Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Loop Industries First Quarter 2025 Corporate Update Call. This conference is being recorded today, July 16, 2024, and the press release accompanying this conference call was issued last evening, July 15, 2024. On our call today is 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 meeting will include forward-looking statements within the meaning of the security 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 on Form 10-Q filed with the SEC yesterday in 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, everybody. Thank you for joining our call, quarterly 1 call. It's a short quarter because we had our year-end call about a month ago. So I'll go through the most important items, which is our refinancing. At the end of last quarter, we concluded a two-part agreement with Reed. One is for a joint venture. So we created a joint venture with Reed, a French private equity firm, to be able to work together in developing Loop's technology across Europe. The joint venture is a 50-50 joint venture. In Europe, we see Europe as a higher-cost manufacturing environment. In these types of situations, we prefer to work with a partner to lessen the equity commitment that Loop needs to put into this to build these plants and rely more on licensing fees and royalty fees coming on an annual basis from the facilities. So that's why the partnership with Reed makes so much sense for us—less CapEx, less equity commitment for Loop, and relying more on our engineering and yearly royalty fees.
That’s a key theme throughout the entire company. So whatever we're doing in higher-cost manufacturing countries, we'll definitely be looking for partners to take on part of the equity check and rely mostly on the licensing side. We will be deploying our capital in lower-cost manufacturing countries such as India, where economics are much more attractive. We'll get to that in a second step when I discuss the partnership with Ester. The other part of the partnership with Reed is also providing Loop financing to fund our first commercial facility in India in partnership with Ester. So besides this joint venture, we have the financing package. It's taken longer than we had expected to close the Reed deal. There have been some delays on Reed's side, not related to Loop. As you saw, all the agreements and details have been finalized. The specifics of the delays will be communicated very soon once they're publicly available.
As a result, we are confident in being able to close the transaction this quarter, as we've stated. Things are progressing really well on that front. I'll provide an updated timeline once the delays have been communicated publicly, and then we'll update the market. I just want to run through the financing package because it is a really good financing package for Loop. So I'll convert euros into U.S. dollars at 10% just to make it easier for the call. The financing package is $11 million to Loop. It's in a convertible preferred security, with a 13% interest rate, and converts at $4.75 per share in 5 years from now. A 13% interest in today's environment is very reasonable, converting at $4.75 if the Loop stock performs well 5 years from now. This capital can be used at our head office and gives us about one year of cash burn at our office at current run rates. Then there's a second tranche, which is $15 million, a straight debt at a 13% interest rate, which is to be used for the CapEx requirements in India.
Today, that CapEx requirement is $25 million. Loop's equity share would be $25 million and $15 million out of that $25 million would be coming from the 13% interest rate, payable in 3 years, providing us with 2 years to build the facility and an extra year of runway before we have to repay this loan along with the interest. So it's a really great financing package for Loop to get that first facility up and running, and we're really excited about the terms. Additionally, we have our government partner who is financing an additional 30% of the Indian CapEx, which is up to $10 million. Between the second tranche of Reed's financing and the money coming from our government partner, it covers almost the entire equity check that Loop needs for our 50% ownership of the Ester joint venture in Quebec. The government entity follows the same terms as Reed's convertible preferred security, so 13% interest converting at Loop stock at $4.75 per share in 5 years.
So at the end of the day, it's a great financing package. All of this combined provides us with approximately one year of cash burn plus the money we need for our equity commitment in India. Yes, it took longer. It was delayed. It was a bit painful. But at the end of the day, it's a great financing package for us, and we've secured the entire financing needed for our first facility in India with our partnership with Ester. We do have a couple of options for some bridge financing if needed. We're currently evaluating those options. If we need to bring in some cash as a bridge, we have a few different options that we're exploring right now. So that's something we’re monitoring to see if we want to pursue that. But it is an available option for us. So that's pretty much the update on the financing side—the Reed partnership, the joint venture, and the financing. The financing packages are excellent for Loop, and we have everything we need to get our first facility up and running.
Next would be the partnership with Ester and the Indian partnership. We're making good advancements with our partner, Ester, on the facility. We've begun securing waste polyester fiber feedstocks for the facility. There's a region in India, the Surat area, where most of the textile manufacturing is located, so there’s an abundance of waste polyester fiber textile scrap available, which currently does not have any type of use. It’s plentifully available, and we've tested the material at our facility in Montreal. The quality meets our standards. So we secured almost more material than we need for the first facility, and we have plans for a second facility eventually because of the abundance of waste polyester fiber feedstock in that area. We’ll be locating our facilities somewhere in that region as well. We've hired a British engineering firm to locate a site for us. The main points for the site criteria are proximity to the waste feedstock, closeness to the Surat area, near ports, because we’ll be exporting most of the finished products from the facility.
