Investissement Québec financing facility

On February 21, 2020, the Company received $1,741,611 (CDN$2,209,234) from Investissement Québec as the first disbursement of our financing facility, out of a maximum of $3,626,330 (CDN$4,600,000) (the “Financing Facility”). The loan bears interest at 2.36% and there is a 36-month moratorium on both capital and interest repayments starting on the date of the first disbursement, after which capital and interest is repayable in 84 monthly installments. The Company established the fair value of the lo an for the first disbursement at $1,354,408 based on a discount rate of 5.45%, which reflected a debt discount of $290,714. The discount rate used was based on the external financing from a Canadian bank. The Company, under the loan agreement, was required to pay fees representing 1% of the loan amount, $36,263 (CDN$46,000) to Investissment Québec which we deferred and recorded as a reduction of the Financing Facility. Debt discount and deferred financing expenses are amortized to “Interest and other financial expenses” in our Consolidated Statements of Operations and Comprehensive Loss. The Company recorded interest expense on the Investissement Québec loan for the year ended February 28, 2021 in the amount of $39,599 (2020 – $968) and an accretion expense of $36,847 (2020 – $872).

The Company has also agreed to issue to Investissement Québec warrants to purchase shares of common stock of the Company in an amount equal to 10% of each disbursement up to a maximum aggregate amount of $362,633 (CDN$460,000). The exercise price of the warrants is equal to the higher of (i) $11.00 per share and (ii) the ten-day weighted average closing price of Loop Industries shares of common stock on the Nasdaq stock market for the 10 days prior to the issue of the warrants. The warrants can be exercised immediately upon grant and will have a term of three years from the date of issuance. The loan can be repaid at any time by the Company without penalty. In connection the first disbursement of the Financing Facility, the Company issued a warrant (“First Disbursement Warrant”) to acquire 15,153 shares of common stock at a strike price of $11.00 per share to Investissement Québec. The Company determined the fair value of the warrants using the Black-Scholes pricing formula. The fair value of the First Disbursement Warrant was determined to be $77,954 and is included in “Additional paid-in capital – Warrants” in our Condensed Consolidated Balance Sheets. The First Disbursement Warrant remains outstanding as at February 28, 2021.

The remaining amount available under the financing facility is $1,884,719 (CDN$2,390,766) to be received in a maximum of two additional disbursements before June 30, 2021.

Term Loan

On January 24, 2018, the Company obtained a $1,103,666 (CDN$1,400,000) 20-year term instalment loan (the “Loan”), from a Canadian bank. The Loan bears interest at the bank’s Canadian prime rate plus 1.5%. By agreement, the Loan is repayable in monthly payments of $4,598 (CDN$5,833) plus interest, until January 2022. It includes an option allowing for the prepayment of the Loan without penalty. In January 2021, the Company and the Canadian bank agreed to maintain the same repayment amount and interest rate until January 2022, at which time the monthly repayment amount and interest rate will be subject to renewal. During the year ended February 28, 2021, we repaid $50,585 (2020 – $52,126) on the principal balance of the Loan and interest paid amounted to $38,157 (2020 – $56,152). The terms of the credit facility require the Company to comply with certain financial covenants. As at February 28, 2021 and February 29, 2020, the Company was in compliance with its financial covenants.

Principal repayments due on the Company’s bank indebtedness over the next five years are as follows: