Loop Energy Inc.

No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws and may not be offered or sold within the United States (within the meaning of Regulation S under the U.S. Securities Act) unless an exemption from such registration is available. This prospectus does not constitute an offer to sell or an offer to buy any of these securities in the United States. See “Plan of Distribution”.

Loop Energy Inc. (“Loop” or the “Company”) is early stage and an investment in the Offered Shares (as defined below) is speculative and subject to a number of risks that should be considered by a prospective purchaser.

PROSPECTUS

Initial Public Offering

February 18, 2021

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LOOP ENERGY INC.

6,250,000 COMMON SHARES $100,000,000

This prospectus qualifies the distribution to the public of an aggregate of 6,250,000 Common Shares (the “ Offered Shares ”) in the capital of Loop at a price of $16.00 per Offered Share (the “ Offering Price ”) for aggregate gross proceeds to the Company of $100,000,000 (the “ Offering ”). If the Over-Allotment Option (as defined below) is exercised in full, an additional 937,500 Shares will be sold by the Company. See “ Plan of Distribution ”.

The Offered Shares are being sold pursuant to the terms of an underwriting agreement dated February 18, 2021 (the “ Underwriting Agreement ”) among the Company and National Bank Financial Inc. (the “ Lead Underwriter ”), as lead underwriter and sole bookrunner, CIBC World Markets Inc., Raymond James Ltd., Canaccord Genuity Corp. and Cormark Securities Inc. (collectively with the Lead Underwriter, the “ Underwriters ”). The Offering Price was determined by negotiation between the Company and the Underwriters.

The Toronto Stock Exchange (“ TSX ”) has conditionally approved the listing of the Offered Shares under the symbol “LPEN”. Listing is subject to the Company fulfilling all the listing requirements of the TSX on or before May 11, 2021, including a distribution of Offered Shares to a minimum number of public shareholders. See “ Plan of Distribution ”.

This prospectus also qualifies the distribution of (i) 8,473,357 Common Shares that will be issued to shareholders of Loop Energy (VCC) Inc. (“ VCC I ”) and Loop Energy (VCC) II Inc. (“ VCC II ” and together with VCC I, the “ VCCs ”) pursuant to the amalgamation of the Company and the VCCs as part of the Pre-Closing Reorganization (as defined below) and (ii) the Special Advisor Warrants (as defined below). See “ Description of Share Capital – Pre-Closing Reorganization ” and “ Prior Sales – Special Advisor Warrants ”.

There is no market through which the Offered Shares may be sold and purchasers may not be able to resell the Offered Shares. This may affect the pricing of the Offered Shares in the secondary market, the transparency

and availability of trading prices, the liquidity of the Offered Shares and the extent of issuer regulation. Prospective purchasers of the Offered Shares should carefully consider the risks described under “ Risk Factors” and “ Cautionary Statement Regarding Forward-Looking Information ” before purchasing the Offered Shares.

Price: $16.00 per Offered Share

Per Offered Share ................................ Total(3).................................................	Offering Price to the Public	Underwriters’ Fee(1)	Net Proceeds(2)
	$16.00 $100,000,000	$0.96 $6,000,000	$15.04 $94,000,000

Notes:

(1) The Company shall pay the Underwriters a cash fee equal to 6.0% of the gross proceeds from the sale of the Offered Shares pursuant to the Offering (the “ Underwriters’ Fee ”), subject to a reduced fee of 3.0% for Offered Shares sold by the Underwriters to certain purchasers designated by the Company who may purchase up to an aggregate of $2,000,000 of Offered Shares (the “ President’s List ”). See “ Plan of Distribution ”.
(2) Assuming there are no Offered Shares sold to the President’s List purchasers in the Offering and before deducting expenses of the Offering estimated to be $1,800,000. The expenses of the Offering will be paid by the Company out of the gross proceeds of the Offering. See “ Use of Proceeds ”.
(3) The Company has granted the Underwriters an over-allotment option (the “ Over-Allotment Option ”) exercisable, in whole or in part, and from time to time, in the sole discretion of the Underwriters, for a period of 30 days from the Closing Date (as defined below), under which the Underwriters may purchase up to an additional 937,500 Offered Shares (representing up to 15% of the aggregate number of the Offered Shares), at the Offering Price, to cover over-allotments, if any, and for market stabilization purposes. All references to “Offered Shares” in this prospectus include the Offered Shares that may be issued or sold pursuant to the Over-Allotment Option. A purchaser who acquires Offered Shares forming part of the Underwriters’ over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. If the Over-Allotment Option is exercised in full (assuming there are no Offered Shares sold to the President’s List purchasers and before deducting the expenses of the Offering), the total “Offering Price to the Public”, “Underwriters’ Fee” and “Net Proceeds” in respect of the Offering will be $115,000,000, $6,900,000 and $108,100,000, respectively. Unless otherwise indicated, all information in this prospectus assumes that the Over-Allotment Option will not be exercised. See “ Plan of Distribution ” and “ Principal Shareholders” .

The following table sets out the aggregate number of Offered Shares that may be sold by the Company to the Underwriters pursuant to the exercise of the Over-Allotment Option:

Underwriters’ Position Over-Allotment Option	Maximum Size 937,500 Offered Shares	Exercise Period Up to 30 days from the Closing Date	Exercise Price
			$16.00

The Underwriters, as principals, conditionally offer the Offered Shares, subject to prior sale, if, as and when issued by the Company and accepted by the Underwriters in accordance with the terms and conditions contained in the Underwriting Agreement referred to under “ Plan of Distribution ”, subject to the approval of certain legal matters on behalf of the Company by Fasken Martineau DuMoulin LLP, and on behalf of the Underwriters by Goodmans LLP. The Offered Shares are being offered to the public in all of the provinces of Canada and in a private placement in the United States in an offering exempt from the registration requirements of the U.S. Securities Act and applicable state laws. The Underwriters may also offer the Offered Shares outside of Canada, the United States, the United Kingdom and the European Economic Area.

Subject to applicable laws, in connection with the Offering, the Underwriters may effect transactions intended to stabilize or maintain the market price of the Offered Shares at levels other than those which might otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any time. The Underwriters may offer the Offered Shares at a price lower than that stated above. Any such reduction in price will not affect the proceeds received by the Company. See “ Plan of Distribution ”.

Subscriptions for the Offered Shares will be received subject to rejection or allotment in whole or in part and the Underwriters reserve the right to close the subscription books at any time without notice.

Other than in certain circumstances, it is anticipated that the Offered Shares will be delivered electronically through the non-certificated inventory system administered by CDS Clearing and Depository Services Inc. (“ CDS ”). On the Closing of the Offering (the “ Closing ”), which is expected to occur on or about February 25, 2021 or on such earlier or later date as the Company and the Underwriters may agree, but in any event not later than 42 days after the date of the receipt for the (final) prospectus (the “ Closing Date ”), the Company, via its transfer agent, will electronically deliver the Offered Shares registered to CDS or its nominee. See “ Plan of Distribution ”.

Dr. Wayne A. Eckerle, a director of the Company, and Christopher C. Clulow, a proposed director of the Company, reside outside of Canada and each has appointed the Company, 2880 Production Way, Burnaby, British Columbia V5C 4T6 as agent for service of process in Canada. Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person who resides outside of Canada, even if the party has appointed an agent for service of process. See “ Risk Factors ”.

Loop’s head office is located at 2880 Production Way, Burnaby, British Columbia V5C 4T6 and its registered and records office is located at 2900 - 550 Burrard Street, Vancouver, British Columbia V6C 0A3.

iii

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US$50B

Patents[(1)] in Market Opportunity IP Portfolio 1. Includes patents issued and pending.

~150 Years $16.4M of Collective Fuel 24-Month Product Cell Experience Backlog

Growth Strategies

Leading PEM Fuel Cell Designer Targeting High Growth Commercial End Markets

eFlow[TM] Advantages[(1)]

Investment Highlights

Up to Lower H2 consumption than 16% competitive fuel cells

Focus on Zero Emission Commercial Applications

Leading Fuel Cell Technology

Up to More peak power vs. 90% competing fuel cell products

Partnerships with Leading OEMs & OEM Suppliers

Up to Better current density 10x uniformity

Seasoned Leaders and Industry Experts

Aim to be a Top Five Fuel Cell Company Globally

Up to Less bipolar plate & MEA 45% materials resulting in lower costs

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Industry Growth Expectations
(in US$ billions) $50.8
$36.7
$28.3
$24.8
[$19.5]
$13.5 $13.9 [$14.6] [$15.5] [$17.3]
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
1. Based on Loop’s internal testing and modelling results.
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Focus on the commercial vehicle market and leverage products into other markets

Scale manufacturing and customer support infrastructure

Develop partnerships with leading OEMs and OEM Suppliers

Reduce costs by leveraging scale and internalizing certain components

Continue to invest to develop and improve eFlow[TM] technology

Page ABOUT THIS PROSPECTUS ................................................................................................................................... 1 GLOSSARY ................................................................................................................................................................. 3 MARKETING MATERIALS ..................................................................................................................................... 9 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION ............................... 9 SUMMARY OF PROSPECTUS .............................................................................................................................. 14 BUSINESS OF THE COMPANY ............................................................................................................................ 14 INDUSTRY DESCRIPTION .................................................................................................................................... 21 SELECTED FINANCIAL INFORMATION .......................................................................................................... 24 THE OFFERING ....................................................................................................................................................... 26 THE COMPANY ....................................................................................................................................................... 30 CORPORATE STRUCTURE .................................................................................................................................. 59 USE OF PROCEEDS ................................................................................................................................................ 59 PLAN OF DISTRIBUTION ..................................................................................................................................... 61 CONSOLIDATED CAPITALIZATION ................................................................................................................. 65 MANAGEMENT’S DISCUSSION AND ANALYSIS............................................................................................ 66 DESCRIPTION OF SHARE CAPITAL ................................................................................................................. 83 OPTIONS AND RIGHTS TO PURCHASE SECURITIES................................................................................... 87 PRIOR SALES ........................................................................................................................................................... 88 ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER ................................................................................................................................................................ 89 DIVIDEND POLICY ................................................................................................................................................ 89 PRINCIPAL SHAREHOLDERS ............................................................................................................................. 89 THE BOARD OF DIRECTORS AND MANAGEMENT ...................................................................................... 89 EXECUTIVE COMPENSATION............................................................................................................................ 96 DIRECTOR COMPENSATION ............................................................................................................................ 111 CORPORATE GOVERNANCE ............................................................................................................................ 113 INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS .............................................................. 119 ELIGIBILITY FOR INVESTMENT..................................................................................................................... 119 CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS ...................................................... 120 RISK FACTORS ..................................................................................................................................................... 122 LEGAL PROCEEDINGS AND REGULATORY ACTIONS ............................................................................. 142 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS.................................. 142 AUDITORS, TRANSFER AGENT AND REGISTRAR ..................................................................................... 142 ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS OR CORPORATIONS ................. 142 MATERIAL CONTRACTS ................................................................................................................................... 142 EXPERTS ................................................................................................................................................................. 143 PURCHASERS’ STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION ..................................... 143

TABLE OF CONTENTS (CONTINUED)

Page APPENDIX “FS” – FINANCIAL STATEMENTS ............................................................................................ FS-1 APPENDIX “A” – MANDATE OF THE BOARD OF DIRECTORS ............................................................... A-1 APPENDIX “B” – CHARTER OF THE AUDIT COMMITTEE ....................................................................... B-1 CERTIFICATE OF THE COMPANY ................................................................................................................. C-1 CERTIFICATE OF THE UNDERWRITERS ..................................................................................................... C-2

ABOUT THIS PROSPECTUS

General Advisory

A prospective purchaser of the Offered Shares should read this entire prospectus and consult its own professional advisors to assess the income tax, legal, risks and other aspects of its investment in the Offered Shares.

The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the Offered Shares. The Company’s business, financial condition, results of operations and prospects may have changed since the date of this prospectus. The Company and the Underwriters have not authorized anyone to provide prospective purchasers of the Offered Shares with additional or different information.

None of the Company or the Underwriters are making an offer to sell these securities in any jurisdictions where the offer or sale is not permitted. For prospective purchasers of the Offered Shares outside Canada, none of the Company or the Underwriters have done anything that would permit the Offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in Canada. Prospective purchasers of the Offered Shares are required to inform themselves about, and to observe any restrictions relating to, the Offering and the distribution of the Offered Shares under this prospectus.

Interpretation

Certain terms used in this prospectus are defined under “ Glossary ”. Unless the context otherwise requires, all references in this prospectus to “Loop”, the “Company” and the words “our,” “us” or “we” refer to Loop Energy Inc. together with its Subsidiary (as defined below), on a consolidated basis, as constituted on the Closing Date after giving effect to the Pre-Closing Reorganization described under “ Description of Share Capital – Pre-Closing Reorganization ”.

Unless otherwise indicated, all information in this prospectus assumes that the Offering and the Pre-Closing Reorganization have been completed and that the Over-Allotment Option will not be exercised.

Market and Industry Data

Unless otherwise indicated, information contained in this prospectus concerning the Company’s industry and the markets in which the Company operates or seeks to operate, including the Company’s general expectations and market position, market opportunities and market share, is based on information from third-party sources, industry reports, journals, studies and publications (including industry surveys and forecasts), websites and other publicly available information, and management studies and estimates.

Unless otherwise indicated, the Company’s estimates are derived from publicly available information released by independent industry analysts and third-party sources as well as data from the Company’s own internal research, and include assumptions made by the Company, which management of the Company believes to be appropriate and reasonable based on its knowledge of its industry and markets. The Company’s internal research and assumptions have not been verified by any independent source, and neither the Company nor the Underwriters have independently verified any third-party information, or ascertained the underlying industry, market, economic and other assumptions relied upon by such sources.

While the Company believes the market information and other estimates included in this prospectus to be generally reliable, such information and estimates are inherently imprecise. In addition, projections, assumptions and estimates of the Company’s future performance, or the future performance of the industry and markets in which the Company operates, are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under “ Cautionary Statement Regarding Forward-Looking Information ” and “ Risk Factors ”.

Trademarks and Trade Names

This prospectus includes the Company’s eFlow™ trademark. This trademark is protected under applicable intellectual property laws and is the Company’s property. The Company’s trademark may appear without the ™ symbol in this prospectus, but such absence is not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, the Company’s rights to this trademark. All other trademarks and trade names used in this prospectus are the property of their respective owners.

Presentation of Financial Information and Other Information

In this prospectus, all references to “$” are references to Canadian dollars. The Financial Statements (as defined below) are presented in Canadian dollars. The Annual Financial Statements (as defined below) have been prepared in accordance with International Financial Reporting Standards (“ IFRS ”) as issued by the International Accounting Standards Board (“ IASB ”) and audited in accordance with Canadian generally accepted auditing standards. The Quarterly Financial Statements (as defined below) are unaudited and have been prepared in accordance with IFRS. All other financial information of the Company referred to herein has not been audited and is derived from the records maintained by management of the Company.

Non-IFRS Measures

The information presented in this prospectus includes certain non-IFRS financial measures, namely EBIT Margin Percentage and Gross Margin Percentage. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. The non-IFRS measures used in this prospectus are not financial measures of the Company and therefore the Company is not able to provide a reconciliation of such non-IFRS measures.

GLOSSARY

This glossary defines certain business, industry, technical and legal terms used in this prospectus for the convenience of the reader. It is not a comprehensive list of all defined terms used in this prospectus.

“ Annual Financial Statements ” has the meaning given to such term under “ Management’s Discussion and Analysis ”.

“ ASIP ” means the Automotive Supplier Innovation Program.

“ Audit Committee ” means the audit committee of the Company.

“ Award ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – One-Time Closing Option Grant to Employees and Directors in Connection with the Offering ”.

“ Award Agreement ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – One-Time Closing Option Grant to Employees and Directors in Connection with the Offering ”.

“ balance of plant ” means an assembly of fuel cell system components surrounding the core fuel cell stack, necessary to (i) supply the fuel cell stack with hydrogen and oxygen, (ii) maintain the desired operating conditions (including pressure, flow, temperature, and humidity), (iii) provide an outlet for electrical power and water, and (iv) monitor and control the performance and safety of the fuel cell system. The balance of plant components may vary depending on power output, jurisdiction, application and manufacturer, among other things, but generally do not include components for hydrogen storage, incoming air filtration, radiator and cooling pump, DC/DC vehicle power electronics interface, or other items that may be vehicle specific in design.

“ Ballard ” means Ballard Power Systems Inc.

“ BCBCA ” means the Business Corporations Act (British Columbia).

“ BEV ” means battery electric vehicle.

“ bipolar plate ” means a key component of the fuel cell stack that conducts current and electrically contacts electrodes, supplies, distributes, and isolates reactants and cooling media, removes products (liquid water), and mechanically supports the MEA. A bipolar plate is typically formed by combining anode and cathode plate halves into a single element.

“ Board of Directors ” or “ Board ” means the board of directors of the Company.

“ CCM ” or “ catalyst coated membranes ” means an assembly of parts comprised of a polymer electrolyte membrane separating catalyst(s)-containing electrode layers that are used in fuel cells and electrolyzers.

“ CDS ” means CDS Clearing and Depository Services Inc.

“ CEO ” means Chief Executive Officer.

“ CFO ” means Chief Financial Officer.

“ channel partners ” means businesses who work with Loop to sell Loop products to their customers or integrate Loop products into their own product offerings.

“ Closing ” means the closing of the Offering.

“ Closing Date ” means the date of the Closing, which is scheduled to occur on or about February 25, 2021 or on such earlier or later date as the Company and the Underwriters may agree.

“ Closing Option Grant ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – One-Time Closing Option Grant to Employees and Directors in Connection with the Offering ”.

“ Code ” has the meaning given to such term under “ Corporate Governance – Board of Directors – Code of Business Conduct and Ethics ”.

“ Commercial Vehicles ” means any type of motor vehicle used for transporting goods or paying passengers.

“ Common Shares ” means the Common shares in the capital of the Company.

“ Consolidation Ratio ” means 3:1.

“ Cummins ” means Cummins Inc.

“ Cummins Apollo ” means Apollo FC Holdings Ltd., a wholly-owned indirect subsidiary of Cummins.

“ DC/DC ” means direct current/direct current.

“ Deloitte Report ” means the joint white paper by Deloitte China and Ballard, “Fueling the Future of Mobility”.

“ Demand Registration Rights ” has the meaning given to such term under “ Description of Share Capital – Investor Rights Agreement”.

“ drayage truck ” means an on-road heavy duty truck that transports containers and bulk to and from ports and intermodal railyards as well as to many other locations.

“ DSU ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – Long-Term Incentive Program”.

“ EBIT Margin Percentage ” means earnings before interest and taxes divided by revenue. EBIT Margin Percentage is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to, or consistent with, other companies.

“ electrolyzer ” means a device that produces hydrogen by breaking water into hydrogen and oxygen.

“ Equity Incentive Plan ” has the meaning given to such term under “ Options and Rights to Purchase Securities ”.

“ ESG ” means environmental, social and corporate governance.

“ EU Directives ” means directives within the meaning of Article 288 of the Treaty on the Functioning of the European Union.

“ EU Regulations ” means regulations within the meaning of Article 288 of the Treaty on the Functioning of the European Union.

“ FCA ” has the meaning given to such term under “ Plan of Distribution – Distribution in the United Kingdom ”.

“ FCEV ” means a fuel cell electric vehicle.

“ Financial Promotion Order ” has the meaning given to such term under Plan of Distribution – Distribution in the United Kingdom ”.

“ Financial Statements ” has the meaning given to such term under “ Management’s Discussion and Analysis ”.

“ fiscal 2017 ” means the fiscal year of the Company ended December 31, 2017.

“ fiscal 2018 ” means the fiscal year of the Company ended December 31, 2018.

“ fiscal 2019 ” means the fiscal year of the Company ended December 31, 2019.

“ fiscal 2020 ” means the fiscal year of the Company ended December 31, 2020.

“ fiscal 2021 ” means the current fiscal year of the Company ending December 31, 2021.

“ FSMA ” has the meaning given to such term under “ Plan of Distribution – Distribution in the United Kingdom ”.

“ fuel cell ” means a device that produces electricity and water through an electrochemical reaction when supplied with hydrogen and oxygen.

“ fuel cell module ” means an assembly of one or more fuel cell stacks, together with other balance of plant components.

“ fuel cell stack ” means a stack of individual fuel cells, consisting of multiple bipolar plates and MEAs that together produce electricity and water when supplied with hydrogen and oxygen.

“ GHG ” means greenhouse gases.

“ GHRNC Committee ” means the Governance, Human Resources, Nominating and Compensation Committee of the Board.

“ Gross Margin Percentage ” means revenue minus costs of goods sold, divided by revenue.

“ hydrogen refueling station ” means a storage or filling station for hydrogen to be used in vehicles.

“ IASB ” means the International Accounting Standards Board.

“ ICE ” or “ internal combustion engine ” means an engine that generates motive power by the burning of gasoline, oil, or other fuel with air inside the engine, the hot gases produced being used to drive a piston or do other work as they expand.

“ ICEV ” means internal combustion engine vehicle.

“ IFRS ” means International Financial Reporting Standards as issued by the IASB.

“ InPower ” means Beijing In-Power Renewable Energy Co., Ltd.

“ InPower-Loop JV Agreement ” means the Sino-foreign equity joint venture agreement dated January 22, 2019 between the Company and InPower.

“ InPower-Loop JV ” means InPower-Loop Energy Technology (Beijing) Co., Ltd., a Sino-foreign joint venture enterprise and limited liability company existing under the laws of the People’s Republic of China.

“ Intellectual Property Committee ” means the intellectual property committee of the Company, which is responsible for creating, enhancing and executing an IP strategy for the Company’s business.

“ Investor Rights Agreement ” means the investor rights agreement entered into by the Company and Cummins Apollo on February 4, 2021, as more particularly described under “ Description of Share Capital – Investor Rights Agreement”.

“ IP ” means intellectual property.

“ IT Systems ” has the meaning given to such term under “ Summary of Prospectus – The Offering ”.

“ JV License Agreement ” means the technology license agreement dated March 31, 2019 between the Company and the InPower-Loop JV.

“ Lead Underwriter ” means National Bank Financial Inc.

“ light commercial vehicles ” means commercial vehicles with a gross vehicle weight of less than 4,536 kg, which in North America are classified as Class 1 and 2 vehicles by the U.S. Department of Transportation.

“ Lock-Up Agreements ” has the meaning given to such term under “ Plan of Distribution – Lock-Up Arrangements ”.

“ Locked-Up Persons ” has the meaning given to such term under “ Summary of Prospectus – The Offering”.

“ Loop ” or “ Company ” means Loop Energy Inc.

“ Market Price ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – One-Time Closing Option Grant to Employees and Directors in Connection with the Offering ”.

“ material handling vehicles ” means commercial vehicles used to move materials and products over relatively short distances, including forklifts, gantry cranes, yard tractors, and reach stackers.

“ MD&A ” has the meaning given to such term under “ Management’s Discussion and Analysis ”.

“ medium and heavy duty trucks ” means commercial vehicles with a gross vehicle weight of between 4,537 kg and 14,969 kg, which in North America are classified as Class 3 to 6 (medium duty) and Class 7 and 8 (heavy duty) vehicles by the U.S. Department of Transportation.

“ MEA ” or “ membrane electrode assembly ” means an assembly of parts comprised of a polymer electrolyte membrane, gas diffusion layers, and electrode layers that are used in fuel cells and electrolyzers.

“ Member State ” means any member state of the European Economic Area.

“ NCI System ” means the non-certificated inventory system of CDS.

“ NEO ” has the meaning given to such term under “ Executive Compensation ”.

“ NI 41-101 ” means National Instrument 41-101 – General Prospectus Requirements.

“ NI 52-109 ” means National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings
“ NI 52-110 ” means National Instrument 52-110 – Audit Committees .

“ NI 58-101 ” means National Instrument 58-101 – Disclosure of Corporate Governance Practices .

“ Notice Date ” has the meaning given to such term under “ Description of Share Capital – Advance Notice Procedures and Shareholder Proposals”.

“ NP 58-201 ” means National Policy 58-201 – Corporate Governance Guidelines .

“ OEM ” or “ original equipment manufacturer ” means a company that manufactures and sells products or parts of a product that their buyers integrate into end products that are sold to the market.

“ Offered Shares ” has the meaning given to such term on the face page of this prospectus.

“ Offering ” has the meaning given to such term on the face page of this prospectus.

“ Offering Price ” has the meaning given to such term on the face page of this prospectus.

“ Options ” has the meaning given to such term under “ Options and Rights to Purchase Securities ”.

“ Other Share-Based Awards ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – Long-Term Incentive Program ”.

“ Over-Allotment Option ” has the meaning given to such term on the face page of this prospectus.

“ PEM ” means a polymer electrolyte membrane.

“ PEM fuel cell ” means a polymer electrolyte membrane fuel cell, an electrochemical fuel cell that converts chemical energy from hydrogen (and air) to electrical energy and water and consists of a solid electrolyte, usually a PEM, sandwiched between two electrodes.

“ Peterbilt ” means Peterbilt Motors Company.

“ Piggyback Registration Rights ” has the meaning given to such term under “ Description of Share Capital – Investor Rights Agreement”.

“ Plan ” has the meaning given to such term under “ Eligibility for Investment ”.

“ Pre-Closing Reorganization ” has the meaning given to such term under “ Description of Share Capital – PreClosing Reorganization ”.

“ Pre-Emptive Rights ” has the meaning given to that such under “ Description of Share Capital – Investor Rights Agreement”.

“ Predecessor Plan ” has the meaning given to such term under “ Options and Rights to Purchase Securities ”.

“ Preferred Shares ” means the Series 1 Preferred Shares and Series 2 Preferred Shares.

“ President’s List ” has the meaning given to such term on the face page of this prospectus.

“ Product Backlog ” means the aggregate estimated sales of the Company’s products pursuant to conditional or unconditional agreements or MOUs to purchase the Company’s products, assuming all such agreements are fulfilled in full.

“ Prospectus Regulation ” means Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, repealing Directive 2003/71/EC (as amended and superseded) and includes any relevant implementing measure in each Member State of the European Economic Area.

“ PSU ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – Long-Term Incentive Program”.

“ Qualified Institutional Buyer ” means a “qualified institutional buyer” (as such term is defined in Rule 144A under the U.S. Securities Act).

“ Quarterly Financial Statements ” has the meaning given to such term under “ Management’s Discussion and Analysis ”.

“ RDSP ” has the meaning given to such term under “ Eligibility for Investment ”.

“ Regulations ” has the meaning given to such term under “ Eligibility for Investment ”.

“ relevant persons ” has the meaning given to such term under “ Plan of Distribution – Distribution in the United Kingdom ”.

“ RESP ” has the meaning given to such term under “ Eligibility for Investment ”.

“ RRIF ” has the meaning given to such term under “ Eligibility for Investment ”.

“ RRSP ” has the meaning given to such term under “ Eligibility for Investment ”.

“ RSU ” has the meaning given to such term under “ Executive Compensation – Components of Executive Compensation – Long-Term Incentive Program”.

“ SEDAR ” means the System for Electronic Document Analysis and Retrieval.

“ SDTC ” means Sustainable Development Technology Canada.

“ Series 1 Preferred Shares ” means the series 1 Class A preferred shares in the capital of the Company.

“ Series 2 Preferred Shares ” means series 2 Class A preferred shares in the capital of the Company.

“ Share Consolidation ” has the meaning given to such term under “ Description of Share Capital – Pre-Closing Reorganization ”.

“ Shareholders’ Agreement ” has the meaning given to such term under “ Description of Share Capital ”.

“ Skywell ” means Skywell New Energy Vehicles Group Co., Ltd.

“ Special Advisor Warrants ” means the warrants to purchase Common Shares to be issued to each of Lord John Browne and Lance Uggla upon the Closing, which warrants will be exercisable into Common Shares at an exercise price per Common Share equal to the Offering Price.

“ Subsidiary ” means 1123640 B.C. Ltd., the Company’s wholly-owned subsidiary.

“ TAM ” means total addressable market.

“ Tax Act ” means the Income Tax Act (Canada) and the regulations thereunder in effect on the date hereof.

“ TCO ”, or “ total cost of ownership ”, is the sum of all costs involved in the purchase, operation, including fuel, and maintenance of a given asset during its lifetime. It is a financial analysis that shows all present and future costs of taking possession of the asset.

“ technology development ” means the overall process of invention, innovation and diffusion of technology or products. In Loop’s case, the development of fuel cell stacks to accommodate a wider range of power needs and applications, and development of MEA plates to enhance performance and reduce cost.

“ TFSA ” has the meaning given to such term under “ Eligibility for Investment ”.

“ Tier 1 OEM Suppliers ” means companies that supply parts or systems directly to OEMs.

“ TRL ” means Technology Readiness Level, a rating system used to assess and report on the maturity level of a developing technology.

“ TSX ” has the meaning given to such term on the face page of this prospectus.

“ Underwriters ” has the meaning given to such term on the face page of this prospectus.

“ Underwriters’ Fee ” has the meaning given to such term on the face page of this prospectus.

“ Underwriting Agreement ” means the underwriting agreement dated February 18, 2021 among the Company and the Underwriters.

“ U.S. Securities Act ” has the meaning given to such term on the face page of this prospectus.

“ WINN ” means the Western Innovation Initiative.

“ ZEV ” or “ zero emission vehicle ” means a vehicle that does not directly produce atmospheric pollutants.

MARKETING MATERIALS

Any template version of any marketing materials (as such term is defined in NI 41-101) that will be filed on SEDAR before the termination of the distribution under this Offering (including any amendments to, or an amended version of, any template version of any marketing materials) will be deemed to be incorporated into the prospectus. Any template version of any marketing materials that are utilized by the Underwriters in connection with this Offering are not part of this prospectus to the extent that the contents of the template version of the marketing materials have been modified or superseded by a statement contained in this prospectus.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This prospectus contains “forward-looking information” and “forward-looking statements” (collectively, “ forwardlooking information ”) within the meaning of applicable Canadian securities legislation which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs and views of future events. Forward-looking information can be identified by the use of forward-looking terminology such as “aim”, “anticipate”, “believes”, “continue”, “estimate”, “envision”, “expect”, “forecast”, “forward”, “future”, “goal”, “intend”, “likely”, “opportunity”, “outlook”, “potential”, “project”, “seeks”, and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “could”, “may”, “should”, “will” or “would” happen, or by discussions of strategy.

Discussions containing forward-looking information may be found, among other places, under “ Summary of Prospectus ”, “ The Company ”, “ Corporate Structure ”, “ Use of Proceeds ”, “ Plan of Distribution ”, “ Management’s Discussion and Analysis ”, “ Executive Compensation ”, “ Director Compensation ” and “ Risk Factors ”.

Forward-looking information includes estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact. Statements containing forward-looking information are made as of the date of this prospectus and include, but are not limited to, statements with respect to:

the completion, expenses and timing of the Closing of the Offering;
the Pre-Closing Reorganization;
the net proceeds of the Offering and the Company’s anticipated use of such proceeds;
the performance of the Company’s business and operations;
the Company’s ability to execute on its mission, strategy and goals;
the Company’s technology, intellectual property and license agreements;

the Company’s products, both existing and under development;
the expected timing and completion of the Company’s objectives;
the estimated operating costs required to meet the Company’s objectives;
the Company’s projections regarding market demand for its products;
the Company’s ability to engage new customers and further develop and maintain its existing customers;
anticipated trends, opportunities, growth rates and challenges in the Company’s business and the markets in which it operates;
the Company’s competitive position and the environment in which it operates;
expectations regarding future director and executive officer compensation levels and plans;
the presumed benefits, development and adoption of the Company’s technology;
the Company’s ability to continue as a going concern;
the market price for the Offered Shares;
the Company’s ability to advance its vertical integration of manufacturing;
the expansion of the Company’s market presence and geographic reach;
the Company’s key growth drivers and opportunities;
the distribution, competitiveness and cost of hydrogen;
results of internal testing and theoretical modelling;
future investment into alternative fuels, batteries, hydrogen, electric powertrain technology and fuel cell technology;
government commitments, strategies, policies and regulations regarding the development and utilization of hydrogen-based, sustainable energy systems;
the potential applications for the Company’s products and technology;
the total addressable market of various market segments;
the adoption and key drivers of fuel cell applications;
the Company’s sales and marketing approach;
the Company’s forecasts, comparisons and projections regarding the TCO of FCEVs;
the Company’s expectations and assumptions regarding general economic and financial market conditions; and

the Company’s expectations and projections regarding the InPower-Loop JV.

Forward-looking information is based on certain assumptions and analyses made by the Company in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that it believes are appropriate and reasonable in the circumstances, and are subject to risks and uncertainties. Despite a careful process to prepare and review forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Given these risks, uncertainties and assumptions, prospective purchasers of the Offered Shares should not place undue reliance on these forward-looking statements. Whether actual results, events, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including but not limited to the following risks described in greater detail under “ Risk Factors ”:

the Company failing to successfully implement and execute on its growth strategy and to otherwise compete effectively in a competitive business environment;
difficulty manufacturing fuel cell products on a commercial basis;
difficulty commencing in-house manufacturing of certain product components currently sourced from third-party suppliers, which the Company relies on for the supply of key materials and components;
the Company being unable to reduce its manufacturing costs consistent with overall market pricing dynamics;
changing product purchase commitments under purchase orders and/or memorandums of understanding (“ MOUs ”) with customers;
the Company’s technology and products not meeting market requirements;
the Company not realizing or maintaining its competitive advantages, in relation to fuel efficiency, peak power output and durability of products;
the ongoing COVID-19 pandemic, including the resulting global economic uncertainty and measures taken in response to the pandemic, could materially impact the Company’s business and future results of operations and financial condition;
certain governmental grants and subsidies becoming unavailable and the Company’s ability to access additional capital in the future;
increasing costs and demands upon management as a result of complying with the laws and regulations affecting public companies and companies with shares trading on the TSX;
the Company being unable to obtain additional financing on favourable terms when required, or at all;
implementing or complying with changes in accounting standards or interpretations could adversely affect the Company’s financial results;
the Company’s ability to establish and maintain effective internal controls in a timely and effective manner could have a material adverse effect on business and the market price of the Common Shares;

a negative effect on the Company’s share price due to fluctuations in operating results and revenues and quarterly financial results being subject to seasonality and market cyclicality;
any design, manufacturing or other defects in our software or other components used in our fuel cell products or an improper use of our products, which could result in performance loss or safety incidents that could negatively affect customer relationships, increase manufacturing costs, damage the Company’s reputation and brand and substantially harm our business;
the Company’s inability to develop and maintain widespread brand awareness cost-effectively;
the Company’s operating results may be adversely affected by fluctuations in currency exchange rates;
fluctuating prices or shortages in the supply of commodities such as platinum, iridium and carbon;
the Company being required by regulatory agencies to modify or terminate existing investments or acquisitions, which could delay or prevent future opportunities;
the Company’s directors and officers making indemnification claims, which would reduce the Company’s available funds;
the Company’s financial performance being negatively affected by potential warranty claims, product performance guarantees or indemnification claims;
the Company failing to protect our intellectual property rights and confidentiality agreements with employees and others not adequately preventing disclosure of trade secrets and other proprietary information;
cybersecurity threats to the Company’s information technology infrastructure and systems, and unauthorized attempts to gain access to its proprietary or confidential information;
the Company’s key suppliers and customers being adversely impacted by global macro-economic conditions beyond the control of the Company;
the Company’s dependence on key and highly-skilled personnel to operate its business and its ability to attract and retain qualified personnel and maintain its corporate culture;
the Company’s risk management efforts may be ineffective;
the Company’s research, development or manufacturing operations may result in liability for environmental damages;
potential product safety, product liability and similar claims, which the Company’s insurance coverage reserves may not cover;
future sales or issuances of securities of the Company, which could decrease the value of the Common Shares, dilute investors’ voting power and reduce the Company’s earnings per Common Share;
changes to tax laws could create adverse outcomes resulting from examination by the tax authorities of its income tax returns;
the accuracy of the forward-looking statements; and

the risks associated with enforcing judgements against foreign persons.

These factors should not be considered exhaustive and should be read together with the other cautionary statements in this prospectus.

If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking statements prove incorrect, actual results might vary materially from those anticipated in those forward-looking statements.

Although the Company has attempted to identify important factors that could cause actual actions, events, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors not presently known to the Company or that the Company presently believes are not material that may cause actions, events, results, performance or achievements to differ from those anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize or should assumptions underlying the forward-looking information prove incorrect, actual actions, events, results, performance or achievements may vary materially from those expressed and implied by such statements contained in this prospectus. The purpose of forward-looking information is to provide the reader with a description of management’s expectations, and such statements may not be appropriate for any other purpose. Accordingly, prospective purchasers of the Offered Shares should not place undue reliance on forward-looking information contained in this prospectus. Although the Company believes that the expectations reflected in statements containing forward-looking information are reasonable, it can give no assurance that such expectations will prove to be correct. The Company disclaims any obligation to update any forward-looking information, whether as a result of new information or future events or results, except to the extent required by applicable securities laws.

“financial outlooks” within the meaning of applicable Canadian securities laws, such information is being provided to demonstrate the anticipated market penetration and the reader is cautioned that this information may not be appropriate for any other purpose and the reader should not place undue reliance on such future-oriented financial information and financial outlooks. Future-oriented financial information and financial outlooks, as with forward-looking statements generally, are, without limitation, based on the assumptions and subject to the risks set out above. The Company’s actual financial position and results of operations may differ materially from management’s current expectations and, as a result, the Company’s revenue and expenses may differ materially from the revenue and expenses profiles provided in this prospectus. Such information is presented for illustrative purposes only and may not be an indication of the Company’s actual financial position or results of operations.

SUMMARY OF PROSPECTUS

The following is a summary of the principal features of the Offering and certain information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in the Offered Shares. You should read this entire prospectus carefully, especially the “Risk Factors” section of this prospectus, and the Financial Statements, before making an investment decision. Certain capitalized terms used in this summary are defined in the “Glossary”.

BUSINESS OF THE COMPANY

Overview

We believe Loop is a leading designer of PEM fuel cell systems targeted for the electrification of commercial vehicles. Our mission is to create world-changing fuel cell products through ingenuity and customer collaboration to drive a thriving hydrogen society. We sell and service two categories of products: fuel cell stacks and fuel cell modules, which are intended to serve a variety of commercial applications including light commercial vehicles, transit buses, medium and heavy duty trucks, marine, train, mining trucks, material handling vehicles and stationary power. Our headquarters are in British Columbia, Canada and we have a manufacturing facility in Burnaby, British Columbia. The InPowerLoop JV (as discussed below) also has a manufacturing facility in Langfang, China.

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We believe zero emission vehicles (“ ZEVs ”) are one of the only viable options for a sustainable future and that commercial vehicles powered solely by lithium ion batteries are a part of the solution. However, we believe fully battery-powered commercial vehicles are unable to economically meet such critical functional characteristics as range, payload and refueling times that we believe are required for mass-market adoption. We believe that a fuel cell system, combined with lithium ion batteries is the solution that meets the requirements of the majority of fleet operators globally. A hydrogen fuel cell is a device that produces electricity and water through an electrochemical reaction when supplied with hydrogen and oxygen.

Our products feature our proprietary eFlow™ technology in the fuel cell stack’s bipolar plates. eFlow™ was designed to enable commercial customers to achieve performance maximization and cost minimization. We believe that Loop has superior fuel cell systems when compared to those of our competitors for a variety of reasons that are important to our customers, including (a) leading fuel efficiency, (b) higher durability, and (c) increased power capabilities.[1]

Since our first commercial launch, we have successfully competed with larger, more established competitors to secure commercial relationships with customers located in China, Europe and the United States. Our business development pipeline increased from two companies at the beginning of 2020 to over 100 as of the date hereof. As of January 31, 2021, we were actively engaged with 98 companies to explore potential product fit, we were in active negotiations with five companies, we had signed MOUs with six companies and we had five customers that had made order commitments. We have partnerships with original equipment manufacturers such as Gaussin SA (“ Gaussin ”), and, through the InPower-Loop JV, Skywell. Our 24-month aggregate Product Backlog increased from $nil as of December 31, 2019 to $16.4 million as of January 31, 2021. Our Product Backlog includes conditional orders, non-binding commitments and MOUs and there can be no assurance that any such conditions will be fulfilled, or that our Product Backlog will be equal to our sales over the next 24 months.

1 When compared with fuel cell stacks of the same size as measured by total active area.

Market Opportunity for our Products

We believe there is a significant market opportunity available to Loop with a total addressable market (“ TAM ”) of over $50 billion, as illustrated in the graphic below.

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Source: Company estimates, OICA (as defined below) survey, IEA Global EV Outlook 2019, H2FC SUPERGEN, Global Market Insights, Fueling the Future of Mobility, Hydrogen Council reports, and publicly available information.

Note:

Commercial applications include light commercial vehicles, medium and heavy duty trucks, transit buses, mining trucks and material handling vehicles.
Key focus includes light commercial vehicles, medium and heavy duty trucks, transit buses, mining trucks and material handling vehicles. Other markets include portable power and electrolyzers.

Our immediate focus markets include light commercial vehicles and medium duty trucks, where we believe there are rapid growth opportunities in the short, medium and long term. We see substantial growth opportunities integrating fuel cell range extenders with battery electric vehicle (“ BEV ”) commercial vehicles to satisfy the performance requirements for mass adoption in these vehicle segments. Material handling vehicles such as forklifts and yard trucks present a tertiary application for our fuel cell systems. Lastly, stationary power applications offer multiple commercial opportunities for our fuel cell systems and we believe that some of the most promising applications include diesel generator replacement in market verticals such as construction site, back-up power and off-grid power applications. Over the next 10 years, we believe the heavy duty truck market will emerge as a cornerstone application for hydrogen fuel cell solutions. We believe that our fuel efficiency advantage offers us a significant competitive edge in this market.

Our Business Strategy

Management believes Loop is a technology leader today and aims to be a “top five player” in the designing, developing, manufacturing and servicing of fuel cell stacks and modules within the next five years. Our goal is to supply fuel cell stacks and modules to (a) OEMs, and (b) suppliers of major vehicle sub-systems to OEMs (“ OEM Suppliers ”), in order to enable the production of fuel cell electric vehicles (“ FCEVs ”) with functionality and economics that are competitive with their ICE counterparts.

Near-Term Market

Our near-term market penetration strategy is to focus on the European and Chinese markets, as we believe these markets currently have the highest levels of government support, anti-emissions regulations, and stakeholder commitments to deploy hydrogen infrastructure. We will continue to focus on the supply of our fuel cell stacks and modules to the light commercial vehicles, material handling vehicles, transit buses and stationary power applications through our relationships with OEMs and OEM Suppliers. In the near term, we are also exploring opportunities for the use of our products in medium and heavy duty trucks by engaging with vehicle manufacturers that produce such vehicles in low volumes in anticipation that these manufacturers will launch FCEV trucks in the near term. Finally, we are also engaging with Tier 1 OEM Suppliers, as some of these larger manufacturers are now beginning the design of vehicle platforms equipped with fuel cell systems for commercial launch between 2025 and 2027.

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Mid-to-Long Term Market

In the mid- to long-term, our strategy will focus on fostering channel partner relationships with Tier 1 OEM Suppliers to supply fuel cell systems to medium and heavy duty truck manufacturers. We anticipate working with our channel partners to integrate fuel cell stacks and modules with their value-added products to supply complete powertrain packages once these markets gain significant traction after 2025. We also anticipate demand for high volumes of light commercial vehicles and will endeavour to leverage our work in the near term to become a market leader in the segment over the long-term. Stationary power system integrators round out our mid- to long-term market strategy. Finally, we believe that the electrification of mining trucks, rail, marine and aerospace transport may present additional market opportunities.

Geographically, we expect to expand our focus to include North and South American and Asia Pacific markets, as market demand in these regions increases.

We expect that in the mid- to long-term, our sales product mix will shift to fuel cell stacks as our customers develop greater in-house integration expertise, larger vehicle manufacturers enter the market and the industry supply chain matures.

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Manufacturing Cost Reduction

As product volumes increase, we intend to begin in-house manufacturing and fabrication of certain components, including all or part of the bipolar plate assembly and potentially membrane electrode assembly or other components. We will also consider vertical integration through organic growth or strategic acquisitions. By internalizing these processes, we expect to achieve significant cost reductions, while increasing margins and production volumes. Whenever possible, we will seek to grow our IP portfolio with respect to improvements in manufacturing and assembly processes. Internalization of certain elements of the bipolar plate production is underway and is expected to be complete by the end of this year.

Certain of our competitors have published Gross Margin Percentage targets of 30% and EBIT Margin Percentage targets of 20% by 2030. Our goal is to achieve similar or better results. Our ability to achieve this goal will be subject to many factors, including our ability to reduce manufacturing costs. We expect that since our eFlow™ plate requires less material than that of many of our competitors, this will assist us in reducing our manufacturing costs.

Technology Leadership in Fuel Cells

We aim to be a “top five player” in the designing, developing, manufacturing and servicing of fuel cell stacks and modules within the next five years. In order to achieve this, we intend to continue to develop our eFlow™ technology, in order to improve the efficiency, performance and durability of our products. Our 2021-2022 development program is currently targeting the following areas :

Fuel Cell Stack Efficiency Improvement. Internal modelling of our new technology in development predicts an additional 6% improvement in fuel efficiency beyond our highly efficient current technology stacks.
Fuel Cell Stack Power Density Improvement. Internal modelling of our new technology in development predicts a 33% improvement in stack power density beyond our high power density current technology stacks.

Our Business Development Pipeline

Our sales and marketing approach is segregated in two phases: our near-term market strategy and our mid- to longterm strategy. We believe our business development efforts, particularly in Europe and China, gained significant momentum in 2020, which were accelerated by the hiring of key individuals with specific experience growing cleantech companies through a sales pipeline, strong industry relationships and knowledge regarding the nuanced strategies to approach OEMs and OEM Suppliers. In addition to the customers in our primary target markets in Europe and China, we are also engaged with customers in Australia, Canada, the United States and South Korea.

Commercial Milestones

We have spent the last decade refining our technology and testing the commercial viability of our fuel cells. Specifically, we engaged in proof-of-concept arrangements from 2016 to 2019. Cummins Apollo’s recent investments have provided Loop with additional resources to accelerate our commercial momentum , including through work with our joint venture with InPower (as discussed below) and an evolving business development pipeline with European OEMs, including our recent MOU with Gaussin. The following highlight Loop’s commercial milestones over the past five years:

In 2015, we began working with Peterbilt to install our fuel cell system in a Peterbilt Class 8 truck for use as a demonstration vehicle in North America. In 2020, the first truck was completed in California and is currently undergoing on-road acceptance testing. We expect manufacturing of the second truck to commence in the first half of 2021.
In July 2017, our T500 fuel cell engine module (“ T500 ”) was deployed for the first time in a yard truck in Shandong, China. The T500 later evolved to become the T505 fuel cell engine module (the “ T505 ”). This proof-of-concept truck demonstrated the functionality of our fuel cell systems in the field and confirmed that the performance benefits of the eFlow™ technology that we observed through our internal testing were also present in field operations.
In 2019, we completed development and commenced commercial sales of the T505. The T505 is our next generation 50 kilowatt (“ kW ”) fuel cell system, for use in material handling vehicles, stationary power, and transit buses.
In January 2019, we entered into the InPower-Loop JV Agreement. The InPower-Loop JV has the capacity to leverage the network that InPower has into the OEM commercial vehicle market network in China. InPower currently sells power electronic equipment to various OEM’s in China as well certain state-owned enterprises who operate in the power utilities sector. InPower is a member of the National Power Quality Standardization Committee, China Energy Conservation Association and National Torch Plan Enterprise. InPower has sales branches in Beijing, Shanghai and Guangzhou, which are used to support sales efforts of the InPower-Loop JV in China. InPower also

manufactures DC/DC units for use in EVs, which we believe are an important part of the integration for fuel cells vehicles.

In September 2019, we entered into an investment agreement with Cummins Apollo, pursuant to which Cummins Apollo made an initial equity investment in Loop in September 2019 and a second equity investment in March 2020.
In January 2020, InPower signed an entry cooperation agreement (the “ Lishui-InPower MOU ”) with the Management Committee of the Lishui Economic Development Zone (the “ Lishui Government ”). The Lishui-InPower MOU outlines the terms under which the Lishui Government would provide an annual order of 100 hydrogen fuel cell operated vehicles for three years using Loop fuel cell modules to be supplied by InPower. In September 2020, the first phase of this process was completed when Skywell, a leading Chinese electric bus manufacturer located in Nanjing, China, received index approval from China’s Ministry of Industry and Information and Technology (the “ Chinese MIIT ”) for a bus with a Loop fuel cell module, after having been tested and verified to meet the requirements to be registered as eligible for government subsidies.
In 2020, we designed and commenced customer sales of the T600, a 60 kW fuel cell system (the “ T600 ”). We expect the first customer shipments of the T600 to occur in the second quarter of 2021. We also completed the development of the S300, a 30 kW fuel cell module (the “ S300 ”) in 2020. We expect the first customer shipments of this product to occur in 2021.
• In December 2020, we entered into a MOU with Gaussin (the “ Gaussin MOU ”) for the purposes of designing and manufacturing hydrogen electric tractors based on the Gaussin platform. Under the Gaussin MOU, the parties anticipate close cooperation during the vehicle design phase followed by the commercial supply of fuel cell products by Loop to Gaussin starting with the Canadian market.
In January 2021, we entered into a commercial sales agreement and conditional purchase order MOU with InPower (the “ InPower MOU ”) for the purposes of outlining our intended long-term strategic partnership with purchase volume forecasts for the T505 and commitments to product pricing based on such purchase volume forecasts. Under the InPower MOU, Loop anticipates purchase orders from InPower for up to 110 units of the T505 in 2021 and for up to 200 units of the T505 in 2022, subject to certain conditions, including confirmation by InPower.

Our Competitive Advantages

We believe that commercial vehicle manufacturers consider the most important performance requirements of a fuel cell solution to be (i) lower total cost of ownership, and (ii) higher power output.

Higher fuel efficiency providing lower TCO.

We believe that fuel consumption is the greatest contributor to vehicle TCO. Based on our internal testing, we believe our eFlow™ - equipped fuel cells can consume up to 16% less fuel than our competitors’ fuel cells when operating in half power cruise mode.[2] We estimate this increased fuel efficiency will result in a reduction in fuel costs over the lifespan of a typical transit bus of up to $300,000,[3] and will further accelerate the breakeven point for fuel cell-equipped electric vehicles relative to their BEV and internal combustion engine vehicle (“ ICEV ”) counterparts.

2 Our engineers and scientists have reviewed and compiled available public performance data, specifications, and design operating conditions of similar fuel cell technologies used by several leading competitors. Our stated estimates of relative performance for Loop technology are based on a comparison of this public information to Loop eFlow[TM] testing and verified predictive modelling results that we use to estimate power and efficiency of Loop technology for equivalent fuel cell active area.

3 Estimating 7.7 kg/100km for transit bus, hydrogen cost of $5.5 per kg, 16% fuel savings, and a 17 year lifespan.

Total Cost of Ownership (USD/100km)[4]

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Source: Deloitte Report, Loop Energy Inc.
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Higher peak power output allowing for a smaller footprint.

- Based on our internal testing, we believe eFlow™ equipped fuel cells can generate as much as 90% more peak power in a comparable package size. This increased power output can yield higher payload capacity and range and permit a wider range of operating parameters.

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Source: Loop Energy Inc.
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Note: We view top competitors as companies with significant vehicle mileage and more mature products and mid-tier competitors as companies that have fuel cell products that are still in the growth stage of development.

Based on our internal testing, we believe Loop can extract more power from the same size and cost per stack relative to competing products. Alternatively, we also believe Loop can extract the same power as our competitors from a smaller package. Both of these scenarios would allow customers to benefit from reduced space requirements and simpler integration into a vehicle chassis (or frame) with minimal redesign and reengineering efforts. Our analysis of the results of our internal testing indicates that our fuel cells use up to 45% less bipolar plate and membrane electrode assembly (“ MEA ”) materials and, consequently, occupy less space than a typical competing commercial fuel cell stack producing comparable power.

Durability increasing life and reducing maintenance costs.

Conventional fuel cell bipolar plates generally have areas near the inlet with a focused concentration of reactants, hydrogen and oxygen, which results in hotspots, as depicted in the image below. Hotspots are due to uneven electrochemical reactions along the length of the fuel cell bipolar plate, which leads to non-uniform temperature and current density of up to 40% across the plate. Higher heat concentration increases (a) electrode wear at certain areas, and (b) reduced utilization, which in turn leads to accelerated MEA degradation and reduced current and power

4 Data is representative of drayage trucks.

density, efficiency and reliability. It can also result in inefficient water removal resulting in potential flooding of the fuel cell.

In contrast, in management’s opinion, the intrinsic design of Loop’s eFlow™ fuel cell bipolar plate allows for a more uniformly distributed reaction rate across the length of the plate. Based on our internal testing, we believe this can lead to up to 10 times better current density uniformity, increased flow velocity and robust water removal, which results in eFlow™-equipped fuel cells being less vulnerable to excessive degradation. We expect the uniform heat distribution and lack of hotspots in our fuel cell bipolar plate, as depicted in the image below, to provide greater product durability and lower service and maintenance costs.

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Source: “Transport in PEMFC Stacks” summary presentation for US DOE H2 Program, Loop Energy Inc.

We hold patents on our eFlow™ technology in each of our core markets. Our core patents extend reliability and power density while reducing heat and operating pressure. We also intend to continue to develop our technology and IP portfolio. As we believe our current competitive advantage relates to our bipolar plate geometry design, and because bipolar plates are a core component of any fuel cell, we expect to maintain our competitive advantage even as the materials used to construct fuel cell components improve, such as catalyst coated membranes (“ CCM ”) materials. We anticipate that eFlow™-equipped fuel cells will continue to offer performance improvements and any advantages of eFlow™-equipped fuel cells will be additive to any other advancements made by the fuel cell industry.

Highly experienced technology and manufacturing team.

We believe Loop’s leadership team includes highly-skilled individuals with experience in fuel cell development, automotive development and new product launches. This mix of industry experience is a result of employees that came from Ballard, Daimler, Automotive Fuel Cell Cooperation (“ AFCC ”), Toyota, Jaguar and General Motors, among others. We believe this diversity in experiences and backgrounds will allow Loop to plan and execute leading programs for the development and launch of its products over the next several years.

Additionally the Company has retained two special advisors, Lord John Browne and Lance Uggla, to provide guidance to management and the Board with respect to the running of a public company, the effective management of a high growth enterprise and the identification of opportunities and relationships of strategic advantage to the Company. Lord Browne’s accomplished career includes being Group Chief Executive of BP plc (“ BP ”) from 1995 to 2007 and cohead of Riverstone Holdings (“ Riverstone ”), one of the world’s largest renewable energy private equity funds, until 2015. Lance Uggla is Chairman and CEO of IHS Markit Ltd. (“ IHS Markit ”). Mr. Uggla founded Markit Ltd. (“ Markit ”) in 2003, took it public in 2014 at a valuation of $4.3 billion, merged with IHS Inc. (“ IHS ”) in 2016 and merged with S&P Global Inc. (“ S&P Global ”) at a market capitalization of approximately $39 billion in November 2020.

INDUSTRY DESCRIPTION

Overview

Climate change is regarded by many as the defining issue of our time. It is estimated that 33.1 billion metric tons of carbon dioxide were emitted globally in 2019. The commitment to taking action to combat climate change is growing among Governments, Investors, Corporates and Society.

Electrification of commercial transportation requires FCEV.

We consider the decarbonization of transportation via electrification and fuel switching to have one of the greatest impacts in reducing overall carbon emissions (estimated to be responsible for over 20% of the potential emission reductions). The movement towards electrification has grown as countries implement regulations and take other actions to achieve commitments made in the Paris Agreement. These actions include the banning of diesel vehicles in major city centers and the progressive phasing out of ICEVs over the next decade and beyond. This movement is apparent in the recent growth in the number of electric vehicles (“ EVs ”) on roads around the world. According to the International Energy Agency, the number of EVs was projected to grow from 1.2 million in 2015 to 14.4 million in 2020 globally, which is approximately a 64% compounded annual increase.

We believe that in order to achieve mass adoption of EVs, the economic and performance trade-offs between EVs and ICEVs need to be minimized. In the subset of EV commercial vehicles, fully battery-powered medium and heavy duty trucks currently suffer from reduced operating performance.

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Source: Loop Energy Inc.

The incorporation of fuel cells (powered with hydrogen) into battery electric commercial vehicles provides several key advantages: reduced curb weight, increased payload capacity, increased range (2.5 to 3 times),[5] and reduced refueling times. We believe that the majority of commercial fleet operators will adopt FCEVs as the ZEV solution that meets the needs of their business.

Total cost of ownership of FCEV to significantly decline and be less than BEV in the near term.

According to the Deloitte Report, FCEVs are forecasted to become cheaper from a TCO perspective as compared to battery electric vehicles (“ BEVs ”) and ICE commercial vehicles over the next 10 years, and the TCO of FCEVs is estimated to decrease by approximately 50% in the next 10 years. We believe this will be driven by a combination of declining costs as the technology matures and economies of scale is achieved, as well as other factors such as lower hydrogen fuel costs and an established hydrogen infrastructure for production, transportation, and refueling.

For example, according to the Deloitte Report, the TCO of a fuel cell drayage truck is forecasted to be lower than that of a battery drayage truck after 2024, and lower than that of diesel drayage trucks after 2028. The projected decline is attributable to the decrease of the purchase price of the truck, hydrogen fuel costs, and other technological advancements relating to hydrogen. This trend can be expected in other vehicle applications as well according to the Deloitte Report.

5 Based on multiple test runs utilizing Loop’s fuel cell modules as range extenders in battery electric trucks.

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Source: Deloitte Report
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Currently, hydrogen costs are greater than the costs of (a) diesel or gasoline used by conventional ICEVs, and (b) electricity used by EVs, due to the difficulty of storing and transporting hydrogen. As hydrogen storage and transportation technologies improves and economies of scale are achieved by large-scale hydrogen production plants, the price of hydrogen fuel is expected to drop to below half of the current price by 2029 per the Deloitte Report.

Significant momentum in the infrastructure build-out globally

According to the Hydrogen Council, a global initiative of leading energy, transport and industry companies with a united vision for hydrogen to foster the clean energy transition, the global deployment of FCEVs could reach 13 million by 2030, a stark increase from the current number – approximately 16,000, as the hydrogen market scales and costs are reduced. The Hydrogen Council also predicts that commercial fuel cell vehicles (including light commercial vehicles, medium and heavy duty trucks, and buses) could grow from approximately 1,600 in 2020 to more than one million by 2030. Governments have also outlined targets for charging and hydrogen refueling stations, and the number of hydrogen refueling stations could exceed 10,000 globally by 2030, up from approximately 400 stations today.

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Source: https://www.spglobal.com/platts/plattscontent/_assets/_images/latest-news/20200127_Hydrogen.jpg

The buildout of hydrogen refueling infrastructure is already underway globally; large companies such as Air Liquide, Shell, Total SE, Linde, BP, Enel S.p.A, Snam S.p.A., Iberdrola and many more have entered the hydrogen market and announced plans to build large hydrogen production plants and establish refueling networks.

Government support for the hydrogen industry is unprecedented

A growing number of governments around the world are combining these regulatory changes with financial support for the transition to ZEV technologies. Bloomberg reports that countries and jurisdictions accounting for more than half of global emissions are working on plans to reduce carbon pollution to net zero by the mid-century.[6] Clean hydrogen has received support among a growing number of global political leaders, who see it as one of the critical technologies needed to decarbonize the economy and meet the targets set out in the Paris Agreement. Eurasia Group estimates that countries representing about 50% of the world’s gross domestic product (“ GDP ”) have announced credible hydrogen strategies, a figure that would increase to 70% following the U.S. and Russia finalizing their respective plans.[7]

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Source: Bloomberg (https://www.bloomberg.com/graphics/2020-opinion-hydrogen-green-energy-revolution-challenges-risksadvantages/policy.html), Goldman Sachs.

In 2020, the European Commission published “ A Hydrogen Strategy for a Climate-Neutral Europe ” (the “ Hydrogen Strategy ”) which outlined a multi-phased roadmap to build out hydrogen supply and infrastructure over the period from 2020 to 2050. It specifically outlines strategies to boost demand for hydrogen in end-use sectors and identifies hydrogen as a promising option for city buses, commercial fleets, and heavy duty road vehicles. To support the initiatives, and the substantial investment required, the European Clean Hydrogen Alliance was formed to “identify and build up a clear pipeline of viable investment projects”.

6 https://www.bloomberg.com/opinion/articles/2020-10-25/zero-emission-climate-targets-should-be-seen-as-credible

7 https://www.bloomberg.com/graphics/2020-opinion-hydrogen-green-energy-revolution-challenges-risks-advantages/policy.html

SELECTED FINANCIAL INFORMATION

The following table sets out historical financial information of the Company, in each case, for the periods ended and as of the dates indicated. The selected consolidated financial information of the Company has been derived from the audited financial statements of the Company for fiscal 2019, fiscal 2018 and fiscal 2017, and the unaudited financial statements of the Company for the three and nine month periods ended September 30, 2020 and 2019, respectively.

The summary financial information should be read in conjunction with the Company’s unaudited financial statements as at September 30, 2020 and for the three and nine-month periods ended September 30, 2020 and 2019, the audited financial statements for the years ended December 31, 2019, 2018 and 2017, together with the notes thereto and the auditors’ report thereon, included in Appendix “FS” of this prospectus, as well as “ Management’s Discussion and Analysis ”.

auditors’ report Analysis”.	thereon, included in Appendix “FS” of this prospectus, as	well as “Management’s Discussion and
	Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019	Year ended December 31, 2019 2018 2017
Sales Expenses Net expenses Loss before taxes Net and comprehensive loss Net loss per common share – basic and diluted(1) Weighted average common shares – basic and diluted(1)	$353,088 $129,440 $353,088 $129,440 3,145,886 1,378,778 7,299,295 4,303,910 2,601,583 1,130,173 5,968,407 3,473,903 (2,438,487) (1,156,233) (6,135,940) (3,573,199) (2,438,487) (1,156,233) (6,135,940) (3,566,741) (0.05) (0.02) (0.11) (0.07) 53,948,038 53,625,220 53,947,610 52,011,324	$467,790 $- $- 6,863,486 5,972,678 5,338,726 4,295,725 3,987,361 3,782,795 (4,295,925) (4,465,305) (3,878,967) (4,289,467) (4,439,085) (3,878,967) (0.08) (0.09) (0.08) 52,496,306 49,454,496 49,314,060

Notes:

(1) Does not take into effect the Pre-Closing Reorganization (including the Share Consolidation).

