, the Company and tkIS continued the process of developing such a fully integrated and reimagined manufacturing facility for sustainable Loop™ PET plastic resin and polyester fiber.

We believe the WtR™ solution will result in a highly scalable recurring revenue licensing model to supply the global demand for 100% sustainable Loop™ PET plastic resin and polyester fiber, allowing us to rapidly penetrate and transform the plastic market and fully capitalize on our disruptive potential to be the leader in the circular economy for PET plastic. This fundamentally changes where and how PET plastic resin production occurs—no longer does PET plastic resin production need to be bound to fossil fuels and fossil fuel infrastructure. WtR™ facilities could be located near large urban centers where feedstock is located, and transportation and logistics costs could be significantly reduced as the distance between feedstock, manufacturing and customer use is collapsed.

We believe the proposition for those seeking a turnkey solution to manufacture Loop™ PET plastic resin and polyester fiber, such as chemical companies, waste managers, existing recyclers and even consumer good companies around the world is compelling. We further believe this will create a recurring licensing revenue stream for us while expanding the capacity of Loop™ PET plastic resin and polyester fiber in the marketplace to meet the substantial demand from consumer goods companies.

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 year we have seen major brands make significant commitments to close the loop on their plastic packaging in two ways, by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging. We believe Loop™ PET plastic resin and polyester fiber provides the ideal solution for these brands because Loop™ PET plastic resin and polyester fiber is recyclable and contains 100% recycled PET and polyester fiber content with virgin quality suitable for use in food-grade packaging. That means consumer packaged goods companies can now market packaging made from a 100% Loop™ branded PET plastic resin and polyester fiber.

Loop believes that 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-like quality of Loop™ branded PET and the marketability of Loop™ PET to extoll the sustainability credentials of consumer brands that incorporate Loop™ PET, it will sell its Loop™ branded PET at a premium price relative to virgin PET.

Turning Waste into Feedstock

To us, waste PET plastic and polyester ~~fibers such as carpets and clothing to be upcycled~~fiber is feedstock, the materials introduced into ~~high value PET/Polyester packaging for consumer goods companies. Our zero energy~~our Generation II depolymerization technology ~~specifically targets PET/Polyester allowing~~to yield PET monomers. Our technology can use 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 ocean plastics that have been degraded by sun and salt. This is yet another distinct advantage of Loop™ PET over mechanically recycled PET, our ability to use materials that nearly all other recyclers do not use. 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.

We have a dedicated team studying the availability of feedstock to ensure each planned facility can operate continuously. The team has already identified the sources required for our first joint venture facility with IVL and is now focused on signing supply agreements to secure this feedstock for the ~~removal~~long term.

The team is also conducting a macro-to-micro analysis in the United States, Canada, European Union and Asia to help us evaluate the size and location of ~~all waste impurities, such as colors/dyes, labels and non-PET plastic waste.~~

~~Plan~~our next facilities. The approach includes a fulsome inventory of ~~Operation~~

~~During~~PET materials introduced into a region, the ~~last three years we have positioned Loop to be a leader~~materials collected (or recycled) in ~~sustainability~~the region and the ~~circular economy.~~ material loss, or the difference between the material introduced and the material collected. This allows us to identify not only the material traditionally available for recycling, but how material can be effectively diverted from landfill, rivers, oceans and natural areas by providing a new outlet for what was formerly considered waste.

We built our pilot plant in Terrebonne, Canada to optimize and showcase our proprietary depolymerization technology. We are currently expanding our pilot plant to increase capacity as we begin our next phase of commercialization.

~~We are focused on commercialization of our technology through~~believe the proposition for those seeking a ~~hybrid revenue model consisting of licensing our technology to world class multinational supply chain management companies~~turnkey solution to manufacture Loop™ ~~branded~~ PET plastic resin and ~~we may also participate with an equity interest in~~polyester fiber, such as chemical companies, waste managers, existing recyclers and consumer good companies around the ~~manufacturing partnerships and/or joint-ventures.~~world is compelling. We further believe this ~~model~~ will ~~position Loop ‎ to ramp up commercial operations more rapidly in order to satisfy demand~~create a recurring licensing revenue stream for ~~sustainable plastics from global consumer brands and achieve meaningful substitution of oil based PET resins. We believe this model will also allow~~ us to partner with others and ramp up capital intensive manufacturing operations to commercialize our technology without having to raise significant new capital and incur resulting significant equity dilution.

~~The company plans to negotiate take or pay contracts with global consumer goods companies for~~while expanding the ~~sale~~capacity of Loop™ PET ~~resin. Loop will continue~~plastic resin and polyester fiber in the marketplace to ~~create brand value for~~meet the substantial demand from consumer goods companies.

Consumer brands are seeking a solution to their plastic challenge, and they are taking bold action. In the past year we have seen major brands make significant commitments to close the loop on their plastic packaging in two ways, by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging. We believe Loop™ PET plastic resin ~~by leveraging~~and polyester fiber provides the ~~global~~ideal solution for these brands because Loop™ PET plastic resin and polyester fiber contains 100% recycled PET and polyester fiber content. The Loop™ PET plastic resin and polyester fiber is virgin quality suitable for use in food-grade packaging. That means consumer packaged goods ~~company’s marketing~~companies can now market packaging made from a 100% Loop™ branded PET plastic resin and ~~branding initiatives.~~

polyester fiber. As a result, during the 2019 fiscal year and the six months ended August 31, 2019, we delivered a significant number of announcements regarding our partnership / engagement with some of the world’s leading brands.

We plan to continue to allocate available capital to strengthen our intellectual property portfolio, build a core competency in managing strategic relationships and continue enhancing our Loop brand value. Our research and development innovation hub in Terrebonne, Quebec, Canada will continue optimizing our current technology as well as innovate into new areas of sustainability. We are investing in building a strong management team to integrate best in class processes and practices while maintaining our entrepreneurial culture.

On November 20, 2017, our securities began trading on The NASDAQ Global Market, under the trading symbol “LOOP”, which we believe will provide the Company heightened exposure with a global audience and greater access to capital.

