Loop Industries, Inc. (LOOP, NASDAQ)
Industry: Basic Materials / Specialty Chemicals
Annual report, fiscal year 2020


# SECURITIES & EXCHANGE COMMISSION EDGAR FILING

Loop Industries, Inc.

Form: 10-K

Date Filed: 2020-05-05

Corporate Issuer CIK: 1504678



# United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 29, 2020

or

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

For the transition period from ___ to ___

Commission File No. 000-54768



Loop Industries, Inc.

(Exact name of Registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

27-2094706

(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:

<table><tr><td>Title of each class</td><td>Trading Symbol(s)</td><td>Name of each exchange on which registered</td></tr><tr><td>Common Stock</td><td>LOOP</td><td>Nasdaq Global Market</td></tr></table>

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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

Large accelerated filer

Non-accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

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

Indicate by check mark if whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes □ No ☒

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

As at August 31, 2019, the last business day of the Registrant's most recently completed second fiscal quarter, the aggregate market value of the voting



common stock held by non-affiliates of the Registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) was approximately $230,397,389. As at April 30, 2020, there were 39,916,905 shares of the Registrant's common stock, par value $0.0001 per share, outstanding.

## Documents incorporated by reference:

Items 10, 11, 12 (as to security ownership of certain beneficial owners and management), 13 and 14 of Part III shall be incorporated by reference information from the registrant's proxy statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the registrant's 2020 Annual Meeting of Stockholders.



## LOOP INDUSTRIES, INC.

## TABLE OF CONTENTS

PART I

Item 1. Business 4
Item 1A. Risk Factors 9
Item 2. Properties 16
Item 3. Legal Proceedings 16
Item 4. Mine Safety Disclosures 16

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 17
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 29
Item 9A. Controls and Procedures 29
Item 9B. Other Information 30

PART III

Item 10. Directors, Executive Officers and Corporate Governance 31
Item 11. Executive Compensation 31
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 31
Item 13. Certain Relationships and Related Transactions, and Director Independence 31
Item 14. Principal Accounting Fees and Services 31

PART IV

Item 15. Exhibits and Financial Statement Schedules 32
Item 16. Form 10-K Summary 34
Signatures 35



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

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

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

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



## PART I

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

Depolymerization refers to the chemical process of breaking a polymer down into its monomer component(s), or smaller oligomers.

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

## ITEM 1. BUSINESS

## Overview

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

## Industry Background

We believe there is an increasing demand for action to address the global plastic crisis, which has been characterized by facts provided by leading academic and not-for-profit organizations. For example, the University of Georgia reports eight million metric tons of plastic waste flows into our shared oceans every year, and, according to The New Plastics Economy, by 2050 more plastic waste is expected to be present in the ocean than fish (by mass). Couple this information with the global annual market demand for PET plastic and polyester fiber at nearly $130 billion, and the current growth projections from the 2018 IHS Polymer Market Report indicating this will exceed $160 billion by 2022, and the need for governments and consumer brands to take decisive action to stem this global plastic crisis becomes readily apparent.

In the last few years, there are numerous examples of governments in North America and Europe proposing laws and regulations mandating the use of minimum recycled content in packaging underlying the strength of this issue in the marketplace. Plastic pollution continues to be one of the most persistently covered environmental issues by media and local and global environmental non-governmental organizations.

Also, global consumer goods companies have made significant commitments to make the transition to a circular plastic economy, namely:

i. In January 2018, Danone's evian \( ^{®} \)  brand bottled spring water committed to a 100% recycled content package by 2025;

ii. In 2018, Coca-Cola committed to an average recycled content of 50% across its packaging by 2030;

iii. In October 2018, PepsiCo committed to use an average of 25% recycled plastic in its packaging by 2025; PepsiCo is also aiming to use 50% recycled plastic in its bottles across the European Union by 2030;

iv. In 2018, L'OccitANE en Provence committed to a 100% recycled content package by 2025; and

v. In March 2019, the L'Oréal Group, a global manufacturer and retailer of natural cosmetics, committed to using 50% recycled or bio-sourced plastic in their packaging by 2025.

We believe these trends indicate that the transformation from a linear to a circular plastic economy is inevitable and underway. This transition is leading to a substantial demand for sustainable products such as Loop™ PET resin and polyester fiber.



## Proprietary Technology and Intellectual Property

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

Our Generation I (“GEN I”) technology process yielded purified terephthalic acid (“PTA”) and monoethylene glycol (“MEG”), two common monomers of PET, through depolymerization. While the monomers were of excellent purity and strong yield, we continued to challenge ourselves to drive down costs and eliminate inputs. It was during this process that we realized we could simplify our process and increase yields at a lower cost, namely by eliminating water and chlorinated solvents from the depolymerization process and reducing the number of reagents from five to two, if we shifted from the production of PTA to the production of dimethyl terephthalate (“DMT”), another proven monomer of PET that is far simpler to purify. Since June 2018, when we transitioned to this Generation II (“GEN 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 Industries. We believe that the GEN II technology requires less energy and fewer resource inputs than conventional PET production processes. We also believe it is one of the most environmentally sustainable methods for producing virgin quality food-grade PET plastic in the world.

In connection with the continuing development of our GEN II technology, we continued to invest in our industrial pilot plant. We made capital investments in the pilot plant of $2,439,013 during the year ended February 29, 2020.

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

We have two patent families, referred to as GEN I technology and the GEN II technology, with claims relating to our technology for depolymerizing PET.

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

The GEN II technology portfolio has an issued U.S. patent and a pending U.S. application, all expected to expire, if granted, on or around September 2037. Internationally, we also have a PCT application, an allowed application in Bangladesh, and pending non-PCT country applications in Argentina, Bolivia, Bhutan, members of the Gulf Cooperation Council, Iraq, Pakistan, Taiwan, Uruguay, and Venezuela, all expected to expire on or around September 2038, if granted. An additional aspect of the GEN II technology is claimed in a U.S. application, a PCT application, and non-PCT country applications in Argentina, Bangladesh, Bolivia, members of the Gulf Cooperation Council, Pakistan, Taiwan, and Uruguay, all expected to expire on or around June 2039, if granted. Additionally, we have two pending U.S. provisional applications directed to further additional aspects of the GEN II technology. Any patents that would ultimately grant from these provisional applications would be expected to expire no earlier than 2040, if granted.

## 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. Additionally, due to the impact of the COVID-19 pandemic, we may experience delays in obtaining such permits or approvals. Failure to obtain or comply with the conditions of permits and approvals or to have the necessary approvals in place may adversely affect our operations and may subject us to penalties.

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 resin has a distinct advantage in these markets. 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 resin will be a significant part of our strategy going forward.

## Supply Agreements with Global Consumer Brands

Consumer brands are seeking a solution to their plastic challenge and they are taking bold action. In the past years we have seen major brands make significant commitments to close the loop on their plastic packaging in two ways, by transitioning their packaging to recyclable materials and by incorporating more recycled content into their packaging. We believe Loop \( ^{™} \)  PET resin and polyester fiber provides the ideal solution for these brands because Loop \( ^{™} \)  PET 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.

Loop Industries 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 be able to sell its Loop \( ^{™} \)  branded PET at a premium price relative to virgin and mechanically recycled PET.

In the last two years, we have made a significant number of announcements with some of the world's leading brands to be supplied from our planned first commercial facility from our joint venture with Indorama Ventures Holdings LP ("Indorama") in Spartanburg, South Carolina, including:

● Multi-year supply agreement with Danone SA, one of the world’s leading global food and beverage companies. Danone will purchase 100% sustainable and upcycled Loop™ branded PET for use in brands across its portfolio including evian®, Danone’s iconic natural spring water;

● Multi-year supply agreement with PepsiCo, one of the largest purchasers of recycled PET plastic, enabling them to purchase production capacity and incorporate Loop™ PET resin into its product packaging;

● Multi-year supply framework with the Coca-Cola system’s Cross Enterprise Procurement Group to supply 100% recycled and sustainable Loop™ PET resin to authorized Coca-Cola bottlers who enter into supply agreements with us;

● Multi-year supply agreement with L'OCCITANE en Provence to supply 100% recycled and sustainable Loop™ PET resin and incorporate Loop™ PET resin into its product packaging; and

● Multi-year supply agreement with L'Oréal Group, the global leader in the beauty industry, enabling them to purchase production capacity and incorporate Loop™ PET resin into its product packaging.

## Turning Waste into Feedstock

To us, waste PET plastic and polyester fiber is feedstock, the materials introduced into our GEN II depolymerization technology 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 advantage of Loop \( ^{™} \)  PET over mechanically recycled PET, our ability to use many materials that mechanical recyclers cannot 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 are identifying the availability of feedstock to ensure each planned facility can operate continuously. We have identified the sources required for our first joint venture facility with Indorama and are now focusing on signing supply agreements to secure this feedstock for the long term.

The team is also studying certain markets in the United States, Canada, European Union and Asia to help us evaluate the size and location of our next facilities. The approach includes a fulsome inventory of PET materials introduced into a region, the materials collected (or recycled) in the region and the 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 landfills, rivers, oceans and natural areas by providing a new outlet for what was formerly considered waste.

## Commercialization Progress

During the year ended February 29, 2020, we continued executing our corporate strategy where Loop Industries focused on developing two distinct business models for the commercialization of Loop \( ^{™} \)  PET resin and polyester fiber to customers: 1) from our joint venture with Indorama, and 2) from our Infinite Loop \( ^{™} \)  greenfield facilities. We continue to develop the engineering of the Infinite Loop \( ^{™} \)  platform and we have increased our focus on the development of Infinite Loop \( ^{™} \)  projects in Europe and in North America.

In September 2018, in connection with one of our business models, we announced a joint venture with Indorama to retrofit their existing PET manufacturing facilities. The joint venture was formed with the objective to manufacture and commercialize sustainable Loop \( ^{™} \)  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 tons per year facility in Spartanburg, South Carolina, in the southeastern United States.

Following the decision of the joint venture with Indorama to double the capacity of the planned Spartanburg plant due to customer demand to 40,000 metric tons per year as disclosed in our 10-Q for the period ended August 31, 2019, we identified a number of enhancements to the plant design to improve the operability and optimize the total construction cost of the plant. We announced that the commissioning of the plant is expected to take place in the third quarter of calendar 2021. All parties are working diligently towards achieving this timetable although we are monitoring the impact of COVID-19 on the project. as well as the operations of our partners. The commissioning date may be impacted by the COVID-19 pandemic.

We have currently contracted for the sale of the initial 20,700 metric tons expected output of the Spartanburg facility and we continue discussions to contract the additional volume up to its planned increased capacity of 40,000 metric tons.

To drive our Infinite Loop \( ^{™} \)  business model, which is a key pillar of our commercialization blueprint, we intend to partner with PET polymerization technology providers and EPC companies (Engineering, Procurement, Construction). As Loop Industries' technology is agnostic to PET polymerization technology, we are also exploring relationships with other partners that provide PET polymerization technology to help us commercialize our Infinite Loop \( ^{™} \)  solution—a fully integrated and reimagined manufacturing facility for sustainable Loop \( ^{™} \)  PET resin and polyester fiber.

We believe the Infinite Loop \( ^{™} \)  solution will result in a highly scalable model to supply the global demand for 100% sustainable Loop \( ^{™} \)  PET 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 also changes where and how PET resin production occurs—no longer does PET resin production need to be bound to fossil fuels and fossil fuel infrastructure. Infinite Loop \( ^{™} \)  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 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 that once the first facilities are operational, it may create the possibility of licensing the technology to create a recurring revenue stream for us, while expanding the capacity of Loop \( ^{™} \)  PET resin and polyester fiber in the marketplace to meet the substantial demand from consumer goods companies.



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 brand value. Our research and development innovation hub in Terrebonne, Québec, 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. On March 9, 2020, we hired Mr. Stephen Champagne as Chief Technology Officer. Mr. Champagne has over 25 years of industrial experience having participated in all project phases from laboratory development through engineering, procurement, and construction, all the way to plant commissioning.

## Employees

As at April 30, 2020, we have 53 employees, all of which are located in Terrebonne, Québec, Canada. Due to the COVID-19 pandemic, we have furloughed 31 employees until government restrictions are lifted. We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We consider our relations with our employees to be good.

## Corporate History

We were originally incorporated in Nevada in March 2010 under the name Radikal Phones Inc., which was changed to First American Group Inc. in October 2010. On June 29, 2015, we completed a reverse acquisition of Loop Holdings, Inc. ("Loop Holdings") whereby we acquired all of Loop Holdings' issued and outstanding shares of common stock in a share exchange for approximately 78.1% of our capital stock at the time. The depolymerization business of Loop Holdings became our sole operating business. On June 22, 2015, our board of directors approved a change in the fiscal year end date from September 30 to the last day of February. On

July 21, 2015, we changed our name to Loop Industries, Inc.

Loop Holdings was originally incorporated in Nevada on October 23, 2014. The depolymerization technology underlying our business was originally developed by Hatem Essaddam who sold the technology and related intellectual property rights to Loop Holdings in October 2014, pursuant to an Intellectual Property Assignment Agreement dated October 27, 2014, by and among Hatem Essaddam, Loop Holdings, and Daniel Solomita. The intellectual property acquired pursuant to such Intellectual Property Agreement formed the basis for establishing the GEN I technology that was initially used by us. The GEN I technology has now been superseded by the development of our GEN II technology, which forms the basis for our commercialization into the future. We do not intend to commercialize our GEN I technology.

On May 24, 2016, 9449507 Canada Inc. was organized under the federal laws of Canada and on November 11, 2016 became a wholly-owned subsidiary of Loop Industries, Inc. following the transfer by Mr. Solomita of all of the issued and outstanding shares of common stock of 9449507 Canada Inc. to Loop Industries, Inc. On December 23, 2016,

9449507 Canada Inc. changed its legal name to Loop Canada Inc.

On December 31, 2016, 8198381 Canada Inc. entered into a purchase and sale agreement to transfer to Loop Canada Inc., all assets and liabilities it held pertaining to our business of depolymerizing plastics, including employees and operations.

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

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." From October 29, 2015 through April 7, 2017, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol "LLPP." From September 26, 2012 to October 28, 2015, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol "FAMG."

## Corporate Information

Our principal executive offices are located at 480 Fernand-Poitras Street, Terrebonne, Québec, Canada J6Y 1Y4. Our telephone number is (450) 951-8555. The information contained on, or that can be accessed through, our website is not a part of this Annual Report on Form 10-K.



## Available Information

Our website is www.loopindustries.com, and our investor relations web page can be found at https://www.loopindustries.com/en/investors/home. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the Securities and Exchange Commission, or the SEC. The SEC also maintains a website that contains our SEC filings. The address of the site is www.sec.gov.

## ITEM 1A. RISK FACTORS

You should carefully consider the risks described below together with all of the other information included in this Form 10-K before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occur, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

## RISKS RELATING TO OUR COMPANY

We have incurred net losses since inception. We expect to continue to incur losses for the foreseeable future and may never achieve or maintain profitability. We have never generated revenue and may never be profitable.

Since our inception in 2010, we have incurred net losses. Our net loss for the year ended February 29, 2020 was $14.51 million. We have five customer agreements signed, we have however earned no revenues to date. We have financed our operations primarily through sales of common stock and incurrence of debt and have devoted substantial efforts to research and development, as well as building our team. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. Although we believe that our business plan has significant profit potential, we may not attain profitable operations and management may not succeed in realizing our business objectives. Our ability to generate revenue depends on our ability to successfully complete the development of our products, obtain the regulatory approvals necessary to commercialize our products and attract additional customers. We expect to incur operating losses in future periods. These losses will occur as we do not have any revenues to offset the expenses associated with our business operations. We may not generate revenues from product sales for the next several years, if ever. If we are not able to develop our business as anticipated, we may not be able to generate revenues or achieve profitability. We cannot guarantee that we will ever be successful in generating revenues in the future. If we are unable to generate revenues, we will not be able to earn profits or continue operations.

## Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

Our business was started in October 2014 with the incorporation of Loop Holdings, Inc. and 8198381 Canada Inc., and the acquisition of intellectual property from Hatem Essaddam in October 2014. Our operations to date have been primarily limited to organizing and staffing our company, business planning, raising capital and developing our technology. We have not yet demonstrated the ability to manufacture a commercial-scale product or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history. In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research focus to a company that is also capable of supporting commercial activities. We may not be successful in such a transition.

There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will almost certainly fail.

## We may not be able to execute our business plan or stay in business without additional funding.

Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through the issuance of debt and/or equity in order to establish profitable operations, and such financing may not be forthcoming. If we are unable to attract investors to invest in our business, we may not be able to acquire additional financing through debt or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. Our failure to secure additional financing on favorable terms when it becomes required would have an adverse effect on our ability to remain in business.



The global COVID-19 pandemic has adversely affected, and may in the future adversely affect, our business, results of operations and financial condition.

In December 2019, COVID-19 began to impact the population of Wuhan, China. The continued spread of COVID-19 globally could result in a widespread health crisis that could adversely affect the global economy and financial markets. In light of the uncertain and rapidly evolving situation relating to COVID-19, we have taken precautionary measures intended to minimize the risk of COVID-19 to our employees, our customers, and the communities in which we operate, which could negatively impact our business. National, state and local authorities have recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures, although intended to protect the population, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. As of the date of this Annual Report on Form 10-K, the COVID-19 outbreak has already begun to cause disruption to our business, including our furloughing a number of employees. Potential financial impacts associated with the COVID-19 outbreak include, but are not limited to, delays in critical development and commercialization activities and potential incremental costs associated with mitigating the effects of the outbreak, furloughs of employees, disruption of supply chains, demand for our product, shipping of raw materials, restrictions on manufacturing, the movement of employees, and a decline in value of assets held by us, including property and equipment. Specifically, the COVID-19 pandemic may have an impact on the operations and the strategies of our first commercial facility from our joint venture with Indorama in Spartanburg, South Carolina. Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, the COVID-19 outbreak is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to accurately forecast any effects on our results of operations for 2021 and beyond.

As a result of COVID-19 and the measures designed to contain the spread of the virus, we may not have the materials or capacity to continue our development efforts according to our schedule. Further, there may be logistics issues, including our ability and to quickly resume operations, if necessary, and transportation demands that may cause further delays. While the disruptions and restrictions on the ability to travel, quarantines, furloughs of employees, and reduced operation of our pilot plant, as well as general limitations on movement are expected to be temporary, the duration of the disruption, and related financial impact, cannot be estimated at this time. Should the distribution continue for an extended period of time, the impact on the development and commercialization of our technology could have a material adverse effect on our results of operations and cash flows.

The macro-economic environment in the United States and abroad has adversely affected, and may in the future adversely affect, our ability to raise capital, which may potentially impact our ability to continue our operations.

We have and, prior to commercialization, will continue to rely on raising funds from investors and/or other sources to support our research and development activities and our operations. Macro-economic conditions in the United States and abroad may result in a tightening of the credit markets and/or less capital available for small public companies, which may make it more difficult to raise capital. Specifically, the outbreak of COVID-19 has caused significant disruptions to the global financial markets, which could increase the cost of capital and adversely impact our ability to raise additional capital, which could negatively affect our liquidity in the future. If we are unable to raise funds as and when we need them, we may be forced to curtail our operations or even cease operating altogether. Therefore, unfavorable macroeconomic conditions, including as a result of COVID-19 and any resulting recession or slowed economic growth, could have a negative impact on us. It is not possible at this time to estimate the impact that COVID-19 could have on our business, as the impact will depend on future developments, which are highly uncertain.

Our technology may not be successful in developing commercial products.

We and our potential future collaborators may spend many years and dedicate significant financial and other resources developing our technology that may never be successfully commercialized. Our technology may never become successfully commercialized for any of the following reasons:

●We may not be able to secure sufficient funding to progress our technology through development and commercial validation;

●We or our future collaborators may be unable to obtain the requisite regulatory approvals for our technology;

●Competitors may launch competing or more effective technology;

●Our technology may not be commercially successful;

●Current and future collaborators may be unable to fully develop and commercialize products containing our technology or may decide, for whatever reason, not to commercialize such products; and

●We may be unable to secure adequate patent protection in the necessary jurisdictions.



If any of these things were to occur, it could have a material adverse effect on our business and our results of operations.

If we are unable to successfully scale our manufacturing processes, we may not meet customer demand.

To be successful, we will have to scale our manufacturing processes while maintaining high product quality and reliability. If we cannot maintain high product quality on a large scale, our business will be adversely affected. We may encounter difficulties in scaling up production, including problems with the supply of key components. Even if we are successful in developing our manufacturing capability, we do not know whether we will do so in time to satisfy the requirements of our customers. The current manufacturing facility is a pilot plant with limited production capacity used principally for research and development. In order to fully implement our business plan, we will need to scale the operations to a larger industrial commercial facility, develop strategic partnerships or find other means to produce greater volumes of finished product.

Decreases in our ability to develop or apply new technology and know-how may affect our competitiveness.

Our success depends partially on our ability to improve production processes and services. We must also introduce new products and services to meet changing customer needs. If we are unable to implement better production processes or to develop new products through research and development or licensing of new technology, we may not be able to remain competitive with other manufacturers. As a result, our business, financial condition or results of operations could be adversely affected.

Disruption at, damage to or destruction of our pilot plant or facilities could impede our ability to continue innovating and refining our technological process, which would harm our business, financial condition and operating results.

Our research and development activities are performed from a single location in Terrebonne, Québec. Our continued innovation activities rely on an uninterrupted and fully functioning pilot plant. Interruptions in operations at this location could result in our inability to provide the most efficient and effective technological solution to our customers. A number of factors could cause interruptions, including, but not limited to, equipment malfunctions or failures, technology malfunctions, work stoppages or slow-downs, damage to or destruction of the facility or regional power shortages. As our equipment ages, it will need to be replaced. Any disruption that impedes our ability to optimize our process in a timely manner could reduce our revenues and materially harm our business.

The plastics manufacturing industry is extremely price-competitive because of the commodity-like nature of PET resin and its correlation to the price of crude oil. If our cost to manufacture recycled PET is not competitive with virgin PET or if the price of oil reduces significantly, it may adversely impact our ability to penetrate the market or be profitable.

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.

We are vulnerable to fluctuations in the supply and price of raw materials.

We purchase raw materials and packaging supplies from several sources. While all such materials are available from independent suppliers, raw materials are subject to fluctuations in price and availability attributable to a number of factors, including general economic conditions, commodity price fluctuations, the 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 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. In light of the uncertain and evolving situation relating to the global COVID-19 pandemic, our access to raw materials, the quality and proximity of such materials may be disrupted. We currently cannot predict the impact that the global COVID-19 pandemic will have on our access to raw materials.



The loss of the services of Mr. Daniel Solomita, our President and Chief Executive Officer, and Chairman of the Board of Directors, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business.

The development of our business and the marketing of our prospective products will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers who are developing our business, and on our ability to identify and retain competent consultants and employees with the skills required to execute our business objectives. The loss of the services of Mr. Daniel Solomita or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our business which could adversely affect our financial results and impair our growth.

Our pilot plant must operate under policies, procedures, and controls for the operation of a chemical manufacturing facility as required under various federal, provincial and local regulations and codes. Failure to comply with such regulations and codes may lead to disruption of operations at the pilot plant and the development of our technology, and financial sanctions.

We are subject to health and safety as well as environmental, zoning and any other regulatory requirements to operate our pilot plant, and as our business evolves, we, directly or indirectly through our partners or other related parties, may be subject to additional government regulations. Any failure to comply with ongoing regulatory requirements, as well as discovery of previously unknown problems, may result in, among other things, costly regulatory inspections, fines or remediation plans. If regulatory issues arise, the value of our business and our operating results may be adversely affected.

Additionally, applicable regulations may change, and additional government regulations may be enacted that could impact our business. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not able to maintain regulatory compliance, are slow or unable to adopt new requirements or policies, or effect changes to existing requirements, our business may be adversely affected.

Our failure to protect our intellectual property and proprietary technology may significantly impair our competitive advantage.

Our success and ability to compete depends in large part upon protecting our proprietary technology. We rely on a combination of patent, trademark and trade secret protection, confidentiality, nondisclosure and nonuse agreements to protect our proprietary rights. The steps we have taken may not be sufficient to prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. The patent and trademark law and trade secret protection may not be adequate to deter third party infringement or misappropriation of our patents, trademarks and similar proprietary rights.

We may face costly intellectual property infringement claims, the result of which would decrease the amount of cash available to operate and complete our business plan.

We anticipate that, from time to time, we will receive communications from third parties asserting that we are infringing certain patents and other intellectual property rights of others or seeking indemnification against alleged infringement. If anticipated claims arise, we will evaluate their merits. Any claims of infringement brought forth by third parties could result in protracted and costly litigation, damages for infringement, and the necessity of obtaining a license relating to one or more of our products or current or future technologies, which may not be available on commercially reasonable terms or at all. Litigation, which could result in substantial costs to us and diversion of our resources, may be necessary to enforce our patents or other intellectual property rights or to defend us against claimed infringement of the rights of others. Any intellectual property litigation and the failure to obtain necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations.

We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could harm our business.

We rely on trade secrets to protect some of our technology and proprietary information, especially where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. Litigating a claim that a third party had illegally obtained and used our trade secrets would be expensive and time consuming, and the outcome would be unpredictable. Moreover, if our competitors independently develop similar knowledge, methods and know-how, it will be difficult for us to enforce our rights and our business could be harmed.



If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the price of our common stock.

We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"). Section 404 requires us to include an internal control report with our Annual Report on Form 10-K. This report must include management's assessment of the effectiveness of our internal control over financial reporting as at the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified.

The process of designing and implementing internal control over financial reporting required to comply with Section 404 of the Sarbanes-Oxley Act is time consuming, costly and complicated. If during the evaluation and testing process, we identify one or more other material weaknesses in our internal control over financial reporting or determine that existing material weaknesses have not been remediated, our management will be unable to assert that our internal control over financial reporting is effective. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

The COVID-19 pandemic has not had a significant impact on the design and effectiveness of the Company’s internal controls over financial reporting.

We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations.

We operate mainly through two entities, Loop Industries, Inc., which is a Nevada corporation and has a U.S. dollar functional currency, and our wholly-owned subsidiary, Loop Canada Inc. ('Loop Canada'), which is based in Terrebonne, Québec, Canada and has a Canadian dollar functional currency. Our reporting currency is the U.S. dollar.

We mainly finance our operations through the sale and issuance of shares of common stock of Loop Industries, Inc. in U.S. dollars while our operations are concentrated in our wholly-owned subsidiary, Loop Canada. 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 U.S. dollar to 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 differ 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 more significant impact on the trading price of our common stock.

We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business.

We cannot predict with certainty the cost of defense, of prosecution or of the ultimate outcome of litigation and other proceedings filed by or against us, including penalties or other civil or criminal sanctions, or remedies or damage awards, and adverse results in any litigation and other proceedings may materially harm our business. Litigation and other proceedings may include, but are not limited to, actions relating to intellectual property, international trade, commercial arrangements, product liability, environmental, health and safety, joint venture agreements, labor and employment or other harms resulting from the actions of individuals or entities outside of our control. In the case of intellectual property litigation and proceedings, adverse outcomes could include the cancellation, invalidation or other loss of material intellectual property rights used in our business and injunctions prohibiting our use of business processes or technology that are subject to third-party patents or other third-party intellectual property rights.



## RISKS ASSOCIATED WITH OUR SECURITIES

Raising additional funds may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.

If we raise additional funds through equity offerings or offerings of equity-linked securities, including warrants or convertible debt securities, our existing stockholders may experience significant dilution, and the terms of such securities may include liquidation or other preferences that may adversely affect the rights of our stockholders. Debt financings, if available, may subject us to restrictive covenants that could limit our flexibility in conducting future business activities, including covenants limiting or restricting our ability to incur additional debt, dispose of assets or incur capital expenditures. We may also incur ongoing interest expense and be required to grant a security interest in our assets in connection with any debt issuance. If we raise additional funds through strategic partnerships or licensing agreements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms that are not favorable to us.

Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity. Our stock price may be volatile, and our stockholders could incur significant investment losses.

The trading price for our common stock will be affected by a number of factors, including:

● any change in the status of our Nasdaq listing;

● the need for near-term financing to continue operations;

●reported progress in our efforts to develop and commercialize our technology, relative to investor expectations;

●general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors;

●volatility in the financial and credit markets, including the recent volatility due, in part, to the current COVID-19 outbreak;

●future issuances and/or sales of our securities;

●announcements or the absence of announcements by us, or our competitors, regarding collaborations, new products, significant contracts, commercial relationships or capital commitments;

● commencement of, or involvement in, litigation;

●any major change in our board of directors or management;

●changes in governmental regulations or in the status of our regulatory approvals;

●announcements related to patents issued to us or our competitors and to litigation involving our intellectual property;

●a lack of, or limited, or negative industry or security analyst coverage;

●uncertainty regarding our ability to secure additional cash resources with which to operate our business;

●short-selling or similar activities by third parties; and

●other factors described elsewhere in these Risk Factors.

As a result of these factors, our stockholders may not be able to resell their shares at, or above, their purchase price. In addition, the stock prices of many technology companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies. Any negative change in the public's perception of the prospects of companies in our industry could depress our stock price regardless of our results of operations. These factors may have a material adverse effect on the market price and liquidity of our common stock and affect our ability to obtain required financing.

Our President and Chief Executive Officer and Chairman of the Board of Directors, Mr. Daniel Solomita, beneficially owns a majority of the total voting power of our capital stock, and accordingly, has control over stockholder matters, our business and management.

As at April 30, 2020, Mr. Daniel Solomita, our President and Chief Executive Officer, Chairman of the Board of Directors, and controlling shareholder, beneficially owns 18,800,000 shares of common stock, or 47.1% of our issued and outstanding shares of common stock and also holds one share of Series A Preferred Stock. The one share of Series A Preferred Stock issued to Mr. 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 our common stock, assuring Mr. Solomita of control of the Company in the event that his ownership of the issued and outstanding shares of our common stock is diluted to a level below a majority. Currently, Mr. Solomita's beneficial ownership of 18,800,000 shares of common stock and 1 share of Series A Preferred Stock provides him with 77.8% 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 us from taking certain actions without Mr. Solomita's (or that of any person to whom the one share of Series A Preferred Stock is transferred) approval. More specifically, so long as any shares of Series A Preferred Stock are outstanding, we are not permitted to take certain actions 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, including for example and without limitation, amending our articles of incorporation, changing or modifying the rights of the Series A Preferred Stock, including increasing or decreasing the number of authorized shares of Series A Preferred Stock, increasing or decreasing the size of the board of directors or remove the director appointed by the holders of our Series A Preferred Stock and declaring or paying any dividend or other distribution.

Moreover, because of the significant ownership position held by our insiders, new investors may not be able to effect a change in our business or management, and therefore, stockholders would have no recourse as a result of decisions made by management.

In addition, sales of significant amounts of shares held by Mr. Solomita, or the prospect of these sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

## Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of our company.

Though not now, we may in the future become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the company in the election of directors: (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of our stockholders, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights, is entitled to demand fair value for such stockholder's shares.

In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the company’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the company, or (ii) an affiliate or associate of the company and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the company. The definition of the term “combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the company’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the company and its other stockholders.

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.



Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. Stockholders may not be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.

The December 22, 2017 comprehensive tax reform bill could adversely affect our business and financial results.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (“TCJA”) that significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. The impact of enactment of U.S. tax reform was recorded on a provisional basis as the legislation provides for additional guidance to be issued by the U.S. Treasury Department on several provisions including the computation of the transition tax. We continue to examine the impact this tax reform legislation may have on our business and we urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.

## ITEM 2. PROPERTIES

On January 26, 2018, we completed the purchase of the land and building housing our pilot plant and corporate offices located at 480 Fernand-Poitras, Terrebonne, Québec, Canada J6Y 1Y4. The 22,042 square foot facility includes 4,080 square feet for our executive offices and 17,962 square feet for our innovation and operational activities. We believe that our existing facilities are adequate for our current needs.

## ITEM 3. LEGAL PROCEEDINGS

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

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

## ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

## ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is incorporated by reference from the section captioned “Executive Officers” contained in our proxy statement for the 2020 annual meeting of stockholders, to be filed with the Commission pursuant to Regulation 14A, not later than 120 days after February 29, 2020.



## ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

## Market Information for Common Stock

Our common stock is currently traded on the Nasdaq Global Market under the symbol "LOOP." 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." From October 29, 2015 through April 7, 2017, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol "LLPP." From September 26, 2012 to October 28, 2015, our common stock was quoted on the OTCQB tier of the OTC Markets Group Inc. under the stock symbol "FAMG."

## Holders

As at April 30, 2020, there were 39,916,905 shares of common stock issued and outstanding (excluding shares of common stock issuable upon conversion or conversion into shares of common stock of all of our currently outstanding Series A Preferred Stock) held by approximately 65 stockholders of record. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

## Dividends

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future. There are no restrictions in our Articles of Incorporation or By-laws that prevent us from declaring dividends. The Nevada Revised Statutes, however, prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

●we would not be able to pay our debts as they become due in the usual course of business; or

●our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution, unless otherwise permitted under our Articles of Incorporation.

## Recent Sales of Unregistered Securities and Use of Proceeds

On February 21, 2020, upon the receipt of the first of three potential disbursements pursuant to our agreement with Investissement Québec for a financing facility, we issued a warrant to acquire 15,153 shares of common stock at a strike price of $11.00 per share, representing a value of 10% of the disbursement. We received gross proceeds of $1,645,122 (CDN$2,209,234) and paid $34,254 (CDN$46,000) in transaction costs. The proceeds were used to finance capital expenses incurred for the expansion of our pilot plant.

## Purchases of Equity Securities by the Registrant and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during the year ended February 29, 2020.

## ITEM 6. SELECTED FINANCIAL DATA

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



## ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information and any forward-looking statements should be read in conjunction with “Risk Factors” discussed elsewhere in this Report. Please refer to the Cautionary Note Regarding Forward-Looking Statements on page 4.

## Introduction

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

## Plan of Operation

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, Québec, 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 year ended February 29, 2020, we continued executing our corporate strategy where Loop Industries focused on developing distinct business models for the commercialization of Loop \( ^{™} \)  PET resin and polyester fiber to customers: 1) from our joint venture with Indorama, and 2) from our Infinite Loop \( ^{™} \)  greenfield facilities. We are continuing to develop the engineering of the Infinite Loop \( ^{™} \)  platform and we have increased our focus on the development of Infinite Loop \( ^{™} \)  projects in Europe and in North America.

In September of 2018, in connection with one of our business models, we announced a joint venture with Indorama to retrofit their existing PET manufacturing facilities. The joint venture was formed to manufacture and commercialize sustainable Loop \( ^{™} \)  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 tons per year facility in Spartanburg, South Carolina.

Following the decision of the joint venture with Indorama to double the capacity of the planned Spartanburg plant due to customer demand to 40,000 metric tons per year as disclosed in our 10-Q for the period ended August 31, 2019, we identified a number of enhancements to the plant design to improve the operability and lower the total construction cost of the plant. We have currently contracted for the sale of the initial 20,700 metric tons expected output of the Spartanburg facility and we continue discussions to contract the additional volume up to its planned increased capacity of 40,000 metric tons.

As part of the joint venture agreement to establish the facility to produce 40,000 metric tons, we are committed to contribute its equity share for the costs under the joint venture agreement to construct the facility. As at April 30, 2020, we have contributed $1,500,000 to the joint venture.

On March 25, 2020, due to the COVID-19 pandemic, the Québec provincial government issued an order that all non-essential business and commercial activity in the province is required to shut down until April 13 and the order provides exemptions that allow us to continue reduced operations at the pilot plant and we have been continuing work with our joint venture partner, Indorama, and our engineering partner, to oversee the engineering for the Spartanburg joint venture facility and pursue our plans for the commercialization of our technology. We have made arrangements for certain employees to work remotely to support these engineering activities. The government has recently announced that we can re-start complete operations on May 11.

The Québec provincial government order has not significantly impacted our ability to work to advance this project to date and the commercialization plan for commissioning of the planned Spartanburg facility is currently unchanged. However, the planned timing may potentially be affected by the COVID-19 pandemic. We are monitoring the potential impact of the pandemic on the global economy and capital markets, as well as on the operations of our partners who are critical to achieving the anticipated commissioning date of the facility scheduled for the third quarter of the calendar year 2021. Both Loop and our partners are fully committed to the joint venture and are working diligently on the commercialization plan.



We, through our wholly-owned subsidiary Loop Innovations, LLC, a Delaware limited liability company, entered into a Joint Venture Agreement (the "Agreement"), as stated above, with Indorama, to manufacture and commercialize sustainable PET resin and polyester fiber to meet the growing global demand from beverage and consumer packaged goods companies. Each company has 50/50 equity interest in Indorama Loop Technologies, LLC ("ILT"), which was specifically formed to operate and execute the joint venture.

This partnership brings together Indorama’s manufacturing footprint and Loop Industries’ proprietary science and technology to become a supplier in the ‘circular’ economy for 100% sustainable and recycled PET resin and polyester fiber.

We are contributing to the 50/50 joint venture an exclusive world-wide royalty-free license to use its proprietary technology to produce 100% sustainably produced PET resin and polyester fiber in addition to its equity cash contribution.

To drive our Infinite Loop \( ^{™} \)  business model, which is a key pillar of our commercialization blueprint, we intend to partner with PET polymerization technology providers and EPC companies (Engineering, Procurement, Construction). As Loop Industries' technology is agnostic to PET polymerization technology, we are also exploring other partners that provide PET polymerization technology to help us commercialize our Infinite Loop \( ^{™} \)  solution—a fully integrated and reimagined manufacturing facility for sustainable Loop \( ^{™} \)  PET resin and polyester fiber.

We believe the Infinite Loop \( ^{™} \)  solution will result in a highly scalable model to supply the global demand for 100% sustainable Loop \( ^{™} \)  PET 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 also fundamentally changes where and how PET resin production occurs—no longer does PET resin production need to be bound to fossil fuels and fossil fuel infrastructure. Infinite Loop \( ^{™} \)  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 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 that once the first facilities are operational it may create the possibility of licensing the technology to create a recurring revenue stream for us while expanding the capacity of Loop \( ^{™} \)  PET resin and polyester fiber in the marketplace to 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 resin and polyester fiber provides the ideal solution for these brands because Loop \( ^{™} \)  PET resin and polyester fiber contains 100% recycled PET and polyester fiber content. The Loop \( ^{™} \)  PET resin and polyester fiber is virgin quality suitable for use in food-grade packaging. That means consumer packaged goods companies can now market packaging made from a 100% Loop \( ^{™} \)  branded PET resin and polyester fiber.

Loop Industries 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 be able to sell its Loop \( ^{™} \)  branded PET at a premium price relative to virgin and mechanically recycled PET.



## Results of Operations

## Fourth Quarter Ended February 29, 2020

The following table summarizes our operating results for the three-month periods ended February 29, 2020 and February 28, 2019, in U.S. Dollars.

<table><tr><td rowspan="3">Revenues</td><td colspan="4">Three Months Ended</td></tr><tr><td rowspan="2">February 29, 2020</td><td colspan="2">February 28, 2019</td><td>$ Change</td></tr><tr><td>$ -</td><td>$</td><td>$ -</td></tr><tr><td>Expenses</td><td></td><td></td><td></td><td></td></tr><tr><td>Research and development</td><td></td><td></td><td></td><td></td></tr><tr><td>Stock-based compensation</td><td>311,253</td><td>250,251</td><td>61,002</td><td></td></tr><tr><td>Other research and development</td><td>1,159,676</td><td>273,815</td><td>885,861</td><td></td></tr><tr><td>Total research and development</td><td>1,470,929</td><td>524,066</td><td>946,863</td><td></td></tr><tr><td>General and administrative</td><td></td><td></td><td></td><td></td></tr><tr><td>Stock-based compensation</td><td>547,327</td><td>575,240</td><td>(27,913)</td><td></td></tr><tr><td>Legal settlement</td><td>-</td><td>4,041,627</td><td>(4,041,627)</td><td></td></tr><tr><td>Other general and administrative</td><td>1,221,037</td><td>1,514,203</td><td>(293,166)</td><td></td></tr><tr><td>Total general and administrative</td><td>1,768,364</td><td>6,131,070</td><td>(4,362,706)</td><td></td></tr><tr><td>Depreciation and amortization</td><td>245,065</td><td>136,285</td><td>108,780</td><td></td></tr><tr><td>Impairment of intangible assets</td><td>-</td><td>298,694</td><td>(298,694)</td><td></td></tr><tr><td>Interest and other finance costs</td><td>406,215</td><td>425,964</td><td>(19,749)</td><td></td></tr><tr><td>Interest income</td><td>(136,913)</td><td>-</td><td>(136,913)</td><td></td></tr><tr><td>Foreign exchange loss (gain)</td><td>4,303</td><td>38,632</td><td>(34,329)</td><td></td></tr><tr><td>Total expenses</td><td>3,757,963</td><td>7,554,711</td><td>(3,796,748)</td><td></td></tr><tr><td>Net loss</td><td>(3,757,963)</td><td>(7,554,711)</td><td>$ 3,796,748</td><td></td></tr></table>

The net loss for the three-month period ended February 29, 2020 decreased $3.80 million to $3.76 million, as compared to the net loss for the three-month period ended February 28, 2019 which was $7.55 million. The decrease is primarily due to decreased general and administrative expenses of $4.36 million, a decrease in impairment of intangible assets of $0.30 million, an increase in interest income of $0.14 million, partially offset by higher research and development expenses of $0.95 million and by higher depreciation and amortization of $0.11 million.

Research and development expenses for the three-month period ended February 29, 2020 amounted to $1.47 million compared to $0.52 million for the three-month period ended February 28, 2019, representing an increase of $0.95 million, or $0.89 million excluding stock-based compensation. The increase of $0.89 million was primarily attributable to higher employee related expenses of $0.63 million, higher spending for purchases and consumables of $0.15 million and higher professional fees of $0.06 million. The increase in non-cash stock-based compensation expense of $0.06 million is mainly attributable to the timing of certain stock awards provided to employees.



General and administrative expenses for the three-month period ended February 29, 2020 amounted to $1.77 million compared to $6.13 million for the three-month period ended February 28, 2019, representing a decrease of $4.36 million, or $0.29 million excluding stock-based compensation and the legal settlement. The decrease of $4.36 million was primarily due to a legal settlement expense which amounted to $4.04 million for the three-month period ended February 28, 2019 compared to nil for the three-month period ended February 29, 2020. Other variances were attributable to lower employee related expenses of $0.23 million, lower legal, accounting and other professional fees of $0.41 million offset by higher Directors' and Officers' insurance expenses of $0.24 million. Stock-based compensation expense for the three-month period ended February 29, 2020 amounted to $0.55 million compared to $0.58 million for the three-month period ended February 28, 2019, representing a decrease of $0.03 million. The decrease was mainly attributable to lower stock awards provided to executives.

Depreciation and amortization for the three-month period ended February 29, 2020 totaled $0.25 million compared to $0.14 million for the three-month period ended February 28, 2019, representing an increase of $0.11 million. The increase is mainly attributable to an increase in the amount of fixed assets held at our pilot plant and corporate offices. Impairment of intangible assets for the three-month period ended February 29, 2020 was nil compared to $0.30 million for the three-month period ended February 28, 2019, representing a decrease of $0.30 million. The increase is entirely attributable to the write-off of the remaining intangible asset balance of the GEN I technology of $0.30 million in the three-month period ended February 28, 2019.

Interest and other finance costs for the three-month period ended February 29, 2020 totaled $0.41 million compared to $0.43 for the three-month period ended February 28, 2019, representing a decrease of $0.02 million. The decrease is mainly attributable to a decrease in interest expense relating to the convertible notes converted during the year in the amount of $0.06 million offset by an increase in accretion expense also relating to the convertible notes converted during the year in the amount of $0.04 million.

## Fiscal Year Ended February 29, 2020

The following table summarizes our operating results for the years ended February 29, 2020 and February 28, 2019, in U.S. Dollars.

<table><tr><td rowspan="3">Revenues</td><td colspan="4">Years Ended</td></tr><tr><td>February 29, 2020</td><td colspan="2">February 28, 2019</td><td>$ Change</td></tr><tr><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td></tr><tr><td>Expenses</td><td></td><td></td><td></td><td></td></tr><tr><td>Research and development</td><td></td><td></td><td></td><td></td></tr><tr><td>Stock-based compensation</td><td>1,252,394</td><td>1,160,254</td><td>92,140</td><td></td></tr><tr><td>Other research and development</td><td>3,464,781</td><td>2,288,293</td><td>1,176,488</td><td></td></tr><tr><td>Total research and development</td><td>4,717,175</td><td>3,448,547</td><td>1,268,628</td><td></td></tr><tr><td>General and administrative</td><td></td><td></td><td></td><td></td></tr><tr><td>Stock-based compensation</td><td>2,216,997</td><td>2,824,902</td><td>(607,905)</td><td></td></tr><tr><td>Legal settlement</td><td>-</td><td>4,041,627</td><td>(4,041,627)</td><td></td></tr><tr><td>Other general and administrative</td><td>4,998,423</td><td>5,986,336</td><td>(987,913)</td><td></td></tr><tr><td>Total general and administrative</td><td>7,215,420</td><td>12,852,865</td><td>(5,637,445)</td><td></td></tr><tr><td>Depreciation and amortization</td><td>830,432</td><td>502,996</td><td>327,436</td><td></td></tr><tr><td>Impairment of intangible assets</td><td>-</td><td>298,694</td><td>(298,694)</td><td></td></tr><tr><td>Interest and other finance costs</td><td>2,223,304</td><td>467,082</td><td>1,756,222</td><td></td></tr><tr><td>Interest income</td><td>(500,478)</td><td>-</td><td>(500,478)</td><td></td></tr><tr><td>Foreign exchange loss (gain)</td><td>19,602</td><td>(33,773)</td><td>53,375</td><td></td></tr><tr><td>Total expenses</td><td>14,505,455</td><td>17,536,411</td><td>(3,030,956)</td><td></td></tr><tr><td>Net loss</td><td>$ (14,505,455)</td><td>(17,536,411)</td><td>3,030,956</td><td></td></tr></table>



The net loss for the year ended February 29, 2020 decreased by $3.03 million, to $14.51 million, as compared to the net loss for the year ended February 28, 2019 which was $17.54 million. The decrease is primarily explained by lower general and administrative expenses of $5.64 million, an increase in interest income of $0.50 million and a decrease of impairment of intangible assets of $0.30 million offset by an increase in research and development expenses of $1.27 million, an increase in interest and other finance costs of $1.76 million, an increase in depreciation and amortization of $0.33 million and an increase in foreign exchange of $0.05 million.

Research and development expenses for year ended February 29, 2020 amounted to $4.72 million compared to $3.45 million for the year ended February 28, 2019, representing an increase of $1.27 million, or $1.18 million excluding stock-based compensation. The increase of $1.18 million was primarily attributable to higher employee related expenses of $1.01 million, increased purchases and consumables of $0.21 million, higher travel costs of $0.06 and higher facilities costs of $0.05 offset by lower professional fees of $0.30 million. The increase in non-cash stock-based compensation expense of $0.09 million was attributable to the timing of certain stock awards provided to employees.

General and administrative expenses for the year ended February 29, 2020 totaled $7.22 million compared to $12.85 million for the year ended February 28, 2019, representing a decrease of $5.64 million, or $0.99 million excluding stock-based compensation and the legal settlement. The decrease of $5.64 million was primarily attributable to a legal settlement expense which amounted to nil for the year ended February 29, 2020 compared to $4.04 million for the year ended February 28, 2019. Other variances were attributable to lower legal fees of $2.04 million offset by higher Directors' and Officers' insurance expenses of $0.4 million, higher employee related expenses of $0.27 million as well as higher accounting and other professional fees of $0.27 million. Stock-based compensation expense for the year ended February 29, 2020 amounted to $2.22 million compared to $2.82 million for the year ended February 28, 2019, representing a decrease of $0.61 million. The decrease was mainly attributable to lower stock awards provided to executives.

Depreciation and amortization for the year ended February 29, 2020 totaled $0.83 million compared to $0.50 million for the year ended February 28, 2019, representing an increase of $0.33 million. The increase is mainly attributable to an increase in the amount of fixed assets held at our pilot plant and corporate offices. Impairment of intangible assets for the year ended February 29, 2020 was nil compared to $0.30 million for the year ended February 28, 2019, representing a decrease of $0.3 million. The decrease is mainly attributable to the write-off of the remaining intangible asset balance of the GEN I technology of $0.3 in the year ended February 28, 2019.

Interest and other finance costs for the year ended February 29, 2020 totaled $2.22 million compared to $0.47 million for the year ended February 28, 2019, representing an increase of $1.76 million. The increase is mainly attributable to an increase in accretion expense related to convertible notes of $1.76 million and increased interest expense also relating to the convertible notes issued during the year of $0.26 million offset by a gain on conversion related to the convertible notes of $0.23 million and a decreased expense for revaluation of financial instruments of $0.03 million.

## LIQUIDITY AND CAPITAL RESOURCES

We are a development stage company with no revenues, and our ongoing operations and commercialization plans 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 potential for commercializing our branded resin and the progress made to date in implementing our business plans. As at February 29, 2020, we had cash and cash equivalents on hand of $33.72 million.

Although we continue to be in a good liquidity position with cash and cash equivalents on hand of $33.72 million, in light of the current global COVID-19 pandemic, our liquidity position may change, including the inability to raise new equity and debt, disruption in completing repayments or disbursements to our creditors. Management continues to be positive about our growth strategy and is evaluating our financing plans to continue to raise capital to finance the start-up of commercial operations and continue to fund the further development of our ongoing operations.

As reflected in the accompanying consolidated financial statements, we are a development stage company, we have not yet begun commercial operations and we do not have any sources of revenue. During the year ended February 29, 2020, we incurred a net loss of $14.51 million, used cash in operations of $9.10 million and had an accumulated deficit as at February 29, 2020 of $53.32 million, all of these factors raise substantial doubt about our ability to continue as a going concern. There can be no assurance that any future financing will be available or, if available, that it will be on terms that are satisfactory to us.

As at February 29, 2020, we have a long-term debt obligation to a Canadian bank in connection with the purchase, in the year ended February 28, 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 24, 2018, the Company obtained a $1,042,520 (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 $4,344 (CDN$5,833) plus interest, until January 2021, at which time it will be subject to renewal. It includes an option allowing for the prepayment of the Loan without penalty.

We also have a long-term debt obligation to Investissement Québec in connection with a financing facility equal to 63.45% of all eligible expenses incurred for the expansion of its Pilot Plant up to a maximum of $3,425,423 (CDN$4,600,000). We received the first disbursement in the amount of $1,645,122 (CDN$2,209,234) on February 21, 2020. There is a 36-month moratorium on both capital and interest repayments as of the first disbursement date. At the end of the 36-month moratorium, capital and interest will be repayable in 84 monthly installments. The loan bears interest at 2.36%. We have also agreed to issue to Investissement Québec warrants to purchase shares of our common stock in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $342,542 (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 us without penalty. On February 21, 2020, upon the receipt of the first disbursement under this facility, we issued a warrant to purchase 15,153 shares of common stock at a price of $11.00 to Investissement Québec.



## Flow of Funds

## Summary of Cash Flows

A summary of cash flows for the years ended February 29, 2020, and February 28, 2019 and 2018 was as follows:

<table><tr><td rowspan="2"></td><td colspan="3">Years Ended</td></tr><tr><td>February 29, 2020</td><td>February 28, 2019</td><td>February 28, 2018</td></tr><tr><td>Net cash used in operating activities</td><td>$ (9,092,549)</td><td>$ (7,562,487)</td><td>$ (6,391,486)</td></tr><tr><td>Net cash used in investing activities</td><td>(3,388,985)</td><td>(2,046,119)</td><td>(2,798,372)</td></tr><tr><td>Net cash provided by financing activities</td><td>40,463,141</td><td>7,328,024</td><td>16,504,451</td></tr><tr><td>Effect of exchange rate changes on cash</td><td>(97,326)</td><td>(35,741)</td><td>(81,367)</td></tr><tr><td>Net change in cash</td><td>$ 27,884,281</td><td>$ (2,316,323)</td><td>$ 7,233,226</td></tr></table>

## Net Cash Used in Operating Activities

During the year ended February 29, 2020, we used $9.10 million in operations compared to $7.56 million during the year ended February 28, 2019 and $6.39 million during the year ended February 28, 2018. The increase over each year is mainly due to increased operating expenses as we move to the next phase of commercialization.

## Net Cash Used in Investing Activities

During the year ended February 29, 2020, we used $3.39 million in investing activities. We made capital asset investments of $2.54 million of which $2.44 million was mainly attributable to the expansion and additions to our pilot plant and executive offices in Terrebonne, Canada. We also invested $0.1 million in our intellectual property as we developed, during the year ended February 29, 2020, our next generation GEN II technology and filed various patents in various jurisdictions around the world which await approval. During the year ended February 29, 2020 we made capital contributions to our joint venture with Indorama for a total of $0.85 million.

## Net Cash Provided by Financing Activities

During the year ended February 29, 2020, we raised $40.46 million mainly through two separate registered direct offerings of common stock, in the net amounts of $34.60 million and $4.20 million, respectively. We also made payments totaling $0.05 million against our long-term debt, representing the loan agreement we entered into during the year ended February 28, 2018 to purchase the land and building of our pilot plant and executive offices. During the year ended February 28, 2019, we raised $7.38 million through the issuance of convertible debt and $15.69 million through the sale of additional common stock and the exercise of warrants in the year ended February 28, 2018.

During the year ended February 29, 2020, we paid a total of $312,000 in interest in connection with convertible notes (2019 – nil; 2018 – nil) that were converted during the year.

On February 21, 2020, we received $1,645,122 (CDN$2,209,234) in connection with the credit facility from Investissement Québec to finance capital expenses incurred for the expansion of our pilot plant. There is a 36-month moratorium on both capital and interest repayments beginning on the date of receipt of the funds.

On January 24, 2018, in connection with the purchase of land and the building, we obtained a credit facility from a Canadian bank in the amount of $1,042,520 (CDN$1,400,000). The Loan bears interest at the bank's Canadian prime rate plus 1.5%. By agreement, the Loan is repayable in monthly payments of $4,344 (CDN$5,833) plus interest, until January 2021, at which time it will be subject be renewal. It includes an option allowing for the prepayment of the Loan without penalty. Interest paid amounted to $56,482 during the year ended February 29, 2020 (2019 - $50,040; 2018 – 5,125). The credit facility is secured by a first ranking hypothec of Loop Canada Inc.'s bank accounts, receivables, inventory, incorporeal rights and property, plant and equipment. In addition, Loop Industries, Inc., Loop Canada Inc.'s parent company, has guaranteed the credit facility and has provided a postponement of any payments that may be made on intercompany loan amounts owed by Loop Canada Inc. to Loop Industries, Inc. The terms of the credit facility require that we comply with certain financial covenants. As at February 29, 2020 and February 28, 2019, we were in compliance with its financial covenants.



## OFF-BALANCE SHEET ARRANGEMENTS

As at February 29, 2020, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

As at February 29, 2020, we did not have any significant lease obligations to third parties.

## OUTLOOK

In connection with the upcoming fiscal year ending February 28, 2021, we will continue to monitor the potential impacts of COVID-19 on our business. We intend to continue to execute our corporate strategy. We believe we must execute on several areas of our operational strategic plan, namely:

● Protecting our intellectual property;

● Continuing to upgrade our pilot plant to ensure the highest quality of sustainable Loop™ PET resin and polyester fiber is produced at the facility;

● Identifying and securing feedstock to ensure our facilities can operate continuously and efficiently;

● With our joint venture with Indorama, complete the engineering work associated with the Spartanburg facility and proceed with construction;

● Continuing to execute brand and other partnerships and/or commercial agreements with customers; and

● Continuing to drive the development of our Infinite Loop™ solution, which we believe is a key pillar of our ambition to sell our technology to potential commercial partners.

Risks that may affect our ability to execute on this strategy include, but are not limited to, those listed under “Risk Factors” elsewhere in this Annual Report.

## CRITICAL 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 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 intangibles, accruals for potential liabilities and assumptions made in calculating the fair value of stock-based compensation and the fair value of convertible notes and related warrants.



## Intangible assets

Intangible assets are recorded at cost and are amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method over 7 years.

The Company reviews the carrying value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an intangible asset might not be recoverable, or a change in the remaining useful life of an intangible asset. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. If the carrying value of assets is determined not to be recoverable, the Company records an impairment loss equal to the excess of the carrying value over the fair value of the assets. The Company's estimate of fair value is based on the best information available, in the absence of quoted market prices. The Company generally calculates fair value as the present value of estimated future cash flows that the Company expects to generate from the asset. If the estimate of an intangible asset's remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life.

## Stock-Based Compensation

We periodically issue stock options and restricted stock units to employees and directors as part of their compensation. We account for stock options and restricted stock units granted to employees and directors based on the authoritative guidance provided by the Financial Accounting Standards Board ("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 has been met.

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 our stock option grants is determined using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

## Convertible notes

## Distinguishing Liabilities from Equity Instruments Issued

The Company applies the guidance in ASC Topic 480 to determine the classification of financial instruments issued. The Company first determines if the instruments should be classified as liabilities under this guidance based on the redemption features, if mandatorily redeemable or not, and the method of redemption, if in cash, a variable number of shares or a fixed number of shares.

If the terms proved that an instrument is mandatorily redeemable in cash, or the holder can compel a settlement in cash, or will be settled in a variable number of shares predominantly based on a fixed monetary amount, the instrument is generally classified as a liability. Instruments that are settled by issuing a fixed number of shares are generally classified as equity instruments.

In some cases, the instruments issued contain settlement features that differ depending upon the prevailing price of the Company’s shares at the date of settlement. Depending on the share price, the instrument will be settled either in a manner consistent with ASC Topic 480 liability treatment, by issuing a variable number of shares based on a fixed monetary amount, or in a manner consistent with ASC Topic 480 treatment for an equity instrument, by issuing a fixed number of shares if the share price is above or below certain levels. In these cases, the Company assesses the likelihood of the various possible settlement outcomes at the inception of the instrument. The classification of the instrument is based on the outcome that is more likely than not to occur. Factors that the Company considers in evaluating the likelihood of the outcomes include:

The terms of the instrument, including its maturity date and the formula for adjustments to the range;

The volatility of the Company’s stock;

The relationship between the price of the Company’s stock on the inception date and fixed prices or ranges the low and high end of the original range; and

Historical and expected dividend levels.



When warrants or similar instruments are issued, the Company applies the guidance in ASC Topic 815 to determine if the warrants should be classified as equity instruments or as derivative instruments. Generally, warrants that are both indexed to the Company's own stock and that would be classified as equity instruments are not classified as derivative instruments under this guidance. A key element to consider in determining if a warrant would be considered indexed to the Company's own stock is if the warrants settlement amount is equal to the difference between the fair value of a fixed number of equity shares and a fixed monetary amount. This criterion is sometimes known as the "fixed-for fixed" criteria. In cases where the fixed for fixed criteria are not met, the warrants are classified as derivative instruments.

Convertible liabilities are also assessed to determine if they contain a beneficial conversion feature. 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. A BCF related to the issuance of a convertible note is recorded as equity at its intrinsic value at the issue date.

## Initial measurement

Instruments are initially measured at fair value. If multiple instruments are issued together, the aggregate proceeds are allocated first to derivative instruments or any instrument that will be subsequently accounted for at fair value and the remainder is allocated to the various instruments based on their relative fair value.

## Subsequent measurement

Instruments initially classified as liabilities are subsequently measured at the present value of the amount to be paid, either in cash or by issuing a variable number of shares based on a fixed monetary amount, and at settlement, accruing interest cost using the rate implicit at inception.

Derivative instruments are recorded at fair value at each reporting period and the variations in fair value are recorded in the consolidated statements of operations and comprehensive loss.

## Deferred financing costs and other transaction costs

Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These fees are amortized as a component of interest expense over the terms of the respective financing agreements, including convertible notes, on a straight-line basis. Unamortized deferred financing fees are expensed in full when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not be successful. Deferred financing fees are deducted from their related liabilities on the balance sheet.

Transaction costs associated with the equity portion of convertible notes are reflected as a charge to deficit or as a reduction of accumulated paid-in-capital. The cost of issuing equity is reflected as a reduction of accumulated paid-in-capital.

## Foreign Currency Translations and Transactions

The accompanying consolidated financial statements are presented in U.S. dollars, the functional 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 and loss ("OCI"). As a result, foreign currency exchange fluctuations may impact operating expenses.

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.



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 differ 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.

The following table summarizes the exchange rates used:

<table><tr><td rowspan="2"></td><td colspan="4">Years Ended</td></tr><tr><td>February 29, 2020</td><td>February 28, 2019</td><td>February 28, 2018</td><td></td></tr><tr><td>Period end Canadian \(: US Dollar exchange rate</td><td>$ 0.74</td><td>$ 0.76</td><td>$ 0.78</td><td></td></tr><tr><td>Average period Canadian \(: US Dollar exchange rate</td><td>$ 0.75</td><td>$ 0.76</td><td>$ 0.78</td><td></td></tr></table>

Expenditures are translated at the average exchange rate for the period presented.

See Notes to the consolidated financial statements included elsewhere in this Form 10-K for management's discussion of recently issued accounting pronouncements.

## ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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



## ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

## Loop Industries, Inc.
February 29, 2020
Index to the Consolidated Financial Statements

<table><tr><td>Contents</td><td>Page(s)</td></tr><tr><td>Report of Independent Registered Public Accounting Firm</td><td>F-1</td></tr><tr><td>Consolidated balance sheets as at February 29, 2020 and February 28, 2019</td><td>F-3</td></tr><tr><td>Consolidated statements of operations and comprehensive loss for the years ended February 29, 2020, February 28, 2019 and February 28, 2018</td><td>F-4</td></tr><tr><td>Consolidated statement of changes in stockholders&#x27; equity for the years ended February 29, 2020, February 28, 2019 and February 28, 2018</td><td>F-5</td></tr><tr><td>Consolidated statement of cash flows for the years ended February 29, 2020, February 28, 2019 and February 28, 2018</td><td>F-6</td></tr><tr><td>Notes to the consolidated financial statements</td><td>F-7</td></tr></table>



## Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Loop Industries Inc.

## Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Loop Industries Inc. and its subsidiaries (together, the Company) as of February 29, 2020 and February 28, 2019, and the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity and cash flows for each of the three years in the period ended February 29, 2020, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 29, 2020 and February 28, 2019, and the results of its operations and its cash flows for the three years in the period ended February 29, 2020 in conformity with accounting principles generally accepted in the United States of America.

## Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.



Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Privatihousecoopcr srl/s.e.n.c.r.t.

Montreal, Canada

May 4, 2020

We have served as the Company's auditor since 2017.



## Loop Industries, Inc.
Consolidated Balance Sheets
(in United States dollars)

<table><tr><td rowspan="2"></td><td colspan="2">As at</td></tr><tr><td>February 29, 2020</td><td>February 28, 2019</td></tr><tr><td>Assets</td><td></td><td></td></tr><tr><td>Current assets</td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 33,717,671</td><td>$ 5,833,390</td></tr><tr><td>Sales tax, tax credits and other receivables (Note 3)</td><td>664,544</td><td>599,000</td></tr><tr><td>Prepaid expenses</td><td>141,226</td><td>226,521</td></tr><tr><td>Total current assets</td><td>34,523,441</td><td>6,658,911</td></tr><tr><td>Investment in joint venture</td><td>850,000</td><td>-</td></tr><tr><td>Property, plant and equipment, net (Note 4)</td><td>7,260,254</td><td>5,371,263</td></tr><tr><td>Intangible assets, net (Note 5)</td><td>202,863</td><td>127,672</td></tr><tr><td>Total assets</td><td>$ 42,836,558</td><td>$ 12,157,846</td></tr><tr><td>Liabilities and Stockholders&#x27; Equity</td><td></td><td></td></tr><tr><td>Current liabilities</td><td></td><td></td></tr><tr><td>Accounts payable and accrued liabilities</td><td>$ 2,082,698</td><td>$ 2,670,233</td></tr><tr><td>Convertible notes (Note 10)</td><td>-</td><td>5,636,172</td></tr><tr><td>Warrants (Note 10)</td><td>-</td><td>219,531</td></tr><tr><td>Current portion of long-term debt (Note 9)</td><td>52,126</td><td>53,155</td></tr><tr><td>Total current liabilities</td><td>2,134,824</td><td>8,579,091</td></tr><tr><td>Long-term debt (Note 9)</td><td>2,238,026</td><td>952,363</td></tr><tr><td>Total liabilities</td><td>4,372,850</td><td>9,531,454</td></tr><tr><td>Stockholders&#x27; Equity</td><td></td><td></td></tr><tr><td>Series A Preferred stock par value $0.0001; 25,000,000 shares authorized; one share issued and outstanding (Note 12)</td><td>-</td><td>-</td></tr><tr><td>Common stock par value $0.0001; 250,000,000 shares authorized; 39,910,774 shares issued and outstanding (2019 - 33,805,706) (Note 12)</td><td>3,992</td><td>3,381</td></tr><tr><td>Additional paid-in capital (Note 13)</td><td>82,379,413</td><td>38,966,208</td></tr><tr><td>Additional paid-in capital - Warrants (Note 10)</td><td>9,785,799</td><td>757,704</td></tr><tr><td>Additional paid-in capital - Beneficial conversion feature (Note 10)</td><td>-</td><td>1,200,915</td></tr><tr><td>Common stock issuable, nil shares (2019-1,000,000 shares) (Note 11)</td><td>-</td><td>800,000</td></tr><tr><td>Accumulated deficit</td><td>(53,317,047)</td><td>(38,811,592)</td></tr><tr><td>Accumulated other comprehensive loss</td><td>(388,449)</td><td>(290,224)</td></tr><tr><td>Total stockholders&#x27; equity</td><td>38,463,708</td><td>2,626,392</td></tr><tr><td>Total liabilities and stockholders&#x27; equity</td><td>$ 42,836,558</td><td>$ 12,157,846</td></tr></table>

See accompanying notes to the consolidated financial statements.



## Loop Industries, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in United States dollars)

<table><tr><td rowspan="2"></td><td colspan="4">Years Ended</td></tr><tr><td>February 29, 2020</td><td>February 28, 2019</td><td>February 28, 2018</td><td></td></tr><tr><td>Revenue</td><td>$ -</td><td>$ -</td><td>$ -</td><td>$ -</td></tr><tr><td>Expenses -</td><td></td><td></td><td></td><td></td></tr><tr><td>Research and development (Notes 2 and 3)</td><td>4,717,175</td><td>3,448,547</td><td>6,694,778</td><td></td></tr><tr><td>General and administrative</td><td>7,215,420</td><td>8,811,237</td><td>6,860,623</td><td></td></tr><tr><td>Legal settlement (Note 18)</td><td>-</td><td>4,041,627</td><td>-</td><td></td></tr><tr><td>Depreciation and amortization (Notes 4 and 5)</td><td>830,432</td><td>502,997</td><td>367,176</td><td></td></tr><tr><td>Impairment of intangible assets (Note 5)</td><td>-</td><td>298,694</td><td>-</td><td></td></tr><tr><td>Interest and other finance costs (Notes 9, 10 and 17)</td><td>2,223,304</td><td>467,082</td><td>5,125</td><td></td></tr><tr><td>Interest income</td><td>(500,478)</td><td>-</td><td>-</td><td></td></tr><tr><td>Foreign exchange loss (gain)</td><td>19,602</td><td>(33,773)</td><td>109,676</td><td></td></tr><tr><td>Total expenses</td><td>14,505,455</td><td>17,536,411</td><td>14,037,378</td><td></td></tr><tr><td>Net loss</td><td>(14,505,455)</td><td>(17,536,411)</td><td>(14,037,378)</td><td></td></tr><tr><td>Other comprehensive loss -</td><td></td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustment</td><td>(98,225)</td><td>(121,124)</td><td>(17,889)</td><td></td></tr><tr><td>Comprehensive loss</td><td>$ (14,603,680)</td><td>$ (17,657,535)</td><td>$ (14,055,267)</td><td></td></tr><tr><td>Loss per share</td><td></td><td></td><td></td><td></td></tr><tr><td>Basic and diluted</td><td>$ (0.38)</td><td>$ (0.52)</td><td>$ (0.43)</td><td></td></tr><tr><td>Weighted average common shares outstanding</td><td></td><td></td><td></td><td></td></tr><tr><td>Basic and diluted</td><td>37,936,094</td><td>33,795,600</td><td>32,642,741</td><td></td></tr></table>

See accompanying notes to the consolidated financial statements.



