Loop Industries, Inc.

’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and any forward-looking statements should be read in conjunction with the “Cautionary Statements Regarding Forward-Looking Statements” in this Annual Report on Form 10-K and the Risk Factors section included in Part I, Item 1A of this Annual Report on Form 10K .

 

 

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 plastic bottles, packaging, and textiles such as carpets and clothing, into its base building block monomers, DMT and MEG. The monomers are separated, 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™ PET plastic and polyester fiber can be recycled infinitely without degradation of quality, helping to close the plastic loop. Loop Industries is committed to contributing to the global movement towards a circular economy by reducing plastic waste and recovering waste plastic for a sustainable future.

 

Loop plans to commercialize the Infinite Loop™ technology through a combination of direct investments with strategic partners to own and operate commercial facilities and the licensing of its technology.

 

As the initial phase of our plan for the commercialization of future Infinite Loop™ manufacturing facilities, we constructed and have successfully operated our Terrebonne Facility for the past five years, demonstrating the effectiveness of our technology and supplying Loop PET resin and polyester fiber to customers. The facility has also been used for research and development activities.

 

Loop is currently executing on its commercialization strategy through two key strategic partnerships. The Company is advancing towards the construction of an Infinite Loop™ manufacturing facility in India through its 50/50 joint venture in India with Ester Industries Ltd. (“Ester”). The facility’s planned production capacity is 70,000 tons per year of Loop branded PET resin and polyester fiber. In addition, the Company sold its first technology license to Reed Societe Generale Group for one Infinite Loop™ manufacturing facility in Europe for an initial down payment of €10 million with additional milestone payments to be received by Loop as the project advances. Infinite Loop Europe, an entity to be owned 10% by Loop and 90% by Reed Societe Generale Group was formed with the purpose of developing Infinite Loop™ manufacturing facilities in Europe. These initiatives represent key steps in implementing the Company's plan to deploy its proprietary depolymerization technology in global markets.

 

Commercialization Plan and Progress

 

Our commercialization strategy to achieve global expansion of the Infinite Loop™ Technology is founded on a combination of direct investments with strategic partners to own and operate commercial facilities and the licensing of our technology.

 

The global expansion plan for our technology will allow our target customers, mostly comprised of apparel companies and CPG companies, to integrate Loop™ PET resin and polyester fiber into their products and packaging. As countries around the globe continue to impose sustainability targets and recycled content mandates, we observe that companies are increasingly seeking to incorporate sustainably produced materials into their products. Our market strategy is to assist global consumer goods and apparel companies in meeting these requirements as well as their own stated sustainability commitments by offering co-branded packaging or polyester fibers that are made with Loop 100% recycled, virgin-quality PET. We believe that Loop™ recycled PET resin and polyester fiber could command premium pricing over virgin, petroleum-based PET resin and provide attractive economic returns.

 

The Infinite Loop™ Technology is the key pillar of our commercialization strategy. We believe our technology is well positioned to respond to the global transition away from fossil fuels and petrochemicals and into the circular economy, where PET plastic and polyester fiber are produced by recycling waste polyester that would otherwise typically be destined for landfill or incineration, rather than relying on fossil-based resources.

 

We have completed our process design package for the Infinite Loop™ full-scale manufacturing facilities to be used as the base engineering platform for all future facilities. We believe this approach allows for quick execution, speed to market, and lends itself well to modular construction. The basic design package has a capacity of up to 70,000 tons of rDMT and 23,000 tons of rMEG, or 70,000 tons of Loop PET and polyester fiber output per year, subject to applicable site-specific permitting, site and regulatory considerations.

 

We are focused on direct investments in Infinite Loop™ commercial facilities located in low-cost manufacturing regions. By strategically selecting cost-efficient locations, we aim to optimize production costs and improve overall financial performance, while limiting our capital contributions.

 

This direct investment approach also includes leveraging partnerships to integrate Loop’s proprietary technology and sales and marketing expertise with the operational and construction capabilities of experienced partners. We believe this combination of complementary skill sets allows for more efficient project execution, accelerated market adoption, and scalable growth.

 

 

We expect that revenue generation from direct investments in commercial facilities will be driven by two key streams: (i) profits from the operation of commercial facilities, and (ii) royalties paid to Loop for licensing its technology and exclusive responsibility of sales and marketing. We believe these income sources will support long-term financial sustainability and growth.