4
~~Table of Contents~~

Results of Operations

The following ~~tables summarize~~table summarizes our operating ~~results.~~

Three months ended

Change

November 30,

2017 vs 2016

2017

2016

$

%

Revenue

$ -

$ -

$ -

-

Operating Expenses -

Research and development

3,894,454

368,403

3,526,051

957 %
General and administrative

2,720,078

277,951

2,442,127

879 %
Depreciation and amortization

98,755

102,244

(3,490 )

-3
%
Foreign exchange loss (gain)

(9,634 )

809

(10,443 )

-1291
%
Total operating expenses

6,703,653

749,407

5,954,246

795 %

Net Loss, before the undernoted

$ (6,703,653 )

$ (749,407 )

$ (5,954,246 )

795 %

Adjusted for Share Based Compensation:

Non-recurring

$ 3,230,910

$ -

$ 3,230,910

-

Ongoing

1,172,635

40,149

1,132,486

2821 %
Total Share Based Compensation

$ 4,403,545

$ 40,149

$ 4,363,396

10868 %

Adjusted Net Loss

$ (2,300,108 )

$ (709,258 )

$ (1,590,850 )

224 %

Adjusted Operating Expenses

$ 2,300,108

$ 709,258

$ 1,590,850

224 %

~~Adjusted Operating Expenses exclude Share Based Compensation amounts.~~

5
~~Table of Contents~~

Nine months ended

Change

November 30,

2017 vs 2016

2017

2016

$

%

Revenue

$ -

$ -

$ -

-

Operating Expenses -

Research and development

5,341,763

1,217,600

4,124,163

339 %
General and administrative

4,691,294

1,034,007

3,657,287

354 %
Depreciation and amortization

281,016

290,396

(9,380 )

-3
%
Foreign exchange loss (gain)

88,634

(2,880 )

91,514

-3178
%
Total operating expenses

10,402,707

2,539,123

7,863,584

310 %

Net Loss, before the undernoted

$ (10,402,707 )

$ (2,539,123 )

$ (7,863,584 )

310 %

Adjusted for Share Based Compensation:

One-time

$ 3,230,910

$ -

$ 3,230,910

-

Ongoing

2,093,007

106,053

1,986,954

1874 %
Total Share Based Compensation

$ 5,323,917

$ 106,053

$ 5,217,864

4920 %

Adjusted Net Loss

$ (5,078,790 )

$ (2,433,070 )

$ (2,645,720 )

109 %

Adjusted Operating Expenses

$ 5,078,790

$ 2,433,070

$ 2,645,720

109 %

~~Adjusted Operating Expenses exclude Share Based Compensation amounts.~~

6
~~Table of Contents~~

~~Operating expenses~~results for the ~~three~~three-month periods ended August 31, 2019 and ~~nine month~~2018, in U.S. Dollars.

	Three Months Ended August 31
Revenues	2019	2018	$ Change
	$-	$-	$-
Operating expenses
Research and development
Stock-based compensation	317,353	250,242	67,111
Other research and development	652,860	816,050	(163,190)
Total research and development	970,213	1,066,292	(96,079)

General and administrative
Stock-based compensation	485,975	755,229	(269,254)
Other general and administrative	1,232,638	1,639,169	(406,531)
Total general and administrative	1,718,613	2,394,398	(675,785)

Depreciation and amortization	201,403	110,589	90,814
Interest and other finance costs	622,183	13,443	608,740
Interest income	(192,259)	(122)	(192,137)
Foreign exchange (gain) loss	21,890	(46,190)	68,080
Total operating expenses	3,342,043	3,538,410	(196,367)
Net loss	$(3,342,043)	$(3,538,410)	$196,367

Second Quarter Ended August 31, 2019

The net loss for the three-month period ended ~~November 30, 2017 were $6.7~~August 31, 2019 decreased $0.20 million ~~and $10.4~~to $3.34 million, ~~respectively, an increase of $6.0 million and $7.9 million,~~as compared to the ~~same periods in 2016. Increases in both~~net loss for the ~~three and nine month periods over the prior year~~three-month period ended August 31, 2018 which was $3.54 million. The decrease of $0.20 million is ~~partially~~primarily attributable to ~~non-cash stock compensation~~lower research and development expenses of ~~$4.4~~$0.10 million, by lower general and administrative expenses of $0.68 million and ~~$5.2~~by an increase in interest income of $0.19 million, ~~respectively.~~

offset by higher depreciation and amortization expenses of $0.09 million, higher interest and other finance costs of $0.61 million and a higher foreign exchange loss of $0.07 million.

Research and development expenses for the ~~three and nine month~~three-month period ended ~~November 30, 2017 were $3.9~~August 31, 2019 amounted to $0.97 million ~~and $5.3~~compared to $1.07 million ~~respectively, representing an increase of $3.5 million and $4.1 million, respectively.~~

~~The increase in research and development expenses~~ for the ~~three month~~three-month period ended August 31, 2018, representing a decrease of $0.10 million, or representing a decrease of $0.16 million excluding stock-based compensation. The decrease of $0.16 million was primarily attributable to anlower legal and professional fees of $0.32 million and by higher research and development tax credits of $0.06 million offset by higher employee compensation costs of $0.20 million. The increase in non-cash stock-based compensation expense of $0.07 million is mainly attributable to the timing of stock compensation of $2.9 million, design and planning costs of $0.4 million incurred in connection with our Terrebonne Pilot Plant, and an increase in staff costs of $0.1 million. Of the $2.9 million stock compensation increase, $2.3 million was recorded in the quarter ended November 30, 2017 as the stock options were fully vested on grant date and the remaining amount, $0.6 million, represents amounts recorded over the requisite vesting service period.

~~The increase in research and development expenses for the nine month period ended November 30, 2017 was primarily due~~awards provided to an increase in non-cash stock compensation of $3.1 million, costs incurred to enhance our Terrebonne Pilot Plant of $0.9 million, and an increase in staff costs of $0.4 million. Of the $3.1 million stock compensation increase, $2.3 million was recorded in the nine month period ended November 30, 2017 as the stock options were fully vested on grant date and the remaining amount, $0.8 million, represents amounts recorded over the requisite vesting service period.

certain employees.

General and administrative expenses for the ~~three and nine month~~three-month period ended ~~November 30, 2017 were $2.7~~August 31, 2019 amounted to $1.72 million compared to $2.39 million for the three-month period ended August 31, 2018, representing a decrease of $0.68 million, or a decrease of $0.41 million excluding stock-based compensation. The decrease of $0.41 million was mainly attributable to lower legal and professional fees of $0.56 million offset by higher employee compensation costs of $0.08 million and ~~$4.7~~higher commercial insurance expenses of $0.06 million. Stock-based compensation expense for the three-month period ended August 31, 2019 amounted to $0.49 million ~~respectively,~~compared to $0.76 million for the three-month period ended August 31, 2018, representing a decrease of $0.27 million, which was mainly attributable lower stock awards provided to executives.

Depreciation and amortization for the three-month period ended August 31, 2019 totaled $0.20 million compared to $0.11 million for the three-month period ended August 31, 2018, representing an increase of ~~$2.4~~$0.09 million. This increase is mainly attributable to the addition of fixed assets at the Company’s pilot plant and corporate offices.

Interest and other finance costs for the three-month period ended August 31, 2019 totaled $0.62 million compared to $0.01 million the three-month period ended August 31, 2018, representing an increase of $0.61 million. The increase is mainly attributable to an increase in accretion expense of $0.49 million, an increase in interest expense of $0.10 million and ~~$3.7 million, respectively.~~

~~The~~by an increase in amortization of deferred financing costs of $0.02 million.

Six Months Ended August 31, 2019

The following table summarizes our operating results for the six-month periods ended August 31, 2019 and 2018, in U.S. Dollars.

	Six Months Ended August 31
	2019	2018	$ Change
Revenues	$-	$-	$-

Operating expenses
Research and development
Stock-based compensation	629,788	660,455	(30,667)
Other research and development	1,338,286	1,471,916	(133,630)
Total research and development	1,968,074	2,132,371	(164,297)

General and administrative
Stock-based compensation	1,104,230	1,530,686	(426,456)
��Other general and administrative	2,517,013	3,219,262	(702,249)
Total general and administrative	3,621,243	4,749,948	(1,128,705)

Depreciation and amortization	365,739	211,658	154,081
Interest and other finance costs	1,124,064	26,481	1,097,583
Interest income	(192,291)	(247)	(192,044)
Foreign exchange (gain) loss	9,764	(52,271)	62,035
Total operating expenses	6,896,593	7,067,940	(171,347)
Net loss	$(6,896,593)	$(7,067,940)	$171,347

The net loss for the six-month period ended August 31, 2019 decreased by $0.17 million to $6.90 million, as compared to the net loss for the six-month period ended August 31, 2018 which was $7.07 million. The decrease of $0.17 million is primarily due to lower research and development expenses of $0.16 million, lower general and administrative expenses of $1.13 million and an increase in interest income of $0.19 million, offset by an increase in interest and other finance costs of $1.10 million, an increase in depreciation and amortization of $0.15 million and by an increase in the foreign exchange loss of $0.06 million.

Research and development expenses for the six-month period ended August 31, 2019 amounted to $1.97 million compared to $2.13 million for the six-month period ended August 31, 2018, representing a decrease of $0.16 million, or representing a decrease of $0.13 million excluding stock-based compensation. The decrease of $0.13 million was primarily attributable to lower legal and professional fees of $0.29 million offset by higher employee compensation costs of $0.17 million. The decrease in non-cash stock-based compensation expense of $0.03 million is mainly attributable to the timing of stock awards provided to certain employees.

General and administrative expenses for the ~~three month~~six-month period ended August 31, 2019 amounted to $3.62 million compared to $4.75 million for the six-month period ended August 31, 2018, representing a decrease of $1.13 million, or a decrease of $0.70 million excluding stock-based compensation. The decrease of $0.70 million was ~~primarily~~mainly attributable to lower legal and professional fees of $1.15 million, offset by higher employee compensation costs of $0.34 million and higher commercial insurance expenses totaling $0.09 million. Stock-based compensation expense for the six-month period ended August 31, 2019 amounted to $1.10 million compared to $1.53 million for the six-month period ended August 31, 2018, representing a decrease of $0.43 million, which was mainly attributable lower stock awards provided to executives.

Depreciation and amortization for the six-month period ended August 31, 2019 totaled $0.37 million compared to $0.21 million for the six-month period ended August 31, 2018, representing an increase of $0.16 million. This increase is mainly attributable to the addition of fixed assets at the Company’s pilot plant and corporate offices.

Interest and other finance costs for the six-month period ended August 31, 2019 totaled $1.13 million compared to $0.03 million the six-month period ended August 31, 2018, representing an increase of $1.10 million. The increase is mainly attributable to an increase in ~~non-cash stock compensation~~accretion expense of ~~$1.5~~$1.04 million, an increase in ~~legal~~interest expense of $0.22 million and ~~accounting fees of $0.4 million,~~by an increase in ~~staff~~amortization of deferred financing costs of ~~$0.3~~$0.07 million, offset by a gain on conversion of the November 2018 Notes of $0.23 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Loop is a development stage company with no revenues, and ~~NASDAQ initial filing fees of $0.1 million. Of~~our ongoing operations are being financed by raising new equity and debt capital. To date, we have been successful in raising capital to finance our ongoing operations, reflecting the ~~$1.5 million stock compensation increase, $0.9 million was recorded in the quarter ended November 30, 2017 as the stock options were fully vested on grant date~~potential for commercializing our branded resin and the ~~remaining amount, $0.6 million, represents amounts recorded over~~progress made to date in implementing our business plans.

