Loop Industries, Inc. (LOOP) Q2 2025 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Loop Industries Second Quarter 2025 Earnings Call. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] This conference is being recorded today, October 16, 2024, and the press release accompanying this conference call was issued yesterday, October 15, 2024. On our call today are Loop Industries' Chief Executive Officer, Daniel Solomita; Fady Mansour, Chief Financial Officer; and Kevin O'Dowd, Head of Investor Relations. I would now like to turn the conference over to Kevin to read a disclaimer about forward-looking statements. Kevin, please go ahead.

Thank you, operator. Before we get started, let me remind you that today's call will include forward-looking statements within the meaning of the securities laws. These forward-looking statements relate to, among other things, current plans, expectations, events and industry trends that may affect the company's future operating results and financial position. Such statements involve risks and uncertainties and future activities and results may differ materially from these expectations. Additional information concerning these statements and related risks and uncertainties is contained in the Risk Factors and Forward-Looking Statements section of our latest annual report on Form 10-K and our quarterly report Form 10-Q filed with the SEC yesterday and yesterday's press release. Copies of these documents are available at sec.gov or from our Investor Relations department. At this time, I'd like to turn the call over to Daniel Solomita, Chief Executive Officer of Loop Industries. Please go ahead, Daniel.

Good morning, everyone. Thank you very much for joining today's call. So it was a pretty significant quarter for us. Obviously, the Reed Financing has been -- we've been talking about it for quite a while now. So we're at the last legs of concluding the transaction with Reed. As we previously announced, Societe Generale, the large French financial institution acquired 75% stake in Reed Management and an initial commitment of $250 million with potential to bring that up to $350 million, and Reed is going to be raising additional financing from other sources as well. So we're really excited about partnering with Reed in their new venture for the energy transition in Europe. I think they'll be a great long-term financial partner and strategic partner for Loop for financing and also for building out our capacity in Europe. The transaction is scheduled to close in November. Regulatory approval on Reed side is imminent. So everything is going according to plan there. There's a little bit of a delay in the schedule, but nothing major. And so we're expecting the entire transaction to close in November and Loop will receive the financing from Reed. Just in case there are any delays, we don't foresee any delays. But in case there would be any delays, myself and one of the other lead directors have agreed to lend the company $2 million to allow our liquidity to go through until mid-February in case there would be any type of a delay on getting the financing from Reed, but we don't anticipate that whatsoever, but it's just an insurance policy in case it's needed. So yes, we're really excited about closing the Reed deal and moving the company forward on the commercialization side. Most of the quarter, we've been really working diligently on our project in India. I still believe that India is the ideal location for the facility, low-cost manufacturing, being in competitive in the PET world no matter what the price of PET does. The past couple of years after COVID, we saw CapExes go up and we saw the price of commodities and plastics come dramatically down. So there's a big delta in those years at the end of COVID. All projects around the world looked really attractive because prices of PET and all plastics were very high, but that reality didn't last as inflation picked up and interest rates picked up, a lot of the consumer good companies were more focused on cutting costs rather than looking at ESG so closely. And so everyone started going back and buying virgin PET plastic at very, very cheap prices because China is oversupplying the world in cheap PET. And therefore, that really put a lot of pressure on seeing projects around the world, which ones make sense and which ones are just too expensive. And so for us, moving into the Indian opportunity allows us to be super competitive no matter what the price of PET does, having a low-cost manufacturing strategy in India, I believe, is really going to pay off big time in the future. So in India, we have a great partner in Ester. They have tons of experience in the polyester world. They've been in PET, making PET since 1985. They have multiple facilities across India that produce virgin PET and other products, some specialty products as well. So great partner with Ester. They bring in a lot of all of the low-cost manufacturing, construction of the facilities and sourcing of the raw