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 BUSINESS AND TECHNOLOGY
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.
Since our inception in 2010, we have incurred net losses. Our net loss for the year ended February 28, 2026 was $12.2 million and we have earned limited revenues to date. We have financed our operations primarily through sales of capital stock and incurrence of debt and have devoted substantial efforts to research and development, process engineering, as well as building our team and business partnerships. We expect to continue to incur significant expenses and operating losses for the foreseeable future, and our net losses may fluctuate significantly from quarter to quarter. As of February 28, 2026, management has determined that our existing cash resources, together with amounts available under our undrawn credit facility, will not be sufficient to fund our ongoing operations, obligations and commitments for at least the next twelve months from the issuance date of our audited consolidated financial statements. These conditions raise substantial doubt about our ability to continue as a going concern. Although we believe that our business plan has significant profit potential, there is no assurance that we will attain profitable operations or that management will succeed in realizing our business objectives.
Our ability to generate revenue at scale depends on the successful commercialization of our technology and products, including the scale-up of our technology, obtaining and maintaining necessary regulatory approvals, attracting additional partners and customers, and securing financing to build and operate commercial facilities. With the development of our core technology substantially complete, our ability to advance to the next stage, including constructing manufacturing plants and commercializing our products at scale, is dependent on our ability to secure financing through a combination of debt, equity, joint ventures, government incentives, and/or customer contributions.
We expect to continue incurring operating losses, as our revenues are not yet sufficient to offset the costs of our business operations. While we have generated $0.5 million in engineering services revenue from our India JV in the year ended February 28, 2026 , we may not generate material revenues from licensing or product sales for several years. If we are not able to develop our business as anticipated, the revenues we generate may not be sufficient to support our operations or achieve profitability. There can be no assurance that we will successfully generate sufficient revenues in the future, and failure to do so would prevent us from earning profits or continuing operations.
We may not be able to execute our business plan or stay in business without additional funding.
Our ability to successfully commercialize our business and generate future revenues depends on whether we can obtain the necessary financing to implement our business plan, on acceptable terms. We will require additional financing through a combination of the issuance of debt, equity, and/or joint ventures and/or government incentive programs in order to establish profitable operations, and such financing may not be forthcoming. We are pursuing financial incentives and financing for our proposed projects with several countries through multiple programs that involve various branches of government. There is no assurance that we will be able to attract government incentives and financing to our projects or investors to invest in our business, or acquire additional financing through debt or equity markets. Our failure to secure additional financing on acceptable terms when it becomes required would have an adverse effect on our ability to execute our business plan or remain in business.
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Conditions in the financial markets and economic conditions in general may adversely affect our ability to raise additional capital, execute our business plan or remain in business.
The business environment in which we operate has been impacted by the effects of worldwide macroeconomic uncertainty. Economic concerns remain as a result of the cumulative weight of uncertainty regarding the economic conditions in the United States, where our securities are listed and in foreign countries, including global political hostilities and other financial disruptions. The imposition of broad tariffs by the United States in April 2025 has contributed to global market volatility. These protectionist measures have intensified trade tensions and heightened economic uncertainty, which may adversely impact investor confidence and constrain the availability of capital. Inflationary pressures have persisted and may continue to rise, driven by supply-demand imbalances, ongoing supply chain disruptions, and broader pricing pressures. The near-term outlook for global markets remains uncertain, and strategic risks, including potentially rising interest rates and sluggish economic growth, continue to pose challenges to many business models.
It is difficult to predict the extent to which these challenging economic conditions will persist or whether recent progress in the economic recovery will instead shift to the potential for further decline. We are not directly affected by U.S. tariff policies, given the nature of our current business, including the fact that our principal operations are based in Canada and that the joint ventures we are focused on establishing and expanding are with non-U.S. partners. However, while we have begun to generate some revenue, our ability to scale operations and achieve profitability depends on continued access to external capital and execution of our business plan. If macroeconomic conditions worsen affecting market demand for our technology and products, and if capital becomes less available, it is uncertain how our business would be affected or whether we could successfully mitigate those impacts. Accordingly, these factors in the global economy could have an adverse effect on our ability to raise additional capital, execute our business plan or remain in business.
Our technology may not be successful in achieving widespread commercial success at scale.
