PCT 10-Q
PureCycle Technologies, Inc. (PCT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from________to________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
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(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 5, 2025, there were approximately
PureCycle Technologies, Inc.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Condensed Consolidated Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 2024 |
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Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three Months ended March 31, 2025 and 2024 (Unaudited) |
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Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2025 and 2024 (Unaudited) |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
43 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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57 |
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PART II - OTHER INFORMATION |
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58 |
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58 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
58 |
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59 |
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60 |
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62 |
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share data) |
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March 31, 2025 |
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December 31, 2024 |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash – current |
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Accounts receivable, net |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash – noncurrent |
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Operating lease right-of-use assets |
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Property, plant and equipment, net |
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Prepaid expenses and other noncurrent assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Accrued interest |
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Current portion of warrant liability |
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Current portion of long-term debt |
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Current portion of related party bonds payable |
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Total current liabilities |
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NONCURRENT LIABILITIES |
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Deferred revenue |
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Long-term debt, less current portion |
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Related party bonds payable |
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Warrant liability |
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Operating lease right-of-use liabilities |
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Preferred stock liability |
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Other noncurrent liabilities |
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TOTAL LIABILITIES |
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STOCKHOLDERS' EQUITY |
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Common shares - $ |
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Preferred shares - $ |
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Additional paid-in capital |
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Accumulated other comprehensive (loss)/income |
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Accumulated deficit |
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TOTAL STOCKHOLDERS' EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share data) |
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2025 |
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2024 |
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Revenues |
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$ |
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$ |
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Operating expenses: |
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Cost of operations |
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Research and development |
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Selling, general and administrative |
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Total operating costs and expenses |
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Operating loss |
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Interest expense |
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Interest income |
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Change in fair value of warrants |
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Loss on debt extinguishment |
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Other (income)/expense |
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Total other (income)/expense |
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Net Income/(loss) |
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$ |
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$ |
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Earnings/(loss) per share |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average common shares |
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Basic |
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Diluted |
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Other comprehensive (loss)/income |
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Unrealized gain on debt securities available for sale |
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$ |
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$ |
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Cumulative translation adjustment |
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Total comprehensive income/(loss) |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
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For The Three Months Ended March 31, 2025 |
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Common stock |
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(in thousands) |
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Shares |
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Amount |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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Accumulated deficit |
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Total stockholders' equity |
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Balance, December 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock |
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— |
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— |
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Warrants exercised |
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— |
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— |
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Share repurchase |
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( |
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( |
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— |
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— |
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( |
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Equity-based compensation |
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— |
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— |
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Cumulative translation adjustment |
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— |
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— |
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— |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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Balance, March 31, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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For The Three Months Ended March 31, 2024 |
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Common stock |
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(in thousands) |
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Shares |
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Amount |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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Accumulated deficit |
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Total stockholders' equity |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of Common Stock |
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— |
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— |
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Share repurchase |
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( |
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— |
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( |
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— |
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— |
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( |
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Equity-based compensation |
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— |
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— |
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Unrealized gain on available for sale debt securities |
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— |
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— |
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— |
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— |
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Cumulative translation adjustment |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance, March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands) |
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2025 |
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2024 |
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Cash flows from operating activities |
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Net income/(loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income/(loss) to net cash used in operating activities |
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Equity-based compensation |
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Change in fair value of warrants |
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( |
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Change in fair value of derivative |
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Depreciation expense |
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Amortization of debt issuance costs and debt discounts |
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Accretion of discount on debt securities |
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Operating lease amortization expense |
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Loss on extinguishment of debt |
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Changes in operating assets and liabilities |
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Accounts receivable, net |
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( |
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Inventory |
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( |
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( |
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Prepaid expenses and other current assets |
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Prepaid expenses and other noncurrent assets |
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( |
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Accounts payable |
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( |
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Accrued expenses |
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Accrued interest |
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( |
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Operating right-of-use liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchase of property, plant and equipment |
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( |
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Purchase of debt securities, available for sale |
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Sale and maturity of debt securities, available for sale |
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Net cash (used in)/provided by investing activities |
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Cash flows from financing activities |
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Payment to purchase revenue bonds |
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Proceeds from bond issuance |
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Debt issuance costs |
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( |
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Payments to repurchase shares |
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( |
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( |
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Other payments for financing activities |
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( |
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Proceeds from issuance of common stock |
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Proceeds from exercise of warrants |
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Net cash provided by/(used in) financing activities |
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Net decrease in cash and restricted cash |
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Cash and restricted cash, beginning of period |
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Cash and restricted cash, end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information |
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Operating activities |
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Interest paid during the period, net of capitalized interest |
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$ |
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$ |
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Non-cash investing activities |
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Additions to property, plant, and equipment in accrued expenses |
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Additions to property, plant, and equipment in accounts payable |
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Non-cash financing activities |
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PIK interest on related party note payable |
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Reconciliation of cash, cash equivalents reported in the consolidated balance sheet |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash and cash equivalents - current |
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Restricted cash and cash equivalents - noncurrent |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION
Formation and Organization
PureCycle Technologies, Inc. (“PCT” or the “Company”) is a Florida-based corporation focused on commercializing a patented purification recycling technology (the “Technology”), originally developed by The Procter & Gamble Company (“P&G”), for restoring waste polypropylene into resin, called PureFive™ resin, which has nearly identical properties and applicability for reuse as virgin polypropylene. PCT has a global license for the Technology from P&G. PCT’s goal is to introduce an important new product to the global polypropylene market that will assist multinational corporations in meeting their sustainability goals as well as federal and state regulations and mandates, providing consumers with polypropylene-based products that are sustainable, and reducing overall polypropylene waste in the world’s landfills and oceans.
Business Combination
On March 17, 2021, the Company consummated the previously announced business combination (“Business Combination”) by and among Roth CH Acquisition I Co., a Delaware corporation (“ROCH”), Roth CH Acquisition I Co. Parent Corp., a Delaware corporation and wholly-owned direct subsidiary of ROCH (“ParentCo”), Roth CH Merger Sub LLC, a Delaware limited liability company and wholly-owned direct subsidiary of ParentCo, Roth CH Merger Sub Corp., a Delaware corporation and wholly-owned direct subsidiary of ParentCo and PureCycle Technologies LLC (“PCT LLC” or “Legacy PCT”) pursuant to the Agreement and Plan of Merger dated as of November 16, 2020, as amended from time to time (the “Merger Agreement”).
Upon the completion of the Business Combination and the other transactions contemplated by the Merger Agreement (the “Transactions”, and such completion, the “Closing”), ROCH changed its name to PureCycle Technologies Holdings Corp. and became a wholly-owned direct subsidiary of ParentCo, PCT LLC became a wholly-owned direct subsidiary of PureCycle Technologies Holdings Corp. and a wholly-owned indirect subsidiary of ParentCo, and ParentCo changed its name to PureCycle Technologies, Inc. The Company’s common stock, par value $
The Legacy PCT unitholders will be entitled to
Unless the context otherwise requires, “Registrant,” the “Company,” and “PCT,” refer to PureCycle Technologies, Inc., and its subsidiaries at and after the Closing and give effect to the Closing. “Legacy PCT,” “ROCH” and “ParentCo” refer to PureCycle Technologies LLC, ROCH and ParentCo, respectively, prior to the Closing.
7
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Liquidity and Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the conditions described below raise substantial doubt about the Company’s ability to do so, which management believes has been alleviated through its plans to mitigate these conditions and obtain additional unrestricted liquidity.
The Company has sustained recurring losses and negative cash flows from operations since its inception. As reflected in the accompanying condensed consolidated financial statements, the Company has begun limited commercial operations but does not have any significant sources of revenue.