material. We hired a British engineering firm with a large presence in India to be able to do a land survey for us. So we looked at all the different regions across India to where would be the best place to implement the plant. The criteria really for the plant was looking for good infrastructure near a seaport as most of our product will be exported around the world. Infrastructure, roads, bridges and petrochemical infrastructure, low-cost manufacturing, so a skilled labor force, low-cost labor force, green energy which is really important for us and the ability close to the polyester manufacturing hubs because the main part of our waste that will be the input feedstocks for our facility will be coming from the polyester textile industry. And so we did a large study, went out and viewed 20 different sites around the world. We ended up choosing the Gujarat province, which is just north of Mumbai as the location for the facility. It really checks all of those boxes, labor force, very skilled labor force, a lot of petrochemical industry in that area and low-cost labor, good infrastructure, near the seaport, green energy. So 100% of the main energy source from the facility will be biomass. So all of our -- replacing all of the main natural gas will be done through biomass, which is the rice husk. So the waste product of the rice manufacturing process will be used as our primary energy source, which is 100% renewable energy, which is fantastic for us. When we're looking at sustainability and a green product, having 100% biomass is really key for us. And the big part is being close to the polyester fiber supply chain. So we've already secured a significant amount of polyester fiber that we'll be using at the facility. We're processing it in our plant in Montreal every day. So we have all of the knowledge about the different suppliers. We're qualifying all the different suppliers. So it's basically waste polyester fiber coming from the sewing factories all across India, especially in the Gujarat province, the Surat area, which enables us to offer a very special product to the customers, which is a polyester resin, fiber-grade resin made from textile waste. So textile to textile recycling. I firmly believe that textile to textile recycling is going to be the largest driver in the future of this business. The brands, the apparel brands need a solution for recycling. Today, the only sustainable materials they can get from polyester is the mechanical recycling of water bottles. But as legislation comes in, as regulation comes in, forcing more recycled content on the bottle industry, bottles have to stay with bottles and bottles can no longer be going into the fiber industry. So being able to supply fiber to fiber, which Loop's technology is one of the only technology in the world able to produce fiber-to-fiber technology for the brand is going to be a huge part of the future of our technology and of Loop's future. So dealing with all the large apparel brands and supplying this new wave material for them. So we see a lot of interest from all the apparel brands. And being in India is close to all of their supply chain. So that's really a key for us. That's where after the resin is sold, then has to get spun into a fiber, then texturized, dyed and then turned into a garment. So being close to that supply chain, and India offers all of that supply chain, is really critical. So yes, the Indian project is really exciting, and it's moving forward, finalizing all of the engineering packages and looking forward to breaking ground on this facility. The Reed Financing and all of the other -- all of the conditions of the Reed Financing will be met, and then we will be fully financed to be able to execute on our project in India. In the market side, we're seeing strong customer demand from the fiber-to-fiber industry, obviously, but also from the bottle grade that needs very high-quality PET, which Loop's material were FDA approved, Health Canada approved, REACH Certification approved for food-grade plastics. We also have Pharmaceutical Grade Certification, which is even a higher qualification than the food-grade plastics. So we're seeing a lot of interest from across the board. There was a little bit of a time, like I said, after COVID when inflation kicked up where brands were really looking at cutting costs rather than focusing on ESG. And now we're seeing that trend come back slowly as inflation comes down, as interest rates are coming down, brands are, again, very interested on the ESG side. So working with all of the large beverage industry customers who are looking for top quality material. So regulation also in Europe coming in 2025 for 50%. Recycled content is another big opportunity where the European beverage brands are now forced to put 50% recycled content starting in January. So that's going to be a big push and most of our material from India will be exported. That's all from me. I'll hand it over to Fady on the CFO side to give you a quick update on the financials.