Balance Sheet Items	As at September 30, 2020	As at December 31, As at December 31, 2019 2018
Cash Investment in joint venture Right-of-use-asset Equipment and leasehold improvements Total assets Total non-current liabilities Shareholders’ equity (deficiency)	$6,336,671 245,115 314,548 2,143,368 11,714,097 610,983 3,371,802	$2,168,047 $9,971 455,644 - 400,334 - 2,216,042 1,591,434 6,818,186 3,151,035 1,426,910 3,299,568 (880,016) (4,261,103)

THE OFFERING

Offering:	6,250,000 Offered Shares.
Offering Price:	$16.00 per Offered Share.
Size of Offering:	$100,000,000 ($115,000,000 if the Over-Allotment Option is exercised in full).
Over-Allotment Option:	The Company has granted the Over-Allotment Option to the Underwriters,
	which is exercisable, in whole or in part, and from time to time, in the sole
	discretion of the Underwriters, for a period of 30 days from the Closing Date,
	and pursuant to which the Underwriters may purchase up to an additional
	937,500 Offered Shares at the Offering Price, to cover over-allotments, if any,
	and for market stabilization purposes. See “Plan of Distribution”.
Shares Outstanding:	Upon completion of the Pre-Closing Reorganization and the Closing Option
	Grant, the Company’s authorized share capital will consist of an unlimited
	number of Common Shares, and there will be 27,327,961 Common Shares
	issued and outstanding, as well as outstanding Options to acquire 2,832,292
	Common Shares and warrants to acquire 381,167 Common Shares.
	Immediately following the Closing, an aggregate of 33,577,961 Common Shares
	will be issued and outstanding. If the Over-Allotment Option is exercised in full,
	an aggregate of 34,515,461 Common Shares will be issued and outstanding. See
	“Description of Share Capital”.
Use of Proceeds:	After deduction of the Underwriters’ Fee (of $6,000,000) and estimated
	expenses of the Offering payable by the Company of ($1,800,000), the Company
	anticipates that it will receive net proceeds of approximately $92,200,000, or
	$106,300,000 if the Over-Allotment Option is exercised in full (in each case,
	assuming there are no Offered Shares sold to President’s List purchasers in the
	Offering).
	The Company intends to use the net proceeds of the Offering (assuming no
	exercise of the Over-Allotment Option) as follows:
	• product and technology development;
	• sales, general and administration expenses; and
	• capital assets.

Although the Company currently intends to allocate the net proceeds received from the Offering as described above, the actual allocation of the net proceeds of the Offering may vary depending on the amount of the net proceeds of the Offering, the Company’s working capital, future cash flows from operations and other circumstances and developments that could arise where the Company’s capital resources may need to be allocated differently at the discretion of the Board of Directors and/or management of the Company. See “ Use of Proceeds ”.

Black-Out Period:

executive incentive compensation arrangements approved by the Lead Underwriter, or issued to vendors in connection with the acquisition of a business or assets, provided such vendors agree not to transfer such securities prior to the date that is 180 days after the Closing Date), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Shares, whether any such transaction is to be settled by delivery of Common Shares, other securities, cash or otherwise. See “ Plan of Distribution – Black-Out Period ”.

Lock-Up Arrangements:

Investor Rights Agreement:

Risk Factors:

The Company has agreed to use commercially reasonable efforts to obtain, and in any event it is a condition of the Closing that the Underwriters have received, from each of the directors and officers of the Company and their respective associates and certain beneficial securityholders of the Company (the “ LockedUp Persons ”), a Lock-Up Agreement (as defined below) with the Underwriters whereby such persons will agree, other than in connection with the Offering and subject to certain exceptions, not to directly or indirectly offer, sell or grant any option, warrant or other right to purchase or agree to sell or otherwise lend, transfer, assign or dispose of any of their Common Shares, securities convertible into or exchangeable into Common Shares, or other equity securities, or announce publicly their intention to do so, without having obtained the prior written consent of the Lead Underwriter, on behalf of the Underwriters, and the Board (with any interested members abstaining) for a period of 180 days following the Closing Date. See “ Plan of Distribution – Lock-Up Arrangements ” and “ Escrowed Securities and Securities Subject to Contractual Restriction on Transfer ”.

Pursuant to the Investor Rights Agreement, Cummins Apollo will be granted Nomination Rights, Demand Registration Rights, Piggyback Registration Rights and Pre-Emptive Rights. See “ Description of Share Capital –Investor Rights Agreement”.

An investment in the Offered Shares should be considered a highly speculative investment in an early stage company that involves significant risks. Prospective purchasers of Offered Shares should carefully review and consider the risk factors described in greater detail under “ Risk Factors ” which include, but are not limited to, the following: (i) our limited operating history and our nascent industry makes evaluating our business and future prospects difficult; (ii) we have limited experience manufacturing fuel cell products on a commercial basis and our experience has been limited to relatively low production volumes; (iii) the competitive advantages of our products, in relation to fuel efficiency, peak power output and durability may not be realized or maintained; (iv) our technology and products may not meet the market requirements, including requirements relating to performance, integration and/or cost; (v) widespread deployment of hydrogen vehicles will be dependent upon the economic production and broad distribution of hydrogen; (vi) a mass market for our products may never develop or may take longer to develop than we anticipate; (vii) our plans are dependent on market acceptance of our products; (viii) certain estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate; (ix) failure to successfully implement our growth strategy could result in reduced revenue and net income growth; (x) we may have difficulty executing on our growth strategy and expanding our manufacturing capability; (xi) we may have difficulty bringing in-house the manufacturing of certain product components currently sourced from third-party suppliers; (xii) we may be unable to reduce our manufacturing costs as market prices for our products decline over time in line with overall market pricing dynamics, (xiii) we are dependent on third-party suppliers for the supply of key

materials and components for our products and services; (xiv) we depend on a limited number of customers for a majority of our revenues and are subject to risks associated with early stage market activities related to the use of fuel cells in commercial vehicles; (xv) some of the product purchase commitments pursuant to our purchase orders and/or MOUs with customers may change based on criteria stipulated under such purchase orders and MOUs; (xvi) in the Chinese market, a significant amount of operations are currently conducted by a joint venture in China that we cannot operate solely for our benefit; (xvii) we expect we will depend on Chinese customers for a significant portion of our revenues and we are subject to risks associated with the economic conditions and government practices in China; (xviii) emerging infectious diseases, like the ongoing COVID-19 pandemic, may adversely affect our operations, our suppliers, our customers, or the InPower-Loop JV; (xix) we have benefited from considerable governmental grants and subsidies to fund our operations, including research and development, which may not be available to us in the future; (xx) we expect our cash reserves will be reduced due to future operating losses, working capital requirements, capital expenditures and potential acquisitions and other investments by our business, and we cannot provide certainty as to how long our cash reserves will last or that we will be able to access additional capital when necessary; (xxi) we have incurred operating losses and negative cash flow in the past and may incur the same in future periods; (xxii) the Company will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm its operating results; (xxiii) the Company may need additional capital, which it may not be able to raise on favourable terms, or at all; (xxiv) the adoption of new accounting standards or interpretations could adversely affect the Company’s financial results; (xxv) failure to establish and maintain effective internal controls in accordance with NI 52-109 could have a material adverse effect on the Company’s business and the market price of the Common Shares; (xxvi) the Company’s operating results and revenues are subject to fluctuations and its quarterly financial results may be subject to seasonality and market cyclicality, each of which could cause its share price to be negatively affected; (xxvii) we are dependent upon systems integrators and OEMs to purchase certain of our products; (xxviii) the components of the Company’s fuel cell products and the associated components in a customer integration, may contain defects or errors, or our customers may operate our products in an improper manner, resulting in performance loss or a safety incident that could negatively affect customer relationships, increase its manufacturing costs, damage the Company’s reputation and brand and substantially harm our business; (xxix) negative publicity could result in a decline in the Company’s client growth and its business could suffer; (xxx) if the Company fails to develop widespread brand awareness cost-effectively, its business may suffer; (xxxi) the Company is subject to risks inherent in foreign operations, including restrictions on the conversion of currencies and restrictions on repatriation of funds, including out of China; (xxxii) exchange rate fluctuations may adversely affect the Company’s results and/or compliance with financial covenants; (xxxiii) commodity price fluctuations are beyond our control and may have a material adverse effect on our business, operating results, financial condition and profitability; (xxxiv) regulatory agencies could require us to modify or terminate existing investments or acquisitions and could delay or prevent future opportunities; (xxxv) growth may place significant demands on the Company’s management and infrastructure; (xxxvi) claims for indemnification by the Company’s directors and officers may reduce its available funds to satisfy successful third-party claims against the Company and may reduce the amount of money available to it; (xxxvii) current or future litigation could substantially harm the Company’s business; (xxxviii) warranty

claims, product performance guarantees or indemnification claims could negatively affect our financial performance; (xxxix) we could be adversely affected by risks associated with acquisitions and investments; (xl) we depend on our IP, and our failure to protect that IP could adversely affect our expected future growth and success; (xli) confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information; (xlii) we may experience cybersecurity threats to our information technology infrastructure and systems (“ IT Systems ”), and unauthorized attempts to gain access to our proprietary or confidential information, as may our customers, suppliers, subcontractors and joint venture partners; (xliii) global macro-economic conditions are beyond our control and may have an adverse impact on our business or our key suppliers and customers; (xliv) the Company operates in a competitive business environment and, if the Company is unable to compete effectively, it could have a material adverse effect on the Company’s business, financial condition and results of operations; (xlv) the Company depends on its key personnel; (xlvi) the Company depends on highly-skilled personnel to operate its business and if the Company is unable to retain its current, or hire additional, personnel, its ability to develop and successfully market its business could be harmed; (xlvii) if the Company cannot maintain its corporate culture, the Company could lose valuable qualities from its workforce; (xlviii) public policy and regulatory changes could hurt the market for our products and services; (xlix) our business is subject to risks associated with obtaining government permits and approvals, and other contingencies that may arise in the course of completing fuel cell installation projects; (l) the Company’s risk management efforts may not be effective; (li) we could be liable for environmental damages resulting from our research, development or manufacturing operations; (lii) the Company’s insurance coverage reserves may not cover future claims; (liii) if completed, potential merger and acquisition activity may fail to achieve the expected benefits of the transaction, including potential disruptions to operations, higher than anticipated costs and efforts to integrate, and loss of key personnel; (liv) the Company’s business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events and to interruption by man-made problems such as terrorism; (lv) our products use flammable fuels and some generate high voltages, which could subject our business to product liability claims; (lvi) investing in the Offered Shares is speculative, and investors could lose their entire investment; (lvii) we do not currently intend to pay cash dividends; (lviii) the market price for Common Shares may be volatile and subject to fluctuations; (lix) securities analysts’ research or reports could impact the price of the Common Shares; (lx) there has been no prior public market for our securities and our share price may decline after the offering; (lxi) future sales or issuances of securities of the Company could decrease the value of the Common Shares, dilute investors’ voting power and reduce the Company’s earnings per Common Share; (lxii) we will have broad discretion over the use of proceeds that we receive in the Offering; (lxiii) future offerings of debt securities, which would rank senior to the Common Shares upon bankruptcy or liquidation, and future offerings of equity securities that may be senior to the Common Shares for the purposes of dividend and liquidating distributions, may adversely affect the market price of the Common Shares; (lxiv) if tax laws change, or the Company experiences adverse outcomes resulting from examination by the tax authorities of its income tax returns, the Company’s results of operations could be adversely affected; (lxv) the forward-looking statements contained in this prospectus may prove to be incorrect; and (lxvi) enforcement of judgments against foreign persons may not be possible.

THE COMPANY

Business Overview

Management believes Loop is a leading designer of PEM fuel cell systems targeted for the electrification of commercial vehicles. Our mission is to create world-changing fuel cell products through ingenuity and customer collaboration to drive a thriving hydrogen society. At Loop, we see a world where we can power our lives without damaging the planet. One that uses the natural elements and flows of nature to generate clean and efficient power. One that does not require us to burn fuels, but can instead use renewable energy from the sun and wind to power fuel cells that generate electrical power for vehicles, buildings and more, with the only by-product being water vapor.

We sell and service two categories of products: fuel cell stacks and fuel cell modules, which are intended to serve a variety of commercial applications including light commercial vehicles, transit buses, medium and heavy duty trucks, marine, train, mining trucks, material handling vehicles and stationary power. Our headquarters are in British Columbia, Canada and we have a manufacturing facility in Burnaby, British Columbia. The InPower-Loop JV (as discussed below) also has a manufacturing facility in Langfang, China.

According to the Environmental Protection Agency (“ EPA ”) and the European Environment Agency (“ EEA ”), the transportation industry produces an estimated 25% to 30% of US and European Union GHG emissions.

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Source: Loop Energy Inc.

With ever-expanding e-commerce freight demands, we believe ZEVs are one of the only viable options for a sustainable future. Commercial vehicles powered solely by lithium ion batteries are a part of the solution. However, we believe fully battery-powered commercial vehicles are unable to economically meet such critical functional characteristics as range, payload and refueling times that we believe are required for mass-market adoption. We believe that a fuel cell system, combined with lithium ion batteries is the solution that meets these requirements. A hydrogen fuel cell is a device that produces electricity and water through an electrochemical reaction when supplied with hydrogen and oxygen.

Our products feature our proprietary eFlow™ technology in the fuel cell stack’s bipolar plate. The bipolar plate controls and manages the flow of gases in a fuel cell stack; the performance of a bipolar plate impacts the efficiency, power, and longevity of a fuel cell system. eFlow™ was designed to enable commercial customers to achieve performance maximization and cost minimization. eFlow™ technology uses a tapered channel, as schematically shown below, rather than a typical rectangular shaped fuel cell channel, thereby decreasing the cross-sectional area and increasing gas velocity.

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Source: Loop Energy Inc.

Based on our internal testing, we believe that Loop has superior fuel cell systems when compared to those of our competitors for a variety of reasons that are important to our customers, including the following:[8]

Leading fuel efficiency resulting in up to 16% lower fuel consumption, thereby reducing TCO.
Higher durability by producing more uniform current density.
Increased power capabilities, offering as much as 90% more peak power vs. competing product offerings, resulting in expanded vehicle functional capabilities including but not limited to uphill capabilities with greater cargo load.
Ability to integrate the same amount of fuel cell peak power capability within a space envelope up to 45% smaller than what would be required otherwise.

We believe that as the market for ICEVs continues to decline due to changing customer preferences and government regulations, Loop continues to gain momentum in offering a leading green solution for commercial vehicles. Since our first commercial launch, we have successfully competed with larger, more established competitors to secure commercial relationships with customers located in China, Europe and the United States. Our business development pipeline increased from only two companies in January 2020 to over 100 as of the date hereof. As of January 31, 2021, we were actively engaged with 98 companies to explore potential product fit, we were in active negotiations with five companies, we had signed MOUs with six companies and we had five customers that had made order commitments. We have partnerships with OEMs such as Gaussin, and, through the InPower-Loop JV, Skywell. Our 24-month aggregate Product Backlog increased from $nil as of December 31, 2019 to $3.2 million as of December 31, 2020 and $16.4 million as of January 31, 2021.[9] Our Product Backlog includes conditional orders, non-binding commitments and MOUs and there can be no assurance that any such conditions will be fulfilled, or that our Product Backlog will be equal to our sales over the next 24 months.

Industry

Climate change is regarded by many as the defining issue of our time. It is estimated that 33.1 billion metric tons of carbon dioxide were emitted globally in 2019. The Paris Agreement was adopted in December 2015 as a legallybinding international treaty on climate change, with a goal of limiting global warming to well below 2°C, preferably to 1.5 °C, compared to pre-industrial levels. To meet this goal, the European Commission has proposed utilizing ZEV

8 When compared with fuel cell stacks of the same size as measured by total active area.

9 We have converted the figures making up our Product Backlog to Canadian dollars using an exchange rate of 1 U.S. dollar: 1.28 Canadian dollars.

technologies to achieve carbon dioxide reduction targets of 20% by 2025, 55% by 2030, and “net zero” by 2050. The commitment to taking action to combat climate change is growing among:

Governments: 96% of countries in the world are committed to the Paris Agreement. Many governments are adopting regulations to help achieve the targets set out in the Paris Agreement (such as carbon taxes, clean fuel standards and providing rebates or other incentives for purchasers of “green” vehicles).
Investors : ESG funds, among other investors, are mandating that companies reduce emissions and take action on climate. For example, Climate Action 100+ is an investor initiative with a mandate to “ensure the world’s largest corporate GHG emitters take necessary action on climate change”. More than 500 investors with more than $50 trillion in assets collectively under management are engaging companies on improving governance, curbing emissions and strengthening climate-related financial disclosures.
Corporates: Globally companies are focusing on reducing their carbon emissions. We have seen global commitment from certain blue chip companies such as Amazon, PepsiCo, FedEx, UPS, Walmart and many others to accelerate their fleet switch from fossil fuels to electric.
Society : 73% of consumers globally would change their consumption habits to reduce their environmental footprint,[10] and 81% feel strongly that companies have a role to play in meeting environmental targets.[11]

Electrification of Transportation

One of the biggest contributors of carbon emissions is transportation. Hence, we consider the decarbonization of transportation via electrification and fuel switching to have one of the greatest impacts in reducing overall carbon emissions (estimated to be responsible for over 20% of the potential emission reductions). The movement towards electrification has grown as countries implement regulations to achieve commitments made in the Paris Agreement. This includes the banning of diesel vehicles in major city centers and the progressive phasing out of ICEVs over the next decade and beyond. This movement is apparent in the recent growth in the number of EVs on roads around the world. According to the International Energy Agency, the number of EVs was projected to grow from 1.2 million in 2015 to 14.4 million in 2020 globally, which is approximately a 64% compounded annual increase.

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Source: https://www.iea.org/reports/global-ev-outlook-2019
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A growing number of governments around the world are combining these regulatory changes with financial support for the transition to ZEV technologies. This support includes generous subsidies and ambitious programs from many

10 https://www.nielsen.com/eu/en/insights/article/2019/a-natural-rise-in-sustainability-around-the-world/ 11 https://www.nielsen.com/eu/en/insights/article/2018/global-consumers-seek-companies-that-care-about-environmental-issues/

countries and regions, led by China and Europe, for the development of hydrogen infrastructure and the deployment of fuel cell powered vehicles.

To achieve global efforts to decarbonize, it is generally understood that EVs need to replace ICEVs. We believe that in order to achieve mass adoption of EVs, the economic and performance trade-offs between EVs and ICEVs need to be minimized. In the subset of EV commercial vehicles, fully battery-powered medium and heavy duty trucks currently suffer from reduced operating performance as the substantial weight and dimensions of battery packs limit range, reduce payload capacity, and require long re-charging times. Conversely, when BEVs in commercial applications are fitted with hydrogen fuel cells as hybrid propulsion systems, we believe these advantages can be fully realized. In hybrid systems, we believe hydrogen fuel cells act as on-board chargers and complement BEVs by addressing their shortcomings to achieve a broad decarbonization of various commercial transportation segments.

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Source: Loop Energy Inc.

The incorporation of fuel cells (fueled by hydrogen) into battery electric commercial vehicles provides several key advantages:

(i) Reduced curb weight.
(ii) Increased payload capacity. (iii) Increased range (2.5 to 3 times).[12]
(iv) Reduced refueling times.

We believe that the majority of commercial fleet operators will adopt FCEVs as the ZEV solution that meets the needs of their business. Our belief in this regard is supported by recent industry statements. In December 2020, the European Automobile Manufacturers Association, an industry group that includes Europe’s largest commercial vehicle manufacturers, and the Potsdam Institute for Climate Impact Research, issued a joint statement that carbon-neutrality by 2050 implies that all new commercial vehicles sold must be “fossil free” by 2040. In the statement, the parties explained: “We are convinced that new powertrain technologies will fast become the backbone of road freight transport. Truck manufacturers are investing heavily in new solutions, such as alternative fuels, batteries and hydrogen. BEVs are the first zero-emission technology to reach the truck market, and will be immediately followed by hydrogenpowered trucks.”

12 Based on multiple test runs utilizing Loop’s fuel cell modules as range extenders in battery electric trucks.

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Source: Green Car Reports
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While some top-tier vehicle manufacturers, such as Toyota and Hyundai, have implemented in-house fuel cell programs, we believe that most are working with external integrators and third-party fuel cell developers to design hybrid FCEVs. Established diesel equipment manufacturers, such as Cummins, are making significant investments in electric powertrain technology, as well as fuel cell technology, which we believe validate the business case of hydrogen-powered commercial vehicles.

We believe major fleet operators of commercial vehicles are beginning to recognize that battery-only electric fleet vehicles are unable to fulfill longer range missions without making significant trade-offs with hauling and cargo capacity, and that fuel cell systems should be integrated into these powertrain systems to achieve such travel distances without taking penalties on capacity. Challenges that large fleet operators with depot/home base operations face with fully BEV fleets include costly large scale battery recharging infrastructure and significant time required to recharge the fleet. While smaller deployments of FCEVs and hydrogen refueling infrastructure are costlier, benefits are compounded when fleets are deployed at scale. When FCEV fleet sizes increase, hydrogen infrastructure becomes less costly per vehicle than BEV recharging infrastructure.

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Source: Loop Energy Inc.
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Some major fleet operators have partnered with fuel cell technology and product providers to influence the design and deployment of the fuel cell solutions. For example, Amazon and Plug Power entered into a partnership in 2017 pursuant to which Amazon’s warrants in Plug Power would fully vest if Amazon spends at least $600 million over the life of the agreement to electrify certain of its commercial vehicles. Other fleet operators, including TransLink in British Columbia, are taking a more traditional, OEM agnostic approach, and are testing and evaluating various platforms in order to identify the best systems for their needs.

FCEVs have been in various stages of prototyping and production since the early 2000s and years of effort made by governments and industry players have resulted in the commerciality of some FCEV applications such as material handling vehicles, transit buses and passenger vehicles. Light commercial vehicles, medium and heavy duty trucks and mining trucks are still in various stages of prototype and demonstration but we believe continued regulatory and corporate efforts to electrify are expected to see these applications commercialize within the next five to 10 years.

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Source: Deloitte Report
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According to the Deloitte Report, FCEVs are forecasted to become cheaper from a TCO perspective as compared to BEVs and ICE commercial vehicles over the next 10 years. The Deloitte Report summarizes that the TCO of FCEVs will decrease by approximately 50% in the next 10 years. We believe this will be driven by a combination of declining costs as the technology matures and economies of scale are achieved, as well as other factors such as lower hydrogen fuel costs and an established hydrogen infrastructure for production, transportation and refueling.

In 2019, FCEVs were approximately 40% to 90% more expensive than BEVs and ICEVs due to the limited production of fuel cells and lack of established hydrogen infrastructure. Today, there are approximately 1,600 fuel cell powered trucks globally, with a majority of them operating in Europe and China. The graph below compares the estimated 2019 TCO breakdown for a FCEV, BEV and ICEV for a drayage truck in the U.S., as per the Deloitte Report.

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Source: Deloitte Report

The TCO of a fuel cell drayage truck is forecasted to be lower than that of a battery drayage truck after 2024, and lower than that of diesel drayage trucks after 2028. The projected decline is attributable to the decrease of the purchase price of the truck, hydrogen fuel costs and other technological advancements relating to hydrogen. This trend can be expected in other vehicle applications as well, according to the Deloitte Report.

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Source: Deloitte Report
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Currently, hydrogen costs are greater than the costs of (a) diesel or gasoline used by conventional ICEVs, and (b) electricity used by EVs due to the difficulty of storing and transporting hydrogen. As hydrogen storage and transportation technologies improve and economies of scale are achieved by large-scale hydrogen production plants, the price of hydrogen fuel is expected to drop to below half of the current price by 2029, according to the Deloitte Report.

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Source: Deloitte Report

Market Opportunities for Our Fuel Cell Products

Light Commercial and Medium Duty Truck Market

Loop’s immediate focus markets are light commercial vehicles and medium duty trucks, where we believe there are rapid growth opportunities in the short, medium and long term. Significant end market demand for these ZEVs has already been demonstrated by some of the largest global fleet operators, including UPS and Amazon. Through consultation with certain major fleet operators, Loop believes that fuel cells will be required to satisfy cargo, range and refueling time requirements for most fleet operations. In the near and medium term, Loop anticipates substantial growth opportunities integrating fuel cell range extenders with commercially available battery electric powertrain vehicles to meet these operational requirements. We plan to work with vehicle manufacturers to incorporate Loop fuel cells into new fuel cell vehicle designs to satisfy longer term market demands. We expect the TAM of this segment to grow from US$299 million in 2021 to US$27 billion in 2030.[13]

Heavy Duty Commercial Market

We believe that over the next 10 years, the heavy duty truck market will emerge as one of the main applications for hydrogen fuel cell solutions. Major OEMs such as Toyota and Hyundai are in the technology development stage, with a limited number of products launched or being tested. We believe our business is well-positioned to benefit from

13 In estimating the TAM, management (i) sourced online data from the International Organization of Motor Vehicle Manufacturers (“ OICA ”) to develop a gross number of ICEVs sold globally; (ii) reviewed the information provided at https://www.iea.org/reports/global-ev-outlook-2019 to determine how many EVs are expected to be produced over the coming years; (iii) applied a percentage capture rate of the EV market for fuel cells to determine a baseline unit count for all fuel cell sales; and (iv) applied an estimated price for Loop’s fuel cell products into this market to build the TAM.

opportunities in the market as these OEMs approach the commercial stage. We further believe that the unique benefits of the eFlow™ technology, such as fuel efficiency and power density, are particularly important in the high fuel consumption, high power heavy duty truck market. We expect the TAM of this segment to grow from $nil in 2021 to US$4 billion in 2030.[13]

Municipal Transit Bus Market

Currently, transit buses are amongst the widest adopters of fuel cell technology due to most buses being publiclyoperated. As transit buses operate predictable, regular routes, it is anticipated that few refueling stations will be required, which simplifies adoption in this market. In addition, broad based fleet replacement of FCEV buses act as a highly visible method for transit authorities to achieve emission goals and, as such, we believe the municipal transit bus market will continue be a key driver of fuel cell applications. We expect the TAM of this segment to grow from US$219 million in 2021 to US$2.3 billion in 2030.[ 13]

Material Handling Vehicle Market

Loop believes that material handling applications, such as forklifts, present a tertiary application for our fuel cell technology. Fuel cell technology has been market tested by companies such as Plug Power, and is proven to complement material handling applications for a variety of factors, including (i) lower technology threshold and infrastructure requirement (as compared to larger trucks, which require more robust refueling infrastructure and larger fuel cells as they require more power), (ii) minimal power output requirements, and (iii) operations in confined areas, such as warehouses, which require a predetermined number of refueling stations. There have been a number of recent strategic partnerships that we believe bode well for the application of fuel cell technology, such as Amazon’s partnership with Plug Power and Weichai Power Co., Ltd.’s joint venture with Ballard. We expect the TAM of this segment to grow from US$2.1 billion in 2021 to US$2.7 billion in 2030.

Stationary Power and Off-Grid Power Applications

Stationary power applications offer multiple opportunities for hydrogen fuel cells. Loop believes that some of the most promising applications include diesel generator replacement in market verticals such as construction sites, backup power and off-grid power applications. While space constraints are rarely relevant in these applications, we believe that our fuel efficiency advantage offers us a significant competitive edge. We expect the TAM of this segment to grow from US$2.3 billion in 2021 to US$3.0 billion in 2030.[ 13]

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Source: Company estimates, OICA survey, IEA Global EV Outlook 2019, H2FC SUPERGEN, Global Market Insights, Fueling the Future of Mobility, Hydrogen Council reports, and publicly available information.

Note: The TAM includes light commercial vehicles, medium and heavy duty trucks, material handling, transit buses, mining trucks, stationary power, portable power and electrolyzers.

How Fuel Cells Work

A PEM fuel cell consists of a cathode, anode and an electrolyte membrane. Multiple cells are combined together to create a fuel cell stack, and the fuel cell stack is further combined with balance of plant components to form a fuel cell module. These fuel cell modules manage the flow of hydrogen and oxygen through a structure that catalyzes a chemical reaction to combine the hydrogen (H2) and oxygen (O2) into water (H2O). This chemical reaction transfers electrons between the ends of the fuel cell. The fuel cell produces electricity, which may be delivered to peripheral devices, and water as a waste by-product, which must be removed from the system. A diagram of the components of a fuel cell is below.

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Source: Loop Energy Inc.

Hydrogen

Hydrogen offers several advantages compared to other sources of energy, which management believes are important, such as:

Greenest Solution: can be produced and converted to usable energy from cradle to grave with zero carbon emissions;
Availability: most abundant element in the universe;
Uses: can be used in all areas of mobility and power generation; and
Energy density: one kg of hydrogen has 2.8 times the energy content of gasoline by weight, two times that of natural gas, and 100-300 times that of lithium-ion batteries.

There are several ways that hydrogen is produced today. To help differentiate how hydrogen is produced, different labels are commonly used, as follows:

(i) Grey hydrogen: is generally produced from natural gas using steam methane reforming;
(ii) Blue hydrogen: is a lower-carbon variant of grey hydrogen, which also uses fossil fuels as a source, but offsets emissions with carbon capture and storage; and
(iii) Green hydrogen: is produced from electrolyzers powered by renewable energy resources such as wind or solar, instead of fossil fuels, and generates no carbon emissions during production.

Currently, most hydrogen in use today (grey hydrogen) is produced from fossil fuels and emits carbon into the atmosphere. There is very little green hydrogen being produced, as referenced by the Green Hydrogen Coalition, a California based non-profit advocacy group, which stated that green hydrogen makes up less than 0.1% of the world’s 70 million metric ton annual hydrogen supply. There are numerous options for producing low-carbon hydrogen, notably via electrolysis using low-carbon renewable energy as an input or reforming natural gas or coal and capturing the emitted carbon. According to the Hydrogen Council, the high production cost, of approximately US$6 per kg for renewable hydrogen produced via electrolysis, is hindering adoption. Additionally, as stated by the International Energy Agency, with limited demand and scale, green hydrogen sources produced from renewable energy can cost 4 times as much as other options.

However, the Hydrogen Council projects that the cost of producing low-carbon or renewable hydrogen will fall by up to 60% over the coming decade, driven by decreasing costs of renewable energy, development of lower-cost carbon storage facilities and increased scaling of electrolyzer manufacturing. This decrease in hydrogen production costs will assist in hydrogen becoming a competitive option against other energy sources in several applications.

We believe transportation and distribution of hydrogen is also important to consider as countries try to establish a hydrogen economy. For hydrogen shipping to become economically feasible, we believe it is important that the industry scale up its hydrogen infrastructure and target to reach similar levels that liquid natural gas has today in the mid to long term. Currently, hydrogen shipping costs are high due to a lack of infrastructure, and significant ramp up in scale will be necessary to reduce transportation costs. Analysis performed by the Hydrogen Council suggests that hydrogen distribution can become competitive once high levels of utilization and scale are achieved throughout the value chain.

There are three main options for distributing hydrogen: (i) trucking of compressed hydrogen, (ii) trucking of liquefied hydrogen, and (iii) the use of pipelines. The decision of which distribution method to utilize will differ from case to case. Compressed gaseous hydrogen offers the lowest cost option for shorter distances. For distances above 300 to 400km, transporting liquefied hydrogen is the most economical option. Establishing a new hydrogen pipeline network would require significant investment but companies could utilize existing natural gas pipelines to transport hydrogen with minimal upgrades.

To attain widespread adoption of hydrogen in order to meet decarbonization targets, we firmly believe that achieving scale is crucial. According to the Hydrogen Council, significant investments from the government and the private sector will be required to establish a hydrogen economy and scale hydrogen production and distribution channels to achieve cost reductions, resulting in hydrogen’s competitiveness against other energy sources. The analysis compared 35 different hydrogen use cases and forecasted that in 22 of the applications, the TCO of hydrogen will reach parity with other low-carbon alternatives by 2030. Of the use cases presented, the benefits of hydrogen as a fuel were most profound in heavy duty motive applications such as medium and heavy duty trucks, transit buses, material handling vehicles, fleet vehicles and trains.

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Source: Hydrogen Council: Path to Hydrogen Competitiveness

According to the Hydrogen Council, the global deployment of FCEVs could reach 13 million by 2030, a stark increase from the current number – approximately 16,000, as the hydrogen market scales and costs are reduced. The Hydrogen Council also predicts that commercial fuel cell vehicles, (including light commercial vehicles, medium and heavy duty trucks and buses) could grow from approximately 1,600 in 2020 to more than one million by 2030. Governments have also outlined targets for charging and hydrogen refueling stations, and the number of hydrogen refueling stations could exceed 10,000 globally by 2030, up from approximately 400 stations today.

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Source: https://www.spglobal.com/platts/plattscontent/_assets/_images/latest-news/20200127_Hydrogen.jpg

The buildout of hydrogen refueling infrastructure is already underway in many regions around the world. Large companies such as Air Liquide, Shell, Total SE, Linde, BP, Enel S.p.A, Snam S.p.A., Iberdrola, and many more, have entered the hydrogen market and announced plans to build large hydrogen production plants and establish refueling networks. It is anticipated that the entry of these leading players will increase the supply of green hydrogen and bring widespread adoption of hydrogen and FCEVs.

For hydrogen to gain market traction and widespread adoption in automotive applications, we believe an interconnected ecosystem of players consisting of hydrogen production and refueling companies, vehicle manufacturers, automotive OEM Suppliers and hydrogen fuel cell manufacturers must collaborate. In recent years, we believe many established companies in the energy and automotive sectors have invested significant capital to explore and build out in-house capabilities to support and grow their exposure in the hydrogen industry. However, we believe only a limited number of hydrogen fuel cell manufacturers have surfaced to support this ecosystem for mobility applications today, and Loop is one of them. We believe the scarcity of such players with fuel cell expertise and validated technology in the mobility fuel cell space could potentially lead to significant value creation once widespread adoption of FCEVs is achieved.

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Source: Loop Energy Inc.
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Clean hydrogen has received support among a growing number of global political leaders, who see it as one of the critical technologies needed to decarbonize the economy and meet the targets set out in the Paris Agreement. Each of the G7 countries have announced strategies to provide continued investments into the technology in order to meet ambitious targets to become carbon neutral by 2050. Bloomberg reports that countries and jurisdictions accounting for more than half of global emissions are working on plans to reduce carbon pollution to net zero by the mid-century.[14] Eurasia Group estimates that countries representing about 50% of the world’s GDP have announced credible hydrogen strategies, a figure that would increase to 70% following the U.S. and Russia finalizing their respective plans.[15]

Scaling up the production of hydrogen will be essential to helping countries achieve their net zero emissions targets and limiting the rise in global temperature to the 1.5°C target of the Paris Agreement. According to a Goldman Sachs report titled “ Green Hydrogen: The next Transformational Driver of the Utilities Industry ”, 25% of renewable electricity may be used to produce green hydrogen by 2050, and green hydrogen could become a €10 trillion addressable market globally by 2050.

14 https://www.bloomberg.com/opinion/articles/2020-10-25/zero-emission-climate-targets-should-be-seen-as-credible

15 https://www.bloomberg.com/graphics/2020-opinion-hydrogen-green-energy-revolution-challenges-risks-advantages/policy.html

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Source: Bloomberg (https://www.bloomberg.com/graphics/2020-opinion-hydrogen-green-energy-revolution-challenges-risksadvantages/policy.html), Goldman Sachs.

In 2020, the European Commission published the Hydrogen Strategy, which outlined a multi-phased roadmap to build out hydrogen supply and infrastructure over the period from 2020 to 2050. The Hydrogen Strategy describes a transition from non-renewable hydrogen to renewable sources of hydrogen, setting ambitious targets for the scale up of renewable hydrogen production capacity. It also specifically outlines strategies to boost demand for hydrogen in end-use sectors and identifies hydrogen as a promising option for city buses, commercial fleets and heavy duty road vehicles. To support the initiatives and the substantial investment required, the European Clean Hydrogen Alliance was formed to “identify and build up a clear pipeline of viable investment projects”.

In 2020, the governments of Germany, France and Spain announced significant investments to increase hydrogen adoption. In June 2020, Germany updated its national hydrogen strategy, allocating €9 billion to the build out of hydrogen infrastructure. In September 2020, France announced its economic recovery plan, which provides for a €7.2 billion investment program to support hydrogen and fuel cells with almost €1 billion allocated to the development of heavy duty trucks. In October 2020, Spain approved its “ Hydrogen Roadmap: A Commitment to Renewable Hydrogen ”, which contemplates a hydrogen-powered fleet of 150 buses, 5,000 light and heavy duty vehicles and two commercial train lines, operating in the country by 2030.

In September 2020, China announced new policies to stimulate the hydrogen fuel cell vehicle industry in China. The new policies contemplate ten model city clusters for fuel cell demonstration. These cities will be provided with subsidies for achieving targets for the development of fuel cell infrastructure and the promotion of FCEVs to the end of 2023. The focus will be on buses, specialty municipal vehicles and commercial medium and heavy duty trucks. The targets contemplate the addition of: (i) 10,000 new FCEVs by the end of 2023; 50,000 FCEVs by the end of 2025, and one million FCEVs by the end of 2030; and (ii) 150 hydrogen refueling stations by the end of 2023, 350 hydrogen refueling stations by the end of 2025, and 1,000 hydrogen refueling stations by the end of 2030. We anticipated selection of the city clusters would be announced prior to Chinese New Year 2021 (February 12, 2021).

In December 2020, Canada announced the “ Hydrogen Strategy for Canada ” which calls on investors to catalyze the growth in a clean fuel sector that the strategy says could be worth $39.2 billion, create 350,000 jobs and help Canada achieve net-zero emissions by 2050. The strategy is divided into three phases, (i) short term goals between now and 2025, (ii) 2025 to 2030, and (iii) long term goals between 2030 and 2050. The short-term goals will involve planning for the development of new hydrogen supply and distribution infrastructure based on mature hydrogen applications such as carbon capture. Between 2025 and 2030, the strategy’s focus shifts to the diversification of hydrogen into

sectors such as residential heating, hydrogen refueling stations or dispatchable power generation. Post-2030, the strategy contemplates market expansion to align with ubiquitous and commercially ready transportation applications.

Our Business Strategy

Management believes Loop is a technology leader today and aims to be a “top five player” in designing, developing, manufacturing and servicing fuel cell stacks and modules within the next five years. Our goal is to supply fuel cell stacks and modules to (a) OEMs, and (b) OEM Suppliers, in order to enable the production of FCEVs with functionality and economics that are competitive with their ICE counterparts.

We intend to take the following actions in pursuit of our strategy:

Penetrate near-term markets and market applications quickly in order to scale manufacturing and customer support infrastructure required to address anticipated mid-term customer demand.
Position Loop to take advantage of the mid-term and long-term market growth by incorporating our fuel cell stacks into FCEV platform design processes currently underway at some of the major vehicle manufacturers.
Reduce manufacturing costs by leveraging supply chain economies of scale and internalizing the fabrication of certain key fuel cell stack components organically and/or through strategic acquisitions.
Pursue technology leadership by continuing to invest and improve in fuel efficiency, power density and durability.
Our strategy is to focus on the commercial vehicle market, and leverage our products into other markets where there is a clear fit such as stationary and portable power.

We believe there is a significant market opportunity available to Loop.

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Note: Commercial applications include light commercial vehicles, medium and heavy duty trucks, material handling, transit buses, and mining trucks. Key focus includes light commercial vehicles, medium and heavy duty trucks, transit buses, mining trucks, and material handling vehicles. Other markets include portable power and electrolyzers.

Near-Term Market

In the near term, we intend to focus our resources on the European and Chinese markets, as we believe demand will be stronger in these markets during this period due to high levels of government support, robust anti-emissions regulations and stakeholder commitments to deploy hydrogen fuel infrastructure. We will also seek out opportunities in the North American and other markets.

Near-term focus for our fuel cell stacks and modules are, and will continue to be, optimized for use in light commercial vehicles (parcel delivery vehicles), material handling vehicles (port and warehouse logistics equipment), transit buses and stationary power applications, as we believe there will be strong initial interest in using fuel cells in these verticals. We believe a large number of these vehicles already have electric powertrains, making it easier to integrate fuel cells in comparison to diesel drivetrains. We also believe there are a large numbers of manufacturers of these vehicles, and that they have accelerated design-to-commercial launch cycles. Similarly, stationary power applications, including the replacement of back-up power diesel generators and large scale renewable energy storage, are accepted from system design standpoints and feature a diverse and growing ecosystem of project developers and system integrators.

We are also exploring opportunities for the use of our products in medium and heavy duty trucks. We are engaging with manufacturers that produce medium and heavy duty trucks in low volumes, in anticipation that these manufacturers will launch FCEV trucks in the near term. We are also engaging with Tier 1 OEM Suppliers that deal directly with OEMs, as some of these larger manufacturers are now beginning the design of vehicle platforms equipped with hydrogen fuel cells for commercial launch between 2025 and 2027.

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Mid-to-Long Term Market

We believe that in the mid- to long-term, market demand for our products will be dominated by higher volume applications, such as light commercial vehicles, and medium and heavy duty trucks, and that larger, top-tier vehicle manufacturers will begin to enter the market as overall demand increases. Stationary power system integrators will also round out our mid-to-long term market strategy.

We also believe that in the mid- to long-term, the electrification of mining trucks, rail, marine and aerospace transport may present additional market opportunities. Geographically, we expect to expand our focus to include North and South American and Asia Pacific markets, as market demand in these regions increases.

Our mid- to long-term strategy is to foster channel partner relationships with Tier 1 OEM Suppliers to OEMs in our target mid- and long-term markets. We anticipate working with our channel partners to integrate our fuel cell stacks and modules with their value-added products for supply to top tier vehicle manufacturers that are currently at the beginning stages of the vehicle platform design cycles. We expect adoption of fuel cells in these markets will begin gaining traction after 2025.

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Manufacturing Cost Reduction

Management believes Loop has benefited from an established supply chain for product components, which has allowed us to develop and refine our products, and supply such products to customers efficiently without significant investment in capital equipment. As product volumes increase, we intend to begin in-house manufacturing and fabricating of certain components, including all or part of the bipolar plate assembly, and potentially the membrane electrode assembly or other components. We will also consider vertical integration through organic growth or strategic acquisitions. By internalizing these processes, we expect to achieve significant cost reductions, while increasing margins and production volumes. Whenever possible, we will seek to grow our IP portfolio with respect to improvements in manufacturing and assembly processes.

Internalization of certain elements of the bipolar plate production is underway and we expect it to be completed by the end of this year. Internalization of other components will be based on a cost-benefit analysis by management as market demand increases.

Certain of our competitors have published Gross Margin Percentage targets of 30% and EBIT Margin Percentage targets of 20% by 2030. We expect to achieve similar or better results as our eFlow™ plate requires less material than that of many of our competitors.

Technology Leadership in Fuel Cells

Fuel Cell Stack Efficiency Improvement. Internal modelling of our new technology in development predicts an additional 6% improvement in fuel efficiency beyond our highly efficient current technology stacks. We believe this would increase the competitive advantage of the Company’s fuel cell stacks from up to 16% to up to 22% against current technology.
Fuel Cell Stack Power Density Improvement. Internal modelling of our new technology in development predicts a 33% improvement in stack power density beyond our high power density current technology stacks.

Our Business Development Pipeline

Our sales and marketing approach is segregated in two phases: our near-term market strategy and our mid- to longterm strategy. Our near-term strategy involves direct engagement with vehicle manufacturers and suppliers while our mid- to long-term strategy builds upon our channel partner relationships with Tier 1 OEM Suppliers to OEMs across geographies.

We believe our business development efforts, particularly in Europe and China, gained significant momentum in 2020, which were accelerated by the hiring of key individuals with specific experience growing cleantech companies through a sales pipeline, strong industry relationships and knowledge regarding the nuanced strategies to approach OEMs and OEM Suppliers. Our current business development pipeline consists of over 100 companies, an increase from only two companies in January 2020.

We have also secured purchase orders and/or MOUs with multiple customers containing, in the aggregate, the following Product Backlog[16] :

24-Month Aggregate Product Backlog as of December 31, 2019	24-Month Aggregate Product Backlog as of December 31, 2020	24-Month Aggregate Product Backlog as of January 31, 2021
$0.00	$3.2 million	$16.4 million

Our Product Backlog includes conditional orders, non-binding commitments and MOUs and there can be no assurance that any such conditions will be fulfilled, or that our Product Backlog will be equal to our sales over the next 24 months.

In addition to the customers in our primary target markets in Europe and China, we are also engaged with customers in Australia, Canada, the United States and South Korea.

Commercial Milestones

We have spent the last decade refining our technology and testing the commercial viability of our fuel cells. Specifically, we engaged in proof of concept arrangements from 2016 to 2019. Cummins Apollo’s recent investments have provided Loop with additional resources to accelerate our commercial momentum through work with our joint venture with InPower (as discussed below) and an evolving business development pipeline with European OEMs, including our recent MOU with Gaussin. The following highlight Loop’s commercial milestones over the past five years:

In 2015, we began working with Peterbilt to install our fuel cell system in a Peterbilt Class 8 truck for use as a demonstration vehicle in North America. In 2015, we were awarded a $7.5 million grant from SDTC to fund this project and to advance our products from TRL 5 to TRL 8. During 2017, Loop and Peterbilt formed a consortium with the Gas Technology Institute and Transportation Power Inc. (now a subsidiary of Meritor, Inc.) to build two Peterbilt Class 8 trucks with our fuel cell system to be operated in California. In 2018, the California Air Resources Board

16 We have converted the figures making up our Product Backlog to Canadian dollars using an exchange rate of 1 U.S. dollar: 1.28 Canadian dollars.

announced a grant to the consortium of US$2 million to support this project. The first truck completed build in October 2020 in Escondido, California and this truck is currently undergoing acceptance testing. We expect manufacturing of the second truck to commence in the first half of 2021.

In July 2017, the T500 was deployed for the first time in a yard truck, jointly built by Loop and China National Heavy Duty Truck Group Jinan Power Co., Ltd. (“ China National Heavy Duty Truck Group ”) in Shandong, China. The T500 later evolved to become the T505. This proof-of-concept truck demonstrated the functionality of our fuel cell systems in the field and confirmed that the performance benefits of our eFlow™ technology that we observed through our internal testing were also present in field operations.

In 2019, we completed development and commenced commercial sales of the T505. The T505 is our next generation 50 kW fuel cell system, for use in material handling vehicles, stationary power and transit buses. We currently offer the T505 fuel cell system for sale as a commercial product in China, Europe and North America. Revenues from product sales were $0.1 million and $0.4 million for the nine month periods ended September 30, 2019 and 2020, respectively.

In January 2019, we entered into the InPower-Loop JV Agreement. The InPower-Loop JV has the capacity to leverage the network that InPower has into the OEM commercial vehicle market network in China. InPower currently sells power electronic equipment to various OEMs in China as well certain state-owned enterprises who operate in the power utilities sector. InPower is a member of the National Power Quality Standardization Committee, China Energy Conservation Association and National Torch Plan Enterprise. InPower has sales branches in Beijing, Shanghai and Guangzhou, which are used to support sales efforts of the InPower-Loop JV in China. InPower also manufactures DC/DC units for use in EVs, which we believe are an important part of the integration for fuel cells vehicles. Loop does not expect to provide any additional funding or investments into the InPower-Loop JV.

In September 2019, we entered into an investment agreement with Cummins Apollo, pursuant to which Cummins Apollo made an initial equity investment in Loop of $5 million and had the right to make an additional equity investment in Loop of up to $10 million. In March 2020, Cummins Apollo exercised its right in full and invested an additional $10 million.

In January 2020, InPower signed the Lishui-InPower MOU. The Lishui-InPower MOU outlines, among other things, the terms under which the Lishui Government would provide an annual order of 100 hydrogen fuel cell operated vehicles for three years, including buses, trucks and garbage trucks, using Loop fuel cell modules to be supplied by the InPower-Loop JV. In September 2020, the first phase of this process was completed when Skywell, a leading Chinese electric bus manufacturer located in Nanjing, China, received index approval from the Chinese MIIT for a bus with a Loop fuel cell module, after having been tested and verified to meet the requirements to be registered as eligible for government subsidies.[17]

In 2020, we designed and commenced customer sales of the T600. The T600 was designed in collaboration with existing and potential customers. We expect the first customer shipments of the T600 to occur in the second quarter of 2021. We also completed the development of the S300 in 2020. We expect the first customer shipments of this product to occur in 2021.

In December 2020, we entered into the Gaussin MOU for the purposes of designing and manufacturing hydrogen electric tractors based on the Gaussin platform. Under the Gaussin MOU, the parties anticipate close cooperation during the vehicle design phase followed by the commercial supply of fuel cell products by Loop to Gaussin starting with the Canadian market.

In January 2021, Loop entered into the InPower MOU. Under the InPower MOU, Loop anticipates purchase orders from InPower for up to 110 units of the T505 in 2021 and for up to 200 units of the T505 in 2022, subject to certain conditions, including confirmation by InPower.

17 https://www.prnewswire.com/news-releases/loop-energy-applauds-skywell-and-joint-venture-partner-inpower-for-inclusionof-a-commercial-hydrogen-fuel-cell-electric-bus-into-chinas-miit-new-energy-vehicle-index-301144988.html

Internal Testing and Modelling

Comparative performance estimates are based on publicly available performance data, specifications, and design operating conditions of competitive fuel cell technology. Competitive performance data found in the literature is representative of typical validated fuel cell performance although it may not represent the very latest technology developments of our competitors. Comparative eFlow™ performance values are estimated and presented for fuel cell active area of equal size to the competitors, and may not be representative of the actual fuel cell size available for sale in current Loop products. Management believes Loop’s predictive performance models are validated by performance tests conducted in our fuel cell test facilities at various operating conditions; however, the exact operating conditions tested may or may not include the precise competitor operating conditions at which the performance comparisons have been made. Performance estimates of future Loop eFlow™ technology are made by predictive theoretical modelling where testing results are not yet available. We believe that, even though results may vary, we have compared performance as fairly and as directly as possible given the significant differences in available product sizes and design operating conditions of the various technology. The majority of Loop’s testing is internal, however, in management’s opinion, test procedures, equipment, and results have been validated. Some independent verification testing was conducted at the US National Renewable Energy Lab facilities in Colorado and the HySA Systems Lab in South Africa. Some independent testing has been conducted for product verification in China at the China Automotive Technology Research Centre

Our Competitive Advantages

We believe commercial vehicle manufacturers consider the most important performance requirements of a fuel cell solution to be: (i) low TCO, including low operating costs, low fuel (hydrogen consumption) and low capital costs including vehicle integration cost and complexity, and (ii) high peak power output, with minimal performance deterioration over the life of the product. Management believes our proprietary eFlow™ bipolar plate addresses all of these performance requirements and provides us with a sustainable and defensible competitive advantage against other leading fuel cell products and companies.

We believe the evolving state of fuel cell development makes it difficult to make direct comparisons between the performance of different fuel cell technologies and components. Based on our internal testing and comparisons of published studies of the performance of fuel cells from other manufacturers and competitors, we believe that eFlow™equipped fuel cells deliver greater efficiency, higher peak power output and longer expected lifetime than our competitor’s products. In order to quantify the benefit of the eFlow™ technology directly, we purchased commercially available CCM materials from a leading competitor, built them into Loop’s eFlow™ fuel cell stack, and then operated this stack at our best estimate of the leading competitor’s operating conditions using publicly available information. We believe the results of our test showed a 25% increase in power at the design operating point, and a 36% increase in available peak power for the eFlow™ fuel cell stack over the performance published by the aforementioned competitor.

Fuel efficiency providing lower TCO.

We believe that fuel consumption is the greatest contributor to vehicle TCO. Based on our internal testing, we believe our eFlow™-equipped fuel cells can consume up to 16% less fuel than our competitors’ fuel cells when operating in half power cruise mode. We estimate this increased fuel efficiency will result in a reduction in fuel costs over the lifespan of a typical transit bus of up to $300,000,[18] and will further accelerate the breakeven point for fuel cellequipped electric vehicles relative to their BEV and ICEV counterparts. This anticipated impact on the break-even timing is illustrated in the data overlaid on the graph from the Deloitte Report below.

18 Estimating 7.7 kg/100km for transit bus, hydrogen cost of $5.5 per kg, 16% fuel savings, and a 17 year lifespan.

Total Cost of Ownership (USD/100km)[19]

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Source: Deloitte Report, Loop Energy Inc.
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Higher peak power output allowing for a smaller footprint.

Based on our internal testing, we believe eFlow™-equipped fuel cells can generate as much as 90% more peak power in a comparable package size. This increased power output can yield higher payload capacity and range and permits a wider range of operating parameters.

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Source: Internal testing of Loop Energy Inc.
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Based on our internal testing, we believe Loop can extract more power from the same size and cost per stack relative to competing products. Alternatively, we also believe Loop can extract the same power as our competitors from a smaller package. Both of these scenarios would allow customers to benefit from reduced space requirements and simpler integration into a vehicle chassis (or frame) with minimal redesign and reengineering efforts. Our analysis of the results of our internal testing indicates that our fuel cells use up to 45% less bipolar plate and MEA materials and, consequently, occupy less space than a typical competing commercial fuel cell stack producing comparable power. In addition to the ability to integrate within a highly constrained space, our fuel cell products possess fundamental manufacturing cost advantages over traditional fuel cell architectures.

Durability increasing life and reducing maintenance costs.

Conventional fuel cell bipolar plates generally have areas near the inlet with a focused concentration of reactants, hydrogen and oxygen, which results in hotspots as depicted in the image below. Hotspots are due to uneven electrochemical reactions along the length of the fuel cell bipolar plate, which leads to non-uniform temperature and current density of up to 40% across the plate. Higher heat concentration increases (a) electrode wear at certain areas,

19 Data is representative of drayage trucks.

and (b) reduced utilization, which in turn leads to accelerated MEA degradation and reduced current and power density, efficiency and reliability. It can also result in inefficient water removal resulting in potential flooding of the fuel cell.

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Source: “Transport in PEMFC Stacks” summary presentation for US DOE H2 Program

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Source: Loop Energy Inc.

We hold patents on our eFlow™ technology in each of our core markets. We also intend to continue to develop our technology and IP portfolio. As we believe our current competitive advantage relates to our bipolar plate geometry design, and because bipolar plates are a core component of any fuel cell, we expect to maintain our competitive advantage even as the materials used to construct fuel cell components improve, such as CCM materials. We anticipate that eFlow™-equipped fuel cells will continue to offer performance improvements and any advantages of eFlow™equipped fuel cells will be additive to any other advancements made by the fuel cell industry .

Highly experienced technology and manufacturing team

We believe Loop’s leadership team includes highly-skilled individuals with experience in fuel cell development, automotive development and new product launches. This mix of industry experience is a result of employees that came from Ballard, Daimler, AFCC, Toyota, Jaguar and General Motors, among others. We believe this diversity in experiences and backgrounds will allow Loop to plan and execute leading programs for the development and launch of its products over the next several years.

Additionally, the Company has retained two special advisors, Lord John Browne and Lance Uggla, to provide guidance to management and the Board with respect to the running of a public company, the effective management of a high growth enterprise and the identification of opportunities and relationships of strategic advantage to the Company. Lord Browne’s accomplished career includes being Group Chief Executive of BP from 1995 to 2007 and co-head of Riverstone, one of the world’s largest renewable energy private equity funds until 2015. Lord Browne is currently Chairman of L1 Energy, Wintershal Dea, the Francis Crick Institute and a Fellow and past President of the Royal Academy of Engineering. Lance Uggla is Chairman and CEO of IHS Markit. Mr. Uggla founded Markit in

2003, took it public in 2014 at a valuation of $4.3 billion, merged with IHS in 2016 and merged with S&P Global at a market capitalization of approximately $39 billion in November 2020.

We are focused on building a culture of innovation and possibility, grounded in the commercial realities that our end customers require of our products. We recognize that our technology and products can only have a positive impact for the greater good of the world if we provide them in a way that satisfies the economics of the businesses who will use them. We believe this grounding in financial reality is present at all levels and in all departments at Loop. We believe this customer-centric culture provides us with a competitive advantage beyond our technology and that this culture will support Loop’s ambitions to be one of the top five fuel cell companies globally.

Our Technology

eFlow[TM] Technology

Through its proprietary bipolar plate geometry, we believe eFlow™ optimizes mass flow in a fuel cell, as schematically shown below, thereby increasing efficiency and expected durability, resulting in improved power, performance and cost.

In management’s opinion, Loop’s core eFlow™ technology is a design innovation of the bipolar plate. The bipolar plate controls and manages the inflow of hydrogen and oxygen, the outflow of water and the flow of the coolant to maintain the optimal internal temperatures for the fuel cell operation. The management of these flows has a direct and significant impact on the performance of the fuel cell, including its efficiency, peak power and expected longevity.

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Source: Loop Energy Inc.

In our internal testing and theoretical modelling, we have demonstrated that Loop’s eFlow™ technology exhibits superior performance that we believe is the result of managing the flow of these molecules more effectively than our competitors’ bipolar plates. We believe our eFlow™ bipolar plate technology efficiently uses oxygen and hydrogen, effectively removes water and provides uniform operating conditions. These attributes are expected to deliver several benefits, including:

by efficiently using available oxygen and hydrogen, eFlow™-equipped fuel cells are expected to deliver improved fuel efficiency;
by more effectively removing water, eFlow™-equipped fuel cells can run at higher peak power levels; and
by providing uniform operating conditions across the MEA active area, vulnerability to degradation can be minimized.

Explore New Markets for eFlow[TM] : Advantages for Electrolyzers

We are conducting and supporting research to assess the suitability of using our eFlow™ technology in electrolyzers, the results of which may open new product and market opportunities for us in the near to medium term.

Electrolyzers are used in the production of hydrogen. When powered by renewable energy sources such as wind or solar, an electrolyzer can produce carbon free green hydrogen. An electrolyzer is effectively a fuel cell operating in reverse; where electricity and water are provided as an input to the device, and hydrogen and oxygen are produced as the output.

Recent research conducted by Dr. Aimy Bazylak, P.Eng., Canada Research Chair in Thermofluidics for Clean Energy, and Professor, Department of Mechanical & Industrial Engineering, University of Toronto, and Dr. Jason Lee, reported a correlation between high current density and high hydrogen flow rates. We believe achieving very high current densities is a strength of eFlow™ fuel cells, and we are collaborating with Dr. Bazylak and Dr. Lee to investigate the degree to which the advantages of the eFlow™ geometry might positively translate into the operation of an electrolyzer. Our preliminary analysis suggests that the application of eFlow™ technology in an electrolyzer device may result in a significant efficiency advantage in the production of green hydrogen.

Our Commercial Products

Loop provides two market ready categories of products, fuel cell stacks and fuel cell modules.

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Source: Loop Energy Inc.
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Fuel cell stacks

We assemble fuel cell stacks that use our proprietary eFlow™ bipolar plate technology. Our fuel cell stacks can be used as stand-alone units or in a twin-stack system, where two fuel cell stacks are connected together with a common balance of plant to reduce overall volume. Our fuel cell stacks have different power ranges, which we believe make them suitable for a variety of different applications. Our fuel cell stacks are paired with balance of plant components to produce fuel cell modules, but are also offered as standalone fuel cell stacks. We offer our fuel cell stacks directly to customers with significant in-house expertise in the design, manufacture and assembly of fuel cell modules and electrical drivetrain systems. For example, we offer our fuel cell stacks to the InPower-Loop JV for assembly into fuel cell modules in China.

Our internal test results indicate that relative to our competitors’ fuel cell stacks, our fuel cell stacks:[20]

consume up to 16% less fuel when operating in half power cruise mode;
generate as much as 90% additional peak power when manufactured using equivalent material quantity; and
are expected to be more durable as they produce more uniform current density across the bipolar plates and are therefore less likely to experience excessive degradation.

We believe these competitive advantages deliver superior technical performance, substantial TCO reduction and competitiveness with incumbent technologies.

Based on our internal testing, we believe Loop is able to extract more power from the same size and cost per stack relative to competing technologies. This results in less material costs to generate the same power output. We believe

20 When compared with fuel cell stacks of the same size as measured by total active area.

the lower TCO benefits derived from our fuel cell products will assist in the acceleration of the adoption of fuel cells as a replacement for ICEs in commercial vehicles.

As fuel cell materials and designs improve, we expect our competitive advantage to be maintained as it relates to the bipolar plate design – an essential component of any fuel cell. We expect eFlow™-equipped fuel cells to continue to offer performance improvements, and as such, any advantages of eFlow™-equipped fuel cells will enhance the fuel cell industry by extension.

The following table lists the fuel cell stacks we currently offer or have in development:

Loop Fuel Cell Stacks:	Small Plate	Large Plate
Target Power Range:	15 kW – 30 kW	50 kW – 100 kW (expected launch in 2021)
Target Application:	Used in a single or twin-stack fuel cell module architecture for stationary power, light commercial vehicles, material handling vehicles and transit buses.	Used in single or twin-stack fuel cell module architecture for stationary power, medium and heavy duty trucking applications.

Fuel cell stacks may be combined in multiples to create higher-powered modules.

Fuel cell modules

Our fuel cell modules are assembled using our fuel cell stacks and components sourced from various suppliers. As with our fuel cell stacks, our fuel cell modules have different power ratings, which we believe make them suitable for a variety of different applications. We believe our fuel cell modules provide customers with an efficient integration of fuel cells into electric powertrains, and are intended for customers that do not have in-house capabilities to assemble fuel cell modules. In the mid- to long-term, we believe that as sales volumes of FCEVs increase, many of our customers will assume fuel cell assembly in-house, and we will transition to only selling fuel cell stacks to these customers.