The following is a summary of the components of the Company's current liquidity:
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As of |
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(in thousands) |
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March 31, 2025 |
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December 31, 2024 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash and cash equivalents (current and noncurrent) |
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Working capital deficit |
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( |
) |
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( |
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Accumulated deficit |
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( |
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( |
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Three Months Ended March 31, |
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(in thousands) |
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March 31, 2025 |
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March 31, 2024 |
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Net income/(loss) |
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$ |
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$ |
( |
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Cash used in operations |
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( |
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( |
) |
As of March 31, 2025, the Company had $
The Company's Ironton facility is working on improving its commercial operating capabilities, including its operating rates, reliability, and product quality. During the first quarter of 2025, the Company reported its first quarterly revenues of approximately $
As of March 31, 2025, the Company has debt service and equipment payments of approximately $
Pursuant to the requirements of the Financial Accounting Standards Board’s (the "FASB") Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for
8
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
plans is only considered if both (1) it is probable that the plans will be effectively implemented within
The Company believes that its current level of unrestricted liquidity is not sufficient to fund operations, outstanding commitments, and further its future growth plans. The conditions described above raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least
In an effort to alleviate these conditions, the Company is working to improve the operation of the Ironton Facility, and continues to pursue commercialization of its products with potential customers. Meanwhile, on February 5, 2025, the Company entered into subscription agreements (the "Offering") with certain investors in a private placement for an aggregate of
In addition, the Company has a $
After considering management’s plans to mitigate these conditions, including operational and commercial progress, the re-marketing of the Bonds and the availability of the Revolving Credit Facility, the Company believes this substantial doubt has been alleviated and it has sufficient liquidity to continue as a going concern for the next twelve months.
The Company’s future capital requirements will depend on many factors, including the funding mechanism and construction schedule of the Augusta Facility and other anticipated facilities outside the United States, build-out of multiple Feed PreP facilities, funding needs to support other business opportunities, funding for general corporate purposes, debt service and other challenges or unforeseen circumstances. As a low-revenue operating company, the Company continually reviews its cash outlays, pace of hiring, professional services and other spend, and capital commitments to proactively manage those needs in tandem with its cash balance. For future growth and investment, the Company expects to seek additional debt or equity financing from outside sources, which it may not be able to raise on terms favorable to the Company, or at all. If the Company is unable to raise additional debt or sell additional equity when desired, or if the Company is unable to manage its cash outflows, the Company’s business, financial condition, and results of operations would be adversely affected. In addition, any financing arrangement may have potentially adverse effects on the Company and/or its stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting the Company’s operating flexibility. If the Company consummates an equity financing to raise
9
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
additional funds, the percentage ownership of its existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of the Company’s common stock.
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. The condensed consolidated financial statements are presented in U.S. Dollars. Certain information in footnote disclosures normally included in annual financial statements was condensed or omitted for the interim periods presented in accordance with the rules and regulations of the SEC and accounting principles generally accepted in the United States of America (“U.S. GAAP”). Intercompany balances and transactions were eliminated upon consolidation. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2025. The accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented.
The unaudited condensed consolidated financial statements should be read in conjunction with the information contained in the Annual Report on Form 10-K for the year ended December 31, 2024. Interim results are not necessarily indicative of the results that may be expected for a full year.
Reclassifications
Certain amounts in prior periods have been reclassified to conform with the report classifications of the three months ended March 31, 2025 and 2024.
Restricted Cash
Cash pledged as collateral for future capital purchases and leased properties is deemed restricted and included within this definition. Restricted cash that is expected to be spent or released from restriction
Revenue recognition
The Company’s revenue is primarily generated from the sale of finished products or byproducts to customers. Those sales predominantly contain a single performance obligation and revenue is recognized at the point in time when control of the product is transferred to customers, along with the title, risk of loss and rewards of ownership. Depending on the arrangement with the customer, these criteria are met either at the time the product is shipped or when the product is made available or delivered to the destination specified in the agreement with the customer. Sales revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for that finished product. Amounts billed to customers related to freight are included in revenues and freight costs are included in cost of operations in the accompanying Condensed Consolidated Statements of Comprehensive Income/(Loss).
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the
10
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
reported amounts of expenses for the period presented. The Company's most significant estimates and judgments involve valuation of the Company's liability-classified warrants and related fair value assumptions. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from these estimates.
Segment Information
Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), in deciding how to allocate resources and in assessing performance. Therefore, the Company's , who is also the CODM, makes decisions and manages the Company's operations as a operating segment, which encompasses integrated business activities related to the recycling of polypropylene into resins. To date, the Company has limited operations and measures performance on a consolidated basis.
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-04 – Debt – Debt with Conversion and Other Options: Induced Conversions of Convertible Debt Instruments, which improves the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt-Debt with Conversion and Other Options. Specifically, the guidance is intended to clarify how to determine whether a settlement of convertible debt (particularly cash convertible instruments) at terms that differ from the original conversion terms should be accounted for under the induced conversion or extinguishment guidance. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. The Company is currently evaluating the impact that the updated standard will have on the financial statements.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Disaggregation Disclosures.” This guidance requires more detailed disclosure about the types of expenses presented within the expense captions of the financial statements. Specifically, disclosure of purchases of inventory, employee compensation, depreciation, and intangible asset amortization are required on both an interim and annual basis. In addition, a qualitative description of remaining amounts in relevant expense captions that have not separately been disaggregated will be required on an interim and annual basis. On an annual basis, disclosure of an entity’s definition of selling expenses and the amount of selling expenses is required. The amendments to this update are effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption of this update is permitted. The Company is currently evaluating the impact that the updated standard will have on its financial statement presentation.
In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. The updated standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted.
11
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
The Company is currently evaluating the impact that the updated standard will have on the financial statement disclosures.
NOTE 3 – LONG-TERM DEBT AND BONDS PAYABLE
The Company’s debt balances, including related party debt, consist of the following at March 31, 2025 and December 31, 2024:
(in thousands) |
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March 31, 2025 |
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December 31, 2024 |
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Long-term Debt |
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|
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Green Convertible Notes, interest at |
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$ |
|
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$ |
|
||
CSC Equipment Financing Payable, currently bearing interest at a monthly charge of |
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Revenue Bonds, interest at |
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Other debt |
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||
|
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Less: Original issue discount and debt issuance costs classified as a reduction to long-term debt |
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|
( |
) |
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|
( |
) |
Less: Current portion |
|
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( |
) |
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( |
) |
Long-term debt, less current portion |
|
$ |
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|
$ |
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||
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|
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Related Party Bonds Payable |
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Revenue bonds due to related party, interest rates between |
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Less: Original issue discount and debt issuance costs classified as a reduction to note payable |
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( |
) |
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( |
) |
Less: Current portion |
|
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( |
) |
|
|
( |
) |
Related party bonds payable, less current portion |
|
$ |
|
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$ |
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||
|
|
|
|
|
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Sylebra Line of Credit, $ |
|
$ |
|
|
$ |
|
||
Revenue Bonds
On October 7, 2020, the Southern Ohio Port Authority (“SOPA”) issued certain Revenue Bonds (as defined below) pursuant to an Indenture of Trust dated as of October 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), between SOPA and UMB Bank, N.A., as Trustee (“Trustee”), and loaned the proceeds from their sale to PureCycle: Ohio LLC (“PCO”), an Ohio limited liability company and indirect wholly-owned subsidiary of the Company, pursuant to a Loan Agreement dated as of October 1, 2020, between SOPA and PCO (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) to be used to, among other things, acquire, construct and equip the Company’s first commercial-scale recycling facility in the Ironton Facility. Capitalized terms used but not defined herein have the meanings ascribed thereto in the Indenture or the Loan Agreement.
The Revenue Bonds were offered in
12
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Bonds (PureCycle Project), Tax-Exempt Series 2020B (“Series 2020B Bonds”); and (iii) Subordinated Exempt Facility Revenue Bonds (PureCycle Project), Taxable Series 2020C (“Series 2020C Bonds” and, together with the Series 2020A Bonds and the Series 2020B Bonds, the “Bonds” or "Revenue Bonds").
Bond Series |
|
Term |
|
Principal Amount |
|
|
Outstanding as of March 31, 2025 |
|
|
Interest Rate |
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|
Maturity Date |
|||
2020A |
|
A1 |
|
$ |
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$ |
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|
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% |
|
||||
2020A |
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A2 |
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% |
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||||
2020A |
|
A3 |
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|
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|
|
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|
% |
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||||
2020B |
|
B1 |
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|
|
|
|
|
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|
% |
|
||||
2020B |
|
B2 |
|
|
|
|
|
|
|
|
% |
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||||
2020C |
|
C1 |
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|
|
|
|
|
|
|
% |
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||||
|
|
|
|
$ |
|
|
$ |
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On February 10, 2024, PCO announced that it had agreed in principle with the Holders (as defined in the Indenture) of a majority in the aggregate principal amount of the Series 2020A Bonds outstanding (the "Majority Holders") that PCO or an affiliate of PCO would purchase (“Purchase”) from Holders for cash, upon the terms and subject to the conditions to be set forth in a definitive purchase agreement, by and among PCO and any Holder of Bonds that elects to be a party to the purchase agreement (each, a “Seller” and collectively, “Sellers”), any and all Bonds held by Sellers at a purchase price equal to $
The Third Supplemental Indenture amended and supplemented the Indenture and certain of the other Financing Documents (as defined by the Indenture) by, among other things and without limitation, eliminating substantially all covenants and events of default contained in the Indenture ("Events of Default"), the Loan Agreement and certain of such other Financing Documents including, but not limited, to the following changes:
13
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
14
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
As of March 5, 2024, (the “Closing Date”) PCO and the Majority Holders closed on the Purchase Agreement and Consent (“Purchase Agreement”) comprising the definitive purchase agreement and, as additional consideration, the consent to the Third Supplemental Indenture, including the Proposed Amendments described therein. PCT LLC, an affiliate of PCO and the Guarantor under the Guaranty, is the purchaser (“Purchaser”) of Bonds under the Purchase Agreement. The Purchase Agreement was executed by each Holder that elects to sell its Bonds to the Purchaser and by PCO and the Purchase was effective on the Closing Date.
