| 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 at the date of the financial statements and the reported amounts of expenses during
the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for depreciable
lives of property, plant and equipment, intangible assets, analysis of impairments of long-lived assets and intangible assets,
accruals for potential liabilities and assumptions made in calculating the fair value of stock-based compensation and other equity
instruments. The uncertainties around the COVID-19 pandemic
required the use of estimates and assumptions that resulted in no significant impact to our unaudited condensed consolidated financial
statements as of and for the three-month period ended May 31, 2020. 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 Loop Industries, Inc. periodically issues stock
options, warrants and restricted stock units to employees and non-employees in non-capital raising transactions for services and
financing expenses. 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 and warrants
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 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 expenses recorded during the three-month periods ended May 31, 2020 and 2019
amounted to $1,480,588 and $997,861, respectively, 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 For the three-month periods ended May 31, 2020
and 2019, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an
antidilutive effect. As at May 31, 2020, the potentially dilutive securities consisted of 1,590,470 outstanding stock options (May
31, 2019 – 1,691,973), 4,302,527 outstanding restricted stock units (May 31, 2019 – 403,767), 5,084,331 outstanding
warrants (May 31, 2019 – 962,132) and nil outstanding issuable common stock (May 31, 2019 – 1,000,000). Recently adopted accounting pronouncements In August 2018, the FASB issued ASU 2018-15,
“Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract,”
which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract
with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements
that include an internal-use software license). This update is effective for fiscal years beginning after December 15, 2019, including
interim periods within those fiscal years. The adoption of the standard had no impact on the consolidated financial statements
of the Company. In February 2018, the FASB issued ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 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, 2020. 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 Recently issued accounting pronouncements
not yet adopted In December 2019, the FASB issued ASU 2019-12,
“Simplifying the Accounting for Income Taxes,” which removes specific exceptions to the general principles in ASC 740,
“Income Taxes,” and clarifies certain aspects of the existing guidance. This update is effective for fiscal years beginning
after December 15, 2020, including interim periods within those fiscal years, with early adoption being permitted as of the beginning
of an interim or annual reporting period. All amendments to this ASU must be adopted in the same period on a prospective basis,
with certain exceptions. We are still evaluating the impact of this accounting guidance on our results of operations and financial
position. In June 2016, the FASB issued ASU 2016-13, “Financial
Instruments—Credit Losses”. This ASU added a new impairment model (known as the current expected credit loss (“CECL”)
model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance
for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial
guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment
losses and entities will need to measure expected credit losses on assets that have a low risk of loss. This update is effective
for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies.
We are still evaluating the impact of this accounting guidance on our results of operations and financial position. |