After almost two decades of technology development, in 2019 we launched our first commercial product, the T505, a 50 kW fuel cell module, for use in material handling vehicles, stationary power, and transit buses. In 2020, we expanded our offering for these vehicles with the launch of the T600. In 2020, we also launched the S300, a 30 kW fuel cell module, for use in light commercial vehicles, an end market that is expected to grow significantly. We expect to launch more powerful fuel cell modules in 2021 for use in larger applications such as medium and heavy duty trucks.

The following table lists the fuel cell modules we currently offer or have in development:

Loop Fuel Cell Modules:	S300	T505 / T600	S1200	T2500
Target Power Range:	15 kW – 30 kW	25 kW – 60 kW	60 kW – 120 kW (expected launch in 2021)	120 kW – 240 kW (expected launch in 2022)
Target Application Example:	Light commercial vehicles.	Stationary power, material handling vehicles and transit buses.	Stationary power, medium and heavy duty trucking applications.	Stationary power, heavy duty trucking and mining applications.

Our technology development activities are focused on optimizing the performance and efficiency of our eFlow™based designs for use in different applications and operating conditions. Our product development activities include efforts to continuously improve of product performance, durability and reduction of TCO. We intend to leverage our expertise in fuel cell stack design, materials and manufacturing processes across multiple product platforms.

Intellectual Property

We believe that protecting intellectual property is an important aspect of our business. We continuously assess the global fuel cell market in an effort to ensure that we are protected in all key markets. Our intellectual property covers multiple aspects of our technology, including fuel cell materials and components, fuel cell stack and system design, operation and control, electrolyzer applications and manufacturing processes.

We protect our intellectual property through a variety of means, including patent protection, trademarks, copyright, licenses and non-disclosure agreements. Our intellectual property portfolio is not limited to our patents and patent applications; it also includes know-how and trade secrets developed over more than 20 years of technology development, product development and production.

We have established a robust internal procedure for encouraging inventiveness, protecting our confidential information, recording inventions, assessing patentability and determining potential value. Our Intellectual Property Committee, which consists of the President and CEO, CFO, VP Engineering, Chief Scientist and IP facilitator (currently filled by our MEA Development Manager), continuously monitor our competitive IP position for strengths, weaknesses, opportunities and threats. The Intellectual Property Committee also manages office actions and maintenance fees, works closely with our patent agents and external counsel on new filings, and reports regularly to the executive management of Loop, with an objective to maximize the quality and value of our IP portfolio.

As we continue to develop our technology and vertically integrate, we will look to protect manufacturing processes and assess next generation component technologies with the aim of protecting those that have commercial synergies with eFlow™.

As of January 31, 2021, we own and control six United States granted patents, one United States allowed patent (pending grant); 10 non-United States granted patents; three United States published patent applications; nine published non-United States patent applications; and one filed (not yet published) United States patent application. Existing granted patents will expire between February 2022 and March 2037. Pending and granted patents are filed in the United States, Canada, China, Japan, India and various European countries. The patent expiring in 2022 relates to conceptual lab-scale demonstration. Loop’s first generation eFlow™ fuel cell technology patent expires in 2027. A new generation of eFlow™ patents have been or are expected to soon be granted, expanding and extending the eFlow™ patent family to 2037 and beyond. This new generation of granted patents covers Loop’s product designs and leverages the benefits of eFlow™ concepts for hydrogen gas management, thermal management and hydrogen generation. The Loop Energy team has extensive experience in commercial fuel cell development and continuously advances eFlow™ technologies, IP and products. Concurrently, the Loop team has developed unique intellectual property pertaining to the design and operation of fuel cell systems enabled by the uniqueness of Loop’s eFlow™ fuel cell stacks.

As part of the JV License Agreement with the InPower-Loop JV, we license certain know-how around the balance of plant. This know-how relates to the disclosure of various components which are used in the balance of plant such as compressors, wiring harnesses and enclosures. The InPower-Loop JV has the right to develop certain new IP around this knowledge transfer as it relates to the balance of plant. Nothing in the JV License Agreement pertains to any of Loop’s current or future patents as it relates to our stack technology.

Manufacturing and Facilities

Canada

We have an approximately 14,000 square foot facility in Burnaby, British Columbia that we believe has the capacity to assemble 3,000 fuel cell stacks per year, based on three eight-hour shifts per business day. Based on our current product configurations, we believe this will produce, in the aggregate, peak power output between 75,000 kW and 90,000 kW. We assemble our fuel cell stacks into fuel cell modules for delivery to our customers. We believe we can

currently produce up to 100 fuel cell modules per year, and we believe we have the capacity to increase production to 1,000 modules per year. We provide these stacks, and fuel cell modules assembled from these stacks, directly to our customers in Europe and North America. The Burnaby facility is also fully equipped with equipment to conduct testing for 5 kW and 30 kW fuel cell stacks and 50 kW fuel cell modules.

Our fuel cell stacks and fuel cell modules use components that we source from a variety of suppliers. We intend to begin in-house manufacturing and fabricating of certain components, including, all or part of the bipolar plate assembly and the membrane electrode assembly, as our sales volumes increase.

We lease a manufacturing facility and administration office in Burnaby, British Columbia that houses our corporate headquarters and our fuel cell development, manufacturing, assembly and testing activities.

International

We have established a joint venture with InPower in China, the InPower-Loop JV, that is equipped to assemble fuel cell modules incorporating fuel cell stacks manufactured by Loop. The InPower-Loop JV occupies an approximately 35,392 square foot floor space in an InPower-owned facility in Langfang, China. The joint venture will supply fuel cell modules to the Chinese market. This facility is equipped for short run volume production of fuel cell modules and testing of fuel cell modules of up to 80 kW.

We also have regional sales, business development and customer support infrastructure in China and Europe.

Customers and Suppliers

Loop engages with strategic partners, OEMs, system integrators, suppliers and research institutions who share our mission to reduce diesel emissions from global cities and ports.

We believe that Loop has a well-established, integrated supply chain. We believe that our supply chain will continue to evolve to successfully deliver at high volumes. Through vertical integration, where appropriate, we expect to experience additional savings when manufacturing at high volumes. We believe that by qualifying multiple suppliers whenever possible, we can select the lowest cost alternative and leverage our economies of scale. In the future, management believes that the entire fuel cell supply chain will grow and evolve, leading to reliable lower cost materials and components, and that by maintaining flexibility in our scope, we will maximize our supply security and minimize our costs to produce safe, reliable, and high performing products.

We plan to continue seeking and developing relationships with potential customers and partners in the automotive systems engineering, vehicle integration and powertrain development space. We are targeting these customer relationships because we believe that they will have the potential to provide us with access to some of the largest distribution channels for fuel cell technology.

Employees

As of January 1, 2021, we have 36 full-time employees, all of whom are located in Canada. We also have a small sales team with two operating regional satellite sales offices in China and Italy. Our product development team has 29 fulltime employees and includes four employees with PhDs and 11 employees with Master’s degrees. Our Chief Scientist, Dr. Sean MacKinnon is responsible for leading and guiding the evolution of Loop’s suite of fuel cell technology solutions. Dr. MacKinnon has over 15 years of experience in research, development and project management, and his past experiences include research and development at Ballard, General Motors Fuel Cell and National Research Council of Canada. He is a named inventor on 36 patents with 13 other patents pending.

Our employees have backgrounds in diverse disciplines, such as electrochemistry, polymer chemistry, chemical, mechanical, electronic and electrical engineering, manufacturing, marketing, sales, business development, finance, human resources and business management. We recruit our employees in a variety of ways and look for talent that fits within our culture and is focused on growing with us in the long-term. We are committed to providing an inclusive and diverse work environment and culture. Our employees are not represented by a labor union.

The table below provides an overview of certain past experiences of the Company’s directors, employees and special advisors.

Name	Position(s)/Title	Past Experience at:
*Board of Directors*
Dr. Andreas Truckenbrodt	Director and Chair of the Board	AFCC, Daimler Chrysler, Ballard, Daewoo, BMW
Allan Collings	Director	ACM Advisors Ltd., Rogers Cablevision
Neil Murdoch	Director	Aston Hill Asset Management, Connor, Clark & Lunn Capital Markets Inc.
Dr. Wayne A. Eckerle(1)	Director	Cummins, United Technologies Research Center
*New Directors to be Appointed on or Prior to the Closing*
Sophia Langlois	Director	KPMG LLP, Alaris Equity Partners Income Trust
Christopher C. Clulow	Director	Cummins, Ernst & Young
*Officers & Senior Management*
Ben Nyland	Director, President and Chief Executive Officer	Rampworth Capital Services Inc., JBN Developments Inc., Exro Technologies Inc., Maclean Group Marketing, Workfire
Darren Ready	Chief Financial Officer	PMI Labs, SignalChem Lifesciences Corporation, Ronin8 Technologies Ltd.
George Rubin	Chief Commercial Officer	Day4 Energy Inc., Heliotrope Technologies Inc.
Dr. Daryl D. Musselman	VP, Engineering	Svante Inc., Xebec Adsorption Inc., Endurance Wind Power, Bionic Power Inc., General Motors of Canada Co., Multimatic Inc.
Dr. Sean MacKinnon	Chief Scientist	Ballard, General Motors
*Management Team*
Kirk Livingston	SVP, APAC-China	Hoerbiger, IMW Industries
Dr. Andrea Sudik	MEA Development Manager	AFCC, Ford Motor Company
Matthew Guenther	Principal Engineer Architecture	AFCC, Ballard
Rob Stevenson	Director of Ops	AFCC, Toyota
Jade Chan	Financial Controller	Deloitte, PricewaterhouseCoopers
*Special Advisors*
Lance Uggla	Special Advisor	IHS Markit, Toronto Dominion Bank, Canadian Imperial Bank of Commerce
Lord John Browne	Special Advisor	BP, L1 Energy, Riverstone, Wintershal Dea

(1) On Closing, Dr. Wayne A. Eckerle will resign as a director of the Company and be replaced by Christopher C. Clulow.

Note:

Competition

Commercial vehicle customers’ expectations of ZEV cost and performance parameters are benchmarked against that of incumbent ICEVs. These parameters include cargo capacity, range, refueling time, acceleration and TCO. To the extent that ZEVs can deliver on cost and performance parameters comparable to that of the status quo experienced with ICEVs, we believe adoption will accelerate. For this reason, Loop views existing internal combustion engines and vehicles as our primary competition. We are working with integrators and vehicle manufacturers to ensure that vehicles that incorporate our fuel cell technology and products come as close as possible to meeting the economic and operational capabilities of today’s ICEs.

In addition to existing ICEVs, Loop competes with other fuel cell developers and manufacturers who also produce fuel cell systems that target similar end markets. Such competitors include Ballard, Beijing Sinohytec Co., Ltd., ElringKlinger AG, Horizon Fuel Cell Technologies Pte. Ltd., Hydrogenics Corporation (acquired by Cummins in 2019), Hyundai, Nuvera Fuel Cells, Plug Power, Powercell Sweden AB, Robert Bosch GmbH, Shanghai Re-Fire Technology Co., Ltd., Symbio SAS, and Toyota.

We believe that Loop has superior fuel cell systems when compared to those of our competitors for a variety of reasons that are important to our customers, including (a) leading fuel efficiency, (b) higher durability, and (c) increased power capabilities.[21]

Corporate History

Our founders have worked collaboratively with the scientists at the Canadian National Research Council to explore and research technologies to improve the performance and commercial viability of fuel cells since Loop was formed in 2000. This work contributed to the discovery of our eFlow™ technology, the proprietary design within bipolar plates in fuel cells. Between 2005 and 2010, we filed and were granted patents for eFlow™. Between 2012 and 2015, we worked to commercialize our technology, including the application for, and subsequent granting of, patents to protect our technology, competitive benchmarking testing, component verification and performance testing and primary market research on the business case for fuel cells. Our philosophy was, and continues to be, that in order for our fuel cell products to gain market adoption our products must deliver superior performance relative to competing products while driving economic and environmental value to our customers.

In 2015, we began execution of our product development plan. In 2016, we developed and built our first prototype product; the T500, a 50 kW fuel cell engine module for use in material handling vehicles, stationary power, and transit buses.

In 2015, we were awarded a $7.5 million grant from SDTC to fund a project with Peterbilt. During 2017, Loop and Peterbilt formed a consortium with the California Gas Technology Institute and Transportation Power Inc. (now a subsidiary of Meritor, Inc.) to build two Peterbilt Class 8 trucks with our fuel cell system to be operated in California. In 2018, the California Air Resources Board announced a grant to the consortium of US$2 million to support this project. In 2020, the first truck was completed in California and this truck is currently undergoing on road acceptance testing.

In 2017, we were awarded a grant of $0.8 million through ASIP to assist the Company with the development and demonstration of its automotive eFlow™ fuel cell stack technology. The project focused on the development of a bipolar plate design for use in light duty commercial applications. The program provided 50% matching of funds towards certain milestones.

In 2017, we were awarded a loan through WINN supporting 49% of the purchase of certain capital assets related to the procurements of manufacturing related equipment. The Company received a total of $0.8 million over the term of the agreement, and started repaying this loan in April 2019 over 60 equal monthly installments. The Company was

21 When compared with fuel cell stacks of the same size as measured by total active area.

subsequently given an extension of payment terms under the WINN loan through a COVID-19 relief program whereby payments were halted between April 2020 and January 2021.

In July 2017, our T500 fuel cell engine module was deployed for the first time in a yard truck, jointly built by Loop and China National Heavy Duty Truck Group in Shandong, China. This proof-of-concept truck demonstrated the functionality of our fuel cell systems in the field and confirmed that the performance benefits of our eFlow™ technology that we had observed in our laboratories were also present in field operations.

In 2018 and 2019, we completed a convertible debenture financing of an aggregate principal amount of $3.6 million. These debentures carried an annual interest rate payment of 12%, were convertible into Common Shares at a price of $0.50 per share and were secured against the assets of the Company. The debentures will convert into 2,399,999 Common Shares, on a post-Share Consolidation basis, as part of the Offering.

In 2019, we completed development and commenced commercial sales of the T505, our next generation 50 kW fuel cell system, for use in material handling vehicles, stationary power and transit buses.

In January 2019, Loop entered into a joint venture in China with InPower, a Chinese manufacturer of power electronics equipment, for the manufacture, production and sale of Loop fuel cell systems in China. InPower provided financing to the InPower-Loop JV for the build out of a manufacturing plant in Langfang, China, which was completed in 2020. In connection with the joint venture, in 2019, In-Power Energy Inc. made a $750,000 equity investment in Loop and purchased $750,000 of convertible debentures. Loop provides fuel cell stacks to the InPower-Loop JV, so the joint venture may assemble fuel cell modules for sales into bus, truck and heavy duty vehicle applications in China.

In September 2019, we entered into an investment agreement with Cummins Apollo, under which Cummins Apollo made an initial equity investment in Loop of $5 million and had the right to make an additional equity investment in Loop of up to $10 million. In March 2020, Cummins Apollo exercised its right in full and invested an additional $10 million.

Prior to Closing, the Company will effect the Pre-Closing Reorganization as described under “ Description of Share Capital – Pre-Closing Reorganization ”.

Current Financial Year

Over the course of 2021, Loop intends to advance the business in geographic reach, manufacturing capability and product offerings. These advances are intended to enable Loop to take maximum advantage of the projected growth of the fuel cell industry; expand its revenues quickly; increase manufacturing capacity to control quality, secure supply and reduce costs; and broaden the customer base for the Company’s products. The Company has developed, and is in the process of executing, a strategic plan designed to accomplish these objectives.

Loop expects to continue to expand into the Chinese market over the course of 2021. In addition to existing strategic customer relationships, Loop’s objective is to expand its market presence in China by engaging additional channel partners in key vertical markets, as well as establishing local field service and manufacturing capabilities. Loop anticipates that strategic relationships will lead to growth in product shipments during 2021 and beyond. In order to better support new customer engagement efforts, in 2021, Loop expects to expand its Asia Pacific sales and business development team, including building a China based business development team and a technical sales group.

Manufacturing localization is another critical element of the Chinese expansion strategy. Before the end of 2021, the Company expects to select and secure a location, and to begin the build out of a manufacturing facility in China that is wholly owned by Loop. This facility will be designed to produce both Loop fuel cell stacks and Loop fuel cell modules for the Chinese market, with the long-term goal of having bipolar plate production in China as well. This is intended to help ensure that Loop is well-positioned to meet all localization requirements, control and protect its intellectual property and meet the manufacturing cost reduction targets required to be a leader in the China fuel cell market.

Management expects Loop’s entry into the European market will continue in 2021 with its product shipments into that market. Loop anticipates our European sales efforts will lead to both a broadening of the European customer base during 2021 and growth in repeat orders from existing customers. The Company intends to expand its local presence

in the market during 2021 by adding additional sales and business development staff, as well as establishing a local field service presence to support the sales, integration and post-sales support efforts. The Company expects that for the duration of 2021, products for the European market will be built in the Company’s Burnaby facility and shipped to Europe.

In addition to the core markets of Europe and China, Loop will be actively seeking partners to expand market and geographic reach throughout the Americas as well as the broader Asia-Pacific region. During 2021, Loop expects to service these markets with sales, support and manufacturing resources located primarily in Burnaby. Loop is further planning a strategic roll-out of local market presence based on customer dynamics starting in the second half of 2021.

Loop anticipates making its first commercial shipments of the S300 and the T600 products during 2021. In addition, the Company is developing its next generation fuel cell stack. The first prototypes of this next generation fuel cell stack are planned to be built and tested during 2021, with the first field deployments planned for early 2022. Loop intends to continue to expand its product development, testing and prototyping capabilities during 2021 through the addition of testing equipment and personnel.

Loop intends to advance its vertical integration of manufacturing during 2021 by bringing the manufacturing capability for certain key components into the Burnaby-based manufacturing facility. This process has been started for two key components, other components may follow within the year.

CORPORATE STRUCTURE

The Company was incorporated on June 21, 2000 under the BCBCA with the name “PowerDisc Development Corporation Ltd.”. Its articles were amended (a) on December 15, 2015 in order to change its name to “Loop Energy Inc.”; (b) on June 27, 2016 to amend the special rights and restrictions attaching to the Common Shares; and (c) on September 16, 2019 in order to create the Series 1 Preferred Shares and the Series 2 Preferred Shares and attach special rights and restrictions thereto.

Prior to Closing, the Company will implement the Pre-Closing Reorganization in order to, among other things: (a) amalgamate the Company with the VCCs; (b) consolidate all of our outstanding Series 1 Preferred Shares, Series 2 Preferred Shares and Common Shares on the basis of the number of pre-consolidation shares equal to the Consolidation Ratio for one post-consolidation share; (c) convert all of the Company’s issued and outstanding Series 1 Preferred Shares and Series 2 Preferred Shares into Common Shares and amend the Company’s authorized capital such that all of the existing classes of Preferred Shares will be deleted and our authorized capital will be comprised of an unlimited number of Common Shares; and (d) convert all of our issued and outstanding convertible debentures into Common Shares. See “ Description of Share Capital – Pre-Closing Reorganization ”.

The Company’s head office is located at 2880 Production Way, Burnaby, British Columbia V5C 4T6 and its registered and records office is located at 2900 – 550 Burrard Street, Vancouver, British Columbia V6C 0A3.

The Company’s fiscal year end is December 31.

USE OF PROCEEDS

Proceeds

The net proceeds to the Company from the Offering (assuming no exercise of the Over-Allotment Option) will be approximately $92,200,000, after deduction of the Underwriters’ Fee of $6,000,000 (assuming no Offered Shares are sold to President’s List purchasers in the Offering) and the estimated expenses payable by the Company in the amount of $1,800,000.

Principal Purposes

The Company intends to use the net proceeds of the Offering (assuming no exercise of the Over-Allotment Option) as follows:

Product and Technology Development .........................................................................	$19,000,000
Sales, General and Administration .................................................................................	$7,200,000
Capital Assets	$66,000,000
Total ..............................................................................................................................	$92,200,000

If the Over-Allotment Option is exercised in full, the Company will receive an additional aggregate of approximately $14,100,000 in net proceeds, after deducting the Underwriters’ Fee. Any amount received by the Company on account of the exercise of the Over-Allotment Option will be used for working capital and general corporate purposes.

Total Funds Available

The Company expects to have approximately $93,700,000 in available funds following completion of the Offering based on net proceeds (assuming no exercise of the Over-Allotment Option) of $92,200,000 and approximately $1,500,000 in estimated working capital as at February 11, 2021. The Company intends to use the total funds available as follows:

Use of Proceeds Product and Technology Development Sales, General and Administration Capital Assets Unallocated working capital Total Use of Available Funds	Approximate Amount ($)
	$19,000,000 $7,200,000 $66,000,000 $1,500,000 $93,700,000

We intend to use the net proceeds from the Offering to further strengthen our balance sheet, thereby providing additional flexibility to fund our growth strategies, including through continued investments in technology and product development, new equipment and new manufacturing facilities, an expansion of our existing manufacturing facility, and/or hiring additional team members and for general corporate purposes. Pending their use, we intend to invest the net proceeds from the Offering in short-term, investment grade, interest bearing instruments or hold them as cash.

The principal purposes for the Offering will focus on continuing the development of our fuel cell products and maturing our products from prototypes and working towards a more commercially ready product. We are planning to achieve these targets in the next 12-18 months. Additionally, we plan to continue further innovation around our fuel cell stack platform by improving performance and quality.

The major components of the proposed programs related to the proceeds are for increases for new hires into our development team and material and supply purchases related to continued development of our fuel cells. We anticipate the costs for these programs to be approximately $19 million over the next two years. We intend to use part of the proceeds to conduct our own research and development as well retain certain subcontractors as needed for various projects. The Offering is not focused on meeting commercial production requirements as it relates typical commercial production levels in the automotive industry. The goals of the Offering are to deploy demonstration units with key customers to help prove out our technology features and performance claims.

Our targeted key milestones over the next 12-18 months are deploying our fuel cell modules with customers in the field of operations to demonstrate that our technology performs well in various bus, light commercial vehicle and material handling environments and continuing our in-house development of our next generation stack design.

The Company intends to use approximately $66,000,000 to purchase certain capital assets for use in the Burnaby testing and manufacturing facility to aid in the testing and design of its balance of plant and fuel cell stacks. We also plan to purchase manufacturing equipment related to the assembly of our fuel cell stacks and equipment for use in the design of a pilot manufacturing line for elements of our bipolar plate assembly. Our plans for 2021 also contemplate purchasing capital assets to start the process of setting up a manufacturing facility in China.

Although the Company currently intends to allocate the net proceeds received from the Offering as described above, the actual allocation may vary depending on the amount of the net proceeds of the Offering, the Company’s working capital, future cash flows from operations and other circumstances and developments that could arise where the Company’s capital resources may need to be allocated differently at the discretion of the Board of Directors and/or management. We expect to have continued negative cash flows from operations for the foreseeable future. Management expects to use the proceeds from the Offering to fund operations. See “ Risk Factors ”.

PLAN OF DISTRIBUTION

General

Pursuant to the Underwriting Agreement, the Company has agreed to issue and sell, and the Underwriters have severally agreed to purchase as principals, on the Closing, an aggregate of 6,250,000 Offered Shares, at a price per Offered Share equal to the Offering Price, for aggregate gross consideration of $100,000,000 payable in cash against delivery of the Offered Shares on the Closing Date, subject to and in compliance with all of the necessary legal requirements and conditions contained in the Underwriting Agreement.

The obligations of the Underwriters under the Underwriting Agreement are several only (and not joint or joint and several). Each of the Underwriters is severally obligated to take up and pay for a certain percentage, as further described in the Underwriting Agreement, of the Offered Shares if any of the Offered Shares are purchased under the Underwriting Agreement. If the Over-Allotment Option is exercised, each of the Underwriters is severally obligated to purchase the same certain percentage of the total number of Common Shares taken up or paid for through the OverAllotment Option. The obligations of the Underwriters under the Underwriting Agreement are conditional and may be terminated at their discretion upon the occurrence of certain events, including “material change out”, “disaster out”, “proceedings to restrict distribution out” and “market out” clauses.

In consideration for the services provided by the Underwriters in connection with the Offering and pursuant to the terms of the Underwriting Agreement, the Company has agreed to pay to the Underwriters the Underwriters’ Fee, equal to 6.0% of the aggregate gross proceeds from the sale of Offered Shares pursuant to the Offering (subject to a reduced fee of 3.0% for Offered Shares sold by the Underwriters to President’s List purchasers). All President’s List purchasers will purchase the Offered Shares from the Underwriters through client accounts with registered dealers who are obligated to conduct know-your-client and suitability analyses for purchasers with respect to such purchases. Further, the Company has agreed to pay for certain expenses of the Underwriters in connection with the Offering and may, in its sole discretion and in recognition of the services provided by the Lead Underwriter, pay the Lead Underwriter an additional incremental fee equal to 0.5% of the aggregate gross proceeds from the sale of Offered Shares pursuant to the Offering.

The Company has granted the Underwriters the Over-Allotment Option exercisable, in whole or in part, and from time to time, in the sole discretion of the Underwriters, for a period of 30 days from the Closing Date, under which the Underwriters may purchase up to an additional 937,500 Offered Shares (representing up to 15% of the aggregate number of initial Offered Shares) at the Offering Price, to cover over-allotments, if any, and for market stabilization purposes. The grant of the Over-Allotment Option is qualified for distribution under this prospectus. A purchaser who acquires securities forming part of the Underwriters’ over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the OverAllotment Option or secondary market purchases.

The Offering Price was determined by negotiation between the Company and the Underwriters, based upon several factors, including the history of, and prospects for, the Company’s business and the industry in which it competes and an assessment of the Company’s management, operations and financial results, and may bear no relationship to the price that will prevail in the public market. After the Underwriters have made a reasonable effort to sell all of the Offered Shares at the price specified on the cover page of this prospectus, the Offering Price may be decreased and may be further changed from time to time to an amount not greater than that set out on the cover page of this prospectus, and the compensation realized by the Underwriters will be decreased by the amount that the aggregate price paid by the purchasers for the Offered Shares is less than the price paid by the Underwriters to us. Any such reduction will not affect the net proceeds received by us. The Underwriters may form a selling group including other qualified investment dealers and determine the fee payable to the members of such group, which fee will be paid by

the Underwriters out of their fees. The obligation to pay the sub-underwriting fee is an obligation of the Underwriters and we shall not be responsible for ensuring that any dealer receives this payment from the Underwriters.

The Offering is being made concurrently in each of the provinces of Canada. The Offered Shares will be offered through the Underwriters directly. Subject to applicable law, the Underwriters may offer the Offered Shares outside of Canada. The Company has agreed to indemnify the Underwriters, their U.S. affiliates and each of their respective affiliates and subsidiaries and each of their respective partners, directors, officers, employees, agents, advisors and shareholders against certain liabilities pursuant to the Underwriting Agreement, including liabilities under Canadian securities legislation, or will contribute to payments the Underwriters may be required to make in respect thereof. There is no market through which Common Shares may be sold and prospective purchasers may not be able to resell Common Shares purchased under this prospectus.

The TSX has conditionally approved the listing of the Offered Shares under the symbol “LPEN”. Listing is subject to the Company fulfilling all the listing requirements of the TSX on or before May 11, 2021, including a distribution of Offered Shares to a minimum number of public shareholders.

Subscriptions will be received subject to rejection or allotment in whole or in part and the Underwriters reserve the right to close the subscription books at any time without notice.

The Underwriters and/or their affiliates from time to time may provide in the future, investment banking, financial advisory, broker-dealer and commercial banking services to the Company and their subsidiaries and affiliates in the ordinary course of business for which they have received, or may receive, customary fees and commissions.

Black-Out Period

The Company has agreed that, for a period commencing on the Closing Date and ending 180 days from the Closing Date, the Company and any successor shall not, directly or indirectly, without the prior written consent of the Lead Underwriter and subject to certain exceptions, (i) offer, issue, grant any option, right or warrant to purchase, or otherwise transfer or dispose of any Common Shares, financial instruments or securities convertible into or exercisable or exchangeable for Common Shares or announce any intention to do any of the foregoing, in a public offering, by way of private placement or otherwise (except pursuant to employee or executive incentive compensation arrangements approved by the Lead Underwriter, or issued to vendors in connection with the acquisition of a business or assets, provided such vendors agree not to transfer such securities prior to the date that is 180 days after the Closing Date), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Shares, whether any such transaction is to be settled by delivery of Common Shares, other securities, cash or otherwise.

Lock-Up Arrangements

The Company has agreed to use commercially reasonable efforts to obtain, and in any event it is a condition of the Closing that the Underwriters have received, from each of the Locked-Up Persons, a lock-up agreement with the Underwriters whereby such persons will agree, other than in connection with the Offering and subject to certain exceptions, not to directly or indirectly offer, sell or grant any option, warrant or other right to purchase or agree to sell or otherwise lend, transfer, assign or dispose of any of their Common Shares, securities convertible into or exchangeable into Common Shares, or other equity securities, or announce publicly their intention to do so, without having obtained the prior written consent of the Lead Underwriter (on behalf of the Underwriters) and the Board (with any interested members abstaining) (the “ Lock-Up Agreements ”). At the Closing, all of the securities held by each Locked-Up Person will be subject to the terms of the Lock-Up Agreements for a period of 180 days following the Closing Date. See “ Escrowed Securities and Securities Subject to Contractual Restriction on Transfer ”.

No Registration in the United States of America

The Offered Shares have not been and will not be registered under the U.S. Securities Act or any U.S. state securities laws and, accordingly, may not be offered or sold within the United States, except in transactions exempt from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. The Underwriters have agreed that, except as permitted by the Underwriting Agreement and as expressly permitted by applicable United States federal and state securities laws, they will not offer or sell any of the Offered Shares within the United States.

The Underwriting Agreement permits the Underwriters to offer and sell the Offered Shares purchased by them outside the United States in compliance with Rule 903 of Regulation S under the U.S. Securities Act. The Underwriting Agreement also permits the Underwriters to offer and resell the Offered Shares that they have acquired pursuant to the Underwriting Agreement in the United States to persons who are Qualified Institutional Buyers in compliance with Rule 144A under the U.S. Securities Act and applicable U.S. state securities laws.

This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the Offered Shares in the United States. In addition, until 40 days after the commencement of the Offering, any offer or sale of Offered Shares offered hereby within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with an exemption from the registration requirements of the U.S. Securities Act.

- Price Stabilization, Short Positions and Passive Market Making

In connection with the Offering, the Underwriters may, subject to applicable law, over-allocate or effect transactions that stabilize or maintain the market price of the Offered Shares at levels other than those that otherwise might prevail on the open market, including stabilizing transactions, short sales, purchases to cover positions created by short sales, the imposition of penalty bids, and syndicate covering transactions. Such transactions, if commenced, may be discontinued at any time.

Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of the Offered Shares while the Offering is in progress. These transactions may also include making short sales of the Offered Shares, which involve the sale by the Underwriters of a greater number of Offered Shares than they are required to purchase in the Offering. Short sales may be “covered short sales”, which are short positions in an amount not greater than the Over-Allotment Option, or may be “naked short sales”, which are short positions in excess of that amount.

The Underwriters may close out any covered short position either by exercising the Over-Allotment Option, in whole or in part, and from time to time or by purchasing Offered Shares in the open market. In making this determination, the Underwriters will consider, among other things, the price of Offered Shares available for purchase in the open market compared with the price at which they may purchase Offered Shares through the Over-Allotment Option.

The Underwriters must close out any naked short position by purchasing Offered Shares in the open market. A naked short position is more likely to be created if the Underwriters are concerned that there may be downward pressure on the price of the Offered Shares in the open market that could adversely affect purchasers who purchase Offered Shares in the Offering.

In addition, in accordance with rules and policy statements of certain Canadian securities regulators, the Underwriters may not, at any time during the period of distribution, bid for or purchase Offered Shares. The foregoing restriction is, however, subject to exceptions where the bid or purchase is not made for the purpose of creating actual or apparent active trading in, or raising the price of, the Offered Shares. These exceptions include a bid or purchase permitted under the by-laws and rules of applicable regulatory authorities and the applicable stock exchange, including the Universal Market Integrity Rules for Canadian Marketplaces, relating to market stabilization and passive market making activities and a bid or purchase made for and on behalf of a customer where the order was not solicited during the period of distribution.

As a result of these activities, the price of the Offered Shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the Underwriters at any time. The Underwriters may carry out these transactions on any stock exchange on which the Offered Shares are listed, in the over-the-counter market, or otherwise.

Closing Mechanics

Other than in certain circumstances, it is anticipated that the Offered Shares will be delivered electronically through the NCI System of CDS. On the Closing Date, the Company, via its transfer agent, will electronically deliver the Offered Shares registered to CDS or its nominee. Transfers of ownership of Offered Shares in Canada must be effected through a CDS participant, which includes securities brokers and dealers, banks and trust companies. All rights of

shareholders who hold Offered Shares in CDS must be exercised through, and all payments or other property to which such shareholders are entitled, will be made or delivered by CDS or the CDS participant through which the shareholder holds such Offered Shares. A holder of an Offered Share participating in the NCI System will not be entitled to a certificate or other instrument from the Company or the Company’s transfer agent evidencing that person’s interest in or ownership of Offered Shares, nor, to the extent applicable, will such holder be shown on the records maintained by CDS, except through an agent who is a CDS participant. The ability of a beneficial owner of Offered Shares to pledge such Offered Shares or otherwise take action with respect to such owner’s interest in such Offered Shares (other than through a CDS participant) may be limited due to the lack of a physical certificate.

Distribution in the United Kingdom

The content of this promotion has not been approved by an authorised person within the meaning of the United Kingdom Financial Services and Markets Act 2000 (the “FSMA”). Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested.

This prospectus is only being and may only be distributed to and directed at a limited number of persons in the United Kingdom who are within the categories of persons referred to in Article 19 (investment professionals) or Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the United Kingdom Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “ Financial Promotion Order ”) or persons in the United Kingdom to whom the Offering may otherwise be lawfully made or to whom the Offering may otherwise be directed in the United Kingdom without an approved prospectus having been made available to the public in the United Kingdom before the Offering is made, and without making an unlawful financial promotion (all such persons together being referred to as “ relevant persons ”).

If investors fall within Article 19(5) (investment professionals) of the Financial Promotion Order, then this prospectus is directed at persons having professional experience in matters relating to investments, and any investment or investment activity to which the this prospectus relates is available only to such persons and will be engaged in only with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this prospectus.

Certified high net worth company or unincorporated association is defined in Article 49(2)(a) to (d) of the Financial Promotion Order as: (a) any body corporate which has, or which is a member of the same group as an undertaking which has, a called-up share capital or net assets of not less than (i) if the body corporate has more than 20 members or is a subsidiary undertaking of an undertaking which has more than 20 members, £500,000; (ii) otherwise, £5 million; (b) any unincorporated association or partnership which has net assets of not less than £5 million; (c) the trustee of a high value trust; (d) any person (“ A ”) whilst acting in the capacity of director, officer or employee of a person (“ B ”) falling within any of sub-paragraphs (a) to (c) where A’s responsibilities, when acting in that capacity, involve him in B’s engaging in investment activity.

It is not intended that this prospectus be distributed or passed on to, directly or indirectly, any person who is not a relevant person and any such person should not act or rely on this prospectus or any of its contents. The securities being offered hereunder are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.

This prospectus is not a prospectus for the purposes of Section 85(1) of the FSMA or an approved prospectus within the meaning of Section 85(7) of the FSMA and has not been prepared in accordance with the prospectus rules contained in the handbook of the United Kingdom Financial Conduct Authority (“ FCA ”) published and updated from time to time by the FCA. Accordingly, this prospectus has not been examined or approved as a prospectus by the FCA under Section 87A of the FSMA or by the London Stock Exchange, and has not been filed with the FCA pursuant to the rules published by the FCA implementing the Prospectus Regulation. References to EU Regulations or EU Directives include, in relation to the United Kingdom, those EU Regulations or EU Directives as they form part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 or have been implemented in United Kingdom domestic law, as applicable.

Distribution in the European Economic Area

In relation to each Member State, no Offered Shares have been offered or will be offered pursuant to the Offering to the public in that Member State prior to the publication of a prospectus in relation to the Offered Shares which has been approved by the competent authority in that Member State, or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of the Offered Shares to the public may be made at any time under the following exemptions under the Prospectus Regulation:

to any legal entity which is a “qualified investor” as defined in the Prospectus Regulation;
to fewer than 150 natural or legal persons (other than “qualified investors” as defined in the Prospectus Regulation) in such Member State; or
in any other circumstances falling within Article 1(4) of the Prospectus Regulation,

provided that no such offer of Offered Shares shall result in a requirement for the publication of a prospectus pursuant to Article 3(1) of the Prospectus Regulation in a Member State and each person to whom any offer is made will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation.

For the purposes of this provision, the expression an “offer to the public” in relation to any offer of Offered Shares in any Member State means a communication in any form and by any means presenting sufficient information on the terms of the offer and any Offered Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Offered Shares.

CONSOLIDATED CAPITALIZATION

The following table sets out the consolidated capitalization of the Company: (a) as at September 30, 2020; and (b) as at September 30, 2020, after giving effect to the Pre-Closing Reorganization and the Offering (and assuming no exercise of the Over-Allotment Option). This table should be read in conjunction with the Company’s Financial Statements and the related notes included elsewhere in this prospectus, and with the information set out under “ Management’s Discussion and Analysis ”, “ Use of Proceeds ” and “ Description of Share Capital – Pre-Closing Reorganization ”.

Cash........................................................................ Total Debt............................................................... Total Equity(2)........................................................ Total Capitalization(3)............................................	As at September 30, 2020 $6,336,671 $4,394,585 $3,371,802 $7,766,387	As at September 30, 2020 (after giving effect to the Pre-Closing Reorganization and the Offering)
		$98,536,671(1) $831,018 $99,135,369
		$99,966,387

Notes:

(1) The amount included in the table includes the estimated net proceeds of the Offering of approximately $92,200,000 after deducting the Underwriters’ Fee of $6,000,000 and the expenses of the Offering estimated at $1,800,000, and assuming no exercise of the OverAllotment Option. The amount does not reflect the use of proceeds set out under “ Use of Proceeds ”.

(2) Total equity is comprised of share capital, including Common Shares, Series 1 Preferred Shares and Series 2 Preferred Shares, reserves and total deficit.

(3) Total capitalization is the sum of total debt and total equity.

After giving effect to the Offering, the equity of the Company will increase by the amount of the capital raised under the Offering and the number of issued and outstanding Common Shares will increase by such number distributed under the Offering.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following management’s discussion and analysis of the financial condition and results of operations (“ MD&A ”) should be read in conjunction with the Company’s consolidated financial statements and related notes for the years ended December 31, 2019, 2018 and 2017 (the “ Annual Financial Statements ”), and the unaudited condensed consolidated interim financial statements for the three and nine month periods ending September 30, 2020 and 2019 (the “ Quarterly Financial Statements ”), including the notes thereto, included in this prospectus and which have been prepared in accordance with IFRS (collectively, the “ Financial Statements ”). This MD&A is presented as of the date of this prospectus and is current to that date unless otherwise stated. This MD&A contains forward-looking statements that involve risks, uncertainties and assumptions, including statements regarding anticipated developments in future financial periods and the Company’s plans and objectives. There can be no assurance that such information will prove to be accurate, and readers are cautioned not to place undue reliance on such forward-looking statements. See “ Cautionary Statement Regarding Forward-Looking Information ” and “ Risk Factors ”.

Our Business

Management believes Loop is an industry leading designer of PEM fuel cell systems targeted for the electrification of commercial vehicles. Our mission is to create world-changing fuel cell products through ingenuity and customer collaboration to drive a thriving hydrogen society. We sell and service two categories of products, fuel cell stacks and fuel cell modules, which are intended to serve a variety of commercial applications including light commercial vehicles, transit buses, medium and heavy duty trucks, marine, train, mining trucks, material handling vehicles, and stationary power. Our headquarters are in British Columbia, Canada and we have a manufacturing facility in Burnaby, British Columbia. The InPower-Loop JV also has a manufacturing facility in Langfang, China.

With ever-expanding e-commerce freight demands, we believe ZEVs are one of the only viable options for a sustainable future. Commercial vehicles powered solely by lithium ion batteries are a part of the solution. However, fully battery-powered commercial vehicles are unable to economically meet such critical functional characteristics as range, payload and refueling times that we believe are required for mass-market adoption. We believe that a fuel cell system combined with lithium ion batteries is the solution that meets these requirements. A hydrogen fuel cell is a device that produces electricity and water through an electrochemical reaction when supplied with hydrogen and oxygen.

Our products feature our proprietary eFlow™ technology in the fuel cell stack’s bipolar plates. eFlow™ was designed to enable commercial customers to achieve performance maximization and cost minimization. eFlow™ technology uses a tapered channel, rather than a typical rectangular shaped fuel cell channel, thereby decreasing the cross-sectional area and increasing gas velocity, allowing for higher power, better fuel efficiency and better expected durability of the fuel cell.

We assemble fuel cell stacks that use our proprietary eFlow™ bipolar plate technology. Our fuel cell stacks can be used as standalone units or in a twin-stack system, where two fuel cell stacks are connected together with a common balance of plant to reduce overall volume. Our fuel cell stacks have different power ranges, which we believe make them suitable for a variety of different applications.

We believe that Loop has superior fuel cell systems when compared to those of our competitors’ for a variety of reasons that are important to our customers, including (a) leading fuel efficiency, (b) higher durability, and (c) increased power capabilities.[22]

How We Are Organized

We operate in various geographic markets and organize ourselves in one reportable segment. Our fuel cell development and business operations are primarily based in Burnaby, British Columbia Canada, where we develop

22 When compared with fuel cell stacks of the same size as measured by total active area.

fuel cell range extenders for the commercial vehicle market. Revenue for the year ended December 31, 2019 was $0.5 million and $0.4 million for the nine-month period ended September 30, 2020. As at September 30, 2020 we had 32 full-time employees.

How We Sell Our Products

Our products are available to be sold worldwide to OEMs, systems integrators and end-users through a direct sales force and the InPower-Loop JV. Our sales method varies depending on the product offering, market and stage of technology adoption. We also have a small sales team with two operating regional satellite sales offices in China and Italy.

The InPower-Loop JV is able to leverage the network that InPower has into the OEM commercial vehicle market network in China. InPower currently sells power electronic equipment to various OEMs in China as well certain stateowned enterprises who operate in the power utilities sector. InPower is a member of the National Power Quality Standardization Committee, China Energy Conservation Association and National Torch Plan Enterprise. InPower has sales branches in Beijing, Shanghai and Guangzhou, which are used to support sales efforts of the InPower-Loop JV in China. InPower also manufactures DC/DC units for use in EVs, which we believe are an important part of the integration for fuel cells vehicles.

Loop does not expect to provide any additional funding or investments into the InPower-Loop JV.

Intellectual Property

We protect our intellectual property through a combination of patents, trademarks, trade secrets, non-disclosure agreements and contractual provisions. We have a policy to enter into non-disclosure and confidentiality agreements with our employees and consultants, and all third parties that have access to our proprietary technology. As of December 31, 2020, we hold 16 patents in a variety of jurisdictions, one allowed patent (pending grant), and have 13 patent applications pending. Additionally, we intend to work with various research institutions in the future around the development of new technologies related to our core intellectual property.

We believe our intellectual property, combined with our industry experience and fuel cell knowledge, provides us with a strong competitive advantage and represents a significant barrier to entry into our industry for potential competitors. We believe our patents place Loop in a strong starting position to build our Company over the long-term and will continue to strengthen our efforts across our target markets. We currently retain sole ownership of all the intellectual property developed by us. Given the relative early stages of our industry, we believe our intellectual property is and will continue to be important in providing differentiated products to customers.

As part of the JV License Agreement with the InPower-Loop JV, we license certain know-how around the balance of plant. This know-how relates to the disclosure of various components which are used in the balance of plant such as compressors, wiring harnesses and enclosures. The InPower-Loop JV has the right to develop certain new IP around this knowledge transfer as it relates to the balance of plant. The JV License Agreement does not pertain to any of Loop’s current or future patents as it relates to our stack technology.

Government Contracts

The material government contracts which are currently in use for the development of our fuel cell products or have been completed over the previous fiscal years are listed below.

Sustainable Development Technology Canada

In 2015, we were awarded a $7.5 million grant from SDTC to fund a project to accelerate the deployment of the Company’s zero-emission powertrain for heavy duty trucks by developing and demonstrating the fuel cell range extender in a real-world full-scale operation. The project would also advance our products from TRL 5 to TRL 8. We receive milestone payments over the life of the contract with SDTC once we have achieved certain targets as set out in the agreement. In March 2020, we received an additional $0.4 million grant to the project or an increase of 5% of the overall project grant.

California Air Resources Board

During 2017, Loop and Peterbilt formed a consortium with the Gas Technology Institute and Transportation Power Inc. (now a subsidiary of Meritor, Inc.) to build two Peterbilt Class 8 trucks with our fuel cell system to be operated in California. In 2018, the California Air Resources Board announced a grant to the consortium of US$2 million to support this project. In 2020, the first truck was completed in California and this truck is currently undergoing acceptance testing. We expect manufacturing of the second truck to commence in the first half of 2021.

Automotive Supplier Innovation Program

Western Innovation Initiative

In 2017, we were awarded a loan through WINN, supporting 49% of the purchase of certain capital assets related to the procurements of manufacturing related equipment. The Company received a total of $0.8 million over the term of the agreement and started repaying this loan in April 2019 over 60 equal monthly installments. The Company was subsequently given an extension of payment terms under the WINN loan through a COVID-19 relief program whereby payments were halted between April 2020 and January 2021. We recommenced the monthly WINN payments in January of 2021.

Strategy and Outlook

Business Strategy

Management believes Loop is a technology leader today and aims to be a “top five player” in the designing, developing, manufacturing, and servicing of fuel cell stacks and modules within the next five years. Our goal is to supply fuel cell stacks and modules to (a) OEMs, and (b) OEM Suppliers, in order to enable the production of FCEVs with functionality and economics that are competitive with their ICE counterparts.

Near-Term Market

Our near-term market penetration strategy is to focus on the European and Chinese markets, as we believe these markets currently have the highest levels of government support, anti-emissions regulations, and stakeholder commitments to deploy hydrogen infrastructure. We will continue to focus on the supply of our fuel cell stacks and modules to the light commercial vehicle, material handling vehicle, transit buses and stationary power applications through our relationships with OEMs and OEM Suppliers. In the near term, we are also exploring opportunities for the use of our products in medium and heavy duty trucks by engaging with vehicle manufacturers that produce such vehicles in low volumes in anticipation that these manufacturers will launch FCEV trucks in the near term. Finally, we are also engaging with Tier 1 OEM Suppliers, as these larger manufacturers are now beginning the design of vehicle platforms equipped with fuel cell systems for commercial launch between 2025 and 2027.

Mid- to Long-Term Market

In the mid to long term, our strategy will focus on fostering channel partner relationships with Tier 1 OEM Suppliers to supply fuel cell systems to medium and heavy duty truck manufacturers. We anticipate working with our channel partners to integrate fuel cell stacks and modules with their value-added products to supply complete powertrain packages once these markets gain significant traction after 2025. We also anticipate demand for high volumes of light commercial vehicles and will endeavour to leverage our work in the near term to become a market leader in the segment over the long-term. Stationary power system integrators round out our mid- to long-term market strategy. Finally, we believe that the electrification of mining trucks, rail, marine and aerospace transport may present additional market opportunities.

Geographically, we expect to expand our focus to include North and South American and Asia Pacific markets, as market demand in these regions increases.

Manufacturing Cost Reduction

Technology Leadership in Fuel Cells

We aim to be a “top five player” in the designing, developing, manufacturing, and servicing of fuel cell stacks and modules within the next five years. In order to achieve this, we intend to continue to develop our eFlow™ technology, in order to improve the efficiency, performance, and durability of our products. Our 2021-2022 development program is currently targeting the following areas:

Fuel Cell Stack Efficiency Improvement. Internal modelling of our new technology in development predicts an additional 6% improvement in fuel efficiency beyond our highly efficient current technology stacks. We believe this would increase competitive advantage of the Company’s fuel cell stacks from up to 16% to up to 22% against current technology.
Fuel Cell Stack Power Density Improvement. Internal modelling of our new technology in development predicts a 33% improvement in stack power density beyond our high power density current technology stacks.

Our Business Development Pipeline

Our sales and marketing approach is segregated in two phases: our near-term market strategy and our mid- to longterm strategy. We believe our business development efforts, particularly in Europe and China, gained significant momentum in 2020, which were accelerated by the hiring of key individuals with specific experience growing cleantech companies through a sales pipeline, strong industry relationships, and knowledge regarding the nuanced strategies to approach OEMs and OEM Suppliers. Our current business development pipeline consists of over 100 companies, an increase from only two companies in January 2020.

We have also secured purchase orders and/or MOUs with multiple customers containing, in the aggregate, the following Product Backlog[23] :

following Product Backlog23:
24-Month Aggregate Product Backlog as of December 31, 2019	24-Month Aggregate Product Backlog as of December 31, 2020	24-Month Aggregate Product Backlog as of January 31, 2021
$0.00	$3.2 million	$16.4 million

23 We have converted the figures making up our Product Backlog to Canadian dollars using an exchange rate of 1 U.S. dollar: 1.28 Canadian dollars.

In addition to the customers in our primary target markets in Europe and China, we are also engaged with customers in Australia, Canada, the United States and South Korea.

Commercial Milestones

We have spent the last decade refining our technology and testing the commercial viability of our fuel cells. Specifically, we engaged in proof of concept arrangements from 2016 to 2019. Cummins Apollo’s recent investments have provided Loop with additional resources to accelerate our commercial momentum, including through work with our joint venture with InPower (as discussed below) and an evolving business development pipeline with European OEMs, including our recent MOU with Gaussin. The following highlight Loop’s commercial milestones over the past five years:

In 2015, we began working with Peterbilt to install our fuel cell system in a Peterbilt Class 8 truck for use as a demonstration vehicle in North America. In 2020, the first truck was completed in California and is currently undergoing on-road acceptance testing. We expect manufacturing of the second truck to commence in the first half of 2021 .
In July 2017, the T500 was deployed for the first time in a yard truck in Shandong, China. The T500 later evolved to become the T505. This proof-of-concept truck demonstrated the functionality of our fuel cell systems in the field and confirmed that the performance benefits of our eFlow™ technology that we observed through our internal testing were also present in field operations.
In 2019, we completed development and commenced commercial sales of the T505. The T505 is our next generation 50 kW fuel cell system, for use in material handling vehicles, stationary power, and transit buses.
In January 2019, we entered into the InPower-Loop JV Agreement. The InPower-Loop JV has the capacity to leverage the network that InPower has into the OEM commercial vehicle market network in China. InPower currently sells power electronic equipment to various OEM’s in China as well certain state-owned enterprises who operate in the power utilities sector. InPower is a member of the National Power Quality Standardization Committee, China Energy Conservation Association and National Torch Plan Enterprise. InPower has sales branches in Beijing, Shanghai and Guangzhou, which are used to support sales efforts of the InPower-Loop JV in China. InPower also manufactures DC/DC units for use in EVs, which we believe are an important part of the integration for fuel cells vehicles.
In September 2019, we entered into an investment agreement with Cummins Apollo, pursuant to which Cummins Apollo made an initial equity investment in Loop in September 2019 and a second equity investment in March 2020.
In January 2020, InPower signed the Lishui-InPower MOU. The Lishui-InPower MOU outlines, among other things, the terms under which the Lishui Government would provide an annual order of 100 hydrogen fuel cell operated vehicles for three years, including buses, trucks and garbage trucks, using Loop fuel cell modules to be supplied by the InPower-Loop JV. In September 2020, the first phase of this process was completed when Skywell, a leading Chinese electric bus manufacturer located in Nanjing, China, received index approval from the Chinese MIIT for a bus with a Loop fuel cell module, after having been tested and verified to meet the requirements to be registered as eligible for government subsidies.
In 2020, we designed and commenced customer sales of the T600. We expect the first customer shipments of the T600 to occur in the second quarter of 2021. We also completed the development

of the S300, a 30 kW fuel cell module. We expect the first customer shipments of this product to occur in 2021.

In December 2020, we entered into the Gaussin MOU for the purposes of designing and manufacturing hydrogen electric tractors based on the Gaussin platform. Under the Gaussin MOU, the parties anticipate close cooperation during the vehicle design phase followed by the commercial supply of fuel cell products by Loop to Gaussin starting with the Canadian market.
In January 2021, we entered into the InPower MOU for the purposes of outlining our intended longterm strategic partnership with purchase volume forecasts for the T505 and commitments to product pricing based on such purchase volume forecasts. Under the InPower MOU, Loop anticipates purchase orders from InPower for up to 110 units of the T505 in 2021 and for up to 200 units of the T505 in 2022, subject to certain conditions, including confirmation by InPower.

Outlook Summary

The timing and full realization of the opportunities above, under the current market environment, cannot be assured or specifically established. We believe it is, however, important to understand the magnitude of these opportunities and the transformative impact that any one of them can have on the business going forward. Over the past several years, in management’s opinion, we have taken significant steps to improve the financial capacity of the Company by taking in strategic investments thereby strengthening our consolidated financial position. We have pursued research and product development to expand use cases across our mobility program. We have worked to establish commercial opportunities with global companies that we believe will support our trajectory to a larger scale.

As a global company, we are subject to the risks arising from adverse changes in global economic and political conditions. Political conditions such as government commitments and policies towards environmental protection and renewable energy may change over time. Economic conditions in leading and emerging economies have been, and remain, unpredictable. These macroeconomic and geopolitical changes could result in our current or potential customers reducing purchases or delaying shipments, which could cause revenue recognition on these products to shift into 2021 or beyond.

Future Markets

We believe there are several drivers that will accelerate growth in our markets in the coming year, including the electrification of transport, elimination of diesel fuel and ongoing concern about air quality, being major themes. Increasingly, a number of governments around the world are supporting these themes with policy and funding initiatives. Hydrogen is a versatile energy carrier that enables the “coupling” of sectors that depend on energy. Renewable power generation, efficient grid operations and industrial demand and transport can all be served in an integrated way with hydrogen. Accordingly, we believe our competence in fuel cells supports attractive future market optionality for the Company.

Summary of Quarterly Results

The Company has not prepared quarterly interim financial statements prior to the quarter ended September 30, 2020. As a result, the Company is unable to provide a summary or the quarterly results for each of the most recently completed quarters other than the quarters ended September 30, 2020 and September 30, 2019.

Operating Results for the Three and Nine Months Ended September 30, 2020, and 2019

Selected Interim Financial information (in thousands of CAD dollars, except per share amounts)

Three	months	ended Sept 30,	Nine	months ended Sept 30,
2020	2019	Variance	2020	2019 Variance

Revenue	$ 353	$ 129	$ 224	173%	$ 353	$ 129	$ 224	173%
Expenses	3,146	1,379	1,767	128%	7,299	4,304	2,995	70%
Less cost recovery:	(544)	(249)	296	119%	(1,331)	(830)	501	60%
Net expenses	2,602	1,130	1,471	130%	5,968	3,474	2,495	72%
Loss before undernoted	(2,248)	(1,001)	(1,248)	125%	(5,615)	(3,344)	(2,271)	68%
Other income (expenses)	(190)	(156)	(34)	22%	(521)	(229)	(292)	128%
Loss before income taxes	(2,438)	(1,156)	(1,282)	111%	(6,136)	(3,573)	(2,563)	72%
Deferred income tax recovery	-	-	-	-	-	6	(6)	(100%)
Net loss and comprehensive	$ (2,438)	$ (1,156)	$ (1,282)	111%	$ (6,136)	$ (3,567)	$ (2,569)	72%
loss
Net loss per common share	$ (0.05)	$ (0.02)			$ (0.11)	$ (0.07)
					September	December
					30, 2020	31, 2019	Variance
Cash					$ 6,337	$ 2,168	$ 4,169	192%
Total assets					11,714	6,818	4,896	72%
Total non-current liabilities					611	1,427	(816)	(57%)

Highlights for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019

Revenues

Revenues increased to $0.4 million for the three and nine months ended September 30, 2020 as compared to $0.1 million, respectively, for the three and nine months ended September 30, 2019 or an increase of $0.2 million in 2020 versus the comparable periods in 2019. This related to the increase in shipments of both demo field and test bench units.

Expenses

Expenses for the three and nine months ended September 30, 2020 increased by $1.8 million and $3.0 million respectively primarily as a result of increased product development and general and administrative costs as discussed below.

Product Development

Product development expenses (“ PDE ”) for the three and nine months ended September 30, 2020 increased by $1.4 million and $2.0 million, respectively, versus the comparative prior periods. Of the $4.8 million spent on PDE for the nine months ended September 30, 2020, a majority of the costs related to product design around the use of our fuel cell modules in additional mobility vehicle applications and furthering the development on our next generation fuel cell stack platform. Salaries and benefits were $0.6 million and $2.0 million (2019 - $0.5 million and $1.5 million) for the three and nine months ended September 30, 2020 and comprise 27% and 42% (2019 – 54% and 51%) of PDE. The relative decrease in composition of salaries and benefits in PDE is attributable to a significant boost to investment in direct materials and prototype supplies in our fuel cell stack development activities in 2020 following the equity injection in March 2020.

General and Administration

General and administration (“ G&A ”) expenses for the three and nine months ended September 30, 2020 increased by $0.2 million and $0.8 million, respectively versus the comparative prior periods. The increase is attributable primarily to increased staff head count and expanded overhead to service the increased activity level during the period. Salaries and benefits were $0.4 million and $1.3 million (2019 - $0.2 million and $0.6 million) for the three and nine months ended September 30, 2020. An increase in full-time employee (“ FTE ”) head count is the primary reason for the increase in the respective periods, and salaries and benefits comprise 52% and 57% (2019 – 30% and 39%) of G&A expenses.

Technology Development

During the three and nine month periods ended September 30, 2020 the Company engaged in some new initiatives related to early stage technology development. These costs were $44,590 and $63,474 (2019 - $nil and $nil), respectively, and related to early stage research for new material development.

Business Development

During the three and nine month periods ended September 30, 2020 the Company invested in various business development (“ BD ”) initiatives. These costs were $0.2 million and $0.2 million (2019 - $nil and $nil), respectively, and related to early market development activities in Europe.

Cost recoveries

Expenses for the three and nine months ended September 30, 2020 were offset by cost recoveries of $0.5 million and $1.3 million (2019 - $0.2 million and $0.8 million), respectively. The Company has estimated higher recoveries in 2020 of refundable Scientific Research & Experimental Development (“ SR&ED ”) tax credits which are generated from the Company’s development of technology activities during the period.

Loss before other income (expenses) increased by $1.2 million and $2.3 million for the three and nine months ended September 30, 2020, respectively, as compared to the comparative periods in 2019. The increase is mainly attributable to increased investment in product development enabled by the financial resources generated from the equity investment in early 2020.

Other income (expenses)

Net finance expenses decreased overall to $0.2 million and $0.4 million (2019 - $0.2 million and $0.7 million) for the three and nine months ended September 30, 2020, respectively, as compared to the comparable periods in 2019. In 2019, the Company settled interest-bearing long-term debt, which resulted in an overall decrease for the 2020 period. Additionally, the Company issued warrants valued, pursuant to the Black-Scholes methodology, at $0.1 million in 2019 as a finance fee with respect to the loans repaid in 2019. In the current period, the Company recognized a noncash gain on debt modification of $4,802 and $70,702 (2019 - $nil and $nil) for extensions granted on the convertible debentures and non-interest bearing government loan which reduced the net finance expense.

In the nine months ended September 30, 2019, the Company recognized a one-time technology license fee income of $0.5 million, which consisted of $0.75 million cash to the Company net of intercompany eliminations with the InPower-Loop JV.

Loss and comprehensive loss

Loss and comprehensive loss for the three and nine months ended September 30, 2020 was consistent with the increased expenses described above and increased by $1.3 million and $2.6 million for the three and nine months ended September 30, 2020 as compared to the same periods in 2019, driven mainly by the increase in PDE as the Company continues to grow its team and invest in fuel cell design and development activities.

Cash used in and/or provided by operating, investing and financing activities

Cash used in operating activities increased by $2.9 million to $5.1 million for the nine-month period ended September 30, 2020 as compared to $2.2 million for the nine-month period ended September 30, 2019 mainly due to the continued investment into product development initiatives as the Company continues to grow its team and continue with design and engineering of its fuel cell modules. A more substantial budget for the nine months ended September 30, 2020 was enabled by the Cummins Apollo investment of $10 million in early fiscal 2020.

Cash used in investing activities for the nine-month period ended September 30, 2020 amounted to $0.3 million as compared to $1.6 million for the nine months ended September 30, 2019 which included a $0.8 million investment in the InPower-Loop JV. The Company was able to leverage capital investments in prior periods through its product development process and, consequently, the expenditures in the current period were more significantly directed to consumables, supplies and product development.

Cash provided by financing activities for the nine months ended September 30, 2020 was $9.6 million (2019 - $6.9 million) as a result of the $10.0 million preferred share financing with Cummins Apollo which closed on March 16, 2020 as compared to the $5.0 million of investment by Cummins Apollo on September 15, 2019. In the prior period, the Company also raised $2.3 million from the issuance of common shares and $0.7 million from the issuance of convertible debentures, while repaying certain interest bearing long-term debt of $1.5 million. Interest paid of $0.2 million (2019 - $0.2 million) increased due to a larger balance of convertible debentures outstanding over the period.