 

This approach is currently being deployed through the Company’s 50/50 joint venture in India with Ester, which is advancing towards the construction of an Infinite Loop™ manufacturing facility. The facility’s planned production capacity is 70,000 tons per year of Loop branded PET resin and polyester fiber. The India JV intends to leverage the complementary skill sets of each partner by combining Loop’s innovative technology and global customer relationships with Ester’s nearly 40 years of specialized polymer production, operational proficiency, and local expertise, including sourcing of PET plastic and polyester fiber waste feedstocks. Loop will grant a royalty-bearing license to the India JV and will be the exclusive seller and marketing agent of the India JV’s products.

 

We also aim to accelerate the roll-out of the Infinite Loop™ technology through the sale of technology licenses for commercial facilities in which Loop may take limited or no ownership. We expect licensee-owned facilities to allow us to scale our technology efficiently, without requiring significant capital investment from Loop. Revenue generation through technology licensing is expected to come from a combination of up-front and recurring royalties.

 

This approach focused on licensing is currently being deployed in our European partnership with Reed Societe Generale Group. The Company sold its first technology license to Reed Societe Generale Group for one Infinite Loop™ manufacturing facility in Europe for an initial down payment of $10.4 million (€10.0 million) with additional milestone payments to be received by Loop as the project advances. Infinite Loop Europe was formed with the purpose of developing Infinite Loop™ manufacturing facilities in Europe to be owned 10% by Loop and 90% by Reed Societe Generale Group.

 

Additionally, we aim to generate income by providing engineering services throughout all phases of project development, construction, and startup for all Infinite Loop™ commercial facilities, supporting efficient project execution and creating a revenue stream prior to the startup of the facility.

 

Loop has entered into engineering services agreements with the India JV to provide engineering services and support the completion of the engineering for the planned Infinite Loop™ manufacturing facility in India. This has resulted in Loop generating engineering services revenue of $0.5 million in the year ended February 28, 2026.

 

We are also in the process of implementing a modular construction strategy, in order to reduce overall capital expenditures and operating expenses, while improving project timelines and ensuring standardized design and quality, and providing a scalable solution for global expansion. This strategy envisages the manufacture of plant modules in a low-cost country to be transported and assembled on site at global locations, and would potentially provide an additional income stream alongside returns from owned facilities and royalties.

 

The Company’s ability to move to the next stage of its strategic development, including the construction of manufacturing plants and the commercialization of its technology and products at scale, is dependent on, among other factors, its ability to obtain the necessary financing through a combination of the issuance of equity, project debt, and/or government incentive programs.

 

Additionally, for a detailed description of our joint venture with Ester and our agreements with Reed Societe Generale Group, see the sections “Overview – Joint Venture with Ester” and “ – Agreements with Reed Societe Generale Group” above under Item 1. Business.

 

 

 

RESULTS OF OPERATIONS

 

All monetary amounts are in thousands of U.S. dollars unless otherwise specified.

 

Fourth Quarter Ended February 28, 2026

 

The following table summarizes our operating results for the three-month periods ended February 28, 2026 and February 28, 2025, in thousands of U.S. Dollars.

 

	Three months ended
	February 28,				February 28,				Change
	2026				2025(1)				favorable / (unfavorable)
Revenues
Technology licensing	$	-			$	10,395			$	(10,395	)
Products		-				46				(46	)
Services		176				368				(192	)
Total revenues		176				10,809				(10,633	)
Cost of services
Cost of services		191				218				27
Total cost of services		191				218				27
Expenses
Research and development
Employee compensation		103				468				365
Stock-based compensation		64				104				40
Plant and laboratory operating expenses		274				193				(81	)
External engineering		24				113				89
Machinery and equipment expenditures		-				20				20
Other		15				190				175
Total research and development		480				1,088				608
General and administrative
Professional fees		382				570				188
Employee compensation		105				148				43
Stock-based compensation		418				185				(233	)
Insurance		302				450				148
Other		179				221				42
Total general and administrative		1,386				1,574				188
Depreciation and amortization		94				126				32
Total expenses		1,960				2,788				828
Loss on equity method investment		353				687				334
Interest and other financial expenses		430				329				(101	)
Interest income		(24	)			(83	)			(59	)
Foreign exchange gain		(31	)			(12	)			19
Total other loss		728				921				193
Net (loss) income	$	(2,703	)		$	6,882			$	(9,585	)

⁽¹⁾ Certain comparative figures have been reclassified to conform to the current year presentation, including the introduction of a cost of services line item causing reclassifications out of research and development employee compensation and external engineering expenses. These reclassifications had no impact on the previously reported net loss and comprehensive loss.

 

Revenues

 

Revenues for the three-month period ended February 28, 2026 decreased $10,633 to $176 as compared to $10,809 for the same period in 2025. The revenues for the three-month period ended February 28, 2026 resulted from $176 in engineering fees. The revenues of $10,809 for the three-month period ended February 28, 2025 resulted from royalty from Reed Societe Generale Group, engineering fees and sales of Loop™ PET resin.

 

Cost of Services

 

Cost of Services for the three-month period ended February 28, 2026 decreased $27 to $191 compared to $218 for the same period in 2025.

 

Research and Development

 

Research and development expenses for the three-month period ended February 28, 2026 decreased $608 to $480, as compared to $1,088 for the same period in 2025. The decrease was primarily attributable to a $365 decrease in employee compensation expenses, a $175 decrease in other, mainly legal fees, and an $89 decrease in external engineering.

 

 

General and administrative expenses

 

General and administrative expenses for the three-month period ended February 28, 2026 decreased $188 to $1,386, as compared to $1,574 for the same period in 2025. The decrease was primarily attributable to a decrease of $188 in professional fees, mainly legal fees, a decrease of $148 in insurance expenses, offset by an increase of $233 in stock-based compensation.

 

Loss on equity accounted investment

 

Loss on equity accounted investment decreased by $334 for the three-month period ended February 28, 2026. This loss relates to the Company’s 50% portion of the loss incurred by the India JV for the three-month period ended February 28, 2026, during which the India JV incurred preliminary project costs for the planned Infinite Loop™ facility in India, which are mainly engineering fees.

 

Net Loss

 

Net income for the three-month period ended February 28, 2026 decreased $9,585 to a loss of $2,703 in the period, as compared to a net income of $6,882 for the same period in 2025. The decrease was primarily due to the decrease of $10,633 in revenues, which was partially offset by the decrease of $608 in research and development expenses, the decrease of $188 in general and administrative expenses and the decrease of $334 in loss on equity accounted investment.

 

Fiscal Year Ended February 28, 2026

 

The following table summarizes our operating results for the years ended February 28, 2026 and February 28, 2025, in thousands of U.S. Dollars.

 

	Years ended
	February 28,				February 28,				Change
	2026				2025(1)				favorable / (unfavorable)
Revenues
Technology licensing	$	-			$	10,395			$	(10,395	)
Products		8				126			$	(118	)
Services		506				368				138
Total revenues		514				10,889				(10,375	)
Cost of services
Cost of services		381				218				(163	)
Total cost of services		381				218				(163	)
Expenses
Research and development
Employee compensation		1,877				3,115				1,238
Stock-based compensation		490				471				(19	)
Plant and laboratory operating expenses		836				870				34
External engineering		96				1,477				1,381
Machinery and equipment expenditures		2				64				62
Other		171				649				478
Total research and development		3,472				6,646				3,174
General and administrative
Professional fees		1,512				3,428				1,916
Employee compensation		1,516				1,942				426
Stock-based compensation		963				881				(82	)
Insurance		1,604				1,871				267
Other		810				1,106				296
Total general and administrative		6,405				9,228				2,823
Impairment of equipment		-				8,460				8,460
Depreciation and amortization		384				524				140
Total expenses		10,261				24,858				14,597
Loss on equity method investment		763				687				(76	)
Interest and other financial expenses		1,703				618				(1,085	)
Interest income		(236	)			(238	)			(2	)
Foreign exchange gain		(59	)			(197	)			(138	)
Total other loss		2,171				870				(1,301	)
Net loss	$	(12,299	)		$	(15,057	)		$	2,758

⁽¹⁾ Certain comparative figures have been reclassified to conform to the current year presentation, including the introduction of a cost of services line item causing reclassifications out of research and development employee compensation and external engineering expenses. These reclassifications had no impact on the previously reported net loss and comprehensive loss.

 

Revenues

 

Revenues for the year ended February 28, 2026 decreased $10,375 to $514, as compared to $10,889 for the same period in 2025. The revenues for the year ended February 28, 2026 resulted from $506 in engineering fees and $8 from sales of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility. The revenues of $10,889 for the year ended February 28, 2025 resulted from $10,395 in licensing revenue from the up-front royalty received from Reed Societe Generale Group, $368 in engineering fees and $126 from sales of Loop™ PET resin produced using monomers manufactured at the Terrebonne Facility .

 

 

 

Research and Development

 

Research and development expenses for the year ended February 28, 2026 decreased by $3,174 to $3,472, as compared to $6,646 for the same period in 2025 . The decrease was primarily attributable to a $1,381 decrease in external engineering expenses, a $1,238 decrease in employee compensation expenses and a $478 decrease in other, mainly legal fees.