On March 5, 2024, PCT LLC, a subsidiary of the Company, purchased
On March 25, 2024, SOPA, as Issuer, PCO, the Guarantor, PCTO Holdco, a Delaware limited liability company and affiliate of PCO (the pledgor under the Equity Pledge and Security Agreement (as defined in the Fourth Supplemental Indenture)) and the Trustee entered into the Fourth Supplemental Indenture (the “Fourth Supplemental Indenture”), which amended certain provisions of the Indenture, the Loan Agreement and that certain Amended and Restated Guaranty of Completion, entered into as of May 11, 2021, and effective as of October 7, 2020 (the “Guaranty”), by instructing the Trustee to release $
On June 14, 2024, SOPA, as Issuer, PCO, the Guarantor, PCTO Holdco, and the Trustee entered into the Fifth Supplemental Indenture (the “Fifth Supplemental Indenture”), which amended certain provisions of the Indenture including (a) redefining “Majority Holders” to be the Holders of seventy-five percent (
The issuance of the Related Party Bonds and retirement of the Term Loan Facility (as defined below) with Pure Plastic (as defined below) was accounted for as a debt modification. The principal issued for the Related Party Bonds amounted to $
15
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
carrying value of the Related Party Bonds is recorded within Related party bonds payable in the Condensed Consolidated Balance Sheets.
On August 7, 2024, PCT LLC, Pure Plastic, and several other parties reached agreement on terms whereby certain investors purchased approximately $
On October 25, 2024, SOPA, as Issuer, PCO, the Guarantor, PCTO Holdco and the Trustee entered into the Sixth Supplemental Indenture (the “Sixth Supplemental Indenture”), which amended certain provisions of the Indenture and Loan Agreements to include, among other things, certain financial covenants. The amendments were a requirement of the Bond Purchase Agreement. Amendments to the Indenture and Loan Agreement included, in relevant part, the following:
16
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
On March 31, 2025, PCT LLC and several other parties reached agreement on terms whereby certain investors purchased approximately $
On April 21, 2025, the Company sold $
Revenue Bonds Issued to Related Party
On May 7, 2024, PCT LLC and Pure Plastic LLC ("Pure Plastic") executed a bond purchase agreement (as subsequently amended and restated to reflect the appropriate denomination of bonds, the “Amended and Restated Bond Purchase Agreement”), whereby Pure Plastic purchased approximately $
On May 10, 2024, Pure Plastic executed a Payoff and Release Letter (the “Payoff and Release Letter”), which memorialized the exchange of the Company’s obligations under the $
On May 28, 2024, PCT LLC and Pure Plastic executed the First Amendment to the Amended and Restated Bond Purchase Agreement (“First Amendment”) whereby Exhibit A to the Amended and Restated Bond Purchase Agreement was replaced with Exhibit A-3 to the First Amendment to facilitate the transfer by the Depository Trust Company of certain of the Related Party Bonds. The total amount of the Related Party Bonds and the cash due from Pure Plastic to PCT LLC remains the same. Except as summarized above and as set forth in the First Amendment, PCT LLC and Pure Plastic each acknowledged and reaffirmed the terms of the Amended and Restated Bond Purchase Agreement in the First Amendment.
In April 2025, the Company sold $
Equipment Financing
CSC Leasing Co.
On May 8, 2023, the Company, through PureCycle PreP LLC, an indirect wholly-owned subsidiary of the Company, entered into a Master Lease Agreement (the “Master Lease Agreement”) with CSC Leasing Co. (“CSC”). Pursuant to the Master Lease Agreement, the Company and CSC agreed to enter into schedules that establish the specific terms and conditions of leasing certain equipment, machines, devices, features and any other items listed in each equipment lease schedule. The Master Lease Agreement commenced on the date set forth above and continues in
17
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
effect until the later time that it is terminated, either by CSC at the end of any lease term, or by the Company upon
Also on May 8, 2023, the Company, also through PureCycle PreP LLC, entered into an Equipment Procurement Agreement (the “Equipment Agreement”) with CSC. Under the terms of the Equipment Agreement, CSC has agreed to finance, acquire and/or purchase certain equipment (the “Equipment”) from third-party vendors and/or manufacturers (each, a “Vendor”), so that CSC may lease the Equipment to the Company pursuant to the terms and conditions of the Master Lease Agreement. Prior to entering into formal lease schedules under the Master Lease Agreement, the Company will lease from CSC certain Equipment pursuant to the terms of the Equipment Agreement.
In connection with the above, CSC has funded $
The Company is required to make monthly payments under the agreements during the period between funding of the construction obligation and delivery of the equipment, which began in June 2023. Payments are equal to a monthly lease rate factor of approximately
Varilease Finance, Inc.
On July 12, 2024, PCT entered into an equipment financing arrangement with Varilease Finance, Inc. ("VFI") pursuant to a master lease agreement dated June 24, 2024, and have received total adjusted funding of $
Sylebra Credit Facility
On March 15, 2023, PCT entered into the $
18
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
“Administrative Agent” and “Security Agent”). The Lenders and their affiliates are greater than
Amounts outstanding under the Revolving Credit Agreement bear interest at a variable annual rate equal to Term SOFR (as defined in the Revolving Credit Agreement) in effect for such period plus an applicable margin. The applicable margin is equal to (i)
The Revolving Credit Agreement contains representations, covenants and events of default that are customary for financing transactions of this nature. Events of default in the Revolving Credit Agreement include, among others: (a) non-payment of principal, interest, fees or other amounts; (b) default of specific covenants; (c) breach of representations and warranties; (d) cross-defaults to other indebtedness in an amount greater than $
Amounts outstanding under the Revolving Credit Agreement are guaranteed by the Guarantors, and are secured by a security interest in substantially all of the assets of PCT. Any majority-owned direct or indirect subsidiaries of PCT formed after the closing date of the Revolving Credit Facility will also be required to guaranty the obligations under the Revolving Credit Agreement and grant security interests in substantially all of their respective assets.
On May 8, 2023, the Company entered into the First Amendment to Credit Agreement, by and among the Company, as borrower, PureCycle Technologies, LLC and PureCycle Technologies Holdings Corp., as Guarantors, the lenders party thereto, and Madison Pacific Trust Limited, as administrative agent and as security agent (the “Sylebra Amendment”) in connection with the Company’s $
On August 4, 2023, the Company entered into the Second Amendment to Credit Agreement, by and among the Company, as borrower, PureCycle Technologies, LLC and PureCycle Technologies Holdings Corp., as Guarantors, the lenders party thereto, and Madison Pacific Trust Limited, as administrative agent and as security agent (the “Second Amendment”), in connection with the Company’s $
On August 21, 2023, the Company further amended the Revolving Credit Agreement to (i) increase the amount available to the Company under the indebtedness covenant basket for offerings of unsecured convertible notes
19
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
from $
On March 1, 2024, PCT increased the Revolving Credit Facility from $
In conjunction with PCT LLC’s sale of approximately $
On September 11, 2024, in connection with PCT’s offering of Series A Preferred Stock, PCT extended the maturity date of the Revolving Credit Facility to March 31, 2026, in conjunction with the Limited Consent and Sixth Amendment to the Credit Agreement, which also (i) permitted the offering of Series A Preferred Stock; (ii) added PureCycle Augusta, LLC as a “Guarantor” and a "Loan Party" thereunder and (iii) added as secured obligations certain obligations in respect of the Series A Preferred Stock and Series C Warrants owed to the Lenders’ affiliates. Refer to Note 4 - Common and Preferred Stock Transactions for further information.