As at August 31, 2019, the ~~requisite vesting service period.~~

The increase in general and administrative expenses for the nine month period ended November 30, 2017 was primarily due to an increase in non-cash time-based stock compensation of $2.1 million which includes $0.5 million stock compensation for the former CFO, an increase in legal and accounting fees of $0.6 million, an increase in staff costs of $0.6 million, and NASDAQ initial filing fees of $0.2 million. Of the $2.1 million stock compensation increase, $0.9 million was recorded in the nine month period ended November 30, 2017 as the stock options were fully vested on grant date and the remaining amount, $1.2 million, represents amounts recorded over the requisite vesting service period.

~~Liquidity and Capital Resources~~

As reflected in the accompanying unaudited interim condensed consolidated financial statements, we have no recurring source of revenue and during the nine months ended November 30, 2017, we incurred a net loss of $10.4 million and used cash in operations of $4.2 million. As of November 30, 2017, weCompany had cash on hand of ~~$3.4~~$37.9 million. On May 29, 2019, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with Northern Private Capital Fund I Limited Partnership (“Northern Capital”) pursuant to which the Company has issued to Northern Capital in a registered direct offering (“Offering”) an aggregate of 4,093,567 shares of the Company’s common stock at a per share purchase price of $8.55 per share, for aggregate net proceeds of approximately $34.6 million, after deducting offering expenses payable by the Company of approximately $400,000. Concurrently with the Offering and ~~stockholders’ equity~~pursuant to the Purchase Agreement, the Company has issued to Northern Capital options to purchase up to an additional 4,093,567 shares of ~~$4.3~~the Company’s common stock at an exercise price of $11.00 per share, which will vest on December 15, 2019, and are exercisable for three years following the closing date of the Offering and which would result in further total net proceeds of approximately $45 million.

The proceeds from the Offering will be used to finance the start-up of its joint venture commercial operations, which is estimated to be between $15,000,000 and $20,000,000, and further fund the development of its technology and new technologies and its ongoing pre-revenue operations.

On February 27, 2019, the Company entered into a Securities Purchase Agreement with a single institutional investor, pursuant to which the Company agreed to issue and sell to the Purchaser, in a registered direct offering (“Offering”), an aggregate of 600,000 shares (“Shares”) of the Company’s common stock at a per share purchase price of $8.55 per share, for aggregate net proceeds of approximately $4.2 million, after deducting placement agent fees and estimated offering expenses payable by the Company of approximately $0.9 million. The Offering closed on March 1, 2019. The Company intends to use the net proceeds from the Offering for general corporate purposes and working capital.

As at August 31, 2019, we have a long-term debt obligation to a Canadian bank in connection with the purchase, in Fiscal 2018, of the land and building where our pilot plant and corporate offices are located, at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4. On January ~~9, 2018, the Board approved the issuance of up to 1,100,000 common shares at an offering price of $12.00. At January 11,~~24, 2018, the Company ~~had sold 612,667 shares for gross aggregate proceeds~~obtained a CDN$1,400,000 20-year term instalment loan (the “Loan”), from a Canadian bank. The Loan bears interest at the bank’s Canadian prime rate plus 1.5%. By agreement, the Loan is repayable in monthly payments of ~~$7.4 million. As a result, management estimates that funds on hand will be sufficient to continue operations during the next twelve months.~~

~~Management may consider seeking additional funds in the future, primarily through the issuance of debt and equity securities for cash to advance the development of our projects to the point~~CDN $5,833 plus interest, until January 2021, at which ~~they will become commercially viable.~~

7
~~Table of Contents~~

~~No assurance can be given that any future financing will be available or, if available, that~~time it will be subject be renewal. It includes an option allowing for the prepayment of the Loan without penalty.

Flow of Funds

Summary of Cash Flows

A summary of cash flows for the six-month period ended August 31, 2019 and 2018 was as follows:

	Six Months Ended August 31
	2019	2018
Net cash used in operating activities	$(5,235,429)	$(3,908,623)
Net cash used in investing activities	(1,785,198)	(1,104,970)
Net cash provided from (used in) financing activities	39,141,055	(26,808)
Effect of exchange rate changes on cash and cash equivalents	(22,778)	(191,846)
Net increase (decrease) in cash and cash equivalents	$32,097,650	$(5,232,247)

Net Cash Used in Operating Activities

During the six months ended August 31, 2019, we used $5.2 million in operations compared to $3.9 million during the six months ended August 31, 2018. The Company continued to invest in research and development on ~~terms that are satisfactory~~its existing technologies and new technologies, particularly on the evolution of its GEN II technology as the Company moves to the ~~Company. Even if~~next phase of commercialization.

Net Cash Used in Investing Activities

During the six months ended August 31, 2019, the Company ~~could obtain additional financing, it may contain undue restrictions on our operations,~~made investments of $1.2 million in property, plant and equipment as compared to $1.0 million for the six months ended August 31, 2018, primarily in connection with the upgrade of its GEN II industrial pilot plant.

During the six months ended August 31, 2019, the Company made investments in intangible assets of $0.08 million as compared to $0.07 million for the six months ended August 31, 2018, particularly in its GEN II patent technology in the ~~case~~United States and around the world.

During the six months ended August 31, 2019, the Company also made its initial contribution of ~~debt financing or cause substantial dilution for our stock holders,~~$500,000 to Indorama Loop Technologies, LLC, the joint venture with Indorama Ventures Holdings LP, USA.

Net Cash Provided from (Used in) Financing Activities

During the six months ended August 31, 2019, we raised net proceeds of $39.2 million through the sale of common stock.

As at August 31, 2019, the Company was in ~~case of equity financing.~~

compliance with its financial covenants.

Off-Balance Sheet Arrangements

As ~~of November 30, 2017,~~at August 31, 2019, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As at August 31, 2019, we did not have any significant lease obligations to third parties.

~~ITEM~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK.~~

RISK

We are subject to risks associated with currency fluctuations and changes in foreign currency exchange rates as well as fluctuations in the supply and price of raw materials and commodity prices.