Operating Results for the Years Ended December 31, 2019, 2018 and 2017

Selected Annual Financial information (in thousands of CAD dollars, except per share amounts)

	Year	ended December	31,		Variance	Variance
	2019	2018	2017		2019 vs 2018	2018 vs 2017
Revenue	$ 468	$ -	$	-	100%	N/A
Expenses	6,863	5,973		5,339	15%	12%
Less cost recoveries	(2,568)	(1,985)	(1,556)		29%	28%
Net expenses	4,296	3,987		3,783	8%	5%
Loss before undernoted	(3,828)	(3,987)	(3,783)		(4%)	5%
Other income (expenses)	(468)	(478)		(96)	(2%)	397%
Loss before income taxes	(4,296)	(4,465)	(3,879)		(4%)	15%
Deferred income tax recovery	6	26		-	(75%)	100%
Net loss and comprehensive loss	$ (4,289)	$ (4,439)	(3,879)		(3%)	14%
Net loss per common share
– basic and fully diluted	$ (0.08)	$ (0.09)	$	(0.08)
Cash	$ 2,168	$ 10	$	938	21,644%	(99%)
Total assets	6,818	3,151		3,666	116%	(14%)
Total non-current liabilities	1,427	3,300		579	(57%)	470%

Over the three years presented, the Company has worked to expand both its financial resources and investment in product development and the underlying capital assets which facilitate development in technology. This has led to a trend in increased assets and expenses over the years ended December 31, 2019, 2018 and 2017.

Highlights for the year ended December 31, 2019 compared to the year ended December 31, 2018

Revenues

The Company recorded revenues from product sales for the first time in fiscal 2019. The $0.5 million in revenue recorded for fiscal 2019 relates to pilot projects for on road and bench top testing. The Company continues through its transitional phase from a technology development company to a commercial stage entity.

Expenses

Expenses increased by $0.9 million during the year ended December 31, 2019 as compared to 2018 primarily as a result of increased product development and general and administrative costs as discussed below.

Product Development

PDE were $4.7 million for the year ended December 31, 2019 compared to $3.9 million in 2018, an increase of $0.9 million, or 22%. The increased costs mainly related to the increase in FTE head count from 14 to 20 during the year as well as material costs related to the build of prototype fuel cell modules for testing and product verification work. Salaries and benefits were $1.9 million (2018 - $1.5 million) for the year ended December 31, 2019 and comprise 40% (2018 – 39%) of PDE. The balance thereafter is substantially spent on supplies and consumables used in the product development process. Depreciation on assets included in PDE was $0.4 million in 2019 and $0.2 million in 2018.

General and Administration

G&A expenses were $2.1 million for the year ended December 31, 2019 compared to $2.0 million in 2018, an increase of $0.1 million, or 4%. Salaries and benefits were $0.7 million (2018 - $0.9 million) for the year ended December 31, 2019 and comprise 35% (2018 – 42%) of G&A expense. Predominantly, the increase in G&A expense related to legal and professional fees as the Company’s business grew in complexity and reach.

Cost recoveries

On March 23, 2017, the Company entered into a development project with SDTC. The project represents a total investment of $30.9 million over five milestones with the Company and its partners providing $19.0 million and the Government of Canada providing the remaining $11.9 million. In 2017, the Company received an initial payment of $1.2 million for the start of the project and to fund SDTC’s portion of the first milestone. In 2018, the Company received a follow-on payment of $0.7 million related to purchases of equipment for the project and the second milestone payment of $1.4 million was received in 2019. One of the goals of the project is to take Loop’s eFlow™ technology from TRL 5 through to TRL 8. The Company successfully completed the first milestone during the year ended December 31, 2019 and recorded $1.3 million as cost recovery.

In the year ended December 31, 2019, the Company recognized a recovery of $1.2 million (2018 - $1.5 million) under the SR&ED tax credits program.

Other income (expenses)

During the year ended December 31, 2019 the Company recorded an income of $0.5 million related to the JV License Agreement it signed with the InPower-Loop JV (2018 - $nil) which consisted of $0.75 million cash to the Company net of intercompany eliminations with the InPower-Loop JV. The income was related to the JV License Agreement with the InPower-Loop JV in China. These fees related to the transfer of know-how related to the parts and operating conditions within the fuel cell module balance of plant. The technology transfer fee was not related to any of Loop’s

core intellectual property related to the fuel cell stack. In relation to the receipt of the payment for the technology license the Company incurred and paid $75,000 in foreign withholding taxes.

In 2019, the first year in which the InPower-Loop JV was operational, we recorded a loss from the joint venture of $0.1 million. The InPower-Loop JV is expected to continue to incur losses over the next few years as it begins to scale up manufacturing and continues to develop sales channels in the Chinese market.

Finance expenses increased to $0.9 million for the year ended December 31, 2019 compared to the $0.4 million the comparable period. The increase was substantially driven by the issuance of convertible debentures in 2018 and early 2019 of which finance expense of $0.1 million (2018 - $0.05 million) was for the accretion of the equity feature in the convertible debenture and $0.4 million (2018 - $0.2 million) was for coupon interest. The Company also issued warrants valued, pursuant to the Black-Scholes methodology, at $0.1 million in 2019 as a finance fee with respect to certain loans repaid in 2019. The accretion of government loans is a non-cash charge of $0.1 million (2018 - $0.1 million) and a first-time finance expense of $0.1 million (2018 - $nil) for lease liabilities pursuant to the adoption of IFRS 16 – Leases (“ IFRS 16 ”).

Loss and comprehensive loss

Loss and comprehensive loss decreased by $0.1 million for the year ended December 31, 2019 to $4.3 million as compared to $4.4 million in the year ended December 31, 2018. The overall loss remained relatively comparable despite an increased rate of investment in product development. The increased investment in 2019 into product development, the InPower-Loop JV and higher finance expenses were partially offset by (i) our first demo product revenues of $0.5 million; (ii) the completion of the first SDTC project milestone and cost recoveries related to the SDTC project at a value of $1.3 million; and (iii) the $0.5 million in revenue related to the technology transfer fee from the InPower-Loop JV in China.

Cash used in and/or provided by operating, investing and financing activities

Cash used in operating activities totalled $2.6 million for the year ended December 31, 2019 as compared to $3.0 million for the year ended December 31, 2018 a reduction of $0.4 million. However, the Company increased its cash used in investing activities to $1.7 million from $0.4 million which reflects a significant investment in equipment and laboratory facilities of $0.9 million (2018 - $0.4 million) and investment into the InPower-Loop JV of $750,000.

Cash increased by $2.2 million during the year ended December 31, 2019 compared to December 31, 2018 primarily due to the Cummins Apollo investment in Series 1 Preferred Shares of $5.0 million closing on September 16, 2019. Additionally, the Company raised funds of $2.3 million (2018 - $nil) from the sale of Common Shares, $0.7 million (2018 - $2.8 million) from the issuance of convertible debentures and $0.8 million (2018 - $0.3 million) from longterm debt. In 2019, the Company settled long-term debt of $1.6 million (2018 - $0.3 million) and paid interest of $0.5 million (2018 - $0.3 million). Financing activities vary with the Company’s intent and access to capital.

Total assets

Total assets increased by $3.7 million for the year ended December 31, 2019 compared to the same periods in 2018 as a result of the initial Cummins Apollo equity investment of $5.0 million in September 2019 and continued investment into equipment and leasehold improvements. The adoption of IFRS 16, described below, resulted in the recognition of a right-of-use asset of $0.4 million.

Highlights for the previous year ended December 31, 2018 compared to the year ended December 31, 2017

Product Development

PDE were $3.9 million for the year ended December 31, 2018 compared to $3.2 million in 2017, an increase of $0.7 million, or 22%. The increased costs mainly related to the increase in FTE head count during the year as the Company continued to build out its engineering design team, make additional purchases around development material for modules and incur costs related to the pilot integration of the fuel cell module in China. Salaries and benefits were $1.5 million (2017 - $0.9 million) for the year ended December 31, 2018 and comprise 39% (2018 – 30%) of PDE. During 2018, we added three new members to our product development team.

General and Administration

G&A expenses were $2.0 million for the year ended December 31, 2018 compared to $1.8 million in 2017, an increase of $0.3 million, or 14%. The increased costs mainly related to some small staff increases and an increase in office related expense as the Company occupied its new manufacturing and testing facility for the full year of 2018. Salaries and benefits were $0.9 million (2017 - $0.6 million) for the year ended December 31, 2018 and comprise 42% (2017 – 37%) of G&A expense.

Business development

BD expenses decreased for the year ended December 31, 2018 to $0.1 million from $0.4 million in 2017, a decrease of $0.3 million, or 85%. The decrease was related to the Company’s focus on investing in product development and sales development related activities.

Cost Recovery Items

During the year ended December 31, 2017 the Company completed a program with the National Research Council Government of Canada’s Industrial Research Assistance Program and received a funding subsidy of $0.1 million for support around the early stage development of the Company’s technology. During the year ended December 31, 2018 and 2017, the Company recorded $1.5 million and $0.9 million respectively for SR&ED tax credits. The increase is due to the increased investment into technology related development activities and is relative to the Company’s spend within the program parameters. During the year ended December 31, 2018 the Company received the second tranche of $0.4 million from ASIP for the plate development project as compared to $0.3 million for the year ended December 31, 2017. The project was completed at a total value of $0.8 million.

Other income (expenses)

Finance expense increased to $0.4 million for the year ended December 31, 2018 compared to the $0.1 million for the comparable period. The increase was substantially driven by the issuance of convertible debentures in 2018 of which $0.05 million (2017 - $nil) was for the accretion of the equity feature in the convertible debenture and $0.2 million (2017 - $nil) was for coupon interest.

Loss and comprehensive loss

Loss and comprehensive loss increased by $0.6 million for the year ended December 31, 2018 to $4.4 million as compared to $3.9 million in 2017. The increase was the result of the factors described above, with net expenses increasing by $0.2 million between 2017 and higher finance expense in 2018 of $0.4 million due to loans initiated in 2018 to fund ongoing expenses.

Cash used in and/or provided by operating, investing and financing activities

Cash used in operating activities totalled $3.0 million for the year ended December 31, 2018 as compared to $2.0 million for the year ended December 31, 2017, an increase of $1.0 million. The timing of settlement of non-cash working capital items largely contributed to the lower cash usage in 2017.

Cash decreased by $0.9 million during the year ended December 31, 2018 compared to December 31, 2017. The Company invested in equipment and leasehold improvements of $0.4 million (2017 - $1.0 million). Financing activities provided net funds of $2.4 million (2017 - $1.2 million) of which $2.8 million (2017 - $nil) was from the issuance of convertible debentures. In 2018, the Company issued debt of $0.3 million (2017 - $1.6 million), repaid debt of $0.3 million (2017 - $0.6 million) and paid interest of $0.3 million (2017 - $0.1 million). Financing activities vary with the Company’s intent and access to capital.

Liquidity and Capital Resources

(in thousands of CAD dollars, except per share amounts)

Variance

(000’s)

September 30,

December 31,

	2020	2019	$	%
Cash	$6,337	$2,168	$4,169	192%
Lease liabilities (current and non-current)	486	589	(103)	(17%)
Long term debt (current and non-current)	831	842	(11)	(1%)
Convertible debentures (current and non-	3,564	3,550	14	0%
current)
Total liabilities	8,342	7,698	644	8%
Working capital (deficiency)	$1,280	($2,525)	$3,805	151%

The Company’s working capital, being its current assets less its current liabilities, position improved significantly at September 30, 2020 from December 31, 2019. Cash increased by $4.2 million or 192% to $6.3 million during the nine months ended September 30, 2020 as compared to a cash balance of $2.2 million at December 31, 2019 mainly due to the $10.0 million Series 2 Preferred Share investment from Cummins Apollo in March of 2020. This was partially offset by the $5.1 million used in operating activities and the $0.3 million in investment in equipment which was principally capital costs associated with our test lab build.

Total liabilities increased to $8.3 million as at September 30, 2020 from $7.7 million at December 31, 2019. The increase was substantially driven by escalating product development investment in the nine months ended September 30, 2020 resulting in a higher balance of accounts payable and accrued liabilities of $1.3 million (December 31, 2019 - $0.7 million). Further the Company’s deferred revenue increased by $0.2 million. The Company is working toward completing its reporting obligations to complete the second milestone under the SDTC agreement and anticipates its completion in the first quarter of 2021.

The Company has been focused on product development with minimal commercial sales activity to date. As a result, the Company has experienced significant losses in past years resulting in an accumulated deficit of $30.0 million at September 30, 2020 and has experienced significant negative cash flow from operations. The Company is reliant on continual support from shareholders and investors, SR&ED tax credit refunds and other government funding. These circumstances have resulted in a material uncertainty about whether the Company will be able to meet its obligations as they become due. This material uncertainty may cast significant doubt about the ability of the Company to continue as a going concern.

The Company is actively pursuing additional injections of capital including sale of shares or issuance of loans. The proceeds from these share sales or issuance of loans will, in management's view, enable the Company to achieve its business plans.

The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned, some of which are described above, which management believes will mitigate the adverse conditions and events which raise significant doubt about the validity of the going concern assumption used in preparing these condensed consolidated interim financial statements. There is no assurance that these and other strategies will be sufficient to permit the Company to continue as a going concern.

Capital Resources

We consider our capital employed to consist of shareholders’ equity and total debt, net of cash. The Company’s objective when managing capital is to maintain adequate levels of funding to support the development of its business and maintain the necessary corporate and administrative functions to facilitate these activities. This is done primarily through debt and equity financing and is supplemented by applying for government grant programs where available. Future financings are dependent on market conditions and the ability to identify sources of investment. There can be no assurance the Company will be able to raise funds in the future. The Company is currently in the process of working to execute a public listing on the TSX for which it will undertake a concurrent listing. There can be no assurance the Company will be able to complete the listing transaction.

There were no changes to the Company’s approach to capital management during the nine-month period ended September 30, 2020. The Company is not subject to externally imposed capital requirements.

Financial Instruments, Long-term Debt, Commitments and Contingent Off-balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and customer receivables, the carrying value of which represents the maximum credit exposure. The Company limits its exposure to credit loss by placing its cash with major financial institutions. As at September 30, 2020, cash consisted of cash held with financial institutions in Canada. Balances exceed amounts insured by the Canada Deposit Insurance Corporation for up to $100,000.

Currency Risk

The Company is exposed to foreign currency risk on fluctuations related to working capital balances primarily denominated in United States dollars. As at September 30, 2020, the Company did not have significant net working capital balances in foreign balances. The Company anticipates that, as its operations and sales expand, the Company will be increasingly subject to fluctuations in the United States dollar.

Interest Rate Risk

The Company’s debt instruments have fixed interest rates, and therefore do not fluctuate with market conditions. Interest income on cash is considered incidental and not significant to operating results.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned, some of which are described above, which management believes will mitigate the adverse conditions and events which raise significant doubt about the validity of the going concern assumption used in preparing these condensed consolidated interim financial statements. There is no assurance that these and other strategies will be sufficient to permit the Company to continue as a going concern. As at September 30, 2020, the Company had working capital of $1.3 million.

The following contractual maturities of financial obligations (including interest) exist as at September 30, 2020:

		Carrying		Contractual						4 to 5 years
		amount		cash flows	Within 1 year			2 to 3 years		and over
Accounts payable and accrued	$	1,257,240	$	1,257,240	$	1,257,240	$	-	$	-
liabilities
Long-term debt		831,018		980,884		524,906		303,984		151,994
Convertible debentures		3,563,567		3,785,868		3,785,868		-		-
	$	5,651,825	$	6,023,992	$	5,568,014	$	303,984	$	151,994

Critical Accounting Estimates

The Company’s management uses its judgement when applying the Company’s accounting policies in the preparation of its consolidated financial statements. The preparation of financial information requires management to make assumptions and estimates of the effects of uncertain future events on the carrying amounts of the Company’s assets and liabilities at the end of the reporting period and on the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant in the circumstances. Revisions to estimates and the resulting effects on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively.

Information on significant areas of uncertainty and critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements relate to the determination of share-based payments, the valuation of convertible debentures and the amount and collectability of SR&ED tax credits receivable. The parameters of management’s estimates are discussed in the accompanying Financial Statements.

The key areas of judgment applied in the preparation of the consolidated financial statements that could result in a material adjustment to the carrying value of assets and liabilities are as follows:

Recoverability of the Carrying Value of the Company’s Joint Venture Investment

The fair value of the Company’s joint venture investment requires management to determine whether there are any indications of impairment. Management evaluates the legal standing of the underlying assets of the investment and reviews the progress and development of the underlying assets in the period when making the assessment of whether there are indications of impairment for the investment.

Research and Development

The Company must assess, on an ongoing basis, whether expenditures qualify as intangible assets under IAS 38 – Intangible Assets. No such costs have been capitalized in the periods reported. Further judgment is required in assessing the qualification of research and development expenditures for SR&ED tax credits.

Performance Obligations in Revenue Contracts

The recognition of revenues upon completion of performance obligations requires the Company to make an assessment of criteria under its revenue recognition policy.

Going concern

The assessment of the Company’s ability to continue as a going concern and to raise sufficient funds to pay its ongoing operation expenditures and to meet its liabilities for the ensuing year, involves significant judgment based on historical experience and other factors, including the expectation of future events that are believed to be reasonable under the circumstances.

Changes in Accounting Policies and Recent Accounting Pronouncements

The Company adopted IFRS 16 with a date of initial application of January 1, 2019. IFRS 16 was applied using the modified retrospective approach effective January 1, 2019, under which the cumulative effect of initial application would not be recognized in retained earnings as at January 1, 2019. Under the modified retrospective approach, the cumulative effect of adopting IFRS 16 is included in operations in the period of adoption. The information presented for 2018 has not been restated and remains as previously reported under IAS 17 – Leases. Further details can be found in Note 4 of the Company’s Annual Financial Statements.

On transition to IFRS 16, the Company recognized a $0.7 million lease liability, with a corresponding right-of-use asset, representing the present value of the remaining minimum lease payments associated with its office and manufacturing space lease. When measuring the lease liability, the Company discounted lease payments using an

incremental borrowing rate at January 1, 2019 of 12%. A previously received lease inducement recorded as a lease liability of $0.2 million at December 31, 2018 was netted against the right-of-use asset upon adoption of IFRS 16.

Subsequent Events

Prior to closing, the Company will complete the Pre-Closing Reorganization. See “ Description of Share Capital - PreClosing Reorganization ”.

Related Party Transactions

Key management personnel includes the members of the Board of Directors, the President and Chief Executive Officer and Chief Financial Officer. Key management personnel compensation for the nine-month period ended September 30 comprises:

	Nine	months	Nine	months
		ended		ended
	September 30,		September 30,
		2020		2019
Salaries and benefits	$	642,083	$	491,250
Share-based payments		223,932		148,574
	$	866,015	$	639,824

For fiscal 2019, fiscal 2018 and fiscal 2017, key management personnel includes the members of the Board of Directors, the President and Chief Executive Officer, the Chief Financial Officer and the former Director of Product Development. Key management personnel compensation for each of these periods is as follows:

	Year	ended	Year	ended	Year	ended
	December 31,		December 31,		December 31,
		2019		2018		2017
Salaries and benefits	$	655,000	$	640,000	$	500,000
Share-based payments		156,765		122,637		427,001
	$	811,765	$	762,637	$	927,001

Management personnel and director transactions for the period ended September 30, 2020:

A principal, Allan Collings, of Collings Family Investments Ltd. (“ CFIL ”) and The Collings Stevens Family Foundation (“ CSFF ”) is a director of the Company. As at September 30, 2020, CFIL and CSFF hold $500,000 (December 31, 2019 - $500,000) of convertible debentures issued by the Company, which will be converted to Common Shares pursuant to the Pre-Closing Reorganization. Included in finance expense for the three-month and nine-month periods ended September 30, 2020 is $15,082 and $44,918 (2019 - $15,123 and $44,877), respectively, in interest paid or accrued to CFIL and CSFF. In 2019, CFIL was issued warrants as a financing fee in connection with certain debt financing. Included in finance expense for the nine-month period ended September 30, 2019 is $56,114 related to the fair value of the warrants issued.

A principal, Neil Murdoch, of Murdoch Family Trust (“ MFT ”) is a director of the Company. As at September 30, 2020, MFT holds convertible debentures issued by the Company of $300,000 (December 31, 2019 - $300,000), which

will be converted to Common Shares pursuant to the Pre-Closing Reorganization. Included in interest within finance expense for the three-month and nine-month periods ended September 30, 2020 is $9,049 and $29,934 (2019 - $10,586 and $31,414), respectively, in interest paid or accrued to MFT.

Andreas Truckenbrodt, a principal of Truckenbrodt Clean Energy Consulting Inc. (“ TCEC ”), is a director of the Company. As at September 30, 2020, TCEC holds convertible debentures issued by the Company of $50,000 (December 31, 2019 - $50,000), which will be converted to Common Shares pursuant to the Pre-Closing Reorganization. Included in interest within finance expense for the three-month and nine-month periods ended September 30, 2020 is $1,508 and $4,492 (2019 - $1,019 and $4,488), respectively, in interest paid or accrued to TCEC.

Management personnel and director transactions for the years ended December 31, 2019, 2018 and 2017:

Allan Collings, a principal of CFIL and CSFF is a director of the Company. As at December 31, 2019, the CFIL and CSFF were long-term debt holders with a principal amount due to them of $nil (2018 - $700,000), and they held $500,000 (2018 - $500,000) of convertible debentures issued by the Company, which will be converted to Common Shares pursuant to the Pre-Closing Reorganization. Included in finance expense for the year ended December 31, 2019 is $148,845 (2018 - $136,712; 2017 - $30,339) in interest paid to CFIL and CSFF for loans of which $nil in accrued interest (2018 - $10,520; 2017 - $nil) is included in accounts payable. In 2019, CFIL was also issued warrants, pursuant to which it is entitled to subscribe for and purchase up to 200,000 Common Shares, as a financing fee in connection with certain debt financing of the Company. Included in finance expense for the year ended December 31, 2019 is $56,114 related to the fair value of the warrant issued.

Neil Murdoch, a principal of MFT is a director of the Company. As at December 31, 2019, MFT held $300,000 (2018 - $300,000) of convertible debentures issued by the Company, which will be converted to Common Shares pursuant to the Pre-Closing Reorganization. Included in interest and bank charges within finance expense for the year ended December 31, 2019 is $47,178 (2018 - $40,273; 2017 - $13,002) in interest paid to MFT for the convertible debentures.

Andreas Truckenbrodt, a principal of TCEC, is a director of the Company and Chair of the Board. As at December 31, 2019, TCEC held $50,000 (2018 - $50,000) of convertible debentures issued by the Company, which have since been converted to Common Shares. Included in interest within finance expense for the year ended December 31, 2019 is $6,000 (2018 - $5,839; 2017 - $nil) in interest paid to TCEC for the convertible debentures.

A member of management loaned the Company, in fiscal 2018, $60,000 accruing interest at 14% per annum, and, in fiscal 2019, an additional $100,000 accruing interest at 14% per annum. The loans were repaid in full in fiscal 2019. Additionally, $50,000 was loaned to the Company in 2018 by the member of management, which was repaid in full in fiscal 2019. Included in interest within finance expense for the year ended December 31, 2019 is $13,579 (2018 - $nil) in interest paid to the member of management.

Management personnel and director balances:

At September 30, 2020, various members of management were owed $8,400 (December 31, 2019 - $4,919; December 31, 2018 - $5,454) for services rendered, which is included in accounts payable.

The following principal balances of convertible debentures were owed to related parties as follows:

	September 30,	September 30,	December 31,	December 31,	December 31,	December 31,
Convertible debentures		2020		2019	2018	2017
CFIL	$	250,000	$	250,000	$250,000	$ -
MFT		300,000		300,000	300,000	-
CSFF		250,000		250,000	250,000	-

TCEC		50,000		50,000		50,000		-
	$	850,000	$	850,000	$	850,000	$	-

The following principal balances of long-term debt were owed to related parties as follows:

	September 30,	September 30,	December 31,	December 31,	December 31,	December 31,	December 31,	December 31,
Long-term debt		2020		2019		2018		2017
Ben Nyland	$	-	$	-	$	110,000	$	-
CFIL		-		-		700,000		700,000
MFT		-		-		-		300,000
	$	-	$	-	$	810,000	$	1,000,000

Transactions with the InPower-Loop JV:

During the nine month period ended September 30, 2020, the Company accrued $nil (2019 – $58,251) in expenses, was paid $nil (2019 - $750,000) in technical license fees, recorded $297,453 (2019 - $nil) in revenue, recorded $360,248 (2019 - $nil) in accounts receivable, recorded $212,017 (2019 - $54,841) in accounts payable and recorded $nil (2019 - $32,410) in deferred revenue from the InPower-Loop JV. The transactions were carried out in the normal course of operations and are measured at the exchange amount, being the amount agreed between the parties.

During the year ended December 31, 2019, the Company accrued $58,251 (2018 – $nil; 2017 - $nil) in expenses, was paid $750,000 (2018 - $nil; 2017 - $nil) in technical license fees, recorded $54,841 (2018 - $nil; 2017 - $nil) in accounts payable and recorded $32,410 (2018 - $nil; 2017 - $nil) in deferred revenue from the InPower-Loop JV. The transactions were carried out in the normal course of operations and are measured at the exchange amount, being the amount agreed between the parties.

DESCRIPTION OF SHARE CAPITAL

The Company is currently authorized to issue an unlimited number of Common Shares and an unlimited number of Preferred Shares, which are issuable in two series: Series 1 Preferred Shares and Series 2 Preferred Shares. As of February 4, 2021, 53,950,518 Common Shares, 8,333,333 Series 1 Preferred Shares and 12,500,000 Series 2 Preferred Shares are issued and outstanding, as well as Options to acquire 7,805,000 Common Shares, and warrants to acquire 200,000 Common Shares.

The Company is party to a shareholder agreement dated September 16, 2019 between the Company and certain of the shareholders of the Company (the “ Shareholders’ Agreement ”). The Shareholders’ Agreement will terminate upon the consummation of the Offering.

Pre-Closing Reorganization

In connection with, and prior to or upon the Closing, the following pre-closing reorganization will be implemented (collectively, the “ Pre-Closing Reorganization ”):

(a) prior to the Closing, the Company will amalgamate with the VCCs, each of which (i) is a venture capital corporation incorporated solely to facilitate the completion of financing rounds previously undertaken by the Company, (ii) has no business operations or liabilities, and (iii) whose sole assets are the Common Shares, in order to form a new corporate entity named “Loop Energy Inc.”;

(b) pursuant to the amalgamation with the VCCs; (i) all of the issued and outstanding Preferred Shares and Common Shares will be consolidated on the basis of the number of pre-consolidation shares equal to the Consolidation Ratio for one post-consolidation share (the “ Share Consolidation ”), (ii) all of the issued and outstanding Preferred Shares will be converted into Common Shares and our authorized capital will be amended to delete the existing classes of Preferred Shares, resulting in our authorized capital being comprised of an unlimited number of Common Shares, and (iii) our articles will be amended to provide for advance notice of shareholder proposals and nominations for directors, see “ Description of Share Capital - Advance Notice Procedures and Shareholder Proposals ”; and
(c) upon the Closing of the Offering, all of our issued and outstanding convertible debentures will automatically be converted into Common Shares, which will result in the issuance of an aggregate of 7,200,000 Common Shares (or 2,399,999 Common Shares following the Share Consolidation).

Accordingly, upon completion of the Pre-Closing Reorganization and the Closing of the Offering (including the Closing Option Grant (as defined below)), there will be 27,327,961 Common Shares issued and outstanding, as well as options to acquire 2,832,292 Common Shares, and warrants to acquire 381,167 Common Shares.

See “ Principal Shareholders ” for the number of Common Shares that will be owned by each person or company who, to the knowledge of the Company, will beneficially own, control or direct, directly or indirectly, more than 10% of the issued and outstanding Common Shares immediately following the Closing. Unless otherwise indicated, all information in this prospectus assumes that the Pre-Closing Reorganization has been completed.

The summary below of the rights, privileges, restrictions and conditions attaching to the Common Shares, which will exist upon completion of the Pre-Closing Reorganization, is subject to, and qualified in its entirety by, reference to the Company’s articles, which will be available under its profile on SEDAR at www.sedar.com.

Common Shares

Dividend Rights

Holders of Common Shares are entitled to receive dividends, subject to the rights of the holders of any other class of shares entitled to receive dividends in priority or concurrently with the holders of the Common Shares, at such times and in such amount and form, as the Board may from time to time determine.

Voting Rights

Holders of Common Shares are entitled to receive notice of and to attend all meetings of shareholders of the Company (other than a separate meeting of the holders of another class or series of shares that are entitled to vote separately as a class or series) and will have one vote for each Common Share held.

Dissolution Rights

Upon our liquidation, dissolution or winding-up, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of the Common Shares will, subject to the rights of the holders of any other class of shares entitled to receive assets in priority or concurrently with the holders of the Common Shares, participate rateably with the holders of other classes of shares in the Company in equal amounts per share, without preference or distinction, in the remaining assets of the Company.

Advance Notice Procedures and Shareholder Proposals

Under the BCBCA, shareholders may make proposals for matters to be considered at the annual meeting of shareholders. Such proposals must be sent to the Company in advance of any proposed meeting by delivering a timely written notice in proper form to the Company’s registered office in accordance with the requirements of the BCBCA. The notice must include information on the business the shareholder intends to bring before the meeting.

The Company’s articles, as amended prior to the Closing pursuant to the Pre-Closing Reorganization, will provide that shareholders seeking to nominate candidates for election as directors must provide timely notice in writing. To be

timely, a shareholder’s notice must be received by the Company: (a) in the case of an annual meeting of shareholders, not less than 30 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date (the “ Notice Date ”) on which the first public announcement of the date of the annual meeting was made, notice by a shareholder may be made not later than the close of business on the 10[th] day following the Notice Date; and (b) in the case of a special meeting (which is not also an annual general meeting) of shareholders called for the purpose of electing directors (whether or not called for other purposes), not later than the close of business on the 15[th] day following the day on which the first public announcement of the date of the special meeting of shareholders was made, provided that, in either instance, if the Company uses “notice-and-access” (as defined in National Instrument 54-101 – Communications with Beneficial Owners of Securities of a Reporting Issuer ) to send proxy-related materials to shareholders in connection with a meeting of the shareholders described above, and the Notice Date in respect of the meeting is not less than 50 days prior to the date of the applicable meeting, the notice must be received not less than 40 days prior to the date of the applicable meeting.

Such advance notice provisions will be designed to: (a) facilitate orderly and efficient meetings of shareholders; (b) ensure that all shareholders receive adequate notice of Board nominations and sufficient information with respect to all nominees; and (c) allow shareholders to register an informed vote having been afforded reasonable time for appropriate deliberation.

Under the advance notice provisions, a nominating shareholder’s notice must set forth: (a) as to each person whom the nominating shareholder proposes to nominate for election as a director: (i) the name, age, business address and residential address of the person; (ii) the present principal occupation or employment of the person and the principal occupation or employment within the five years preceding the notice; (iii) the country of residence of the person; (iv) the class or series and number of shares in the capital of the Company which are directly or indirectly controlled or directed or which are owned beneficially or of record by the person as of the record date for the annual general meeting of shareholders, or the special meeting of shareholders if one of the purposes for which the special meeting was called is the election of directors, (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; (v) full particulars regarding any agreements between the person and/or the nominating shareholder and/or any other person or company relating to the person’s nomination for election as a director of the Company; and (vi) any other information relating to the person that would be required to be disclosed in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the BCBCA and applicable securities laws; and (b) as to the nominating shareholder giving the notice, full particulars regarding any proxy, contract, agreement, arrangement, understanding or relationship pursuant to which such nominating shareholder has a right to vote any shares of the Company and any other information relating to such nominating shareholder that would be required to be made in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the BCBCA and applicable securities laws.

As a whole, these provisions are intended to provide shareholders, directors and the Company’s management with a clear framework for nominating directors. These provisions could also have the effect of delaying until the next shareholder meeting the nomination of certain persons for director that are favoured by the holders of a majority of the Company’s outstanding voting securities.

Other than the advance notice procedures summarized above, the Company’s articles will have terms that are customary for corporations incorporated under the BCBCA.

The summary of the advance notice requirements under the Company’s articles described above is qualified in its entirety by reference to the full text of the Company’s amended articles, a copy of which will be available under its profile on SEDAR at www.sedar.com.

Investor Rights Agreement

On February 4, 2021, the Company and Cummins Apollo entered into the Investor Rights Agreement, which governs certain rights of Cummins Apollo as a shareholder of the Company. The Investor Rights Agreement is a material contract of the Company. The following summary of the Investor Rights Agreement is qualified in its entirety by reference to the full text of the Investor Rights Agreement, a copy of which will be available following Closing under the Company’s profile on SEDAR at www.sedar.com.

Nomination Rights

The Investor Rights Agreement provides that Cummins Apollo shall be entitled to designate one nominee for election to the Board for so long as Cummins Apollo, together with any of its affiliates (the “ CMI Group ”), holds, directly or indirectly, in the aggregate, 10% or more of the then outstanding Common Shares on a non-diluted basis (the “ Nomination Rights ”). Wayne A. Eckerle is Cummins Apollo’s current appointee to the Board and, on Closing, he will be replaced by Christopher C. Clulow pursuant to the terms of the Investor Rights Agreement.

Registration Rights

Subject to the terms and conditions of the Investor Rights Agreement, the CMI Group shall have rights (“ Demand Registration Rights ”) commencing 180 days after the Closing of the Offering to require the Company to qualify all or a portion of the Common Shares held by the CMI Group for distribution to the public in accordance with Canadian securities laws (a “ Demand Registration ”), provided that the Company will not be obliged to effect (i) more than one Demand Registration in any 90-day period, (ii) any Demand Registration that would reasonably be expected to result in gross proceeds to the CMI Group of less than $10 million, or (iii) a Demand Registration during the period starting 14 calendar days prior to and ending upon the expiry of any black-out period applicable to the Company, except as may be otherwise agreed by the Company and the underwriters managing the offering. The Company may also distribute Common Shares in connection with a Demand Registration provided that if the Demand Registration involves an underwritten offer and the lead underwriter determines that the total number of Common Shares to be included in such Demand Registration should be limited for certain prescribed reasons, the Common Shares to be included in the Demand Registration will first be allocated to the CMI Group.

Subject to the terms and conditions of the Investor Rights Agreement, the CMI Group will have rights (“ Piggyback Registration Rights ”) to require the Company to include its Common Shares in any future public offerings undertaken by the Company by way of prospectus that it may file with applicable Canadian securities regulatory authorities (a “ Piggyback Registration ”). If the Piggyback Registration involves an underwritten offer and the lead underwriter determines that the total number of Common Shares to be included in such Piggyback Registration should be limited for certain prescribed reasons, the Common Shares to be included in the Piggyback Registration will first be allocated to the Company.

The Demand Registration Rights and Piggyback Registration Rights may be exercised so long as the CMI Group owns, in the aggregate, at least 10% of the issued and outstanding Common Shares (on a non-diluted basis) at the time of exercise.

The Demand Registration Rights and Piggyback Registration Rights are subject to various conditions and limitations, and the Company will be entitled to defer any Demand Registration in certain circumstances for a period not exceeding 120 days during any 12-month period. The registration expenses in respect of a Demand Registration and a Piggyback Registration, subject to certain exceptions, will be borne by the Company, except that any underwriting discount or commission on the sale of Common Shares by the CMI Group and the fees of its external legal counsel will be borne by the CMI Group.

Pursuant to the Investor Rights Agreement, the Company will indemnify the CMI Group for any misrepresentation in a prospectus under which the CMI Group’s Common Shares are distributed (other than in respect of any prospectus disclosure provided by the CMI Group in respect of the CMI Group). The CMI Group will indemnify the Company for any prospectus disclosure provided by the CMI Group.

Pre-Emptive Rights

In the event that the Company decides to issue Common Shares or any type of securities convertible into or exchangeable or redeemable for Common Shares or an option or other right to acquire such securities, the CMI Group, for so long as it continues to own or exercise control or direction over an aggregate of at least 10% of the outstanding Common Shares on a non-diluted basis, shall have pre-emptive rights (the “ Pre-Emptive Rights ”) to subscribe for Common Shares or such other securities as are being contemplated for issuance to maintain its pro rata ownership interest. Notice by the CMI Group of the exercise of the Pre-Emptive Rights is to be provided in advance of the commencement of any offering of securities of the Company and in accordance with the terms and conditions of the

Investor Rights Agreement. Pursuant to the Investor Rights Agreement, the pre-emptive rights will not apply to issuances in the following circumstances:

in respect of the exercise or issuance of options or other securities issued under compensatory plans or other plans to purchase Common Shares or any other securities in favour of the management, directors, employees or consultants of the Company;
pursuant to a share split, share dividend or any similar recapitalization offered to all shareholders holding Common Shares;
pursuant to a shareholders’ rights plan of the Company;
as full or partial consideration for the purchase of any shares, business, assets, property the Company or its subsidiaries;
in respect of the exercise by a holder of a conversion, exchange or other similar right pursuant to the terms of a security in respect of which the CMI Group were granted the right to exercise their pre-emptive rights or in respect of which the pre-emptive rights did not apply; and
pursuant to the Offering and any exercise of the Over-Allotment Option.

OPTIONS AND RIGHTS TO PURCHASE SECURITIES

We have previously granted options under the Company’s existing stock option plan (the “ Predecessor Plan ”). Prior to the Closing of the Offering, the Predecessor Plan will be superseded by a new omnibus equity incentive compensation plan (the “ Equity Incentive Plan ”), under which options to purchase Common Shares (“ Options ”) may be granted to employees, executive officers, directors and consultants of the Company and its affiliates. After giving effect to the Pre-Closing Reorganization and the Closing Option Grant, an aggregate of 2,832,292 Common Shares (which includes 230,632 options expected to be granted pursuant to the Closing Option Grant) will be reserved for issuance under the Equity Incentive Plan. The total number of Common Shares reserved and available for grant and issuance pursuant to Awards (as defined below) granted under the Equity Incentive Plan shall not exceed 10% of the total issued and outstanding voting shares of the Company. For a summary of the terms of the Equity Incentive Plan, see “ Executive Compensation – Components of Executive Compensation –One-Time Closing Option Grant to Employees and Directors in Connection with the Offering ”.

The following table sets out the aggregate number of Options expected to be outstanding upon the Closing after giving effect to the Pre-Closing Reorganization and the Closing Option Grant. No other Awards are expected to be outstanding upon Closing.

Category of Holder Current and former executive officers of the Company, as a group (four in total) Current and former employees of the Company, as a group (Thirty- three in total) Current and former directors of the Company who are not also executive officers, as a group (five in total)	Options Granted 1,262,000(2) 539,992(3) 846,966(4)	Exercise Price per Option(1) $2.79 $2.84 $1.28	Expiry Dates
			December 31,2026 – February 25, 2031 November 1, 2023 – February 25, 2031 June 15, 2022 – February 25, 2031

Consultants of the Company, as a group (four in total)

183,334 $1.28 July 25, 2021 – August 30, 2030

Note:

(1) Represents the weighted average exercise price of all outstanding Options, whether vested or unvested.

(2) Including 142,000 options that are intended to be part of the Closing Option Grant.

(3) Including 58,332 options that are intended to be part of the Closing Option Grant.

(4) Including 30,300 options that are intended to be part of the Closing Option Grant.

PRIOR SALES

The following table summarizes the issuances of Common Shares or securities convertible into Common Shares during the 12-month period preceding the date of this prospectus.

Date of Issuance February 25, 2021 February 25, 2021 August 16, 2020 August 15, 2020 September 11, 2020(5) March 13, 2020 February 28, 2020 February 28, 2020 Notes:	As Date	at the Hereof(1)	Immediately Following the Share Consolidation
	Type of Security Special Advisor Warrants to purchase Common Shares Options(3) Options(4) Options(4) Common Shares Series 2 Preferred Shares Options(4) Options(4)	Number of Securities Issued(2) - - 50,000 490,000 3,125 12,500,000 320,000 100,000	Issuance / Exercise Price per Security(2) Number of Securities Issued Issuance / Exercise Price per Security
			- 314,500 $16.00 - 230,632 $16.00 $0.80 16,667 $2.40 $0.80 163,333 $2.40 $0.60 1,042 $1.80 $0.80 4,166,667 $2.40 $0.60 106,667 $1.80 $0.50 33,333 $1.50

(1) The exercise price per security will be the Offering Price.

(2) On a pre-Share Consolidation basis.

(3) Options expected to be granted pursuant to the Closing Option Grant.

(4) Options granted pursuant to the Predecessor Plan.

(5) Pursuant to exercise of Options.

Prior to Closing, the Company will implement the Pre-Closing Reorganization. See “ Description of Share Capital - Pre-Closing Reorganization ”.

Special Advisor Warrants

On Closing, the Company intends to issue the Special Advisor Warrants. 31,500 warrants will be issued to Lord John Browne and 283,000 warrants will be issued to Lance Uggla. The Special Advisor Warrants will be exercisable into Common Shares for a period of one year following the Closing Date at an exercise price equal to the Offering Price.

ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER

The following table sets out the number of each class of the Company’s securities that, to the knowledge of the Company, are anticipated to be subject to a contractual restriction on transfer immediately following the Closing, and the percentage that number represents of the outstanding securities of that class. To the knowledge of the Company, no securities of the Company are anticipated to be held in escrow at the Closing.

Designation of Class Common Shares............................................................................	Number of Securities Held in Escrow or that are Subject to a Contractual Restriction on Transfer 26,579,308(1)	Percentage of Class(2)
		79.16%

Notes:

(1) These Common Shares will be subject to a contractual restriction on transfer pursuant to the Lock-Up Agreements entered into between the Company and each of the Locked-Up Persons. See “ Plan of Distribution - Lock-Up Arrangements ”.

(2) Immediately following the Closing and assuming no exercise of the Over-Allotment Option.

Holders of 2,019,466 Options and 66,667 Warrants (on a post-Share Consolidation basis) have also agreed that any Common Shares received on exercise of such securities will be bound by the terms of the Lock-Up Agreement. See “ Plan of Distribution - Lock-Up Arrangements ”.

DIVIDEND POLICY

Loop has not paid dividends since the date of its incorporation and does not expect to pay dividends in the near future. The Company expects that it will retain earnings to finance the further development and growth of its business. The Board of Directors will determine if and when dividends should be declared and paid in the future and any such determination will be based on the Company’s financial position, business environment, operating results, capital requirements, any contractual restrictions on the payment of dividends and any other factors that the Board may deem relevant at the time.

PRINCIPAL SHAREHOLDERS

The following table sets out each person or company who, to the knowledge of the Company, will beneficially own, control or direct, directly or indirectly, more than 10% of the issued and outstanding Common Shares as of the date hereof and immediately following the Closing:

Name Cummins Apollo(2).................................................	Immediately following the Closing(1)	Immediately following the Closing(1)
	Number of Common Shares Owned 6,944,445	% of Common Shares Owned
		20.68%(3)

Notes:

(1) Assumes that no Offered Shares are purchased by Cummins Apollo through the Offering, the Over-Allotment Option is not exercised and the Pre-Closing Reorganization (including the Share Consolidation) has been completed. See “ Description of Share Capital - PreClosing Reorganization ”.

(2) Cummins Apollo is a wholly-owned indirect subsidiary of Cummins and owns the Common Shares both of record and beneficially. As of the date hereof, Cummins Apollo owns 8,333,333 Series 1 Preferred Shares and 12,500,000 Series 2 Preferred Shares.

(3) 18.88% on a fully-diluted basis.

THE BOARD OF DIRECTORS AND MANAGEMENT

The following table sets out information regarding our anticipated directors and executive officers of the Company at the Closing. As of the date of this prospectus, our Board of Directors consists of Andreas Truckenbrodt, Neil Murdoch,

Allan Collings, Ben Nyland and Wayne A. Eckerle. On or prior to the Closing, it is anticipated that Sophia Langlois will be appointed as a director of the Board and that Wayne A. Eckerle will resign from the board and be replaced by Christopher C. Clulow, such that there will be a total of six directors on the Board on or prior to the Closing. As Sophia Langlois and Christopher C. Clulow are not members of the Board at the time of this prospectus, the Company does not believe they will have any liability for the contents of this prospectus in such capacity under the applicable securities laws of the provinces of Canada. The Company’s directors are elected annually and all of the above-noted individuals are expected to hold office until the next annual meeting of shareholders. The nominees for election by shareholders as directors will be determined by the Board in accordance with the provisions of applicable corporate law, the articles of the Company and the Investor Rights Agreement.

On the Closing, the proposed directors and executive officers, as a group, are expected to beneficially own, or exercise control or direction over, a total of 2,869,148 Common Shares, representing approximately 8.54% of the total issued and outstanding Common Shares (or 2,869,148 Common Shares, representing approximately 8.31% of the total issued and outstanding Common Shares assuming the exercise in full of the Over-Allotment Option).

The following table sets out certain summary information in respect of the current and proposed directors and executive officers of the Company.

Name and Place of Residence	Position(s)/Title	Date First Became a Director	Principal Occupation(s) for the Past Five Years
*Current Board of Directors*
Andreas Truckenbrodt(2) British Columbia, Canada	Director and Chair of the Board	March 3, 2014	• Consultant for TCEC (March 2014 to present)
Neil Murdoch(1)(3) Ontario, Canada	Director	June 16, 2016	• Chief Executive Officer of Connor Clark & Lunn Capitals Markets Inc. (December 2003 to August 2013) • Chief Operating Officer of Aston Hill Financial Inc. (August 2013 to December 2015) • Chief Executive Officer of Wm T Murdoch Ltd. (January 2005 to present)
Allan Collings(1)(3) British Columbia, Canada	Director	June 16, 2016	• Co-Chairman of ACM Advisors Ltd. (January 1993 to present)
Ben Nyland British Columbia, Canada	Director (Not Independent) President and Chief Executive Officer	June 16, 2016	• Chief Executive Officer of the Company (June 2016 to present) • President of the Company (January 2015 to present)
Wayne A. Eckerle(3)(4) Indiana, USA	Director	March 16, 2020	• VP, Research and Technology of Cummins (July 1989 to present)
*New Director to be Appointed on Closing*
Sophia Langlois(1)(2)(3) Alberta, Canada	Director	February 25, 2021	• Director of Alaris Equity Partners Income Trust (July 2020 to present) • Director of Southern Alberta Institute of Technology (April 2014 to July 2020) • Audit Partner with KPMG LLP (October 2006 to April 2020)

Name and Place of Residence	Position(s)/Title	Date First Became a Director	Principal Occupation(s) for the Past Five Years
Christopher C. Clulow(2)(3) Indiana, USA	Director	February 25, 2021	• Corporate Controller at Cummins (March 2017 to present) • Components Controller at Cummins (April 2015 to March 2017)
*Executive Officers*
Ben Nyland British Columbia, Canada	Director, President and Chief Executive Officer	June 16, 2016	• Chief Executive Officer of the Company (June 2016 to present) • President of the Company (January 2015 to present)
Darren Ready British Columbia, Canada	Chief Financial Officer and Corporate Secretary	N/A	• Corporate Secretary of the Company (January 2021 to present) • Chief Financial Officer of the Company (January 2017 to present) • Accountant at the Company (November 2016 to January 2017) • CFO at Ronin8 Technologies Ltd. (March 2015 to October 2016)
George Rubin British Columbia, Canada	Chief Commercial Officer	N/A	• Chief Commercial Officer of the Company (January 2021 to present) • Managing Director, Commercial Strategy of the Company (January 2020 to December 2020) • CEO of Heliotrope Technologies Inc. (October 2017 to October 2019) • VP Business Development of General Fusion Inc. (August 2016 to September 2017) • Managing Partner of Pacific Surf Partners Corp. (September 2012 to July 2016)
Daryl D. Musselman British Columbia, Canada	VP, Engineering	N/A	• VP, Engineering of the Company (May 2020 to present) • Vice President, Operations and Engineering and Vice President, Manufacturing Operations of Svante Inc. (formerly Inventys Thermal Technologies Inc.) (August 2017 to May 2020) • Chief Operating Officer of Bionic Power Inc. (September 2016 to August 2017) • Director and President of First Principles Engineering Inc. (September 2000 topresent)

Notes:

(1) Proposed member of the Audit Committee (following the Closing).

(2) Proposed member of the GHRNC Committee (following the Closing).

(3) Independent within the meaning of NI 58-101.

(4) On Closing, Dr. Wayne A. Eckerle will resign as a director of the Company and be replaced by Christopher C. Clulow.

Biographies

The following is a brief biography of each of the individuals who will comprise our directors and executive officers upon the Closing:

Directors

Andreas Truckenbrodt, Director, Chair of the Board

Dr. Truckenbrodt joined Loop as Chair of the Board in 2014 after a successful 30+ year career in the automotive industry. Previously he was CEO of the AFCC – a joint venture of Daimler AG and Ford Motor Company – where he was responsible for driving the development and commercialization of the automaker’s fuel cell vehicle program. Prior to AFCC, Dr. Truckenbrodt led the Hybrid Development Center for Daimler Chrysler, as well as senior management and engineering roles with Ballard, Daewoo and BMW. He was also previously the President and CEO of the Canadian Hydrogen & Fuel Cell Association. Dr. Truckenbrodt holds a degree in Aeronautics and Aerospace Engineering from the Technical University of Munich, Germany, and received his PhD in Mechanics and Control Systems from the Technical University of Munich, Germany in 1980. Dr. Truckenbrodt is currently a consultant for TCEC, providing strategic and technical advice to companies with respect to their clean energy transport programs.

Neil Murdoch, Director

Mr. Murdoch has been a director of the Company since 2016 following a rewarding career as COO of Aston Hill Financial Inc. (“ Aston Hill ”) and founding member of Connor, Clark & Lunn Capital Markets Inc. where, as CEO, he raised over $2.5 billion in new assets before being acquired by Aston Hill in 2013. Mr. Murdoch is a retired Chartered Financial Analyst, and holds a Bachelor of Commerce degree from McGill University, a Bachelor of Law from the University of Toronto, and an MBA degree from the Kellogg Graduate School of Management.

Allan Collings, Director

Mr. Collings is co-chairman of ACM Advisors Ltd., a leading commercial mortgage fund manager in Canada with assets under management in excess of $3.5 billion. Since joining Loop as a director in 2016, Mr. Collings has added significant strategic business planning, financial analysis, management and administrative experience to the Board based on his many years of senior financial and accounting management positions with Rogers Cablevision and companies in British Columbia’s forest industry. He holds a Bachelor of Commerce degree (Dean's List) from the University of British Columbia.

Dr. Wayne A. Eckerle, Director

As Vice President, Research and Technology at Cummins, Wayne A. Eckerle is responsible for developing and integrating technology for the company’s next generation of products, developing advanced computer simulation and advanced manufacturing capability, deploying engineering processes to improve product development efficiency, and creating the technology roadmaps to deliver future products. Since joining Cummins in 1989, he has also held leadership positions in Metrology, Quality, Fuel Systems Technology, Thermal and Fluid Sciences, and Advanced Engineering. Dr. Eckerle holds a Masters in Aeronautical Engineering from Purdue University and a PhD in Fluid Mechanics from the University of Connecticut. Dr. Eckerle joined Loop Energy’s Board of Directors in 2020 following Cummins’ investment in the Company.

Christopher C. Clulow, Director

Mr. Clulow has been the Corporate Controller of Cummins since March 1, 2017. As Controller, he is responsible for Cummins’ global accounting processes, financial reporting, accounting policy, Sarbanes-Oxley compliance, finance transformation, and finance systems. He joined Cummins in May 2004, initially in the Sarbanes Oxley compliance group. He progressed through several leadership roles in finance and strategy from 2005 to 2014 across three of the four Cummins operating segments. Prior to joining Cummins, he worked in public accounting for eight years with Ernst & Young, in the U.S. and U.K., and the two years prior to that with Coopers & Lybrand. During

his time in public accounting, he held roles in audit, mergers & acquisitions, and US GAAP technical advisory services. Mr. Clulow graduated from Miami University in Oxford, Ohio in 1994 with a Bachelor of Science Degree in Accountancy and Finance. He is a Certified Public Accountant (CPA) and a graduate of Cummins’ Executive Leadership Development Program.

Sophia Langlois, Director

Ms. Langlois is a member of the board of directors of Alaris Equity Partners Income Trust where she serves on the audit committee and the compensation committee, and TELUS Spark, Science Centre where she is the chair of the audit committee. She was a board member at the Southern Alberta Institute of Technology from 2014 until 2020, serving as the vice chair of the board of directors, chair of the audit committee and investment committee, and a member of the executive committee. She was an Audit Partner at KPMG LLP (“ KPMG ”) from October 2006 to April 2020. She has 28 years of experience at KPMG, including her time as an Audit Partner, in a broad range of industries delivering accounting, assurance and securities services, including leading the Corporate Services group for KPMG Calgary for three years and acting as the KPMG National Audit Partner in charge of people for three years. Ms. Langlois holds a Bachelor of Commerce degree with a major in Accounting from the University of Calgary, a Chartered Professional Accountant (CPA), a Chartered Accountant designation, a Chartered Professionals in Human Resources designation and the ICD.D designation from the Institute of Corporate Directors.

Executive Officers

Ben Nyland, President, Chief Executive Officer and Director

Mr. Nyland, 50, was appointed President of Loop in 2015 and Chief Executive Officer of Loop in 2016, following more than three years as the Company’s Vice President, Operations. Mr. Nyland is responsible for the Company’s strategic planning, corporate leadership, market expansion, and managing key partner relationships as the Company commercializes its clean and affordable transportation solutions. Prior to joining Loop, Mr. Nyland spent over 10 years in a variety of senior management positions, including as President of Rampworth Capital Services Inc., JBN Developments Inc., Exro Technologies Inc. and Maclean Group Marketing. Mr. Nyland is a full time employee of Loop. Mr. Nyland holds a Bachelor of Science in Computer Engineering from the University of Alberta.

Darren Ready, Chief Financial Officer and Corporate Secretary

Mr. Ready, 47, joined Loop in 2016 as an accountant, and then as Chief Financial Officer with responsibility for the Company’s financial compliance, strategy and governance. He joined Loop after spending fifteen years in similar roles with a variety of private and public companies in the clean technology and biotechnology sectors. Mr. Ready has experience negotiating and signing joint venture agreements in Asia. Previously Mr. Ready served as Director of Finance for a TSX-listed company with operations in Hong Kong and Nanning, China. He also played a role in an early stage start up software and hardware company, which has now successfully deployed over 400 dementia care systems into seniors housing facilities across the United States and Canada. For seven years, Mr. Ready was also the CFO of a biotech company which pioneered the use of computer-aided learning in microscopy imaging devices for use by pathologists to help predict cancer through the quantitative measurement of DNA content levels in early stage cancer cells. Darren earned his Bachelor of Commerce degree in International Business from the University of Victoria, and holds CPA and Certified Management Accountant designations. Mr. Ready is a full time employee of Loop.

George Rubin, Chief Commercial Officer

Mr. Rubin, 46, joined Loop in 2020 as Managing Director, Commercial Strategy, and then as Chief Commercial Officer. He is a seasoned technology industry executive with the unique combination of a strong scientific background and in-depth, hands-on experience in building sales, business development and marketing organizations. As Co-Founder, Vice President and subsequently President of Day4 Energy Inc., Mr. Rubin was instrumental to developing a strategic vision and directly responsible for executing the corporate development plan. This included including growing company operations from a research and development start-up in 2003 with a total of five staff, to 265 employees and sales in excess of $350 million in seven years. As CEO of Heliotrope Technologies Inc., Mr.

Rubin developed a minimum viable product strategy, early adopter customer base and ultimately a sales pipeline in excess of $40 million in under two years. Mr. Rubin is a full time employee of Loop.

Dr. Daryl D. Musselman, Vice President, Engineering

Dr. Musselman, 53, joined Loop in 2020, bringing over 30 years of experience from renewable energy and automotive sectors. Recently at Svante Inc. (formerly Inventys Thermal Technologies Inc., “ Svante ”), Dr. Musselman was Vice President, Operations and Engineering and Vice President, Manufacturing Operations, where he built a team from less than five people in 2017, to about 45 by 2019, and successfully executed the design, construction, and operation of a world-first point source carbon capture plant removing 30 tons of carbon dioxide per day using Svante’s proprietary technology. As Vice President, Engineering at Endurance Wind Power Inc., Dr. Musselman grew a technical team from about 15 to more than 50 in three years as annual corporate revenues grew from approximately $6 million to $60 million in the same period and his team designed, installed, and maintained approximately 700 new turbines in the United Kingdom with an estimated combined installed cost in excess of £250 million. Dr. Musselman’s other executive roles include Chief Operating Officer at Bionic Power Inc., and Vice President, Engineering and Technology Development at Xebec Adsorption Inc. where he has repeatedly delivered on the commercialization and production scale up of new technologies. His career foundation was built in the automotive industry where he held plant and maintenance engineering roles at General Motors of Canada Co. car assembly plants, and led advanced engineering efforts for Multimatic Inc., a Tier 1 OEM Supplier and motorsports company. A registered Professional Engineer, Dr. Musselman has Bachelor of Applied Science and Master of Applied Science degrees in mechanical engineering from the University of Waterloo, a PhD in engineering science from Western University, and has completed the Executive Development Course at McGill University. Dr. Musselman is a full time employee of Loop.

Special Advisors

From time to time Loop may engage consultants as special advisors to work with management and/or the Board of Directors to help the Company prepare for key milestones. The Company recently engaged two special advisors, Lord John Browne and Lance Uggla, who will be working with management and the Board. Lord Browne and Mr. Uggla have been engaged to provide guidance to management and the Board with respect to the running of a public company, the effective management of a high growth enterprise and the identification of opportunities and relationships of strategic advantage to the Company.

Lord John Browne, Special Advisor

John Browne (Lord Browne of Madingley) was Group Chief Executive of BP from 1995 to 2007. During that period he created the world’s first supermajor through a series of mergers and acquisitions, including BP’s merger with Amoco in 1998. His landmark speech at Stanford University in 1997 established BP as a global leader in the way it thought about, and sought to address, climate change. In 2007 he joined Riverstone, where he was co-head of the world’s largest renewable energy private equity fund until 2015. He is currently Executive Chairman of L1 Energy and Chairman of Wintershall Dea, Europe’s largest independent oil and gas company. Lord Browne is Chairman of the Francis Crick Institute, a Fellow and past President of the Royal Academy of Engineering, and Chairman of the Queen Elizabeth Prize for Engineering. Lord Browne holds degrees in Natural Sciences from the University of Cambridge and an MS in Business from Stanford University. He is the author of five books and founder of the John Browne Charitable Trust.

Lance Uggla, Special Advisor

Lance Uggla is Chairman and CEO of IHS Markit, responsible for leading the strategic direction and operational results of the company. He founded Markit in 2003 having identified opportunities to create greater transparency and data accuracy in illiquid financial markets, initially focusing on derivatives. He grew the company both organically and through acquisition, taking Markit public in 2014 at a valuation of $4.3 billion. In 2016, he jointly led the merger of equals between IHS and Markit, becoming Chairman and CEO in January 2018. Since the merger, which was targeted to meet the growing demands for alternative data and leverage the trend towards data science and advanced analytics, the company has grown revenues at a compound annual growth rate of 12% and in 2020 had revenues of $4.3 billion. In November 2020, the company announced it had agreed to merge with S&P Global at a market capitalization of approximately $39 billion. Mr. Uggla earned his BBA at Simon Fraser University and his Master of Science at the London School of Economics. He was previously Head of Global Markets at CIBC and Head of Europe

and Asia and Cohead Credit Trading at TD Securities. He was the UK EY Entrepreneur of the Year in 2012 and won the Simon Fraser Outstanding Alumni Award in 2014.

Corporate Cease Trade Orders or Bankruptcies

Other than as set out below, to the Company’s knowledge, no current or proposed director, or executive officer is, as at the date of the prospectus, or was within 10 years before the date of the prospectus, a director, chief executive officer or chief financial officer of any company that:

(a) was subject to a cease trade order or similar order or an order that denied the company access to any statutory exemptions, that was in effect for a period of more than 30 consecutive days, that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or
(b) was subject to a cease trade order or similar order or an order that denied the company access to any statutory exemptions, that was in effect for a period of more than 30 consecutive days, that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

Bankruptcies

Other than as set out below, to the Company’s knowledge, no current or proposed director or executive officer or shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company:

(a) is, as at the date of the prospectus, or has been within the 10 years before the date of the prospectus, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
(b) has, within the 10 years before the date of the prospectus, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold assets of the director, executive officer or shareholder.

Neil Murdoch was a director of Eight Solutions Inc. (“ Eight Solutions ”) between January 6, 2014 and May 22, 2019. On June 5, 2019, the British Columbia Securities Commission (“ BCSC ”) issued a cease trade order against Eight Solutions. The cease trade order was issued in connection with Eight Solutions failing to file its interim financial report, interim management’s discussion and analysis, and certification of interim filings for the period ended March 31, 2019, during which time Neil Murdoch was a director of Eight Solutions. The cease trade order is still in effect. On July 4, 2019, the Supreme Court of British Columbia issued an order pursuant to the Bankruptcy and Insolvency Act (Canada) appointing a trustee of the estate of Eight Solutions.

Penalties or Sanctions

To the Company’s knowledge, no current or proposed director or executive officer or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, has been subject to:

(a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
(b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an investment decision.

Director Nomination Rights

Under the Investor Rights Agreement, Cummins Apollo is entitled to Nomination Rights. See “ Description of Share Capital –Investor Rights Agreement”.

Conflicts of Interest

The members of the Board of Directors are required by law to act honestly and in good faith with a view to the best interests of the Company, and to disclose any interests that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board of Directors, any director in a conflict is required to disclose his or her interest and abstain from voting on such matter. See “ Corporate Governance ”.

Other than as disclosed herein, there are no known existing or potential conflicts of interest among the Company, its directors and officers or other members of management of the Company or of any proposed director, officer or other member of management as a result of their outside business interests, except that certain of the directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to the Company and their duties as a director or officer of such other companies. See “ Corporate Governance – General ” and “ Risk Factors ”.

EXECUTIVE COMPENSATION

The following section describes the significant elements of the Company’s proposed executive compensation program following the Closing, with particular emphasis on the process for determining compensation payable to the Company’s CEO, CFO and, each of the two most highly compensated executive officers of the Company, or the two most highly compensated individuals acting in a similar capacity, other than the CEO and the CFO, whose total compensation was, individually, more than $150,000 for fiscal 2020 (collectively, the “ NEOs ”). For fiscal 2021, the NEOs are expected to be Ben Nyland (President and CEO), Darren Ready (CFO), George Rubin (Chief Commercial Officer) and Daryl Musselman (Vice President, Engineering).