In conjunction with a private placement offering (the "Offering") on February 5, 2025, the Company, the Guarantors, the Administrative Agent, the Security Agent and the Lenders executed a Limited Consent and Seventh Amendment to the Credit Agreement to, among other things, permit the Offering and the transactions contemplated thereby. The lenders and their affiliates are greater than
On April 11, 2025, the Company entered into the Eighth Amendment to the Revolving Credit Agreement, which extends the maturity date of the Revolving Credit Facility from March 31, 2026 to
There were
The Pure Plastic Term Loan Facility
On May 8, 2023, the Company entered into a $
On March 1, 2024, PCT increased the amount available to the Company under the Term Loan Credit Agreement's permitted indebtedness covenant basket for the Revolving Credit Facility from $
On May 10, 2024, Pure Plastic executed the Payoff and Release Letter, which memorialized the exchange of the Company’s obligations under the Term Loan Credit Agreement. Refer to "Revenue Bonds Issued to Related Party" section above for further discussion.
20
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Green Convertible Notes
On August 21, 2023, the Company priced its private offering of $
On August 24, 2023, the Company completed the private offering of the Green Convertible Notes. Each $
The net proceeds from this offering, excluding any offering expenses, were approximately $
The Company has allocated $
“Eligible Green Projects” means: investments in (i) acquisitions of buildings; (ii) building developments or redevelopments; (iii) renovations in existing buildings; and (iv) tenant improvement projects, in each case, that have received, or are expected to receive, in the
The Augusta Facility is currently in the front-end engineering and design validation phase and is incorporating the operational optimization and efficiency opportunities identified during the Ironton Facility commissioning. The Company identified “Building Design and Construction” as the appropriate LEED rating system for the Augusta
21
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Facility project though the Company believes it is premature to register the Augusta Facility project with the LEED on-line platform at this time.
In connection with the issuance of the Green Convertible Notes, the Company entered into an Indenture, dated August 24, 2023 (the “Indenture”), with U.S. Bank Trust Company, National Association, as trustee. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable. The events of default, as set forth in the Indenture and subject in certain cases to customary grace and cure periods, include customary events including a default in the payment of principal or interest, failure to comply with the obligation to deliver amounts due upon conversion, failure to give certain notices, failure to comply with the obligations in respect of certain merger transactions, defaults under certain other indebtedness and certain events of bankruptcy and insolvency.
The Green Convertible Notes will mature on August 15, 2030 (the “Maturity Date”), unless earlier repurchased, redeemed or converted. The Green Convertible Notes will bear interest at a rate of
Holders of the Green Convertible Notes may convert all or any portion of the Green Convertible Notes at their option at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The conversion rate will initially be
Holders of the Green Convertible Notes have the right to require the Company to repurchase for cash all or any portion of their Green Convertible Notes on August 15, 2027 at a repurchase price equal to
The Company may not redeem the Notes prior to August 20, 2025. The Company may redeem for cash all or any portion of the Notes (subject to certain exceptions and restrictions specified in the Indenture), at its option, on or after August 20, 2025 and on or before the 40th scheduled trading day immediately before the Maturity Date, at a cash redemption price equal to
22
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
The following provides a summary of the interest expense of the Company's convertible debt instruments:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands, except interest rate) |
|
2025 |
|
|
2024 |
|
||
Contractual interest expense |
|
$ |
|
|
$ |
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Amortization of original issue discount |
|
|
|
|
|
|
||
Effective interest rate |
|
|
% |
|
|
% |
||
The following provides a summary of the Company's convertible notes:
(in thousands) |
|
|
|
March 31, |
|
|
December 31, |
|
||
Unamortized deferred issuance costs |
|
|
|
$ |
|
|
$ |
|
||
Net carrying amount |
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|
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|
||
Principal repayments due on Long-term debt and Related party note payable over the next five years are as follows (in thousands):
Years ending December 31, |
|
Long-term debt |
|
|
Related party note payable |
|
||
2025 (April through December) |
|
$ |
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$ |
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2026 |
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2027 |
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2028 |
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2029 |
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2030 |
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Thereafter |
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|
||
Less: Original issue discount and debt issuance costs classified as a reduction to long-term debt |
|
|
( |
) |
|
|
( |
) |
Less: Current Portion |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
||
NOTE 4 - COMMON AND PREFERRED STOCK TRANSACTIONS
Private Placement Offering
On March 7, 2022, the Company entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “2022 PIPE Investors”), pursuant to which the Company agreed to sell to the Investors, in a private placement, shares of the Company’s common stock, par value $
On March 17, 2022, the Company closed the 2022 PIPE Offering and issued to the 2022 PIPE Investors an aggregate of
23
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Preferred Transactions
On September 11, 2024, the Company entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “Investors”), including related parties, pursuant to which the Company agreed to sell to the Investors, in a private placement, an aggregate of (i)
Series A Preferred Stock
The shares of Series A Preferred Stock were issued pursuant to a Certificate of Designations (the “Certificate of Designations”) filed on September 13, 2024, and rank senior to the Common Stock with respect to the payment of dividends and distributions upon liquidation, dissolution or winding-up. Holders of the Series A Preferred Stock are entitled to receive dividend payments at a return equal to
The holders of the Series A Preferred Stock have a contingent put right (the “Put Option”), which was bifurcated and recognized separately at fair value through earnings pursuant to ASC 815-15, Embedded Derivatives. The Put Option is contingent upon the Company incurring any indebtedness after the initial issue date that is senior to the Series A Preferred Stock and/or secured by the assets of PureCycle Augusta, LLC. As of March 31, 2025 and December 31, 2024, the Put Option liability has a fair value of $
The shares of Series A Preferred Stock will be redeemed in cash at a price equal to $
24
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
On September 17, 2024, the holders of all of the shares of Series A Preferred Stock entered into waivers to irrevocably and unconditionally waive (and consent to such waivers for purposes of Section 12 of the Certificate of Designations) the rights of the holders of shares of Series A Preferred Stock, (i) pursuant to the Certificate of Designations, (a) to elect to receive shares of Common Stock or pre-funded warrants to purchase Common Stock in connection with redemption events under the Certificate of Designations, (b) to elect to receive additional shares of Series A Preferred Stock on return payment dates, and (c) to receive
Refer to Note 6 - Warrants for further information.
Common Stock
Holders of PCT common stock are entitled to
On February 5, 2025, the Company entered into subscription agreements with certain investors (the “Investors”), including affiliates of Sylebra Capital Management, Pleiad Asia Master Fund, Pleiad Asia Equity Master Fund and affiliates of Samlyn Capital, LLC, pursuant to which the Company agreed to sell to the Investors, in a private placement an aggregate of
Preferred Stock
As of March 31, 2025 and December 31, 2024, the Company is authorized to issue
25
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
NOTE 5 - EQUITY-BASED COMPENSATION
2021 Equity Incentive Plan
On March 17, 2021, the Company's stockholders approved the PureCycle Technologies, Inc. 2021 Equity and Incentive Compensation Plan (the “Plan”).
The Plan provides for the grant of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance shares, performance units, dividend equivalents, and certain other awards. In general, the amount of shares issuable under the Plan will be automatically increased on the first day of each fiscal year, beginning in 2022 and ending in 2031, by an amount equal to the lesser of (a)
As of March 31, 2025, approximately
Restricted Stock Agreements
RSUs issued pursuant to the Plan are time-based and vest over the period defined in each individual grant agreement or upon a change of control event as defined in the Plan. The Company recognizes compensation expense for the shares equal to the fair value of the equity-based compensation awards and is recognized on a straight-line basis over the vesting period of such awards. The fair value of the awards is equal to the fair value of the Company’s common stock at the date of grant. The Company has the option to repurchase all vested shares upon a stockholder’s termination of employment or service with the Company.
A summary of restricted stock activity for the three months ended March 31, 2025 is as follows:
|
|
Number of RSUs |
|
|
Weighted average grant date fair value |
|
|
|
Weighted average remaining recognition period |
|
|||
Non-vested at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
||
Non-vested at March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|||
On December 31, 2024, the Company entered into an agreement with the Company's former Chief Financial Officer, whereby the restricted stock award set to expire on
26
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
2024. The cash payment of $
As of March 31, 2025, there were $
Stock Options
The stock options issued pursuant to the Plan are time-based and vest over the period defined in each individual grant agreement or upon a change of control event as defined in the Plan.