Thank you very much, Dan. Yes, going through the financial results for the second quarter ended August 31, our expense -- our total operating expenses were $4.5 million. That's higher than the baseline cash expenses that I've been guiding to, but I'll help you reconcile the difference between those 2. There's 3 reconciliatory items. Obviously, one is stock-based comp, which totaled $400,000 for the quarter, and that's obviously noncash expenses related to our stock options and our restricted share units. The second component is legal expenses. We had nonrecurring legal expenses of about $800,000 for the quarter for mostly regulatory filing. We had to update our shelf prospectus and now we're good for 3 years. We also had to update an S-3 for one of our major shareholders. So we incurred nonrecurring legal expenses to the tune of $800,000. And the third bucket is project costs, which totaled $500,000. So the sum of those 3, when you back out those 3 items, you get to $2.9 million. It's the first quarter that we're under the $3 million or the $1 million a month. So we're very proud of that at Loop. The reason why the project cost we backed that out is, when we communicate a total installed cost, let's say, for India of $165 million, obviously, the lion's share of that is CapEx. Let's say, $160 million of it is CapEx and the other -- but there are amounts that go through our P&L and our partner, Ester's P&L, and that's what we're guiding. We don't want to double count that item. As we start to turn our focus towards the next fiscal year, we've already identified an additional 10% of savings or about $1 million that would bring the annual run rate closer to $11 million than the $12 million. It's emanating from a bunch of factors. We're pulling on all different types of levers to draw value. One of them obviously is continued productivity initiatives. The second one is tapping into some government incentives for our R&D lab. Real estate consolidation is an area that we're looking to reduce cost in the next fiscal year and just the continued reduction in consulting fees and outsourced services. The combination of those 4 buckets lead us to comfortably believe that we're going to get closer to $11 million than $12 million. And we continue to look for cost-saving opportunities as we bridge the gap between now and the first commercial operation of India in 2027. On the balance sheet, we have $2.4 million of total liquidity, $1.4 million of cash on hand and still $1 million of untapped line of credit available at our disposal. As Daniel alluded to, because of the potential contribution of $2 million from our CEO and our Board of Directors, we've got enough liquidity to last us through February. So that gives us ample time to make sure that we close the Reed arrangement. Again, as Daniel said, we plan to close that transaction in November. So this is really just a shock absorber in case there's delays, but we don't foresee any of that. The cash spend for the current quarter also happens to be $2.9 million, by coincidence the same number. So all the metrics related to our back office, our fixed costs are trending downward. And that's -- and we are well positioned to handle the liquidity over the next couple of months until we finalize the Reed arrangements. With that, I'll turn it over to either Daniel or Kevin for closing comments or for Q&A. Thank you.

Yes, please go on to Q&A.

[Operator Instructions] Our first question today comes from the line of Nick Boychuk with Cormark.

Daniel, I'm wondering if you can share a little bit more information on the India opportunity, specifically when we might hear some details about the exact site located. I understand and appreciate that it's now in Gujarat, but when we might have little bit more visibility, where it's going to be, when time lines for breaking ground are going to occur? And if or when we would hear announcements on things like feedstock and offtake agreements?

Yes. So feedstock, we don't -- we've already secured significant amount of feedstock for the facility. So we generally don't make any press releases around feedstock. Our suppliers are obviously something that's important for us. So we don't really disclose all of our suppliers for the feedstock side, but it's all coming from the waste polyester fiber sewing factories across India, which is generally in that Surat area. As far as the actual site selection, I would expect sometime in November to have the final site location. I think we're down to a few sites in Gujarat that we're just working on. We're negotiating with the pricing to purchase those pieces of land. So that would probably come sometime in November. Engineering is underway for the facility. So we're expecting breaking ground to be done sometime in the first half of next year, probably in the March time frame is when we'd be breaking ground on the facility. So milestones customer contracts as well, that would probably be in Q1 of 2025, where we'll see the customer contracts. Right now, like I said, a lot of the pricing power is starting in 2025. We've already seen an uptick in the PET prices because of the regulations coming in, in 2025. So for us and for our customers, we both want to see what's coming in January of 2025 and how the price of PET will react before locking in those long-term supply agreements with the customers. So we're expecting that to happen in the first quarter of 2025. So yes, we'll be giving regular project updates on the construction and the schedule as soon as we have those updates. But for right now, everything is going off as planned.

Okay. Great. And on that pricing dynamic, can you share a little bit more about what exactly is happening there? The supply-demand dynamics, if it's going to have an impact on maybe the amount of DMT, MEG or like the individual monomer or whether or not you'll have to repolymerize some of the output from India? Any color on the industry backdrop, I think, would be pretty helpful.

Yes. The industry, like I said, it's really been an interesting -- PET is a very dynamic industry because you have the commodity side, which is the pure PET virgin resin, which is still the major supplier to the marketplace. And China has built up a tremendous amount of capacity, and they're really flooding the world with very cheap virgin PET. So in general, the virgin PET industry is having very, very difficult times. If you look at the other players in the industry who are focused solely on virgin PET, they're having a very, very difficult time because of the overcapacity by China. Recycled material is a completely different landscape. So for recycled material in Europe for food-grade material of high quality, the pricing is coming up. So we've seen a significant increase this year. From January, let's say, until October, we've seen a significant increase, more than a 50% increase in the price. And we use a dynamic pricing off of the indexes with a premium for Loop's material because of the quality that we can supply. What we see right now is as mechanical recycling, which is how you get recycled material today, as more and more mechanical recycling is coming online to try to satisfy the 50% recycled content across Europe, the quality of the PET is going down because the bales where you get the material are much dirtier, there's a lot more contamination. So the mechanical recyclers are having a hard time on the quality side. So price is going up, but quality is going down. So it really brings in that segment for Loop's material, which is virgin quality plus to the market to be able to get the premium above what the RPET index is at today. And so for us, everyone is kind of waiting to see January where the prices are going to be because of this mandate to have the 50% recycled content. Now the good stuff -- the good news for us is that we also have a very diversified portfolio. We have the pharmaceutical grade material, we have the food-grade material of the highest quality and then the textile to textile. Textile to textile is a whole different -- completely different segment that doesn't really exist today because there's not many offerings of it today. And so the brands, the textile brands, the apparel brands being able to get that textile to textile is where they need -- they know they need to do it, they need to get there. They need a solution for their waste coming from their factories. They need a solution for the post-consumer material. And the pressure, it's coming on them. They don't feel it 100% as much as the bottle guys do, but it's coming. Today, if you Google who are the top polluters in the world, you'll see they're all beverage companies because the water bottle has become the symbol of pollution. But people haven't realized that our clothing is just as polluting as a water bottle, even more polluting because really, besides Loop technology and maybe some -- a few smaller other players, there's really no way to be able to recycle the textile, the polyester from clothing because of all the dies and the complexity of the different materials of construction. So having the ability to do textile to textile is another huge win for us because that's a special market that there's no real players in the market today. And like I said, being in India, being close to the supply chain to be able to get that those -- the PET polyester resin spun into a fiber, then it gets texturized dyed and then turned into a garment, all of that is done in India already. So having that opportunity for the customers is really, really important.

Okay. That makes a lot of sense. And sticking with India for a second here, can you kind of walk us through the time lines of when you might have to start allocating capital and specifically whether or not the timing of the Reed Financing closing in November lines up well with that for when you'll actually have to start sending money to that project in JV?

I mean, we're already spending money for the project today, like part of our regular project costs are in there because all of the testing of all the feedstock. So we're bringing in containers full of material from India, processing it in our plant here. So already getting the material out to the customer. So we're doing a lot of that already. So we're already incurring project costs for the Indian project. But the main bulk of the project costs will be coming in towards the end of the year. So the project is not being slowed down because of the Reed closing. That's not at all what's happening. But the projects are taking the regular due course. The big bulk of the project costs are going to come in Q1 of 2025 when that's when we're really going to yield shovels in the ground, construction, ordering long lead time equipment and getting that process done, securing -- paying for the land and everything else.

I guess the other update is also we've hired one of the big 4 accounting firms to do, what they call in India, DPR, a detailed project report, which is what the banking syndicate in India needs for them to provide the debt financing. So that's already been engaged by the -- we've already engaged them. So we're working on that as well.

The next question comes from the line of Gerry Sweeney with ROTH Capital.

I want to start with Reed. What hurdles remain for closing? And then once it is closed, what's the time line for the funding to come from Reed to Loop?

Yes. So the closing of the transaction, the only thing that's left is for them to get the regulatory -- the final regulatory approval, which they've been working on since August. And we're in constant communication with all parties involved, and we're expecting that to happen imminently. Once the approval happens, then it takes a few weeks of administrative work for Loop to get the cash. So that's where we're expecting the entire transaction to close in November.

And the transaction remains as described previously with 2 different tranches?

Yes, there's going to be in separate tranches. There's going to be the initial tranche, which is the EUR 10 million CPS, the convertible preferred security, which converts into Loop shares at $4.75 a share in 5 years from now at a 13% PIK interest, and then there's other amounts to follow after that.