Our ability to commercialize our technology depends on our ability, and the ability of our collaborators, joint ventures and licensees, to finance, permit, engineer, construct, commission and operate planned commercial facilities, including the planned India JV facility and the first planned European facility to be developed under our licensing arrangement in Europe. Although we have substantially completed the development of our core technology and have operated our Terrebonne, Québec depolymerization facility for five years demonstrating the effectiveness of our technology, the Terrebonne Facility is a small-scale plant with limited production capacity used principally for research and development, training and customer marketing purposes, and we have not yet tested our technology at the scale and cost structure required for large commercial use.
Our technology may never achieve widespread commercial success for, among others, any of the following reasons:
We may not be able to secure sufficient funding to construct and operate planned commercial manufacturing facilities, or to fund our ongoing operational needs pending the commencement of commercial operations;
We or our collaborators may be unable to obtain the required permits and regulatory approvals necessary for the construction and operation of our planned commercial facilities or for other commercialization activities, or the process for obtaining such permits and approvals may be delayed, including as a result of changes in applicable laws and regulations;
Competitors may launch competing or more effective technology;
Our technology may not achieve broad market adoption or sustained commercial success;
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 an adverse effect on our ability to raise additional capital, execute our business plan, or remain in business.
We face business risks due to our relationships with strategic partners and other factors that may affect our joint venture endeavors.
We rely on our strategic partner relationships for the scaling, manufacturing and commercialization of our technology. We have arrangements with Ester and Reed Societe Generale Group to commercially scale our technology in India and Europe, respectively. Termination of any of these agreements could have an adverse effect on our business. Although we have not received any indication from our strategic partners of an intent to terminate and we expect these relationships to continue progressing, we cannot guarantee that our partners will not exercise their applicable termination rights, which are outside our control, or that other unforeseen factors will not affect the continuation of these collaborations.
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There are various reasons, whether operational, strategic, or external, that could lead either us or our partners to determine not to proceed with a joint venture project. For example, we and our partner SKGC mutually agreed in January 2025 to terminate our joint venture agreement to build an Infinite Loop™ facility in South Korea. This decision reflected our shift in strategy to focus on capital deployment in lower-cost jurisdictions and emphasized licensing and engineering services in higher-cost regions, while SKGC underwent a broader strategic restructuring. Similarly, a planned European partnership with SUEZ and SKGC was suspended in 2022 after the parties determined not to proceed. These decisions, while strategic, resulted in the suspension or winding down of planning efforts with associated sunk costs.
Joint ventures and strategic partnerships require significant time, financial investment, and management attention during early-stage planning, engineering, and feasibility activities, all of which may be incurred before a final investment decision is made. If a joint venture is suspended or terminated prior to commercialization, we may be unable to recover these investments. Moreover, strategic shifts by partners, changes in market or regulatory conditions, misalignment of commercial priorities, or challenges in achieving project economics could impact the long-term viability and expected benefits of such arrangements. Any failure of our strategic partners or us to meet our required commitments, whether financial or otherwise, could result in a termination of such agreements as described above, operational issues, increased expenditures, or damage to our reputation or loss of clients or customers, any of which could adversely affect our business and operations, financial performance, or prospects.
If we are unable to successfully scale our manufacturing processes, we may not meet customer demand.
To be successful, we will need to scale our manufacturing processes in a cost-effective manner while maintaining high product quality and reliability. If we cannot maintain high product quality at a large scale and with an acceptable cost structure, our business will be adversely affected. We may encounter difficulties in scaling up production, including problems with the supply of key components, cost over-run, or quality control. Even if we are successful in developing our manufacturing capability including through joint ventures, we do not know whether we will do so quickly and efficiently enough to satisfy the requirements of our customers. Our current manufacturing facility is a small-scale plant with limited production capacity used principally for research and development, training, and customer marketing purposes. 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 with cost . We, however, have not yet tested our technology at the scale that will be required for large commercial use nor at a scale and cost structure sufficient to conclude the commercial of our technology.
Our joint venture with Ester to construct and operate a manufacturing facility in India involves significant risks, and any delays or disruptions could adversely affect our business, financial condition, and prospects.
We are currently advancing a joint venture with Ester to construct the Infinite Loop™ India manufacturing facility, which is expected to produce approximately 70,000 tons per year of Loop branded PET resin and polyester fiber. This project is in the early stages of development, and there can be no assurance when commercial operations will begin. The total initial funding requirement is estimated at approximate ly $165 to $170 million and is expected to be financed through a combination of debt and equity capital. The success of the facility depends on a number of factors, many of which are outside of our control.