GHRNC Committee

On the Closing, the Company will establish the GHRNC Committee, a standing committee that will meet with management to review the Company’s executive and director compensation programs and, if deemed appropriate, make further recommendations to the Board regarding changes to the program in light of the then relevant factors.

The GHRNC Committee will be responsible for reviewing and establishing compensation for the CEO, and, in consultation with the CEO, will be responsible for establishing, reviewing and overseeing the compensation policies of the Company and compensation of the NEOs.

It is anticipated that the CEO will make recommendations to the GHRNC Committee each year with respect to the compensation for the NEOs. The GHRNC Committee will review the recommendations of the CEO in determining whether to make a recommendation to the Board of Directors or recommend any further changes to compensation for the executives. In addition, the GHRNC Committee will annually review and make recommendations to the Board of Directors regarding the compensation for the CEO.

A more detailed overview of the role and responsibilities of the GHRNC Committee can be found under “ Corporate Governance - Committees ”.

Compensation Consultant

On December 29, 2020, we retained Hugessen Consulting Inc. (“ Hugessen ”), an independent consulting firm, to advise us in respect of compensation matters in advance of the Offering, and to, among other things:

(a) articulation of an execution compensation philosophy;
(b) develop a compensation peer group of public companies with similar attributes to the Company for the purposes of benchmarking;

(c) benchmark competitive pay levels to determine market pay levels, using both the compensation peer group and survey data for similarly-sized, publicly traded companies;
(d) development of a short-term and long-term incentive framework; and
(e) advise on the development of appropriate executive compensation governance practices/policies.

The GHRNC Committee will work with Hugessen through 2021 to enact appropriate policies and compensation practices in connection with the above, including with respect to developing 2021 salaries, bonus opportunities, and target long-term incentive opportunities, as appropriate. However, the decisions made regarding final compensation and incentive plan design are made by, and are the responsibility of, the Board on recommendation of the GHRNC Committee.

Compensation Philosophy and Objectives

The Company’s executive compensation practices are based on a pay-for-performance philosophy that is designed to attract, motivate, and retain its executives. Assessment of performance will be based on the Company’s financial and operational performance, as well as individual contributions, and effective risk management. This philosophy is intended to effectively support the Company’s goals of retaining and attracting the highest calibre of talent to pursue a leadership position in the industry.

Pay will be benchmarked and compared on a target total direct compensation basis (base salary plus short-term target annual incentive plus target annual long-term equity-based incentive). The Board reviews benchmarking data for external market context, and views the 50th percentile of total compensation as a point of reference and a guideline, but does not target executive compensation to a fixed percentile relative to any one specific peer group.

Consideration of Loop’s internal hierarchy, criticality of the role, market context and performance, will be applied to peer data to produce an informed process for setting each position’s pay.

Comparator Group

To benchmark the level and mix of executive compensation arrangements, a peer group was derived consisting of a group of comparably-sized reporting issuers operating in industries related to the Company’s industry that are broadly representative of Loop’s executive employee market.

Based on the above, the following peer group will be used to review and determine the compensation market:

ClearPoint Neuro, Inc.	dynaCERT Inc.	Electrameccanica Vehicles	Electrovaya Inc.
		Corp.
Exro Technologies Inc.	GreenPower Motor	POET Technologies Inc.	SunHydrogen, Inc.
	Company Inc.

Components of Executive Compensation

Consistent with the Company’s historical approach, the compensation program for executives on the Closing will consist of three major elements: (a) base salary; (b) annual short-term incentives; and (c) long-term incentives. Perquisites and personal benefits are not a significant element of compensation of the NEOs.

Base Salary

A primary element of the Company’s compensation program is base salary. The Company’s view is that a competitive base salary is a necessary element for attracting and retaining qualified executive officers. Base salaries are set and adjusted to reflect the scope of an executive’s responsibility and prior experience, and the overall market demand for such executives at time of hire. Base salaries will be reviewed annually.

Effective January 1, 2021, the base annual salaries of the NEOs are as follows: Ben Nyland - $225,000, Darren Ready - $200,000, George Rubin - $235,000 and Daryl Musselman - $245,000. Following the Closing, the GHRNC Committee will work with Hugessen to establish the compensation arrangements for each of the NEOs, assuming the continued employment of each NEO.

Short-Term Incentive Program

Loop will grant short-term incentive awards to its executive officers in the form of annual cash bonuses, which are intended to motivate and reward such executive officers for achieving and surpassing annual corporate and individual goals approved by the Board. The Company believes that a performance-based bonus program promotes its overall compensation objectives by tying a meaningful portion of an executive’s compensation to the overall growth of the business, thereby aligning the interests of executive officers with the interests of holders of Common Shares and other stakeholders. Bonuses for the CEO will be recommended by the GHRNC Committee and approved by the Board, while bonuses for all other NEOs will be recommended by the CEO and reviewed and approved by the GHRNC Committee. In the past, bonus levels were mainly determined based on the informed judgement of the Board. Following completion of the Offering, the Company intends to put in place a more structured scorecard to assess performance, while still allowing the GHRNC Committee to use its informed judgment to determine final bonus levels.

Long-Term Incentive Program

The executive officers of the Company, along with other employees and directors, will be eligible to participate in the long-term incentive program of the Company, which may be comprised of Options, performance share units (“ PSUs ”), restricted share units (“ RSUs ”), deferred share units (“ DSUs ”) and other share-based awards (“ Other Share-Based Awards ”) issued pursuant to the Equity Incentive Plan. The purpose of the long-term incentive program is to promote greater alignment of interests between employees and shareholders, and to support the achievement of the Company’s long-term performance objectives, while providing a long-term retention element.

One-Time Closing Option Grant to Employees and Directors in Connection with the Offering

In connection with, and conditional upon, completion of the Offering, the Board will approve a one-time grant of Options pursuant to the Equity Incentive Plan to certain officers, directors, and employees, including the NEOs, to purchase an aggregate of 230,632 Common Shares, which Options will be exercisable at the Offering Price (the “ Closing Option Grant ”). 1/16th of the Options granted pursuant to the Closing Option Grant will vest each quarter following the date of grant and will expire on the ten year anniversary of the date of grant.

Equity Incentive Plan

On Closing, the Company will establish the Equity Incentive Plan. The following summary of the Equity Incentive Plan is qualified in its entirety by reference to the full text of the Equity Incentive Plan, a copy of which will be available under the Company’s profile on SEDAR at www.sedar.com.

Purpose

The purpose of the Equity Incentive Plan is to provide the Company with a share-related mechanism to attract, retain and motivate qualified directors, employees and consultants of the Company, to reward those directors, employees and consultants as may be granted Awards by the Board from time to time for their contributions toward the longterm goals and success of the Company and to enable and encourage such directors, employees and consultants to acquire Shares (as defined in the Equity Incentive Plan) as long-term investments and proprietary interests in the Company.

Types of Awards

The Equity Incentive Plan provides for the grant of Options, PSUs, RSUs, DSUs and Other Share-Based Awards (collectively, the “ Awards ”) which may be denominated or settled in Common Shares, cash or in such other forms as provided for in the Equity Incentive Plan. All Awards will be evidenced by an agreement or other instrument or document (an “ Award Agreement ”).

Plan Administration

The Equity Incentive Plan will be administered by the Board, which may delegate its authority to any duly authorized committee of the Board (the “ Plan Administrator ”). The Plan Administrator has sole and complete authority, in its discretion, to:

(a) determine the individuals (the “ Participants ”) to whom grants of Awards under the Equity Incentive Plan may be made;
(b) make grants of Awards under the Equity Incentive Plan, whether relating to the issuance of Common Shares or otherwise (including any combination of Options, RSUs, PSUs, DSUs or Other Share-Based Awards), in such amounts, to such Participants and, subject to the provisions of the Equity Incentive Plan, on such terms and conditions as it determines, including, without limitation:
(i) the time or times at which Awards may be granted;
(ii) the conditions under which: (A) Awards may be granted to Participants; or (B) Awards may be forfeited to the Company, including any conditions relating to the attainment of specified performance goals;
(iii) the number of Common Shares to be covered by any Award;
(iv) the price, if any, to be paid by a Participant in connection with the purchase of Common Shares covered by any Awards;
(v) whether restrictions or limitations are to be imposed on the Common Shares issuable pursuant to grants of any Award, and the nature of such restrictions or limitations, if any; and
(vi) any acceleration of exercisability or vesting, or waiver of termination regarding any Award, based on such factors as the Plan Administrator may determine;
(c) establish the form or forms of Award Agreements;
(d) cancel, amend, adjust or otherwise change any Award under such circumstances as the Plan Administrator may consider appropriate in accordance with the provisions of the Equity Incentive Plan;
(e) construe and interpret the Equity Incentive Plan and all Award Agreements;
(f) adopt, amend, prescribe and rescind administrative guidelines and other rules and regulations relating to the Equity Incentive Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws; and
(g) make all other determinations and take all other actions necessary or advisable for the implementation and administration of the Equity Incentive Plan.

Notwithstanding the foregoing, the grant of any Other Share-Based Awards that are not Options, DSUs, RSUs or PSUs will be subject to TSX and shareholder approval (as applicable).

Common Shares Available for Awards

As of the date of Closing, there are estimated to be approximately 2,832,292 Common Shares reserved and available for issuance under the Equity Incentive Plan.

The Equity Incentive Plan is considered to be an “evergreen” plan, since the Common Shares covered by Awards which have been exercised or terminated will be available for subsequent grants under the Equity Incentive Plan and the number of Awards available to grant increases as the number of issued and outstanding Common Shares increases.

The aggregate number of Common Shares: (a) issuable to Insiders (as defined in the Equity Incentive Plan) at any time under all of the Company’s security-based compensation arrangements (which, for greater certainty, includes the Predecessor Plan) may not exceed 10% of the Company’s total issued and outstanding Common Shares; and (b) issued to Insiders within any one-year period, under all of the Company’s security-based compensation arrangements may not exceed 10% of the Company’s total issued and outstanding Common Shares.

Blackout Period

In the event that the date of grant of an Award occurs, or an Award expires, at a time when an undisclosed material change or material fact in the affairs of the Company exists, the effective date of grant, or expiry of, such Award, as the case may be, will be no later than 10 business days after which there is no longer such undisclosed material change or material fact, and the Market Price (as defined below) with respect to the grant of such Award will be calculated based on the five business days immediately preceding the effective date of grant.

“ Market Price ” is defined as the volume weighted average closing price of the Common Shares on the TSX for the five trading days immediately preceding the date of grant (or, if such Common Shares are not then listed and posted for trading on the TSX, on such stock exchange on which the Common Shares are listed and posted for trading as may be selected for such purpose by the Board); provided that, for so long as the Common Shares are listed and posted for trading on the TSX, the Market Price shall not be less than the market price as calculated under the policies of the TSX.

Description of Awards

Subject to the provisions of the Equity Incentive Plan and such other terms and conditions as the Plan Administrator may prescribe, including with respect to performance and vesting conditions, the Plan Administrator may, from time to time, grant the following types of Awards to any Participant.

Options

An Option entitles a holder thereof to purchase a Common Share at an exercise price set at the time of the grant, which price must in all cases be not less than the Market Price on the date of grant. Each option will expire on the expiry date specified in the Award Agreement (which shall not be later than the tenth anniversary of the date of grant) or, if not so specified, the tenth anniversary of the date of grant.

Deferred Share Units

A DSU is a unit that vests upon grant but does not settle until a future date, generally as established in the Award Agreement, or if not so established, then upon termination of service with the Company. The number of DSUs (including fractional DSUs) granted at any particular time will be calculated by dividing (a) the amount of any compensation that is to be paid in DSUs, as determined by the Plan Administrator by (b) the Market Price of a Common Share on the date of grant.

DSUs shall be settled on the date established in the Award Agreement; provided, however that in no event shall a DSU be settled prior to, or later than one year following, the date of the applicable Participant’s separation from service. Subject to the terms of the Equity Incentive Plan, and except as otherwise provided in an Award Agreement, on the settlement date for any DSU, the Participant will redeem each vested DSU for a Common Share, a cash payment, or a combination thereof.

Unless otherwise determined by the Plan Administrator and set forth in the particular Award Agreement, DSUs will be credited with dividend equivalents in the form of additional DSUs as of each dividend payment date in respect of which normal cash dividends are paid on Common Shares. Dividend equivalents will vest in proportion to the DSUs to which they relate and will be settled in the same manner as the DSUs.

Restricted Share Units

A RSU is a unit equivalent in value to a Common Share that does not vest until after a specified period, or satisfaction of other vesting conditions as determined by the Plan Administrator. The number of RSUs (including fractional RSUs)

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granted at any particular time will be calculated by dividing (a) the amount of any compensation that is to be paid in RSUs, as determined by the Plan Administrator, by (b) the Market Price of a Common Share on the date of grant.

The Plan Administrator will have the sole authority to determine the settlement terms applicable to the grant of RSUs. Subject to the terms of the Equity Incentive Plan, and except as otherwise provided in an Award Agreement, on the settlement date for any RSU, the Participant will redeem each vested RSU for a Common Share, a cash payment, or a combination thereof.

Unless otherwise determined by the Plan Administrator and set forth in the particular Award Agreement, RSUs will be credited with dividend equivalents in the form of additional RSUs as of each dividend payment date in respect of which normal cash dividends are paid on Common Shares. Dividend equivalents will vest in proportion to the RSUs to which they relate and will be settled in the same manner as the RSUs.

Performance Share Units

A PSU is also a unit equivalent in value to a Common Share that does not vest until after a specified period, or satisfaction of other vesting conditions as determined by the Plan Administrator. The Plan Administrator will issue performance goals prior to the date of grant to which such performance goals pertain. The performance goals may be based upon the achievement of corporate, divisional or individual goals and may be applied to performance relative to an index or comparator group, or on any other basis determined by the Plan Administrator. The Plan Administrator may modify the performance goals as necessary to align them with the Company’s corporate objectives, subject to any limitations set forth in an Award Agreement or other agreement with a Participant. The performance goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur) and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur), all as set forth in the applicable Award Agreement.

Unless otherwise determined by the Plan Administrator and set forth in the particular Award Agreement, PSUs will be credited with dividend equivalents in the form of additional PSUs as of each dividend payment date in respect of which normal cash dividends are paid on Common Shares. Dividend equivalents will vest in proportion to the PSUs to which they relate and will be settled in the same manner as the PSUs.

Each PSU will consist of a right to receive a Common Share, cash payment, or a combination thereof, upon the achievement of such performance goals during such performance periods as the Plan Administrator may establish.

Other Share-Based Awards

Each Other Share-Based Award shall consist of a right (a) which is other than an Award or right described above, and (b) which is denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Common Shares (including, without limitation, securities convertible into Common Shares) as are deemed by the Plan Administrator to be consistent with the purposes of the Equity Incentive Plan; provided, however, that such right will comply with applicable law. Subject to the terms of the Equity Incentive Plan and any applicable Award Agreement, the Plan Administrator will determine the terms and conditions of Other Share-Based Awards.

Effect of Termination on Awards

The following table describes the impact of certain events upon the Participants under the Equity Incentive Plan, including termination for cause, resignation, termination without cause, disability, death or retirement, subject, in each case, to the terms of a Participant’s employment agreement, Award Agreement or other written agreement:

Event Provisions Termination for cause Resignation	Provisions
	Forfeiture of any unexercised Option or other Award. Forfeiture of any unexercised Option or other Award.

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Event Provisions

Provisions

Termination without cause

Any unvested Options or other Awards held by the Participant as of the Termination Date shall be immediately forfeited and cancelled as of the Termination Date and any vested Options or other Awards held by the Participant as of the Termination Date may be exercised or surrendered to the Company by the Participant at any time during the period that terminates on the earlier of: (A) the Expiry Date of such Award; and (B) the date that is 60 days after the Termination Date. Any Option or other Award that remains unexercised or has not been surrendered to the Company by the Participant shall be immediately forfeited upon the termination of such period. For vested PSUs, the GHRNC Committee will use current information at the time of termination to determine the payout multiplier.

Death

Any Option or other Award held by the Participant that has not vested as of the date of the death of such Participant shall vest on such date and may be exercised or surrendered to the Company by the Participant at any time during the period that terminates on the earlier of: (A) the expiry date of such Award; and (B) the first anniversary of the date of the death of such Participant. Any Option or other Award that remains unexercised or has not been surrendered to the Company by the Participant shall be immediately forfeited upon the termination of such period.
Retirement A retirement Option or other Award continues to vest in accordance with its terms and may be exercised or surrendered to the Company at any time during the period that terminates on the earlier of the expiry date and three years after retirement date to exercise. Any Option or other Award that remains unexercised or has not been surrendered to the Company by the Participant shall be immediately forfeited upon the termination of such period. If the Participant commences employment following retirement, any Option or other Award held by the Participant that has not been exercised as of such date is immediately forfeited.
Disability Any Option or other Award held by the Participant that has not vested as of the date of the disability of such Participant shall continue to vest in accordance with its terms and may be exercised or surrendered to the Company by the Participant at any time during the period that terminates on the earlier of: (A) the Expiry Date of such Award; and (B) the third anniversary of the Participant’s date of disability. Any Option or other Award that remains unexercised or has not been surrendered to the Company by the Participant shall be immediately forfeited upon the termination of such period.

Notwithstanding the foregoing, the Plan Administrator may, in its discretion, permit the acceleration of vesting of any or all Awards or waive termination of any or all Awards, all in the manner and on the terms as may be authorized by the Plan Administrator.

Change in Control

Except as may be set forth in an employment agreement, Award Agreement or other written agreement between the Company or a subsidiary of the Company and the Participant or as set out in the Equity Incentive Plan, the Plan

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Administrator may, without the consent of any Participant, take such steps as it deems necessary or desirable, including to cause:

(a) the conversion or exchange of any outstanding Awards into or for rights or other securities of substantially equivalent value, as determined by the Plan Administrator in its discretion, in any entity participating in or resulting from a Change in Control (as defined in the Equity Incentive Plan);
(b) outstanding Awards to vest and become exercisable, realizable or payable, or restrictions applicable to an Award to lapse, in whole or in part prior to or upon consummation of such Change in Control, and, to the extent the Plan Administrator determines, terminate upon or immediately prior to the effectiveness of such Change in Control;
(c) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise or settlement of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction net of any exercise price payable by the Participant (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction, the Plan Administrator determines, in good faith, that no amount would have been attained upon the exercise or settlement of such Award or realization of the Participant’s rights net of any exercise price payable by the Participant, then such Award may be terminated by the Company without payment);
(d) the replacement of such Award with other rights or property selected by the Board in its sole discretion; or
(e) any combination of the foregoing.

In taking any of the foregoing actions, the Plan Administrator will not be required to treat all Awards similarly in the transaction.

Notwithstanding the foregoing, and unless otherwise determined by the Plan Administrator or as set out in the Equity Incentive Plan, if, as a result of a Change in Control, the Common Shares will cease trading on a stock exchange, the Company may terminate all of the Awards granted under the Equity Incentive Plan at the time of and subject to the completion of the Change in Control by paying to each holder an amount for each Award equal to the fair market value of the Award held by such Participant as determined by the Plan Administrator, acting reasonably.

Assignability

Except as required by law, the rights of a Participant under the Equity Incentive Plan are not capable of being assigned, transferred, alienated, sold, encumbered, pledged, mortgaged or charged and are not capable of being subject to attachment or legal process for the payment of any debts or obligations of the Participant unless otherwise approved by the Plan Administrator.

Amendment, Suspension or Termination of the Equity Incentive Plan

The Plan Administrator may from time to time, without notice and without approval of the Shareholders, amend, modify, change, suspend or terminate the Equity Incentive Plan or any Awards granted pursuant thereunder as it, in its discretion, determines appropriate, provided, however, that: (a) no such amendment, modification, change, suspension or termination may materially impair any rights of a Participant or materially increase any obligations of a Participant under the Equity Incentive Plan without the consent of the Participant, unless the Plan Administrator determines such adjustment is required or desirable in order to comply with any applicable securities laws or TSX requirements; (b) any amendment that would cause an Award held by a U.S. taxpayer to be subject to the additional tax penalty under the U.S. tax code will be null and void with respect to the U.S. taxpayer unless his or her consent is obtained; and (c) any amendments to the Equity Incentive Plan or to any Awards granted pursuant to the Equity Incentive Plan are subject to TSX approval (including such amendments that do not otherwise trigger approval of the holders of voting shares of the Company).

Without limiting the generality of the foregoing, but subject to the below, the Plan Administrator may, without shareholder approval, at any time or from time to time, amend the Equity Incentive Plan for the purposes of making:

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any amendments to the general vesting provisions of each Award;
any amendment regarding the effect of termination of a participant’s employment or engagement;
any amendments to add covenants of the Company for the protection of Participants, provided that the Plan Administrator must be of the good faith opinion that such additions will not be prejudicial to the rights or interests of the Participants;
any amendments not inconsistent with the Equity Incentive Plan as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the Plan Administrator, having in mind the best interests of the Participants, it may be expedient to make, including amendments that are desirable as a result of changes in law in any jurisdiction where a Participant resides, provided that the Plan Administrator must be of the opinion that such amendments and modifications will not be prejudicial to the interests of the Participants and non-employee directors; or
any such changes or corrections which, on the advice of counsel to the Company, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the Plan Administrator must be of the opinion that such changes or corrections will not be prejudicial to the rights and interests of the Participants.

Notwithstanding the foregoing and subject to any rules of the TSX, shareholder approval will be required for any amendment, modification or change that:

increases the percentage of Common Shares reserved for issuance under the Equity Incentive Plan, except pursuant to the provisions in the Equity Incentive Plan which permit the Plan Administrator to make equitable adjustments in the event of transactions affecting the Company or its capital;
increases or removes the 10% limits on Common Shares issuable or issued to Insiders;
reduces the exercise price of an Award, except pursuant to the provisions in the Equity Incentive Plan which permit the Plan Administrator to make equitable adjustments in the event of transactions affecting the Company or its capital;
extends the term of an Award beyond the original expiry date (except where an expiry date would have fallen within a blackout period applicable to the Participant or within five business days following the expiry of such a blackout period);
permits an Award to be exercisable beyond 10 years from its date of grant (except where an expiry date would have fallen within a blackout period);
increases or removes the non-employee director participation limits;
permits Awards to be transferred to a person;
changes the eligible participants of the Equity Incentive Plan; or
deletes or reduces the range of amendments which require shareholder approval.

Pension Benefits and Nonqualified Deferred Compensation

The Company does not have a company-sponsored pension plan, and none of the NEOs participate in a nonqualified deferred compensation plan.

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Other Perquisites and Benefits

The Company also provides a limited benefits package to executive officers that consists of health and dental benefits, life insurance, long-term disability insurance and an employee and family assistance plan.

Compensation Risk Assessment

Following the Closing and on an annual basis thereafter, the Board will review the potential risks associated with the structure and design of the various compensation plans of the Company, including a comprehensive review of the material compensation plans and programs for all employees.

As part of the Company’s approach to compensation risk mitigation, the Board and GHRNC Committee will review risk mitigating compensation governance practices/policies, including:

Competitive and typical pay philosophy, peer group, and pay mix;
Risk mitigating design features related to the short and long-term incentive (e.g., caps on bonus payouts; incorporation of Board judgment in assessing performance);
Choice of corporate performance metrics and their alignment to stock price performance;
R etaining an independent advisor to provide various executive and director compensation related services, as required;
Prohibition on hedging;
Executive and director share ownership guidelines;
Incentive compensation clawback/forfeiture policy.

Summary Compensation Table

The following table presents total compensation amounts expected to be paid, accrued or otherwise expensed by the Company with respect to fiscal 2021 for each of the NEOs, assuming the continued employment of each NEO. Following the Closing, the GHRNC Committee will work with Hugessen to establish the compensation arrangements for each of the NEOs, assuming the continued employment of each NEO.

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Name and principal position	Year	Salary(1)	Share awards(2)	Option awards(3)	Non-equity incentive plan compensation	Non-equity incentive plan compensation	Pension Value	All other compensation(5)	Total compensation
					Annual incentive plans(4)	Long-term incentive plans
Ben Nyland(6) President, Chief Executive Officer and Director	2021	$225,000	-	$448,871	$100,000	N/A	N/A	N/A	$773,871
Darren Ready Chief Financial Officer	2021	$200,000	-	$260,028	$100,000	N/A	N/A	N/A	$560,028
George Rubin Chief Commercial Officer	2021	$235,000	-	$430,077	N/A	N/A	N/A	N/A	$665,077
Daryl D. Musselman VP, Engineering	2021	$245,000	-	$269,895	N/A	N/A	N/A	N/A	$514,895

Notes:

(1) Amounts reflect the annualized base salary for each NEO to be in effect as of the Closing.
(2) The Company has yet to establish equity compensation levels for its NEOs.
(3) Includes options granted under the Predecessor Plan and options to be granted to such individuals pursuant to the Closing Option Grant. Option values have been calculated using the Black-Scholes option pricing model.
(4) The total amount of all short-term incentive bonuses to be paid or payable in or with respect to fiscal 2021 has yet to be determined. However, in connection with the year ended December 31, 2020, the Board has approved the following cash bonuses to the NEOs which will be paid during fiscal 2021: Ben Nyland - $100,000 and Darren Ready - $100,000.
(5) None of the NEOs are entitled to perquisites or other personal benefits which, in the aggregate, are worth over $50,000 or over 10% of their base salary.
(6) The entirety of Mr. Nyland’s compensation relates to his role as an executive officer of the Company. Mr. Nyland is not compensated for his role as a director of the Company.

Outstanding Option-Based and Share-Based Awards

The following table sets out, for each NEO, the value of all Options that are anticipated to be outstanding on the Closing. The Company does not anticipate a NEO having any other share-based awards outstanding on the Closing.

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Name and Principal Position		Option-based awards	Option-based awards
	Number of securities underlying unexercised Options	Option exercise price	Option expiration date	Value of unexercised in-the- money options(1)
Ben Nyland Chief Executive Officer, President and Director	696,666 Common Shares(2) 36,000 Common Shares(3)	$0.99(2) $16.00(3)	December 31, 2026 February 25, 2031	$10,456,957
Darren Ready Chief Financial Officer	323,334 Common Shares(2) 23,500 Common Shares(3)	$0.99(2) $16.00(3)	December 31, 2026 February 25, 2031	$4,853,243
George Rubin Chief Commercial Officer	56,500 Common Shares(3)	$16.00(3)	February 25, 2031	$Nil
Daryl D. Musselman VP, Engineering	100,000 Common Shares(2) 26,000 Common Shares(3)	$2.40(2) $16.00(3)	August 30, 2030 February 25, 2031	$1,360,000

Notes:

(1) The value of unexercised in-the-money Options is calculated based on the Offering Price.
(2) Reflects Options granted under the Predecessor Plan after giving effect to the Share Consolidation pursuant to the Pre-Closing Reorganization.
(3) Options expected to be granted pursuant to the Closing Option Grant.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table indicates, for each NEO, the value of incentive plan awards currently expected to be vested or earned during fiscal 2021, assuming the continued employment of each NEO. Following the Closing, the GHRNC Committee will work with Hugessen to establish the compensation arrangements for each of the NEOs, assuming the continued employment of each NEO.

Name and Principal Position	Option-Based Awards – Value Vested During the Year(1)	Share-Based Awards – Value Vested During the Year	Non-Equity Incentive Plan Compensation – Value Earned During the Year
Ben Nyland President, Chief Executive Officer and Director	$3,485,652	N/A	N/A
Darren Ready Chief Financial Officer	$1,617,748	N/A	N/A
George Rubin Chief Commercial Officer	$Nil	N/A	N/A
Daryl D. Musselman VP Engineering	$340,000	N/A	N/A

Note:

(1) The value of Options expected to vest in fiscal 2021 is calculated based on the Offering Price.

Mr. Nyland and Mr. Ready’s Options have a combination of time-based and non-time based vesting provisions. 50% of the Options vest equally over 16 quarters starting on January 1, 2017. The remaining 50% vest equally over three milestones: (i) upon a liquidity event, (ii) upon a post-money valuation of $50,000,000 or more and (iii) upon a postmoney valuation of $100,000,000 or more.

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NEO Employment Agreements

The Company has written employment agreements with each of the NEOs, who are each entitled to receive compensation established by the Company as well as other benefits in accordance with plans available to the most senior employees.

Upon the Closing, each of these employment agreements will be reviewed by the Board in consultation with the GHRNC Committee and Hugessen and may, as considered appropriate, be amended to reflect the changed status of the Company and the compensation framework developed following the Closing. A summary of the termination and/or change of control provisions in the current employment agreements is set out below.

Ben Nyland, President, Chief Executive Officer and Director

If Mr. Nyland is terminated without cause, the Company will provide Mr. Nyland with (i) notice or pay in lieu of notice equal to 13 months base salary, if terminated before June 16, 2021, such notice or pay in lieu of notice period will increase by one month on June 16, 2021 and on each anniversary of such date up to a combined maximum of 24 months; and (ii) any performance bonus earned but unpaid, with respect to the compensation program for the previous fiscal year based on the average performance bonus paid in the two years preceding termination, during such notice period. Additionally, on the termination date, any unvested Options held by Mr. Nyland, which would have vested during the applicable notice period, will automatically fully vest and, together with all vested Options, may be exercised by Mr. Nyland for a period of three months from the date of said termination.

Furthermore, if there is a “change of control” of the Company and (a) in the three months preceding, or 12 months following, such “change of control”, Mr. Nyland’s employment is terminated or he experiences a material adverse change concerning his employment, or (b) the successor company does not fully assume the Company’s obligations under Mr. Nyland’s employment agreement or Mr. Nyland does not enter into a mutually agreeable employment agreement with such successor effective within 30 days of the “change of control”, then, in addition to his accrued but unpaid base salary and vacation pay up to the applicable date, and benefits continuation, the Company will provide Mr. Nyland with (i) pay, in lieu of notice of termination, in a lump sum equivalent to the total of 24 months base salary; and (ii) any performance bonus earned but unpaid, with respect to the compensation program for the previous fiscal year based on the average performance bonus paid in the two years preceding termination, during such notice period. Additionally, all unvested Options held by Mr. Nyland will automatically fully vest and, together with all vested Options, may be exercised by Mr. Nyland for a period of three months from such applicable date.

In the event of Mr. Nyland’s employment being terminated without cause or the occurrence of a “change of control” event, as described above, Mr. Nyland is required to release the Company from all claims arising out of his employment, the termination of such employment and termination of the benefits of such employment, except for in respect to any amounts, rights or benefits he is entitled to under his employment agreement, the Company’s standard incentive stock option plan or any other agreements with the Company that he did not yet receive at the time of the release. Mr. Nyland is not required to mitigate the amount of any payments provided upon termination or the occurrence of a “change of control” event, nor shall any payment provided be reduced by any compensation, remuneration and/or benefits earned by Mr. Nyland as a result of employment by another employer or the rendering of services after the date of termination.

Mr. Nyland has also entered into a confidentiality, intellectual property and non-competition agreement with the Company, which, among other things, contains certain customary restrictive covenants that will continue to apply following the termination of his employment, including non-competition provisions that are in effect for the 12 months following the termination of Mr. Nyland’s employment and non-solicitation provisions that are in effect during his employment and for the 12 months following the termination of his employment.

Darren Ready, Chief Financial Officer

If Mr. Ready is terminated without cause, the Company will provide Mr. Ready with (i) notice or pay in lieu of notice equal to 10 months base salary if terminated before January 1, 2022, such notice or pay in lieu of notice period will increase by one month on January 1, 2022 and on each anniversary of such date up to a combined maximum of 18 months; and (ii) any performance bonus earned but unpaid, with respect to the compensation program for the previous fiscal year based on the average performance bonus paid in the two years preceding termination, during such notice

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period. Additionally, on the termination date, any unvested Options held by Mr. Ready, which would have vested during the applicable notice period, will automatically fully vest and, together with all vested Options, may be exercised by Mr. Ready for a period of three months from the date of said termination.

Furthermore, if there is a “change of control” of the Company and (a) in the six months preceding, or 12 months following, such “change of control”, Mr. Ready’s employment is terminated or he experiences a material adverse change concerning his employment, or (b) the successor company does not fully assume the Company’s obligations under Mr. Ready’s employment agreement or Mr. Ready does not enter into a mutually agreeable employment agreement with such successor effective within 30 days of the “change of control”, then in addition to his accrued but unpaid base salary and vacation pay up to the applicable date, and benefits continuation, the Company will provide Mr. Ready with (i) pay, in lieu of notice of termination, in a lump sum equivalent to the total of 24 months base salary; and (ii) any performance bonus earned but unpaid, with respect to the compensation program for the previous fiscal year based on the average performance bonus paid in the two years preceding termination, during such notice period. Additionally, all unvested Options held by Mr. Ready will automatically fully vest and, together with all vested Options, may be exercised by Mr. Ready for a period of three months from such applicable date.

In the event of Mr. Ready’s employment being terminated without cause or the occurrence of a “change of control” event, as described above, Mr. Ready is required to release the Company from all claims arising out of his employment, the termination of such employment and termination of the benefits of such employment, except for in respect to any amounts, rights or benefits he is entitled to under his employment agreement, the Company’s standard incentive stock option plan or any other agreements with the Company that he did not yet receive at the time of the release. Mr. Ready is not required to mitigate the amount of any payments provided upon termination or the occurrence of a “change of control” event, nor shall any payment provided be reduced by any compensation, remuneration and/or benefits earned by Mr. Ready as a result of employment by another employer or the rendering of services after the date of termination.

Mr. Ready has also entered into a confidentiality, intellectual property and non-competition agreement with the Company, which, among other things, contains certain customary restrictive covenants that will continue to apply following the termination of his employment, including non-competition provisions that are in effect for the 12 months following the termination of Mr. Ready’s employment and non-solicitation provisions that are in effect during his employment and for the 12 months following the termination of his employment.

George Rubin, Chief Commercial Officer

If Mr. Rubin is terminated without cause, the Company will provide Mr. Rubin with (i) notice or pay in lieu of notice equal to six months base salary if terminated before January 1, 2022, such notice or pay in lieu of notice period will increase by one month on January 1, 2022 and on each anniversary of such date up to a combined maximum of 18 months; and (ii) any bonus earned prior to termination, but unpaid, with respect to the compensation program for the previous fiscal year and any bonus which would have been paid out during the notice period. Additionally, on the termination date, any unvested Options held by Mr. Rubin, which would have vested during the applicable notice period, will automatically fully vest and, together with all vested Options, may be exercised by Mr. Rubin for a period of three months from the date of said termination.

Furthermore, if there is a “change of control” of the Company and (a) in the next 12 months following such “change of control”, Mr. Rubin’s employment is terminated or he experiences a material adverse change concerning his employment, or (b) the successor company does not fully assume the Company’s obligations under Mr. Rubin’s employment agreement or Mr. Rubin does not enter into a mutually agreeable employment agreement with such successor effective within 30 days of the “change of control”, then in addition to his accrued but unpaid base salary and vacation pay up to the applicable date, and benefits continuation, the Company will provide Mr. Rubin with (i) pay, in lieu of notice of termination, in a lump sum equivalent to the total of 18 months base salary; and (ii) any bonus earned prior to termination, but unpaid, with respect to the compensation program for the previous fiscal year and any bonus which would have been paid out during the notice period. Additionally, all unvested Options held by Mr. Rubin will automatically fully vest and, together with all vested Options, may be exercised by Mr. Rubin for a period of three months from such applicable date.

In the event of Mr. Rubin’s employment being terminated without cause or the occurrence of a “change of control” event, as described above, Mr. Rubin is required to release the Company from all claims arising out of his employment, the termination of such employment and termination of the benefits of such employment, except for in respect to any

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amounts, rights or benefits he is entitled to under his employment agreement, the Company’s standard incentive stock option plan or any other agreements with the Company that he did not yet receive at the time of the release. Mr. Rubin is not required to mitigate the amount of any payments provided upon termination or the occurrence of a “change of control” event, nor shall any payment provided be reduced by any compensation, remuneration and/or benefits earned by Mr. Rubin as a result of employment by another employer or the rendering of services after the date of termination.

Mr. Rubin has also entered into a confidentiality, non-disclosure and non-competition agreement with the Company, which, among other things, contains certain customary restrictive covenants that will continue to apply following the termination of his employment, including non-competition and non-solicitation provisions that are in effect during Mr. Rubin’s employment and for the 12 months following the termination of his employment.

Daryl Musselman, Vice President, Engineering

If Dr. Musselman is terminated without cause, then in addition to benefits continuation, the Company will provide Dr. Musselman with (i) notice or pay in lieu of notice equal to four months base salary, if terminated before May 4, 2021, such notice or pay in lieu of notice period will increase by one month on May 4, 2021 and on each anniversary of such date up to a combined maximum of 12 months; and (ii) any performance bonus earned but unpaid, with respect to the compensation program for the previous fiscal year based on the average performance bonus paid in the two years preceding termination, during such notice period. Additionally, on the termination date, any unvested Options held by Dr. Musselman, which would have vested during the applicable notice period, will automatically fully vest and, together with all vested Options, may be exercised by Dr. Musselman for a period of three months from the date of said termination.

Furthermore, if there is a “change of control” of the Company and in the three months preceding, or 12 months following, such “change of control”, (a) Dr. Musselman’s employment is terminated, (b) Dr. Musselman experiences a material adverse change concerning his employment, or (c) the successor company does not fully assume the Company’s obligations under Dr. Musselman’s employment agreement or Dr. Musselman does not enter into a mutually agreeable employment agreement with such successor effective within 30 days of the “change of control”, then in addition to his accrued but unpaid base salary and vacation pay up to the applicable date, and benefits continuation, the Company will provide Dr. Musselman with (i) pay, in lieu of notice of termination, in a lump sum equivalent to the total of 12 months base salary; and (ii) any performance bonus earned but unpaid, with respect to the compensation program for the previous fiscal year based on the average performance bonus paid in the two years preceding termination, during such notice period. Additionally, all unvested Options held by Dr. Musselman will automatically fully vest and, together with all vested Options, may be exercised by Dr. Musselman for a period of three months from such applicable date.

In the event of Dr. Musselman’s employment being terminated without cause or the occurrence of a “change of control” event, as described above, Dr. Musselman is required to release the Company from all claims arising out of his employment, the termination of such employment and termination of the benefits of such employment, except for in respect to any amounts, rights or benefits he is entitled to under his employment agreement, the Company’s standard incentive stock option plan or any other agreements with the Company that he did not yet receive at the time of the release. Dr. Musselman is not required to mitigate the amount of any payments provided upon termination or the occurrence of a “change of control” event, nor shall any payment provided be reduced by any compensation, remuneration and/or benefits earned by Dr. Musselman as a result of employment by another employer or the rendering of services after the date of termination.

Dr. Musselman has also entered into a confidentiality, non-disclosure and non-competition agreement with the Company, which, among other things, contains certain customary restrictive covenants that will continue to apply following the termination of his employment, including non-competition and non-solicitation provisions that are in effect during Dr. Musselman’s employment and for the 12 months following the termination of his employment.

Termination or Change of Control Table

The table below shows the estimated incremental payments that would be made to the following NEOs upon the occurrence of certain events based on their current employment agreements:

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Name and Principal Position	Event	Severance ($)	Acceleration of Unvested Options(1) ($)	Total ($)
Ben Nyland President & Chief Executive Officer	Termination without cause	243,750	3,485,652	3,729,402
	Occurrence of a change of control event	450,000	3,485,652	3,935,652
Darren Ready Chief Financial Officer	Termination without cause	166,667	1,617,748	1,784,414
	Occurrence of a change of control event	400,000	1,617,748	2,017,748
George Rubin Chief Commercial Officer	Termination without cause	117,500	Nil	117,500
	Occurrence of a change of control event	352,500	Nil	352,500
Daryl Musselman VP, Engineering	Termination without cause	81,667	85,000	166,667
	Occurrence of a change of control event	245,000	1,190,000	1,435,000

Note:

(1) Assuming the triggering event took place on December 31, 2020.

The termination benefits described above will be subject to applicable laws.

DIRECTOR COMPENSATION

General

The following discussion describes the significant elements of the expected compensation program for members of the Board of Directors and its committees. The compensation of the Company’s directors is designed to attract and retain committed and qualified individuals to serve on the Board of Directors and to align their compensation with the long-term interests of its shareholders.

Director Compensation

In consideration for serving on the Board, each director (other than directors that are employees of the Company or one of its affiliates) will be paid an annual retainer. The chairs of the Board, the Audit Committee, and the GHRNC Committee will also receive an additional annual retainer. All directors will be reimbursed for their reasonable outof-pocket expenses incurred while serving as directors.

The Board of Directors, on the recommendation of the GHRNC Committee, will be responsible for reviewing and approving the directors’ specific compensation arrangements, and implementing any changes to those arrangements. In arriving at these, the GHRNC Committee will work with Hugessen to review competitive market practice among the Board-approved peer group and will recommend compensation arrangements based on this group and its median target pay position. As required, the Committee may apply judgement to developing its recommendation to consider the size and relative complexity of Loop as compared to its peers.

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Long-Term Incentive Plan

Equity Incentive Plan

On Closing, the Company will establish the Equity Incentive Plan, which will provide for the grant of Awards. See “ Executive Compensation – Components of Executive Compensation –One-Time Closing Option Grant to Employees and Directors in Connection with the Offering ”.

Each year, the Company’s directors may elect to take all or a portion of their annual Board retainer in the form of RSUs or DSUs. Participation by the directors in the Equity Incentive Plan is voluntary. If the Director has elected to receive RSUs they will vest in accordance with the terms of the plan that will be established by the GHRNC Committee and approved by the Board of Directors after Closing. If the Director has elected to receive DSUs, following the end of an eligible director’s tenure as a member of the Board, the director will receive Common Shares, a payment in cash at the fair market value of the Common Shares represented by his or her DSUs, or a combination of the two on the director’s elected redemption date. Each director’s elected redemption date may not be (a) earlier than the date the director’s tenure as a member of the Board ceases, and (b) later than December 15[th] of the year following the year in which the director’s tenure as a member of the Board ceases.

It is anticipated that share ownership guidelines for non-employee directors will be established to further align the interests of directors and shareholders and to demonstrate the Board’s long-term commitment to growth and continuance of a sound corporate governance program.

Outstanding Option-Based and Share-Based Awards

The following table sets out, for each director other than the executive director, the value of all Options that are anticipated to be outstanding on the Closing. The Company does not anticipate a NEO having any other share-based awards outstanding on the Closing.

Name and Principal Position		Option-based awards	Option-based awards
	Number of securities underlying unexercised Options	Option exercise price	Option expiration date	Value of unexercised in-the- money options(1)
Andreas Truckenbrodt Director and Chair of the Board	100,000 Common Shares(2) 183,333 Common Shares(2) 9,300 Common Shares(3)	$0.74(2) $0.74(2) $16.00(3)	September 23, 2023 May 15, 2024 February 25, 2031	$4,323,662
Neil Murdoch Director	183,333 Common Shares(2) 7,000 Common Shares(3)	$0.74(2) $16.00(3)	September 23, 2023 February 25, 2031	$2,797,662
Allan Collings Director	183,333 Common Shares(2) 7,000 Common Shares(3)	$0.74(2) $16.00(3)	September 23, 2023 February 25, 2031	$2,797,662
Wayne A. Eckerle Director	Nil	N/A	N/A	N/A
Sophia Langlois Director	7,000 Common Shares(3)	$16.00(3)	February 25, 2031	$Nil

Notes:

(1) The value of unexercised in-the-money Options is calculated based on the Offering Price.

(2) Reflects Options granted under the Predecessor Plan after giving effect to the Share Consolidation pursuant to the Pre-Closing Reorganization.

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(3) Options expected to be granted pursuant to the Closing Option Grant.

CORPORATE GOVERNANCE

General

The Company’s corporate governance disclosure obligations are set out in the Canadian Securities Administrators’ NI 52-110, NI 58-101 and NP 58-201. These instruments contain a series of guidelines and requirements for effective corporate governance (collectively, the “ Guidelines ”). The Guidelines address matters such as the constitution and independence of corporate boards, the functions to be performed by boards and their committees, the effectiveness and education of board members and other items dealing with sound corporate governance. NI 58-101 requires the disclosure by each listed corporation of its approach to corporate governance with reference to the Guidelines.

Set out below is a description of the Company’s approach or anticipated approach to corporate governance in relation to the Guidelines.

Board of Directors

Overview

The Company’s articles provide for the number of directors of the Company being the greater of three, and the number set by ordinary resolution or resulting from retiring directors continuing in office due to such positions not being filled at a shareholders’ meeting in which there should be an election of directors. The current maximum number of directors, in accordance with the Company’s last annual general meeting, is six. In addition, the Board of Directors may appoint one or more additional directors who shall hold office until the close of the next annual meeting of holders of Common Shares, provided that the total number of directors so appointed may not exceed: (i) one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or (ii) in any other case, one-third of the number of current directors who were elected or appointed as directors, provided that such current directors were not appointed as additional directors.

Upon the Closing, the Board of Directors will be comprised of six directors; Andreas Truckenbrodt, Neil Murdoch, Allan Collings, Ben Nyland, Christopher C. Clulow, and Sophia Langlois. Certain members of the Board of Directors are also members of the board of directors of other reporting issuers, as noted below:

Name of Director Sophia Langlois	Name(s) of Reporting Issuer(s) and Exchange
	Alaris Equity Partners Income Trust – TSX (AD.UN)

The mandate of the Board of Directors (the “ Mandate of the Board of Directors ”) will require that the Board meet as many times as it considers necessary to carry out its responsibilities effectively, and in any event on a quarterly basis, at minimum, and that Board meetings also include in-camera meetings of the independent members of the Board without any members of management present to allow for open discussions between such independent directors. A copy of the Mandate of the Board of Directors is appended to this prospectus at Appendix “A”.

Independence of the Board

Under NI 58-101, a director is considered to be independent if he or she is independent within the meaning of certain provisions of NI 52-110. For the purposes of this disclosure, the applicable meaning of “independent” is that which is provided in NI 52-110. Pursuant to NI 52-110, an “independent director” is a director who has no direct or indirect material relationship with the Company. A “material relationship” is in turn defined as a relationship that could, in the view of the Board, be reasonably expected to interfere with such member’s independent judgment. In determining whether a particular director is an “independent director” or a “non-independent director”, the Board considers the factual circumstances of each director in the context of the Guidelines.

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Five of the six members who are expected to form the Board of Directors on the Closing – Andreas Truckenbrodt, Neil Murdoch, Allan Collings, Christopher C. Clulow and Sophia Langlois (the “ Independent Directors ”) – are considered “independent” under Sections 1.4 and 1.5 of NI 52-110. The Board of Directors has determined that each of the Independent Directors does not have a material relationship with the Company that could be reasonably expected to interfere with the exercise of their respective independent judgement. In addition, the Board of Directors has considered that none of the Independent Directors exercise control over the Company by virtue of beneficial ownership of the Company’s securities or any relationship with a beneficial owner thereof, and accordingly the Board of Directors does not consider that any such security holdings or relationships will interfere with the exercise of their respective independent judgement. Ben Nyland is not considered “independent” under Sections 1.4 and 1.5 of NI 52-110 because he also functions as the President and CEO of the Company.

Director Tenure

It is expected that each of the proposed directors of the Company will serve until the close of the next annual meeting of holders of Common Shares or until his or her successor is elected or appointed. The Board is not expected to adopt a term limit for directors, as the Board believes that the imposition of director term limits may discount the value of experience and continuity amongst Board members and runs the risk of excluding experienced and potential valuable Board members. The Board will rely on an annual director assessment procedure, as more fully described below, in evaluating Board members, and believes that it can best strike the right balance between continuity and fresh perspectives without mandated term limits.

Board Mandate

The members of the Board are ultimately responsible for the stewardship of the Company’s business and affairs. In exercising their powers and discharging their duties, the directors are required to act honestly and in good faith with a view to the best interests of the Company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Although directors may be appointed or elected by the shareholders to bring special expertise or point of view to Board deliberations, they are not chosen to represent a particular constituency, and the best interests of the Company as a whole shall be paramount at all times.

The Board acts in accordance with the Company’s articles, as well as with applicable laws and Company policies. The Board will discharge its responsibilities both directly and through the work performed by its standing committees, as well as any other committees appointed from time to time on an ad hoc basis. The Board will review and approve any transactions and decisions that fall within its approval mandate and will review the results of these decisions on a regular basis. A copy of the Mandate of the Board of Directors is attached as Appendix “A” to this prospectus and will be available on the Company’s website at www.loopenergy.com.

Position Descriptions

Chair of the Board and Committee Chairs

It is expected that Andreas Truckenbrodt will continue to be the chair of the Board of Directors. A written position description for the chair is included as part of the mandate of the Board of Directors, which sets out the position’s key responsibilities, including to (a) ensure the Board is aware of its obligations to the Company, shareholders, management, other stakeholders and lead the Board in carrying out such obligations pursuant to applicable law; (b) establish, in conjunction with the GHRNC Committee, the frequency of Board meetings and review such frequency from time to time, as considered appropriate or as requested by the Board; (c) recommend the committees of the Board and their composition, review the need for, and the performance and suitability of such committees and make such adjustments as are deemed necessary from time to time; (d) ensure the Board receives adequate and regular updates from the CEO and executive officers on all material issues relating to the Company; (e) act as a liaison and regularly communicate with all directors and committee chairs to coordinate input from directors, and optimize the effectiveness of the Board and its committees; and (f) in conjunction with the GHRNC Committee, review and assess director attendance, performance and compensation as well as the size and composition of the Board.

The charters for each standing committees of the Board will include the responsibilities of each committee chair, including chairing committee meetings and working with the respective committee and management to ensure, to the

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greatest extent possible, the effective functioning of the committee. These charters and position descriptions will be considered by the Board of Directors for approval annually.

CEO

Ben Nyland is the Company’s President and CEO. The primary functions of the CEO are to lead the management of the Company’s business and affairs and to lead the implementation of the resolutions and the policies of the Board of Directors. Prior to the Closing, the Board will develop a written position description for the CEO which will set out the CEO’s key responsibilities, including duties relating to strategic planning, operational direction and interaction with the Board of Directors and communication with shareholders. The CEO position description will be considered by the Board of Directors for approval annually.

Orientation and Continuing Education

Upon the Closing, the Board will consist of directors who are familiar with the industry or who bring particular expertise to the Board from their professional experience. New directors will be expected to participate in an initial information session on the Company in the presence of its senior executive officers to learn about, among other things, the business of Loop, its financial situation and its strategic planning. All directors will receive a record of public information about the Company, as well as other relevant corporate and business information including corporate governance practices of the Company, the structure of the Board and its standing committees, its corporate organization, the charters of the Board and its standing committees, the Company’s articles, the Code (as defined below) and other relevant corporate policies. Senior management will make regular presentations to the Board on the main areas of the business and the directors will have the opportunity to ask questions and tour Loop’s facilities.

The GHRNC Committee shall review, monitor and make recommendations with respect to director orientation. In addition, the GHRNC Committee shall review, monitor and make recommendations with respect to director continuing education opportunities designed to maintain or enhance the skills and abilities of the Company’s directors and to ensure that their knowledge and understanding of the Company’s business remains current.

Code of Business Conduct and Ethics

On or prior to Closing, the Company expects to adopt code of business conduct and ethics (the “ Code ”) for directors, officers, employees and consultants. The Code is expected to set out our core values and standards of behaviour that are expected from our personnel with respect to all aspects of our business. The Code will be designed to deter wrongdoing, promote honest and ethical conduct; promote the avoidance of conflicts of interest; ensure compliance with applicable governmental laws, rules and regulations, ensure prompt internal reporting of any violations of the Code; establish accountability for adherence to the Code; and support the Company’s culture of honesty and accountability.

Management of the Company is responsible for investigating and enforcing matters related to the Code and for reporting breaches of the Code to the appropriate officer of the Company. Certain of the matters covered by the Code are also subject to Audit Committee oversight. Management is also responsible for communicating the Code to those who, together with the Company’s employees, will be expected to encourage and promote a culture of ethical business conduct.

Directors and executive officers are required by applicable law and the Company’s corporate governance practices and policies to promptly disclose any potential conflict of interest that may arise. If a director or executive officer has a material interest in an agreement or transaction, applicable law and principles of sound corporate governance require them to declare the interest in writing and, where required by applicable law, abstain from voting with respect to such agreement or transaction.

Employees and consultants of Loop are required to immediately report any such conflicts of interest to their direct supervisor, a member of the human resources team or a senior executive officer of the Company. The Code also sets out: (a) standards for the Company’s and its employees’ relationships with customers and others; (b) standards for the accuracy of the Company’s books and records and the provision of information to external auditors; and (c) rules regarding the ownership, protection and proper use of the Company’s assets.

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Any waiver of the Code’s provisions in respect of a director or officer must be approved by the Board. The CEO may approve waivers in respect of employees and consultants, and must report such waivers to the Board.

A copy of the Code will be available on the Company’s website at www.loopenergy.com.

Committees

On the Closing, the Board of Directors will implement charters for each of its proposed standing committees, namely the Audit Committee and the GHRNC Committee. Position descriptions for each of the chair of the Board, and the chairs of each of the Audit Committee and the GHRNC Committee, will be included in their respective charters. The Board of Directors will delegate to the applicable committee the duties and responsibilities set out in each standing committee’s charter and the charters will be reviewed annually by the Board.

Audit Committee

The role of the Audit Committee is to assist the Board in fulfilling its financial oversight obligations, including the responsibility to: (a) assist the Board in fulfilling its responsibility to oversee the Company’s accounting and financial reporting processes and audits of the Company’s financial statements; (b) review the Company’s financial reports and other financial information, disclosure controls and procedures and internal accounting and financial controls; (c) oversee the work of the external auditor in preparing or issuing an audit report or related work, monitor the independence of the external auditor and pre-approve all auditing services and permitted non-audit services provided by the external auditor; and (d) serve as an independent and objective party to monitor the Company’s financial reporting processes and internal control systems. A copy of the charter of the Audit Committee is attached as Appendix “B” to this prospectus and will be available on the Company’s website at www.loopenergy.com.

Until the Closing, the members of the Audit Committee are Neil Murdoch and Allan Collings. Following the Closing, the members of the Audit Committee are expected to consist of Neil Murdoch, Allan Collings and Sophia Langlois. As discussed above, each of the current and expected members of the Audit Committee are considered “independent” under Sections 1.4 and 1.5 of NI 52-110. Each of the current and expected members of the Audit Committee are also “financially literate” within the meaning of NI 52-110. For the purposes of NI 52-110, an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and level of complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements. All current and expected members of the Audit Committee have experience reviewing financial statements and dealing with related accounting and auditing issues. The education and experience of each expected member of the Audit Committee relevant to the performance of his or her duties as a member of the Audit Committee can be found under “ The Board of Directors and Management – Biographies ”.

Pre-Approval Policies and Procedures

The Audit Committee charter includes responsibilities regarding the provision of non-audit services by Loop’s external auditors. This policy encourages consideration of whether the provision of services other than audit services is compatible with maintaining the auditor’s independence and requires Audit Committee pre-approval of permitted audit and audit-related services.

Auditor Fees

The total fees billed by KPMG LLP in fiscal 2019 and fiscal 2018 were $69,657 and $60,622 respectively, as detailed below. “Audit fees” refers to the aggregate fees billed by the external auditor for audit services. “Audit related fees” refers to aggregate fees billed for assurance and related services by the Company’s external auditor that are reasonably related to the performance of the audit or review of the Financial Statements and not reported under audit fees including the review of interim filings and travel related expenses for the annual audit. “Tax fees” includes fees for professional services rendered by the external auditor for tax compliance, tax advice, and tax planning. “All other fees” includes all fees billed by the external auditors for services not covered in the other three categories.

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Audit fees .................................................................................................................................. Audit-related fees ...................................................................................................................... Tax fees ..................................................................................................................................... All other fees ............................................................................................................................. Total ...................................................................................................................................	Year ended 2019 $69,657 - - - $69,657	Year ended 2018
		$48,872 - $11,750 -
		$60,622

Governance, Human Resources, Nomination and Compensation Committee

On the Closing, the Board will establish the GHRNC Committee, to be comprised of three directors, each of whom will be considered to be “independent”, as that term is defined in NI 52-110. The members of the GHRNC Committee are expected to be Andreas Truckenbrodt, Christopher C. Clulow and Sophia Langlois.

Prior to Closing, the Board will adopt a written charter for the GHRNC Committee that establishes, inter alia , the GHRNC Committee’s purpose and responsibilities with respect to executive compensation. Within the purview of its mandate, the GHRNC Committee shall, among other things:

consider and recommend for approval by the Board: (i) the appointment of the Company’s executive officers; and (ii) a succession plan with respect to each executive officer, as may be required;
review the CEO’s assessment of existing management resources and plans for ensuring that qualified personnel will be available as required for succession of each executive officer and to report on this matter to the Board;
assess the performance of the executive officers against pre-set specific corporate and individual goals and objectives approved by the GHRNC Committee;
review and recommend to the Board the annual objectives for which the CEO is responsible;
oversee and recommend for approval by the Board the executive compensation principles, policies, programs, grants of equity-based incentives and processes based on the principles that the Company’s executive compensation should be designed to (i) attract, retain, motivate and reward management for their performance and contribution to Loop’s long-term success and (ii) focus management on the key business factors that affect shareholder value and to align their compensation with Loop’s business and financial objectives and the long-term interests of Loop’s shareholders;
consider and recommend annually, or as required for approval by independent directors of the Board, all forms of compensation for the executive officers;
review the “compensation discussion and analysis” and related executive compensation disclosure for inclusion in the Company’s public disclosure documents, in accordance with applicable rules and regulations; and
review, monitor, report and, where appropriate, provide recommendations to the Board on the Company’s exposure to risks related to executive compensation policies and practices, if any, and identify compensation policies and practices that mitigate any such risk.

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Compensation Oversight

The GHRNC Committee will oversee and recommend for approval by the Board the executive and director compensation principles, policies, programs, grants of equity-based incentives and processes. The GHRNC Committee will specifically consider and recommend annually, or as required for approval by the independent directors of the Board, all forms of compensation for the executive officers and directors of the Company. Further particulars of the process by which compensation for the Company’s executive officers and directors is determined is provided under the headings “ Executive Compensation ” and “Director Compensation” in this prospectus, respectively. The Chair of the GHRNC Committee will be an independent director and be responsible for effectively managing the affairs of the GHRNC Committee and ensuring that it is properly organized and functions efficiently.

Board Nominations

The GHRNC Committee will be responsible for recommending to the Board nominees for election or appointment as directors, as the case may be, in accordance with the provisions of applicable corporate law and the charter of the GHRNC Committee. It is expected that the GHRNC Committee will consider the competencies and skills that the Board considers to be necessary for the Board as a whole to possess, that the Board considers each existing director to possess, and each new nominee will bring to the boardroom. The GHRNC Committee is expected to also consider the amount of time and resources that nominees have available to fulfill their duties as a member of the Board.

To assist the GHRNC Committee’s task in assessing the contribution of individual directors and in the creation of a more transparent, effective corporate governance culture, the Board will enact the compensation structure more fully described under “ Director Compensation ”.

The complete and full responsibilities, powers and operation of the GHRNC Committee will be set out in its charter, a copy of which will be available on the Company’s website at www.loopenergy.com.

Diversity and Inclusion

Loop recognizes and embraces the benefits of having diversity on the Board and in its senior management. Prior to the Closing, the Company will adopt a diversity policy (the “ Diversity Policy ”), which recognizes that it is important to ensure that members of the Board and senior management provide the necessary range of perspectives, experience and expertise required to achieve our objectives and deliver for the Company’s stakeholders. The Company believes that having a diverse and inclusive organization overall is beneficial to its success, and the Company is committed to diversity and inclusion at all levels of the Company to ensure that it attracts, retains and promotes the brightest and most talented individuals.

The Company also recognizes that the Board and its senior management appointments must be based on performance, ability, merit and potential. Therefore, the Company ensures a merit-based competitive process for appointments and as such, it is not expected to adopt a target regarding women in executive officer positions or as directors of the Company. The Company’s commitment to diversity will include ensuring that diversity is given due consideration by the GHRNC Committee.

With respect to Board composition, the GHRNC Committee will consider diversity of Board composition, including gender considerations, in accordance with the Company’s Diversity Policy, in identifying and recommending candidates to the Board to be nominated for election by shareholders at annual meetings of shareholders. Currently, the Board does not believe that targets or strict rules set out in a formal policy necessarily result in the identification or selection of the best candidates. At any given time, the Board may seek to adjust one or more objectives concerning its diversity and measure progress accordingly.

With respect to senior management appointments, the GHRNC Committee will consider and recommend the appointment of executive officers for approval by the Board, which considerations shall include gender considerations, in accordance with the Diversity Policy. At any given time, the Board may seek to adjust one or more objectives concerning senior management diversity and measure progress accordingly.

The Board does not intend to specifically define diversity, but the GHRNC Committee will value diversity of experience, perspective, education, background, race, gender and national origin as part of its overall evaluation of

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director nominees for election or re-election and the Board and the GHRNC Committee will value the same as part of their respective evaluation of candidates for executive positions. This will be achieved through ensuring that diversity considerations are taken into account to fill vacancies, continuously monitoring the level of women represented on our Board and in our executive team, continuing to broaden recruiting efforts to attract and interview qualified female candidates and committing to retention and training to ensure that our most talented employees are promoted from within our organization.

At Closing, the Company will have one female director (representing approximately 16.7% of the Board). The Company does not currently have any women acting as an executive officer of the Company.

Assessments

As described above, it will be the responsibility of the Board and the GHRNC Committee to regularly evaluate the overall efficiency of the Board and its various committees. In connection with such evaluations by the Board, the performance of the Board as a whole, as well as the performance of each individual director is evaluated and reviewed on an annual basis. The evaluation by the Board takes into account (i) in the case of the Board, the Board mandate and (ii) in the case of an individual director, the applicable position description(s), as well as the competencies and skills each individual director is expected to contribute to the Board. The GHRNC Committee will assess the contribution of individual directors on an ongoing basis and in light of the opportunities and risks facing the Company, and the competencies, skills and qualities required of directors. As part of its mandate, the GHRNC Committee will develop long-term plans for the composition of the Board, as well as ensure that an appropriate system is in place to evaluate the effectiveness of the Board as a whole and its various committees.