The Company recognizes compensation expense for the shares equal to the fair value of the equity-based compensation awards and is recognized on a straight-line basis over the vesting period of such awards.
|
|
|
|
Three Months Ended March 31, |
|
||||||
|
|
|
|
2025 |
|
|
|
2024 |
|
||
Expected annual dividend yield |
|
|
|
|
|
|
|
||||
Expected volatility |
|
|
|
|
|
|
|
||||
Risk-free rate of return |
|
|
|
|
|
|
|
||||
Expected option term (years) |
|
|
|
|
|
|
|
|
|
||
The expected term of the shares granted is determined based on the period of time the shares are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the Company’s capital structure and volatility of similar entities referred to as guideline companies. In determining similar entities, the Company considered industry, stage of life cycle, size and financial leverage. The dividend yield on the Company’s shares is assumed to be zero as the Company has not historically paid dividends. The fair value of the underlying Company shares is determined using the Company’s closing stock price on the grant date.
A summary of stock option activity for the three months ended March 31, 2025 is as follows:
|
|
Number of Options |
|
|
Weighted Average Exercise Price |
|
|
|
Weighted Average Remaining Contractual Term (Years) |
|
|||
Balance, December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
||
Balance, March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|||
Exercisable |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Weighted average grant date fair values |
|
$ |
|
|
|
|
|
|
|
|
|||
As of March 31, 2025, there were $
27
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Performance-Based Restricted Stock Agreements
The shares issued pursuant to the Performance-Based Restricted Stock Agreements vest depending on if the performance obligations are met. In general, the performance-based stock units (“Performance PSUs”) will be earned based on achievement of pre-established financial and operational performance objectives and will vest on the date the attainment of such performance objectives as determined by the Compensation Committee of the Board, subject to the participant’s continued employment with the Company. The Company has also issued performance-based stock units that vest if the market price of the Company's common stock exceeds a defined target during the performance period ("Market PSUs," together with the Performance PSUs, the “PSUs”).
As of March 31, 2025, the performance-based provisions have
The Company recognizes compensation expense for the Performance PSUs equal to the fair value of the equity-based compensation awards and is recognized on a straight-line basis over the vesting period of such awards as the Company has concluded the performance condition is probable to be met. The fair value of the awards is equal to the fair value of the Company's common stock at the date of grant.
A summary of the PSU activity for the three months ended March 31, 2025 is as follows:
|
|
Number of PSUs |
|
|
Weighted average grant date fair value |
|
|
|
Weighted average remaining recognition period |
|
|||
Balance, December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
||
Balance, March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|||
Equity-based compensation cost is recorded within the selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income/(Loss).
|
|
|
|
Three Months Ended March 31, |
|
||||||
(in thousands) |
|
|
|
2025 |
|
|
|
2024 |
|
||
Total equity-based compensation for RSUs |
|
|
|
$ |
|
|
|
$ |
|
||
Total equity-based compensation for PSUs |
|
|
|
|
|
|
|
|
( |
) |
|
Total equity-based compensation for stock options |
|
|
|
|
|
|
|
|
|
||
Total equity-based compensation |
|
|
|
$ |
|
|
|
$ |
|
||
NOTE 6 - WARRANTS
RTI Warrants
RTI Global (“RTI”) held warrants to purchase
The Company determined the warrants were liability-classified under ASC 480, Distinguishing Liabilities from Equity. Accordingly, the warrants were held at their initial fair value and were remeasured to fair value at each
28
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
subsequent reporting date, with changes in the fair value presented in the Condensed Consolidated Statements of Comprehensive Income/(Loss).
Public Warrants and Private Warrants
The Company has outstanding public and private warrants that entitle each holder to exercise its warrants for a whole number of shares of the Company's common stock at a price of $
The Company may redeem the outstanding warrants in whole, but not in part, at a price of $
The public warrants are accounted for as equity-classified warrants as they were determined to be indexed to the Company’s stock and meet the requirements for equity classification. The Company has classified the private warrants as a warrant liability as there is a provision within the warrant agreement that allows for private warrants to be exercised via a cashless exercise while held by the Sponsor and affiliates of the Sponsor, but would not be exercisable at any time on a cashless basis if transferred and held by another investor. Therefore, the Company classifies the private warrants as a liability pursuant to ASC 815, Derivatives and Hedging Activities, until the private warrants are transferred from the initial purchasers or any of their permitted transferees.
There were approximately
Series A Warrants
On March 7, 2022, the Company issued approximately
The Company may redeem the outstanding Series A Warrants in whole, but not in part, at a price of $
On April 11, 2025, the Company entered into a side letter agreement with certain holders of the Series A Warrants to forbear the Company's exercise of its redemption rights with respect to those certain holders' Series A Warrants.
29
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
As a consequence of such side letter, the Company is unable to redeem the Series A Warrants for any holder of the Series A Warrants.
The agreements governing the Series A Warrants provide for a Black-Scholes value calculation in the event of certain transactions, which includes a floor on volatility utilized in the value calculation at
As of both March 31, 2025 and December 31, 2024, there were approximately
Series B Warrants
On May 10, 2024, pursuant to the Series B Warrant Agreement, the Company issued Series B Warrants to Pure Plastic to purchase an aggregate of
At any time following
The Series B Warrant Agreement provides for a Black-Scholes value calculation in the event of certain transactions, which includes a floor on volatility utilized in the value calculation at
As of both March 31, 2025 and December 31, 2024, there were approximately
Series C Warrants
On September 13, 2024, pursuant to the Subscription Agreements, the Company issued Series C Warrants to purchase an aggregate of
At any time following
30
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
The Series C Warrant provides for a Black-Scholes value calculation in the event of certain transactions, which includes a floor on volatility utilized in the value calculation at
As of both March 31, 2025 and December 31, 2024, there were
Warrant (benefit)/expense recognized for each period is presented in the following table:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
RTI Warrants |
|
$ |
( |
) |
|
$ |
|
|
Private placement warrants |
|
|
( |
) |
|
|
|
|
Series A Warrants |
|
|
( |
) |
|
|
|
|
Series B Warrants |
|
|
( |
) |
|
|
|
|
Series C Warrants |
|
|
( |
) |
|
|
|
|
Total warrant (benefit) expense |
|
$ |
( |
) |
|
$ |
|
|
NOTE 7 – NET EARNINGS/(LOSS) PER SHARE
The Company follows the two-class method when computing net earnings/(loss) per common share when shares are issued that meet the definition of participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The two-class method also requires losses for the period to be allocated between common and participating securities based on their respective rights if the participating security contractually participates in losses. As holders of participating securities do not have a contractual obligation to fund losses, undistributed net losses are not allocated to nonvested restricted stock for purposes of the loss per share calculation.
Presented in the table below is a reconciliation of the numerator and denominator for the basic and diluted earnings per share ("EPS") calculations for the three months ended March 31, 2025 and 2024:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands, except per share data) |
|
2025 |
|
|
2024 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net income/(loss) attributable to common shareholders |
|
$ |
|
|
$ |
( |
) |
|
Denominator: |
|
|
|
|
|
|
||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
||
Net earnings/(loss) per share attributable to common stockholder, basic |
|
$ |
|
|
$ |
( |
) |
|
31
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Presented in the table below is a reconciliation of the numerator and denominator for the diluted EPS calculations for the three months ended March 31, 2025 and 2024:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands, except per share data) |
|
2025 |
|
|
2024 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net earnings/(loss) attributable to PCT |
|
$ |
|
|
$ |
( |
) |
|
Net earnings/(loss) attributable to common shareholders |
|
$ |
|
|
$ |
( |
) |
|
Denominator: |
|
|
|
|
|
|
||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
||
Add common equivalent shares from equity awards |
|
|
|
|
|
|
||
Weighted average common shares outstanding, diluted |
|
|
|
|
|
|
||
Net earnings/(loss) per share attributable to common stockholder, diluted |
|
$ |
|
|
$ |
( |
) |
|
Certain outstanding common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented as including them would have been anti-dilutive.