Foreign Currency Exchange Risk

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 mainly finance our operations through the sale and issuance of shares of common stock and debt of Loop Industries, Inc. in U.S. dollars while our operations are concentrated in our wholly-owned subsidiary, Loop Canada. Accordingly, we are exposed to foreign exchange risk as we maintain bank accounts in U.S. dollars and a significant portion of our operational costs (including payroll, site costs, costs of locally sourced supplies and income taxes) are denominated in Canadian dollars.

Significant fluctuations in the U.S. dollar to the Canadian dollar exchange rates could materially affect our result of operations, cash position and funding requirements. To the extent that fluctuations in currency exchange rates cause our results of operations to differ materially from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected.

From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. As part of our risk management program, we may enter into foreign exchange forward contracts to lock in the exchange rates for future foreign currency transactions, which is intended to reduce the variability of our operating costs and future cash flows denominated in currencies that differs from our functional currencies. 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. Nonetheless, these instruments involve costs and have risks of their own in the form of transaction costs, credit requirements and counterparty risk. If our hedging program is not successful, or if we change our hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates. Any hedging technique we implement may fail to be effective. If our hedging activities are not effective, changes in currency exchange rates may have a ~~“smaller reporting company,” as defined in Rule 12b-2~~more significant impact on the trading price of our common stock.

Commodity Price Risk

The plastics manufacturing industry is extremely price competitive because of the ~~Exchange Act,~~commodity like nature of PET resin and its correlation to the price of crude oil. The demand for recycled PET has fluctuated with the price of crude oil. If crude oil prices decline, the cost to manufacture recycled PET may become comparatively higher than the cost to manufacture virgin PET. Our ability to penetrate the market will depend in part on the cost of manufacturing virgin PET and if we do not successfully distinguish our product from those of virgin PET manufacturers, our entry into the market and our ability to secure customer contracts can be adversely affected.

Raw Material Price Risk

We purchase raw materials and packaging supplies from several sources. While all such materials are ~~not required~~available from independent suppliers, raw materials are subject to ~~provide~~fluctuations in price and availability attributable to a number of factors, including general economic conditions, commodity price fluctuations, the ~~information called~~demand by other industries for the same raw materials and the availability of complementary and substitute materials. 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 ~~this Item.~~

the price and availability, the yield loss of lower quality raw materials, and the capabilities of the producer’s production facility. Additionally, the high cost of transportation could favor suppliers located in close proximity to our factories. If the quality of these raw materials is lower, the quality of our product may suffer. Economic and financial factors could impact our suppliers, thereby causing supply shortages. Increases in raw material costs could have a material adverse effect on our business, financial condition or results of operations. Our hedging procedures may be insufficient, and our results could be materially impacted if costs of materials increase.

ITEM 4. CONTROLS AND ~~PROCEDURES.~~

PROCEDURES

Management’s Evaluation of our Disclosure Controls and Procedures

~~Under the supervision~~

Evaluation of Disclosure Controls and with the participation of our management, including our Chief Executive Officer and the Chief Financial Officer, we are responsible for conducting an evaluation of the effectiveness of the design and operation of our internal controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the fiscal quarter covered by this report. Procedures

Disclosure controls and procedures ~~means~~are designed to provide reasonable assurance that ~~the material~~ information required to be ~~included~~disclosed by us in ~~our SEC~~the reports that we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in ~~SEC~~the U.S. Securities and Exchange Commission’s rules and ~~forms relating~~forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our ~~company,~~management, including ~~any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation,~~ our principal executive ~~officer~~ and principal financial ~~officer concluded~~officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

As of the ~~evaluation date that our disclosure controls and procedures were not effective as of November 30, 2017.~~

~~Changes in Internal Control over Financial Reporting~~

~~In light~~end of the ~~restatement to our fiscal 2017 consolidated financial statements, our~~period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, ~~have re-evaluated~~of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of August 31, 2019.

Changes in Internal Control over Financial Reporting

There were no other changes in our internal control over financial reporting ~~and its disclosure controls and procedures and concluded that they were not effective at February 28, 2017. Furthermore,~~during the ~~CEO and CFO have determined that at May 31, 2017,~~quarter ended August 31, ~~2017 and November 30, 2017,~~2019 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting were not effective. The material weakness that existed on those dates are described in Part II, Item 9A – Controls and Procedures in our most recent Amended Annual Report on Form 10-K/A, filed on January 12, 2018. We are committed to remediating our material weaknesses as promptly as possible. Implementation of our remediation plans has commenced and is being overseen by the Audit Committee.

~~We have taken steps to enhance our internal control over financial reporting and plan to take additional steps to remediate the material weaknesses. Specifically:~~

· ~~We appointed additional independent members with public company board experience to our board of directors,~~
· ~~We established an audit committee~~
· ~~We engaged a third-party Sarbanes-Oxley consultant to assist in addressing controls and process gaps~~
· ~~We added staff to our finance team, and outsourced to third party the assessment of certain complex transactions under US GAAP~~
· ~~We developed and communicated a series of corporate policies, including the Whistle-Blower Policy, Insider Trading Policy, Global Anti-Corruption Policy and Related Party Transaction policy~~
· ~~On October 8, 2017, we hired a General Counsel to the management team, and~~
· ~~On November 8, 2017, we hired a Chief Financial Officer with public company experience~~

~~We believe that the measures described above will strengthen our internal control over financial~~ reporting. ~~We expect that our efforts, including design, implementation and testing will continue throughout fiscal year 2018.~~

8
~~Table of Contents~~

~~PART~~PART II. OTHER INFORMATION

~~ITEM~~TEM 1. LEGAL ~~PROCEEDINGS.~~

PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. ~~As of November 30, 2017, no~~We are not presently a party to any legal proceedings, government actions, administrative actions, investigations or claims that are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business, financial condition or operating results. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

~~We anticipate~~

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

~~ITEM~~ITEM 1A. RISK ~~FACTORS.~~

FACTORS

We are subject to various risks and uncertainties in the course of our business. Risk factors relating to us are set forth under ~~"Risk Factors"~~“Risk Factors” in our Annual Report on Form 10-K, ~~for the year ended February 28, 2017,~~ filed on May ~~30, 2017, as amended by Amendment No. 1 thereto on Form 10-K/A, filed on January 12, 2018, and our Quarterly Report on Form 10-Q for~~3, 2019. No material changes to such risk factors have occurred during the ~~quarter~~six months ended August 31, ~~2017, filed on October 11, 2017, as amended by Amendment No.1 thereto on Form 10-Q/A filed on January 12, 2018, and in our other filings with the SEC.~~

2019.