Got it. Okay. And then India side, I mean, very good project. What are you looking at in terms of -- is there an option to maybe potentially license the technology to other areas of the world or other interested parties? Just curious as to alternative routes to go down?

Yes, there's a lot of interest. The one thing that Loop has done really well is build the technology. We've been running the plant here in Montreal for 4 years. We operated at a very high rate. We've tested thousands of different feedstocks, qualified different materials. So we have great technology. And I think anyone that takes the time, does due diligence on the technology looks at the marketplace knows that we have great technology. In financial investors, we haven't done a great job of working on showing the story or having financial investors understand the story. So that's something we have to do a lot better. But on the technology side, anyone that takes a look really understands the power of Loop's technology. And so we have tons of different opportunities for other companies. Like I said, now that sustainability is coming back into the forefront very slowly, there's a lot of other -- a lot of companies looking to be able to either license the technology, partner with us, governments or industrial partners. So we have a lot of interest right now. It takes a lot of time. It takes a lot of work to develop these relationships. a lot of -- they have to visit, do technical due diligences. So there's a lot of that, that we're working on right now. So we'll see how that goes. But that's going to be a big part of our business, right? We always said, we want to focus our capital allocation into low-cost manufacturing countries or where there's significant government involvement and then the rest where there's higher cost manufacturing, that's where we'll look more to licensing the technology and bringing in the partnership. So there's a lot of that, that we're working on as well.

Got you. That makes sense. Obviously, India forefront once India gets up and running. I mean, this is a little bit of a forward-looking question. Would you -- do you think Loop would look to build another facility or partner with and JV with whether at Ester or another company to build a second facility? Or do you think the path forward would be more looking for licensing agreements?

So in India, we're definitely looking for a second facility. So in India, that's a great question, Gerry. That's a great question. So in India, the land we're buying is enough for 2 facilities. So we're planning for a second expansion in India, which would be 100% dedicated fiber to fiber because as 2030, that's when the fiber to fiber is really going to be important. Brands have mandates of 50% sustainable materials by 2030 on the textile-to-textile side. So that pressure is coming in 2030. So the first facility will have a blend, bottle grade, fiber grade submonomers. Second facility, which probably would be larger than 70,000 tons. We could easily scale the technology to 100,000 tons, would be dedicated 100% fiber to fiber, textile to textile because that's really an emerging market. And we have -- like I said, we have lots of different inbound opportunities for projects around the world. We have to have a partnership with SK and we have other industrial companies or governments that are asking about, inquiring about putting up facilities because at the end of the day, people need -- it's like an infrastructure. People need a solution for the plastic problems. And so some governments are getting more active in trying to actively find a solution. So if the government financing makes sense, brings cost down, you could look at a higher cost manufacturing company because of the government subsidies to be able to support a facility. So we have a lot of different conversations with a lot of different partners around the world or potential partners around the world. So we'll see how we go. But definitely, low-cost manufacturing, India, other parts of Asia where there's textile to textile industry, Vietnam is another really interesting opportunity there. And then we'll see how far the world is -- we'll see how far the world goes, right? There could be cases where there's more tariffs put on plastics. So China won't have as much of an advantage or as much of a drag on prices because like you see in the EV car industry, right, putting tariffs to protect certain industries, that could open up opportunities in other parts of the world. So once you have the technology and we continually improve the technology, get better at the technology, that always will -- that's our saving grace because we have great technology. So that allows us to open up all these different avenues and be ready and agile to adjust to the way that the world changes.

The next question comes from the line of [indiscernible] with Bryan, Garnier & Co.

First question, sort of circling back on potential licensing agreement. Could you give us more color on what specific structure you are being -- you are considering right now? And maybe second question on your local projects in North America. Could you give us more color on what are the latest developments in your local North American market?