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Anti-dilutive shares |
|
|
|
|
|
|
||
Warrants, vested not exercised |
|
|
|
|
|
|
||
Stock options, vested not exercised |
|
|
|
|
|
|
||
RSU, non-vested |
|
|
|
|
|
|
||
PSU, non-vested |
|
|
|
|
|
|
||
Contingently - issuable shares to Legacy PCT unitholders |
|
|
|
|
|
|
||
Shares issuable upon conversion of Green Convertible Notes |
|
|
|
|
|
|
||
Total anti-dilutive shares |
|
|
|
|
|
|
||
NOTE 8 - INVENTORY
The Company's inventory is as follows:
(in thousands) |
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
32
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
NOTE 9 – PROPERTY, PLANT AND EQUIPMENT
Presented in the table below are the major classes of property, plant and equipment by category as of the below dates:
|
|
March 31, 2025 |
|
|||||||||
(in thousands) |
|
Cost |
|
|
Accumulated |
|
|
Net Book |
|
|||
Building |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Machinery and equipment |
|
|
|
|
|
|
|
|
|
|||
Leasehold improvements |
|
|
|
|
|
|
|
|
|
|||
Fixtures and furnishings |
|
|
|
|
|
|
|
|
|
|||
Land improvements |
|
|
|
|
|
|
|
|
|
|||
Land |
|
|
|
|
|
|
|
|
|
|||
Construction in process |
|
|
|
|
|
|
|
|
|
|||
Total property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
December 31, 2024 |
|
|||||||||
(in thousands) |
|
Cost |
|
|
Accumulated |
|
|
Net Book |
|
|||
Building |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Machinery and equipment |
|
|
|
|
|
|
|
|
|
|||
Leasehold improvements |
|
|
|
|
|
|
|
|
|
|||
Fixtures and furnishings |
|
|
|
|
|
|
|
|
|
|||
Land improvements |
|
|
|
|
|
|
|
|
|
|||
Land |
|
|
|
|
|
|
|
|
|
|||
Construction in process |
|
|
|
|
|
|
|
|
|
|||
Total property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Depreciation expense is recorded in the Condensed Consolidated Statements of Comprehensive Income/(Loss) as follows:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Cost of operations |
|
$ |
|
|
$ |
|
||
Research and development expense |
|
|
|
|
|
|
||
Selling, general, and administrative expense |
|
|
|
|
|
|
||
Total depreciation expense |
|
$ |
|
|
$ |
|
||
NOTE 10 - INCOME TAXES
The Company has determined that any net deferred tax assets are not more likely than not to be realized in the future, and a full valuation allowance is required. In addition, the Company has determined that any current forecasted operations would result in federal and state income tax losses that are also not more likely than not to be realized. As a result, for both periods ended March 31, 2025 and 2024, the Company has reported tax expense of $
33
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, and fair value is determined through the use of models or other valuation methodologies.
Level 3 - Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation.
Assets and liabilities measured and recorded at Fair Value on a recurring basis
As of March 31, 2025 and December 31, 2024, the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||||||||||
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Restricted Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Restricted cash equivalents - current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Restricted cash equivalents - noncurrent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Put option liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Warrant liability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Private warrants - liability classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RTI warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Series A warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Series B warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Series C warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total warrant liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
34
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
As of March 31, 2025 and December 31, 2024, the Company's financial liabilities for instruments not remeasured at fair value on a recurring basis within the fair value hierarchy are as follows:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||||||||||
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Green Convertible Notes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Revenue bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Related party bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Third-party bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
For the instruments classified as Level 3, significant changes in any of the significant unobservable inputs in isolation would not result in a materially different fair value estimate. The fair value of the liabilities above is derived from the trading price of the Company's publicly traded bonds on the last trading day of the fiscal quarter. The Company's publicly traded bonds are thinly traded and, as such, the Company has deemed the input as an unobservable input. Since each of the instruments classified as Level 3 are being valued using similar inputs, a significant change that would impact expected volatility or the market price of PCT's Common Stock could result in a material change to the total combined value of these instruments. An increase in one or both of these inputs would result in a higher assessed value for each instrument.
Measurement of the Private Warrants
The private warrants are measured at fair value on a recurring basis using a Black-Scholes model. The private warrants are classified as Level 3 and were valued using the following assumptions:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Expected annual dividend yield |
|
|
% |
|
|
% |
||
Expected volatility |
|
|
% |
|
|
% |
||
Risk-free rate of return |
|
|
% |
|
|
% |
||
Expected option term (years) |
|
|
|
|
|
|
||
The expected term of the warrants granted is determined based on the duration of time the warrants are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the implied volatility calculated for the Company’s public warrants, which have similar characteristics to the private warrants. The dividend yield on the Company’s warrants is assumed to be
A summary of the private warrants activity from December 31, 2024 to March 31, 2025 is as follows:
(in thousands) |
|
Fair Value |
|
|
Balance, December 31, 2024 |
|
$ |
|
|
Change in fair value |
|
|
( |
) |
Balance, March 31, 2025 |
|
$ |
|
|
Refer to Note 6 – Warrants for further information.
Measurement of the RTI warrants
35
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
On January 16, 2025, RTI exercised their outstanding warrants. The Company received $
|
|
|
|
December 31, 2024 |
|
|
Expected annual dividend yield |
|
|
|
|
% |
|
Expected volatility |
|
|
|
|
% |
|
Risk-free rate of return |
|
|
|
|
% |
|
Expected option term (years) |
|
|
|
|
|
|
The expected term of the warrants granted was determined based on the duration of time the warrants were expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility was calculated based on the specific volatility of PCT’s publicly-traded common stock. The dividend yield on the Company’s warrants was assumed to be
A summary of the RTI warrants activity
(in thousands) |
|
Fair Value |
|
|
Balance, December 31, 2024 |
|
$ |
|
|
Change in fair value |
|
|
( |
) |
Exercise of warrant |
|
|
( |
) |
Balance, March 31, 2025 |
|
$ |
|
|
Measurement of the Series A Warrants
The Series A Warrants meet the definition of derivative instruments and are measured at fair value on a recurring basis using the market price of the Company’s publicly traded warrants, with changes in fair value recorded in current earnings. The Company has determined the publicly traded warrants to be an appropriate proxy to value the Series A Warrants as both warrants have similar redemption features and the same exercise price. The Series A Warrants are classified as Level 2 for both initial measurement at issuance and subsequent measurement each period.
Measurement of the Series B Warrants
The Series B Warrants meet the definition of derivative instruments and are measured at fair value on a recurring basis.
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Expected annual dividend yield |
|
|
% |
|
|
% |
||
Expected volatility |
|
|
% |
|
|
% |
||
Risk-free rate of return |
|
|
% |
|
|
% |
||
Expected option term (years) |
|
|
|
|
|
|
||
The expected term of the warrants granted is determined based on the duration of time the warrants are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the valuation date. The expected volatility is based on the implied volatility calculated for the Company’s public warrants, which have similar characteristics to the Series B Warrants. The dividend yield on the Company’s warrants is assumed to be
36
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
the Company has not historically paid dividends. The fair value of the underlying Company shares was determined using the Monte Carlo simulation.
A summary of the Series B warrants activity
(in thousands) |
|
Fair Value |
|
|
Balance, December 31, 2024 |
|
$ |
|
|
Change in fair value |
|
|
( |
) |
Balance, March 31, 2025 |
|
$ |
|
|
Measurement of the Series C Warrants
The Series C Warrants meet the definition of derivative instruments and are measured at fair value on a recurring basis.
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Expected annual dividend yield |
|
|
% |
|
|
% |
||
Expected volatility |
|
|
% |
|
|
% |
||
Risk-free rate of return |
|
|
% |
|
|
% |
||
Expected option term (years) |
|
|
|
|
|
|
||
The expected term of the warrants granted is determined based on the duration of time the warrants are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the valuation date. The expected volatility is based on the implied volatility calculated for the Company’s public warrants, which have similar characteristics to the Series B Warrants. The dividend yield on the Company’s warrants is assumed to be
(in thousands) |
|
Fair Value |
|
|
Balance, December 31, 2024 |
|
$ |
|
|
Change in fair value |
|
|
( |
) |
Balance, March 31, 2025 |
|
$ |
|
|
Measurement of the Put Option Liability
The Put Option liability meets the definition of a derivative instrument and is measured at fair value on a recurring basis.
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Risk-free rate of return |
|
|
% |
|
|
% |
||
Credit spread |
|
|
% |
|
|
% |
||
37
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
(in thousands) |
|
Fair Value |
|
|
Balance, December 31, 2024 |
|
$ |
|
|
Change in fair value |
|
|
( |
) |
Balance, March 31, 2025 |
|
$ |
|
|
In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to fair value measurements.
The Company records cash and cash equivalents and accounts payable at cost, which approximates fair value due to their short-term nature or stated rates. The Company records debt at cost.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Financial Assurance
On March 14, 2024, the Company renewed a surety bond in the amount of $
The surety bond will expire at the earlier of satisfaction of the obligations, termination of the related vendor contract, or
Legal Proceedings
The Company is subject to legal and regulatory actions that arise from time to time in the ordinary course of business. The assessment as to whether a loss is probable or reasonably possible, and as to whether such loss or a range of such losses is estimable, often involves significant judgment about future events, and the outcome of litigation is inherently uncertain. Other than as described below, there is no material pending or threatened litigation against the Company that remains outstanding as of March 31, 2025.