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Risks related to this joint venture and facility construction include, but are not limited to:
Delays in securing required permits, land use approvals, or regulatory clearances in India;
Increases in construction costs or supply chain disruptions that could affect budget and timeline;
Inability to raise sufficient debt or equity capital on acceptable terms or within the expected timeframe;
Engineering or technical challenges during construction or commissioning;
Risks associated with political, regulatory, or economic changes in India that could impact construction or operations;
Potential misalignment between joint venture partners on key strategic or operational decisions; and
Failure to achieve expected operating efficiencies or projected economic returns.
Additionally, several of our key commercial agreements and strategic alliances, including the offtake agreements with Nike and Taro Plast and strategic alliances with Shinkong and Hyosung TNC, are conditioned upon, or otherwise dependent on, the successful construction and operation of the Infinite Loop™ India facility. If the facility is not completed, is significantly delayed, or fails to achieve the required production volumes or product quality specifications, we may be unable to realize the anticipated benefits under these agreements, which could result in their termination or renegotiation, damage our relationships with key customers and strategic partners, and adversely affect our ability to generate revenues and execute our commercialization strategy.
Although we and Ester have a well-established working relationship and have made initial equity contributions to support engineering work, the facility remains in the pre-construction phase. If we or our joint venture partner are unable to meet our respective obligations, secure financing, or complete the facility as planned, our commercialization strategy could be delayed, and our business, financial condition, and results of operations could be adversely affected.
We may not realize the expected benefits and may face risks associated with our licensing arrangements, and our ability to continue to generate significant revenue from technology licensing may be limited or delayed.
A key component of our commercialization strategy is the licensing of our proprietary depolymerization technology to third parties for the development and operation of Infinite Loop™ manufacturing facilities. Under the License Agreement entered with RCE, acting on behalf of Infinite Loop Europe SAS, we granted a non-transferable, royalty-bearing license to use our technology at a single facility in Europe, with the possibility of sublicensing to a third-party operator under certain conditions. While the agreement includes an upfront €10.0 million upfront licensing fee payment and provides for additional royalty payments upon satisfaction of certain conditions, future revenues are dependent on Infinite Loop Europe SAS’s ability and willingness to proceed with facility construction and commercialization activities.
Our ability to scale this model and generate meaningful revenue from licensing depends on a number of uncertain factors, including the relevant joint venture’s progress in executing the project, satisfaction of conditions that trigger payments, and our ability to enter into new license agreements with additional partners or for new facilities.
If a joint venture project is delayed, canceled, or otherwise fails to meet commercial expectations, or if we are unable to enter into additional license agreements on favorable terms, our ability to generate recurring revenue from licensing may be adversely affected. Furthermore, any termination of existing or future licensing agreements due to breach, failure to meet payment obligations, or other triggering events could materially impact our revenue streams and strategic growth plans. There can be no assurance that our licensing model will be adopted at scale or that it will result in meaningful or sustained revenue.
Licensing arrangements also present legal and operational risks, including challenges in protecting our intellectual property, especially as our technology is deployed in multiple jurisdictions with differing enforcement standards. While we retain ownership of our technology and all related intellectual property rights under our license agreements, we rely on licensees to comply with confidentiality and use restrictions and to notify us of any potential infringement or misuse. Failure by a licensee to adequately safeguard our intellectual property or unauthorized use or disclosure of our proprietary technology could compromise our competitive advantage. In addition, sublicensing rights, where permitted, may create added complexity and limit our direct oversight over third-party operators.
We operate in a highly competitive and rapidly evolving industry, and increased competition or technological advances could adversely affect our business, financial condition, and results of operations.
The plastics manufacturing industry is extremely price-competitive because of the commodity-like nature of virgin PET resin, and its correlation to the price of crude oil. If our cost to manufacture rPET is not competitive with virgin PET, or if the price of oil decreases significantly, it may adversely impact our ability to penetrate the market or be profitable.