Yes. As far as licensing, it's really interesting. there's a lot of different models or different ways to do licensing. For us, one thing is definitely to have an upfront payment, which -- because there's a lot of work that goes into the licensing side. A percentage of revenue is always something that's interesting. Loop is unique because we bring in the customer relationships as well. We have strong relationships with a lot of the customer brands. So we do a lot of -- like in the joint venture in India, for example, we do all of the sales. So Ester is the manufacturing partner. We work together on the product, but all the sales comes through Loop. But when you're licensing, there's a lot of different ways. There's upfront fees, there's potential licensing on an annual basis, a percentage of revenue. And then if they want us to get involved in helping on the sales side, that would be an extra charge. So there's a lot of different ways to be able to do it. It's really tailored. It's really going to depend a lot about the price of PET. That's going to be the driving factor, right? PET prices today, let's say, in Europe, today, you're talking about EUR 1,650, so USD 1,825. So those numbers make it challenging to be spending big CapEx in Europe because of the low PET price. We're expecting to see PET prices move into the $2,000 range, maybe the $2,200 range in early 2025 when the regulation comes in. So it really depends that revenue, you got to make sure that whoever is licensing your technology has enough profit to be able to license the technology and be interested in licensing your technology. So the pricing is going to play a big factor into it. People that are expecting PET prices to be at EUR 3,000, I don't think that's realistic whatsoever. So those type of projections are completely false and I don't think any producer or any customers willing to pay those type of prices, which is why you see a lot of projects stalling right now in Europe. And the second part of your question, North America. Yes, we're talking to a couple of different opportunities in North America, looking and seeing where the best opportunity is for us. We would love to do something. We've always said we want to do something in Quebec in Canada. So we'll see how that plays out, but we always would love to do a larger scale facility than the one we have in Montreal.

The next question comes from Marvin Wolff with Paradigm Capital.

Yes. I had a question. If we roll the calendar out to October '27, okay, so that would be -- so this point in time in your fiscal '28 year, how many plants do you see operating using the Loop technology?

Well, for sure, we'd have the Indian facility up and running. And we will probably have a second facility potentially up and running by that time as well, assuming we would start a second project sometime at the end of next year. It takes about 2 years to get a project done. So we would be at potentially 2 facilities running.

Okay. And where would the French plant be at that time?

French plant, that's an interesting question. We have to really look and see where the pricing in Europe is going to be. That's going to be the determining factor for European projects. PET prices being EUR 1,650 a ton right now, put a lot of pressure, and that's why you see all projects in Europe kind of being slowed down right now because of the pricing. Now let's see what happens in 2025 if the pricing power is going to come back, that would be -- make -- accelerate the deployment of projects, but that's something that everyone is waiting to see what -- where we get to in 2025. That's the big drop that I was talking about, Marvin. After COVID times, we were talking about PET prices being somewhere around $2,500 a ton and then it dropped down to $1,100 a ton. So that put a lot of pressure on projects globally, similar to what happened with electric car batteries, right? All of these projects around the world were great when lithium was at certain price, lithium came crashing down and now all those projects are stalled. So we're seeing the same thing in the plastic side. So really, that's going to be a big driving factor on deployment in Europe. We're going to see where the pricing is in early '25.

Do you think the Europeans will put substantial tariffs on Chinese PET coming into Western Europe?

I don't know. I don't think -- not on the virgin side, I don't think the virgin side. On the recycled material, they put this 50% recycled content. There is a small tariff. I think it's like 5% or 6% tariff today. If they're going to go higher, I really don't know. If they -- it seems that if you put a tariff on China, like Spain tried to do, China turns around and slaps a tariff on the pork coming from Spain and then the Spanish Prime Minister had to back out of it. So we'll see. I mean, that's something I really don't know, but we'll see where we get to. We'll see what the U.S. election happens as well. That could be another opportunity where more tariffs will be put on things. We really don't know, but that's why everyone is taking a wait-and-see approach until 2025 to see how that all plays out.

Yes. No, I think 2025 is going to be the year, yes, for sure when we can tell with more clarity what some of these issues are going to be.