Shareholder Securities Litigation
On September 29, 2023, Jay Southgate, a purported shareholder, filed a complaint in the U.S. District Court for the Southern District of New York against PCT, and certain senior members of management (“Individual Southgate Defendants”), asserting violations of federal securities laws under Section 10(b) and Section 20(a) of the Exchange Act.
On April 5, 2024, plaintiffs in the Southgate matter filed an amended complaint (“Amended Southgate Complaint”), in which the plaintiffs allege the Company and the Individual Southgate Defendants violated Section 10(b) and Section 20(a) of the Exchange Act. The Amended Southgate Complaint alleges that beginning in April 2023 through December 2023, the Company and the Individual Southgate Defendants made misleading and inaccurate statements and omissions regarding the operations at the Ironton Facility, PCT’s ability to meet certain milestones and alleged issues with certain third-party contractors. Following briefings filed by the parties, on December 20, 2024, the Court granted the Defendants' motion to dismiss the Amended Southgate Complaint without prejudice, permitting the plaintiff to file a motion to amend the complaint no later than January 10, 2025.
38
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Han, Ayers, and Brunson Derivative Litigation
On November 3, 2021, Byung-Gook Han, a purported PCT shareholder, derivatively and purportedly on behalf of PCT, filed a shareholder derivative action in the United States District Court for the District of Delaware (Byung-Gook Han v. Otworth et. al., Case No. 1:21-cv-01569-UNA) against certain senior members of PCT’s management, PCT’s directors and Byron Roth, who was subsequently dismissed (collectively, the “Individual Han Defendants”), alleging violations of Section 20(a) of the Exchange Act and breaches of fiduciary duties and bringing claims for unjust enrichment and waste of corporate assets (“Han Derivative Lawsuit").
On January 27, 2022, Patrick Ayers, a purported PCT shareholder, derivatively and purportedly on behalf of PCT, filed a shareholder derivative action in the United States District Court of the District of Delaware, captioned Patrick Ayers v. Otworth et. al., Case No. 1:22-cv-00110, against certain members of PCT’s management, PCT’s directors and others (collectively, the “Individual Ayers Defendants”), alleging violations of Section 20(a) of the Exchange Act and breaches of fiduciary duties, as well as claims for unjust enrichment, gross mismanagement, contribution, and indemnification (“Ayers Derivative Lawsuit").
The Company and the Individual Ayers and Han Defendants (collectively, the “Individual Derivative Defendants”) filed a joint stipulation to consolidate the related derivative actions on June 26, 2023. The court granted the motion to consolidate the derivative actions on June 27, 2023, and ordered the Consolidated Derivative Action to be captioned In re: PureCycle Technologies, Inc. Derivative Litigation, Lead Case No. 21-1569-RGA (D. Del.) (“Consolidated Derivative Litigation”).
On February 23, 2024, Ayers filed an amended derivative complaint under seal. The Consolidated Amended Derivative Complaint generally alleges that the Individual Derivative Defendants made materially false and misleading statements and omissions in press releases, webinars and other public filings regarding PCT’s business, the technology, PCT’s prospects, the background and experience of the Individual Derivative Defendants, PCT’s internal controls, and various production issues and delays. The Consolidated Amended Derivative Complaint seeks unspecified monetary damages, reform of the corporate governance and internal procedures, unspecified restitution from the Individual Han Defendants, and costs and fees associated with bringing the action.
On March 29, 2024, John Brunson, a purported Company shareholder, and on behalf of whom the February 2023 Delaware 220 demand referenced below was issued to the Company, derivatively and purportedly on behalf of PCT, filed a shareholder derivative action under seal in the Court of Chancery in the State of Delaware, captioned John Brunson v. Otworth et. al., against certain members of PCT’s management, PCT’s directors and others (collectively, the “Individual Brunson Defendants”), alleging breaches of fiduciary duties, aiding and abetting breaches of fiduciary duty, corporate waste, and unjust enrichment (“Brunson Derivative Lawsuit"). The Brunson Derivative Lawsuit generally contains similar allegations as contained in Consolidated Derivative Amended Derivative Complaint, as well as allegations regarding undisclosed operational risks, production issues and delays, persistent failure to remediate known material deficiencies, including inadequate staffing, lack of segregation of duties, unfamiliarity with financial reporting requirements, and lack of accounting resources, leading to revisions of prior financial statements.
On May 7, 2024, the Company entered into a memorandum of understanding agreement to settle the Consolidated Derivative Litigation, the Brunson Derivative Lawsuit, and certain shareholder demand letters described below under the heading Other Matters, excluding the demand issued by Selim Piot (the “Settling Demand Letters”), including demands under Delaware Code Section 220 and/or investigation demands (the “Derivative Settlement”).
39
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
On July 17, 2024, the parties executed a Stipulation of Settlement. Under the proposed terms of the Stipulation in the Derivative Settlement, all claims shall be settled in exchange for certain corporate therapeutics and a monetary component of $
In the future, the Company may become party to additional legal matters and claims arising in the ordinary course of business. While the Company is unable to predict the outcome of the above or future matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial position, results of operations, or cash flows.
Denham-Blythe Arbitration
On October 7, 2020, PCO, a subsidiary of the Company and Denham-Blythe Company, Inc. (“DB”) executed an Engineering, Procurement, and Construction Agreement for certain construction activities associated with the Ironton Facility (“EPC Contract”).
On June 16, 2023, following unsuccessful efforts at mediating various disputes over certain unapproved change orders and payment applications, DB filed a demand for binding arbitration (“Arbitration Demand”) with the American Arbitration Association (“AAA”), seeking approximately $
On August 30, 2023, DB filed a breach of contract claim against PCO and others in Lawrence County Ohio, alleging the same facts contained in its arbitration demand, as well as an action to foreclose on a lien filed in Lawrence County, Ohio. Concurrently DB requested the complaint be stayed pending the resolution of all issues in the arbitration.
On March 8, 2024, ISC Constructors, a DB subcontractor, filed an action in equity for unjust enrichment against PCO in Lawrence Co. Ohio Case # 240C000171. The lawsuit alleges $
40
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Recently PCO moved to stay the ISC lawsuit and consolidate it with the DB lawsuit, which is currently stayed. Discovery in the arbitration proceeding is ongoing.
PCO intends to vigorously defend itself against DB’s claims and to pursue recovery of damages resulting from DB’s failure to perform adequately under the EPC Contract. Given the stage of the arbitration, PCT cannot reasonably estimate at this time whether there will be any loss, or if there is a loss, the possible range of loss, that may result from the Arbitration Demand.
Other Matters
On February 3, 2023, the Company received a books and records demand pursuant to Section 220 of the Delaware General Corporation Law, from a purported stockholder of the Company, in connection with the stockholder’s investigation of, among other matters, potential breaches of fiduciary duty, mismanagement, self-dealing, corporate waste or other violations of law by the Company’s Board with respect to these matters. The Company is currently unable to predict the outcome of this matter.
On October 6, 2023 and October 27, 2023, the Company received
On April 25, 2024, the Company received a litigation demand letter from a purported shareholder, Selim Piot, requesting that the Board take action against certain officers and directors. On May 6, 2024, Mr. Piot served a books and records demand and initiated a derivative action in the Chancery Court of Delaware captioned Piot v. Bouck, et al., No. 2024-0475-NAC (Del. Ch.). On May 21, 2024, Mr. Piot served another books and records demand. The claims asserted in Mr. Piot’s demand letters and derivative action are substantially similar to those asserted in the Consolidated Derivative Litigation and Brunson Derivative Lawsuits and the Demand Letters. If the Court grants final approval of the Derivative Settlement referenced above, the Company intends to seek dismissal of the Piot complaint. The Company is currently unable to predict the outcome of this matter.
NOTE 13 - SUBSEQUENT EVENTS
In connection with the preparation of the condensed consolidated financial statements for the period ended March 31, 2025, management has evaluated events through May 7, 2025 to determine whether any events required recognition or disclosure in the condensed consolidated financial statements.
On April 11, 2025, the Company entered into an amendment to extend the maturity of its Revolving Credit Facility to September 30, 2026. Refer to Note 3 - Long-term Debt and Bonds Payable for further information.