Majority Voting Policy

While the Board will be responsible for recommending the nominees to be elected by holders of Common Shares at each annual meeting of shareholders, the Company will adopt a majority voting policy to deal with situations where a candidate recommended by the Board for election has more votes withheld than are voted in favour of such nominee. The Company believes that each director should have the confidence and support of the shareholders. Where a director nominee has more votes withheld than are voted in favour of such nominee, the nominee, even though duly elected as a matter of corporate law, will be required to tender his or her resignation, which will be accepted by the Board, absent extraordinary circumstances, within 90 days after the date of the shareholder meeting.

Timely Disclosure, Confidentiality and Insider Trading

Loop will adopt a policy in respect of timely disclosure, confidentiality and insider trading to govern the conduct of the Company’s directors, officers, employees and other insiders with respect to the proper maintenance and disclosure of confidential information and the trading of the Company’s securities, particularly in the context of material information concerning the Company and its affairs. Among other matters, the policy will: (a) establish a disclosure committee to be made up of the CEO, CFO and Chair of the Board; (b) establish a procedure for the designation of individuals authorized to speak on behalf of the Company; (c) establish rules and procedures for the disclosure of material information and the maintenance of confidential information; (d) set out prohibited trading activities, including regular and special black-out periods; and (e) describe reporting requirements applicable to insiders. Under the policy, the directors, officers and employees will not be permitted to purchase financial instruments to hedge or offset a decrease in the market value of the Company’s securities.

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

None of the directors or executive officers of the Company, nor any associate of such director or executive officer is indebted to the Company or its Subsidiary or has any indebtedness to another entity that is the subject of a guarantee, support agreement, letter of credit or similar arrangement or understanding provided by the Company or its Subsidiary.

ELIGIBILITY FOR INVESTMENT

In the opinion of Fasken Martineau DuMoulin LLP, legal counsel to the Company, and Goodmans LLP, legal counsel to the Underwriters, based on the current provisions of the Income Tax Act (Canada) (the “ Tax Act ”) and the

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regulations thereunder (the “ Regulations ”), the Offered Shares, if issued on the date hereof would be, on such date, qualified investments under the Tax Act and the Regulations for a trust governed by a registered retirement savings plan (“ RRSP ”), a registered retirement income fund (“ RRIF ”), a registered disability savings plan (“ RDSP ”), a registered education savings plan (“ RESP ”), a tax-free savings account (“ TFSA ”, and together with a RRSP, RRIF, RDSP and RESP, each a “ Plan ”), or a deferred profit sharing plan (as those terms are defined in the Tax Act), provided that on such date the Offered Shares are listed on a “designated stock exchange” (as defined in the Tax Act), which currently includes the TSX.

Notwithstanding that the Offered Shares may be “qualified investments” for a trust governed by a Plan, if the Offered Shares are a “prohibited investment” for a Plan, the annuitant, holder, or subscriber of such Plan, as the case may be, will be subject to penalty taxes as set out in the Tax Act. The Offered Shares will generally not be a prohibited investment for a Plan, if the annuitant, holder, or subscriber, as the case may be, (a) deals at arm’s length with the Company, for the purposes of the Tax Act, and (b) does not have a “significant interest” as defined in the Tax Act in the Company. In addition, the Offered Shares will not be a prohibited investment if the Offered Shares are “excluded property” within the meaning of the Tax Act, for the Plan.

Prospective purchasers of Offered Shares who intend to hold the Offered Shares in a Plan should consult their own tax advisors in regard to the application of the prohibited investment rules in their particular circumstances.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

In the opinion of Fasken Martineau DuMoulin LLP, counsel to the Company, and Goodmans LLP, counsel to the Underwriters, the following is, as of the date hereof, a general summary of the principal Canadian federal income tax considerations pursuant to the Tax Act generally applicable to a holder (a) who acquires Offered Shares, as beneficial owner, pursuant to the Offering, (b) who, for purposes of the Tax Act and at all relevant times, holds the Offered Shares as capital property, (c) who deals at arm’s length with the Company and each of the Underwriters and is not affiliated with the Company or any of the Underwriters, in each case, for purposes of the Tax Act, and (d) who, for purposes of the Tax Act and any applicable income tax treaty or convention, and at all relevant times, is (or is deemed to be) a resident of Canada (a “ Holder ”). Generally, Offered Shares will be considered to be capital property to a Holder provided that the Holder does not hold the Offered Shares in the course of carrying on a business of trading or dealing in securities and has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade. Certain Holders who might not otherwise be considered to hold their Offered Shares as capital property may, in certain circumstances, be entitled to have their Offered Shares, and all other “Canadian securities” (as defined in the Tax Act) owned by such Holders in the year of the election and any subsequent year, treated as capital property by making the irrevocable election permitted by subsection 39(4) of the Tax Act. Such Holders should consult their own tax advisors for advice with respect to whether an election under subsection 39(4) of the Tax Act is available or advisable having regard to their particular circumstances.

This summary is not applicable to a Holder (a) that is a “financial institution” (as defined in the Tax Act for the purposes of the mark-to-market rules), (b) an interest in which would be a “tax shelter investment” (as defined in the Tax Act), (c) that is a “specified financial institution” (as defined in the Tax Act), (d) that makes or has made a functional currency reporting election pursuant to section 261 of the Tax Act, or (e) that has entered or will enter into a “derivative forward agreement”, “synthetic disposition arrangement” or a “dividend rental arrangement” (each as defined in the Tax Act) with respect to Offered Shares. In addition, this summary does not address the possible application of the “foreign affiliate dumping” rules in section 212.3 of the Tax Act to a holder that is a corporation resident in Canada and is (or does not deal at arm’s length for purposes of the Tax Act with a corporation resident in Canada that is), or becomes as part of a transaction or event or series of transactions or events that includes the acquisition of an Offered Share, controlled by a non-resident person or a group of non-resident persons not dealing with each other at arm’s length for purposes of such rules. Any such holder should consult its own tax advisor with respect to an investment in Offered Shares.

This summary is based upon the provisions of the Tax Act in force as of the date hereof, all specific proposals to amend the Tax Act that have been publicly announced prior to the date of this prospectus by or on behalf of the Minister of Finance (Canada) (the “ Proposed Amendments ”) and counsel’s understanding of the administrative policies and assessing practices of the Canada Revenue Agency (the “ CRA ”) made publicly available in writing prior to the date hereof. This summary assumes the Proposed Amendments will be enacted in the form proposed; however,

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no assurance can be given that the Proposed Amendments will be enacted in such form, if at all. This summary is not exhaustive of all possible Canadian federal income tax considerations and, except for the Proposed Amendments, does not take into account any changes in the law or in the administrative policies or assessing practices of the CRA, whether by legislative, governmental or judicial action, nor does it take into account provincial, territorial or foreign tax considerations, which may differ significantly from those discussed herein.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Holder or prospective Holder of an Offered Share, and no representations with respect to the income tax consequences to any Holder or prospective Holder are made. Consequently, Holders and prospective Holders of Offered Shares should consult their own tax advisors for advice with respect to the tax consequences to them of acquiring Offered Shares pursuant to the Offering, having regard to their particular circumstances.

Dividends on Offered Shares

A dividend received (or deemed to be received) in a taxation year on an Offered Share held by a Holder will be included in computing the Holder’s income for such year for purposes of the Tax Act.

In the case of a Holder who is an individual (other than certain trusts), such dividend will be subject to the gross-up and dividend tax credit rules in the Tax Act normally applicable to dividends received from taxable Canadian corporations, including the enhanced gross-up and dividend tax credit in respect of dividends designated by the Company as “eligible dividends”. A dividend will be eligible for the enhanced gross-up and dividend tax credit if the recipient receives written notice (which may include a notice published on the Company’s website) from the Company designating the dividend as an eligible dividend.

A taxable dividend received (or deemed to be received) by a Holder who is an individual (including certain trusts) may be relevant for purposes of calculating the Holder’s liability for alternative minimum tax under the Tax Act. Holders who are individuals should consult their own tax advisors in this regard.

In the case of a Holder that is a corporation, a dividend received (or deemed to be received) on an Offered Share held by the Holder generally will be deductible in computing its taxable income, with the result that no tax will be payable by it in respect of such dividend. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received by a Holder that is a corporation as proceeds of disposition or a capital gain. A Holder that is a “private corporation” or “subject corporation” (as such terms are defined in the Tax Act) may be liable under Part IV of the Tax Act to pay a refundable tax in respect of a dividend received (or deemed to be received) on an Offered Share to the extent the dividend is deductible in computing the Holder’s taxable income. Holders that are corporations should consult their own tax advisors having regard to their particular circumstances.

Disposition of Offered Shares

A disposition (or deemed disposition) of an Offered Share by a Holder (other than to the Company, unless purchased by the Company in the open market in the manner in which Offered Shares are normally purchased by any member of the public in the open market) generally will result in the Holder realizing a capital gain (or capital loss) equal to the amount by which the proceeds of disposition of the Offered Share exceed (or are exceeded by) the aggregate of the adjusted cost base to the Holder thereof immediately before the disposition (or deemed disposition) and any reasonable costs of disposition. Such capital gain (or capital loss) will be subject to the tax treatment described below under the heading “– Taxation of Capital Gains and Capital Losses ”.

The adjusted cost base to a Holder of an Offered Share acquired at any time will be determined by averaging the cost of the Offered Share with the adjusted cost base of all other Common Shares (if any) held by the Holder as capital property immediately before that time. The Holder’s cost for purposes of the Tax Act of Offered Shares will include all amounts paid or payable by the Holder for the Offered Shares, subject to certain adjustments under the Tax Act.

Taxation of Capital Gains and Capital Losses

Generally, one-half of any capital gain (a “taxable capital gain”) realized by a Holder in a taxation year must be included in the Holder’s income for the year. One-half of any capital loss (an “allowable capital loss”) realized by a

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Holder in a taxation year must generally be deducted from taxable capital gains realized by the Holder in the year of disposition. Allowable capital losses in excess of taxable capital gains realized in a taxation year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year, to the extent and under the circumstances described in the Tax Act.

The amount of any capital loss realized by a Holder that is a corporation on the disposition of an Offered Share may be reduced by the amount of dividends received (or deemed to be received) by it on the Offered Share (or on a share for which the Offered Share has been substituted) to the extent and under the circumstances described in the Tax Act. Similar rules may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns an Offered Share directly or indirectly through a partnership or a trust. A Holder that is, throughout the relevant taxation year, a “Canadian-controlled private corporation” (as defined in the Tax Act) is liable for tax, a portion of which may be refundable, on its “aggregate investment income”, which is defined in the Tax Act to include taxable capital gains.

A capital gain realized by a Holder who is an individual (including certain trusts) may be relevant for purposes of calculating the Holder’s liability for alternative minimum tax under the Tax Act. Holders who are individuals should consult their own tax advisors in this regard.

RISK FACTORS

An investment in the Offered Shares should be considered a highly speculative investment in an early stage company that involves significant risk. A prospective purchaser of the Offered Shares should carefully consider all of the information disclosed in this prospectus prior to making a decision to purchase the Offered Shares. In addition to the other information presented in this prospectus, the following risk factors should be given special consideration when evaluating an investment in the Company. Some of the following factors are interrelated and, consequently, prospective purchasers of Offered Shares should treat such risk factors as a whole. The following information is a summary only of certain risk factors that prospective purchasers of Offered Shares should consider and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this prospectus. These risks and uncertainties are not the only ones that could affect the Company or the Offered Shares and additional risks and uncertainties not currently known to the Company, or that it currently deems immaterial, may also impair the business, financial condition and results of operations of the Company and/or the value of the Offered Shares. If any of the following risks or other risks occur, they could have a material adverse effect on the Company’s business, financial condition and results of operations and/or the value of the Offered Shares. There is no assurance that any risk management steps taken by the Company will avoid future loss due to the occurrence of the risks described below or other unforeseen risks.

Risks Related to our Business

Our limited operating history and our nascent industry makes evaluating our business and future prospects difficult.

Since our inception, we have focused principally on research and development activities relating to our fuel cell products and have a limited history operating our business at its current scale, and therefore a limited history upon which you can evaluate our business and performance and base an investment decision.

Our fuel cell product is a new type of product in the nascent hydrogen fuel cell industry. Predicting our future revenue and appropriately budgeting for our expenses is difficult, and we have limited insight into trends that may emerge and affect our business. If actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially and adversely affected. You should consider our prospects in light of the risks and uncertainties emerging companies encounter when introducing a new product into a nascent industry.

We have limited experience manufacturing fuel cell products on a commercial basis and our experience has been limited to relatively low production volumes.

To date, we have limited experience manufacturing fuel cell products on a commercial basis and our experience has been limited to relatively low production volumes. We cannot be sure that we, or some of our vendors, will be able to develop efficient, low-cost, high-volume automated processes that will enable us to meet our cost goals and profitability projections. We cannot be sure that we will be able to achieve any planned increases in production

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capacity or that unforeseen problems relating to our manufacturing processes will not occur. Even if we are successful in developing high-volume automated processes and achieving planned increases in production capacity, we cannot be sure that we will do so in time to meet our product commercialization schedule or to satisfy customer demand. If our business does not grow as quickly as anticipated, our existing and planned manufacturing facilities would, in part, represent excess capacity for which we may not recover the cost, in which case our revenues may be inadequate to support our committed costs and planned growth, and our financial performance and business strategy would be adversely affected. Any of these factors could have a material adverse effect on our business, results of operations and financial performance.

The competitive advantages of our products, in relation to fuel efficiency, peak power output and durability may not be realized or maintained.

Statements regarding our competitive advantage are based on our assessment that our fuel cell products provide superior performance relative to our competitors products. This assessment and comparison of our products is based on our own internal testing. There is currently no third-party benchmark testing of fuel cell products and the variability of the range of fuel cell products makes comparison testing difficult. If our internal assessment of the competitive advantages of our products is incorrect, or if such advantages are not as significant as we believe, potential purchasers may decline to purchase our products.

Our technology and products may not meet the market requirements, including requirements relating to performance, integration and/or cost.

The market requirements for our products and, by extension, our technology change rapidly. Our existing and planned products may not meet the market requirements for any number of characteristics, including performance, fuel efficiency, power output, useful life, reliability, integration characteristics, and cost. Accordingly, we may not be able to sell our products on a commercially viable basis on the timetable we anticipate, or at all.

Other than our current products, which we believe to be commercially viable at this time, we do not know when or whether we will successfully complete the research and development of other commercially viable products that could be critical to our future. If we are unable to develop additional commercially viable products, we may not be able to generate sufficient revenue to become profitable. The profitable commercialization of our products depends on our ability to reduce the costs of our products, and we may not be able to sufficiently reduce these costs. In addition, the profitable commercialization of our products requires achievement and verification of their overall reliability, fuel efficiency, power output and safety targets, and we cannot assure you that we will be able to develop, acquire or license the technology necessary to achieve these targets. We must complete additional research and development to fill our product portfolios and deliver enhanced functionality and reliability in order to manufacture additional commercially viable products in commercial quantities. In addition, while we continue to conduct tests to predict the overall life of our products, we may not have run our products over their projected useful life prior to large‑scale commercialization. As a result, we cannot be sure that our products will last as long as predicted, resulting in possible warranty claims and commercial failures.

In addition, before we release any product to market, we subject it to numerous field tests. These field tests may encounter problems and delays for a number of reasons, many of which are beyond our control. If these field tests reveal technical defects or that our products do not meet performance goals, our anticipated timeline for selling our products on a commercially viable basis could be delayed, and potential purchasers may decline to purchase our products.

Widespread deployment of hydrogen vehicles will be dependent upon the economic production and broad distribution of hydrogen.

Our success in selling our products in larger volumes for use in commercial vehicles will depend on the widespread deployment of hydrogen-powered vehicles in our target markets. This deployment will depend upon a number of factors outside of our control, including the construction of hydrogen infrastructure for the manufacture and distribution of hydrogen, the construction of a network of hydrogen fuelling stations, and the market price of hydrogen. Although many countries have announced strategies and financial support for the build out of hydrogen supply and infrastructure, there can be no assurance that such infrastructure will be completed, or completed in a timely manner, to the extent required to accelerate the adoption of hydrogen vehicles to support our growth strategy. If the necessary

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infrastructure is not built or is delayed, this will slow the deployment of hydrogen-powered vehicles and will reduce our ability to execute our growth strategy.

A mass market for our products may never develop or may take longer to develop than we anticipate.

Our fuel cell products represent emerging markets, and we do not know whether end-users will want to use them in commercial volumes. In such emerging markets, demand and market acceptance for recently introduced products and services is subject to a high level of uncertainty and risk. The development of a mass market for our fuel cell products may be affected by many factors, some of which are beyond our control. These factors include the emergence of newer, more competitive technologies and products, the cost of fuels used by our products, the development of accessible hydrogen fuel infrastructure, regulatory requirements, consumer perceptions of the safety of hydrogen as a fuel for our products, end-user reluctance to buy a new product, and the continued development and improvement of existing power technologies.

If a mass market fails to develop, or develops more slowly than we anticipate, we may never achieve sustained profitability. In addition, we cannot guarantee that we will continue to develop, manufacture or market our products if sales levels do not support the continuation of the product.

Our plans are dependent on market acceptance of our products.

Our plans are dependent upon market acceptance of, as well as enhancements to, our products. Fuel cell systems represent an emerging market, and we cannot be sure that potential customers will accept fuel cells as a replacement for traditional power sources or non-fuel based power sources, hydrogen generation sources or storage. As is typical in a rapidly evolving industry, demand and market acceptance for recently introduced products and services are subject to a high level of uncertainty and risk. Since the hydrogen fuel cell market is still evolving, it is difficult to predict with certainty the size and growth rate of this market. The development of a market for our products may be affected by many factors that are out of our control, including:

the cost competitiveness of our fuel cell products including availability and output expectations and TCO;
the future costs of fuels used by our products;
customer reluctance to try a new product;
the market for distributed generation, hydrogen and storage and government policies that affect those markets;
government incentives, mandates or other programs favoring zero carbon energy sources;
local permitting and environmental requirements;
customer preference for non-fuel based technologies; and
the emergence of newer, more competitive technologies and products.

Certain estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate.

This prospectus includes several estimates by us and third parties of the potential addressable market for hydrogen fuel cell products and for our products and services, both internationally and in Canada. Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. In particular, estimates and forecasts relating to the size and expected growth of demand in our target markets, the adoption of our products, our capacity to address this demand, and our pricing, may prove to be inaccurate. In addition, third-party estimates of the addressable market for fuel cell products reflect the opportunity available from all participants and potential participants in the market. Our Product Backlog is not necessarily determinative of the number of actual sales in the next 24 months and the vast majority of the documents that comprise the Product Backlog are conditional and unconfirmed. Certain prospective orders in the Product Backlog are conditional on the success of pilot projects, the Company’s products successfully meeting customer requirements, or the customer’s success in acquiring end customers for their products, among other factors. Many of these factors are beyond the Company’s control, any of which could prevent the Company from successfully converting the Product Backlog into product sales. Failure to convert the Product Backlog into sales may impact the viability of the Company on a go forward basis.

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Any inaccuracies or errors in third-party estimates of market opportunity may cause us to misallocate capital and other business resources, which could divert resources from more valuable alternative projects and harm our business.

The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet the size estimates and growth forecasts in this prospectus, our business could fail to grow at similar rates, if at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market size or growth included in this prospectus should not be taken as indicative of our future growth.

Failure to successfully implement our growth strategy could result in reduced revenue and net income growth.

The execution of our growth strategy poses many challenges and is based on a number of assumptions and we may not be able to successfully execute our business plan. Failure to successfully implement our growth strategy could reduce the growth of, our revenue and net income and adversely affect our business, overall financial condition and results of operations. If we experience significant cost overruns in our operations, or if our growth strategy is more costly than we anticipate, certain product development activities may be delayed or eliminated, resulting in changes or delays to our commercialization plans, or we may be compelled to secure additional funding (which may or may not be available) to execute our growth strategy. We cannot predict with certainty our future revenues or results from our operations. If the assumptions on which our revenue or expenditure forecasts are based change, the benefits of our growth strategy may change as well. In addition, we may consider expanding our business beyond what is currently contemplated in our growth strategy. Depending on the financing requirements of a potential acquisition or new product opportunity, we may be required to raise additional capital through the issuance of equity or debt. If we are unable to raise additional capital on acceptable terms, we may be unable to pursue a potential acquisition or new product opportunity.

We may have difficulty executing on our growth strategy and expanding our manufacturing capability.

Our growth strategy contemplates us increasing our manufacturing production, which will require successful execution of:

expanding our existing customers and expanding to new markets;
ensuring the manufacture, delivery and installation of our products;
implementing and improving additional and existing administrative, financial and operations systems, procedures and controls;
hiring and retaining additional qualified employees;
expanding and upgrading our technological capabilities;
managing relationships with our customers, suppliers and strategic partnerships with other third parties;
identifying and qualifying new vendors that are able to supply components in new market jurisdictions;
responding quickly to changes in government policy requiring local sourced goods to qualify for subsidies;
maintaining adequate liquidity and financial resources; and
continuing to increase our revenues from operations.

If our business grows more quickly than we anticipate, our manufacturing facilities may become inadequate and we may need to seek out new or additional space at considerable cost to us. If our business does not grow as quickly as

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we expect, our manufacturing facilities would in part represent excess capacity for which we may not recover the cost; in that circumstance, our revenues may be inadequate to support our committed costs and our planned growth, and our financial performance and business strategy would suffer.

If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, develop new products, satisfy customer requirements, execute our business plan, respond to competitive pressures or achieve satisfactory financial performance.

We may have difficulty bringing in-house the manufacturing of certain product components currently sourced from third-party suppliers.

Our manufacturing strategy contemplates that we will establish our own in-house manufacturing capabilities for bipolar plates. We may encounter difficulties commencing in-house manufacturing due to several factors, including but not limited to, the specification, purchase, cost, delivery, and start-up of manufacturing equipment and ensuring adequate product quality and production rates. In addition, we may wish to establish manufacturing facilities in different countries simultaneously based on market demand, which may strain our resources and delay the manufacture and delivery of our products.

We may be unable to reduce our manufacturing costs as market prices for our products decline over time in line with overall market pricing dynamics.

We expect that the market prices for fuel cells will decline over time. Should we fail to reduce our manufacturing costs in line with this anticipated trend, our business may suffer from reduced profit margins, and we may be unable to grow or maintain our market share relative to lower cost competitive product offerings.

We are dependent on third-party suppliers for the supply of key materials and components for our products and services.

We rely on certain key suppliers for critical components in our products, and other components for our products that are sole sourced. If we fail to maintain our relationships with our suppliers or build relationships with new suppliers, or if suppliers are unable to meet our demand, we may be unable to manufacture our products, or our products may be available only at a higher cost or after a delay. In addition, to the extent that our supply partners use technology or manufacturing processes that are proprietary, we may be unable to obtain comparable components from alternative sources.

The failure of a supplier to develop and supply components in a timely manner or at all, or to develop or supply components that meet our quality, quantity and cost requirements, or our inability to obtain substitute sources of these components on a timely basis or on terms acceptable to us, could impair our ability to manufacture our products or could increase our cost of production. If we cannot obtain substitute materials or components on a timely basis or on acceptable terms, we could be prevented from delivering our products to our customers within required timeframes. Any such delays could result in sales and installation delays, cancellations, penalty payments or loss of revenue and market share, any of which could have a material adverse effect on our business, results of operations, and financial condition.

We depend on a limited number of customers for a majority of our revenues and are subject to risks associated with early stage market activities related to the use of fuel cells in commercial vehicles.

We have only recently started commercial sales of our products. We depend on a limited number of customers for a majority of our revenues and are subject to risks associated with early stage market activities related to the use of fuel cells in commercial vehicles. While we are seeking to expand our customer base, we expect that for the foreseeable future, we will continue to have a limited number of customers. To date our customers have purchased limited numbers of our products. Our future success is dependent upon our existing customers purchasing increased numbers of our products and us securing additional customers. Any fluctuations in anticipated demand from these customers may negatively affect our business, financial condition and results of operations.

If we are unable to broaden our customer base and expand relationships with other potential customers, our business will continue to be impacted by unanticipated demand fluctuations due to our dependence on a limited number of

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customers. Unanticipated demand fluctuations can have a negative impact on our revenues and business, and an adverse effect on our business, financial condition and results of operations. In addition, our dependence on a limited number of customers exposes us to numerous other risks, including: (a) a slowdown or delay in customer deployment of our products could significantly reduce demand for our products as well as increase pricing pressure on our products due to increased purchasing leverage; (b) reductions in customer forecasts and demand could result in excess inventories; (c) the current or future economic conditions could negatively affect customers and cause them to significantly reduce operations or file for bankruptcy; (d) concentration of accounts receivable credit risk, which could have a material adverse effect on our liquidity and financial condition if customers declare bankruptcy or delay payment of their receivables; (e) reductions in customer demand as a result of their own strategic action to dual source their supply of fuel cell stacks or pursue alternate technology; and (f) changes in government support for zero-emission vehicles could adversely affect the end-user cost of vehicles incorporating our heavy duty motive products.

Some of the product purchase commitments pursuant to our purchase orders and/or MOUs with customers may change based on criteria stipulated under such purchase orders and MOUs.

While some of the purchase commitments we have with our customers pursuant to purchase orders and/or MOUs are irrevocable, others are subject to specific criteria stipulated in the terms and conditions of the applicable purchase orders and MOUs. As a result, some of the purchase commitments in Product Backlog may change over time, thus adversely impacting our revenue expectations over the period affected by such changes.

In the Chinese market, a significant amount of our operations are currently conducted through a joint venture in China that we cannot operate solely for our benefit.

One of the key parts of our strategy is based on the localization of production with our joint venture partner in China, where we do not control the InPower-Loop JV. Manufacturing of fuel cell modules for distribution in China is currently carried out by the InPower-Loop JV, a joint venture between the Company and InPower that is headquartered in Zhong Guan Cun, Beijing. Our joint venture partner may not have the same goals, strategies, priorities or resources as we do and may compete with us, both in China and abroad, outside the joint venture. Joint ventures are intended to operate for the equal benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. If our co-owner changes or relationships deteriorate, this may have a material adverse effect on our success in the InPower-Loop JV.

In addition, because we have a minority share ownership, we have limited control over the actions of the InPowerLoop JV. As a result, we may be unable to prevent misconduct or other violations of applicable laws by the InPowerLoop JV. To the extent that another party makes decisions that negatively impact the InPower-Loop JV, or internal control issues arise within the joint venture, we may have to take responsive or other action or we may be subject to penalties, fines or other related actions for these activities.

Further, under the terms of the InPower-Loop JV Agreement, InPower will be granted exclusivity to sell to certain customers in China. The granting of this exclusivity may negatively affect our ability to expand our sales in China if InPower fails to deliver sales or limits our ability to sell through other channels.

We expect we will depend on Chinese customers for a significant portion of our revenues and we are subject to risks associated with the economic conditions and government practices in China.

We expect to increase sales of our product in China to Chinese customers, including through the InPower-Loop JV and affiliates of the InPower-Loop JV. Any significant economic slowdown in China could have an adverse impact on our business, financial condition and results of operations.

In addition, macro-economic conditions, including government subsidy programs and significant volatility in China’s capital markets, may adversely affect access to capital and program plans by our Chinese customers, which could adversely affect our business. Furthermore, successful large-scale deployment of ZEVs will require adequate investment in hydrogen fueling infrastructure and competitive pricing of hydrogen fuel. Inadequate hydrogen fueling infrastructure and/or excessive hydrogen fuel costs could negatively impact deployment of fuel cell powered ZEVs and may negatively impact our business, financial condition and results of operations. Our performance in China is dependent on our business model of localization, including the strength and performance of our localization partners.

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Emerging infectious diseases, like the ongoing COVID-19 pandemic, may adversely affect our operations, our suppliers, our customers, or the InPower-Loop JV.

Emerging diseases, like COVID-19, and government actions to address them, may adversely affect our operations, our suppliers, our customers, or the InPower-Loop JV.

A local, regional, national or international pandemic, like the COVID-19 pandemic, may prevent, or cause delays in, acquiring components of our products, producing our products, delivering our services and/or completing sales of our products or services, whether by direct impacts to our operations, or impacts to the operations of our suppliers, customers or to the financial markets. The InPower-Loop JV may similarly be affected.

The COVID-19 pandemic continues to evolve rapidly and, as a result, it is difficult to accurately assess its continued magnitude, outcome and duration, but it could:

worsen economic conditions, which could negatively impact levels of investment in fuel cell technology deployments by governments and/or our customers;
impact our production levels, including as a result of full or partial shutdowns of our manufacturing facilities;
impact our customers’ or joint venture’s production volume levels, including as a result of prolonged unscheduled facility shutdowns;
cause potential shortages of employees to staff our facilities, or the facilities of our customers, suppliers or joint venture;
lead to prolonged disruptions of critical components, including as a result of the bankruptcy/insolvency of one or more suppliers due to worsening economic conditions; or
result in governmental regulation adversely impacting our business,

all of which could have a material adverse effect on our business, financial condition and results of operations, which could be rapid and unexpected.

We have benefited from considerable governmental grants and subsidies to fund our operations, including research and development, which may not be available to us in the future.

We have received and benefited from various governmental grants and subsidies for ZEVs or hydrogen fueling infrastructure, including those offered by SDTC, WINN and ASIP. In the past, these various governmental grants and subsidies have been used to fund our operations, including research and development. There can be no guarantee that these programs, or similar sources of grants and subsidies, will be available to the Company in the future, and we cannot provide certainty that we will be able to access additional capital if and when necessary to fund our operations.

We expect our cash reserves will be reduced due to future operating losses, working capital requirements, capital expenditures and potential acquisitions and other investments by our business, and we cannot provide certainty as to how long our cash reserves will last or that we will be able to access additional capital when necessary.

We expect to incur continued losses and generate negative cash flow until we can produce sufficient revenues to cover our costs. For the reasons discussed in more detail below, there are substantial uncertainties associated with our ability to achieve and sustain profitability. We expect our cash reserves will be reduced due to future operating losses and working capital requirements, and we cannot provide certainty as to how long our cash reserves will last or that we will be able to access additional capital if and when necessary.

We have incurred operating losses and negative cash flow in the past and may incur the same in future periods.

Throughout our history, we have experienced net losses. As of December 31, 2019, we had an accumulated deficit of $23.9 million. We commenced commercial sales of our products in 2019 and have had minimal commercial sales

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activity to date. As a result, we continue to experience significant losses and negative operating cash flow. We are reliant on continual support from investors and other sources of funding to provide sufficient cash for future operations. These circumstances have resulted in a material uncertainty about whether we will be able to meet our obligations as they become due.

The Company will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm its operating results.

As a public company whose shares are admitted to trading on the TSX, the Company will incur significant legal, accounting, investor relations and other expenses that it did not incur as a private company, including costs associated with the increased reporting requirements that apply to such companies. The Company also has incurred and will incur costs associated with current corporate governance requirements, including requirements implemented by the BCSC and the TSX. The Company expects these rules and regulations to increase its legal and financial compliance costs substantially and to make some activities more time-consuming and costly. The Company’s management team does not have experience operating the Company as a public company whose shares are admitted to trading on the TSX and may not successfully or efficiently manage the Company’s transition to being a public company which is subject to significant regulatory oversight and reporting obligations under Canadian securities laws.

In particular, these new obligations will require substantial attention from the Company’s management team and could divert their attention away from the day-to-day management of the Company’s business. The Company also expects that, as a public company, it will be more expensive to obtain director and officer liability insurance and it may be more difficult to attract and retain qualified individuals to serve on its Board or as its executive officers.

The Company may need additional capital, which it may not be able to raise on favourable terms, or at all.

The Company expects that available cash, together with cash from its operations and net proceeds from the Offering, will be sufficient to meet its future capital requirements. Nevertheless, the Company may require additional capital if it experiences higher than anticipated expenses or cost overruns, encounters unanticipated problems or delays, fails to achieve further market adoption of its products or engages in acquisitions or additional joint ventures. The Company may need additional financing in the future to further expand its business strategy through mergers and acquisitions. Additional financing may not be available to the Company on favourable terms when required, or at all. If the Company were to raise additional funds through the issuance of equity, equity-related or debt securities, those securities may have rights, preferences or privileges senior to those of the Common Shares and the Company’s shareholders may experience additional dilution. If it cannot raise additional funds, further business development may be delayed, the Company may lose clients and its sales and growth may be limited.

The adoption of new accounting standards or interpretations could adversely affect the Company’s financial results.

The Company’s implementation of and compliance with changes in accounting rules and interpretations could adversely affect its operating results or cause unanticipated fluctuations in its results in future periods. The accounting rules and regulations that the Company must comply with are complex and continually changing. The Company cannot predict the impact of future changes to accounting principles on its financial statements going forward.

Failure to establish and maintain effective internal controls in accordance with NI 52-109 could have a material adverse effect on the Company’s business and the market price of the Common Shares.

The Company is not currently required to comply with NI 52-109. As a publicly-traded company with its Common Shares admitted to trading on the TSX, the Company will become subject to reporting and other obligations under applicable Canadian securities laws and the rules of the TSX, including NI 52-109. These reporting and other obligations will place significant demands on the Company’s management, administrative, operational and accounting resources. In order to meet such requirements, the Company will, among other things, establish systems, implement financial and management controls, reporting systems and procedures and, if necessary, hire qualified accounting and finance staff. However, if the Company is unable to accomplish any such necessary objectives in a timely and effective manner, the Company’s ability to comply with its financial reporting obligations and other rules applicable to reporting issuers could be impaired. Moreover, any failure to maintain effective internal controls could cause the Company to fail to satisfy its reporting obligations or result in material misstatements in its financial statements. If the Company

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cannot provide reliable financial reports or prevent fraud, its reputation and operating results could be materially adversely effected which could also cause investors to lose confidence in the Company’s reported financial information, which could result in a reduction in the trading price of the Common Shares.

The Company does not expect that its disclosure controls and procedures and internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes.

Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all.

The Company’s operating results and revenues are subject to fluctuations and its quarterly financial results may be subject to seasonality and market cyclicality, each of which could cause its share price to be negatively affected.

The markets within which the Company operates may be influenced by general economic conditions, economic cycles and annual seasonality factors, among others, which in turn may impact the Company’s financial results. Different sectors of the industry within which the Company operates are influenced differently by different factors, and have historically moved through economic cycles with different timing. As such, it is difficult to estimate the potential impact of economic cycles and conditions or seasonality from year-to-year on the Company’s overall operating results. With respect to seasonality, the timing of widely observed holidays and vacation periods and particularly slowdowns during the end-of year holiday period could significantly affect the Company’s quarterly operating results during those periods. If the Company is unable to adequately respond to economic, seasonal or cyclical conditions, its revenues, expenses and operating results may fluctuate from quarter to quarter.

Fluctuations or seasonality effects could negatively affect the Company’s results of operations during the period in question and/or future periods or cause its share price to decline. In addition, changes in accounting policies or practices may affect the Company’s level of net income and other financial measures.

Fluctuations in its financial results, revenues and expenses may cause the market price of the Company’s shares to decline.

We are dependent upon systems integrators and OEMs to purchase certain of our products.

To be commercially useful, our fuel cell products must be integrated into products manufactured by systems integrators and OEMs. We can offer no guarantee that systems integrators or OEMs will manufacture appropriate, durable or safe products or, if they do manufacture such products, that they will choose to use our fuel cell products. Any integration, design, manufacturing or marketing problems encountered by systems integrators or OEMs could adversely affect the market for our fuel cell products and our financial results.

The components of the Company’s fuel cell products and the associated components in a customer integration, may contain defects or errors, or our customers may operate our products in an improper manner, resulting in performance loss or a safety incident that could negatively affect customer relationships, increase manufacturing costs, damage the Company’s reputation and brand and substantially harm our business.

The satisfactory performance, reliability and availability of the Company’s technology and products are critical to the Company’s reputation and its ability to attract and retain clients.

Our fuel cell products are complex and must meet stringent technical requirements. The software and other components used in our fuel cell products may contain design, manufacturing or other defects, which could result in the failure of our fuel cell products to perform, damage to the Company’s reputation and brand, interruption of business operations, loss of clients, diversion of technical and other resources, a diversion to development resources and increased development, negative publicity, loss of data, and cause our business and operating results to suffer. Any

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one or more of the foregoing occurrences could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company may experience the failure of its fuel cell products to perform for a variety of reasons, including manufacturing defects, design defects or integration issues.

Negative publicity could result in a decline in the Company’s client growth and its business could suffer.

There has been a marked increase in the use of social media platforms and similar channels, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability and impact of information on social media platforms is virtually immediate and the accuracy of such information is not independently verified. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. The Company’s reputation is very important to attracting new clients as well as selling additional services to existing clients. While the Company believes that it has a good reputation and that it provides its clients with a superior experience, there can be no assurance that the Company will continue to maintain a good relationship with its clients or avoid negative publicity. Any damage to the Company’s reputation, whether arising from business conduct, negative publicity, regulatory, supervisory or enforcement actions, matters affecting its financial reporting or compliance with the BCSC and TSX listing requirements, security breaches or otherwise could have a material adverse effect on its business.

If the Company fails to develop widespread brand awareness cost-effectively, its business may suffer.

The Company believes that developing and maintaining widespread awareness of its brand in a cost-effective manner is critical to achieving widespread acceptance of its products and attracting new clients. The Company’s marketing efforts are primarily directed at the development of new clients and increased penetration of existing clients. Brand promotion activities may not generate client awareness or increase revenues, and even if they do, any increase in revenues may not offset the expenses the Company incurs in building its brand. If the Company fails to successfully promote and maintain its brand, or incur substantial expenses, it may fail to attract or retain clients necessary to realize a sufficient return on the Company’s brand-building efforts, or to achieve the widespread brand awareness that is critical for broad client adoption of the Company’s services.

The Company is subject to risks inherent in foreign operations, including restrictions on the conversion of currencies and restrictions on repatriation of funds, including out of China.

Our success depends on our ability to secure international customers and receive payments from international customers and the InPower-Loop JV. The Company intends to continue to selectively pursue international market growth opportunities, which could result in sales outside of Canada continuing to account for a more significant portion of the Company’s revenue. The Company has committed, and may continue to commit, significant resources to its international operations and sales and marketing activities. While the Company has experience conducting business outside of Canada, it may not be aware of all the factors that may affect its business in foreign jurisdictions. The Company has limited experience developing and manufacturing products that meet foreign regulatory and commercial requirements in our target markets.

The Company is subject to a number of risks associated with international business activities that may increase costs and require significant management attention. International operations carry certain risks and associated costs, such as the complexities and expense of administering a business abroad, restrictions on the conversion of currencies, restrictions on repatriation of funds, complications in compliance with, and unexpected changes in regulatory requirements, foreign laws, trading and investment policies, exchange controls, difficulties in collecting accounts receivable, potential adverse tax consequences, uncertainties of laws, difficulties in protecting, maintaining or enforcing intellectual property rights, difficulty in managing a geographically dispersed workforce in compliance with diverse local laws and customs, and other factors, depending upon the country involved. Trade disputes and trade barriers, whether tariff or non-tariff, could prevent us from selling our products in key geographical markets, make our products uncompetitive with local competitors, and prevent us from sourcing key components of our products.

Moreover, local laws and customs in many countries differ significantly and compliance with the laws of multiple jurisdictions can be complex, difficult and costly. The Company cannot assure that risks inherent in its foreign operations will not have a material adverse effect on its business.

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Exchange rate fluctuations may adversely affect the Company’s results and/or compliance with financial covenants.

Due to the Company’s international operations, the Company is exposed to the effects of fluctuations in currency exchange rates. The Company generates revenue and/or incurs expenses for contractor or employee compensation and other operating expenses through its supply chain and sales channels in China, Europe and other parts of Asia. Through the operations of the InPower-Loop JV in China, the Company is exposed to Chinese local currency. In other markets, the Company’s operations are exposed Japanese yen, euros, U.S. dollars and UK Pound sterling. Fluctuations in the exchange rates between the Canadian dollar and these currencies could result in the dollar equivalent of such revenue and expenses being lower, which could have a negative net impact on the Company’s reported operating results. See “ Management’s Discussion and Analysis – Currency Risk ”.

Commodity price fluctuations are beyond our control and may have a material adverse effect on our business, operating results, financial condition and profitability.

We intend to manufacture and/or purchase significant volumes of bipolar plates and MEAs in the short to medium term, and commodity prices, in particular the price of carbon, platinum and iridium, will affect our costs. Carbon is a key component of bipolar plates and platinum and iridium are used in small quantities in MEAs. These materials are scarce natural resources and we are dependent upon a sufficient supply of these commodities. While we do not anticipate significant near or long-term shortages in the supply of platinum, iridium or carbon, such shortages could adversely affect our ability to produce commercially viable fuel cell products or significantly raise our cost of producing such products.

Regulatory agencies could require us to modify or terminate existing investments or acquisitions and could delay or prevent future opportunities.

Our current and future investment and acquisition opportunities are, or may be, subject to the jurisdiction of the Department of Innovation, Science and Economic Development (“ ISED ”) under the Investment Canada Act (the “ ICA ”), the U.S. Federal Trade Commission (“ FTC ”) and Department of Justice (“ DOJ ”) under the Hart-ScottRodino Antitrust Improvements Act of 1976 (the “ HSR Act ”) and related legislation and regulations, the Committee on Foreign Investment in the United States (“ CFIUS ”) and other similar regulatory schemes. The ICA regulates the acquisition of control of a Canadian business by a non-Canadian and requires that certain transactions be reviewed by ISED before they are permitted to close. The HSR Act regulates certain transactions that affect U.S. commerce and requires that certain transactions be reported to the FTC and DOJ before they are permitted to close. CFIUS has jurisdiction over investments in “U.S. businesses” by non-U.S. persons that involve U.S. national security concerns, which concerns may change or evolve over time in response to political, economic or other events. Unlike the ICA and the HSR Act, CFIUS may intervene in the transaction before or after the closing if the parties to a transaction do not make a voluntary or required filing with CFIUS.

Because we are a British Columbia-based company with operations and assets in British Columbia and a joint venture in China, from time to time, we may receive inquiries from, or may be required to make filings with, these agencies. Any of these agencies could delay or prevent us from participating in future investment, acquisition or joint venture opportunities, or could require us to take steps to address concerns identified by the regulatory agency with respect to existing investments or joint ventures. Each of these regulatory agencies has broad discretion to investigate and intervene in transactions that fall within the scope of their respective regulatory authority. In addition, CFIUS could intervene in our previously completed transactions and require us to modify or amend the terms of those transactions, or terminate or unwind all or part of the transactions, if CFIUS determines that it is necessary to address U.S. national security concerns, without regard to whether the transaction was completed and operated in accordance with applicable law. If these regulatory agencies modify, delay, prevent or terminate our participation in these investments, acquisitions and joint ventures, our results of operations or financial condition may be adversely impacted.

Growth may place significant demands on the Company’s management and infrastructure.

The Company’s growth has placed and may continue to place significant demands on its management and operational and financial infrastructure. The expansion of the Company’s infrastructure will require it to commit financial, operational and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase. Continued growth could also strain the Company’s ability to maintain reliable

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service levels for its clients, develop and improve its operational, financial and management controls, enhance its reporting systems and procedures and recruit, train and retain highly-skilled personnel. Managing the Company’s growth will require expenditures and the allocation of valuable management resources. Failure to effectively manage growth could result in difficulty or delays in serving clients, declines in quality or client satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties, and any of these difficulties could adversely impact the Company’s business performance and results of operations.

Claims for indemnification by the Company’s directors and officers may reduce its available funds to satisfy successful third-party claims against the Company and may reduce the amount of money available to it.

On Closing, the Company will have indemnification agreements with each of its directors and officers. The indemnification agreements will generally require that the Company indemnify and hold the indemnitees harmless to the fullest extent permitted by law for liabilities arising out of the indemnitees’ service to the Company as directors and officers, provided that the indemnitees acted honestly and in good faith with a view to the best interests of the Company and in the case of a criminal or administrative proceeding that is enforced by a monetary penalty, the indemnitees’ had reasonable grounds for believing that his or her conduct was lawful. The indemnification agreements will also provide for the advancement of defense expenses to the indemnitees by the Company provided that the indemnitees must repay all advances if it is finally determined that the indemnitees are not entitled to indemnification under the agreements or the payment of any costs is prohibited by applicable law. The obligation to repay advances of defense expenses will be unsecured and no interest will be charged thereon. Any claims for indemnification by the Company’s directors and officers may reduce the available funds to satisfy successful third-party claims against the Company and may reduce the amount of money available to it.

Current or future litigation could substantially harm the Company’s business.

The Company is not currently involved in any material litigation; however, it may become involved in legal proceedings, claims and other litigation in the future.

The Company may be subject to various legal proceedings and claims arising out of the ordinary course of business, including lawsuits relating to commercial liability, product recalls, product liability, product claims, employment matters, environmental matters, breach of contract, intellectual property, indemnification, stockholder suits, derivative actions or other aspects of our business. The outcome of litigation, regulatory investigations and arbitration disputes are inherently difficult to predict and as a result there is the risk that an unfavorable outcome could negatively affect the Company’s business, results of operations and financial condition. In addition, litigation can result in substantial costs and diversion of the resources of the Company. Insurance may not cover such investigations and claims, may not be sufficient for one or more such investigations or claims and may not continue to be available on acceptable terms. An investigation or claim brought against the Company could also result in unanticipated costs and reputational harm.

Warranty claims, product performance guarantees or indemnification claims could negatively affect our financial performance.

There is a risk that our warranty accrual estimates are not sufficient and we may recognize additional expenses, including those related to litigation, because of warranty claims in excess of our current expectations. Such warranty claims may necessitate changes to our products or manufacturing processes and/or a product recall, all of which could hurt our reputation and the reputation of our products and may have an adverse impact on our financial performance and/or on future sales. While we attempt to mitigate these risks through product development, quality assurance, customer support and service processes, there can be no assurance that these processes are adequate. Even in the absence of any warranty claims, a product deficiency such as a design or manufacturing defect could be identified, necessitating a product recall or other corrective measures, which could hurt our reputation and the reputation of our products and may have an adverse impact on our financial performance and/or on future sales.

Litigation is inherently unpredictable, and although we may believe we have meaningful defenses in these matters, we may incur judgments or enter into settlements of claims that could have a material adverse effect on our business, financial condition, and results of operations. The costs of responding to or defending litigation may be significant and may divert the attention of management away from our strategic objectives. There may also be adverse publicity

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associated with litigation that may decrease customer confidence in our business or our management, regardless of whether the allegations are valid or whether we are ultimately found liable.

New products may have different performance characteristics from previous products. In addition, we have limited field experience with existing commercial products from which to make our warranty accrual estimates.

We could be adversely affected by risks associated with acquisitions and investments.

We may in the future, seek to expand our business through acquisitions and investments in capital equipment and new business processes.

Acquisitions will be in part dependent on management’s ability to identify, acquire and develop suitable acquisition targets in both new and existing markets. In certain circumstances, acceptable acquisition targets might not be available. Acquisitions involve a number of risks, including: (a) the possibility that we, as successor owner, may be legally and financially responsible for the liabilities of prior owners; (b) the possibility that we may pay more than the acquired company or assets are worth; (c) the additional expenses associated with completing an acquisition and amortizing any acquired intangible assets; (d) the difficulty of integrating the operations and personnel of an acquired business; (e) the challenge of implementing uniform standards, controls, procedures and policies throughout an acquired business; (f) the inability to integrate, train, retrain and motivate key personnel of an acquired business; and (g) the potential disruption of our ongoing business and the distraction of management from our day-to-day operations.

While necessary for the growth of our business, investments in capital equipment and new business processes, involve allocating resources based on future expectations that may or may not be correct. Investments in capital equipment and new business processes may not address the requirements of the targeted markets in the future and may result in lower than expected returns on such investments.

The above risks and difficulties, if they materialize, could disrupt our ongoing business, distract management, result in the loss of key personnel, increase expenses and otherwise have a material adverse effect on our business, results of operations and financial performance.

We depend on our IP, and our failure to protect that IP could adversely affect our expected future growth and success.

Failure to protect our existing IP rights may result in the loss of our exclusivity regarding, or the right to use, our technologies. If we do not adequately ensure our freedom to use certain technology, we may have to pay others for rights to use their IP, pay damages for infringement or misappropriation, or be enjoined from using such IP. We rely on patent and trademark laws to protect our IP. Some of our IP is not covered by any patent or patent application, and the patents to which we currently have, or expect soon to have, rights expire between 2022 and 2037. Our present or future-issued patents may not protect our technological leadership, and our patent portfolio may not continue to grow at the same rate as it has in the past. Moreover, our patent position is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope and enforceability of a particular patent. Accordingly, there is no assurance that: (a) any of the patents owned by us or other patents that third parties license to us will not be invalidated, circumvented, challenged, rendered unenforceable or licensed to others; or (b) any of our pending or future patent applications will be issued with the breadth of claim coverage sought by us, if issued at all. In addition, effective patent and trademark protection may be unavailable, limited or not applied for in certain countries.

Certain of our IP have been licensed to us on a non-exclusive basis from third parties who may also license such IP to others, including our competitors. If necessary or desirable, we may seek further licences under the patents or other IP rights of others. However, we may not be able to obtain such licences or the terms of any offered licences may not be acceptable to us. The failure to obtain a licence from a third-party for IP we use could cause us to incur substantial liabilities and to suspend the manufacture or shipment of products or our use of processes requiring the use of such IP.

We may become subject to lawsuits in which it is alleged that we have infringed the IP rights of others or commence lawsuits against others who we believe are infringing upon our rights. Our involvement in IP litigation could result in significant expense to us, adversely affecting the development of sales of the challenged product or IP and diverting the efforts of our technical and management personnel, whether or not such litigation is resolved in our favour.

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Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect the Company’s IP, the Company relies in part on confidentiality agreements with its strategic partners, employees, independent contractors and other advisors. These agreements may not effectively prevent the disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of the unauthorized disclosure of confidential information. We can provide no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that such persons or institutions will not assert rights to IP arising out of these relationships. In addition, others may independently discover the Company’s trade secrets and proprietary information, and in such cases, the Company could not assert any trade secret rights against such parties.

To the extent that the Company’s employees, contractors or other third parties with whom it does business use IP owned by others in their work for the Company, disputes may arise as to the rights in related or resulting know-how and inventions. The loss of trade secret protection could make it easier for third parties to compete with the Company’s services by copying functionality. In addition, any changes in, or unexpected interpretations of, IP laws may compromise the Company’s ability to enforce its trade secret and IP rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of the Company’s proprietary rights, and failure to obtain or maintain protection of its trade secrets or other proprietary information could harm the Company’s business, results of operations, reputation and competitive position.

We may experience cybersecurity threats to our IT Systems, and unauthorized attempts to gain access to our proprietary or confidential information, as may our customers, suppliers, subcontractors and joint venture partners.

We depend on IT Systems, hosted internally and outsourced, to process, transmit and store electronic data and financial information (including proprietary or confidential information), and manage business operations. Our business requires the appropriate and secure utilization of sensitive, confidential or personal data or information belonging to our employees, customers and partners. In addition, the Company’s proprietary or confidential information may be stored on IT Systems of our suppliers, customers and partners. Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks pose a risk to the security of the Company’s and its customers’, partners’, suppliers’ and third-party service providers’ IT Systems and the confidentiality, availability and integrity of the Company’s and its customers’ and partners’ data or information. While we have made investments seeking to address these threats, including the monitoring of networks and systems, hiring of experts, training of employees and the establishment of security policies for employees, we may face difficulties in anticipating and implementing adequate preventative measures and may potentially remain vulnerable. We must rely on our own safeguards as well as the safeguards put in place by our suppliers, customers and partners to mitigate the threats. Our internal systems have been audited for cybersecurity vulnerabilities by a third-party security firm in an effort to ensure we are prepared for new and emerging threats. Our suppliers, customers and partners have varying levels of cybersecurity expertise and safeguards, most have yearly compliance audits that are available upon request.

An IT System failure or non-availability, cyber-attack or breach of systems security could disrupt our operations, cause the loss of, corruption of, or unauthorized access to sensitive, confidential or personal data or information or expose us to regulatory investigation, litigation or contractual penalties. Our customers, partners or governmental authorities may question the adequacy of cybersecurity processes and procedures and this could have a negative impact on existing business or future opportunities. Furthermore, given the highly evolving nature of cybersecurity threats or disruptions and their increased frequency, the impact of any future incident cannot be easily predicted or mitigated, and the costs related to such threats or disruptions may not be fully insured or indemnified by other means.

Additionally, the legal and regulatory environment surrounding information security and privacy in Canada and international jurisdictions is constantly evolving. Violation or non-compliance with any of these laws or regulations, any contractual requirements relating to data security and privacy, or with our own privacy and security policies, either intentionally or unintentionally, or through the acts of intermediaries could have a material adverse effect on our brand, reputation, business financial condition and results of operations, as well as subject us to significant fines, litigation losses, third-party damages and other liabilities.

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Global macro-economic conditions are beyond our control and may have an adverse impact on our business or our key suppliers and customers.

Current global economic conditions, including volatility in China, may adversely affect the development of sales of our products, and thereby delay the commercialization of our products. Customers and/or suppliers may not be able to successfully execute their business plans; product development activities may be delayed or eliminated; new product introduction may be delayed or eliminated; end-user demand may decrease; and some companies may not continue to be commercially viable.

Financial market volatility can affect the debt, equity and project finance markets. This may affect the amount of financing available to all companies, including companies with substantially greater resources, better credit ratings and more successful operating histories than ours. It is impossible to predict future financial market volatility and instability, and it may have a materially adverse effect on us.

The Company operates in a competitive business environment and, if the Company is unable to compete effectively, it could have a material adverse effect on the Company’s business, financial condition and results of operations.

As fuel cell products have the potential to replace existing power products, competition for our products will come from current power technologies, improvements to current power technologies and new alternative energy technologies, including other types of fuel cells. Our target markets are currently serviced by existing manufacturers with existing customers and suppliers. These manufacturers use proven and widely accepted technologies such as internal combustion engines and batteries as well as coal, oil and nuclear-powered generators.

Additionally, there are competitors working on developing technologies other than PEM fuel cells (such as other types of fuel cells and advanced batteries) in each of our targeted markets. Some of these technologies are as capable of fulfilling existing and proposed regulatory requirements as the PEM fuel cell.

Within the PEM fuel cell market, we also have a large number of competitors. Across the world, corporations, national laboratories and universities are actively engaged in the development and manufacture of PEM fuel cell products and components. Each of these competitors have the potential to capture market share in our target markets. We expect that the PEM fuel cell market will continue to attract new competitors and new technologies.

Many of our competitors have substantial financial resources, customer bases, manufacturing, marketing and sales capabilities, and businesses or other resources, which give them significant competitive advantages over us. Some competitors may be prepared to offer lower priced products with reduced performance and quality than our products, and we may be unable or unprepared to offer similar lower priced products. There can be no assurance that we will be able to compete successfully against current or future competitors or that the competitive pressures we face in the markets in which we operate will not have a material adverse effect on our business, financial condition and results of operations.

The Company depends on its key personnel.

The Company’s future success and its ability to manage future growth depend, in large part, upon the continued services of its senior management and the ability to attract and retain key officers and other highly qualified personnel. Competition for such personnel is intense. There can be no assurance that the Company will continue to be successful in attracting and retaining qualified personnel, and the loss of the services of any of these individuals could have a material adverse effect on its revenue, financial performance and results of operations. The Company does not currently have key-man insurance.

The Company depends on highly-skilled personnel to operate its business and if the Company is unable to retain its current, or hire additional, personnel, its ability to develop and successfully market its business could be harmed.

The Company believes its future success will depend in part upon its ability to attract and retain highly skilled managerial, technical, finance, creative and sales and marketing personnel. The Company may be unable to attract and retain suitably qualified individuals who are capable of meeting its growing sales, operational and managerial requirements, or may be required to pay increased compensation in order to do so. If the Company is unable to attract and retain the qualified personnel it needs to succeed, its business will suffer. If the Company grows, the number of

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people it needs to hire will increase. The Company will also need to increase its hiring if it is not able to maintain its attrition rate through current recruiting and retention policies.

If the Company cannot maintain its corporate culture, the Company could lose valuable qualities from its workforce.

The Company believes that its corporate culture is a critical component of its success. As the Company develops the infrastructure of a public company and continues to grow, the Company may find it difficult to maintain the valuable aspects of its corporate culture. Failure to preserve its corporate culture could negatively impact the Company’s future success, including its ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue its corporate objectives.

Public policy and regulatory changes could hurt the market for our products and services.

Changes in existing government regulations and the emergence of new regulations with respect to fuel cell products may hurt the market for our products and services. Environmental laws and regulations have driven interest in fuel cells. We cannot guarantee that these laws and policies, including subsidies or incentives associated with the adoption of clean energy products, will not change. Changes in these laws and other laws and policies, or the failure of these laws and policies to become more widespread, could result in manufacturers abandoning their interest in fuel cell products or favouring alternative technologies. In addition, as fuel cell products are introduced into our target markets, governments may impose burdensome requirements and restrictions on the use of fuel cell products that could reduce or eliminate demand for some or all of our products and services.

Government budgetary constraints could reduce the demand for our products by restricting the funding available to public transportation agencies and militaries. We cannot guarantee that current government direct and indirect financial support for our products will continue.

Our business is subject to risks associated with obtaining government permits and approvals, and other contingencies that may arise in the course of completing fuel cell installation projects.

Canadian and international governments heavily influence the market for our product and services. A number of our customers are government entities and therefore reviews and approvals are necessary prior to proceeding with projects. In addition, delays with respect to any required approvals or withdrawals of any prior approvals from government or public or regulatory agencies must be considered. If governmental entities modify, delay or reject our participation in certain projects or with specific customers our results of operations or financial condition may be adversely impacted.

The Company’s risk management efforts may not be effective.

The Company could incur substantial losses and its business operations could be disrupted if the Company is unable to effectively identify, manage, monitor and mitigate financial risks, such as credit risk, interest rate risk, liquidity risk and other market-related risks, as well as operational risks related to its business, assets and liabilities. The Company’s risk management policies, procedures and techniques may not be sufficient to identify all of the risks the Company is exposed to, mitigate the risks that the Company has identified or identify concentrations of risk or additional risks to which the Company may become subject in the future.

We could be liable for environmental damages resulting from our research, development or manufacturing operations.

Our business exposes us to the risk of harmful substances escaping into the environment, resulting in personal injury or loss of life, damage to or destruction of property, and natural resource damage. Depending on the nature of the claim, our current insurance policies may not adequately reimburse us for costs incurred in settling environmental damage claims, and in some instances, we may not be reimbursed at all. Our business is subject to numerous laws and regulations that govern environmental protection and human health and safety. These laws and regulations have changed frequently in the past and it is reasonable to expect additional and more stringent changes in the future. Our operations may not comply with future laws and regulations, and we may be required to make significant unanticipated capital and operating expenditures. If we fail to comply with applicable environmental laws and regulations, governmental authorities may seek to impose fines and penalties on us, or to revoke or deny the issuance or renewal

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of operating permits, and private parties may seek damages from us. Under those circumstances, we might be required to curtail or cease operations, conduct site remediation or other corrective action, or pay substantial damage claims.

The Company’s insurance coverage reserves may not cover future claims.

The Company maintains various insurance policies for commercial general liability, excess liability, property and management liability. The Company has third-party insurance coverage to limit its exposure for both individual and aggregate claim costs. The Company is also responsible for losses up to a certain limit for commercial general liability, excess liability, property and management liability insurance.

If a greater amount of claims occur compared to what the Company estimated, its accrued liabilities might not be sufficient and it may be required to record additional expenses. Unanticipated changes may also produce materially different amounts of expenses than reported under these programs, which could adversely impact the Company’s results of operations.

The Company’s failure to comply with applicable laws regarding privacy and protection of data could lead to significant fines and penalties imposed by regulators, as well as claims by the Company’s clients. In addition, if the Company’s security measures fail to protect credit and debit card information adequately, the Company could be liable to its clients for their losses. There can be no assurance that the limitations of liability (if applicable) in the Company’s contracts would be enforceable or adequate or would otherwise protect the Company from any such liabilities or damages with respect to any particular claim. The Company also cannot be sure that its existing general and management liability insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that the Company’s insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against the Company that exceeds its available insurance coverage, or changes in the Company’s insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on the Company’s business, financial condition and results of operations.

If completed, potential merger and acquisition activity may fail to achieve the expected benefits of the transaction, including potential disruptions to operations, higher than anticipated costs and efforts to integrate, and loss of key personnel.

Merger and acquisition activities are disruptive to management and the expected benefits of a merger or acquisition transaction are subject to numerous risks, including the disruption of our day-to-day operations, a failure to realize projected revenue gains, achieve expected cost savings within the assumed timeframe, and integration costs being higher than expected. In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. An inability to realize the all or any of the anticipated benefits of a merger or acquisition transaction, as well as any delays encountered in the integration process, could have a material adverse effect on our business and results of operations.

The Company’s business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events and to interruption by man-made problems such as terrorism.

The Company’s systems and operations are vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war and similar events. For example, a significant natural disaster, such as an earthquake, fire or flood, could have a material adverse impact on the Company’s business, operating results and financial condition and its insurance coverage may be insufficient to compensate the Company for any losses that may occur. Acts of terrorism, which may be targeted at metropolitan areas which have higher population density than rural areas, could cause disruptions in the Company’s or its clients’ businesses or the economy as a whole.

The Company may not have sufficient protection or recovery plans in certain circumstances and its insurance policies may be insufficient to compensate the Company for losses that may occur. See “ The Company’s insurance coverage reserves may not cover future claims ” above.

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Our products use flammable fuels and some generate high voltages, which could subject our business to product liability claims.