## Loop Industries, Inc.

## Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended February 29, 2020, February 28, 2019 and February 28, 2018
(in United States dollars)

<table><tr><td></td><td>Common Stock par value $0.0001</td><td colspan="3">Preferred stock par value $0.0001</td></tr></table>

See accompanying notes to the consolidated financial statements.



<table><tr><td></td><td colspan="2">Common stock par value $0.0001</td><td colspan="2">Preferred stock par value $0.0001</td></tr></table>

See accompanying notes to the consolidated financial statements.



<table><tr><td></td><td colspan="2">Common stock par value $0.0001</td><td colspan="2">Preferred stock par value $0.0001</td></tr></table>

See accompanying notes to the consolidated financial statements.



## Loop Industries, Inc.
Consolidated Statements of Cash Flows
(in United States dollars)

<table><tr><td rowspan="2"></td><td colspan="3">Years Ended</td></tr><tr><td>February 29, 2020</td><td>February 28, 2019</td><td>February 28, 2018</td></tr><tr><td>Cash Flows from Operating Activities</td><td></td><td></td><td></td></tr><tr><td>Net loss</td><td>$ (14,505,455)</td><td>$ (17,536,411)</td><td>$ (14,037,378)</td></tr><tr><td>Adjustments to reconcile net loss to net cash used in operating activities:</td><td></td><td></td><td></td></tr><tr><td>Depreciation and amortization (Notes 4 and 5)</td><td>830,432</td><td>502,997</td><td>367,176</td></tr><tr><td>Impairment of intangible assets (Note 5)</td><td>-</td><td>298,694</td><td>-</td></tr><tr><td>Warrants issued for legal settlement (Note 18)</td><td>-</td><td>2,271,627</td><td>-</td></tr><tr><td>Shares issued for legal settlement (Note 18)</td><td>-</td><td>1,770,000</td><td>-</td></tr><tr><td>Stock-based compensation (Note 13)</td><td>3,469,390</td><td>3,985,160</td><td>6,547,313</td></tr><tr><td>Accrued interest (Note 10)</td><td>363,390</td><td>109,804</td><td>-</td></tr><tr><td>Loss on revaluation of warrants (Note 10)</td><td>8,483</td><td>65,167</td><td>-</td></tr><tr><td>Convertible notes debt discount amortization (Note 10)</td><td>1,892,185</td><td>185,505</td><td>-</td></tr><tr><td>Deferred financing costs</td><td>96,155</td><td>47,123</td><td>-</td></tr><tr><td>Gain on conversion of convertible notes (Note 10)</td><td>(232,565)</td><td>-</td><td>-</td></tr><tr><td>Fair value of warrants issued (Note 9)</td><td>7,744</td><td>-</td><td>-</td></tr><tr><td>Loss on revaluation of foreign exchange contracts</td><td>27,129</td><td>-</td><td>-</td></tr><tr><td>Changes in operating assets and liabilities:</td><td></td><td></td><td></td></tr><tr><td>Valued added tax and tax credits receivable</td><td>(77,294)</td><td>(234,366)</td><td>(218,560)</td></tr><tr><td>Prepaid expenses</td><td>83,876</td><td>285,052</td><td>(511,573)</td></tr><tr><td>Accounts payable and accrued liabilities</td><td>(1,056,019)</td><td>687,161</td><td>1,821,536</td></tr><tr><td>Advances from controlling stockholder</td><td>-</td><td>-</td><td>(360,000)</td></tr><tr><td>Net cash used in operating activities</td><td>(9,092,549)</td><td>(7,562,487)</td><td>(6,391,486)</td></tr><tr><td>Cash Flows from Investing Activities</td><td></td><td></td><td></td></tr><tr><td>Investment in joint venture (Note 8)</td><td>(850,000)</td><td>-</td><td>-</td></tr><tr><td>Additions to property, plant and equipment (Note 4)</td><td>(2,439,013)</td><td>(1,892,654)</td><td>(2,710,053)</td></tr><tr><td>Additions to intangible assets (Note 5)</td><td>(99,972)</td><td>(153,465)</td><td>(88,319)</td></tr><tr><td>Net cash used in investing activities</td><td>(3,388,985)</td><td>(2,046,119)</td><td>(2,798,372)</td></tr><tr><td>Cash Flows from Financing Activities</td><td></td><td></td><td></td></tr><tr><td>Proceeds from sales of common shares and exercise of warrants, net of share issuance costs (Note12)</td><td>39,216,399</td><td>(25,544)</td><td>15,694,497</td></tr><tr><td>Repayment of advances from controlling stockholder (Note 11)</td><td>-</td><td>-</td><td>(278,472)</td></tr><tr><td>Proceeds from issuance of long-term debt (Note 9)</td><td>1,645,122</td><td>-</td><td>-</td></tr><tr><td>Proceeds from issuance of convertible notes (Note 10)</td><td>-</td><td>7,550,000</td><td>1,092,980</td></tr><tr><td>Deferred financing costs</td><td>(34,254)</td><td>(143,277)</td><td>-</td></tr><tr><td>Payment of accrued interest on convertible notes (Note 10)</td><td>(312,000)</td><td>-</td><td>-</td></tr><tr><td>Repayment of long-term debt</td><td>(52,126)</td><td>(53,155)</td><td>(4,554)</td></tr><tr><td>Net cash provided by financing activities</td><td>40,463,141</td><td>7,328,024</td><td>16,504,451</td></tr><tr><td>Effect of exchange rate changes</td><td>(97,326)</td><td>(35,741)</td><td>(81,367)</td></tr><tr><td>Net change in cash</td><td>27,884,281</td><td>(2,316,323)</td><td>7,233,226</td></tr><tr><td>Cash and cash equivalents, beginning of year</td><td>5,833,390</td><td>8,149,713</td><td>916,487</td></tr><tr><td>Cash and cash equivalents, end of year</td><td>$ 33,717,671</td><td>$ 5,833,390</td><td>$ 8,149,713</td></tr><tr><td>Supplemental Disclosure of Cash Flow Information:</td><td></td><td></td><td></td></tr><tr><td>Income tax paid</td><td>$ -</td><td>$ -</td><td>$ -</td></tr><tr><td>Interest paid</td><td>$ 368,482</td><td>$ 54,040</td><td>$ 5,125</td></tr><tr><td>Interest received</td><td>$ 500,478</td><td>$ -</td><td>$ -</td></tr></table>

See accompanying notes to the consolidated financial statements.



# Loop Industries, Inc.
February 29, 2020, February 28, 2019 and February 28, 2018
Notes to the Consolidated Financial Statements
(in United States dollars except where otherwise indicated)

## 1. The Company and Basis of Presentation

## The Company

Loop Industries, Inc. (the "Company," "Loop Industries," "we," or "our") is a technology company that 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 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

These consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) and comprise the consolidated financial position and results of operations of Loop Industries, Inc. and its subsidiaries, Loop Innovations, LLC and Loop Canada Inc. All subsidiaries are, either directly or indirectly, wholly-owned subsidiaries of Loop Industries, Inc. (collectively, the “Company”). The Company also owns, through Loop Innovations, LLC, a 50% interest in a joint venture, Indorama Loop Technologies, LLC, which is accounted for under the equity method.

Intercompany balances and transactions are eliminated on consolidation.

## 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 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 intangibles, accruals for potential liabilities and assumptions made in calculating the fair value of stock-based compensation and the fair value of convertible notes and related warrants.

## Fair value of financial instruments

The Company applies Financial Accounting Standards Board (“FASB”) Codification (“ASC”) 820, Fair Value Measurement, which defines fair value and establishes a framework for measuring fair value and making disclosures about fair value measurements. FASB ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of financial instruments and the characteristics specific to them. Financial instruments with readily available quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.



There are three levels within the hierarchy that may be used to measure fair value:

Level 1– A quoted price in an active market for identical assets or liabilities.

Level 2– Significant pricing inputs are observable inputs, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

Level 3– Significant pricing inputs are unobservable inputs, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values.

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

## Convertible notes

## Distinguishing Liabilities from Equity Instruments Issued

The Company applies the guidance in ASC Topic 480 to determine the classification of financial instruments issued. The Company first determines if the instruments should be classified as liabilities under this guidance based on the redemption features, if mandatorily redeemable or not, and the method of redemption, if in cash, a variable number of shares or a fixed number of shares.

If the terms proved that an instrument is mandatorily redeemable in cash, or the holder can compel a settlement in cash, or will be settled in a variable number of shares predominantly based on a fixed monetary amount, the instrument is generally classified as a liability. Instruments that are settled by issuing a fixed number of shares are generally classified as equity instruments.

In some cases, the instruments issued contain settlement features that differ depending upon the prevailing price of the Company’s shares at the date of settlement. Depending on the share price, the instrument will be settled either in a manner consistent with ASC Topic 480 liability treatment, by issuing a variable number of shares based on a fixed monetary amount, or in a manner consistent with ASC Topic 480 treatment for an equity instrument, by issuing a fixed number of shares if the share price is above or below certain levels. In these cases, the Company assesses the likelihood of the various possible settlement outcomes at the inception of the instrument. The classification of the instrument is based on the outcome that is more likely than not to occur. Factors that the Company considers in evaluating the likelihood of the outcomes include:

● The terms of the instrument, including its maturity date and the formula for adjustments to the range.

● The volatility of the Company’s stock.

● The relationship between the price of the Company’s stock on the inception date and fixed prices or ranges the low and high end of the original range.

● Historical and expected dividend levels.

When warrants or similar instruments are issued, the Company applies the guidance in ASC Topic 815 to determine if the warrants should be classified as equity instruments or as derivative instruments. Generally, warrants that are both indexed to the Company's own stock and that would be classified as equity instruments are not classified as derivative instruments under this guidance. A key element to consider in determining if a warrant would be considered indexed to the Company's own stock is if the warrants settlement amount is equal to the difference between the fair value of a fixed number of equity shares and a fixed monetary amount. This criterion is sometimes known as the "fixed-for fixed" criteria. In cases where the fixed for fixed criteria are not met, the warrants are classified as derivative instruments.



Convertible liabilities are also assessed to determine if they contain a beneficial conversion feature. 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. A BCF related to the issuance of a convertible note is recorded at its intrinsic value at the issue date.

## Initial measurement

Instruments are initially measured at fair value. If multiple instruments are issued together, the aggregate proceeds are allocated first to derivative instruments or any instrument that will be subsequently accounted for at fair value and the remainder is allocated to the various instruments based on their relative fair value.

## Subsequent measurement

Instruments initially classified as liabilities are subsequently measured at the present value of the amount to be paid, either in cash or by issuing a variable number of shares based on a fixed monetary amount, and at settlement, accruing interest cost using the rate implicit at inception.

Derivative instruments are recorded at fair value at each reporting period and the variations in fair value recorded in income.

## Government grants

US GAAP for profit-oriented entities does not define government grants; nor is there specific guidance applicable to government grants. Under the Company's accounting policy for government grants and consistent with non-authoritative guidance, grants are recognized on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.

Grants that relate to the acquisition of an asset are recognized as a reduction of the cost of the asset and in the statement of operations and comprehensive loss as the asset is depreciated or amortized.

A grant that is compensation for expenses or losses already incurred, or for which there are no future related costs, is recognized in the statement of operations and comprehensive loss in the period in which it becomes receivable.

Low-interest loans or interest-free loans from a government are initially measured at fair value and interest expense is recognized on the loan subsequently under the effective interest method, with the difference recognized as a government grant

## Deferred financing costs and other transaction costs

Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These fees are amortized as a component of interest expense over the terms of the respective financing agreements, including convertible notes, on a straight-line basis. Unamortized deferred financing fees are expensed in full when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not be successful. Deferred financing fees related to the liability portion of Convertible Notes are deducted from their related liabilities on the balance sheet.

Transaction costs associated with the equity portion of convertible notes are reflected as a charge to deficit or as a reduction of accumulated paid-in-capital. The cost of issuing equity is reflected as a reduction of accumulated paid-in-capital.

## Foreign currency translations and transactions

The accompanying consolidated financial statements are presented in U.S. dollars, the functional 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 and 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.



Property, plant and equipment are recorded at cost and are amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method over the following periods:

<table><tr><td>Building</td><td>30 years</td></tr><tr><td>Land</td><td>Indefinite</td></tr><tr><td>Office equipment and furniture</td><td>8 years</td></tr><tr><td>Machinery and equipment</td><td>3-8 years</td></tr><tr><td>Building improvements</td><td>5 years</td></tr></table>

Costs related to repairs and maintenance of property, plant and equipment are expensed in the period in which they are incurred. Upon sale or disposal, the Company writes off the cost of the asset and the related amount of accumulated depreciation. The resulting gain or loss is included in the consolidated statement of operations and comprehensive loss.

Management reviews the carrying values of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows. As at February 29, 2020, and February 28, 2019 and 2018, the Company determined that there were no indicators of impairment and therefore, did not recognize any impairment of its property, plant and equipment.

## Intangible assets

Intangible assets are recorded at cost and are amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method over 7 years.

The Company reviews the carrying value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an intangible asset might not be recoverable, or a change in the remaining useful life of an intangible asset. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. If the carrying value of assets is determined not to be recoverable, the Company records an impairment loss equal to the excess of the carrying value over the fair value of the assets. The Company's estimate of fair value is based on the best information available, in the absence of quoted market prices. The Company generally calculates fair value as the present value of estimated future cash flows that the Company expects to generate from the asset. If the estimate of an intangible asset's remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life.

## Stock-based compensation

The Company periodically issues stock options and restricted stock units to employees and directors as part of their compensation. The Company accounts for stock options and restricted stock units granted to employees and directors 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 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.



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 years ended February 29, 2020, February 28, 2019 and February 28, 2018 amounted to $4.72 million, $3.45 million and $6.69 million, respectively, and are net of government research and development tax credits and government grants from the federal and provincial taxation authorities accrued and recorded during the year based on qualifying expenditures incurred during the fiscal year.

## 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. 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 years ended February 29, 2020, February 28, 2019 and February 28, 2018, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an antidilutive effect. As at February 29, 2020, the potentially dilutive securities consisted of 1,587,081 outstanding stock options (2019 –1,962,400; 2018 –2,374,581), 4,218,802 outstanding restricted stock units (2019 –402,868; 2018–34,102), 5,059,331 outstanding warrants (2019 –802,469; 2018 –140,667) and nil outstanding issuable common stock (2019 –1,000,000; 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. The Company adopted ASU 2018-02 on March 1, 2019 and include its effects in the current fiscal year. 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 through a cumulative-effect adjustment at the adoption date. The adoption of the standard had no impact on the consolidated financial statements of the Company.

## Recently issued accounting pronouncements not yet adopted

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.

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. We are still evaluating the impact of this accounting guidance on our results of operations and financial position.

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.

## 3. Sales Tax, Tax Credits and Other Receivables

Sales tax, research and development tax credits and other receivables as at February 29, 2020 and February 28, 2019 were as follows:

<table><tr><td></td><td>February 29, 2020</td><td>February 28, 2019</td></tr><tr><td>Sales tax</td><td>$ 180,971</td><td>$ 82,992</td></tr><tr><td>Research and development tax credits</td><td>447,843</td><td>410,997</td></tr><tr><td>Other receivables</td><td>35,730</td><td>105,011</td></tr><tr><td></td><td>$ 664,544</td><td>$ 599,000</td></tr></table>



The Company is registered for the Canadian federal and provincial goods and services taxes. As such, the Company is obligated to collect from third parties, and is entitled to claim sales 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 year ended February 29, 2020, the Company recorded $221,603, (2019 – $305,592; 2018 – 221,202) as a reduction of research and development expenses. During the year ended February 29, 2020, research and development tax credits received by the Company from taxation authorities amounted to $175,929 (2019 – nil; 2018 - nil).

Research and development expenses are also presented net of eligible government grants from the federal and provincial taxation authorities. Government grants received during the year ended February 29, 2020 amounted to nil (2019 - $73,581; 2018 – $4,000) and government grants receivable at February 29, 2020 amounted to nil (2019 – nil; 2018 - $73,581).

The Company is also eligible for non-refundable research and development tax credits from the federal taxation authorities which can be used as a reduction of income tax expense in any given year to the extent the Company has taxable income. The Company has not had taxable income since inception and has not been able to use these non-refundable federal research and development tax credits. During the year ended February 29, 2020, the Company was eligible for non-cash research and development tax credits in the amount of $251,019 (2019 - $255,975; 2018 - $248,690). These non-cash tax credits, which have an unlimited carry forward period are not recognized in the Company's consolidated financial statements.

## 4. Property, Plant and Equipment

<table><tr><td rowspan="2"></td><td colspan="3">As at February 29, 2020</td></tr><tr><td colspan="2">Accumulated depreciation</td><td>Net book value</td></tr><tr><td>Building</td><td>$ 1,846,070</td><td>$ (128,911)</td><td>$ 1,717,159</td></tr><tr><td>Land</td><td>264,868</td><td>-</td><td>264,868</td></tr><tr><td>Building Improvements</td><td>733,884</td><td>(214,068)</td><td>519,816</td></tr><tr><td>Machinery and equipment</td><td>6,085,195</td><td>(1,426,465)</td><td>4,658,730</td></tr><tr><td>Office equipment and furniture</td><td>162,466</td><td>(62,785)</td><td>99,681</td></tr><tr><td></td><td>$ 9,092,483</td><td>$ (1,832,229)</td><td>$ 7,260,254</td></tr></table>

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

Depreciation expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $807,800 for the year ended February 29, 2020 (2019 - $443,146; 2018 - $303,597).



During the year ended February 29, 2020, the Company recorded a government grant in connection with the financing facility received from Investissement Québec as a reduction in the cost of fixed assets for a total of $179,522 (2019 – nil; 2018 – nil). More details on the Investissement Québec financing facility can be found in note 9, Long-Term Debt.

## 5. Intangible Assets

During the year ending February 29, 2020, the Company finalized the development of its next Generation II ("GEN II") technology and filed various patents in jurisdictions around the world. On April 9, 2019, the first GEN II U.S. patent was issued. The GEN II technology portfolio has an issued U.S. patent and a pending U.S. application, all expected to expire, if granted, on or around September 2037. Internationally, the GEN II technology portfolio also has a PCT application, an allowed application in Bangladesh, and pending non-PCT country applications in Argentina, Bolivia, Bhutan, members of the Gulf Cooperation Council, Iraq, Pakistan, Taiwan, Uruguay, and Venezuela, all expected to expire on or around September 2038 if granted. Additional aspects of the GEN II technology are claimed in a U.S. application, a PCT application, and non-PCT country applications in Argentina, Bangladesh, Bolivia, members of the Gulf Cooperation Council, Pakistan, Taiwan, and Uruguay, all expected to expire on or around June 2039, if granted. Additionally, we have two pending provisional applications directed to further additional aspects of the GEN II technology. Any patents that would ultimately grant from these provisional applications would be expected to expire no earlier than 2040, if granted.

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 its GEN I intangible asset, which amounted to $298,694.

Amortization expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $22,631 for the year ended February 29, 2020 (2019 - $59,851; 2018 - $63,579).

<table><tr><td></td><td>As at February 29, 2020</td><td>As at February 28, 2019</td></tr><tr><td>Intangible assets, at cost - beginning of period</td><td>$ 127,672</td><td>$ 533,369</td></tr><tr><td>Intangible assets, accumulated depreciation - beginning of period</td><td>-</td><td>(200,629)</td></tr><tr><td></td><td>127,672</td><td>332,740</td></tr><tr><td>Add: Additions in the year</td><td>99,972</td><td>153,477</td></tr><tr><td>Deduct: Amortization of intangibles</td><td>(22,631)</td><td>(59,851)</td></tr><tr><td>Deduct: Impairment of intangibles</td><td>-</td><td>(298,694)</td></tr><tr><td>Deduct: Foreign exchange effect</td><td>(2,150)</td><td>-</td></tr><tr><td></td><td>$ 202,863</td><td>$ 127,672</td></tr></table>



## 6. Fair value of financial instruments

The following table presents the fair value of the Company’s financial liabilities and warrants at February 29, 2020 and February 28, 2019:

<table><tr><td rowspan="2"></td><td colspan="4">Fair Value Measurements as at February 29, 2020</td></tr><tr><td>Carrying Amount</td><td>Fair Value</td><td>Level in the hierarchy</td><td></td></tr><tr><td>Instruments measured at fair value on a recurring basis:</td><td>$ -</td><td>$ -</td><td>-</td><td></td></tr></table>

<table><tr><td>Financial liabilities measured at amortized cost:</td><td></td><td></td><td></td></tr><tr><td>Long-term debt</td><td>956,932</td><td>956,932</td><td>Level 2</td></tr><tr><td>Investissement Québec financing facility</td><td>$ 1,356,228</td><td>$ 1,357,185</td><td>Level 2</td></tr></table>

<table><tr><td rowspan="2"></td><td colspan="4">Fair Value Measurements at February 28, 2019</td></tr><tr><td>Carrying Amount</td><td>Fair Value</td><td>Level in the hierarchy</td><td></td></tr><tr><td>Financial liabilities measured at fair value on a recurring basis:</td><td></td><td></td><td></td><td></td></tr><tr><td>Warrants (First Issuance)</td><td>$ 219,531</td><td>$ 219,531</td><td>Level 3</td><td></td></tr><tr><td>Financial liabilities measured at amortized cost:</td><td></td><td></td><td></td><td></td></tr><tr><td>Long-term debt</td><td>1,005,518</td><td>1,005,518</td><td>Level 2</td><td></td></tr><tr><td>Convertible notes (First Issuance)</td><td>2,495,636</td><td>2,650,000</td><td>Level 2</td><td></td></tr><tr><td>Convertible notes (Second Issuance)</td><td>$ 3,126,886</td><td>$ 3,150,000</td><td>Level 2</td><td></td></tr></table>

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 February 29, 2020 and February 28, 2019 were as follows:

<table><tr><td></td><td>February 29, 2020</td><td>February 28, 2019</td></tr><tr><td>Trade accounts payable</td><td>$ 814,081</td><td>$ 1,784,362</td></tr><tr><td>Trade accrued liabilities</td><td>593,789</td><td>330,805</td></tr><tr><td>Accrued employee compensation</td><td>634,807</td><td>554,204</td></tr><tr><td>Other accrued liabilities</td><td>40,021</td><td>862</td></tr><tr><td></td><td>$ 2,082,698</td><td>$ 2,670,233</td></tr></table>



## 8. 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 Indiana Ventures Holdings LP ("Indorama"), an indirect subsidiary of Indorama Ventures Public Company Limited, to retrofit their existing PET manufacturing facilities. The joint venture is expected to manufacture and commercialize sustainable Loop \( ^{TM} \)  branded PET resin and polyester fiber. The joint venture agreement details the establishment of an initial 20,700 metric tons per year facility. The joint venture agreed to double the capacity of the facility to 40,000 metric tons per year thus increasing the engineering work required. 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. Equity funding of the JV is also split on a 50/50 basis.