The demand for rPET has historically fluctuated with the price of crude oil. Recent volatility in global financial markets and in oil prices have increased uncertainty in the pricing dynamics of the plastics industry. If crude oil prices decline, the cost to manufacture rPET may become comparatively higher than the cost to manufacture virgin alternatives. This could reduce demand for recycled alternatives if customers prioritize cost over sustainability. Our ability to penetrate the market will depend in part on the cost of manufacturing of our products, and if we do not successfully distinguish our products from those of virgin manufacturers our entry into the market and our ability to secure customer contracts can be adversely affected.
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In addition, we operate in a highly competitive market that is attracting increased interest from both industrial and environmental stakeholders, which may lead to greater competition, particularly from new entrants promoting circular economy solutions. The development of competing recycling technologies, especially those based on chemical depolymerization processes, has gained momentum in recent years and may benefit from greater financial, technical, or operational resources. While we believe our depolymerization process offers advantages in handling more contaminated feedstock and in its scalability, which is expected to differentiate it from other available methods, there can be no assurance that technically, environmentally, or economically superior solutions will not be developed and brought to market. If competing technologies offer better performance, cost advantages, or gain greater customer or regulatory acceptance, our competitive position could be materially impacted, which could have a material adverse effect on our business, financial condition, or results of operations.
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, yield loss of lower quality raw materials, and the capabilities of the producer’s production facility. Additionally, the 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 feedstock supply strategy, including any hedging procedures, may be insufficient, and our results could be materially impacted if costs of materials increase.
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 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 plans.
We are subject to certain risks related to litigation filed by or against us and investigations we are subject to, 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, investigations and other proceedings filed by or against us or individuals to whom we may have indemnity and/or advancement obligations, 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, including the subpoena we received from the SEC in October 2020 requesting certain information regarding testing, testing results and details of results from our GEN I and GEN II technologies and certain of our partnerships and agreements. In March 2022, we received a subpoena requesting additional information, including information concerning our reverse-merger in 2015, and communications with certain individuals and entities. There have been no further information requests relating to the Company’s business or technology. 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 resulting from the actions of individuals or entities outside of our control. In the case of intellectual property and proceedings, outcomes could include the , or other of material intellectual property rights used in our business and prohibiting our use of business processes or technology that are subject to third-party patents or other third-party intellectual property rights. We expect to continue to incur legal fees in relation to , and other proceedings.
We are subject to an SEC Investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.
As described in “Item 3. Legal Proceedings—SEC Investigation,” of this Annual Report on Form 10-K, the SEC in October 2020 requested certain information regarding testing, testing results and details of results from our GEN I and GEN II technologies and certain of our partnerships and agreements. In March 2022, we received a subpoena requesting additional information, including information concerning our reverse-merger in 2015, and communications with certain individuals and entities. There have been no further information requests relating to the Company’s business or technology. We cannot predict or provide any assurance as to the timing, outcome or consequences of the SEC investigation. If the SEC were to conclude that enforcement action is appropriate, we could be required to pay civil penalties and fines, and the SEC could impose other sanctions against us or against our current and former officers and directors. We have incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with matters relating to or arising from the SEC investigation. In addition, our Board of Directors, management, and employees may expend a substantial amount of time on the SEC , resources and attention that would otherwise be directed toward our operations and implementation of our business strategy, all of which could materially affect our business, financial condition, and results of operations. Furthermore, while the SEC has informed us that the should not be construed as an indication by the SEC or its staff that any of law has occurred, nor as a reflection upon any person, entity or security, publicity surrounding the foregoing, or any SEC enforcement action or settlement as a result of the SEC’s , even if ultimately resolved for us, could have an impact on our reputation, business, financial condition, or results of operations.
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Our Terrebonne Facility or other planned facilities 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 Terrebonne Facility or other planned facilities 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 Terrebonne Facility and our other planned facilities, 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 Canada or in other jurisdictions where we or our partners will operate manufacturing facilities. 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 depend in large part upon protecting our proprietary technology. We rely on a combination of patent, trademark and trade secret protection, confidentiality, nondisclosure and non-use agreements to protect our proprietary rights. As we expand our business through licensing and joint venture arrangements, our intellectual property is increasingly exposed to third-party use and international enforcement environments.
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 or Canada. Moreover, as we allow third-party partners to access and implement our technology under license or through engineering collaboration, we rely on contractual safeguards and partner cooperation to ensure appropriate protection and restricted use of our intellectual property. Even with these measures in place, there is a risk that partners, sublicensees, contractors, or others may misappropriate our trade secrets or reverse-engineer our technology, knowingly or inadvertently, which could compromise our competitive position.