Clean energy is also very important for us. There’s an abundance of clean energy options in India using biomass as a primary energy source. That's another critical criterion for our customers. We must ensure we are offering the lowest carbon PET polyester, DNT, and MEG on the market. So having a renewable energy source is vital for us. We're also looking for as much wind and solar as possible from the electrical grid. CapEx estimates still stand at $165 million for the entire facility. Loop's equity commitment would be $25 million, Ester would also contribute $25 million, and about $110 million of project finance, which we’ve begun working with Ester’s banking syndicate in India to secure financing for the projects. Stock availability is plentiful, and customer demand is robust. We’ve reached out to all our global customers. Most of the material will be exported into either PET plastics for bottles or polyester fiber for the textile industry, which is essential considering India is the perfect place for that, where much of our customer base in the textile manufacturing sector has operations in India or nearby in Bangladesh and other countries.
This makes it sensible to cut down on logistics costs and be close to the supply chain for our customers. Furthermore, there’s demand for DMT and MEG in the marketplace where it’s an underserved market. There’s tremendous demand for DMT for a variety of specialty products. Our material has been tested by various customers for DMT and MEG quality, and the feedback has been extremely positive. We're excited to provide DMT, MEG, PET, and polyester fiber. Ester has been in the PET business since 1985, and they currently have three plants operating in India. We've been collaborating with them for 5 years. Our relationship has been strong. At Loop's facility in Canada, we produce DMT and MEG, send it to India, they polymerize it for us, and then we send it to our customers. In summary, it's a very positive joint venture. Those are the two major updates I wanted to share today. I will now turn the call over to our CFO, Fady, at this time.
Thank you very much, Daniel. The first quarter is always a little quiet from a financial reporting perspective. As Daniel mentioned, we just conducted our year-end call for the 12 months ended February 28, 2024, approximately 45 days ago, so I will be brief today. It’s been a quiet quarter from a financial standpoint, but there have been plenty of business developments, notably the Ester and Reed announcements that reached finality in the first quarter, which we previously disclosed in other documents. Looking at our P&L, our total expenses for the quarter were $5.2 million, which appears higher than what I've guided to in the past. However, there were two specific items contributing to the increase versus our run rate. One of them, obviously, is getting the Ester and Reed documents finalized, which required significant legal expenses, totaling about $800,000. We also had project expenses amounting to $600,000, which are included in our overall expenses.
By backing out noncash expenses such as depreciation and stock-based compensation, which are also noncash, we arrive at total cash expenses of $3.2 million, aligning with the $1 million per month I've been guiding. Some quarters will inevitably be lumpy. We've experienced significant positive business developments, but sometimes that success incurs costs for outside advisors. We’re happy to incur those expenses to further our strategic agenda. In terms of our P&L, research and development expenses are down by 50% compared to the first quarter of 2023. Last year, we had a $1.2 million purchase of equipment that did not happen this year, and we've implemented reductions across the board, including headcount and pilot running more than 40 hours a week rather than 24/7. We've made a deliberate effort to lower our run rate from an R&D perspective, and that trend is well underway. G&A expenses have actually increased by 20% compared to the prior quarter.
Once again, this is primarily due to the legal expenses incurred. If we exclude that item, there would be a 20% decrease in G&A expenses. I'm very confident that our cash run rate is about $1 million a month, considering some variance depending on business development issues. That being said, the first quarter fell in line with that. From a balance sheet perspective, we have $5.3 million in liquidity, which is enough to sustain us until November. This gives us sufficient time for the closing of the Reed transaction, as Daniel indicated, and enables us to secure long-term financing that can be allocated for working capital and equity deployment in our facility for India. So that's it for the quarter; it was a relatively quiet period. I'm reiterating our cash burn rate of about $1 million per month, and I’m happy to answer any questions you might have. Thank you.
We currently have no further questions, so I will hand it back to Daniel Solomita to conclude.
Thank you very much, everyone, for attending the call.
This concludes today's call. Thank you for joining. You may now disconnect your lines.