Our business exposes us to potential product safety, product liability and similar claims that are inherent in electrical products and in products that use hydrogen or hydrogen-rich reformate fuels. High-voltage electricity poses potential shock hazards, and hydrogen is a flammable gas and therefore a potentially dangerous fuel. Any accidents involving our products or other hydrogen-based products could materially impede widespread market acceptance and demand for our fuel cell products. Involvement in litigation could result in significant expense to us, adversely affecting the development and sales of our products, and diverting the efforts of our technical and management personnel, whether or not the litigation is resolved in our favour. In addition, we may be held responsible for damages beyond the scope of our insurance coverage. We also cannot predict whether we will be able to maintain our insurance coverage on acceptable terms.

Risks Related to the Common Shares

Investing in the Offered Shares is speculative, and investors could lose their entire investment.

An investment in the Offered Shares is speculative and may result in the loss of an investor’s entire investment. Only potential investors who are experienced in high-risk investments and who can afford to lose their entire investment should consider an investment in the Offered Shares.

We do not currently intend to pay cash dividends.

We have never declared or paid cash dividends on our Common Shares. We currently intend to retain future earnings to finance the operation, development and expansion of our business. We do not anticipate paying cash dividends on the Common Shares in the near future. Payment of future cash dividends, if any, will be at the discretion of the Board and will depend on the Company’s financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that the Board considers relevant. Accordingly, investors will only see a return on their investment if the value of the Common Shares appreciates.

The market price for Common Shares may be volatile and subject to fluctuations.

The market price of the Common Shares may be volatile and subject to fluctuations in response to numerous factors, many of which are beyond our control. This volatility may affect the ability of holders of Common Shares to sell their securities at an advantageous price. Market price fluctuations in the Common Shares may be due to our operating results failing to meet expectations of securities analysts or investors in any period, downward revision in securities analysts’ estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions or other material public announcements by us or our competitors, along with a variety of additional factors. These broad market fluctuations may adversely affect the market price of the Common Shares.

In addition to general economic, political and market conditions, the price and trading volume of the Common Shares could fluctuate widely in response to many factors, including:

governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency concerns regarding the safety or effectiveness of our products;
changes in Canadian, Chinese, U.S. or other foreign regulatory policies during the period of product development;
changes in Canadian, Chinese, U.S. or other foreign political environments and the passage of laws, including tax, environmental or other laws, affecting the product development business;
developments in patent or other proprietary rights, including any third-party challenges of our IP rights;

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announcements of technological innovations by us or our competitors;
actual or anticipated variations in our operating results due to the level of development expenses and other factors;
changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; and
conditions and trends in the cleantech, energy and other industries.

Financial markets historically at times experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Common Shares may decline even if our operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, our operations could be adversely impacted and the trading price of the Common Shares may be materially adversely affected.

Securities analysts’ research or reports could impact the price of the Common Shares.

The trading market for the Common Shares will rely in part on the research and reports that industry or financial analysts publish about the Company or the Company’s business. The Company does not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of the Company, the trading price of the Common Shares would likely decrease. Even if the Company does obtain analyst coverage, if one or more of the analysts covering the Company’s business downgrade their evaluations of the Common Shares or Common Share price, the price of the Common Shares could decline. If one or more of these analysts cease to cover the Common Shares, the Company could lose visibility in the market for the Common Shares, which in turn could cause the Common Share price to decline.

There has been no prior public market for our securities and our share price may decline after the offering.

Before this offering, there has been no public market for our securities, and an active public market for our securities may not develop or be sustained after this offering. If an active public market for our securities does not develop, the liquidity of your investment may be limited, and the price of the Common Shares may decline below the Offering price. The Offering Price was determined by negotiations between the Company and the Underwriters, and may bear no relationship to the price that will prevail in the public market. The market price of the Common Shares could be subject to wide fluctuations in response to many risk factors discussed in this section.

In recent years, the stock markets have experienced significant price and volume fluctuations, especially with certain issuers in the technology sector. Our securities may also experience that volatility for reasons unrelated to our own operating performance, including the performance of other companies in the fuel cell or alternative power businesses, news announcements, securities analysts’ reports and recommendations and other developments with respect to our industry or our competitors, and changes in general economic conditions.

Future sales or issuances of securities of the Company could decrease the value of the Common Shares, dilute investors’ voting power and reduce the Company’s earnings per Common Share.

We may sell additional securities in subsequent offerings and may issue additional securities to finance operations, acquisitions or other projects. Our articles permit the issuance of an unlimited number of Common Shares. Moreover, we may issue additional Common Shares on the exercise of Options under the Equity Incentive Plan. We cannot predict the size of future sales and issuances of securities or the effect, if any, that such future sales and issuances of securities will have on the market price of the Common Shares. Our directors have discretion to determine the price and the terms of further issuances. Sales or issuances of a substantial number of securities, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares. With any additional sale or issuance of Common Shares (including securities convertible into Common Shares), investors will suffer dilution of their voting power and may experience dilution in the Company’s earnings per share.

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We will have broad discretion over the use of proceeds that we receive in the Offering.

We intend to allocate the net proceeds from the Offering to product and technology development, sales, general and administration expenses and capital assets, as described in detail under the heading “ Use of Proceeds ”. Management will have discretion concerning the specific use of the proceeds that we receive in the Offering and might not be able to obtain a significant return, if any, on the investment of these proceeds. Investors in the Offering will need to rely upon the judgment of our management with respect to the use of these proceeds. If we do not use the proceeds that we receive in the Offering effectively, our business, financial condition, and results of operations could be harmed.

Future offerings of debt securities, which would rank senior to the Common Shares upon bankruptcy or liquidation, and future offerings of equity securities that may be senior to the Common Shares for the purposes of dividend and liquidating distributions, may adversely affect the market price of the Common Shares.

In the future, the Company may attempt to increase its capital resources by making offerings of debt securities or additional offerings of equity securities. Upon bankruptcy or liquidation, holders of the Company’s debt securities and lenders with respect to any other borrowings will each be entitled to receive a distribution of the Company’s available assets prior to the holders of the Common Shares. Additional equity offerings may dilute the holdings of the Company’s existing shareholders or reduce the market price of the Common Shares, or both, and may result in future limitations under applicable tax legislation that could reduce the pace at which the Company utilizes any net operating loss carry-forwards to reduce its taxable income. The Company’s decision to issue securities in any future offering will depend on market conditions and other factors beyond its control. As a result, the Company cannot predict or estimate the amount, timing or nature of its future offerings, and purchasers of the Common Shares in the Offering bear the risk of the Company’s future offerings reducing the market price of the Common Shares and diluting their ownership interest in the Company.

If tax laws change, or the Company experiences adverse outcomes resulting from examination by the tax authorities of its income tax returns, the Company’s results of operations could be adversely affected.

The Company is subject to federal, provincial and local income taxes in Canada and in foreign jurisdictions. The Company’s future effective tax rates and the value of its deferred tax assets could be adversely affected by changes in tax laws. In addition, the Company is subject to the examination of its income tax returns by the CRA and other tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of its provision for income tax. Significant judgment is required in determining the Company’s worldwide provision for income taxes. Although the Company believes it has made appropriate provisions for taxes in the jurisdictions in which it operates, changes in the tax laws or challenges from tax authorities under existing tax laws could adversely affect the Company’s business, financial condition and results of operations.

The forward-looking statements contained in this prospectus may prove to be incorrect.

The forward-looking statements relating to, among other things, future results, performance, achievements, prospects or opportunities of the Company included in this prospectus (including, in particular, the information contained in the sections entitled “ Summary of Prospectus ”, “ Business of the Company ”, “ Use of Proceeds ” and “ Management’s Discussion and Analysis ”), are based on opinions, assumptions and estimates made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors the Company believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Actual results of the Company in the future may vary significantly from the historical and estimated results and those variations may be material. There is no representation by the Company that actual results achieved by the Company in the future will be the same, in whole or in part, as those included in this prospectus. See “ Cautionary Statement Regarding Forward-Looking Information ”.

Enforcement of judgments against foreign persons may not be possible.

A director of the Company resides outside of Canada. Some or all of the assets of such person may be located outside of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable Canadian securities laws against such person. Moreover, it may not be possible for investors to effect the service of process within Canada upon such person.

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LEGAL PROCEEDINGS AND REGULATORY ACTIONS

The Company is or was not a party to any material legal proceedings and does not know of any such proceedings that are contemplated.

We are not aware of penalties or sanctions imposed by a court relating to provincial and territorial securities legislation or by a securities regulatory authority within the three years immediately preceding the date of this prospectus. No other penalties or sanctions have been imposed by a court or regulatory body against the Company necessary for this prospectus to contain full, true and plain disclosure of all material facts. The Company has not entered into any settlement agreements before a court relating to provincial and territorial securities legislation or with a securities regulatory authority within the three years immediately preceding the date of this prospectus.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as disclosed in this prospectus, none of the directors or executive officers of the Company, nor any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of any class or series of the Company’s outstanding voting securities, nor any associate or affiliate of the foregoing persons, has or has had any material interest, direct or indirect, in any transaction within the three years prior to the date of this prospectus that has materially affected or is reasonably expected to materially affect the Company or its subsidiaries.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of the Company are KPMG LLP, located at 777 Dunsmuir Street, 11[th] Floor, Vancouver, BC V7Y 1K3.

The transfer agent and registrar of the Common Shares will be Computershare Investor Services Inc., at its principal offices located at 100 University Ave, Toronto, ON M5J 2Y1.

ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS OR CORPORATIONS

Dr. Wayne A. Eckerle, a director of the Company, resides outside of Canada and has appointed the Company, 2880 Production Way, Burnaby, British Columbia V5C 4T6 as his agent for service of process in Canada.

Christopher C. Clulow, a proposed director of the Company, resides outside of Canada and has appointed the Company, 2880 Production Way, Burnaby, British Columbia V5C 4T6 as his agent for service of process in Canada.

Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person who resides outside of Canada, even if the party has appointed an agent for service of process. See “ Risk Factors ”.

MATERIAL CONTRACTS

Except for contracts made in the ordinary course of business, the Underwriting Agreement, the Investor Rights Agreement and the InPower-Loop JV Agreement are the only material contracts entered into by the Company to the date hereof which are currently in effect and considered to be currently material. See “ Plan of Distribution – General ” for details regarding the Underwriting Agreement and see “ Description of Share Capital – Investor Rights Agreement ” for details regarding the Investor Rights Agreement.

InPower-Loop JV Agreement

On January 22, 2019 we entered into the InPower-Loop JV Agreement, an equity joint venture agreement with InPower providing for the formation of the InPower-Loop JV, a Sino-foreign equity joint venture enterprise, being a limited liability company organized and existing under the laws of the People’s Republic of China.

The InPower-Loop JV Agreement provides that the InPower-Loop JV was established in order to establish and operate a production and assembly line to manufacture fuel cell range extender units using the Company’s proprietary fuel cell stacks, and the sale and service of such units, in China (except for any special administrative regions therein) into bus, truck and heavy duty vehicle applications. The initial term of InPower-Loop JV is ten years from the date on

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which a certain business license is issued to InPower-Loop JV, subject to early termination provisions or the parties agreeing to extend such term.

The InPower-Loop JV Agreement provides that the Company’s initial contribution of $750,000 into InPower-Loop JV was 26.9% of its registered capital, with InPower providing an initial contribution equal to 73.1% of InPowerLoop JV’s registered capital. The InPower-Loop JV Agreement further provides for InPower-Loop JV’s board of directors consisting of three directors, with one appointed by the Company and two appointed by InPower, who shall (a) direct and supervise the management of InPower-Loop JV, and (b) decide matters by way of majority vote except for in certain significant circumstances.

The InPower-Loop JV Agreement permits the Company to conduct and develop business within China independently of InPower-Loop JV, except for in respect to certain customers and prospective customers of InPower-Loop JV.

The Underwriting Agreement and the InPower-Loop JV Agreement will be available on the Company’s SEDAR profile at www.sedar.com.

EXPERTS

KPMG LLP are the external auditors of the Company and have confirmed that they are independent of the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations.

Certain legal matters relating to the distribution of the Offered Shares will be passed upon by Fasken Martineau DuMoulin LLP, on behalf of the Company, and by Goodmans LLP, on behalf of the Underwriters. As at the date hereof the partners and associates of Fasken Martineau DuMoulin LLP as a group, and the partners and associates of Goodmans LLP as a group, beneficially owned, directly or indirectly, less than 1% of the Company’s outstanding voting shares.

PURCHASERS’ STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION

Securities legislation in certain of the provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of these rights or consult with a legal advisor.

Purchasers on the President’s List who purchase Offered Shares under the Offering have the same rights and remedies for rescission and/or damages against the Company and the Underwriters, as the case may be, as other purchasers.

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FS-1

APPENDIX “FS” - FINANCIAL STATEMENTS

Index to Financial Statements

Audited Consolidated Financial Statements As at and for the years ended December 31, 2019, 2018 and 2017 .................................................. Condensed Consolidated Interim Financial Statements (Unaudited) As at September 30, 2020 and for the three and nine month periods ended September 30, 2020 and 2019 ............................................................................................................................................	Page
	FS-2 FS-40

Audited Consolidated Financial Statements
As at and for the years ended December 31, 2019, 2018 and 2017 ..................................................
Condensed Consolidated Interim Financial Statements (Unaudited)
As at September 30, 2020 and for the three and nine month periods ended September 30, 2020 and
2019
............................................................................................................................................

Page

FS-2
FS-40

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FS-2

Consolidated Financial Statements of

And Independent Auditors’ Report thereon (Expressed in Canadian dollars)

Years ended December 31, 2019, 2018 and 2017

FS-3

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KPMG LLP PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada Telephone (604) 691-3000 Fax (604) 691-3031

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Loop Energy Inc.

Opinion

We have audited the consolidated financial statements of Loop Energy Inc. (the “Entity”), which comprise:

the consolidated statements of financial position as at December 31, 2019 and 2018
the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity (deficiency) and cash flows for the years ended December 31, 2019, 2018 and 2017
and notes, comprising of significant accounting policies and other explanatory information.

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2019 and December 31, 2018, and its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2019, December 31, 2018 and December 31, 2017 in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2(b) in the financial statements, which indicates that the Entity has experienced continued net losses and needs continued financial support from investors and other sources of funding.

As stated in Note 2(b) in the financial statements, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Entity's ability to continue as a going concern.

FS-4

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Our opinion is not modified in respect of this matter.

Responsibilities of Management and Those Charged with Governance for

the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Robert Ryan Owsnett, CPA, CA

Vancouver, Canada February 4, 2021

FS-6

LOOP ENERGY INC.

Consolidated Statements of Financial Position (Expressed in Canadian dollars) As at December 31, 2019 and 2018

LOOP ENERGY INC. Consolidated Statements of Financial Position (Expressed in Canadian dollars) As at December 31, 2019 and 2018
		2019		2018
ASSETS
Current assets:
Cash	$	2,168,047	$	9,971
Accounts receivable (note 5)		125,159		47,668
Tax credit receivable (note 16)		1,224,015		1,350,000
Prepaid expenses and advances		228,945		151,962
		3,746,166		1,559,601
Investment in joint venture (note 6)		455,644		-
Right-of-use asset (note 9(a))		400,334		-
Equipment and leasehold improvements (note 7)		2,216,042		1,591,434
	$	6,818,186	$	3,151,035
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Current liabilities:
Accounts payable and accrued liabilities (note 8)	$	716,618	$	906,764
Current portion of lease liability (note 9(b))		189,638		25,825
Current portion of long-term debt (note 10)		514,992		1,309,355
Convertible debentures (note 12)		2,849,573		-
Deferred revenue and recoveries (note 11)		2,000,471		1,870,626
		6,271,292		4,112,570
Convertible debentures (note 12)		700,274		2,746,784
Long-term debt (note 10)		327,432		387,854
Lease liability (note 9(b))		399,204		164,930
		7,698,202		7,412,138
Shareholders’ deficiency:
Common shares (note 14)		15,672,209		13,290,298
Preferred shares (note 14)		4,999,982		-
Reserves		2,303,540		2,014,879
Deficit		(23,855,747)		(19,566,280)
		(880,016)		(4,261,103)
	$	6,818,186	$	3,151,035

Going concern (note 2(b)) Subsequent events (notes 2(b), 10(a), 11, 12, 14(b), 15 and 22)

The notes are an integral part of these consolidated financial statements.

FS-7

LOOP ENERGY INC.

Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars) For the years ended December 31, 2019, 2018 and 2017

		2019		2018		2017
Revenue	$	467,790	$	-	$	-
Expenses:
Product development		4,749,509		3,897,166		3,193,538
General and administrative		2,101,922		2,016,575		1,764,420
Business development		12,055		58,937		380,768
		6,863,486		5,972,678		5,338,726
Less cost recovery:
Sustainable Development Technology
Canada (note 11)		(1,337,069)		-		-
Industrial Research Assistance Program Grants		-		-		(53,718)
Research and development tax credits (note 16)		(1,227,992)		(1,496,472)		(918,388)
Other grants		(2,700)		(57,713)		(281,610)
Automotive Supplier Innovation Program		-		(431,132)		(302,215)
Net expenses		4,295,725		3,987,361		3,782,795
Loss before the undernoted		(3,827,935)		(3,987,361)		(3,782,795)
Other income (expenses):
Technology license fee (note 6)		548,250		-		-
Foreign withholding tax paid (note 6)		(75,000)		-		-
Loss from investment in joint venture (note 6)		(68,630)		-		-
Foreign exchange loss		(9,673)		(51,060)		(19,625)
Interest income		9,284		1,630		1,596
Finance expense (note 13)		(872,221)		(428,514)		(78,143)
		(467,990)		(477,944)		(96,172)
Loss before income taxes		(4,295,925)		(4,465,305)		(3,878,967)
Deferred income tax recovery		6,458		26,220		-
Loss and comprehensive loss	$	(4,289,467)	$	(4,439,085)	$	(3,878,967)
Loss per common share – basic and diluted	$	(0.08)	$	(0.09)	$	(0.08)
Weighted average number of
common shares outstanding		52,496,306		49,454,496		49,314,060

The notes are an integral part of these consolidated financial statements.

FS-8

LOOP ENERGY INC.

Consolidated Statement of Changes in Shareholders’ Equity (Deficiency) (Expressed in Canadian dollars)

(Expressed in Canadian dollars)
								Total
							shareholder
	Common		Preferred					equity
	shares		shares		Reserves	Deficit	(deficiency)
Balance, January 1, 2017	$13,086,606	$	-	$	1,293,149	$ (11,248,228)	$	3,131,527
Issuance of common shares, net of costs	200,000		-		-	-		200,000
Exercise of stock options	3,692		-		-	-		3,692
Share-based payments	-		-		439,208	-		439,208
Loss for the year	-		-		-	(3,878,967)		(3,878,967)
Balance December 31, 2017	13,290,298		-		1,732,357	(15,127,195)		(104,540)
Issuance of convertible debentures,
net of deferred tax of $26,220	-		-		70,889	-		70,889
Share-based payments	-		-		211,633	-		211,633
Loss for the year	-		-		-	(4,439,085)		(4,439,085)
Balance December 31, 2018	13,290,298		-		2,014,879	(19,566,280)		(4,261,103)
Issuance of common shares, net of costs	2,262,961		-		-	-		2,262,961
Issuance of preferred shares, net of costs	-		4,999,982		-	-		4,999,982
Exercise of stock options	56,350		-		-			56,350
Settlement of long-term debt	62,600		-		-			62,600
Issuance of convertible debentures,
net of deferred tax of $6,458	-		-		17,461	-		17,461
Issuance of warrants	-		-		56,114	-		56,114
Share-based payments	-		-		215,086	-		215,086
Loss for the year	-		-		-	(4,289,467)		(4,289,467)
Balance, December 31, 2019	$15,672,209	$	4,999,982	$	2,303,540	$ (23,855,747)	$	(880,016)

The notes are an integral part of these consolidated financial statements.

FS-9

LOOP ENERGY INC.

Consolidated Statements of Cash Flows

(Expressed in Canadian dollars) For the years ended December 31, 2019, 2018, and 2017

		2019		2018		2017
Cash flows from operating activities:
Loss for the year	$	(4,289,467)	$	(4,439,085)	$	(3,878,967)
Items not affecting cash:
Depreciation		431,763		244,652		77,318
Finance expense		872,221		428,514		78,143
Loss from investment in joint venture		68,630		-		-
Share-based payments		215,086		211,633		439,208
Unrealized foreign exchange		23,976		-		-
Technology license fee (note 6)		201,750		-		-
Accretion on no interest loan (note 10(a))		-		(57,713)		(281,610)
Amortization of lease inducement liability (note 9(b))		-		(28,080)		(12,050)
Deferred income tax recovery		(6,458)		(26,220)		-
		(2,482,499)		(3,666,299)		(3,577,958)
Changes in non-cash working capital items:
Accounts receivable		(77,491)		(4,843)		388,570
Tax credit receivable		125,985		(375,000)		(161,321)
Prepaid expenses and advances		(76,983)		132,771		(243,247)
Accounts payable and accrued liabilities		(190,146)		294,820		439,937
Deferred revenue and recoveries		129,845		666,946		1,203,680
Cash used in operating activities		(2,571,289)		(2,951,605)		(1,950,339)
Cash flows from investing activities
Investment in joint venture		(750,000)		-		-
Purchase of equipment and leasehold improvements		(941,989)		(429,018)		(1,046,317)
Proceeds from the disposition of equipment		-		17,841		-
Cash used in investing activities		(1,691,989)		(411,177)		(1,046,317)
Cash flows from financing activities
Proceeds from convertible debentures,
net of issuance costs		689,061		2,797,500		-
Issuance of common shares,
net of share issuance costs		2,319,311		-		203,692
Issuance of preferred shares,
net of share issuance costs		4,999,982		-		-
Proceeds from long-term debt		750,000		257,969		1,612,009
Repayment of long-term debt		(1,624,000)		(300,000)		(600,000)
Interest paid		(519,716)		(320,757)		(58,466)
Lease payments		(193,284)		-		-
Cash provided by financing activities		6,421,354		2,434,712		1,157,235
Change in cash		2,158,076		(928,070)		(1,839,421)
Cash, beginning of the year		9,971		938,041		2,777,462
Cash, end of the year	$	2,168,047	$	9,971	$	938,041
Supplemental schedule of non-cash activities
Issuance of common shares for debt	$	62,600	$	-	$	-
Acquisition of leaseholds through lease inducement	$	-	$	-	$	230,885

The notes are an integral part of these consolidated financial statements.

FS-10

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

1. General information:

Loop Energy Inc. (the "Company") was incorporated under the laws of British Columbia on August 9, 2012. The address of the Company's registered office is 2900 - 550 Burrard Street, Vancouver, BC, V6C 0A3. The Company primarily is involved in the development of fuel cell technology.

2. Basis of presentation:

(a) Statement of compliance:

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

The consolidated financial statements were authorized for issue by the Board of Directors on February 4, 2021.

The accounting policies set out in note 3 have been applied consistently to all years presented in these consolidated financial statements, except for the adoption of IFRS 16, Leases, which was adopted without restatement of comparative periods as described in note 4.

(b) Going concern:

These consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company has been focused on product development with minimal commercial sales activity to date. As a result, the Company has experienced significant losses in past years resulting in a working capital deficiency of $2,525,126 and an accumulated deficit of $23,855,747 at December 31, 2019 and has experienced significant negative cash flow from operations. The Company is reliant on continual support from shareholders and investors, Scientific Research and Experimental Development ("SR&ED") tax credit refunds and other government funding. These circumstances have resulted in a material uncertainty about whether the Company will be able to meet its obligations as they become due. This material uncertainty may cast significant doubt about the ability of the Company to continue as a going concern.

Subsequent to December 31, 2019, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy, capital markets and our business are not known at this time. These impacts could include the ability of the Company to raise capital, the impairment in the value of our long-lived assets, or potential future decreases in revenue or the profitability of our ongoing and future operations.

FS-11

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

2. Basis of presentation (continued):

(b) Going concern (continued):

The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned, some of which are described above, which management believes will mitigate the adverse conditions and events which may raise significant doubt about the validity of the going concern assumption used in preparing these consolidated financial statements. There is no assurance that these and other strategies will be sufficient to permit the Company to continue as a going concern.

These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values and classification of assets and liabilities.

(c) Basis of measurement and presentation:

The consolidated financial statements have been prepared on the historical cost basis using the accrual basis of accounting, except for cash flow information.

(d) Functional and presentation currency:

These consolidated financial statements are presented in Canadian dollars, which is also the Company's functional currency.

(e) Basis of consolidation:

The consolidated financial statements comprise the accounts of Loop Energy Inc., the parent company, and its wholly-owned subsidiary, 1123640 B.C. Ltd., after the elimination of all material intercompany balances and transactions. Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases.

The accounts of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-company transactions, balances and unrealized gains or losses on transactions are eliminated upon consolidation.

FS-12

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

2. Basis of presentation (continued):

(f) Use of estimates and judgments:

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

Information on significant areas of uncertainty and critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements relate to the determination of share-based payments (note 15), the valuation of convertible debentures (note 10), and the amount and collectability of Scientific Research and Experimental Development (“SR&ED”) tax credits receivable (note 16).

Recoverability of the carrying value of the Company’s joint venture investment

The fair value of the Company’s joint venture investment (note 6) requires management to determine whether there are any indications of impairment. Management evaluates the legal standing of the underlying assets of the investment and reviews the progress and development of the underlying assets in the period when making the assessment of whether there are indications of impairment for the investment.

Research and development

The Company must assess on an ongoing basis whether expenditures qualify as intangible assets under IAS 38 Intangible Assets . No such costs have been capitalized as at December 31, 2019. Further judgment is required in assessing the qualification of research and development expenditures for SR&ED tax credits.

Performance obligations in revenue contracts

The recognition of revenues upon completion of performance obligations requires the Company to make an assessment of criteria under its revenue recognition policy.

FS-13

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

2. Basis of presentation (continued):

(f) Use of estimates and judgments (continued):

Going concern

The assessment of the Company’s ability to continue as a going concern and to raise sufficient funds to pay its ongoing operational expenditures and to meet its liabilities for the ensuing year, involves significant judgment based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances (see note 2(b)).

3. Significant accounting policies:

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements unless otherwise indicated.

(a) Investment in joint venture:

The Company accounts for its investment in associate enterprises and joint ventures using the equity method. The investment is initially recognized at cost and subsequently adjusted to account for the Company’s share of net income (loss) reported by the joint venture entity. Dividends declared by the joint venture is recognized as a reduction of the investment. At the end of each annual reporting period, the Company determines whether there are indications that an investment may be impaired. When there is an indication of impairment, and the Company determines that a significant adverse change has occurred during the period in the expected timing or amount of future cash flows, a writedown is recognized in income. If the indicators of impairment have decreased or no longer exist, the previously recognized impairment loss may be reversed to the extent of the improvement. The adjusted carrying amount of the investment may not be greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in income.

(b) Equipment and leasehold improvements:

(i) Recognition and measurement:

Items of equipment and leasehold improvements are measured at cost less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset, including the costs of dismantling and removing the items and restoring the site on which they are located at the end of the life of the equipment and leasehold improvements, and borrowing costs on qualifying assets.

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

FS-14

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

3. Significant accounting policies (continued):

(b) Equipment and leasehold improvements (continued):

When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment.

Gains and losses on disposal of an item of equipment and leasehold improvements are determined by comparing the proceeds from disposal with the carrying amount of equipment and leasehold improvements and are recognized net within other income in profit or loss.

(ii) Subsequent costs:

The cost of replacing a part of an item of equipment and leasehold improvements is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of equipment are expensed as incurred.

(iii) Depreciation:

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of equipment and leasehold improvements, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

The estimated useful lives for the current and comparative periods are as follows:

Equipment	3-10 years
Leasehold Improvements	4-6 years, and no longer than the lease term
Computer hardware	2 years
Computer software	1-3 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted, if appropriate.

FS-15

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

3. Significant accounting policies (continued):

Research and development:

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are expensed as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. None of the Company’s development expenditures to date have met these criteria.

(d) Lease liabilities:

The Company’s accounting policies for leases up to December 31, 2018 were in accordance with IAS 17 Leases “IAS 17”). The Company adopted IFRS 16 Leases (“IFRS 16”) effective from January 1, 2019. Accounting policies for leases applicable from January 1, 2019 are disclosed in note 4.

Policy applicable prior to January 1, 2019

Leases for which the Company assumes or relinquishes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Operating leases are not recognized in the Company’s statement of financial position when the Company is the lessee.

(e) Provisions:

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(f) Revenue recognition:

Revenue is recognized in profit or loss in accordance with the pattern of the Company satisfying its performance obligations under a contract. This occurs when control of a good is transferred, or service provided, to the customer as follows:

FS-16

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

3. Significant accounting policies (continued):

(f) Revenue recognition (continued):
(i) Sale of goods is included in income when the product transfers to the customer and the good has been integrated into the customer’s product, the customer has obtained the significant risks and rewards of ownership and the customer has accepted the good. Provisions for future services including warranty are deferred and amortized to income over the warranty period.
(ii) Technology license fees that are distinct from other performance obligations are included in income when the license and related rights are transferred to the customer, if the customer can direct the use of, and obtain substantially all of the remaining benefits from, the license as it exists at the time of transfer. If it is determined that the license is not distinct from other performance obligations, revenue is recognized over time as the customer simultaneously receives and consumes the benefit over the licensing period.
(iii) Other revenue including provision of ancillary services are recognized when a sale is made or a service has been provided.

Deferred revenue from customers represents cash received from customers in excess of revenue recognized on uncompleted contracts.

(g) Government grants:

Government grants are recognized initially as deferred recoveries at fair value when there is reasonable assurance that they will be received, and the Company will comply with the conditions associated with the grant. Grants that compensate the Company for expenses incurred are recognized in profit or loss as other income on a systematic basis in the periods in which the expenses are recognized and/or the related project is agreed to be complete. Grants that compensate the Company for the cost of an asset are recognized in profit or loss on a systematic basis over the useful life of the asset.

(h) Foreign currency translation:

Transactions in foreign currencies are comprised of purchases from foreign suppliers. These transactions are translated using the functional currency of the Company at exchange rate at the dates of the transactions. The related payables denominated in a foreign currency at the reporting date are translated into the functional currency at the exchange rate at that date. The resulting foreign currency gains or losses are recognized on a net basis in profit or loss.

(i) Preferred shares:

Preferred shares of the Company automatically convert to an equivalent number of common shares immediately prior to the listing of the common shares on an approved exchange. The preferred shares are a residual interest in the assets of the entity and are therefore classified within shareholders’ equity.

FS-17

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

3. Significant accounting policies (continued):

(j) Share-based payment transactions:

The grant-date fair value of share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the service period of the award. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

(k) Income taxes:

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

FS-18

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

3. Significant accounting policies (continued):

(l) Financial instruments:
(i) Recognition and measurement:

Financial instruments are required to be classified into one of the following categories: amortized costs, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”). All financial instruments are measured at fair value on initial recognition. Measurement in subsequent periods depends on the classification of the financial instrument. Transaction costs are included in the initial carrying amount of financial instruments except for financial instruments classified as FVTPL in which case transaction costs are expensed as incurred.

Financial assets and financial liabilities are recognized initially on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position only when the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

A financial asset is measured at amortized cost if it meets both of the following conditions:

It is held within a business model whose objective is to hold assets to collect contractual cash flows; and
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset is measured at FVOCI if it meets both of the following conditions:

It is held within a business model whose objective is to hold assets to collect contractual cash flows and selling financial assets; and
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Company may irrevocably elect to measure financial assets that otherwise meets the requirements to be measured at amortized cost or at FVOCI or FVTPL when doing so results in more relevant information.

FS-19

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

3. Significant accounting policies (continued):

(l) Financial instruments:

(i) Recognition and measurement (continued):

Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. The Company has not classified any of its financial assets as FVOCI.

A financial liability is generally measured at amortized cost, with exceptions that may allow for classification as FVTPL. These exceptions include financial liabilities that are mandatorily measured at fair value through profit or loss, such as derivative liabilities. The Company may also, at initial recognition, irrevocably designate a financial liability as measured at FVTPL when doing so results in more relevant information.

(ii) Amortized cost:

Financial assts and liabilities classified as amortized cost are recognized initially at fair value plus any directly attributable transaction costs. Subsequent measurement is at amortized cost using the effective interest method, less any impairment losses. The Company classifies cash, accounts receivable, accounts payable and accrued liabilities, long-term debt, lease liabilities and convertible debentures at amortized cost.

The effective interest method is a method of calculating the amortized cost of a financial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial asset or liability, or where appropriate, a shorter period.

(iii) Derecognition of financial instruments:

Financial assets are derecognized when the contractual rights to receive the cash flows from these assets have ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred.

If the Company has neither transferred nor retained substantially all the risks and rewards of the transferred financial asset, it assesses whether it has retained control over the transferred asset. If control has been retained, the Company recognizes the transferred asset to the extent of its continuing involvement. If control has not been retained, the Company derecognizes the transferred asset. Financial liabilities are derecognized when they have been redeemed or otherwise extinguished.

FS-20

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

3. Significant accounting policies (continued):

(m) Loss per share:

Basic loss per share is computed by dividing the loss available to common shareholders by the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the “if converted” method. The dilutive effect of outstanding preferred shares, convertible debentures, options and warrants and their equivalents is reflected in diluted earnings per share by application of the weighted-average method. Since the Company has a loss in all periods presented, the conversion of outstanding convertible securities has not been included in this calculation as they would be antidilutive.

4. Change in accounting policies:

IFRS 16, Leases :

The Company adopted IFRS 16 with a date of initial application of January 1, 2019. IFRS 16 was applied using the modified retrospective approach effective January 1, 2019, and accordingly the information presented for the years ended December 31, 2018 and 2017 have not been restated and remain as previously reported under IAS 17.

IFRS 16 sets out a new model for lease accounting, replacing IAS 17. The new standard recognizes the initial present value of unavoidable future lease payments as right-of-use assets and lease liabilities on the statement of financial position, including those for most leases that were previously accounted for as operating leases.

(a) Lease definition - policy applicable from January 1, 2019:

At inception of a contract, the Company assesses whether a contract is or contains a lease based on the definition of a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has the right to control an identified asset if it obtains substantially all of its economic benefits and either predetermines or directs how and for what purpose the asset is used.

FS-21

LOOP ENERGY INC. Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

4. Change in accounting policies (continued):

IFRS 16, Leases (continued):

(b) Recognition and measurement - policy applicable from January 1, 2019:

The Company recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use assets are initially measured at the amount of the lease liability plus initial direct costs incurred by the lessee. Adjustments may also be required for lease incentives, payments at or prior to commencement and restoration obligations.

The right-of-use assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits.

The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease, or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Lease payments included in the measurement of the lease obligation, when applicable, may comprise fixed payments, variable payments that depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise price under a purchase, extension or termination option that the Company is reasonably certain to exercise. The lease liability is subsequently measured at amortized cost using the effective interest rate method. It is remeasured when there are changes in the following: i) the lease term; ii) the Company's assessment of whether it will exercise a purchase option; iii) a change in an index or a change in the rate used to determine the payments; and iv) amounts expected to be payable under residual value guarantees.

On initial application, the Company elected to record the right-of-use assets based on the corresponding lease liability. Right-of-use assets and lease liability of $705,471 were recorded as at January 1, 2019, with no impact on deficit for leases previously recognized as operating leases under IAS 17. A previously received lease inducement recorded as a lease liability of $190,755 at December 31, 2018 was netted against the right-of-use asset upon adoption of IFRS 16. See note 9 for further information with respect to the adoption of IFRS 16.

The Company applied the following recognition exemptions and practical expedients:

To not recognize short term leases with a term less than 12 months or leases of low value assets;
To apply IFRS 16 only to contracts that were previously identified as leases; and
To use hindsight when determining the lease term if the contract contained options to extend or terminate the lease.

5. Accounts receivable:

		2019		2018
GST receivable	$	84,789	$	47,668
Customer receivables		40,370		-
	$	125,159	$	47,668

FS-22

LOOP ENERGY INC. Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

6. Investment in joint venture:

On January 22, 2019, the Company executed a non-exclusive joint venture with Beijing In-Power Renewable Energy Co., Ltd. to create Inpower Loop Energy Technology (Beijing) Co., Ltd. (the “InPower-Loop JV”), a limited liability company in China. The InPower-Loop JV will manufacture and sell Fuel Cell (“FC”) range extenders in the Chinese market and will purchase FC stacks from the Company.

As part of the joint venture transaction, the Company closed a common share equity investment in InPowerLoop JV of $750,000 at a share price of $0.50 per share resulting in ownership of 26.9% of InPower-Loop JV. The Company has the right to appoint one director to the three-person board of InPower-Loop JV. Operational decisions are made by majority vote, subject to approval by the Company’s nominee for all major matters affecting the InPower-Loop JV. The Company accounts for the investment in InPower-Loop JV using the equity method in accordance with IFRS 11, “Joint Arrangements”.

Investment in joint venture-InPower-Loop JV		2019
Purchase of 26.9% of common voting shares of InPower-Loop JV	$	750,000
Intercompany elimination		(201,750)
Foreign exchange		(23,976)
Company’s share of loss		(68,630)
	$	455,644

Inpower Loop Energy Technology (Beijing) Co., Ltd.		2019
Cash	$	110,795
Other current assets		1,615,840
Non-current assets		837,990
Current liabilities		(191,221)
Net assets (100%)		2,373,404
Company’s share of net assets (26.9%)		638,446
Eliminations related to intercompany transactions and foreign exchange		(182,802)
Carry amount of interestinjointventure	$	455,644

Inpower Loop Energy Technology (Beijing) Co., Ltd.		2019
Revenue	$	45,897
Loss and comprehensive loss (100%)		(298,466)
Company’s share of loss and comprehensive loss (26.9%)		(80,287)
Eliminations related to inter-company transactions		11,657
Company’s share of loss	$	(68,630)

Concurrently with the establishment of the joint venture, InPower-Loop JV paid the Company a one-time technology license fee of $750,000, against which a withholding tax of $75,000 was applied, for the use of the Company’s intellectual property in China. The technology license fee income has been reduced by $201,750 to recognize income only to the extent it has been paid to the Company by unrelated investors in the InPower-Loop JV.

FS-23

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

7. Equipment and leasehold improvements:

				Leasehold		Computer		Computer
		Equipment	improvements			hardware		software		Total
Cost
Balance, December 31, 2017	$	1,275,337	$	271,957	$	20,728	$	56,055	$	1,624,077
Additions		149,010		268,951		11,057		-		429,018
Dispositions		(58,128)		-		-		-		(58,128)
Balance, December 31, 2018		1,366,219		540,908		31,785		56,055		1,994,967
Additions		204,906		705,736		24,929		6,418		941,989
Balance,December 31,2019	$	1,571,125	$	1,246,644	$	56,714	$	62,473	$	2,936,956
Accumulated depreciation
Balance, December 31, 2017	$	107,468	$	19,240	$	20,728	$	51,732	$	199,168
Depreciation		193,355		45,868		1,106		4,323		244,652
Dispositions		(40,287)		-		-		-		(40,287)
Balance, December 31, 2018		260,536		65,108		21,834		56,055		403,533
Depreciation		191,665		123,504		2,212		-		317,381
Balance,December 31,2019	$	452,201	$	188,612	$	24,046	$	56,055	$	720,914
Carrying amounts
December 31, 2018	$	1,105,683	$	475,800	$	9,951	$	-	$	1,591,434
December31,2019	$	1,118,924	$	1,058,032	$	32,668	$	6,418	$	2,216,042

Depreciation expense during the year was $317,381 (2018 - $244,652; 2017 - $77,318) and is included in product development expenses.

8. Accounts payable and accrued liabilities:

		2019		2018
Trade payables and accrued expenses	$	594,958	$	848,536
Trade and other payables due to related parties (note 17(b) and (c))		59,760		15,974
Payroll accruals		61,900		42,254
	$	716,618	$	906,764

FS-24

LOOP ENERGY INC. Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

9. Right-of-use asset and lease liability:

The Company leases one premise consisting of a building for the Company’s office and manufacturing space. This lease runs for a period of six years, with an option to renew the lease after that date.

(a) Right-of-use asset:

The movement of right-of-use asset during the year ended December 31, 2019 is as follows:

		Total
Balance at December 31, 2018	$	-
Lease liability from adoption of IFRS 16		705,471
Less lease inducement previously recognized as lease liability		(190,755)
Balance at January 1, 2019		514,716
Depreciation		(114,382)
Balance at December 31, 2019	$	400,334

Depreciation expense for the right-of-use asset of $22,877 is included in general and administrative expense and $91,505 is included in product development expense in the statement of loss.

(b) Lease liability:

Prior to the adoption of IFRS 16, the building lease was accounted for as an operating lease and during the year ended December 31, 2018 total lease payments of $158,830 (2017 - $79,414) were expensed as part of general and administrative expenses. In addition, prior to the adoption of IFRS 16, the Company had recorded a lease inducement liability representing certain inducements received at the commencement of the lease. The inducement was being amortized over the term of the lease on a straight-line basis. On adoption of IFRS 16 the remaining lease inducement liability was netted against the resulting right-of-use-asset.

On transition to IFRS 16, the Company recognized a $705,471 lease liability, with a corresponding right-of-use asset, representing the present value of the remaining minimum lease payments associated with its office and manufacturing space lease. When measuring the lease liability, the Company discounted lease payments using an incremental borrowing rate at January 1, 2019 of 12%.

		Total
Lease inducement liability at December 31, 2017	$	218,835
Amortization of lease inducement liability		(28,080)
Lease inducement liability at December 31, 2018		190,755
Transfer of lease inducement liability to right-of-use asset		(190,755)
Adoption of IFRS 16 – lease commitments		907,744
Discounted using the incremental borrowing rate at January 1, 2019		(202,273)
Lease liability recognized at January 1, 2019		705,471
Finance expense		76,655
Lease payments		(193,284)
Lease liability at December 31, 2019	$	588,842
…. continued

FS-25

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

9. Right-of-use asset and lease liability (continued):

		Total
…. continued
Current portion	$	189,638
Non-current portion		399,204

		Total
Maturity analysis – contractual undiscounted cash flows:
2020	$	200,187
2021		203,639
2022		207,090
2023		103,545
Total undiscounted lease liability at December 31, 2019	$	714,461

10. Long-term debt:

		2019		2018
Balance, beginning of the year	$	1,697,209	$	1,735,589
Proceeds from long-term debt		750,000		257,969
Repayment of long-term debt		(1,624,000)		(300,000)
Loan discount		-		(57,713)
Finance expense		170,389		155,337
Interest paid		(88,574)		(93,973)
Converted to shares		(62,600)		-
Balance, end ofyear	$	842,424	$	1,697,209
Long-term debt consists of the following:
		2019		2018
Unsecured loan payable, maturing March 1, 2024, bearing no interest,
and repayable in monthly principal payments of $12,666 (a)	$	469,512	$	501,697
Unsecured promissory notes, with no maturity date
and without interest (b)		372,912		385,512
SR&ED loan payable, bearing interest at 14% per annum (c)		-		760,000
Unsecured loan payable, bearing interest at 12% per annum (d)		-		50,000
		842,424		1,697,209
Less current portion of long-term debt		514,992		1,309,355
	$	327,432	$	387,854

a) The Company signed a Western Innovation Initiative (“WINN”) loan funding agreement on September 15, 2017 which provided loans to the Company up to $760,000 based on matching investments for certain projects. The Company applied an effective interest rate of 15% to discount the cash flows of the noninterest bearing loan and recorded a loan discount of $57,713 during the year ended December 31, 2018 (2017 - $281,610) which was recorded to cost recoveries as an other grant. During the year ended December 31, 2019, the Company recorded an associated non-cash finance expense of $81,815 (2018 - $61,364; 2017 - $19,677) related to the accretion of the loan discount.

FS-26

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

10. Long-term debt (continued):

Subsequent to December 31, 2019, the Company was granted an extension on the loan as a relief measure with monthly payments suspended from April 1, 2020 and deferred to January 1, 2021.

b) During the year ended December 31, 2019, $12,600 of the loan was converted into 21,000 common shares of the Company. This loan has no term or payment due date and as such is recorded as a current liability.
c) The loan was secured by a first charge on all the Company's future Government of Canada receivables in the form of the 2018 SR&ED refunds. The loan was payable to an entity in which a director of the Company was the principal (note 17(b)(i)) and to a member of key management of the Company and was fully repaid during 2019. During the year ended December 31, 2019, the Company issued 200,000 common share purchase warrants to a lender as a financing fee and the associated fair value of $56,114 was expensed as part of finance expense. The warrants were valued based on the following assumptions in a Black-Scholes valuation: annualized volatility of 75.00%, risk-free interest rate of 1.60%, expected life of 4 years and a dividend rate of nil%.
d) During the year ended December 31, 2019, the loan was converted into 83,333 common shares of the Company. The amount was due to a member of key management of the Company.
e) During the year ended December 31, 2019 the Company received, and repaid in full, loans from related parties in the amount of $750,000.

Principal repayments until maturity are as follows:

2020	$	524,903
2021		151,996
2022		151,996
2023		151,996
2024		37,998
	$	1,018,889

FS-27

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

11. Deferred revenue and recoveries:

		2019		2018
Sustainable Development Technology Canada (“SDTC”)	$	1,905,930	$	1,870,626
Contracts with customers		94,541		-
	$	2,000,471	$	1,870,626

On March 31, 2017, the Company signed an agreement with SDTC for funding related to the development of the Company’s technology. The funding is for a total of $7,500,000 of which the Company received the first milestone payment of $1,203,680 in 2017 to initiate the project, a follow-on payment of $666,946 related to purchases of equipment for the project was advanced in 2018 and the second milestone payment of $1,372,373 was received in 2019. In March 2020, SDTC increased the total funding commitment to $7,875,000 and provided an additional payment of $375,000.

During the fourth quarter of 2019, the first milestone under the agreement was achieved and $1,203,680, representing the amounts advanced in relation to the first milestone, has been recorded as a cost recovery on the Statement of Loss and Comprehensive Loss. The cost associated with the $666,946 for equipment costs is being amortized over a five-year period commensurate with the average depreciable life of the equipment being used in the project, with $133,389 being recognized as part of the SDTC cost recovery during the year ended December 31, 2019.

12. Convertible debentures:

The convertible debentures (“debentures”) are secured by an interest in the Company’s assets and liabilities except the Company's future Government of Canada receivables in the form of SR&ED tax credit refunds. The debentures are convertible at the option of the debenture holder at any time during the term of the note into common shares of the Company, at a conversion price of $0.50 per share. The debentures also carry an annual interest rate of 12% which is payable on a monthly basis. The Company had the right to offer a buy-back of the debentures after a one-year period from the date of issuance, which was not exercised. The following schedule sets out the debentures outstanding at December 31, 2019:

	Date of eligible buy-
Date of closing	back	Maturity date		Principal amount
March 15, 2018	March 15, 2019	March 15, 2020	$	2,050,000
May 31, 2018	May 31, 2019	May 31, 2020		100,000
August 15, 2018	August 15, 2019	August 15, 2020		100,000
September 27, 2018	September 27, 2019	September 27, 2020		500,000
October 18, 2018	October 18, 2019	October 18, 2020		100,000
January 31, 2019	January 31, 2020	January 31, 2021		750,000
			$	3,600,000

Subsequent to December 31, 2019, all of the debenture holders agreed to extend the maturity date to March 15, 2021.

At December 31, 2019, debentures with a principal amount of $850,000 were held by related parties (2018 - $850,000).

FS-28

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

12. Convertible debentures (continued):

The Company has estimated that a similar borrowing without a conversion feature would be available to the Company at an interest rate of 14% (2018 – 14%) per annum. The Company has discounted the convertible debenture cash flows and recognized the discount as the value associated with the conversion feature upon issuance of the associated instrument, with such amounts recorded as a credit to equity reserves. The carrying value of the convertible debentures, being net of the conversion feature and transaction costs, are accreted over the term of the debentures to their repayment amount.

Convertible debentures		2019		2018
Balance, beginning of the year	$	2,746,784	$	-
Issuance of convertible debentures		750,000		2,850,000
Conversion feature recorded in equity reserves		(23,919)		(97,109)
Issuance costs		(60,939)		(52,500)
Finance expense		569,063		273,177
Cash interest paid		(431,142)		(226,784)
Balance, end of year	$	3,549,847	$	2,746,784
Current	$	2,849,573	$	-
Long-term	$	700,274	$	2,746,784

13. Finance expense:

		2019		2018		2017
Accretion of convertible debt (note 12)	$	137,921	$	46,393	$	-
Interest paid – convertible debt (note 12)		431,142		226,784		-
Interest expense – long-term debt (note 10)		88,574		93,973		58,466
Accretion of WINN loans (note 10(a))		81,815		61,364		19,677
Finance expense – lease liabilities (note 9)		76,655		-		-
Warrants granted as finance costs (note 10(c))		56,114		-		-
	$	872,221	$	428,514	$	78,143

14. Share capital:

(a) Authorized and issued:

Authorized: Unlimited common shares without par value Unlimited Class A preferred shares without par value, issuable in Series

Drag-along rights: The articles of the Company include drag-along rights which enables a majority shareholder to force a minority shareholder to join in the sale of the Company and which enable minority shareholders to join in the sale of a majority shareholder stake at the same price, terms and conditions.

Preferred share rights: Preferred shares have voting rights on a one-for-one basis with common shareholders. Preferred shareholders are entitled to dividends along with, or in priority to, common shareholders. In the event of liquidation, preferred shares are entitled to priority settlement. Preferred shareholders may convert to common shares at their option.

FS-29

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

14. Share capital (continued):

(b) Issuance of shares:

	Number of		Number of
	common	Common	preferred		Preferred
	shares	shares	shares		shares
Balance, January 1, 2017	48,839,438	$ 13,086,606	-	$	-
Issuance of common shares	600,058	200,000	-		-
Exercise of stock options	15,000	3,692	-		-
Balance December 31, 2017 and 2018	49,454,496	13,290,298	-		-
Issuance of common shares	4,163,164	2,324,054	-		-
Shares issuance costs	-	(61,093)	-		-
Issuance of preferred shares	-	-	8,333,333		5,000,000
Preferred share issuance costs	-	-	-		(18)
Exercise of stock options	225,400	56,350	-		-
Settlement of long-term debt	104,333	62,600	-		-
Balance, December 31, 2019	53,947,393	$ 15,672,209	8,333,333	$	4,999,982

In connection with the investment of $5,000,000 in preferred shares during the year ended December 31, 2019, the investor has the right to make an additional equity contribution of up to $10,000,000, which was made in March 2020 (see note 22).

(c) Warrants:

The Company has issued warrants that allow the holder to acquire additional common shares of the Company. Warrant transactions are summarized as follows:

	Number	Weighted Average
	of Warrants	Exercise Price
Balance, January 1, 2017	1,054,544	$ 0.63
Expired	(430,544)	1.19
Balance, December 31, 2017	624,000	0.25
Expired	(624,000)	0.25
Balance, December 31, 2018	-	-
Granted (note 10(c))	200,000	0.50
Balance,December 31,2019	200,000	$ 0.50

As at December 31, 2019, warrants outstanding enabling holders to acquire common shares are as follows:

Number of		Exercise
Warrants Outstanding		Price	ExpiryDate
200,000	$	0.50	January 10, 2024

FS-30

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

15. Share-based payments:

The Company has a stock option plan to provide incentives to its officers, directors, employees and certain non-employees. The Company has reserved up to 20% of the issued and outstanding common shares of the Company to be issued under the plan. The exercise price of each option is set by the plan administrator and may not be less than 85% of the fair value of the common shares on the option grant date. The stock options have a maximum term of ten years. Most stock options issued by the Company vest over the first two to three years of the option period.

Stock option transactions are as follows:

	Number	Weighted Average	Weighted Average
	of Stock Options	Exercise Price
Balance, January 1, 2017	5,085,000	$	0.25
Granted	3,635,000		0.33
Cancelled	(50,000)		0.25
Exercised	(15,000)		0.25
Balance, December 31, 2017	8,655,000	$	0.28
Granted	565,000		0.38
Cancelled	(700,000)		0.29
Balance, December 31, 2018	8,520,000	$	0.29
Cancelled	(100,000)		0.33
Exercised	(225,400)		0.25
Expired	(469,600)		0.25
Balance, December 31, 2019	7,725,000	$	0.29
Exercisable,December31,2019	5,511,250	$	0.27

FS-31

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

15. Share-based payments (continued):

At December 31, 2019, stock options were outstanding enabling holders to acquire common shares as follows:

Number of Stock Options Outstanding Number of Stock Options Vested	Number of Stock Options Outstanding Number of Stock Options Vested	Number of Stock Options Outstanding Number of Stock Options Vested	Exercise Price ExpiryDate
	250,000 775,000 100,000 50,000 1,650,000 150,000 400,000 225,000 100,000 300,000 3,260,000 150,000 315,000 7,725,000	250,000 775,000 100,000 50,000 1,650,000 150,000 400,000 225,000 100,000 300,000 1,297,500 56,250 157,500 5,511,250	$ 0.24618 April 15, 2020(1) 0.24618 June 15, 2020(2) 0.24618 July 27, 2020(1) 0.24618 July 25, 2021 0.24618 September 23, 2021(3) 0.24618 December 1, 2021 0.24618 November 1, 2023 0.24618 April 15, 2024 0.24618 April 15, 2024 0.24618 May 15, 2024 0.33000 December 31, 2026 0.50000 June 30, 2027(4) 0.33000 December 31, 2027 $ 0.2899

(1) Expired unexercised subsequent to December 31, 2019.

(2) 500,000 expired unexercised subsequent to December 31, 2019. The expiry date of 275,000 stock options were extended to June 15, 2022.

(3) Subsequent to December 31, 2019 the expiry date was extended to September 23, 2023.

(4) Subsequent to December 31, 2019, 5,000 stock options were cancelled.

During the year ended December 31, 2019, the Company granted a total of nil (2018 – 565,000; 2017 – 3,635,000) stock options with a weighted average fair value of $nil per option (2018 - $0.29; 2017 - $0.25).

The stock options granted in 2018 vest equally over 16 quarters from the grant date. During the year ended December 31, 2017, 2,105,000 stock options were granted that vest equally over 16 quarters from the grant date (of which 375,000 were cancelled in 2018), and 1,530,000 stock options were granted which vest upon reaching the following performance conditions: 504,900 stock options vesting upon achieving a company valuation of $50 million; 504,900 stock options vesting upon achieving a company valuation of $100 million and 520,200 stock options vesting upon a liquidity event such as a listing on a recognized public stock exchange or a purchase acquisition. At December 31, 2019 no share-based compensation expense has been recognized with respect to the 1,530,000 stock options granted during the year ended December 31, 2017 with performance conditions as the performance requirements were not met at period end.

FS-32

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

15. Share-based payments (continued):

The Company recognized share-based payments expense for options granted and vesting, net of recoveries on cancellations of unvested options, during the years ended December 31, 2019, 2018 and 2017 with allocations to functional expense as follows:

		2019		2018		2017
Product development	$	94,201	$	82,469	$	31,150
General and administrative		120,885		129,164		408,058
	$	215,086	$	211,633	$	439,208

In order to compute this fair value of stock options, the Company uses the Black-Scholes option pricing model; this inherently requires management to make various estimates and assumptions in relation to the expected life of the award, expected volatility, risk-free rate and forfeiture rates. Changes in any of these inputs could cause a significant change in the share-based compensation expense charged in the statement of loss and to equity reserves in a given period. The following weighted average assumptions were used for the Black-Scholes option pricing model valuation of stock options granted:

	2019	2018	2017
Risk-free interest rate	-	2.20%	1.74%
Expected life of options	-	10 years	10 years
Expected annualized volatility	-	71%	71%
Dividend	-	0%	0%
Forfeiture rate	-	0%	0%

Expected annualized volatility was determined through the comparison of historical share price volatilities used by similar publicly listed companies in similar industries.

During the year ended December 31, 2019, the Company amended the expiry dates of 1,225,000 outstanding stock options. This resulted in additional share-based payments expense of $130,846 for the year ended December 31, 2019. The weighted average assumptions used for the Black-Scholes valuation of the modified options were annualized volatility of 75%, risk-free interest rate of 1.56%, expected life of 4.5 years and a dividend rate of 0%.

FS-33

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

16. Income taxes and scientific research and experimental development tax credits:

Income taxes

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

		2019		2018		2017
Net loss for the year, before tax	$	(4,295,925)	$	(4,465,305)	$	(3,878,967)
Statutory rate		27%		27%		26%
Recovery of income taxes
based on statutory tax rates		(1,159,900)		(1,205,632)		(1,008,531)
Differences in tax rates and change in tax rates		39,738		-		(124,489)
Permanent differences		81,750		137,453		124,566
Changes in unrecognized
deductible temporary differences		1,031,954		1,041,959		1,008,454
Total income tax (recovery) expense	$	(6,458)	$	(26,220)	$	-

The significant components of the Company’s unrecognized tax effected temporary tax differences are as follows:

		2019		2018		2017
Equipment and leaseholds	$	237,054	$	259,452	$	188,101
Long-term debt		126,769		135,458		94,521
SR&ED pools and credits		1,373,180		1,120,292		677,774
Financing fees		51,250		44,113		49,160
Lease liabilities		158,987		51,504		-
Non-capital losses		3,751,523		3,142,740		2,575,238
Investment in joint venture		39,740		-		-
Deferred tax assets		5,738,503		4,753,559		3,584,794
SR&ED credits		(259,899)		(292,607)		(193,669)
Convertible debenture		(13,566)		(27,868)		-
		(273,465)		(320,475)		(193,669)
Unrecognized net deferred tax asset	$	5,465,038	$	4,433,084	$	3,391,125

At December 31, 2019, the Company has Canadian non-capital losses of $13,895,000 that may be applied to reduce future taxable income. If these losses are not used to offset future income, they will expire in various years between 2028 and 2039. Additionally, as at December 31, 2019, the Company had SR&ED expenditure pools of approximately $4,947,000 which do not expire.

FS-34

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

16. Income taxes and scientific research and experimental development tax credits (continued):

Scientific research and experimental development (“SR&ED”) tax credits

The Company estimated its SR&ED investment tax credit claim for the year ended December 31, 2019 to be $1,224,015 (2018 - $1,350,000; 2017 - $975,000) which has been recorded as taxes receivable and a cost recovery in the statement of comprehensive loss. To the extent the SR&ED claim is adjusted and accepted, it would impact the amount of the tax losses and undeducted SR&ED costs carried forward as noted above.

		2019		2018		2017
SR&ED claim for the year	$	1,224,015	$	1,350,000	$	975,000
Adjustment to prior year SR&ED claim		3,977		146,472		(56,612)
	$	1,227,992	$	1,496,472	$	918,388

17. Related party transactions:

(a) Key management personnel compensation:

Key management includes the members of the Board of Directors, the President and Chief Executive Officer and Chief Financial Officer. Key management personnel compensation comprises:

		2019		2018		2017
Salaries and benefits	$	655,000	$	640,000	$	500,000
Share-based payments		156,765		122,637		427,001
	$	811,765	$	762,637	$	927,001

(b) Key management personnel and director transactions:

A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities. A number of these entities transacted with the Company in the reporting period.

The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence (in addition to the transactions disclosed in notes 10 and 12) were as follows:

(i) A principal of Collings Family Investments Ltd. and The Collings Stevens Family Foundation is a director of the Company. As at December 31, 2019, the Collings Family Investments Ltd. and The Collings Stevens Family Foundation are long-term debt holders with a principal amount due to them of $Nil (2018 - $700,000) and hold $500,000 (2018 - $500,000) of convertible debentures. Included in finance expense for the year ended December 31, 2019 is $148,845 (2018 - $136,712; 2017 - $30,339) in interest paid to Collings Family Investments Ltd. and The Collings Stevens Family Foundation for loans of which nil in accrued interest (2018 - $10,520; 2017 - $nil) is included in accounts payable. In 2019, Collings Family Investments Ltd. was issued warrants as a financing fee in connection with certain debt financing. Included in finance expense for the year ended December 31, 2019 is $56,114 related to the fair value of the warrants issued.

FS-35

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

17. Related party transactions (continued):

(b) Key management personnel and director transactions (continued):
(ii) A principal of Murdoch Family Trust is a director of the Company. As at December 31, 2019, the Murdoch Family Trust holds convertible debentures of $300,000 (2018 - $300,000). Included in interest within finance expense for the year ended December 31, 2019 is $47,178 (2018 - $40,273; 2017 - $13,002) in interest paid to Murdoch Family Trust for a loan.
(iii) A principal of Truckenbrodt Clean Energy Consulting is a director of the Company. As at December 31, 2019, the Truckenbrodt Clean Energy Consulting holds convertible debentures of $50,000 (2018 - $50,000). Included in interest within finance expense for the year ended December 31, 2019 is $6,000 (2018 - $5,839; 2017 - $nil) in interest paid to Truckenbrodt Clean Energy Consulting for a loan.
(iv) During the year ended December 31, 2018 a member of key management loaned the Company $60,000 as part of the SR&ED loan payable (note 10(c)) with an additional $100,000 loaned in the year ended December 31, 2019. The loans were repaid in full during the year ended December 31, 2019. Additionally, $50,000 was loaned to the Company which was converted into common shares during the year ended December 31, 2019 (note 10(d)). Included in interest within finance expense for the year ended December 31, 2019 is $13,579 (2018 - $nil) in interest paid to the member of key management.
(v) Various members of management are owed $4,919 (2018 - $5,454) for services rendered which is included in accounts payable.
(c) During the year ended December 31, 2019, the Company accrued $58,251 (2018 – $nil; 2017 - $nil) in expenses, was paid $750,000 (2018 - $nil; 2017 - $nil) in technical license fees, recorded $54,841 (2018 - $nil; 2017 - $nil) in accounts payable and $32,410 (2018 - $nil; 2017 - $nil) in deferred revenue from a joint venture (see note 6). The transactions were carried out in the normal course of operations and are measured at the exchange amount, being the amount agreed between the parties.

18. Segmented information and major customers:

The Company operates in one segment being the development of fuel cell technology. All of the Company’s non-current assets are located in Canada with the exception of its investment in joint venture, which investment is in a company domiciled in China (note 6).