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

None.

~~On September 7, 2017, we sold to accredited investors an aggregate of 18,128 shares of its common stock, par value $0.0001 per share (the "~~~~Shares~~~~") for an aggregate purchase price of approximately $0.2 million in a private placement offering (the "~~~~Private Placement~~~~").~~

~~The net proceeds of the Private Placement are expected to be used as general working capital of the Company.~~

For these unregistered sales, we relied on the private offering safe harbor provision of Rule 506 of Regulation D promulgated thereunder based on the following factors: (i) the number of offerees or purchasers, as applicable, (ii) the absence of general solicitation, (iii) representations obtained from the purchasers relative to their accreditation and/or sophistication and/or their relationship to the company (directors and officers), (iv) the provision of appropriate disclosure, and (v) the placement of restrictive legends on the certificates reflecting the securities coupled with investment representations obtained from the purchasers.

~~A copy of the form of Common Stock Subscription Agreement is attached as Exhibit 10.4 to this report and is incorporated herein by reference.~~

~~ITEM~~TEM 3. DEFAULTS UPON SENIOR ~~SECURITIES.~~SECURITIES

None.

~~None.~~

~~ITEM~~TEM 4. MINE SAFETY ~~DISCLOSURES.~~DISCLOSURES

Not applicable.

~~None.~~

~~ITEM~~TEM 5. OTHER ~~INFORMATION.~~INFORMATION

None.

~~None.~~

9
~~Table of Contents~~

~~ITEM~~TEM 6.~~EXHIBITS.~~

EXHIBITS

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

Exhibit Index

Incorporated by Reference
Number

Description

Form

File No.

Filing Date

Exhibit No.
3.1

Articles of Incorporation

10-K

000-54768

May 30, 2017

3.1
3.2

By-laws

S-1

333-171091

Dec 10, 2010

3.2
4.1

Form of 2015A Warrant

Filed herewith

4.2

Form of 2015B Warrant

Filed herewith

4.3

Form of 2017 Warrant

Filed herewith

10.1

Employment Agreement, dated March 17, 2017, by and between D. Jennifer Rhee and Loop Industries, Inc.

10-Q

000-54768

July 14, 2017

10.2
10.2

Separation Agreement, dated October 25, 2017, by and between D. Jennifer Rhee and Loop Industries, Inc.

8-K

000-54768

October 25, 2017

10.1
10.3

Employment Agreement, dated October 20, 2017 by and between Frank Zitella and Loop Canada, Inc.

Filed herewith

10.4

Form of Common Stock Subscription Agreement

Filed herewith

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Furnished herewith

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Furnished herewith

101.INS

XBRL Instance Document

Filed herewith

101.SCH

XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

10
~~Table of Contents~~

Incorporated by Reference
Number Description Form File No. Filing Date Exhibit No.
4.1
Amendment to Securities Purchase Agreement dated June 14, 2019 between Loop Industries, Inc. and the Purchaser identified therein.
8-K 001-38301 14-Jun-19 10.1
24.1 Power of Attorney (contained on signature page to the previously filed Annual Report on Form 10-K) 10-K 000-54768 08-May-19 24.1
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith
32.1
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith
32.2
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith
101.INS XBRL Instance Document Filed herewith
101.SCH XBRL Taxonomy Extension Schema Document Filed herewith
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith
101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed herewith
101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed herewith
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, ~~the Registrant has duly caused~~as amended, this report ~~to be~~has been signed ~~on its behalf~~below by the ~~undersigned, thereunto duly authorized.~~

following persons on behalf of the registrant in the capacities and on the dates indicated.

Date: October 8, 2019	~~LOOP INDUSTRIES, INC.~~
By:
~~Date: January 12, 2018~~	~~By:~~	/s/ Daniel Solomita
	Name:	Daniel Solomita
	Title:	President and Chief Executive Officer, ~~(principal executive officer)~~

~~Date: January 12, 2018~~ and Director (Principal Executive Officer)	~~By:~~	~~/s/ Frank Zitella~~
	~~Name:~~	~~Frank Zitella~~
Date: October 8, 2019	~~Title:~~ By:	/s/ Nelson Gentiletti
	Name:	Nelson Gentiletti
	Title:	Chief Financial Officer ~~(principal accounting~~ ~~officer~~ and ~~principal financial officer)~~ Treasurer (Principal Accounting Officer and Principal Financial Officer)

~~Index~~ Item 2.			~~PAGE~~

~~PART I.~~	~~FINANCIAL INFORMATION~~
~~Item 1~~	~~Financial Statements (unaudited)~~		~~F-1~~
~~Item 2~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations		5	20
Item 3 3.	Quantitative and Qualitative Disclosures About Market Risk		7	25
Item 4 4.	Controls and Procedures		8	26

PART II. Other Information	~~OTHER INFORMATION~~
Item 1 1.	Legal Proceedings		9	27
Item 1A 1A.	Risk Factors		9	27
Item 2 2.	Unregistered Sales of Equity Securities and Use of Proceeds		9	27
Item 3 3.	Defaults Upon Senior Securities		9	27
Item 4 4.	Mine Safety Disclosures		9	27
Item 5 5.	Other Information		9	27
Item 6 6.	Exhibits		10	27
	Signatures	29


2Condensed consolidated balance sheets as at August 31, 2019 and February 28, 2019 (Unaudited)		F-2

Condensed consolidated statements of operations and comprehensive loss for the three and six months ended August 31, 2019 and 2018 (Unaudited)		F-3