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. If we are unable to adequately protect our intellectual property or enforce our rights, our ability to generate licensing revenue, maintain strategic control over our technology, and preserve long-term value may be materially impaired. Additionally, we may be required to expend significant time and resources to monitor compliance, enforce our rights, or defend against claims of infringement, any of which could adversely affect our business and financial condition.
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 us claimed of the rights of others. Any intellectual property and the to obtain necessary licenses or other rights could have a material effect on our business, financial condition and results of operations.
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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 our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience material adverse effects on our business, financial condition, results of operations and prospects.
Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase. These threats are becoming increasingly difficult to detect and pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of data. Disruptions or failures in the physical infrastructure or operating systems that support our business, suppliers and other partners, or cyber-attacks or security breaches of our networks or systems or of third party suppliers and service providers, could result in the loss of customers and business opportunities, lawsuits, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, any of which could materially affect our business, financial condition, results of operations and prospects. Increasing costs associated with cybersecurity protections may be and may also affect our financial condition. While we attempt to mitigate these risks, our systems, data, networks, products, and technology remain potentially to advanced and cybersecurity .
In the ordinary course of our business, we may process proprietary, confidential, and sensitive data, including personal data, intellectual property, and trade secrets (collectively, sensitive information), that is subject to privacy and security laws and regulations. Despite our efforts to protect sensitive information, our facilities and systems, business partners, suppliers and third-party service providers may be vulnerable to cybersecurity incidents, theft, misplaced or loss of data, programming and/or human errors that could lead to the compromise of sensitive, confidential or personal data or information or unauthorized use or disruption of our systems and software.
While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit such vulnerabilities change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred. These vulnerabilities pose material risks to our business.
Despite our efforts to identify and remediate vulnerabilities, if any, in our information technology systems, our efforts may not be successful. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences.
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.
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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 complex. If, during the evaluation and testing process, we identify one or more 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. As we remain a Smaller Reporting Company, our independent registered public accounting firm is not required to express an opinion as to the effectiveness of our internal control over financial reporting. However, pursuant to Section 404, in the future, we may be required to furnish an attestation on internal control over financial reporting issued by our independent registered public accounting firm. our efforts, our independent registered public accounting firm may determine we have a material or significant in our internal controls over financial reporting once such firm begins its Section 404 reviews in the future. If we are to assert that our internal controls over financial reporting are , or when required in the future, if our independent registered public accounting firm is to express an opinion as to the effectiveness of our internal controls over financial reporting as required by Section 404, investors may confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be affected and we could become subject to or by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
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. In addition, as we expand internationally through joint ventures and other arrangements, including agreements entered into with strategic partners in Europe and India, we expect to become subject to additional foreign exchange risks related to local currencies, contract payments, and operating costs in other jurisdictions. Volatility in these regions could impact the financial performance of our joint ventures, the timing and value of payments, and the funding requirements of our global commercialization strategy. 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.
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We are subject to extensive and evolving domestic and global legal and regulatory requirements, and failure to obtain or maintain necessary approvals and comply with applicable laws could adversely affect our ability to commercialize our technology and operate our business.
As part of our commercialization strategy, we plan to expand the deployment of our proprietary Infinite Loop™ technology globally through a mix of owned facilities, joint ventures, licensing arrangements, and engineering services. This exposes us to a broad range of legal and regulatory regimes, including those related to environmental protection, chemical handling, health and safety, food and pharmaceutical packaging, land use, and foreign investment.
Our operations in Canada, including our Terrebonne Facility, are subject to federal and provincial regulations with which we are required to comply. While we have obtained relevant certifications for food and pharmaceutical packaging materials in Canada, the U.S., and the EU, maintaining these approvals requires ongoing compliance and may be affected by changes in laws or regulatory interpretations. As we expand internationally, including through current joint ventures in India and Europe, we will encounter additional permitting, compliance, and operational risks that vary by jurisdiction. Delays or failures in obtaining required approvals, or changes in regulatory requirements, could impact project timelines, increase costs, or limit our ability to operate. In addition, our reliance on third-party partners under licensing and joint venture structures adds complexity to compliance, particularly in jurisdictions with less predictable legal enforcement. Failure to obtain or maintain required permits and approvals, or to ensure compliance by our partners, could result in penalties, project delays, increased costs, reputational damage, or other adverse effects on our business and financial condition.