Under the Agreement, Indorama is required to contribute manufacturing knowledge and the Company is required to contribute its proprietary science and technology. Specifically, the Company will contribute an exclusive world-wide royalty-free license for ILT to use its proprietary technology to produce 100% sustainably produced PET resin and polyester fiber in addition to its cash contributions.

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 and October 21, 2019, Loop Innovations, LLC, the Company's wholly owned subsidiary, and Indorama, each contributed cash of $850,000, respectively, to ILT. As there were no other transactions during the year ended February 29, 2020, the carrying value of the equity investment as at February 28, 2019 was $850,000.

## 9. Long-Term Debt

## Investissement Québec financing facility

On July 24, 2019, the Company signed an agreement with Investissement Québec providing it with a financing facility equal to 63.45% of all eligible expenses incurred for the expansion of its pilot plant up to a maximum of $3,425,423 (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 installments. The loan bears interest at 2.36%. The Company, under the loan agreement, is required to pay fees representing 1% of the loan amount, $34,254 (CDN$46,000), to IQ. The Company has also agreed to issue to Investissement Québec warrants to purchase shares of common stock of the Company in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $342,542 (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. On February 21, 2020, the Company received $1,645,122 (CDN$2,209,234) based on its first claim made with Investissement Québec and issued a warrant to acquire 15,153 shares of common stock at a strike price of $11.00 per share to Investissement Québec in connection therewith. This was the first and only disbursement of the financing facility received as at February 29, 2020.

The financing facility is composed of three elements: the loan, the warrants and the interest discount. Stock warrants are freestanding instruments that provide the right to acquire/purchase a company's stock at some point in the future. Because warrants are freestanding instruments (even if issued along with debt or some other instruments), they must be recorded separately. The warrants meet the requirements of the scope exemption 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. The fair value of the warrants was determined to be $77,954.

The Company believes that the terms of the debt on a stand-alone basis are not representative of market given the risk-free interest rate of the loan which was based on the rate of a 10-year Canadian Bond at the time of the agreement. US GAAP for profit-oriented entities does not define government grants; nor is there specific guidance applicable to government grants. However, US practice may look to other sources of non-authoritative guidance. Under the Company's accounting policy for government grants, low-interest loans or interest-free loans from a government are initially measured at fair value and interest expense is recognized on the loan subsequently under the effective interest method, with the difference recognized as a government grant and recognized on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. The government grant portion of the first disbursement was recorded as a reduction of fixed assets.

The allocated fair values of the government grant and the warrants is recorded in the financial statements as a debt discount from the face amount of the loan and such discount is amortized over the expected term of the convertible note and is charged to interest expense.



The company established the fair value of the loan for the portion drawn on February 20, 2020 at $1,354,408 based on a discount rate of 5.45%. The discount rate used was based on the external financing from a Canadian bank.

Even if ASC 470-20-25-2 specifies that the entity issues debt with equity-classified stock purchase warrants, it uses the relative fair value method at time of issuance to allocate the consideration received to the debt and the warrants. Because the total fair value of the debt and the warrants are less than the cash received, the Company believes that the With and Without Method shall be used. The debt and warrants that are separately valued are recorded at their respective fair values and the excess of the total transaction proceeds over the sum of those fair value amounts is allocated to the remaining component, i.e. the government grant.

The financing facility is secured by a principal hypothec in the amount of $3,425,423 (CDN$4,600,000) and an additional hypothec in the amount of $685,085 (CDN$920,000) over the universality of its present and future, tangible and intangible movable property, excluding however all intellectual property. This hypothec is subordinate to all other hypotheses published on June 21, 2019 except for any hypotheses that the Company may have granted to a shareholder, a related person or related company, an insurer, a tenant, or a supplier.

The aggregate value of the Investissement Québec financing facility as shown on the consolidated balance sheet is broken down as follows:

<table><tr><td></td><td colspan="2">February 29, 2020</td><td>Issue Date</td></tr><tr><td>Investissement Québec loan</td><td>$ 1,356,228</td><td>$ 1,354,408</td><td></td></tr><tr><td>Government grant - assets</td><td>178,891</td><td>179,522</td><td></td></tr><tr><td>Warrants - equity</td><td>$ 77,954</td><td>$ 77,954</td><td></td></tr></table>

The Company recorded interest expense on the Investissement Québec loan from the issue date to February 29, 2020 in the amount of $968 (2019 – nil; 2018 – nil) and an accretion expense of $872 (2019 – nil; 2018 – nil).

## Term loan

On January 24, 2018, the Company obtained a credit facility, consisting of a $37,233 (CDN$50,000) credit card facility and a $1,042,520 (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 $4,344 (CDN$5,833) plus interest, until January 2021, at which time it will be subject to renewal. It includes an option allowing for the prepayment of the Loan without penalty. Interest paid amounted to $56,482 during the year ended February 29, 2020 (2019 - $54,040; 2018 - $5,125).

The credit facility is secured by a first ranking hypothec of Loop Canada Inc.'s bank accounts, receivables, inventory, incorporeal rights and property, plant and equipment. In addition, Loop Industries, Inc., Loop Canada Inc.'s parent company, has guaranteed the credit facility and has provided a postponement of any payments that may be made on intercompany loan amounts owed by Loop Canada Inc. to Loop Industries, Inc. The terms of the credit facility require the Company to comply with certain financial covenants. As at February 29, 2020 and February 28, 2019, the Company was in compliance with its financial covenants.

<table><tr><td></td><td colspan="2">February 29, 2020</td><td colspan="2">February 28, 2019</td></tr><tr><td>Instalment loan</td><td>$</td><td>933,924</td><td>$</td><td>1,005,518</td></tr><tr><td>Less current portion</td><td></td><td>52,126</td><td></td><td>53,155</td></tr><tr><td>Non-current portion</td><td>$</td><td>881,798</td><td>$</td><td>952,363</td></tr></table>



Principal repayments due on the Company’s long-term debt over the next five years are as follows:

<table><tr><td>Years ending</td><td>Amount</td></tr><tr><td>February 28, 2021</td><td>$ 52,126</td></tr><tr><td>February 28, 2022</td><td>52,126</td></tr><tr><td>February 28, 2023</td><td>52,126</td></tr><tr><td>February 29, 2024</td><td>287,140</td></tr><tr><td>February 28, 2025</td><td>287,140</td></tr><tr><td>Thereafter</td><td>1,848,388</td></tr><tr><td>Total</td><td>$ 2,579,046</td></tr></table>

## 10. Convertible Notes

## First Issuance

On November 13, 2018, the Company issued convertible 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 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 Company used the net proceeds of the November 2018 Private Placement for general corporate and working capital purposes. 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 initial 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 shall 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 shall 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 shall 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 will be 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 aggregate value of the November 2018 Notes and November 2018 Warrants as shown on the consolidated balance sheet are broken down as follows:

<table><tr><td></td><td>February 29, 2020</td><td>February 28, 2019</td><td>Issue Date</td></tr><tr><td>November 2018 Convertible Notes - Liability</td><td>-</td><td>$ 2,495,636</td><td>$ 2,495,636</td></tr><tr><td>Accrued interest - Liability</td><td>-</td><td>60,793</td><td>-</td></tr><tr><td>Deferred financing costs</td><td>-</td><td>(26,557)</td><td>(63,738)</td></tr><tr><td></td><td>-</td><td>2,529,872</td><td>2,431,898</td></tr><tr><td>November 2018 Warrants - Liability</td><td>-</td><td>$ 219,531</td><td>$ 154,364</td></tr></table>

The transaction costs relating 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.

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 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 notes from this issuance (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 $400,000 (the "January 2019 Private Placement"). The Company used the net proceeds of the January 2019 Private Placement for general corporate and working capital purposes.

The January 2019 Notes carried an interest rate of 8.00% per annum and had initial maturity dates of 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. The January 2019 Notes were converted at the January 2020 Maturity Date with no adjustment to the January 2020 Conversion Price.



With respect to accrued and unpaid interest at the January 2020 Maturity Date, the Investors had the option of receiving cash or common stock of the Company at that date. Upon the January 2020 Maturity Date, where the Investor elects 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. On the January 2020 Maturity Date, $312,000 in accrued interest was paid in cash and a value of $80,000 was paid in common stock (7,820 shares).

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 purchaseable 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 elected to take accrued and unpaid interest on the January 2019 Notes in common stock, additional warrants would 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"). Upon conversion, 3,911 additional warrants were issued in connection with accrued interest paid in common stock. 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. A BCF related to the issuance of a convertible note is recorded at the issue date. With the conversion feature on the January 2019 Notes being “in the money”, the beneficial conversion feature is measured using the intrinsic value method and is shown as a discount on the carrying amount of the convertible note and is credited to additional paid-in capital. The intrinsic value of the beneficial conversion feature at the issue 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 shown as a discount on the carrying amount of the convertible note and is credited to additional paid-in capital. The fair value of the warrants at the issue date was determined to be $757,704. The fair value of the additional warrants issued in connection with accrued interest paid in stock was also calculated using the Black-Scholes and amounted to $7,744.

The allocated fair values of the beneficial conversion feature and the warrants is recorded in the financial statements as a debt discount from the face amount of the convertible note and such discount is amortized over the expected term of the convertible note and is charged to interest expense.

The aggregate values of the beneficial conversion feature, the January 2019 Warrants and the January 2019 Notes are broken down as follows:

<table><tr><td></td><td>February 29, 2020</td><td>February 28, 2019</td><td>Issue Date</td></tr><tr><td>January 2019 Convertible Notes - Liability</td><td>$ -</td><td>$ 3,126,886</td><td>$ 2,941,381</td></tr><tr><td>Accrued interest - Liability</td><td>-</td><td>49,011</td><td>-</td></tr><tr><td>Deferred financing costs</td><td>-</td><td>(69,597)</td><td>(79,539)</td></tr><tr><td></td><td>-</td><td>3,106,300</td><td>2,861,842</td></tr><tr><td>January 2019 Beneficial Conversion Option - Equity</td><td>-</td><td>1,200,915</td><td>1,200,915</td></tr><tr><td>January 2019 Warrants - Equity</td><td>$ 727,148</td><td>$ 757,704</td><td>$ 757,704</td></tr></table>

The Company recorded accretion expense during the year ended February 29, 2020 of $1,773,114 (2019 – $185,505; 2018 - nil) and is included in operating expenses. The Company recorded interest expense on the January 2019 Notes for the year ended February 29, 2020 in the amount of $342,989 (2019 – $49,011; 2018 – nil).



The transaction costs relating to this issuance were split pro-rata between the January 2019 Notes, the beneficial conversion feature and the January 2019 Warrants. The portion relating to the January 2019 Notes were deferred and are being amortized over the life of the convertible notes. The portion relating to the beneficial conversion feature and January 2019 Warrants were recorded as share issuance expenses and offset against paid-in capital. Upon conversion of the notes, the liability portion and $80,000 in accrued interest were reversed to equity (common stock $61,28 and additional paid-in capital $4,979,939) and the BCF was reversed to additional paid-in capital.

## 11. Related Party Transactions

## Advances from controlling stockholder

Mr. Daniel Solomita, the Company’s controlling stockholder and CEO, and companies controlled by him, previously made advances to the Company totaling $278,472 as at February 28, 2017. The advances were unsecured, non-interest bearing with no formal terms of repayment. Also, as at February 28, 2017, accrued compensation totaling $360,000 was owed to Mr. Solomita. During the year ended February 28, 2018, the Company paid to Mr. Solomita or companies controlled by him, as applicable, an aggregate amount of $638,472. As at February 29, 2020 and February 28, 2019, no amounts were owed to Mr. Solomita or to companies controlled by him.

## Employment Agreement

On June 29, 2015, the Company entered into an employment agreement with Mr. Daniel Solomita, the Company's President and Chief Executive Officer ("CEO"). The employment agreement is for an indefinite term.

On July 13, 2018, the Company and Mr. Solomita entered into an amendment and restatement of the employment agreement. The amended and restated employment agreement provides for an increase in Mr. Solomita's base salary and eligibility to participate in an annual cash bonus subject to performance measures. Mr. Solomita's base salary and bonus opportunity are retroactive effective to March 1, 2018.

In addition, the employment agreement provided for a long-term incentive grant of 4,000,000 shares of the Company's common stock, in tranches of one million shares each, upon the achievement of four performance milestones. This was modified to provide a grant of 4,000,000 restricted stock units covering 4,000,000 shares of the Company's common stock while the performance milestones remained the same. The Company's board of directors approved the grant of the restricted stock units, effective and contingent upon approval by the Company's shareholders at the Company's 2019 annual meeting, of an increase in the number of shares available for grant under the Plan. Such approval was granted by the Company's shareholders at the Company's 2019 annual meeting. The restricted stock units vest upon the achievement of applicable performance milestones, as follows:

i) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company's securities are listed on an exchange or the OTCQX tier of the OTC Markets;

ii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of PTA/EG or a PET;

iii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company's first full-scale production facility is in commercial operation; and

iv) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company's second full-scale production facility is in commercial operation.

During the year ended February 28, 2017, it became probable that the first milestone would be met. Accordingly, 1,000,000 performance incentive shares of common stock with a fair value of $800,000 were earned and are issuable to Mr. Solomita. This amount was reflected as stock-based compensation expense during the year ended February 28, 2017 based on the grant date fair value. The 1,000,000 performance incentive shares of common stock have been replaced by restricted stock units and are issuable to Mr. Solomita, 200,000 of which were settled in October 2019. During the years ended February 29, 2020, February 28, 2019 and February 28, 2018, no other milestones became probable of being met and, accordingly, the Company did not record any additional compensation expense.



## 12. Stockholders' Equity

## Series A Preferred Stock

Mr. Solomita’s amended employment agreement of February 15, 2016 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 18,800,000 shares of common stock and 1 share of Series A Preferred Stock provides him with 77.8% 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 By-laws;

(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 By-laws 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);

(I) 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

<table><tr><td>For the year ended February 29, 2020</td><td>Number of shares</td><td>Amount</td></tr><tr><td>Balance, February 28, 2019</td><td>33,805,706</td><td>$ 3,381</td></tr><tr><td>Issuance of shares for cash</td><td>4,693,567</td><td>469</td></tr><tr><td>Issuance of shares upon vesting of restricted stock units</td><td>244,884</td><td>25</td></tr><tr><td>Issuance of shares upon the cashless exercise of stock options</td><td>69,101</td><td>7</td></tr><tr><td>Issuance of shares upon the exercise of warrants</td><td>15,432</td><td>1</td></tr><tr><td>Issuance of shares upon settlement of legal matter</td><td>150,000</td><td>15</td></tr><tr><td>Issuance of shares upon conversion of convertible notes</td><td>932,084</td><td>94</td></tr><tr><td>Balance, February 29, 2020</td><td>39,910,774</td><td>$ 3,992</td></tr></table>

<table><tr><td>For the year ended February 28, 2019</td><td>Number of shares</td><td>Amount</td></tr><tr><td>Balance, February 28, 2018</td><td>33,751,088</td><td>$ 3,376</td></tr><tr><td>Cashless exercise of stock options</td><td>18,821</td><td>2</td></tr><tr><td>Issuance of shares upon vesting of restricted stock units</td><td>35,797</td><td>3</td></tr><tr><td>Balance, February 28, 2019</td><td>33,805,706</td><td>$ 3,381</td></tr></table>

During the year ended February 29, 2020, 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 July 17, 2019, the Company issued 15,432 shares of common stock upon the exercise of warrants;

(vi) On January 16, 2020 and January 21, 2020, the Company converted convertible notes with a face value of $4,900,000 at a conversion price of $8.10 plus $80,000 of accrued interest at a conversion price of $10.23 into a total of 612,758 shares of common stock;

(vii) The Company issued 244,884 shares of common stock, in aggregate, upon the vesting of restricted stock units related to employees and Directors; and

(viii) The Company issued 69,101 shares of common stock, in aggregate, upon the cashless exercise of stock options related to employees;

During the year ended February 28, 2019, the Company recorded the following common stock transactions:

(i) the Company issued 18,821 shares of common stock upon the cashless exercise of stock options related to employees; and

(ii) the Company issued 35,797 shares of common stock upon the vesting of restricted stock units related to employees and Directors.



## 13. Share-Based Payments

## Stock Options

The following tables summarizes the continuity of the Company’s stock options during the years ended February 29, 2020 and February 28, 2019:

<table><tr><td rowspan="2"></td><td colspan="3">2020</td><td colspan="3">2019</td></tr><tr><td>Number of stock options</td><td>Weighted average exercise price</td><td>Number of stock options</td><td>Weighted average exercise price</td><td>Number of stock options</td><td>Number of stock exercise price</td></tr><tr><td>Outstanding, beginning of year</td><td>1,962,400</td><td>$ 7.53</td><td>2,374,581</td><td>$ 7.99</td><td></td><td></td></tr><tr><td>Granted</td><td>-</td><td>-</td><td>39,902</td><td>9.67</td><td></td><td></td></tr><tr><td>Exercised</td><td>(75,000)</td><td>0.80</td><td>(20,000)</td><td>0.80</td><td></td><td></td></tr><tr><td>Forfeited</td><td>(39,902)</td><td>9.67</td><td>(369,583)</td><td>11.49</td><td></td><td></td></tr><tr><td>Expired</td><td>(260,417)</td><td>13.59</td><td>(62,500)</td><td>4.80</td><td></td><td></td></tr><tr><td>Outstanding, end of year</td><td>1,587,081</td><td>$ 6.81</td><td>1,962,400</td><td>$ 7.53</td><td></td><td></td></tr><tr><td>Exercisable, end of year</td><td>986,248</td><td>$ 6.89</td><td>1,126,664</td><td>$ 7.72</td><td></td><td></td></tr></table>

<table><tr><td rowspan="2">Exercise Price</td><td colspan="2">2020</td><td colspan="2">2019</td></tr><tr><td>Number of stock options outstanding</td><td>Weighted average remaining life</td><td>Number of stock options outstanding</td><td>Weighted average remaining life</td></tr><tr><td>$ 0.80</td><td>507,081</td><td>5.75</td><td>582,081</td><td>6.76</td></tr><tr><td>$ 5.25</td><td>380,000</td><td>7.49</td><td>380,000</td><td>8.50</td></tr><tr><td>$ 8.75</td><td>-</td><td>-</td><td>26,693</td><td>10.00</td></tr><tr><td>$ 11.52</td><td>-</td><td>-</td><td>13,209</td><td>9.36</td></tr><tr><td>$ 12.00</td><td>700,000</td><td>7.54</td><td>700,000</td><td>8.54</td></tr><tr><td>$ 13.49</td><td>-</td><td>-</td><td>193,750</td><td>0.17</td></tr><tr><td>$ 13.89</td><td>-</td><td>-</td><td>66,667</td><td>0.01</td></tr><tr><td>Outstanding, end of year</td><td>1,587,081</td><td>6.96</td><td>1,962,400</td><td>6.91</td></tr><tr><td>Exercisable, end of year</td><td>986,248</td><td>6.97</td><td>1,126,664</td><td>5.99</td></tr></table>

The Company applies the fair value method of accounting for stock-based compensation awards granted. Fair value is calculated based on a Black-Scholes option pricing model. The principal components of the pricing model were as follows:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Exercise price</td><td>$ -</td><td>$3.75 to $11.52</td><td>$5.25 to $13.89</td></tr><tr><td></td><td></td><td>2.70% to</td><td>1.46% to</td></tr><tr><td>Risk-free interest rate</td><td>-</td><td>2.82%</td><td>2.15%</td></tr><tr><td>Expected dividend yield</td><td>-</td><td>0%</td><td>0%</td></tr><tr><td>Expected volatility</td><td>-</td><td>78%</td><td>80% to 94%</td></tr><tr><td>Expected life</td><td>-</td><td>6.5 to 7 years</td><td>3 to 6 years</td></tr></table>

There were no new issuances of stock options for the year ended February 29, 2020.

During the year ended February 29, 2020, stock-based compensation expense attributable to stock options amounted to $2,178,948 (2019 - $3,176,786; 2018 - $6,281,319) and is included in operating expenses.



## Restricted Stock Units

The following table summarizes the continuity of the restricted stock units (“RSUs”) during the years February 29, 2020 and February 28, 2019:

<table><tr><td rowspan="2"></td><td colspan="2">2020</td><td colspan="2">2019</td></tr><tr><td>Number of units</td><td>Weighted average fair value price</td><td>Number of units</td><td>Weighted average fair value price</td></tr><tr><td>Outstanding, beginning of year</td><td>402,868</td><td>$ 8.77</td><td>34,102</td><td>$ 13.00</td></tr><tr><td>Granted</td><td>4,114,567</td><td>1.06</td><td>406,188</td><td>8.80</td></tr><tr><td>Settled</td><td>(244,884)</td><td>2.54</td><td>(35,797)</td><td>13.06</td></tr><tr><td>Forfeited</td><td>(53,750)</td><td>9.82</td><td>(1,625)</td><td>12.31</td></tr><tr><td>Outstanding, end of year</td><td>4,218,802</td><td>$ 1.60</td><td>402,868</td><td>$ 8.77</td></tr><tr><td>Outstanding vested, end of year</td><td>831,684</td><td>$ 1.19</td><td>-</td><td>$ -</td></tr></table>

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 closing share price at grant date multiplied by the number of restricted stock unit awards granted.

During the year ended February 29, 2020, stock-based compensation attributable to RSUs amounted to $1,290,443 (2019 - $808,374; 2018 - $265,994) and is included in operating expenses.