And interest rates are coming down. Yes, interest rates are coming down. Inflation rates are coming down. So the refocus -- I've seen a big refocus the past few months from the brands refocusing on sustainability. For a while, they all said, hey, I'm just going to buy the virgin stuff from China or from Indonesia because it's way cheaper. It's going to bring my cost down, bring us back into profitability. Now that, that's rebalancing, the inflation is coming down, the interest rates are coming down, now there's a renewed focus on sustainability. So let's see -- we'll see how that goes. But that's why for us, like I said, Marvin, I've been preaching that for a few months now, low-cost manufacturing in India, no matter what happens to the PET price, you're always going to be profitable. And that's the big key for low-cost manufacturing. The best way to worrying about China is to compete directly with them, and India allows us to do that.

For sure. The India project makes a lot of sense. There's no doubt about it. So if we lived in a world where we got these higher prices because of the 25 Regs, would the French plant be a 2028 calendar sort of start-up?

Yes, somewhere around there. And then also with Reed, right, that's a big part about bringing Reed in. Let's not forget, Reed is a financial. So there's a financial side to Reed, but they're also a partner of ours to develop projects across Europe. So having Reed's partnership and leadership and knowledge about the European market and building CapEx projects in Europe is really important. So besides the financial side, the guys at Reed are really experienced at putting these projects, CapEx projects is up in Europe. So having them as a partner, a strategic partner on the financial side, but also on the deployment side in Europe is going to be interesting. So yes, let's see where the prices get to.

Our next question comes from Ivan [indiscernible].

Just a couple of clarifying questions on the cash position post 3 transactions. So number one, I've seen you had increased trade accounts payable by approximately 1.5 million during the quarter ending August 31. Could you help me understand kind of how should we be thinking about the working capital needs going forward? And then a second question in terms of your spend on the Indian facility. So can you help me understand how much of the machinery and equipment, which currently sits in the warehouse, if I read your 10-Q correctly, can be utilized in the Indian facility so it wouldn't be a direct drag on your cash balances?

The cash available to us, what Fady alluded to was $2.4 million in cash plus a $2 million loan from myself and one of the lead directors. So it's $4.4 million in cash. The initial Reed Financing is USD 11 million, which would be our initial tranche and then there would be subsequent cash coming after that in a very short period after the initial tranche closes. We also have some government financing available for the India project. So the cash through India is also spread out over a 2-year period. It's not everything has to be paid upfront. So we'll be fine going forward from a cash perspective once we close the Reed transaction and the subsequent government financing. As far as the equipment in the warehousing, I mean, the India project really is only Loops technology, there's no polymerization technology. So I think the equipment you're alluding to is polymerization technology that would be used for a separate project, not for the India project because Ester provides the polymerization equipment for us. So they have all of the polymerization. So we don't need to spend any CapEx on the polymerization section, which is why the CapEx number in India is definitely much lower because you don't need 50% of the plant. That equipment that's going to be in the warehousing will be used for another project eventually that we're working on that would have certain pieces of that equipment used at that project. What are you saying? You have another question?

Yes. And just to clarify on the working capital and the accounts payable, if you could just provide some clarity as to how should we be thinking about your working capital needs going forward post Reed during the construction period in India?

I can handle that one, Daniel. You're right, the accounts payable, there was an increase, as you alluded to. A lot of the expenses that I -- when I did my section in terms of the legal expenses and all those expenses, a lot of them came at the end of the quarter. So we did see a spike up in our accounts payable. As Daniel alluded to, the working capital payments are going to happen in the next couple of months, but that's in the figures that we've been guiding to. So with the liquidity on hand of $2.4 million and the potential cash injection, we have funds to get us through to February, including the payments of working capital. So these things happen at the end of the quarter, largely at the end of the quarter, and that's why you see the ramp-up, and they're going to be in our outflows in the next couple of months. So that's all factored in there. It's part of our liquidity channel between now and, call it, February of 2025.

And post Reed transaction, we'll have enough funds for the breaking ground of the facility, the construction -- beginning of the construction pieces, plus our working capital with post Reed and our other -- the government financing as well.

Thank you, everyone, for your questions and for participating in today's discussion. Before we conclude, I'd like to turn the call back to Kevin O'Dowd for closing remarks.

Thank you all for your questions and interest in Loop. We're committed to driving sustainable value. For any further inquiries, please reach out to our Investor Relations team. We look forward to sharing our continued progress next quarter. Thank you for your support, and have a great day.

Thank you, everyone.

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.