 

General and administrative expenses

 

General and administrative expenses for the year ended February 28, 2026 decreased $2,823 to $6,405, as compared to $9,228 for the same period in 2025. The decrease was primarily attributable to a $1,916 decrease in legal fees, a decrease of $426 in employee compensation expenses, a decrease of $296 in other expenses and a decrease of $267 in insurance expenses.

 

Impairment of equipment

 

Impairment of equipment expense decreased by $8,460 for the year ended February 28, 2026. The impairment was fully recognized in the year ended February 28, 2025 and the agreement with the joint venture between the Company and SKGC was terminated. There are no future plans to construct and operate an Infinite Loop™ manufacturing facility in Ulsan, South Korea. As a result, there is no impairment to be recognized in the year ending February 28, 2026. 

 

Loss on equity accounted investment

 

Loss on equity accounted investment increased by $76 for the year ended February 28, 2026. This loss relates to the Company’s 50% portion of the loss incurred by the India JV for the year ended February 28, 2026, during which the India JV incurred preliminary project costs for the planned Infinite Loop™ facility in India, which are mainly engineering fees.

 

Net Loss

 

The net loss for the year ended February 28, 2026 decreased $2,758 to $12,299, as compared to $15,057 for the same period in 2025. The decrease was primarily due to $8,460 decrease in impairment of equipment, the $3,174 decrease in research and development expenses, the $2,823 decrease in general and administrative expenses, which were offset by a $10,375 decrease in revenue and by $1,085 increase in interest and other financial expenses.

 

LIQUIDITY AND CAPITAL RESOURCES

 

All monetary amounts are in thousands of U.S. dollars unless otherwise specified.

 

Going Concern

 

The consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to, twelve months from the date of issuance of the consolidated financial statements.

 

Since its inception, the Company has been in the pre-commercialization stage with no recurring revenues, and its ongoing operations and commercialization plans have been financed primarily by raising equity and debt. The Company has recurring net losses, negative cash flow from operating activities since its inception, and a net capital deficiency. Management continuously monitors the Company's cash resources against its cash commitments to determine whether there is sufficient liquidity to fund its costs for at least twelve months from the consolidated financial statement issuance date. In preparing this going concern assessment in accordance with US GAAP, the Company included cash flows that meet the 'probable' threshold under ASC 205-40 in its going concern evaluation and has excluded forecasted cash flows that lack substantive support or binding commitments.

 

 

Management has determined that cash and cash equivalents on hand as of February 28, 2026 of $2,356, together with the $2,566 available under its undrawn credit facility, will not be sufficient to fund the Company's ongoing operations, obligations and commitments for the next twelve months from consolidated financial statements issuance date. These events and conditions are material uncertainties that raise substantial doubt upon the Company's ability to continue as a going concern and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern. 

 

The Company’s ability to continue as a going concern and execute upon management's plans to move to the next stage of its strategic development is dependent on, among other factors, whether the Company can obtain the necessary financing through a combination of the issuance of debt and/or equity, technology licensing and engineering services arrangements, and/or financing from government incentive programs. In particular, the Company will require capital sufficient to fund its equity contributions to the India JV for the construction of the planned Infinite Loop™ facility in India, as well as its ongoing cash requirements until Loop begins receiving returns from the India JV. While the Company is actively engaged in financing discussions, there is no assurance that the Company will be successful in attracting additional funding on terms acceptable to the Company. Failure to secure additional financing on acceptable terms when it becomes required would have an adverse effect on the Company’s financial position and on its ability to execute its business plan.

 

The consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

 

At-The-Market Offering

 

On July 3, 2025, the Company entered into an At the Market Offering Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Sales Agent”), pursuant to which the Company may offer and sell, from time to time, shares of its common stock, par value $0.0001 per share having an aggregate offering price of up to $15.0 million through the Sales Agent, acting as its agent, or directly to the Sales Agent, acting as principal (the “ATM Equity Offering”).

 

As of February 28, 2026, the Company had sold 510,435 shares of common stock under the Sales Agreement for aggregate gross proceeds of approximately $917 and net proceeds of approximately $889, after deducting sales agent commissions and other offering expenses. As of February 28, 2026, the Company had approximately $14.1 million of capacity remaining under the ATM Equity Offering.