Condensed consolidated statement of changes in stockholders’ equity for the three and six months ended August 31, 2019 and 2018 (Unaudited)		F-4

Condensed consolidated statement of cash flows for the six months ended August 31, 2019 and 2018 (Unaudited)		F-6

Notes to the condensed consolidated financial statements (Unaudited)		F-7

	As at
	November 30,			February 28,
	2017			2017

Assets
Current Assets
Cash	$	3,400,973		$	916,487
Restricted cash		38,795			-
Valued added tax and other receivables		148,905			259,297
Prepayments		15,518			-
Total current assets		3,604,191			1,175,784

Property and Equipment, net of accumulated depreciation of $734,699 and $497,244, respectively		1,659,781			1,566,969

Intellectual Property, net of accumulated amortization of $184,734 and $137,050, respectively		260,316			308,000
Total assets	$	5,524,288		$	3,050,753

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities	$	1,162,216		$	161,536
Accrued officer compensation		-			360,000
Advance from majority stockholder		72,880			391,695
Total current liabilities		1,235,096			913,231

Commitments and Contingencies

Stockholders' Equity
Series A Preferred stock par value $0.0001; 25,000,000 shares authorized; one share issued and outstanding		-			-
Common stock par value $0.0001: 250,000,000 shares authorized; 32,807,137 and 31,451,973 shares issued and outstanding, respectively		3,281			3,146
Additional paid-in capital		21,275,564			8,723,390
Common stock issuable, 1,000,000 shares at November 30 and February 28, 2017		800,000			800,000
Accumulated deficit		(17,640,510	)		(7,237,803	)
Accumulated other comprehensive loss		(149,143	)		(151,211	)
Total stockholders' equity		4,289,192			2,137,522
Total liabilities and stockholders' equity	$	5,524,288		$	3,050,753

	Three months ended						Nine months ended
	November 30,						November 30,
	2017			2016			2017			2016

Revenue	$	-		$	-		$	-		$	-

Operating Expenses -
Research and development		3,894,454			368,403			5,341,763			1,217,600
General and administrative		2,720,078			277,951			4,691,294			1,034,007
Depreciation and amortization		98,755			102,244			281,016			290,396
Foreign exchange loss (gain)		(9,634	)		809			88,634			(2,880	)
Total operating expenses		6,703,653			749,407			10,402,707			2,539,123

Net Loss		(6,703,653	)		(749,407	)		(10,402,707	)		(2,539,123	)

Other comprehensive gain (loss) -
Foreign currency translation adjustment		155,354			(18,488	)		(2,068	)		(42,846	)
Comprehensive Loss	$	(6,548,299	)	$	(767,895	)	$	(10,404,775	)	$	(2,581,969	)

Loss per share
- Basic and Diluted	$	(0.20	)	$	(0.02	)	$	(0.32	)	$	(0.08	)

Weighted average common shares outstanding
- Basic and Diluted		32,793,181			31,390,807			32,183,343			31,001,702

																				Accumulated
	Common stock						Preferred stock													Other
	par value $0.0001						par value $0.0001				Additional			Common						Comprehensive			Total
	Number of						Number of				Paid-in			Stock			Accumulated			Income			Stockholders'
	Shares			Amount			shares		Amount		Capital			Issuable			Deficit			(Loss)			Equity
Balance, February 29, 2016		29,910,800		$	2,992			1	$	-	$	3,918,356		$	614,001		$	(3,123,802	)	$	5,931		$	1,417,478

Issuance of common shares for cash		1,275,340			128							3,825,888												3,826,016
Reclass. of common shares issuable to shares outstanding		204,667			20							613,981			(614,001	)								-
Fair value of Warrants issued for services												135,673												135,673
Cancellation of shares issued for services and as a settlement		(200,000	)		(20	)						20												-
Issuance of common shares upon exercise of warrants for cash		200,000			20							159,980												160,000
Issuance of shares for services		23,166			2							69,496												69,498
Issuance of shares upon cash-less exercise of warrants		38,000			4							(4	)											-
Fair value of issuable shares for services-officer															800,000									800,000
Foreign currency translation																					(157,142	)		(157,142	)
Net loss																		(4,114,001	)					(4,114,001	)

Balance, February 28, 2017		31,451,973			3,146			1		-		8,723,390			800,000			(7,237,803	)		(151,211	)		2,137,522

Issuance of common shares for cash		1,141,394			114							6,114,610												6,114,724
Fair value of warrants issued for services												5,235,253												5,235,253
Fair value of restricted stock units issued for services												88,664												88,664
Issuance of shares upon exercise of warrants for cash		193,770			19							1,162,997												1,163,016
Issuance of shares upon cash-less exercise of warrants		20,000			2							(2	)											-
Share issuance costs												(49,348	)											(49,348	)
Foreign currency translation																					2,068			2,068
Net loss																		(10,402,707	)					(10,402,707	)

Balance, November 30, 2017		32,807,137		$	3,281			1	$	-	$	21,275,564		$	800,000		$	(17,640,510	)	$	(149,143	)	$	4,289,192

	Nine months ended November 30,
	2017			2016
Cash Flows from Operating Activities
Net loss	$	(10,402,707	)	$	(2,539,123	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		233,332			242,712
Amortization expense		47,684			47,684
Fair value of warrants issued for services		5,235,253			106,053
Fair value of restricted stock units issued for services		88,664			-
Changes in operating assets and liabilities:
Valued added tax and other receivables		(2,831	)		89,427
Prepayments		(15,518	)		36,129
Accounts payable and accrued liabilities		1,000,680			(196,813	)
Accrued officer compensation		(360,000	)		135,000
Net Cash Used in Operating Activities		(4,175,443	)		(2,078,931	)

Cash Flows from Investing Activities
Purchases of property and equipment		(273,550	)		(412,921	)
Net Cash Used in Investing Activities		(273,550	)		(412,921	)