## 14. 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 lesser 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. A discretionary share reserve increase of 500,000 shares was approved at the 2019 Annual Meeting of Stockholders held on June 27, 2019. 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 years ended February 29, 2020 and February 28, 2019:

<table><tr><td rowspan="2"></td><td>2020</td><td>2019</td></tr><tr><td>Number of units</td><td>Number of units</td></tr><tr><td>Outstanding, beginning of year</td><td>3,223,516</td><td>1,735,898</td></tr><tr><td>Share reserve increase</td><td>2,000,000</td><td>1,500,000</td></tr><tr><td>Units granted</td><td>(4,114,567)</td><td>(446,090)</td></tr><tr><td>Units forfeited</td><td>93,652</td><td>371,208</td></tr><tr><td>Units expired</td><td>97,917</td><td>62,500</td></tr><tr><td>Outstanding, end of year</td><td>1,300,518</td><td>3,223,516</td></tr></table>



## 15. Warrants

<table><tr><td rowspan="2"></td><td colspan="2">2020</td><td colspan="2">2019</td></tr><tr><td>Number of warrants</td><td>Weighted average exercise price</td><td>Number of warrants</td><td>Weighted average exercise price</td></tr><tr><td>Outstanding, beginning of year</td><td>802,469</td><td>$ 10.74</td><td>140,667</td><td>$ 12.00</td></tr><tr><td>Issued</td><td>4,272,294</td><td>10.91</td><td>802,469</td><td>10,74</td></tr><tr><td>Exercised</td><td>(15,432)</td><td>9.32</td><td>-</td><td>-</td></tr><tr><td>Expired</td><td>-</td><td>-</td><td>(140,667)</td><td>12.00</td></tr><tr><td>Outstanding, end of year</td><td>5,059,331</td><td>$ 10.92</td><td>802,469</td><td>$ 10.74</td></tr></table>

The expiration dates of the warrants outstanding as at February 29, 2020 are as follows:

<table><tr><td rowspan="2"></td><td colspan="2">2020</td></tr><tr><td>Number of warrants</td><td>Weighted average exercise price</td></tr><tr><td>August 25, 2020</td><td>200,000</td><td>$ 11.00</td></tr><tr><td>October 5, 2020</td><td>159,663</td><td>8.55</td></tr><tr><td>January 15, 2021</td><td>281,689</td><td>9.32</td></tr><tr><td>January 21, 2021</td><td>9,259</td><td>9.32</td></tr><tr><td>February 25, 2021</td><td>300,000</td><td>12.00</td></tr><tr><td>June 14, 2022</td><td>4,093,567</td><td>11.00</td></tr><tr><td>February 21, 2023</td><td>15,153</td><td>11.00</td></tr><tr><td>Outstanding, end of year</td><td>5,059,331</td><td>$ 10.89</td></tr></table>

## 16. Income Taxes

The components of the Company’s loss before taxes are summarized below:

<table><tr><td rowspan="2"></td><td colspan="4">Years ended February 28,</td></tr><tr><td>February 29, 2020</td><td>February 28, 2019</td><td>February 28, 2018</td><td></td></tr><tr><td>U.S. operations</td><td>$ (4,220,000)</td><td>$ (8,948,305)</td><td>$ (8,509,651)</td><td></td></tr><tr><td>Foreign operations</td><td>(10,285,455)</td><td>(8,588,106)</td><td>(5,527,727)</td><td></td></tr><tr><td>Loss before taxes</td><td>$ (14,505,455)</td><td>$ (17,536,411)</td><td>$ (14,037,378)</td><td></td></tr></table>



A reconciliation from the statutory U.S. income tax rate and the Company's effective income tax rate, as computed on loss before taxes, is as follows:

<table><tr><td></td><td>February 29, 2020</td><td>Years ended February 28, 2019</td><td>February 28, 2018</td></tr><tr><td>Statutory Federal rate</td><td>21%</td><td>21%</td><td>32.7%</td></tr><tr><td>Federal income tax at statutory rate</td><td>$ (3,046,145)</td><td>$ (3,682,646)</td><td>$ (4,585,497)</td></tr><tr><td>Effect of foreign jurisdiction</td><td>(424,593)</td><td>(308,046)</td><td>320,769</td></tr><tr><td>Non-deductible expenses</td><td>1,069,845</td><td>888,749</td><td>2,169,384</td></tr><tr><td>Tax credits related to research and development expenditures</td><td>(446,967)</td><td>(387,326)</td><td>(146,757)</td></tr><tr><td>Impact of Tax Cuts and Jobs Act Enactment</td><td>-</td><td>-</td><td>876,812</td></tr><tr><td>Unrecognized tax benefit of net operating losses and other available deductions</td><td>2,847,860</td><td>3,489,269</td><td>1,365,289</td></tr><tr><td>Effective income tax expense</td><td>$ -</td><td>$ -</td><td>$ -</td></tr><tr><td>Current</td><td>$ -</td><td>$ -</td><td>$ -</td></tr><tr><td>Deferred</td><td>$ -</td><td>$ -</td><td>$ -</td></tr></table>

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“U.S. tax reform”) that lowers the statutory tax rate on U.S. earnings to 21%, taxes historic foreign earnings at a reduced rate of tax, establishes a territorial tax system and enacts new taxes associated with global operations.

The impact of enactment of U.S. tax reform was recorded on a provisional basis as the legislation provides for additional guidance to be issued by the U.S. Treasury Department on several provisions including the computation of the transition tax. The Company’s Controlled Foreign Corporations (“CFCs”) were deficit earnings & profits corporations, as such no income was recognized by Loop Industries during the year ended February 28, 2018. No further inclusions were made thereafter based on guidance issued. Additional guidance may be issued after February 29, 2020 and any resulting effects will be recorded at that time.

Additionally, as part of tax reform, the U.S. has enacted a minimum tax on foreign earnings (“global intangible low-taxed income”). The Company has not made an accrual for the deferred tax aspects of this provision as Loop Industries’ CFCs have suffered net tested losses.

With the enactment of U.S. tax reform, we recorded, for the year ended February 28, 2018, tax expense of $876,812 to reflect the revaluation of deferred taxes. For the years ended February 28, 2019 and February 29, 2020, we finalized our provisional estimate of the enactment of U.S. tax reform without additional tax expense.

On March 27, the US government signed the Coronavirus Aid, Relief and Economic Security (“CARES”) Act into law, a $2 trillion relief package to provide support to individuals, businesses and government organizations during the COVID-19 pandemic. The income tax provisions contained in the CARES Act are not likely to have an impact for the Company.

The Company has net operating loss carry forwards of approximately 2020 - $16,074,873 (2019 - $14,473,810) for U.S. Federal income tax purposes expiring between 2035 and 2037, post 2018 net operating losses may be carried forward indefinitely. The Company has net operating loss carry forwards for Canadian Federal and Québec tax purposes of approximately 2020 - $14,670,709 (CDN$19,701,295) and 2019 - $7,495,099 (CDN$10,065,169), expiring between 2037 and 2040. Realization of future tax assets is dependent on future earnings, the timing and amount of which are uncertain. Accordingly, the net future tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $2,896,093 and $3,270,369, respectively, for the years ended February 29, 2020 and 2019. The Company has provided a full valuation allowance on the deferred tax assets as a result of the uncertainty regarding the probability of its realization.



The Company has approximately $3,258,598 (CDN$4,375,971), 2019 - $3,477,574 (CDN$4,670,034) of research and development expenditures for Canadian Federal and Québec provincial purposes that are available to reduce taxable income in future years and have an unlimited carry forward period, the benefit of which has not been reflected in these financial statements. Research and development expenditures are subject to audit by the taxation authorities and accordingly, these amounts may vary.

The tax effect of temporary differences between US GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:

<table><tr><td rowspan="2"></td><td colspan="2">As at</td></tr><tr><td>February 29, 2020</td><td>February 28, 2019</td></tr><tr><td>Deferred tax assets</td><td></td><td></td></tr><tr><td>Canada net operating loss carry forward</td><td>$ 3,905,836</td><td>$ 2,026,984</td></tr><tr><td>U.S. net operating loss carry forward</td><td>3,376,117</td><td>3,165,937</td></tr><tr><td>Accrual and reserves</td><td>186,985</td><td>118,309</td></tr><tr><td>Intangibles</td><td>92,292</td><td>-</td></tr><tr><td>Property, plant and equipment</td><td>140,538</td><td>-</td></tr><tr><td>Research and development expenditures and credits</td><td>1,426,470</td><td>1,058,010</td></tr><tr><td>Other</td><td>126,362</td><td>38,418</td></tr><tr><td>Deferred tax assets</td><td>9,254,600</td><td>6,407,658</td></tr><tr><td>Deferred tax liabilities</td><td></td><td></td></tr><tr><td>Property, plant and equipment</td><td>-</td><td>(41,636)</td></tr><tr><td>Intangibles</td><td>(27,267)</td><td>(34,785)</td></tr><tr><td>Accrual and reserves</td><td>-</td><td>-</td></tr><tr><td>Investment tax credits</td><td>-</td><td>-</td></tr><tr><td>Unrealized foreign exchange</td><td>-</td><td>-</td></tr><tr><td>Deferred tax liabilities</td><td>(27,267)</td><td>(76,421)</td></tr><tr><td>Deferred tax assets, net</td><td>9,227,333</td><td>6,331,239</td></tr><tr><td>Valuation allowance</td><td>(9,227,333)</td><td>(6,331,239)</td></tr><tr><td>Deferred tax assets, net</td><td>$ -</td><td>$ -</td></tr></table>

Assessment of the amount of value assigned to the Company’s deferred tax assets under the applicable accounting

rules is judgmental. The Company is required to consider all available positive and negative evidence in evaluating the likelihood that the Company will be able to realize the benefit of its deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of the Company's deferred tax assets is dependent on generating sufficient taxable income in future periods. Management does not believe that it is more likely than not that future taxable income will be sufficient to allow it to recover substantially all of the value assigned to its deferred tax assets. Accordingly, the Company has provided for a valuation allowance of the Company's deferred tax asset.
The tax years subject to examination by major tax jurisdiction include the years 2016 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2016 and forward for the Canadian jurisdiction.



## 17. Interest and Other Finance Costs

Interest and other finance costs for the years ended February 29, 2020, February 28, 2019 and February 28, 2018 are as follows:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Interest on long-term debt</td><td>$ 57,450</td><td>$ 54,040</td><td>$ 5,125</td></tr><tr><td>Interest on convertible notes</td><td>362,426</td><td>109,804</td><td>-</td></tr><tr><td>Accretion expense</td><td>1,892,185</td><td>185,505</td><td>-</td></tr><tr><td>Amortization of deferred finance costs</td><td>96,155</td><td>47,123</td><td>-</td></tr><tr><td>Revaluation of warrants</td><td>8,483</td><td>65,167</td><td>-</td></tr><tr><td>Loss on revaluation of foreign exchange contracts</td><td>27,129</td><td>-</td><td>-</td></tr><tr><td>Gain on conversion of November 2018 Notes</td><td>(232,565)</td><td>-</td><td>-</td></tr><tr><td>Other</td><td>12,041</td><td>5,811</td><td>-</td></tr><tr><td></td><td>$ 2,223,304</td><td>$ 467,450</td><td>$ 5,125</td></tr></table>

## 18. Legal Settlement

On January 27, 2017, two individuals (“Plaintiffs”), filed a claim against the Company in the Los Angeles Superior Court (“Court”), seeking damages for breach of implied covenant of good faith and fair dealing, breach of contract, and promissory fraud, asserting entitlement to shares of the Company’s common stock. On February 25, 2019, the Company and the Plaintiffs entered into a settlement agreement and release (“Settlement Agreement”), which sets forth the parties’ agreement in principle for settlement. Through the Settlement Agreement, Plaintiffs, the Company and certain other parties to the Settlement Agreement agreed to mutual releases of any and all claims.

Pursuant to the terms of the Settlement Agreement, without agreeing that any of the Plaintiffs' claims have merit, the Company agreed to issue to the Plaintiffs 150,000 shares of the Company's common stock ("Plaintiff Common Shares") and 500,000 warrants exercisable for shares of the Company's common stock ("Plaintiff Warrants"). The Plaintiff Common Shares will be restricted upon issuance, but within 180 days following the date of the Settlement Agreement, the Company has agreed to file and use its reasonable best efforts to have declared effective a registration statement to register the Plaintiff Common Shares and the shares of the Company's common stock underlying the Plaintiff Warrants. The Company also agreed to maintain such registration statement for 2 years from the date of effectiveness unless the Plaintiffs sell or otherwise transfer the shares covered by such registration statement prior to the two-year anniversary. 300,000 of the Plaintiff Warrants are exercisable for shares of the Company's common stock at an exercise price of $12.00 per share for a period of 24 months following the date of the Settlement Agreement. The remaining 200,000 Plaintiff Warrants are exercisable for shares of the Company's common stock at an exercise price of $11.00 per share for a period of 24 months, but in the event the Company's 5-day average trading price during any period in the first 18 months following the date of the Settlement Agreement is above $11 per share, then the exercise term of such warrants shall automatically be reduced to 18 months instead of 24 months.

In connection with the legal settlement, the Company recorded an expense in the amount of $4,041,627, based on the fair value of the Plaintiff Common Shares and Plaintiff Warrants that were issued on February 25, 2019, under the terms of the Settlement Agreement.

## 19. Commitments

The Company has entered into multi-year supply agreements with PepsiCo, Coca-Cola's Cross Enterprise Procurement Group, Danone SA, L'OCCITANE en Provence and L'Oréal that will enable them to purchase Loop™ PET resin from the Company's joint venture facility with Indorama in the United States.



## 20. Subsequent Event

## Potential impact of the COVID-19 pandemic

The Company announced on March 25, 2020, that due to the COVID-19 pandemic the Québec provincial government issued an order that all non-essential business and commercial activity in the province is required to shut down until April 13 and has since been extended it to May 4. The order provides exemptions that allow the Company to continue reduced operations at the pilot plant.

## Capital contribution to the joint venture

On March 13, 2020, Loop Innovations, LLC, a wholly-owned subsidiary of Loop Industries, Inc. contributed $650,000 to Indorama Loop Technologies, LLC, the joint venture with Indorama.

## ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE

None.

## ITEM 9A. CONTROLS AND PROCEDURES

## Disclosure Controls and Procedures

Under the supervision 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 at the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, 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 assessment, management determined that the Company's disclosure controls and procedures over financial reporting as of February 29, 2020 were effective.

## Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP in the United States of America and includes those policies and procedures that:

● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

● Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our Chief Executive Officer and Chief Financial Officer have performed an evaluation of our internal control over financial reporting under the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective at February 29, 2020. Based on this assessment, management determined that the Company’s internal control over financial reporting as of February 29, 2020 was effective.



## Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal year that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

## Inherent Limitation on the Effectiveness of Internal Controls

The effectiveness of any system of internal controls over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting can only provide reasonable, not absolute, assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.

## ITEM 9B. OTHER INFORMATION

None.



## ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item concerning our directors is incorporated by reference to the information set forth in the section titled "Election of Directors" in our Proxy Statement. Information required by this item concerning our executive officers is incorporated by reference to the information set forth in the section entitled "Executive Officers" in our Proxy Statement. Information required by this item concerning our audit committee and our security holder director nomination procedures is incorporated by reference to the information set forth in the section entitled "Corporate Governance" in our Proxy Statement. Information regarding Section 16 reporting compliance is incorporated by reference to the information set forth in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement.

Our Board of Directors adopted a Code of Ethics for all of our directors, officers and employees on January 25, 2017. A copy of our Code of Ethics is available under Corporate Governance Documents in the Investors section of our website, and via the following hyperlink: https://www.loopindustries.com/en/investors/corporate-governance. To date, there have been no waivers under our Code of Ethics. We will post waivers, if and when granted, of our Code of Ethics on our website at www.loopindustries.com. The information contained on, or that can be accessed through, our website is not a part of this Annual Report on Form 10-K.

## ITEM 11. EXECUTIVE COMPENSATION

The information required by this item regarding director’s compensation table and compensation risk management disclosures are incorporated by reference to the information set forth in the section titled “Corporate Governance” in our Proxy Statement. All other information required by this item regarding executive compensation is incorporated by reference to the information set forth in the section titled “Executive Compensation” in our Proxy Statement.

## Employment Agreement

On April 30, 2020, the Company and Mr. Solomita entered into an amendment of Mr. Solomita's employment agreement. The amendment clarified the milestones consistent with the shift in the Company's business from the production of terephthalate to the production of dimethyl terephthalate, another proven monomer of PET plastic that is far simpler to purify.

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference to the information set forth in the sections titled "Security Ownership of Certain Beneficial Owners and Management" and "Executive Compensation" in our Proxy Statement.

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

It is the policy of the Board that all transactions required to be reported pursuant to Item 404 of Regulation S-K be subject to approval by the Audit Committee of the Board. In furtherance of relevant Nasdaq rules and our commitment to corporate governance, the charter of the Audit Committee provides that the Audit Committee shall review and approve any proposed related party transactions including, transactions required to be reported pursuant to Item 404 of Regulation S-K for potential conflict of interest situations. The Audit Committee reviews the material facts of all transactions that require the committee's approval and either approves or disapproves of the transaction. In determining whether to approve a transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances.

The additional information required by this item regarding director independence, certain relationships and related party transactions is incorporated by reference to the information set forth in the sections titled “Transactions with Related Persons” and “Corporate Governance” in our Proxy Statement.

## ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this section is incorporated by reference from the information in the section entitled “Ratification of Appointment of Independent Registered Public Accounting Firm” in our Proxy Statement.



## ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

## (1) Financial Statements

The response to this portion of Item 15 is set forth under Item 8 above.

(2) Financial Statement Schedules.

All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto set forth under Item 8 above.

## (3) Exhibits.

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

Exhibit Index

<table><tr><td rowspan="2">Number</td><td rowspan="2">Description</td><td colspan="3">Incorporated by Reference</td></tr><tr><td>Form</td><td>File No.</td><td>Filing Date</td></tr><tr><td>2.1</td><td>Share Exchange Agreement, dated June 29, 2015, by and among First American Group Inc., Loop Holdings, Inc., and the stockholders of Loop Holdings, Inc.</td><td>8-K</td><td>000-54768</td><td>June 30, 2015</td></tr><tr><td>3.1</td><td>Articles of Incorporation, as amended to date</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td></tr><tr><td>3.2</td><td>By-laws, as amended to date</td><td>8-K</td><td>000-54768</td><td>April 10, 2018</td></tr><tr><td>4.1</td><td>Description of Securities</td><td>10-K</td><td>001-38301</td><td>May 8, 2019</td></tr><tr><td>4.2</td><td>Form of Amendment No. 1 to the January 15, 2019 Note Purchase Agreement, dated April 4, 2019.</td><td>8-K</td><td>001-38301</td><td>April 10, 2019</td></tr><tr><td>4.3</td><td>Form of Amendment to 2019 Warrant, dated April 4, 2019.</td><td>8-K</td><td>001-38301</td><td>April 10, 2019</td></tr><tr><td>4.4</td><td>Form of Amendment and Conversion Agreement, dated April 5, 2019.</td><td>8-K</td><td>001-38301</td><td>April 10, 2019</td></tr><tr><td>4.5</td><td>Form of Amendment to November 2018 Warrant, dated April 8, 2019.</td><td>8-K</td><td>001-38301</td><td>April 10, 2019</td></tr><tr><td>4.6</td><td>Form of Convertible Promissory Note, dated January 15, 2019 (under Note and Warrant Purchase Agreement).</td><td>8-K</td><td>001-38301</td><td>January 16, 2019</td></tr><tr><td>4.7</td><td>Form of Warrant, dated January 15, 2019 (under Note and Warrant Purchase Agreement).</td><td>8-K</td><td>001-38301</td><td>January 16, 2019</td></tr><tr><td>4.8</td><td>Form of Note and Warrant Purchase Agreement, dated November 13, 2018.</td><td>8-K</td><td>001-38301</td><td>November 13, 2018</td></tr><tr><td>4.9</td><td>Form of Note, dated November 13, 2018 (under Note and Warrant Purchase Agreement).</td><td>8-K</td><td>001-38301</td><td>November 13, 2018</td></tr><tr><td>4.10</td><td>Form of Warrant, dated January 11, 2018</td><td>8-K</td><td>001-38301</td><td>January 18, 2018</td></tr><tr><td>4.11</td><td>Form of Indenture</td><td>S-3</td><td>333-226789</td><td>August 10, 2018</td></tr><tr><td>4.12</td><td>2017 Equity Incentive Plan</td><td>10-Q</td><td>000-54768</td><td>October 11, 2017</td></tr><tr><td>4.13</td><td>Form of Stock Option Agreement</td><td>10-Q</td><td>000-54768</td><td>October 11, 2017</td></tr><tr><td>4.14</td><td>Form of Restricted Stock Unit Agreement</td><td>10-Q</td><td>000-54768</td><td>October 11, 2017</td></tr></table>