 

Investissement Québec financing facility

 

We have a long-term debt obligation to Investissement Québec in connection with a financing facility (the “Financing Facility”) for the expansion of the Terrebonne Facility up to a maximum of $3,390. We received the first disbursement in the amount of $1,628 on February 21, 2020 and the second disbursement in the amount of $1,762 on August 26, 2021. The loan can be repaid at any time by us without penalty. The loan’s interest rate was initially set at 2.36% and there was a 36-month moratorium on both capital and interest repayments as of the first disbursement date. Under the original terms of the Financing Facility, at the end of the 36-month moratorium, capital and interest was repayable in 84 monthly installments. There is no remaining amount available for disbursement under the Financing Facility.

 

On November 21, 2022, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Financing Facility Amendment”). As per the Financing Facility Amendment, a total of $37 (CDN $50) of the principal amount was repayable in monthly installments in the fiscal year ended February 28, 2025, with the remainder of the principal amount being repayable in 72 monthly installments.

 

On February 28, 2024, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Second Financing Facility Amendment”). As per the Second Financing Facility Amendment, a total of $74 (CDN $100) of the principal amount was repayable in monthly installments in the fiscal year ended February 28, 2026, with the remainder of the principal amount being repayable in 60 monthly installments. Pursuant to the Second Financing Facility Amendment the interest rate of the Financing Facility was increased from 2.36% to 3.36%.

 

 

 

On February 5, 2025, the Company and Investissement Québec entered into an agreement to amend the existing Financing Facility which modifies the repayments of the principal amount (the “Third Financing Facility Amendment”). As per the Third Financing Facility Amendment, total annual principal repayments in monthly installments are of $275 for the fiscal year ending February 28, 2026 and $605 for the fiscal year ending February 28, 2027, with the remainder of the principal amount being repayable in 24 monthly installments. Pursuant to the Third Financing Facility Amendment the interest rate of the Financing Facility was increased from 3.36% to 4.36%.

 

Under the original terms of the Financing Facility, the principal amount was repayable in 84 monthly installments beginning in March of 2023. The amendments do not modify the repayment terms of accrued interest or any of the other terms of the Financing Facility that are not mentioned above. The amendments did not meet the criteria of ASC 470, Debt for an extinguishment of debt as the amendments did not substantially modify the terms of the Financing Facility. The Company therefore applied modification accounting and no immediate gain or loss was recognized related to the amendments.

 

Credit facility from a Canadian bank

 

On July 26, 2022, Loop Canada, Inc., a wholly-owned subsidiary of the Company, entered into an Operating Credit Facility (the “Credit Facility”) with a Canadian bank. The Credit Facility allows for borrowings of up to $2,566 (CDN $3,500) in aggregate principal amount. The Credit Facility is secured by the Company’s Terrebonne, Québec property. All borrowings under the Credit Facility will bear interest at an annual rate equal to the bank’s Canadian prime rate plus 1.0%. As at February 28, 2026, the $2,566 Credit Facility was available and undrawn.

 

Due to customer

 

In October 2022, the Company received a cash deposit from a customer of $1,000 in relation to an executed capacity reservation agreement. The deposit was intended to be credited against any future sales of Loop™ PET resin over a five-year period, commencing two years after the first delivery of Loop™ PET resin to the customer. Upon mutual agreement, the capacity reservation agreement with the customer was terminated on January 18, 2024. The customer and the Company agreed for the deposit to be refunded in full on July 1, 2027, with no restriction on the Company’s use of the funds. The amount bears no interest. The cause of the termination is related to the customer’s decision to abandon its plans to incorporate recycled PET in its products for technical reasons.

 

Exchange rate hedging

 

From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. As part of our risk management program, we may enter into foreign exchange forward contracts to lock in the exchange rates for future foreign currency transactions, which is intended to reduce the variability of our operating costs and future cash flows denominated in currencies that differs from our functional currencies. We do not enter into these contracts for trading purposes or speculation, and our management believes all such contracts are entered into as hedges of underlying transactions.

 

The following table summarizes the exchange rates used:

 

	February 28,		February 28,
	2026		2025
Period end Canadian $: US Dollar exchange rate	$	0.73	$	0.69
Average period Canadian $: US Dollar exchange rate	$	0.72	$	0.72

 

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

 

 

Flow of Funds

 

Summary of Cash Flows

 

A summary of cash flows for the years ended February 28, 2026, and February 28, 2025 in U.S. dollars was as follows:

 

	February 28,			February 28,
	2026			2025
Net cash used in operating activities	$	(10,110	)	$	(2,121	)
Net cash used in investing activities		(1,171	)		(2,036	)
Net cash provided by used in financing activities		678			10,318
Effect of exchange rate changes on cash		(14	)		(146	)
Net change in cash	$	(10,617	)