In the year ended December 31, 2019, two customers, both of whom were located in the United States, provided 100% (2018 – nil%; 2017 – nil%) of the Company’s revenues from contracts with customers.

FS-36

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

19. Financial Instruments and Risk:

Fair value

The carrying value of cash, accounts receivable, and accounts payable and accrued liabilities, approximates their fair value given their short-term nature. The carrying value of the long-term debt approximates fair value given the difference between the discount rates used to recognize the liabilities in the consolidated statement of financial position and the market rates of interest being insignificant. The fair value of convertible debentures and accrued interest as at December 31, 2019 was $3,600,000 which represents the value to settle the convertible debentures in cash or equity.

Fair value measurements recognized in the consolidated statement of financial position must be categorized in accordance with the following levels:

(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
(ii) Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company does not have any financial instruments measured at fair value in the consolidated statement of financial position and has therefore not transferred any financial instruments between the levels of the fair value hierarchy during the year ended December 31, 2019.

Financial risk factors

Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and customer receivables. The Company limits its exposure to credit loss by placing its cash with major financial institutions. As at December 31, 2019, cash consisted of cash held with financial institutions in Canada. Balances exceed amounts insured by the Canada Deposit Insurance Corporation for up to $100,000.

The Company’s exposure to credit risk on customer accounts receivable is influenced mainly by the individual characteristics of each debtor. The Company currently works with a small number of customers and is therefore able to monitor credit risk on an individual account basis and apply lifetime expected loss provisions where any uncertainty on collectability is identified. No such provision is required as at December 31, 2019.

FS-37

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

19. Financial Instruments and Risk (continued):

Financial risk factors (continued)

Credit risk (continued):

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

		2019		2018
Accounts receivable	$	125,159	$	47,668
Cash		2,168,047		9,971
	$	2,293,206	$	57,639

Liquidity risk

The following contractual maturities of financial obligations (including interest) exist as at December 31, 2019:

		Carrying	Contractual	Contractual					4	to 5 years
		amount		cash flows	Within 1 year		2 to 3 years			and over
Accounts payable and accrued	$	716,618	$	716,618	$	716,618	$	-	$	-
liabilities
Long-term debt		842,424		1,018,889		524,903		303,992		189,994
Convertible debentures		3,549,847		3,814,722		3,057,222		757,500		-
	$	5,108,889	$	5,550,229		4,298,743	$ 1,061,492		$	189,994

Foreign exchange risk

The Company is exposed to foreign currency risk on fluctuations related to working capital balances are denominated in United States dollars. As at December 31, 2019, the Company did not have significant working capital balances in foreign balances. The Company anticipates that, as its operations and sales expand, the Company will be increasingly subject to fluctuations in the US dollar.

Interest rate risk

The Company’s debt instruments have fixed interest rates and therefore do not fluctuate with market conditions. Interest income on cash is considered incidental and not significant to operating results.

FS-38

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

LOOP ENERGY INC.

20. Capital management:

The Company considers its capital to be the components of shareholders’ equity and debt, less cash on hand. The Company’s objective when managing capital is to maintain adequate levels of funding to support the development of its business and maintain the necessary corporate and administrative functions to facilitate these activities. This is done primarily through debt and equity financing and is supplemented by applying for government grant programs where available. Future financings are dependent on market conditions and the ability to identify sources of investment. There can be no assurance the Company will be able to raise funds in the future.

There were no changes to the Company’s approach to capital management during the year ended December 31, 2019. The Company is not subject to externally imposed capital requirements.

21. Employee remuneration:

Employee salaries and benefits are classified in the statement of loss and comprehensive loss as follows:

		2019		2018		2017
Product development	$	1,882,578	$	1,509,085	$	948,366
General and administrative		725,720		851,574		647,538
	$	2,608,298	$	2,360,659	$	1,595,904

22. Subsequent events:

Equity offering

On March 16, 2020, the Company issued 12,500,000 Series 2 Class A preferred shares for cash consideration of $10,000,000. The preferred shares have the same rights as the Series 1 Class A preferred shares issued during the year ended December 31, 2019.

Stock options

In February 2020, the Company granted 275,000 stock options with an exercise price per common share of $0.60 to vest equally over 16 quarters starting January 1, 2020. An additional 45,000 stock options were granted with an exercise price per common share of $0.60 to vest equally over 16 quarters starting January 1, 2020, or fully vest upon acquisition or change of control. The Company also granted 100,000 stock options with an exercise price of $0.50 per common share, of which 50,000 options vested immediately with the remaining 50,000 options to vest equally over 8 quarters starting January 1, 2020.

In August 2020, the Company granted 540,000 stock options with an exercise price per common share of $0.80 to vest equally over 16 quarters starting September 1, 2020.

Additionally, the Company extended the maturity of 275,000 stock options exercisable at a price of $0.24618 by two years to June 15, 2022 and 1,650,000 stock options exercisable at a price of $0.24618 from September 23, 2021 to September 23, 2023.

FS-39

LOOP ENERGY INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars) Years ended December 31, 2019, 2018 and 2017

22. Subsequent events (continued):

Convertible debentures

Subsequent to December 31, 2019, the Company extended the maturity of convertible debentures totaling $3,600,000 maturing in 2020 to March 15, 2021.

New Lease

The Company has entered into an additional premises lease on January 4, 2021. The term covers period from March 1, 2021 to September 29, 2024 with an annual basic rent payment of $321,898.

FS-40

Condensed Consolidated Interim Financial Statements of

LOOP ENERGY INC.

(Unaudited) (Expressed in Canadian dollars)

Three and nine month periods ended September 30, 2020 and 2019

FS-41

LOOP ENERGY INC.

Condensed Consolidated Interim Statements of Financial Position (Unaudited)

(Expressed in Canadian dollars)

LOOP ENERGY INC. Condensed Consolidated Interim Statements of Financial Position (Unaudited) (Expressed in Canadian dollars)
	September 30,			December 31,
		2020		2019
ASSETS
Current assets:
Cash	$	6,336,671	$	2,168,047
Accounts receivable (note 3)		566,271		125,159
Tax credit receivable (note 14)		1,109,792		1,224,015
Prepaid expenses and advances		998,332		228,945
		9,011,066		3,746,166
Investment in joint venture (note 4)		245,115		455,644
Right-of-use asset (note 7(a))		314,548		400,334
Equipment and leasehold improvements (note 5)		2,143,368		2,216,042
	$	11,714,097	$	6,818,186
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and accrued liabilities (note 6)	$	1,257,240	$	716,618
Current portion of lease liability (note 7(b))		191,200		189,638
Current portion of long-term debt (note 8)		514,992		514,992
Convertible debentures (note 10)		3,563,567		2,849,573
Deferred revenue and recoveries (note 9)		2,204,313		2,000,471
		7,731,312		6,271,292
Convertible debentures (note 10)		-		700,274
Long-term debt (note 8)		316,026		327,432
Lease liability (note 7(b))		294,957		399,204
		8,342,295		7,698,202
Shareholders’ equity (deficiency)
Common shares (note 12)		15,675,495		15,672,209
Preferred shares (note 12)		14,989,712		4,999,982
Reserves		2,698,282		2,303,540
Deficit		(29,991,687)		(23,855,747)
		3,371,802		(880,016)
	$	11,714,097	$	6,818,186

Going concern (note 2(b)) Subsequent events (notes 8(a), 10, 13 and 20)

The notes are an integral part of these condensed consolidated interim financial statements.

FS-42

LOOP ENERGY INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (Unaudited) (Expressed in Canadian dollars)

(Unaudited) (Expressed in Canadian dollars)
	For the three		For the three			For the nine		For the nine
	months ended		months ended		months ended		months ended
	September 30,		September 30,		September 30,		September 30,
		2020		2019		2020		2019
Revenue	$	353,088	$	129,440	$	353,088	$	129,440
Expenses:
Product development		2,207,550		853,758		4,833,220		2,824,867
General and administrative		734,538		516,941		2,221,062		1,466,988
Technology development		44,590		-		63,474		-
Business development		159,208		8,080		181,539		12,055
		3,145,886		1,378,779		7,299,295		4,303,910
Less cost recovery:
Sustainable Development Technology
Canada (note 9)		33,347		33,347		166,100		100,042
Research and development tax credits (note 14)		510,565		215,259		1,109,792		727,265
Automotive Supplier Innovation Program		-		-		54,083		-
Other grants		391		-		913		2,700
Net expenses		2,601,583		1,130,173		5,968,407		3,473,903
Loss before the undernoted		(2,248,495)		(1,000,733)		(5,615,319)		(3,344,463)
Other income (expenses):
Technology license fee (note 4)		-		-		-		548,250
Foreign tax paid		-		-		-		(75,000)
Loss from investment in joint venture (note 4)		(50,778)		(17,157)		(152,333)		(51,472)
Foreign exchange gain (loss)		11,602		38,006		21,511		19,101
Interest income		8,847		1,106		24,814		1,816
Finance expense (note 11)		(159,663)		(177,455)		(414,613)		(671,431)
		(189,992)		(155,500)		(520,621)		(228,736)
Loss before income taxes		(2,438,487)		(1,156,233)		(6,135,940)		(3,573,199)
Deferred income tax recovery		-		-		-		6,458
Loss and comprehensive loss	$	(2,438,487)	$	(1,156,233)	$	(6,135,940)	$	(3,566,741)
Loss per common share – basic and diluted	$	(0.05)	$	(0.02)	$	(0.11)	$	(0.07)
Weighted average number of
common shares outstanding		53,948,038		53,625,220		53,947,610		52,011,324

The notes are an integral part of these condensed consolidated interim financial statements.

FS-43

LOOP ENERGY INC.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity (Deficiency) (Unaudited)

(Expressed in Canadian dollars)

(Unaudited) (Expressed in Canadian dollars)
								Total
							shareholder
	Common		Preferred					equity
	shares		shares		Reserves	Deficit	(deficiency)
Balance December 31, 2019	$15,672,209	$	4,999,982	$	2,303,540	$ (23,855,747)	$	(880,016)
Issuance of preferred shares, net of costs	-		9,989,730		-	-		9,989,730
Exercise of stock options	3,286		-		(1,411)	-		1,875
Share-based payments	-		-		396,153	-		396,153
Loss for the period	-		-		-	(6,135,940)		(6,135,940)
Balance, September 30, 2020	$15,675,495	$	14,989,712	$	2,698,282	$ (29,991,687)	$	3,371,802
Balance December 31, 2018	13,290,298 $	$	-	$	2,014,879	$ (19,566,280)	$	(4,261,103)
Issuance of common shares, net of costs	2,262,961		-		-	-		2,262,961
Issuance of preferred shares, net of costs	-		4,999,982		-	-		4,999,982
Exercise of stock options	49,334		-		-			49,334
Settlement of long-term debt	62,600		-		-			62,600
Issuance of convertible debentures,
net of deferred tax of $6,458	-		-		17,461	-		17,461
Issuance of warrants	-		-		56,114	-		56,114
Share-based payments	-		-		191,062	-		191,062
Loss for the period	-		-		-	(3,566,741)		(3,566,741)
Balance, September 30, 2019	$15,665,193	$	4,999,982	$	2,279,516	$ (23,133,021)	$	(188,330)

The notes are an integral part of these condensed consolidated interim financial statements.

FS-44

LOOP ENERGY INC.

Condensed Consolidated Interim Statements of Cash Flows (Unaudited) (Expressed in Canadian dollars)

	For the nine months ended September 30, 2020 For the nine months ended September 30, 2019
Cash flows from operating activities: Loss for the period Items not affecting cash: Depreciation Finance expense Loss from investment in joint venture Joint venture eliminations (note 4) Share-based payments Unrealized foreign exchange Deferred income tax recovery	$ (6,135,940) $ (3,566,741) 484,912 284,930 414,613 671,431 152,333 51,472 80,015 201,750 396,153 191,062 (21,819) 17,982 - (6,458)
Changes in non-cash working capital items: Accounts receivable Tax credit receivable Prepaid expenses and advances Accounts payable and accrued liabilities Deferred revenue and recoveries	(4,629,733) (2,154,572) (441,112) (66,935) 114,223 630,052 (769,387) (454,989) 458,933 (106,410) 203,842 (51,798)
Cash used in operating activities	(5,063,234) (2,204,652)
Cash flows from investing activities Investment in joint venture Purchase of equipment and leasehold improvements	- (750,000) (326,452) (863,700)
Cash used in investing activities	(326,452) (1,613,700)
Cash flows from financing activities Proceeds from convertible debentures, net of issuance costs Issuance of common shares, net of share issuance costs Issuance of preferred shares, net of share issuance costs Proceeds from long-term debt Exercise of stock options Repayment of long-term debt Interest paid Lease payments	- 689,061 - 2,312,295 9,989,730 4,999,982 - 750,000 1,875 - (38,003) (1,486,002) (245,152) (175,606) (150,140) (143,237)
Cash provided by financing activities	9,558,310 6,946,493
Change in cash Cash, beginning of the period	4,168,624 3,128,141 2,168,047 9,971
Cash, end of the period	$ 6,336,671 $ 3,138,112
Supplemental schedule of non-cash activities Issuance of common shares for debt	$ - $ 62,600

The notes are an integral part of these condensed consolidated interim financial statements.

FS-45

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

1. General information:

2. Basis of presentation:

(a) Statement of compliance:

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board and Interpretations issued by the IFRS Interpretations Committee. The accounting policies and methods of computation applied are the same as those applied in the Company’s annual consolidated financial statements for the year ended December 31, 2019. These condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2019

The condensed consolidated interim financial statements were authorized for issue by the Board of Directors on February 4, 2021.

(b) Going concern:

These condensed consolidated interim financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company has been focused on product development with minimal commercial sales activity to date. As a result, the Company has experienced significant losses in past years resulting in an accumulated deficit of $29,991,687 at September 30, 2020 and has experienced significant negative cash flow from operations. The Company is reliant on continual support from shareholders and investors, Scientific Research and Experimental Development ("SR&ED") tax credit refunds and other government funding. These circumstances have resulted in a material uncertainty about whether the Company will be able to meet its obligations as they become due. This material uncertainty may cast significant doubt about the ability of the Company to continue as a going concern.

FS-46

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

2. Basis of presentation (continued):

(b) Going concern (continued):

In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy, capital markets and our business are not known at this time. These impacts could include the ability of the Company to raise capital, the impairment in the value of our long-lived assets, or potential future decreases in revenue or the profitability of our ongoing and future operations.

These condensed consolidated interim financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis were not appropriate for these condensed consolidated interim financial statements, then adjustments would be necessary to the carrying values and classification of assets and liabilities.

(c) Basis of measurement and presentation:

The condensed consolidated interim financial statements have been prepared on the historical cost basis using the accrual basis of accounting, except for cash flow information.

(d) Functional and presentation currency:

These condensed consolidated interim financial statements are presented in Canadian dollars, which is also the Company's functional currency.

(e) Basis of consolidation:

The condensed consolidated interim financial statements comprise the accounts of Loop Energy Inc., the parent company, and its wholly-owned subsidiary, 1123640 B.C. Ltd., after the elimination of all material intercompany balances and transactions. The accounts of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-company transactions, balances and unrealized gains or losses on transactions are eliminated upon consolidation.

FS-47

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

2. Basis of presentation (continued):

(f) Use of estimates and judgments:

The preparation of the condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from those estimates.

Information on significant areas of uncertainty and critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements relate to the determination of share-based payments (note 13), the valuation of convertible debentures (note 10), and the amount and collectability of Scientific Research and Experimental Development (“SR&ED”) tax credits receivable (note 14).

Significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2019. The assessment of the Company’s ability to continue as a going concern and to raise sufficient funds to pay its ongoing operational expenditures and to meet its liabilities for the ensuing year, involves significant judgment based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances (see note 2(b)).

3. Accounts receivable:

	September 30,	September 30,	December 31,	December 31,
		2020		2019
GST receivable	$	72,542	$	84,789
Customer receivables (note 15(c))		493,729		40,370
	$	566,271	$	125,159

FS-48

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

4. Investment in joint venture:

As part of the joint venture transaction, the Company closed a common share equity investment in InPowerLoop of $750,000 at a share price of $0.50 per share resulting in ownership of 26.9% of the InPower-Loop JV. The Company has the right to appoint one director to the three-person board of InPower-Loop JV. Operational decisions are made by majority vote, subject to approval by the Company’s nominee for all major matters affecting the InPower-Loop JV. The Company accounts for the investment in InPower-Loop JV using the equity method in accordance with IFRS 11, “Joint Arrangements”.

		Nine months
		ended		Year ended
	September 30,		December 31,
Investment in joint venture-InPower-Loop JV		2020		2019
Balance, beginning of period	$	455,644	$	-
Purchase of 26.9% of common voting shares of InPower-Loop JV		-		750,000
Intercompany elimination		(80,015)		(201,750)
Foreign exchange		21,819		(23,976)
Company’s share of loss		(152,333)		(68,630)
	$	245,115	$	455,644

Concurrently with the establishment of the joint venture, InPower-Loop JV paid the Company a one-time technology license fee of $750,000, against which a withholding tax of $75,000 was applied, for the use of the Company’s intellectual property in China. The technology license fee income has been reduced by $201,750 to recognize the income only to the extent it has been paid to the Company by unrelated investors in the InPower-Loop JV.

In the three and nine month periods ended September 30, 2020, the Company recognized sales of $297,453 to the InPower-Loop JV which was reduced by $80,015 to recognize the intercompany impact for sold product that is in InPower-Loop JV’s inventory.

FS-49

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

5. Equipment and leasehold improvements:

				Leasehold		Computer		Computer
		Equipment	improvements			hardware		software		Total
Cost
Balance, December 31, 2019	$	1,571,125	$	1,246,644	$	56,714	$	62,473	$	2,936,956
Additions		157,239		56,658		38,612		73,943		326,452
Balance, September30,2020	$	1,728,364	$	1,303,302	$	95,326	$	136,416	$	3,263,408
Accumulated depreciation
Balance, December 31, 2019	$	452,201	$	188,612	$	24,046	$	56,055	$	720,914
Depreciation		162,307		206,848		12,834		17,137		399,126
Balance, September30,2020	$	614,508	$	395,460	$	36,880	$	73,192	$	1,120,040
Carrying amounts
December 31, 2019	$	1,118,924	$	1,058,032	$	32,668	$	6,418	$	2,216,042
September 30, 2020	$	1,113,856	$	907,842	$	58,446	$	63,224	$	2,143,368

Depreciation expense during the three-month and nine-month periods ended September 30, 2020 was $141,749 and $399,126 respectively (2019 - $95,537 and $199,144) and is included in product development expenses.

6. Accounts payable and accrued liabilities:

	September 30,	September 30,	December 31,	December 31,
		2020		2019
Trade payables and accrued expenses	$	939,853	$	594,958
Trade and other payables due to related parties (note 15(b) and (c))		220,417		59,760
Payroll accruals		96,970		61,900
	$	1,257,240	$	716,618

7. Right-of-use asset and lease liability:

(a) Right-of-use asset:

The movement of right-of-use asset during the period is as follows:

		Nine months
		ended
		September
		30, 2020
Balance, beginning of the period	$	400,334
Depreciation		(85,786)
Balance, end of period	$	314,548

FS-50

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

7. Right-of-use asset and lease liability (continued):

(a) Right-of-use asset (continued):

Depreciation expense for the three-month and nine-month periods ended September 30, 2020 and 2019 for the right-of-use asset of $5,719 and $17,157, respectively, is included in general and administrative expense and $22,876 and $68,629 respectively is included in product development expense in the statement of loss.

(b) Lease liability:

		Total
Lease liability at December 31, 2019	$	588,842
Finance expense		47,455
Lease payments		(150,140)
Lease liability at September 30, 2020	$	486,157
Current portion	$	191,200
Non-current portion		294,957

		Total
Maturity analysis – contractual undiscounted cash flows:
2020	$	50,046
2021		203,639
2022		207,090
2023		103,545
Total undiscounted lease liability at September 30, 2020	$	564,320

8. Long-term debt:

		Nine months
		ended
	September 30,
		2020
Balance, beginning of the period	$	842,424
Repayment of long-term debt		(38,003)
Finance expense, net of modification gain		26,597
Balance, end of period	$	831,018

FS-51

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

8. Long-term debt (continued):

Long-term debt consists of the following:

	September 30,	September 30,	December 31,	December 31,
		2020		2019
Unsecured loan payable, maturing March 1, 2024, bearing no interest,
and repayable in monthly principal payments of $12,666 (a)	$	458,104	$	469,512
Unsecured promissory notes, with no maturity date
and without interest (b)		372,914		372,912
		831,018		842,424
Less current portion of long-term debt		514,992		514,992
	$	316,026	$	327,432

a) The Company signed a Western Innovation Initiative (“WINN”) loan funding agreement on September 15, 2017 which provided loans to the Company up to $760,000 based on matching investments for certain projects. The Company applied an effective interest rate of 15% to discount the cash flows of the noninterest bearing loan. During the three-month and nine-month periods ended September 30, 2020, the Company recorded an associated non-cash finance expense of $17,221 and $51,372 respectively (2019 - $19,046 and $63,489), related to the accretion of the loan discount.

During the nine-month period ended September 30, 2020, the Company was granted an extension on the loan as a relief measure with monthly payments suspended from April 1, 2020 and deferred to recommence October 1, 2020. The Company recognized a gain on modification in the amount of $24,775 in the nine months ended September 30, 2020. Subsequent to September 30, 2020, a further extension was granted to January 1, 2021.

b) During the nine-month period ended September 30, 2019, $12,600 of the loan was converted into 21,000 common shares of the Company. This loan has no term or payment due date and as such is recorded as a current liability.

Principal repayments until maturity are as follows:

2020	$	410,902
2021		151,996
2022		151,996
2023		151,996
2024		113,994
	$	980,884

FS-52

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

9. Deferred revenue and recoveries:

		September 30,	December 31,	December 31,
		2020		2019
Sustainable Development Technology Canada (“SDTC”)	$	2,114,830	$	1,905,930
Contracts with customers		89,483		94,541
	$	2,204,313	$	2,000,471

On March 31, 2017, the Company signed an agreement with SDTC for funding related to the development of the Company’s technology. The funding was for a total of $7,500,000 of which the Company received the first milestone payment of $1,203,680 in 2017 to initiate the project, a follow-on payment of $666,946 related to purchases of equipment for the project was advanced in 2018 and the second milestone payment of $1,372,373 was received in 2019. In March 2020, SDTC increased the total funding commitment to $7,875,000 and provided an additional payment of $375,000.

During the three and nine month periods ended September 30, 2020, the Company recognized a deferred cost recovery of $33,347 and $166,100 respectively (2019 - $33,347 and $100,042, respectively) in relation to the amortization of the deferred equipment cost payment and the recognition associated with the completion of milestones.

10. Convertible debentures:

	Date of eligible buy-
Date of closing	back	Maturity date		Principal amount
March 15, 2018	March 15, 2019	March 15, 2021	$	2,050,000
May 31, 2018	May 31, 2019	March 15, 2021		100,000
August 15, 2018	August 15, 2019	March 15, 2021		100,000
September 27, 2018	September 27, 2019	March 15, 2021		500,000
October 18, 2018	October 18, 2019	March 15, 2021		100,000
January 31, 2019	January 31, 2020	March 15, 2021		750,000
			$	3,600,000

In the nine-month period ended September 30, 2020, the Company extended the maturity of $2,850,000 debentures issued in the year ended December 31, 2018 to March 15, 2021. Subsequent to September 30, 2020, the debentures originally maturing January 31, 2021 were also extended to March 15, 2021. In the three and nine months ended September 30, 2020, the Company recognized a gain on debt modification of $4,802 and $45,927, respectively, in finance expense related to the maturity date extensions.

FS-53

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

10. Convertible debentures (continued):

At September 30, 2020, debentures with a principal amount of $850,000 were held by related parties (December 31, 2019 - $850,000) (note 15).

The Company has estimated that a similar borrowing without a conversion feature would be available to the Company at an interest rate of 14% per annum. The Company has discounted the convertible debenture cash flows and recognized the discount as the value associated with the conversion feature upon issuance of the associated instrument, with such amounts recorded as a credit to equity reserves. The carrying value of the convertible debentures, being net of the conversion feature and transaction costs, are accreted over the term of the debentures to their repayment amount.

	September 30,	September 30,
Convertible debentures		2020
Balance, beginning of the period	$	3,549,847
Finance expense, net of modification gain		340,561
Cash interest paid		(245,152)
Cash interest accrued in accounts payable and accrued liabilities		(81,689)
Balance, end of period	$	3,563,567
Current	$	3,563,567
Long-term	$	-

11. Finance expense:

	Three	months	Three	months	Nine	months	Nine	months
		ended		ended		ended		ended
	September 30,		September 30,		September 30,		September 30,
		2020		2019		2020		2019
Accretion of convertible debt (note 10)	$	23,778	$	29,173	$	59,647	$	81,178
Interest – convertible debt (note 10)		108,674		110,476		326,841		327,854
Interest expense
– long-term debt (note 8)		-		-		-		83,952
Accretion of
WINN loans (note 8(a))		17,221		19,046		51,372		63,489
Gain on debt modification –
WINN loans (note 8(a))		-		-		(24,775)		-
Gain on debt modification –
convertible debentures (note 10)		(4,802)		-		(45,927)		-
Finance expense
– lease liabilities (note 7(b))		14,792		18,760		47,455		58,844
Warrants granted
as finance costs (note 12(c))		-		-		-		56,114
	$	159,663	$	177,455	$	414,613	$	671,431

FS-54

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

12. Share capital:

(a) Authorized and issued:

Authorized: Unlimited common shares without par value Unlimited Class A preferred shares without par value, issuable in Series

Preferred share rights: Preferred shares have voting rights on a one-for-one basis with common shareholders. Preferred shareholders are entitled to dividends along with, or in priority to, common shareholders. In the event of liquidation, preferred shares are entitled to priority settlement. Preferred shareholders may convert to common shares at their option.

(b) Issuance of shares:

	Number of		Number of
	common	Common	preferred		Preferred
	shares	shares	shares		shares
Balance, December 31, 2019	53,947,393	$ 15,672,209	8,333,333	$	4,999,982
Issuance of preferred shares	-	-	12,500,000		10,000,000
Preferred share issuance costs	-	-	-		(10,270)
Exercise of stock options	3,125	3,286	-		-
Balance, September 30, 2020	53,950,518	$ 15,675,495	20,833,333	$	14,989,712

(c) Warrants:

The Company has issued warrants that allow the holder to acquire additional common shares of the Company. As at September 30, 2020, warrants outstanding enabling holders to acquire common shares are as follows:

Number of		Exercise
Warrants Outstanding		Price	ExpiryDate
200,000	$	0.50	January10,2024

During the nine-month period ended September 30, 2019, the Company issued 200,000 common share purchase warrants to a lender as a financing fee and the associated fair value of $56,114 was expensed as part of finance expense. The warrants were valued based on the following assumptions in a Black-Scholes valuation: annualized volatility of 75.00%, risk-free interest rate of 1.60%, expected life of 4 years and a dividend rate of nil%.

FS-55

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

13. Share-based payments:

Stock option transactions are as follows:

	Number	Weighted Average	Weighted Average
	of Stock Options	Exercise Price

Balance, December 31, 2019	7,725,000	$	0.29
Cancelled	(21,875)		0.60
Granted	960,000		0.70
Exercised	(3,125)		0.60
Expired	(850,000)		0.25
Balance, September 30, 2020	7,810,000	$	0.34
Exercisable, September30,2020	5,755,217	$	0.29

A September 30, 2020, stock options were outstanding enabling holders to acquire common shares as follows:

Number of Stock Options Outstanding Number of Stock Options Vested	Number of Stock Options Outstanding Number of Stock Options Vested	Number of Stock Options Outstanding Number of Stock Options Vested	Exercise Price ExpiryDate
	50,000 150,000 275,000 1,650,000 400,000 225,000 100,000 300,000 3,260,000 150,000 315,000 100,000 295,000 540,000 7,810,000	50,000 150,000 275,000 1,650,000 400,000 225,000 100,000 300,000 2,126,775 84,375 236,256 68,750 55,311 33,750 5,755,217	$ 0.24618 July 25, 2021 0.24618 December 1, 2021 0.24618 June 15, 2022 0.24618 September 23, 2023 0.24618 November 1, 2023 0.24618 April 15, 2024 0.24618 April 15, 2024 0.24618 May 15, 2024 0.33000 December 31, 2026 0.50000 June 30, 2027(1) 0.33000 December 31, 2027 0.50000 February 28, 2029 0.60000 February 28, 2029 0.80000 August 30, 2030 $ 0.34433

(1) Subsequent to September 30, 2020, 5,000 stock options were cancelled.

FS-56

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

13. Share-based payments (continued):

During the nine-month period ended September 30, 2020, the Company granted a total of 960,000 (2019 – nil) stock options with a weighted average fair value of $0.53 per option (2019 - $nil).

During the year ended December 31, 2017, 1,530,000 stock options were granted which vest upon reaching the following performance conditions: 504,900 stock options vesting upon achieving a company valuation of $50 million (vested in the nine months ended September 30, 2020); 504,900 stock options vesting upon achieving a company valuation of $100 million and 520,200 stock options vesting upon a liquidity event such as a listing on a recognized public stock exchange or a purchase acquisition. In the nine months ended September 30, 2020, the Company recognized share-based compensation expense of $126,713 with respect to the vesting of 504,900 performance options. No share-based compensation expense has been recognized with respect to the remaining 1,025,100 stock options granted during the year ended December 31, 2017 with performance conditions as the performance requirements were not met at period end.

The Company recognized share-based payments expense for options granted and vesting, net of recoveries on cancellations of unvested options, with allocations to functional expense as follows:

	Three	months	Three	months	Nine	months	Nine	months
		ended		ended		ended		ended
	September 30,		September 30,		September 30,		September 30,
		2020		2019		2020		2019
Product development	$	23,528	$	10,562	$	74,672	$	85,443
General and administrative		116,867		12,898		321,481		105,619
	$	140,395	$	23,460	$	396,153	$	191,062

	2020
Risk-free interest rate	0.81%
Expected life of options	10 years
Expected annualized volatility	71%
Dividend	0%
Forfeiture rate	0%

Expected annualized volatility was determined through the comparison of historical share price volatilities used by similar publicly listed companies in similar industries.

FS-57

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

LOOP ENERGY INC.

13. Share-based payments (continued):

During the nine-month period ended September 30, 2020, the Company amended the expiry dates of 1,925,000 outstanding stock options. This resulted in additional share-based payments expense of $85,769 for the nine-month period ended September 30, 2020. The weighted average assumptions used for the Black-Scholes valuation of the modified options were annualized volatility of 78%, risk-free interest rate of 0.27%, expected life of 2.9 years and a dividend rate of 0%.

During the nine-month period ended September 30, 2019, the Company amended the expiry dates of 1,075,000 outstanding stock options. This resulted in additional share-based payments expense of $123,207 for the nine-month period ended September 30, 2019. The weighted average assumptions used for the Black-Scholes valuation of the modified options were annualized volatility of 75%, risk-free interest rate of 1.54%, expected life of 4.9 years and a dividend rate of 0%.

14. Scientific research and experimental development tax credits:

The Company estimated its SR&ED investment tax credit claim for the period nine-month period ended September 30, 2020 to be $1,109,792 (2019 - $723,288) which has been recorded as a tax credit receivable and a cost recovery in the statement of comprehensive loss.

Three months ended September 30, 2020 Three months ended September 30, 2019	Nine months ended September 30, 2020 Nine months ended September 30, 2019
SR&ED claim estimate for the period $ 510,565 $ 215,259 Adjustment to prior year SR&ED claim - -	$ 1,109,792 $ 723,288 - 3,977
$ 510,565 $ 215,259	$ 1,109,792 $ 727,265

15. Related party transactions:

(a) Key management personnel compensation:

Key management includes the members of the Board of Directors, the President and Chief Executive Officer and Chief Financial Officer. Key management personnel compensation for the nine-month period ended September 30 comprises:

		2020		2019
Salaries and benefits	$	642,083	$	491,250
Share-based payments		223,932		148,574
	$	866,015	$	639,824

FS-58

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

15. Related party transactions (continued):

(b) Key management personnel and director transactions:

(i) A principal of Collings Family Investments Ltd. and The Collings Stevens Family Foundation is a director of the Company. As at September 30, 2020, the Collings Family Investments Ltd. and The Collings Stevens Family Foundation hold $500,000 (December 31, 2019 - $500,000) of convertible debentures. Included in finance expense for the three-month and nine-month periods ended September 30, 2020 is $15,082 and $44,918 respectively (2019 - $15,123 and $44,877), respectively, in interest paid or accrued to Collings Family Investments Ltd. and The Collings Stevens Family Foundation. In 2019, Collings Family Investments Ltd. was issued warrants as a financing fee in connection with certain debt financing. Included in finance expense for the ninemonth period ended September 30, 2019 is $56,114 related to the fair value of the warrants issued.
(ii) A principal of Murdoch Family Trust is a director of the Company. As at September 30, 2020, the Murdoch Family Trust holds convertible debentures of $300,000 (December 31, 2019 - $300,000). Included in interest within finance expense for the three-month and nine-month periods ended September 30, 2020 is $9,049 and $29,934 (2019 - $10,586 and $31,414), respectively, in interest paid or accrued to Murdoch Family Trust for a loan.
(iii) A principal of Truckenbrodt Clean Energy Consulting is a director of the Company. As at September 30, 2020, the Truckenbrodt Clean Energy Consulting holds convertible debentures of $50,000 (December 31, 2019 - $50,000). Included in interest within finance expense for the threemonth and nine-month periods ended September 30, 2020 is $1,508 and $4,492 (2019 - $1,019 and $4,488), respectively, in interest paid or accrued to Truckenbrodt Clean Energy Consulting.
(iv) Various members of management are owed $8,400 (December 31, 2019 - $4,919) for services rendered which is included in accounts payable.
(c) During the period ended September 30, 2020, the Company accrued $nil (2019 – $58,251) in expenses, was paid $nil (2019 - $750,000) in technical license fees, recorded $297,453 (2019 - $nil) in revenue, recorded $360,248 (2019 - $nil) in accounts receivable, $212,017 (2019 - $54,841) in accounts payable and $nil (2019 - $32,410) in deferred revenue from a joint venture (see note 4). The transactions were carried out in the normal course of operations and are measured at the exchange amount, being the amount agreed between the parties.

FS-59

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

16. Segmented information and major customers:

In the nine-month period ended September 30, 2020, two customers (2019 – one), one of whom were located in the United States and the other in China, provided 38% and 62% (2019 – 100% and 0%) of the Company’s revenues from contracts with customers.

17. Financial Instruments and Risk:

Fair value

The carrying value of cash, accounts receivable, and accounts payable and accrued liabilities, approximates their fair value given their short-term nature. The carrying value of the long-term debt approximates fair value given the difference between the discount rates used to recognize the liabilities in the condensed consolidated interim statement of financial position and the market rates of interest being insignificant. The fair value of convertible debentures and accrued interest as at September 30, 2020 was $3,600,000 which represents the value to settle the convertible debentures in cash or equity.

Financial risk factors

Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash, and customer receivables, the carrying value of which represents the maximum credit exposure. The Company limits its exposure to credit loss by placing its cash with major financial institutions. As at September 30, 2020, cash consisted of cash held with financial institutions in Canada. Balances exceed amounts insured by the Canada Deposit Insurance Corporation for up to $100,000.

Liquidity risk

FS-60

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

17. Financial Instruments and Risk:

Financial risk factors (continued)

Liquidity risk (continued)

The following contractual maturities of financial obligations (including interest) exist as at September 30, 2020:

	Carrying	Contractual				4	to 5 years
	amount	cash flows	Within 1 year	2 to 3 years			and over
Accounts payable and	$ 1,257,240	$ 1,257,240	$ 1,257,240	$	-	$	-
accrued liabilities
Long-term debt	831,018	980,884	524,906		303,984		151,994
Convertible debentures	3,563,567	3,785,868	3,785,868		-		-
	$ 5,651,825	$ 6,023,992	$ 5,568,014	$	303,984	$	151,994

Foreign exchange risk

The Company is exposed to foreign currency risk on fluctuations related to working capital balances are primarily denominated in United States dollars. As at September 30, 2020, the Company did not have significant net working capital balances in foreign balances. The Company anticipates that, as its operations and sales expand, the Company will be increasingly subject to fluctuations in the US dollar and Euro.

Interest rate risk

18. Capital management:

There were no changes to the Company’s approach to capital management during the nine-month period ended September 30, 2020. The Company is not subject to externally imposed capital requirements.

FS-61

LOOP ENERGY INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in Canadian dollars) Three and nine month periods ended September 30, 2020 and 2019

19. Employee remuneration:

Employee salaries and benefits are classified in the statement of loss and comprehensive loss as follows

	Three	months	Three	months	Nine months	Nine months	Nine months	Nine months
		ended		ended		ended		ended
	September 30,		September 30,		September 30,		September 30,
		2020		2019		2020		2019
Product development	$	605,973	$	464,033	$	2,030,372	$	1,452,457
General and administrative		378,817		157,237		1,276,657		569,885
	$	984,790	$	621,270	$	3,307,029	$	2,022,342

20. Subsequent events:

New Lease

The Company has entered into an additional premises lease on January 4, 2021. The term covers period from March 1, 2021 to September 29, 2024 with an annual basic rent payment of $321,898.

A-1

APPENDIX “A” – MANDATE OF THE BOARD OF DIRECTORS

1 PURPOSE

The members of the board of directors (the “ Board ”) of Loop Energy Inc. (the “ Corporation ”) are ultimately responsible for the stewardship of the Corporation’s business and affairs. In exercising their powers and discharging their duties, the directors shall act honestly and in good faith with a view to the best interests of the Corporation and shall exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Although directors may be appointed or elected by the shareholders to bring special expertise or point of view to Board deliberations, they are not chosen to represent a particular constituency, and the best interests of the Corporation as a whole shall be paramount at all times.

Subject to the limitations set forth under applicable laws, the Board may discharge its responsibilities, including those listed below, through one or more Board committees. The Board shall have two standing committees: (a) the Audit Committee and (b) the Governance, Human Resources, Nominating and Compensation Committee (the “ GHRNC Committee ” and together with the Audit Committee, the “ Standing Committees ”). In addition to the Standing Committees, the Board may appoint ad hoc committees periodically to address certain issues of a more short-term nature.

2 COMPOSITION, TERM AND INDEPENDENCE

2.1 Board composition

Subject to the Corporation’s constating documents and applicable laws, the Board shall be comprised of a minimum of one and a maximum of ten directors. The Board shall periodically review its size in light of its duties and responsibilities from time to time.

2.2 Board term

Subject to the Corporation’s constating documents and applicable laws, directors shall be elected by the shareholders at each annual meeting of shareholders (“ AGM ”) at which an election of directors is required, and shall hold office until the next AGM.

2.3 Independence

(a) The Board shall be comprised of a majority of independent directors. A director shall be considered independent if he or she would be considered independent for the purposes of National Instrument 58-101 – Disclosure of Corporate Governance Practices .
(b) The Board shall appoint an independent lead director (the “ Lead Director ”) from among the directors, who shall serve for such term as the Board may determine. If the Corporation has a nonexecutive Chair, then the role of the Lead Director will be filled by the non-executive Chair. The Lead Director or non-executive Chair shall chair any meetings of the independent directors and assume such other responsibilities as the independent directors may designate in accordance with any applicable position descriptions or other applicable guidelines that may be adopted by the Board from time to time.

3 MANDATE AND RESPONSIBILITIES

To fulfill its mandate, the Board assumes responsibility for the following matters:

A-2

3.1 Appointment of senior management

(a) The Board has the responsibility for (a) appointing the Chief Executive Officer (“ CEO ”) and all other senior executives and delegating to the CEO and other senior executives the authority over the day-to-day management of the business and affairs of the Corporation, and (b) assessing the performance of the CEO, following a review of the recommendations of the GHRNC Committee. To the extent feasible, the Board shall satisfy itself as to the integrity of the CEO and other executive officers and that the executive officers create a culture of integrity throughout the Corporation.
(b) The Board has the responsibility for determining the compensation to be paid to the CEO, and approving the compensation to be paid to all other executive officers following a review of the recommendations of the GHRNC Committee and of the CEO (with respect to the other executive officers’ compensation).
(c) The Board may, from time to time, delegate to executive officers the authority to enter into certain types of transactions, including financial transactions, subject to specified limits. Investments and other expenditures above the specified limits and material transactions outside the ordinary course of business shall be reviewed by, and subject to the prior approval of, the Board.
(d) The Board oversees that appropriate succession planning programs are in place, including programs to appoint, train, develop and monitor senior management.

3.2 Strategic planning

(a) The Board has the responsibility for adopting a strategic planning process and approving and reviewing, on at least an annual basis, the strategic direction of the Corporation and its business, operational, and financial plans. Such strategic planning shall take into account, among other things, the opportunities and risks of the Corporation’s business and affairs.
(b) The Board has the responsibility for:
(i) adopting processes for monitoring the Corporation’s progress toward its strategic and operational goals, and providing input and guidance to management in light of changing circumstances affecting the Corporation; and
(ii) taking action when the Corporation’s performance falls short of its goals or when other special circumstances warrant.

3.3 Monitoring of financial performance and financial reporting

The Board has the responsibility for:

(a) approving the audited financial statements, interim financial statements and the notes and management’s discussion and analysis accompanying such financial statements.
(b) reviewing and approving material transactions outside the ordinary course of business and those matters which the Board is required to approve under the Corporation’s constating documents or applicable laws, including the payment of dividends, the issuance, purchase and redemption of securities, the acquisitions and dispositions of material capital assets and material capital expenditures.
(c) overseeing the accurate reporting of the financial performance of the Corporation to shareholders, other stakeholders and regulators (as applicable) on a timely basis; and

A-3

(d) overseeing that the financial results are reported fairly and in accordance with generally accepted accounting standards and disclosure requirements under applicable laws.

3.4 Risk management

The Board has the responsibility for:

(a) identifying, in conjunction with management, the principal risks of the Corporation’s business and ensuring the implementation of appropriate systems to effectively monitor and manage such risks, with a view to balancing such risks against the potential shareholder returns and the long-term viability of the Corporation; and
(b) implementing a system of internal control measures, including management of all information systems, and ensuring that any remedial actions or adoption of new control measures are implemented effectively.

3.5 Corporate governance

(a) The Board has the responsibility for developing the Corporation’s approach to corporate governance, including developing a set of corporate governance guidelines for the Corporation.
(b) Following a review of the recommendations of the GHRNC Committee, the Board has the responsibility for approving and monitoring compliance with all of the Corporation’s policies and procedures related to corporate governance.

3.6 Communications and stakeholder engagement

The Board has the responsibility for adopting a communications policy which addresses, among other things:

(a) the timely disclosure of any material changes, material facts and other developments that have a significant and material impact on the Corporation;
(b) how the Corporation interacts with analysts, investors, other key stakeholders and the public;
(c) determining who is authorized to communicate on behalf of the Corporation;
(d) measures for the Corporation to comply with its continuous and timely disclosure obligations and to avoid selective disclosure;
(e) understanding and enforcing the prohibition on tipping and restrictions on the purchase and sale of securities of the Corporation, including by insiders and other persons with a special relationship with the Corporation;
(f) the management and use of electronic communications channels, including the Corporation’s website;
(g) reporting periodically, at least annually, to shareholders on its stewardship for the preceding year; and
(h) the Corporation’s development of stakeholder engagement programs and the implementation of systems which accommodate feedback from stakeholders.

3.7 Orientation and continuing education

The Board has the responsibility for:

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(a) developing a description of the expectations and responsibilities of directors, including basic duties and responsibilities with respect to attendance at Board meetings and advance review of meeting materials;
(b) ensuring that all new directors receive a comprehensive orientation, that they fully understand the role and duties of the Board, as well as the contribution individual directors are expected to make (including the commitment of time and resources that the Corporation expects from its directors) and that they understand the nature, operation and strategic direction of the Corporation’s business; and
(c) providing continuing education opportunities for all directors, so that individuals may maintain or enhance their skills and abilities as directors, as well as ensuring that their knowledge and understanding of the Corporation’s business, including opportunities and risks, remains current.

3.8 Nomination of directors

In connection with the nomination or appointment of directors, the Board has the responsibility for reviewing periodically, at least annually, what competencies and skills the Board, as a whole, should possess, and assessing what competencies and skills each existing director possesses, identifying any gaps while taking into account the Corporation’s strategic direction and changing needs. In the course of this process, the members of the Board shall identify the strengths in a director that would benefit the Board and then seek out individuals who may possess such strengths.

3.9 Board evaluation

The Board has the responsibility for assessing periodically, at least annually, the Board, the Standing Committees and any other committee, and each individual director regarding his, her or its effectiveness and contribution. Such assessment will consider, in the case of the Board or any Standing Committee or any other committee, its performance against its mandate or charter and, in the case of an individual director, his or her attendance and against the competencies and skills each individual director is expected to bring to the Board.

The Chair of the Board, together with the independent Lead Director, if any, shall be responsible for assessing the effectiveness of the Board as a whole as well as individual Board members.

3.10 Role and responsibilities of the Chair of the Board

In addition to the duties and responsibilities of the Board generally, the Chair of the Board has the duties and responsibilities set out below.

(a) Working with Management

The Chair has the responsibility to:

(i)	act as the principal sounding board, counselor and confidant for the CEO, including helping
	to review strategies, define issues, maintain accountability, and build relationships;
(ii)	in co-operation with the CEO, assist in representing the Corporation both internally and
	externally, including as a designated spokesman;
(iii)	regularly communicate and ensure the CEO is aware of concerns of the Board,
	shareholders, other stakeholders and the public; and
(iv)	assess, in conjunction with the GHRNC Committee and the Board, the performance of the
	CEO and other executive officers, and provide input with respect to compensation and
	succession.

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(b) Managing the Board

The Chair has the responsibility to:

(i) chair the Board;
(ii) ensure the Board is aware of its obligations to the Corporation, shareholders, management, other stakeholders and lead the Board in carrying out such obligations pursuant to applicable law;
(iii) establish, in conjunction with the GHRNC Committee, the frequency of Board meetings and review such frequency from time to time, as considered appropriate or as requested by the Board;
(iv) recommend the committees of the Board and their composition, review the need for, and the performance and suitability of such committees and make such adjustments as are deemed necessary from time to time;
(v) ensure the co-ordination of the agenda, information packages and related events for Board meetings;
(vi) ensure the Board receives adequate and regular updates from the CEO and executive officers on all material issues relating to the Corporation;
(vii) act as a liaison and regularly communicate with all directors and committee chairs to coordinate input from directors, and optimize the effectiveness of the Board and its committees; and
(viii) in conjunction with the GHRNC Committee, review and assess director attendance, performance and compensation as well as the size and composition of the Board.

3.11 Corporate policies

The Board shall adopt and periodically review policies and procedures designed to ensure that the Corporation and its directors, officers and employees comply with all applicable laws, rules and regulations and conduct the Corporation’s business ethically and with honesty and integrity.

4 MEETINGS

4.1 Meetings

Directors are expected to attend, in person or via tele- or video-conference, all meetings of the Board and the committees upon which they serve, to come to such meetings fully prepared, and to remain in attendance for the duration of the meeting. Where a director’s absence from a meeting is unavoidable, the director should, as soon as practicable after the meeting, contact the Chair, the CEO, or the Secretary for a briefing on the substantive elements of the meeting.

Subject to the Corporation’s constating documents and applicable laws, the time at which and the place where the meetings of the Board shall be held, the calling of meetings and the procedure at such meetings shall be determined by the Chair. The Board shall meet as many times as it considers necessary to carry out its responsibilities effectively and shall, in any event, meet at least once per quarter. Meetings of the Board will also include in-camera meetings of the independent members of the Board without management present.

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4.2 Attendance

The Board Committee may invite such officers, directors or employees of the Corporation, financial, technical or legal advisors, or other persons as it sees fit, from time to time, to attend at meetings of the Board and to assist in the discussion of matters being considered by the Board.

4.3 Authority to engage advisors

The Board shall have the authority to engage, at the expense of the Corporation, such outside advisors as it determines necessary or advisable to carry out its duties, including legal, financial, technical and accounting advisors, and establish the compensation of such advisors.

4.4 Review

The Board shall review and assess the adequacy of this Mandate, taking into account the strategic direction of the Corporation, its changing needs, and propose recommended changes for approval.

This Mandate is not intended to give rise to civil liability on the part of the Corporation or its directors or officers to shareholders, other security holders, customers, suppliers, competitors, employees or other persons or to any other liability whatsoever on their part.

Effective Date: February 17, 2021

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APPENDIX “B” – CHARTER OF THE AUDIT COMMITTEE

1 PURPOSE

The purpose of the Audit Committee (the “ Committee ”) of the Board of Directors (the “ Board ”) of Loop Energy Inc. (the “ Corporation ”) is to:

(a) assist the Board in fulfilling its responsibility to oversee the Corporation’s accounting and financial reporting processes and audits of the Corporation’s financial statements;
(b) review the Corporation’s financial reports and other financial information, disclosure controls and procedures and internal accounting and financial controls;
(c) review the Corporation’s financial statements, management’s discussion and analysis and annual and interim profit or loss press releases before public release;
(d) serve as an independent and objective party to monitor the Corporation’s financial reporting processes and internal control systems;
(e) recommend to the Board of Directors the appointment of the external auditors, to be approved by the shareholders, compensation, and retention (and where appropriate, replacement) of the external auditors;
(f) oversee the work of the external auditor in preparing or issuing an audit report or related work, monitor the independence of the external auditor and pre-approve all auditing services and permitted non-audit services provided by the external auditor;
(g) receive direct reports from the external auditor and resolve any disagreements between management and the external auditor regarding financial reporting;
(h) review the Corporation’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Corporation; and
(i) carry out the specific responsibilities set forth below in furtherance of this stated purpose.

2 COMPOSITION AND TERM

Committee members shall be appointed by the Board, and shall serve at the pleasure of the Board. Any member of the Committee may be removed or replaced at any time by the Board and shall, in any event, cease to be a member of the Committee upon ceasing to be a member of the Board. The Board shall designate one member as chair of the Committee (the “ Chair ”).

The Committee shall be comprised of three or more directors, each of whom shall be “independent” and “financially literate”, as required by and defined in National Instrument 52-110 – Audit Committees (“ NI 52 110 ”), subject to any exceptions permitted under NI 52-110.

3 MANDATE AND RESPONSIBILITIES

The Committee’s role is one of oversight of the integrity of the Corporation’s accounting and financial reporting process, including financial reporting processes, internal controls over financial reporting and disclosure controls procedures. It is recognized that the Corporation’s management is responsible for preparing the financial statements and notes thereto and that the Corporation’s external auditor is ultimately accountable to the Board and the Committee, as representatives of the shareholders and other stakeholders, for providing an audit opinion on the financial statements and notes.

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The mandate and responsibilities of the Committee are as follows:

(a) Appointment of External auditor . The Committee shall have direct responsibility for recommending the appointment, compensation, retention (and where appropriate, replacement), and oversight of the work of any accounting firm selected to be the Corporation’s external auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Corporation, and to review the performance of the external auditors.
(b) Appointment of Chief Financial Officer and Internal Auditor . The Committee shall participate in the identification of candidates for the positions of Chief Financial Officer and the manager of the Corporation’s internal auditing function, if any, and shall advise management with respect to the decision to hire a particular candidate.
(c) Disclosure Controls and Procedures . The Committee shall review periodically with management the Corporation’s disclosure controls and procedures.
(d) Internal Controls . The Committee shall discuss periodically with management and the external auditor the quality and adequacy of the Corporation’s internal controls and internal auditing procedures, if any, including any significant deficiencies in the design or operation of those controls which could adversely affect the Corporation’s ability to record, process, summarize and report financial data and any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal controls. The Committee shall also discuss with the external auditor how the Corporation’s financial systems and controls compare with industry practices.
(e) Accounting Policies . The Committee shall review periodically with management and the external auditor the quality, as well as acceptability, of the Corporation’s accounting policies, and discuss with the external auditor how the Corporation’s accounting policies compare with those in the industry. The Committee shall discuss with the external auditors the quality and not just the acceptability of the Corporation’s accounting principles, including all critical accounting policies and estimates used, any alternate treatment of financial information that have been discussed with management, the ramifications of use of such alternative classifications, recognitions, derecognitions, measurements, presentations and disclosures and treatments and the auditor’s preferred treatment, as well as any other material communications with management.
(f) Pre-approval of All Audit Services and Permitted Non-Audit Services . The Committee shall approve, in advance, all audit services and all permitted non-audit services to be provided to the Corporation by the external auditor; provided that any non-audit services performed pursuant to an exception to the pre-approval requirement permitted by applicable securities regulators shall not be deemed unauthorized and as permitted under the rules of professional conduct of the Chartered Professional Accountants of Ontario.
(g) Annual Audit . In connection with the annual audit of the Corporation’s financial statements, the Committee shall:
(i) request from the external auditor a formal written statement delineating all relationships between the external auditor and the Corporation;
(ii) discuss with the external auditor any disclosed relationships and their impact on the external auditor’s objectivity and independence, and take appropriate action to oversee the independence of the external auditor;
(iii) approve the selection, and the terms of the engagement, of the external auditor;

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(iv) review with management and the external auditor the audited financial statements to be filed on the System for Electronic Document Analysis and Retrieval (“ SEDAR ”) and review and consider with the external auditor the matters required to be discussed under applicable statements of auditing standards;
(v) perform the procedures set forth under the heading “Financial Reporting Procedures” below with respect to the annual financial statements;
(vi) review with the Corporation’s counsel, external auditors and management any legal or regulatory matter that could have a significant impact on the Corporation’s financial statements;
(vii) review and make recommendations with respect to any litigation, claim or contingency that could have a material effect upon the financial position of the Corporation and the appropriateness of the disclosure thereof in the documents reviewed by the Committee; and
(viii) review with management and the external auditor the Corporation’s critical accounting policies and estimates.
(h) Financial Reporting Procedures . In connection with the Committee’s review of each reporting of the Corporation’s annual financial information, the Committee shall:
(i) discuss with the external auditor whether all material correcting adjustments identified (if any) by the external auditor in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board of London, England and adopted by the Canadian Accounting Standards Board, Generally Accepted Auditing Standards of Canada and the rules of the applicable securities regulators, as may be amended from time to time, are reflected in the Corporation’s financial statements;
(ii) review with the external auditor all material communications between the external auditor and management, such as any management letter or schedule of unadjusted differences (if any);
(iii) review with management and the external auditor any significant financial or other arrangements of the Corporation which do not appear on the Corporation’s financial statements and any transactions or courses of dealing with third parties that are significant in size or involve terms or other aspects that differ from those that would likely be negotiated with independent parties, and which arrangements or transactions are relevant to an understanding of the Corporation’s financial statements; and
(iv) resolve any disagreements, if any, between management and the external auditor regarding financial reporting.
(i) Insurance Coverage . Review and make recommendation regarding insurance coverage (annually or as may be otherwise appropriate).
(j) Audit Committee Charter . The Committee shall review and reassess at least annually the adequacy of this Audit Committee Charter and recommend any proposed changes to the Board for approval.

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4 MEETINGS AND PROCEDURES

4.1 Meetings

The time at which and the place where the meetings of the Committee shall be held, the calling of meetings and the procedure at such meetings shall be determined by the Chair. The Committee shall meet as many times as it considers necessary to carry out its responsibilities effectively and shall, in any event, meet at least once per quarter.

4.2 Quorum

Unless otherwise determined by the Committee, two or more members of the Committee shall constitute a quorum.

4.3 Attendance

The Committee may invite such officers, directors or employees of the Corporation, external auditors, insurance agents and brokers, financial, technical or legal advisors, or other persons as it sees fit, from time to time, to attend at meetings of the Committee and to assist in the discussion of matters being considered by the Committee.

4.4 Chair

The Chair shall preside at all meetings of the Committee. In the Chair’s absence, or if the position is vacant, the Committee may select another member as Chair. The Chair will have the right to exercise all powers of the Committee between meetings but will attempt to involve all other members as appropriate prior to the exercise of any powers and will, in any event, advise all other members of any decisions made or powers exercised. In case of an equality of votes on any matter voted on by the Committee, the Chair shall have a second casting vote.

4.5 Decisions

Decisions of the Committee shall be evidenced by resolutions passed at meetings of the Committee and recorded in the minutes of such meetings or by an instrument in writing signed by all of the members of the Committee.

4.6 Secretary and Minutes

The Chair shall appoint a secretary for each meeting to keep minutes of such meeting. The minutes of the Committee will be in writing and duly entered into the books of the Corporation. The minutes of the Committee will be circulated to all members of the Board, redacted as may be determined necessary by the Chair to remove any sensitive personnel information not otherwise material to the Board.

4.7 Authority to Engage Advisors

The Committee shall have the authority to engage, at the expense of the Corporation, such outside advisors as it determines necessary or advisable to carry out its duties, including legal, financial, tax, technical and accounting advisors, and establish the compensation of such advisors.

4.8 Reporting to the Board

The Committee shall report to the Board on such matters and questions relating to the mandate and activities of the Committee as the Committee may deem appropriate or as the Board may from time to time request or refer to the Committee.

4.9 Complaints

Any issue of significant financial misconduct shall be brought to the attention of the Committee for its consideration. In this regard, the Committee shall establish and maintain procedures for (a) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.

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5 RESOURCES AND AUTHORITY

The Committee is granted all authority required by NI 52-110, including without limitation the authority to:

(a) investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Corporation;
(b) engage independent legal, tax, accounting or other advisors to obtain such advice and assistance as the Committee determines necessary to carry out its duties and set and pay the compensation for any advisors so engaged; and
(c) communicate directly with the external auditors (and internal auditors, if any).

The Committee may request any officer or employee of the Corporation or the Corporation’s counsel or other advisors to attend a meeting of the Committee or to meet with any member of, or consultants to, the Committee.

The Corporation shall provide the Committee all appropriate funding, as determined by the Committee, for payment of compensation to any such advisors and any external auditor, as well as for any ordinary administrative expenses of the Committee that it determines are necessary or appropriate in carrying out its responsibilities.

This Charter is not intended to give rise to civil liability on the part of the Corporation or its directors or officers to shareholders, other security holders, customers, suppliers, competitors, employees or other persons or to any other liability whatsoever on their part.

Effective Date: February 17, 2021

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CERTIFICATE OF THE COMPANY

Date: February 18, 2021

This prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Canada.

(Signed) “ Ben Nyland ” President & Chief Executive Officer

(Signed) “ Darren Ready Chief Financial Officer

On behalf of the Board of Directors

(Signed) “ Allan Collings ” (Signed) “ Neil Murdoch Director Director

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CERTIFICATE OF THE UNDERWRITERS

Date: February 18, 2021

To the best of our knowledge, information and belief, this prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Canada.

NATIONAL BANK FINANCIAL INC.

(Signed) “ Saad Rawra ” Per: Saad Rawra Managing Director

CIBC WORLD MARKETS INC.

RAYMOND JAMES LTD.

(Signed) “ Kathy Butler ” Per: Kathy Butler Managing Director

(Signed) “ Jimmy Leung ” Per: Jimmy Leung Managing Director

CANACCORD GENUITY CORP.

CORMARK SECURITIES INC.

(Signed) “ Andrew D. Birkby ” Per: Andrew D. Birkby Managing Director

(Signed) “ Alfred Avanessy ” Per: Alfred Avanessy Managing Director

AI assistant

Loop Energy Inc. — Capital/Financing Update 2021

47395_rns_2021-02-18_4a05338c-653a-4219-99bc-9f7c3d60329d.pdf

PROSPECTUS

Initial Public Offering

Notes:

Leading PEM Fuel Cell Designer Targeting High Growth Commercial End Markets

eFlow[TM] Advantages[(1)]

Investment Highlights

TABLE OF CONTENTS

TABLE OF CONTENTS (CONTINUED)

ABOUT THIS PROSPECTUS

General Advisory

Interpretation

Market and Industry Data

Trademarks and Trade Names

Presentation of Financial Information and Other Information

Non-IFRS Measures

GLOSSARY

MARKETING MATERIALS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

SUMMARY OF PROSPECTUS

BUSINESS OF THE COMPANY

Overview

Market Opportunity for our Products

Our Business Strategy

Near-Term Market

Mid-to-Long Term Market

Manufacturing Cost Reduction

Technology Leadership in Fuel Cells

Our Business Development Pipeline

Commercial Milestones

Our Competitive Advantages

Higher fuel efficiency providing lower TCO.

Higher peak power output allowing for a smaller footprint.

Durability increasing life and reducing maintenance costs.

Highly experienced technology and manufacturing team.

INDUSTRY DESCRIPTION

Overview

Electrification of commercial transportation requires FCEV.

Total cost of ownership of FCEV to significantly decline and be less than BEV in the near term.

Significant momentum in the infrastructure build-out globally

Government support for the hydrogen industry is unprecedented

SELECTED FINANCIAL INFORMATION

Notes:

THE OFFERING

Black-Out Period:

THE COMPANY

Business Overview

Industry

Electrification of Transportation

Market Opportunities for Our Fuel Cell Products

Light Commercial and Medium Duty Truck Market

Heavy Duty Commercial Market

Municipal Transit Bus Market

Material Handling Vehicle Market

Stationary Power and Off-Grid Power Applications

How Fuel Cells Work

Hydrogen

Our Business Strategy

Near-Term Market

Mid-to-Long Term Market

Manufacturing Cost Reduction

Technology Leadership in Fuel Cells

Our Business Development Pipeline

Commercial Milestones

Internal Testing and Modelling

Our Competitive Advantages

Total Cost of Ownership (USD/100km)[19]

Durability increasing life and reducing maintenance costs.

Highly experienced technology and manufacturing team

Our Technology

eFlow[TM] Technology

Explore New Markets for eFlow[TM] : Advantages for Electrolyzers

Our Commercial Products

Fuel cell stacks

Fuel cell modules

Intellectual Property

Manufacturing and Facilities

Canada

Loop Energy Inc. Capital/Financing Update 2021