<table><tr><td>10.1</td><td>Intellectual Property Assignment Agreement dated October 27, 2014, as supplemented April 10, 2015, by and among Hatem Essaddam, Loop Holdings, Inc. and Daniel Solomita.</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>10.1</td></tr><tr><td>10.2</td><td>Subscription Agreement, dated May 22, 2015, by and between 9121820 Canada Inc. and Loop Holdings, Inc.</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>10.2</td></tr><tr><td>10.3</td><td>Technology Transfer Agreement, dated June 22, 2015 by and between 8198381 Canada Inc. and Loop Holdings, Inc.</td><td>8-K</td><td>000-54768</td><td>June 30, 2015</td><td>10.7</td></tr><tr><td>10.4</td><td>Amended and Restated Employment Agreement, dated July 13, 2018, by and between Loop Industries, Inc. and Daniel Solomita.</td><td>8-K</td><td>001-38301</td><td>July 13, 2018</td><td>10.12</td></tr><tr><td>10.5</td><td>Master Services Agreement, dated September 1, 2015, by and between 8198381 Canada Inc. and Loop Holdings, Inc.</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>10.5</td></tr><tr><td>10.6</td><td>Purchase and Sale Agreement, by and between 8198381 Canada Inc. and Loop Canada Inc. (formerly 9449507 Canada Inc.)</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>10.7</td></tr><tr><td>10.7†</td><td>Agreement for Services, dated February 28, 2017, by and between Loop Industries, Inc. and Drinkfinity USA, Inc.</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>10.8</td></tr><tr><td>10.8</td><td>Articles of Merger of Loop Holdings, Inc. into Loop Industries, Inc.</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>10.9</td></tr><tr><td>10.9</td><td>Form of Indemnification Agreement</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>10.10</td></tr><tr><td>10.10</td><td>Securities Purchase Agreement, dated February 27, 2019, by and between Loop Industries, Inc. and the purchaser identified therein.</td><td>8-K</td><td>001-8301</td><td>February 28, 2019</td><td>10.1</td></tr><tr><td>10.11</td><td>Form of Note and Warrant Purchase Agreement, dated January 15, 2019.</td><td>8-K</td><td>001-8301</td><td>January 16, 2019</td><td>10.1</td></tr><tr><td>10.12</td><td>Master Term and Conditions Supply Agreement, dated November 23, 2018, by and between Loop Industries, Inc. and Coca-Cola Cross Enterprise Procurement Group.</td><td>8-K</td><td>001-8301</td><td>November 29, 2018</td><td>10.1</td></tr><tr><td>10.13</td><td>Form of Warrant, dated November 13, 2018 (under Note and Warrant Purchase Agreement).</td><td>8-K</td><td>001-8301</td><td>November 13, 2018</td><td>10.1</td></tr><tr><td>10.14</td><td>Terms and Conditions Agreement, dated October 9, 2018, by and between Loop Industries, Inc. and Pepsi-Cola Advertising and Marketing, Inc.</td><td>8-K</td><td>001-8301</td><td>October 15, 2018</td><td>10.1</td></tr><tr><td>10.15</td><td>Limited Liability Company Agreement, dated September 24, 2018, by and between Loop Industries, Inc. and Indorama Loop Technologies, LLC.</td><td>8-K</td><td>001-8301</td><td>September 28, 2018</td><td>10.1</td></tr><tr><td>10.16</td><td>License Agreement, dated September 24, 2018 by and between Loop Industries, Inc. and Indorama Loop Technologies, LLC.</td><td>8-K</td><td>001-8301</td><td>September 28, 2018</td><td>10.2</td></tr><tr><td>10.17</td><td>Marketing Agreement, dated September 24, 2018, by and between Loop Industries, Inc. and Indorama Loop Technologies, LLC.</td><td>8-K</td><td>001-8301</td><td>September 28, 2018</td><td>10.3</td></tr><tr><td>10.18</td><td>Form of Common Stock Subscription Agreement</td><td>8-K</td><td>001-8301</td><td>January 18, 2018</td><td>10.1</td></tr><tr><td>10.19</td><td>Employment Agreement, dated April 10, 2018, by and between Loop Canada Inc. and Nelson Switzer</td><td>10-Q/A</td><td>000-54768</td><td>July 11, 2018</td><td>10.12</td></tr><tr><td>10.20</td><td>Employment Agreement, dated December 19, 2018, by and between Loop Canada Inc. and Nelson Gentiletti.</td><td>10-K</td><td>000-54768</td><td>May 8, 2019</td><td>10.35</td></tr><tr><td>10.21</td><td>Employment Agreement May 28, 2019 by and between Loop Canada Inc. and Michel Megelas</td><td colspan="4">Filed herewith</td></tr><tr><td>10.22</td><td>Amendment No. 1, dated April 30, 2020, to the Amended and Restated Employment Agreement by and between Loop Industries, Inc. and Daniel Solomita, dated July 13, 2018.</td><td colspan="4">Filed herewith</td></tr></table>



<table><tr><td>14</td><td>Code of Ethics</td><td>8-K</td><td>000-54768</td><td>Jan 31, 2017</td><td>14.1</td></tr><tr><td>21.1</td><td>Subsidiaries of Registrant</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>21.1</td></tr><tr><td>23.1</td><td>Consent of PricewaterhouseCoopers LLP regarding the registration on form S-3 filed with the SEC on October 8, 2019</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>23.2</td><td>Consent of PricewaterhouseCoopers LLP regarding the registration on form S-8 files with the SEC on July 10, 201</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>24.1</td><td>Power of Attorney (contained on signature page to the previously filed Annual Report on Form 10-K)</td><td>10-K</td><td>000-54768</td><td>May 30, 2017</td><td>24.1</td></tr><tr><td>31.1</td><td>Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>31.2</td><td>Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>32.1</td><td>Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</td><td></td><td></td><td>Furnished herewith</td><td></td></tr><tr><td>32.2</td><td>Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</td><td></td><td></td><td>Furnished herewith</td><td></td></tr><tr><td>101.INS</td><td>XBRL Instance Document</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>101.SCH</td><td>XBRL Taxonomy Extension Schema Document</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>101.CAL</td><td>XBRL Taxonomy Extension Calculation Linkbase Document</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>101.DEF</td><td>XBRL Taxonomy Extension Definition Linkbase Document</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>101.LAB</td><td>XBRL Taxonomy Extension Label Linkbase Document</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>101.PRE</td><td>XBRL Taxonomy Extension Presentation Linkbase Document</td><td></td><td></td><td>Filed herewith</td><td></td></tr><tr><td>104</td><td>Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)</td><td></td><td></td><td></td><td></td></tr></table>

† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been submitted separately to the SEC.

## ITEM 16. FORM 10-K SUMMARY

None.



## SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

## LOOP INDUSTRIES, INC.

Date: May 4, 2020

By: /s/ Daniel Solomita
Name: Daniel Solomita
Title: Chief Executive Officer, President, and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Date: May 4, 2020

By: /s/ Daniel Solomita
Name: Daniel Solomita
Title: Chief Executive Officer, President, and Director
(principal executive officer)

Date: May 4, 2020

By: /s/ Nelson Gentiletti
Name: Nelson Gentiletti
Title: Chief Operating Officer and Chief Financial Officer (principal accounting officer and principal financial officer), Secretary and Treasurer

Date: May 4, 2020

By: /s/ Sidney Horn
Name: Sidney Horn
Title: Director

Date: May 4, 2020

By: /s/ Jay Stubina
Name: Jay Stubina
Title: Director

Date: May 4, 2020

By: /s/ Andrew Lapham
Name: Andrew Lapham
Title: Director

Date: May 4, 2020

By: /s/ Laurence Sellyn
Name: Laurence Sellyn
Title: Lead Director



# LOOP CANADA INC.

# EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is dated as of May 28, 2019, by and between Michel Megelas (the "Executive") and Loop Canada Inc. (the "Company").

## 1. Duties.

1.1 Position. The Executive is employed as Chief Legal Officer, reporting to the Chief Operating and Chief Financial Officer (the "COO") of the Company. The duties and responsibilities of the Executive shall be commensurate with the position of an individual providing the same type of services in a similar company. The Executive shall perform such duties as from time to time may be prescribed for him by the Company.

1.2 Obligations to the Company. The Executive agrees to the best of his ability and experience that he will at all times loyally and conscientiously perform all of the duties and obligations required of and from the Executive pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. During the term of the Executive's employment relationship with the Company, the Executive further agrees that he will devote all of his business time and attention to the business of the Company, on a full-time basis, and the Executive will not render commercial or professional services of any nature to any person or organization, whether or not for compensation, without the prior written consent of the COO which consent shall not be unreasonably withheld. The Executive will comply with and be bound by the Company's operating policies, procedures and practices from time to time in effect during the term of the Executive's employment.

2. Term of Employment. The Executive's employment hereunder shall be for an indeterminate term and shall commence on June 25, 2019 or such later date as the parties may agree ("Commencement Date").

3. Compensation. For the duties and services to be performed by the Executive hereunder, the Company shall pay the Executive in Canadian currency, and the Executive agrees to accept, the salary and other benefits described below in this Section 3.

3.1 Salary. The Executive shall receive a yearly base salary equal to the Canadian dollar equivalent on the Commencement Date of $190,000. The Executive's salary will be payable pursuant to the Company's normal payroll practices for payment of salary to executive employees. The Executive's base salary will be reviewed as part of the Company's normal salary review process.

3.2 Employee Benefit Plans. Executive shall participate in the employee benefit plans, programs and policies maintained by or for the Company for similarly situated employees in accordance with the terms and conditions to participate in such plans, programs and policies as in effect from time to time. The introduction and administration of benefit plans, programs and policies are within the Company's sole discretion and the introduction, deletion or amendment of any benefit plan, program or policy will not constitute a breach of this Employment Agreement.



3.3 Annual and Equity Incentive. The Executive shall be eligible for the following incentive awards:

a) An annual incentive award opportunity, which is the short-term incentive for the Executive, will be paid in cash, (the "Annual Incentive") Specific goals will be defined by the COO, as agreed upon by the Executive as to individual Executive goals. Up to 25% of those goals could be individual goals and the balance would conform to Company goals. Depending upon the level of performance achieved relative to the specified goals (threshold, target or maximum), the Executive can earn an Annual Incentive in the amount of 10% of base salary for threshold performance, 20% of base salary for target performance and a maximum of 30% of base salary for achievement of maximum performance. If performance relative to the specified goals is below threshold performance, there would be no award. For scalable goals, interpolation can be applied between award levels; otherwise, goals will be binary and cumulative. The Annual Incentive will be paid or issued, as the case may be, within 30 days of determination of annual performance and approved by the Board. For fiscal 2020, the Executive will receive an Annual Incentive of $20,000.

b) A long-term equity annual incentive award opportunity (the "LTI") will be provided to the Executive. The LTI will be performance-based and will be provided in Stock Options. The LTI will be earned based on achievement of performance goals as determined by the COO. Goals and their attainment will be mapped to 3 levels of attainment: threshold, target and maximum. Threshold, target and maximum levels of attainment would provide the Executive Stock Options equivalent to 10%, 15% and 20% respectively, of Employee's base salary. If the achievement is below threshold level, there would be no award. For scalable goals, interpolation can be applied between award levels; otherwise, goals will be binary and cumulative. The Executive will become eligible for LTI for fiscal 2021.

Each LTI award will vest in 1/3rd increments on the first three anniversaries of March 1 following the fiscal year in which the applicable performance goals were achieved (shortly after the Compensation Committee and Board approve the year-end results).

c) Effective on or shortly after the date of hire, the Executive will receive a one-time grant of time vesting restricted stock units ("the RSUs") with a grant date fair value of US$ 40,000 (the "Up-Front Award"). Subject to section 4.3.1, this restricted stock unit award will vest 5 years from the date of grant. To determine the number of RSUs, the dollar value of the RSU will be divided into the Company's closing stock price on the date of Board approval. RSUs earned will be settled in shares of the Company's common stock within 30 days following the vesting date.

The terms and conditions of the incentive awards shall at all times be governed by the Loop Industries, Inc. 2017 Equity Incentive Plan (or any successor plan or plans governing executive incentive awards). The Compensation Committee may make changes to the form of the equity incentive plan at any time if it is concluded that it is in the best interest of the Company.



3.4 Executive Plans and Policies. Executive will be subject to and comply with any clawback (recoupment) policy, stock ownership/retention guidelines and other plans or policies applicable to other executive positions of a comparable level that the Company may adopt or amend, from time to time in its own discretion.

3.5 Vacation. The Executive shall be eligible for 4 weeks of paid vacation per calendar year, which vacation time shall be taken at such time or times in each year so as not to materially and adversely interfere with the business of the Company. Such entitlement will be prorated for the calendar year in which the Executive commences employment and for any other year of partial employment. The vacation entitlement is acquired during the reference payment period, which is from January to December 31. Payment of all vacation pay will be at base salary. Such vacation entitlement is in addition to any Company closures for any holiday period. Unused vacation may not be carried over from any one-year period to any other period but will be forfeited, subject to the Executive being paid annually the minimum vacation time and vacation pay required under applicable employment standards legislation, including the ARLS (as defined in section 4.1).

4. Termination of Employment. The Executive or the Company may end the Executive's employment as described below. The Executive will always receive all accrued base salary, any accrued and unused vacation pay, any unpaid expenses owing and any other amounts required by the ARLS up to his last day of employment, payable in one lump sum within 30 days of termination (collectively, the "Termination Date Amount").

4.1 Voluntary Termination. The Executive may terminate this Agreement by voluntary resignation or by the Executive's Resignation for Good Reason, as defined in Section 5.3 below, upon giving a minimum of 30 days' advance written notice to the Company (the "Resignation Notice Period"). Upon any termination under this Section 4.1, the Company shall pay the Employee the Termination Date Amounts. The Company may, at any time during the Resignation Notice Period, relieve the Executive from all or any of his duties for all or part of the remainder of the Resignation Notice Period. This may include a requirement that the Executive stay away from all or any of the Company's premises, not be provided with any work, and/or have no business contact with all or any of the Company's agents, employees, customers, clients, distributors and suppliers. Whether or not the Executive is relieved of any duties during the Resignation Notice Period, the Executive will be paid his base salary and any other benefits in accordance with this Agreement, his employment will not be terminated by any removal of duties, his employment will continue during the Resignation Notice Period and he will continue to be bound by his obligations under this Agreement. Executive will not disclose his resignation without the prior approval of the Company. The Company will comply with all requirements of applicable employment standards legislation including the Québec Act Respecting Labour Standards, as amended or replaced (all such legislation referred to as the "ARLS") in respect of the termination of the Executive's employment, and the Company shall not have any further obligation to Executive.

4.2 Termination for Serious Reason. This Agreement may be terminated immediately by the Company at any time for Serious Reason as defined in section 5.1 below. Upon any termination under this Section 4.2, the Company shall pay the Executive the Termination Date Amount. The Company will not be required to provide any form of advance notice of termination, pay in lieu of such notice, or any form of severance pay, except as required by applicable employment standards legislation, including the ARLS. Any unvested award (including any



unvested LTI, Annual Incentive or Up-Front Award) will immediately cease to vest and be terminated.

## 4.3 Termination Without Serious Reason by the Company

4.3.1 The Company may terminate this Agreement at any time and without notice or Serious Reason (not related to a Change of Control) by providing the Executive with payment of the Termination Date Amount, and the payment of severance benefits consisting of cash severance and outstanding equity awards set forth below (the "Separation Package"). The cash component of the Separation Package (the "Cash Component of the Separation Package") shall be: (i) the Annual Incentive prorated to the date of termination based on actual performance, payable in one lump-sum within the later of 30 days of termination for time based awards or shortly after performance is determined at the end of the next quarterly reporting period for performance awards, and (ii) severance benefits (less applicable deductions and withholdings) (the "Severance Benefits") as follows:

a) 3 months of the Employee's then-current base salary for the first year of service;

b) one month of the Employee's then-current base salary for each additional year of service for a maximum of no more than 9 months.

The LTI portion of the Separation Package: Any LTI vested as of the previous annual vesting date will be granted and shall be paid in one lump sum within 30 days of termination shortly after performance is determined at the end of the next quarterly reporting period. Any unvested LTI on the date of termination will be forfeited.

The Up-Front Award will be treated and paid out as follows, notwithstanding the terms of Section 3.3(c): The Up-Front Award will be paid as if vested ratably over a period of five years from the Commencement Date. Any RSUs vested under the Up-Front Award as of the date of termination shall be payable in one lump sum within 30 days of termination. Any unvested RSUs on the date of termination will be forfeited.

The Executive acknowledges that the foregoing arrangements fully satisfy the Company's obligations in respect of the termination of the Executive's employment and irrevocably agrees that the foregoing arrangements constitute an appropriate indemnity in lieu of reasonable notice, in full compliance with the Executive's entitlements under the Civil Code of Quebec (the "CCQ") having explicit regard for the nature of the employment, the specific



circumstances in which it is carried on and the duration of the period of work. The Executive further acknowledges that entitlements herein have been specifically negotiated by Executive prior to the Commencement Date.

4.3.2 The Company's obligation to pay the Separation Package and other amounts set forth in Section 4.3.1 above (other than the Termination Date Amount) is conditional upon the Executive's ongoing compliance with the post-employment covenants contained in Sections 6 and 8 of this Agreement. In the event that the Executive breaches the post-employment covenants contained in Sections 6 and 8, the Executive will remain bound by all of the terms of this Agreement, any payments made pursuant to the Separation Package will automatically cease, and the Executive will be required to return any payments already made pursuant to the Separation Package (other than the Termination Date Amount). Notwithstanding the cessation and/or return of payments, the Executive will at no point receive payment pursuant to the Separation Package that is less than the minimum amount of payment required to comply with applicable legislation, including the ARLS.

4.3.3 The Company's obligation to pay the Separation Package and other amounts set forth in Section 4.3.1 above (other than the Termination Date Amount) is conditional upon the Executive signing, in the presence of a witness, a full and final release in a form satisfactory to the Company and delivering an original executed copy of the full and final release to the Company within thirty (30) days after the date of termination. If the Executive fails to execute the full and final release, the Executive will not be entitled to the Separation Package and will instead receive only the Termination Date Amount and such other payments and benefit continuation as are required by the ARLS, if any.

4.3.4 If during the applicable Severance Period the Executive finds new work, whether as an employee, consultant or otherwise, the amount of the Severance Benefits due hereunder will be reduced by an amount equal to 50% of the amount of Severance Benefits outstanding, but such Severance Benefits shall never be less than 3 months (as per 4.3.1.a).

4.4 Change of Control. In the event of a Change of Control resulting in termination without Serious Reason or resignation by the Executive for Good Reason within two years of the Change of Control, the Executive's entitlements and the terms and conditions noted in section 4.3 with respect to the Cash Component of the Separation Package shall apply. In addition, the LTI vested as of the previous year-end will be granted. Any unvested LTI and the Up-Front Award will become 100% vested and will be granted at target level of performance, as applicable. Up-Front Award shall be payable in one lump sum within 30 days of termination. The Performance-Based LTI award shall be payable shortly after performance is determined at the end of the next



quarterly reporting period. The shares will be granted at a value equal to the closing price of the Company's Common Stock on the NASDAQ stock market at the close of business on the date of termination.

4.5 No Further Rights. The Executive shall have no further entitlements upon termination, except if necessary, to comply with the minimum requirements of the ARLS. For greater certainty, other than as specifically stated herein, any unearned equity and unvested options, warrants, or other awards or entitlements at the time of the Executive's termination for any reason shall cease to vest and terminate immediately upon Executive's termination of employment. All vested options, warrants, or other incentive entitlements will continue pursuant to their terms. The Executive acknowledges that the foregoing arrangements fully satisfy the Company's and all affiliates' obligations to his in respect of the termination of his employment and he agrees that the foregoing arrangements constitute reasonable notice in accordance with the civil law and that he will not be entitled to further notice of termination, severance pay, incentive compensation, damages or other compensatory payments under common law, civil law or contract.

4.6 Return of Company Property. All equipment, documents or any other materials of any kind created or used by the Executive in the course of employment, or otherwise furnished by the Company or its customers, suppliers, distributors, employees or consultants in the Executive's possession or control, shall be surrendered to the Company, in good condition, promptly upon the Executive's termination of employment, irrespective of the time, manner or cause of termination.

5. Definitions. For purposes of this Agreement, the following definitions shall apply:

5.1 "Serious Reason" means a serious reason pursuant to Article 2094 of the CCQ and includes, without limitation, (a) the Executive's breach of a material term of this Agreement; (b) the Executive's conviction of a criminal offence involving fraud or dishonesty, or which otherwise adversely impacts the reputation of the Company; (c) the Executive directly or indirectly making personal profit out of or in connection with a transaction or business opportunity to which the Company is involved or otherwise associated with, without making disclosure to and seeking the prior written consent of the Company; (d) the Executive's failure to comply with any Company rules or policies of a material nature; (e) the Executive's continued failure to substantially perform his job duties; (f) any actions or omissions on the Executive's part constituting gross misconduct or negligence in connection with the business of the Company.

5.2 "Resignation for Good Reason" means the Executive's resignation as a result of: (i) a significant and substantial reduction in the Executive's job, duties, or responsibilities in a manner that is substantially and materially inconsistent with the position, duties, or responsibilities held by the Executive immediately before such reduction; or (ii) any reduction in the Executive's base salary other than in connection with and consistent with a general reduction of all officer base salaries. In each case, the Executive shall give written notice to the Company of such event and allow the Company a reasonable period to cure such event.



5.3 "Change of Control" means a sale of all or substantially all of the shares or assets of the Company or the Company's parent, LOOP Industries, Inc. ("LPP"), or any merger or consolidation of the Company or LPP with or into another corporation other than a merger or consolidation in which the holders of more than 50% of the shares of capital stock of the Company or LPP outstanding immediately prior to such transaction continue to hold (either by the voting securities remaining outstanding or by their being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company or LPP, or such surviving entity, outstanding immediately after such transaction.

6. Confidentiality Agreement. The Executive has signed a Proprietary Information and Inventions Agreement (the "Proprietary Agreement") that is incorporated by reference and made a part of this Agreement and the form of which is attached hereto as Schedule "A". The Executive hereby represents and warrants to the Company that the Executive has complied with all obligations under the Proprietary Agreement and agrees to continue to abide by the terms of the Proprietary Agreement and further agrees that the provisions of the Proprietary Agreement shall survive any termination of this Agreement or of the Executive's employment relationship with the Company in accordance with the terms of the Proprietary Agreement.

7. Confidentiality of Terms. The Executive agrees to follow the Company's strict policy that employees must not disclose, either directly or indirectly, any information, including any of the terms of this Agreement, regarding salary or stock purchase allocations to any person, including other employees of the Company (other than such employees who have a need to know such information); provided, however, that the Executive may discuss such terms with members of his immediate family and any legal, tax or accounting specialists who provide the Executive with individual legal, tax or accounting advice. Notwithstanding anything to the contrary herein, disclosure of such information shall not be precluded if such disclosure is in response to a valid order of a court or governmental body or is otherwise required by law.

8. Covenants. This Agreement is conditional upon the Executive signing and agreeing to be bound to the Non-Competition, Non-Solicitation and Non-Disparagement Agreement attached as Schedule "B" to this Agreement (the "Non-Competition, Non-Solicitation and Non-Disparagement Agreement"), which the Executive agrees to execute and deliver to the Company in connection with this Agreement and is incorporated by reference.

9. Breach of the Agreement. The Executive acknowledges that upon his breach of this Agreement or the Proprietary Agreement, the Company would sustain irreparable harm from such breach, and, therefore, the Executive agrees that in addition to any other remedies which the Company may have under this Agreement or otherwise, the Company shall be entitled to obtain equitable relief, including specific performance and injunctions, restraining the Executive from committing or continuing any such violation of this Agreement or the Proprietary Agreement. The Executive acknowledges and agrees that upon the Executive's material or intentional breach of any of the provisions of the Agreement (including Sections 6 and 8) or the Proprietary Agreement, in addition to any other remedies the Company may have under this Agreement or otherwise, the Company's obligations to provide benefits to the Executive as described in this Agreement, including without limitation those benefits provided in Section 4, shall immediately terminate, except as required by applicable law.

10. Entire Agreement. This Agreement, together with its Exhibits and Schedules (including



the Proprietary Agreement and the Non-Competition, Non-Solicitation and Non-Disparagement Agreement), sets forth the entire agreement and understanding of the parties relating to the subject matter herein, supersedes any prior agreement, and merges all prior discussions between them.