RISKS ASSOCIATED WITH OUR SECURITIES
Our current arrangements contain certain restrictions and potential cash obligations, and raising additional funds may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
We currently have several financing arrangements in place that contain restrictions and potential cash obligations. For example, our Series B CPS issued to an affiliate of Reed c arries voting rights and a 13% cumulative annual PIK dividend, and is redeemable by the holder on the fifth anniversary of issuance. Additionally, we have a $2.6 million (CDN $3.5 million) secured credit facility with a Canadian bank, which is secured by the Company’s Terrebonne, Québec property. As of February 28, 2026, we have a loan from Investissement Quebec with an outstanding balance of $3.0 million (CDN $4.1 million). These existing and potential obligations, together with any new financings we may pursue, could impact our future liquidity and operational flexibility.
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 expenses 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;
our ability 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;
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volatility in the financial and credit markets, including the recent volatility due, in part, to current geo-political events, inflation, economic uncertainty and the corresponding fiscal and monetary responses by central banks and governments;
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 or investigations;
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 negative 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;
limited trading liquidity in our shares and any short positions held; 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 the 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 May 26, 2026, Mr. Daniel Solomita, our President and Chief Executive Officer, Chairman of the Board of Directors, and controlling stockholder, beneficially owns 20,015,516 shares of common stock, or 41.4% 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 total number of outstanding shares of our common stock on February 12, 2016 (as adjusted for any stock splits and stock dividends effected after February 12, 2016), 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 20,015,516 shares of common stock and one share of Series A Preferred Stock provides him with 76.0% of the voting control of the Company.
Additionally, the one share of Series A Preferred Stock issued to Mr. Solomita contains protective provisions, which preclude 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 removing the director appointed by the holders of our Series A Preferred Stock, replacing the President and/or Chief Executive Officer of the Company (unless approved by the Board of Directors, including the director appointed by the holders of our Series A Preferred Stock), and declaring or paying any dividend or other distribution.
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As a result, Mr. Solomita has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, under Nevada law and subject to certain exceptions, any director or one or more of the incumbent directors may be removed as a director only by the vote of stockholders representing not less than two-thirds of the voting power of the issued and outstanding stock entitled to vote. Mr. Solomita therefore has the voting power to remove directors who oppose actions or decisions he favors. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support. This concentrated control could also discourage a potential investor from acquiring our common stock due to the limited voting power of such stock relative to the Series A Preferred Stock and might harm the market price of our common stock. In addition, Mr. Solomita has the ability to control the management and major strategic investments of our company as a result of his position as our President, Chief Executive Officer, and Chairman of the Board of Directors and his ability to control the election or replacement of our directors. Because of this significant ownership position, new investors may not be to effect a change in our business or management, and therefore, stockholders would have no recourse as a result of decisions made by management. As a board member and officer, Mr. Solomita owes a fiduciary duty to our stockholders and must act in faith in a manner he reasonably believes to be in the interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Solomita is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally.
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 that 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.
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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 on Form 10-K before you decide to purchase our securities. If any of these risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.
Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock.
Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.
We currently have an effective shelf registration statement on Form S-3 (File No. 333-281883), declared effective by the SEC on September 10, 2024, which allows us to offer and sell up to $175.0 million in any combination of debt securities, common stock, preferred stock, depositary shares, warrants, subscription rights, and units. In addition, on July 3, 2025, we entered into an At the Market Offering Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”), pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $15.0 million from time to time through Roth, acting as sales agent or principal, in transactions that may be deemed to be “at-the-market” offerings under Rule 415 promulgated under the Securities Act (the “ATM Equity Offering”. As of February 28, 2026, the Company had sold 510,435 shares of common stock under the Sales Agreement, and as of May 26, 2026, the Company had approximately $14.1 million of capacity remaining under the ATM Equity Offering.
If a significant number of shares is sold in the public market, this could put downward pressure on our stock price. Moreover, we cannot in general predict the effect that future sales of our common stock, or the market perception that such sales may occur, would have on the market price of our common stock. Even the perception of potential dilution could adversely affect investor confidence and market value.