Cash Flows from Financing Activities
Proceeds from sales of common shares and exercise of warrants, net of share issuance costs (note 7)		7,228,393			3,826,016
Repayment of advances from majority stockholder		(205,592	)		(132,044	)
Net Cash Provided by Financing Activities		7,022,801			3,693,972

Effect of exchange rate changes		(50,527	)		(26,307	)
Net Change in Cash and Restricted Cash		2,523,281			1,175,813

Cash and Restricted Cash - beginning of period		916,487			422,586

Cash and Restricted Cash - end of period	$	3,439,768			1,598,399
Comprises of:
Cash		3,400,973			1,598,399
Restricted cash		38,795			-
		3,439,768			1,598,399

Supplemental disclosure of cash flow information:
Income tax paid	$	-		$	-

Non Cash Financing and Investing Activities
Reclass of value added tax and other receivables to advances from majority stockholder	$	113,223		$	-

	Estimated
	Useful	November 30,			February 28,
	Life	2017			2017
	(years)

Machinery and Equipment	5 - 7	$	1,845,256		$	1,590,187
Office equipment and furniture	5 - 8		166,877			131,607
Leasehold improvements	3		382,347			342,419

			2,394,480			2,064,213
Less: accumulated depreciation			(734,699	)		(497,244	)
Property and equipment, net		$	1,659,781		$	1,566,969

	Number of Warrant Shares			Exercise Price Range Per Share	Weighted Average Exercise Price
Balance, February 28, 2017		1,647,670		$0.80 to $6.00	$	2.91

Granted		2,310,000		$5.25 to $13.89	$	9.23

Forfeited		(515,418	)	$0.80 to $5.25	$	4.95

Exercised		(213,770	)	$0.80 to $6.00	$	5.52

Expired		(543,900	)	$5.25 to $6.00	$	5.86

Balance, November 30, 2017		2,684,582		$0.80 to $13.89	$	7.16

Earned and exercisable, November 30, 2017		966,250		$0.80 to $13.49	$	4.90

Unvested, November 30, 2017		1,718,332		$0.80 to $13.89	$	8.42

		Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price

$	0.80		912,082		6.21	$	0.80		594,582		6.32	$	0.80
$	3.00		12,500		0.50	$	3.00		12,500		0.50	$	3.00
$	5.25		530,000		9.74	$	5.25		36,250		9.74	$	5.25
$	12.00		700,000		9.79	$	12.00		216,668		9.79	$	12.00
$	13.49		250,000		9.88	$	13.49		106,250		9.88	$	13.49
$	13.89		280,000		9.94	$	13.89		-		-	$	-
Total			2,684,582						966,250

	Three months ended						Change
	November 30,						2017 vs 2016
	2017			2016			$			%

Revenue	$	-		$	-		$	-			-

Operating Expenses -
Research and development		3,894,454			368,403			3,526,051			957	%
General and administrative		2,720,078			277,951			2,442,127			879	%
Depreciation and amortization		98,755			102,244			(3,490	)		-3	%
Foreign exchange loss (gain)		(9,634	)		809			(10,443	)		-1291	%
Total operating expenses		6,703,653			749,407			5,954,246			795	%

Net Loss, before the undernoted	$	(6,703,653	)	$	(749,407	)	$	(5,954,246	)		795	%

Adjusted for Share Based Compensation:
Non-recurring	$	3,230,910		$	-		$	3,230,910			-
Ongoing		1,172,635			40,149			1,132,486			2821	%
Total Share Based Compensation	$	4,403,545		$	40,149		$	4,363,396			10868	%

Adjusted Net Loss	$	(2,300,108	)	$	(709,258	)	$	(1,590,850	)		224	%

Adjusted Operating Expenses	$	2,300,108		$	709,258		$	1,590,850			224	%

	·	~~We appointed additional independent members with public company board experience to our board of directors,~~

	·	~~We established an audit committee~~

	·	~~We engaged a third-party Sarbanes-Oxley consultant to assist in addressing controls and process gaps~~

	·	~~We added staff to our finance team, and outsourced to third party the assessment of certain complex transactions under US GAAP~~

	·	~~We developed and communicated a series of corporate policies, including the Whistle-Blower Policy, Insider Trading Policy, Global Anti-Corruption Policy and Related Party Transaction policy~~

	·	~~On October 8, 2017, we hired a General Counsel to the management team, and~~

	·	~~On November 8, 2017, we hired a Chief Financial Officer with public company experience~~

		Incorporated by Reference
Number	Description	Form	File No.	Filing Date	Exhibit No.
3.1	Articles of Incorporation	10-K	000-54768	May 30, 2017	3.1
3.2	By-laws	S-1	333-171091	Dec 10, 2010	3.2
4.1	Form of 2015A Warrant			Filed herewith
4.2	Form of 2015B Warrant			Filed herewith
4.3	Form of 2017 Warrant			Filed herewith
10.1	Employment Agreement, dated March 17, 2017, by and between D. Jennifer Rhee and Loop Industries, Inc.	10-Q	000-54768	July 14, 2017	10.2
10.2	Separation Agreement, dated October 25, 2017, by and between D. Jennifer Rhee and Loop Industries, Inc.	8-K	000-54768	October 25, 2017	10.1
10.3	Employment Agreement, dated October 20, 2017 by and between Frank Zitella and Loop Canada, Inc.			Filed herewith
10.4	Form of Common Stock Subscription Agreement			Filed herewith
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			Filed herewith
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			Filed herewith
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			Furnished herewith
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			Furnished herewith
101.INS	XBRL Instance Document			Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document			Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document			Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document			Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document			Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document			Filed herewith

		Incorporated by Reference
Number	Description	Form	File No.	Filing Date	Exhibit No.
4.1	Amendment to Securities Purchase Agreement dated June 14, 2019 between Loop Industries, Inc. and the Purchaser identified therein.	8-K	001-38301	14-Jun-19	10.1
24.1	Power of Attorney (contained on signature page to the previously filed Annual Report on Form 10-K)	10-K	000-54768	08-May-19	24.1
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith
101.INS	XBRL Instance Document		Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document		Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document		Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document		Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document		Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document		Filed herewith