11 Conflicts. The Executive represents and warrants that his performance of all the terms of this Agreement will not breach any other agreement or understanding to which the Executive is a party. The Executive has not, and will not during the term of this Agreement, enter into any oral or written agreement in conflict with any of the provisions of this Agreement.

12. Dispute Resolution. Any dispute, controversy or claim arising under or in connection with this Agreement, or the breach hereof (including a dispute as to whether Serious Reason or Resignation for Good Reason exists), shall be settled by the competent courts of the Province of Québec, district of Montreal. Each party shall pay his, his or its own costs (including lawyers' fees) in connection with such court proceeding except that the Company shall pay the fees and expenses of the Executive if the Executive is the ultimate successful party in the dispute as determined in a final, non-appealable judgement. Notwithstanding the foregoing, the Company shall be entitled to seek equitable relief directly from a court of competent jurisdiction with respect to any alleged breach of the Proprietary Agreement or Sections 6 and 8, including specific performance and injunctions, restraining the Executive from committing or continuing to commit such alleged breach.

13. Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Agreement and agrees expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. The terms of this Agreement and all of the Executive's rights hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

## 14 Miscellaneous Provisions.

14.1 Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the parties. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

14.2 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or 48 hours after being deposited in the mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party's address as set forth below or as subsequently modified by written notice.

14.3 Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Province of Québec, and the federal laws of Canada applicable therein, without giving effect to its or any other jurisdiction's principles of conflict of laws.

14.4 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law then (i) such provision shall be excluded from this Agreement,



(ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

14.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

14.6 Advice of Counsel. Each party to this agreement acknowledges that, in executing this Agreement, such party has had the opportunity to seek the advice of independent legal counsel and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting of preparation hereof.

14.7 Language. The parties hereto have expressly required that this agreement and documents ancillary thereto be drafted in the English language. Les parties à la présente ont expressément exigé que le présent accord et les documents afférents soient rédigés en langue anglaise.

[Signature page follows.]



The parties have executed this Employment Agreement as of the date first written above.

The Company:

LOOP CANADA INC.

By: (s) Nelson Gentiletti
Nelson Gentiletti
Chief Operating and Chief Financial Officer

Executive:

By: (s) Michel Megelas

Michel Megelas



# PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT

# LOOP CANADA INC.

In consideration of my employment or consultancy (as the case may be) by LOOP Canada Inc. (the "Company", which term includes the Company's parent, LOOP Industries, Inc., and any of their respective subsidiaries and affiliates), any opportunity for advancement or reassignment that the Company may offer me, the compensation paid to me in connection with such employment and any stock and/or stock options which have been or may be granted to me by the Company, I, Michel Megelas, hereby agree as follows:

1. Whenever used in this Agreement the following terms will have the following meanings:

1.1 "Invention(s)" means discoveries, developments, designs, improvements, inventions and/or works of authorship, whether or not patentable, copyrightable or otherwise legally protectable. This includes, but is not limited to, any new machine, article of manufacture, biological material, method, process, technique, use, equipment, device, apparatus, system, compound, formulation, composition of matter, design or configuration of any kind, or any improvement thereon.

1.2 "Proprietary Information" means information or physical material not generally known or available outside the Company or information or physical material entrusted to the Company by third parties. This includes, but is not limited to, Inventions, confidential knowledge, trade secrets, copyrights, product ideas, techniques, processes, formulas, object codes, biological materials such as nucleic acids, proteins, organisms, strands, cell lines, antibodies or antigen source materials, or fragments thereof, mask works and/or any other information of any type relating to documentation, data, schematics, algorithms, flow charts, mechanisms, research, manufacture, improvements, assembly, installation, marketing, forecasts, pricing, customers, the salaries, duties, qualifications, performance levels and terms of compensation of other employees, and/or cost or other financial data concerning any of the foregoing or the Company and its operations. Proprietary Information may be contained in material such as drawings, samples, procedures, specifications, reports, studies, customer or supplier lists, budgets, cost or price lists, compilations or computer programs, or may be in the nature of unwritten knowledge or know-how.

1.3 "Company Documents" means documents or other media that contain Proprietary Information or any other information concerning the business, operations or plans of the Company, whether such documents have been prepared by me or by others. "Company Documents" include, but are not limited to, blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, tapes or printouts, sound recordings and other printed, typewritten or handwritten documents.

2. I understand that the Company is engaged in a continuous program of research, development and production. I also recognize that the Company possesses or has rights to Proprietary Information (including certain information developed by me during my employment or consultancy (as the case may be) by the Company that has commercial value in the Company's business.



3. I understand that the Company possesses Company Documents that are important to its business.

4. I understand and agree that my employment or consultancy (as the case may be) creates a relationship of confidence and trust between me and the Company with respect to (i) all Proprietary Information and (ii) the confidential information of another person or entity with which the Company has a business relationship and is required by terms of an agreement with such entity or person to hold such information as confidential. At all times, both during my employment or consultancy (as the case may be) by the Company and after its termination, I will keep in confidence and trust all such information, and I will not use or disclose any such information without the written consent of the Company, except as may be necessary in the ordinary course of performing my duties to the Company.

## 5. In addition, I hereby agree as follows:

5.1 All Proprietary Information will be the sole property of the Company and its assigns, and the Company and its assigns will be the sole owner of all trade secrets, patents, copyrights and other rights in connection therewith. I hereby assign to the Company any rights I may presently have, or I may acquire in such Proprietary Information.

5.2 All Company Documents, apparatus, equipment and other physical property, whether or not pertaining to Proprietary Information, furnished to me by the Company or produced by me or others in connection with my employment or consultancy (as the case may be) will be and remain the sole property of the Company. I will return to the Company all such Company Documents, materials and property as and when requested by the Company, excepting only (i) my personal copies of records relating to my compensation; (ii) my personal copies of any materials previously distributed generally to stockholders of the Company; and (iii) my copy of this Agreement (my "Personal Documents"). Even if the Company does not so request, I will return all such Company Documents, materials and property upon termination of my employment or consultancy (as the case may be) by me or by the Company for any reason, and, except for my Personal Documents, I will not take with me any such Company Documents, material or property or any reproduction thereof upon such termination.

5.3 I will promptly disclose to the Company, or any persons designated by it, all Inventions relating to the Field, as defined below, made or conceived, reduced to practice or created by me, either alone or jointly with others, prior to the term of my employment or consultancy (as the case may be) and for one (1) year thereafter. For purposes of this Agreement, "Field" means research, development, marketing or manufacturing of any products also researched, developed, marketed or manufactured by the Company.

5.4 All Inventions that I conceive, reduce to practice, develop or have developed (in whole or in part, either alone or jointly with others) during the term of my employment or consultancy (as the case may be) in connection with the business of the Company will be the sole property of the Company and its assigns to the maximum extent permitted by law (and to the fullest extent permitted by law will be deemed "works made for hire"), and the Company and its assigns will be the sole owner of all patents, copyrights and other rights in connection therewith. I hereby assign to the Company my entire right, title and interest, whether possessed now or later acquired, in such Inventions. I agree that any Invention required to be disclosed under paragraph 5.3 above within one (1) year after the term of my employment or consultancy (as the case may be) will be



presumed to have been conceived during my employment or consultancy (as the case may be). I understand that I may overcome the presumption by showing that such Invention was conceived after the termination of my employment or consultancy (as the case may be).

5.5 During or after my employment, upon the Company's request and at the Company's expense, I will execute all papers in a timely manner and do all acts necessary to apply for, secure, maintain or enforce patents, copyrights and any other legal rights in Inventions assigned to the Company under this Agreement, and I will execute all papers and do any and all acts necessary to assign and transfer to the Company or any person or party to whom the Company is obligated to assign its rights, my entire right, title and interest in and to such Inventions. This obligation will survive the termination of my employment or consultancy (as the case may be), but the Company will compensate me at a reasonable rate after such termination for time actually spent by me at the Company's request on such assistance. In the event that the Company is unable for any reason whatsoever to secure my signature to any document reasonably necessary or appropriate for any of the foregoing purposes, (including renewals, extensions, continuations, divisions or continuations in part), I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agents and attorneys-in-fact to act for and in my behalf and instead of me, but only for the purpose of executing and filing any such document and doing all other lawfully permitted acts to accomplish the foregoing purposes with the same legal force and effect as if executed by me.

5.6 So that the Company may be aware of the extent of any other demands upon my time and attention, I will disclose to the Company (such disclosure to be held in confidence by the Company) the nature and scope of any other business activity in which I am or become engaged during the term of my employment or consultancy (as the case may be). During the term of my employment or consultancy (as the case may be), I will not engage in any other business activity that is related to the Company's business or its actual or demonstrably anticipated research and development.

6. As a matter of record I attach hereto as Exhibit A a complete list of all Inventions (including patent applications and patents) relevant to the Field that have been made, conceived, developed or first reduced to practice by me, alone or jointly with others, prior to my employment or consultancy (as the case may be) with the Company that I desire to remove from the operation of this Agreement, and I covenant that such list is complete. If no such list is attached to this Agreement, I represent that I have no such Inventions at the time of signing this Agreement. If in the course of my employment or consultancy with the Company, I use or incorporate into a product or process an Invention not covered by Paragraph 5.4 of this Agreement in which I have an interest, the Company is hereby granted a nonexclusive, fully paid-up, royalty-free, perpetual, worldwide license of my interest to use and sublicense such Invention without restriction of any kind.

7. I represent that my execution of this Agreement, my employment or consultancy (as the case may be) with the Company and my performance of my proposed duties to the Company in the development of its business will not violate any obligations I may have to any former employer, or other person or entity, including any obligations to keep confidential any proprietary or confidential information of any such employer. I have not entered into, and I will not enter into, any agreement that conflicts with or would, if performed by me, cause me to breach this Agreement.



8. In the course of performing my duties to the Company, I will not utilize any proprietary or confidential information of any former employer.

9. This Agreement will be effective as of the first day of my employment or consultancy (as the case may be) by the Company and the obligations hereunder will continue beyond the termination of my employment and will be binding on my heirs, assigns and legal representatives. This Agreement is for the benefit of the Company, its successors and assigns (including all subsidiaries, affiliates, joint ventures and associated companies) and is not conditioned on my employment for any period of time or compensation therefor. I agree that the Company is entitled to communicate any obligations under this Agreement to any future employer or potential employer of mine.

10. I agree that any dispute in the meaning, effect or validity of this Agreement will be resolved in accordance with the laws of the Province of Quebec without regard to its or any other jurisdiction's conflict of law's provisions. I further agree that if one or more provisions of this Agreement are held to be unenforceable under applicable laws of the Province of Quebec, such provision(s) will be excluded from this Agreement and the balance of the Agreement will be interpreted as if such provision were so excluded and will be enforceable in accordance with its terms.



11. I HAVE READ AND UNDERSTOOD THEIR AGREEMENT. THEIR AGREEMENT MAY ONLY BE MODIFIED BY A SUBSEQUENT WRITTEN AGREEMENT EXECUTED BY THE PRESIDENT OR CHIEF OPERATING OFFICER OF THE COMPANY AND MYSELF.

Dated: May 28, 2019.

By: (s) Michel Megelas
Name (Print): Michel Megelas

Accepted and Agreed to:

LOOP CANADA INC.

By: (s) Nelson Gentiletti

Nelson Gentiletti

Chief Operating and Chief Financial Officer



# EXHIBIT A
TO
PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT

LOOP Canada Inc.

Ladies and Gentlemen:

1. The following is a complete list of all inventions or improvements relevant to the subject matter of my employment or consultancy (as the case may be) by LOOP Canada Inc. (the "Company") that have been made or conceived or first reduced to practice by me, alone or jointly with others, prior to my employment or consultancy (as the case may be) by the Company that I desire to remove from the operation of the Proprietary Information and Inventions Agreement entered into between the Company and me.

X No inventions or improvements.

Any and all inventions regarding:

Additional sheets attached.

2. I propose to bring to my employment or consultancy (as the case may be) the following materials and documents of a former employer:

X No materials or documents.

See below:

(s) Michel Megelas

(Signature)

Print Name: Michel Megelas



# SCHEULE B
NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT

1. Non-Competition. Except as with the express written permission of Loop Canada Inc. (the "Company"), Michel Megelas ("the Executive") shall not at any time during employment or during the 12 month period following the Termination Date (the "Restricted Period"), on the Executive's own behalf or on behalf of any Person, whether directly or indirectly, in a Same or Similar Capacity, carry on, be involved or engaged in, provide any services in relation to or have any interest in any activity in all or part of the Territory which is in competition with the Business. The Executive shall not be in default under this provision solely by virtue of holding, strictly for portfolio purposes and as a passive investor, not more than five percent (5%) of the issued and outstanding shares of a corporation in competition with the Business, the shares of which are listed on a recognized stock exchange.

2. Non-Solicitation of Employees. The Employeeshall not, during the Restricted Period on the Executive's own behalf or on behalf of any person, whether directly or indirectly, in all or part of the territory, -offer employment to or solicit the employment or services of or otherwise entice away from the employment or service of the Company or its Affiliates, any Person or Persons who are, or within the 12 months preceding the Termination Date, were- (i) employed by the Company or its Affiliates or (ii) providing consulting or other services to the Company or its Affiliates, whether as an independent contractor or otherwise; whether or not such Person or Persons would commit any breach of his or her contract of employment or services by reason of leaving the service of the Company or its Affiliates.

3. Non-Solicitation of Customers and Suppliers. The Executive shall not, during the Restricted Period, on the Executive's own behalf or on behalf of any Person, whether directly or indirectly, for any purpose which is in competition, in whole or in part, with the Business:

(a) solicit any Customer or Supplier or procure or assist in the solicitation of any Customer or Supplier, in all or part of the Territory; or

(b) accept business with or enter into a commercial arrangement with any Customer or Supplier, in all or part of the Territory.

4. Non-Disparagement. The Executive shall not, during employment with the Company or its Affiliates or following the termination of the Executive's employment for any reason, on the Executive's own behalf or on behalf of any person, whether directly or indirectly:

(a) take any action that might impair the reputation of the Company or its Affiliates, or which might otherwise be detrimental to the business or operational interests of the Company or its Affiliates; or

(b) criticize, disparage, defame or make any negative comments, statements or images about the Company or its Affiliates, Including their current or former operations, projects, initiatives, employees, consultants, independent contractors, officers, directors, customers, suppliers, distributors, shareholders, agents, representatives,



goods, products and/or services, whether oral or written. Including statements and images made or posted via social media or on the internet.

5. Definitions. The following capitalized terms, when used herein, have the respective meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Employment Agreement.

“Affiliates” means all of the Company’s direct and indirect predecessor, subsidiary, parent, related, affiliated and successor companies.

“Business” means at the Termination Date, or in the two years preceding the Termination Date, any business or industry in which the Company and its Affiliates operate, or sell, provide or distribute goods, products or services.

“Customer” means any Person, to the Executive’s knowledge:

(a) that has purchased or distributed the Company’s or any of its Affiliates’ goods, products or services in connection with the Business at any time during the 12 months preceding the Termination Date; or

(b) whom the Company has solicited, called upon or negotiated with at any time during the 12 months preceding the Termination Date with a view to selling or providing goods, products or services to such Person or distributing goods, products or services through such Person.

“Including” means “including, without limitation”.

“Person” means any individual, corporation, firm partnership, governmental organization or other entity.

“Same or Similar Capacity” means:

(a) the same or similar capacity or function in which the Executive worked for the Company and/or any of its Affiliates at any time during the 12 months preceding the Termination Date; and/or

(b) any other capacity, where the Employee’s knowledge of Confidential Information could provide a competitive advantage to any Person engaged in or associated with a Person in competition with the Business.

“Supplier” means any Person, to the Employee’s knowledge:

(a) having provided goods, products or services to the Company or any of its Affiliates in connection with the Business at any time during the 12 months preceding the Termination Date; or

(b) whom the Company is in negotiation with as at the Termination Date with a view to having such Person provide goods, products or services to the Company [or any of its Affiliates]



“Termination Date” means the date on which employment will end as specified in the written notice of termination of employment provided by the Employee or the Company, as the case may be.

“Territory” means Canada or the United States of America.

May 28, 2019

(s) Michel Megelas

Date

Michel Megelas



# AMENDMENT No. 1 TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amendment No. 1 to the Amended and Restated Employment Agreement (this "Agreement") is effective as of the date last signed below and is entered into by and between Daniel Solomita ("Executive"), Loop Industries, Inc., a Nevada corporation ("Loop") (formerly known as First American Group, Inc.), and Loop Canada Inc., a corporation duly formed and existing under the laws of Canada and a wholly-owned subsidiary of Loop ("Loop Canada" and together with Loop and any parent, subsidiary or affiliate of Loop, "Loop Group")

## RECTALS

WHEREAS, Executive previously entered into an Employment Agreement with Loop dated June 29, 2015 (the "Prior Agreement");

WHEREAS, the Prior Agreement was amended effective July 13, 2018 (the "Restated Agreement");

WHEREAS, at the time of the Restated Agreement, Loop Group had ceased developing its GEN 1 technology process, which yielded terephthalate ("PTA") and monomethyl glycol ("MEG"), two common monomers of PET, and shifted to the production of dimethyl terephthalate ("DMT"), another proven monomer of PET along with MEG;

WHEREAS, Exhibit A to the Restated Agreement was not updated to reflect the shift in Loop Group's business from the production of PTA to the production of DMT.

WHEREAS, Loop Group and Executive wish to hereby amend the Restated Agreement to revise Exhibit A set forth therein, for good and sufficient consideration as described in this Agreement;

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, Loop Group and Executive agree as follows:

1. Capitalized words used herein and not otherwise defined shall have the meanings ascribed thereto in the Restated Agreement.

2. Exhibit A of the Restated Agreement is hereby deleted in its entirety and replaced by attached "Exhibit A (REVISED)".

3. All other terms and conditions of the Restated Agreement shall remain in force and unchanged.

4. This Agreement shall bind and inure to the benefit of the parties and their respective heirs and successors and shall not be assigned by either party. Any assignment or transfer of this Agreement in violation of the foregoing shall be null and void.

5. This Agreement, together with the Restated Agreement contains the entire agreement between the parties with respect to the subject matter hereof.

6. No provision of this Agreement may be amended or otherwise modified except by a writing signed by the parties to this Agreement.



7. The Parties may execute this Agreement in counterparts, each of which shall be deemed an original, but all of which together constitute one and the same agreement. This Agreement may be delivered by facsimile transmission (including via email), and facsimile copies of executed signature pages (including PDF copies) shall be binding as originals.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date last written.

## LOOP INDUSTRIES, INC.

By: (2) Andrew Lapham

Name: Andrew Lapham

Title: Director

Date: April 30, 2020

By: (3) Nelson Gentiletti

Name: Nelson Gentiletti

Title: COO and CFO

Date: April 30, 2020

## LOOP CANADA INC.

By: (3) Nelson Gentiletti

Name: Nelson Gentiletti

Title: COO and CFO

Date: April 30, 2020

## DANIEL SOLOMITA:

By: (3) Daniel Solomita
Daniel Solomita

Date: April 30, 2020



## EXHIBIT A (REVISED)

Pursuant to Section 3.3 of the Amended and Restated Employment Agreement by and between Loop Industries, Inc., a Nevada corporation ("Loop") (formerly known as First American Group, Inc.), and Loop Canada Inc., a corporation duly formed and existing under the laws of Canada and a wholly-owned subsidiary of Loop ("Loop Canada" and together with Loop and any parent, subsidiary or affiliate of Loop, "Loop Group"), and Daniel Solomita, Loop shall grant a bonus grant of the RSUs to Mr. Solomita as follows:

(i) Milestone One: 1,000,000 shares of common stock shall be issued to Mr. Solomita when Loop's securities are listed an exchange or the OTCQX tier of the OTCMarkets;

(ii) Milestone Two: 1,000,000 shares of common stock shall be issued to Mr. Solomita when Loop executes a contract for a minimum quantity of 25,000 M/T of DMT/MEG or PET;

(iii) Milestone Three: 1,000,000 shares of common stock shall be issued to Mr. Solomita when Loop's first full-scale production facility is in commercial operation; and

(iv) Milestone Four: 1,000,000 shares of common stock shall be issued to Mr. Solomita when Loop's second full-scale production facility is in commercial operation.

The term “commercial operation” means a full-scale production facility of Loop produces 10 M/T per hour of DMT and MEG combined, for a term of not less than six (6) months.



# CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No 333-234133) of Loop Industries Inc. of our report dated May 4, 2020 relating to the financial statements, which appears in Loop Industries Inc.'s Annual Report on Form 10-K for the year ended February 29, 2020. We also consent to the reference to us under the heading "Experts" in such Registration Statement.

PricewaterhouseCoopers LLP

Montréal, Canada
May 4, 2020



## CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (333-232600) of Loop Industries Inc. of our report dated May 4, 2020 relating to the financial statements, which appears in Loop Industries Inc.'s Annual Report on Form 10-K for the year ended February 29, 2020.



Montreal, Canada

May 4, 2020



## SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Daniel Solomita, certify that:

1. I have reviewed this annual report on Form 10-K of Loop Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2020

/s/ Daniel Solomita

Daniel Solomita

President and Chief Executive Officer (principal

executive officer)



## SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Nelson Gentiletti, certify that:

1. I have reviewed this annual report on Form 10-K of Loop Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2020

/s/ Nelson Gentiletti

Nelson Gentiletti

Chief Operating Officer and Chief Financial Officer and

Treasurer (principal financial officer and principal

accounting officer)



## SECTION 906 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

In connection with the accompanying Annual Report on Form 10-K of Loop Industries, Inc. for the year ended February 29, 2020, the undersigned, Daniel Solomita, President and Chief Executive Officer of Loop Industries, Inc., does hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) such Annual Report on Form 10-K for the year ended February 29, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in such Annual Report on Form 10-K for the year ended February 29, 2020, fairly presents, in all material respects, the financial condition and results of operations of Loop Industries, Inc.

Date: May 4, 2020

/s/ Daniel Solomita
Daniel Solomita

President and Chief Executive Officer (principal executive officer)



## SECTION 906 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

In connection with the accompanying Annual Report on Form 10-K of Loop Industries, Inc. for the year ended February 29, 2020, the undersigned, Nelson Gentiletti, Chief Financial Officer of Loop Industries, Inc., does hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) such Annual Report on Form 10-K for the year ended February 29, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in such Annual Report on Form 10-K for the year ended February 29, 2020, fairly presents, in all material respects, the financial condition and results of operations of Loop Industries, Inc.

Date: May 4, 2020

/s/ Nelson Gentiletti

Nelson Gentiletti

Chief Operating Officer and Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)