On April 11, 2025, the Company entered into a side letter agreement with certain holders of the Series A Warrants to forbear the Company's exercise of its redemption rights with respect to those certain holders' Series A Warrants. As a consequence of such side letter, the Company is unable to redeem the Series A Warrants for any holder of the Series A Warrants.
41
PureCycle Technologies, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
During April 2025, the Company sold $
42
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements about the financial condition, results of operations, earnings outlook and prospects of PureCycle Technologies, Inc. (“PCT”). Forward-looking statements generally relate to future events or PCT’s future financial or operating performance and may refer to projections and forecasts. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions (or the negative versions of such words or expressions), but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on the current expectations of the management of PCT and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of this Quarterly Report on Form 10-Q. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section of PCT’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Annual Report on Form 10-K”) entitled “Risk Factors,” those discussed and identified in other public filings made with the U.S. Securities and Exchange Commission (the “SEC”) by PCT and the following:
43
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
PCT undertakes no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
44
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
Should one or more of these risks or uncertainties materialize or should any of the assumptions made prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events.
45
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
The following discussion and analysis provides information that PCT’s management believes is relevant to an assessment and understanding of PCT’s interim condensed consolidated results of operations and financial condition. The discussion should be read together with the audited consolidated financial statements and the accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our most recent Annual Report on Form 10-K, as well as the unaudited interim condensed consolidated financial statements, together with related notes thereto, included elsewhere in this Quarterly Report on Form 10-Q. This discussion may contain forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” and “our,” are intended to mean the business and operations of PCT and its consolidated subsidiaries.
Overview
We are a Florida-based corporation focused on commercializing a patented dissolution recycling technology to physically separate the polymer from other plastics, color, and contaminants (the “Technology”), originally developed by P&G, for restoring waste polypropylene into resin, called PureFive™ resin, which has similar properties and applicability for reuse as virgin polypropylene. PCT has a global license for the Technology from P&G, which was amended during 2025 to permanently waive the possible clawback of our exclusivity for plants located in North America and extend the time in which our plants must begin construction and commence sales in other regions to avoid a clawback of exclusivity under the license agreement. In April 2023, we certified the Ironton Facility as mechanically complete. We expect to have capacity of approximately 107 million pounds per year when fully operational. Commissioning activities are ongoing, but the plant is not yet operating at the expected full capacity. Our goal is to create an important new segment of the global polypropylene market that will assist multinational entities in meeting their sustainability goals, providing consumers with polypropylene-based products that are sustainable, and reducing overall polypropylene waste in the world’s landfills and oceans.
PCT’s process includes the following steps:
The Feedstock Evaluation Unit
The Feedstock Evaluation Unit ("FEU") is an 11,000 square foot facility located adjacent to the commercial line at the Ironton Facility with over 1 mile of stainless-steel piping. The facility was completed in July 2019 and has been
46
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
producing PureFive™ resin since that time. The FEU is considered a pilot scale replica of the larger commercial line at the Ironton Facility.
The Ironton Facility
Located on the same site as the FEU, we commenced construction in October 2020 of our first commercial-scale plant, the Ironton Facility. We commenced commissioning activities at the Ironton Facility in April 2023, and later in 2023, we achieved mechanical completion of the plant and commenced pellet production from post-industrial and post-consumer materials. The Ironton Facility is expected to have PureFive™ resin capacity of approximately 107 million pounds per year when fully operational. While the facility is currently operational, we are pacing production with the level of anticipated commercial sales, while working on improving the operating rates, reliability and product quality. During 2024, we initiated compounding operations to blend our resin with either post-industrial recycled material or virgin polypropylene, which is expected to improve product consistency and accelerate the product delivery to customers. We are currently focused on customer sampling and qualifications and believe that this will lead to meaningful future sales.
During the first quarter of 2025, we reported our first quarterly revenues of approximately $1.6 million. Numerous customer trials are on-going and are expected to lead to higher future revenues; however, there is uncertainty as to the success or the timing of future orders from any trials.
The Research and Development Lab
The lease for our research and development lab in Durham, North Carolina commenced in 2023 and the facility opened in 2024. The lab is instrumental in developing cutting-edge analytical techniques to characterize polymer-solvent interaction in supercritical fluids, advancing fundamental process understanding to target hard to recycle polypropylene materials, generating insights into process modifications that drive energy reduction and capital expenditure reductions for future plant sites, leveraging research and development analytical techniques and expertise to allow industries with traditionally low recycling rates to adopt recycled polypropylene material, and supporting zero-waste efforts by engaging third parties to utilize byproducts, including polyethylene and other materials.
The Augusta Facility
In July 2021, we reached an agreement with the Augusta Economic Development Authority (“AEDA”) to build our first U.S. facility with multiple lines for both Feed PreP and purification in Augusta, Georgia (the “Augusta Facility”). We expect the approximately 200-acre location to eventually include up to eight production lines, which are expected to collectively have PureFive™ resin production capacity of approximately 1 billion pounds per year. When fully operational, each purification line at the Augusta Facility is expected to have annual production capacity of approximately 130 million pounds of PCT’s PureFive™ resin. We have allocated 40% of the Augusta Facility output for Lines 1 and 2 to existing customers and expect that additional offtake agreements will continue to be negotiated.
On June 30, 2023, we executed an Economic Development Agreement (“EDA”) with the AEDA related to our plans to construct the Augusta Facility. Pursuant to the AEDA, we expect to receive certain property tax abatement benefits as well as certain other incentives, including site infrastructure development assistance (“Incentive Benefits”). In order to receive the Incentive Benefits under Phase One (as defined below) of the Augusta Project, we will be obligated to create 82 full-time jobs with investments of at least $440.0 million no later than December 31, 2026. If we elect to activate the second phase of the Augusta Project, we will be required to create an additional 25 full-time jobs and investments of $295.0 million no later than December 31, 2028. To the extent we fail to achieve an average of 80% of the jobs and investment commitments in any year over the 20-years of each phase, we will be
47
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
required to make a repayment to the AEDA of a pro rata portion of the total value of the Incentive Benefits we received in such year.
Also on June 30, 2023, we entered into a series of agreements with the AEDA to construct phase one (“Phase One”) of the Augusta Facility. We are leasing 150 acres of land (“Real Property”) owned by the AEDA and will construct buildings, building equipment, and other structures (the “Improvements”) on the land. We will also acquire and install the necessary processing, warehousing, and other equipment, as well as conveyors and pipelines (the “Equipment”, together with the Real Property and the Improvements, the “Augusta Project”). The Improvements and Equipment will be transferred to the AEDA and leased back to us. We anticipate that the first portion of Phase One will consist of one purification line. As noted above, construction of the first purification line must be completed by December 31, 2026.
The legal sale-leaseback structure provides the Incentive Benefits to us as lessee of the Augusta Project. We will remain the owner of the Improvements and Equipment for accounting purposes during the term of the lease as we will have the right to acquire title to the Augusta Project for a nominal amount during the term and at the conclusion of the arrangement, which has an initial expiration date in 2044. The payments we make to the AEDA during the term of the arrangement are not otherwise expected to be material.
In November 2024, we commenced early works construction activities including site clearing and grading. When early works are successfully completed, expected next steps should include underground utility installation, piling, and foundations. Pursuant to the EDA, we must continue construction progress on the first purification line under the first phase of the Augusta Project during 2025 or risk losing certain future Incentive Benefits. While we believe we have satisfied the contractual obligations regarding financing and construction of Phase One to date, the AEDA believes that it could seek to terminate our lease if we do not demonstrate further progress on Phase One. Market conditions remain challenging and have created uncertainty as to the timing or likelihood of success of the currently anticipated project financing for the Augusta Facility. As a result, we are currently pursuing various structures for project financing of the Augusta Facility. While we remain confident in our ability to finance the Augusta Facility, we are limiting our expenses and adjusting our timeline in light of this uncertainty. If we are unable to raise additional debt or equity, when desired, or on terms favorable to us, our business, financial condition, and results of operations would be adversely affected.
Feedstock Pricing
We see a robust pipeline of demand for our recycled polypropylene and we are seeing market acceptance of our “Feedstock+” pricing model for our PureFive™ resin. Our Feedstock+ pricing model divides the market cost of feedstock by a set yield-loss and adds a fixed price, which effectively passes on the cost of feedstock and reduces the risk of our operating margin volatility.
For the Ironton Facility, our feedstock price was linked, in part, to changes in the Chemical Market Analysis, the index for virgin polypropylene, and a price schedule that contained a fixed, collared price around an index price range, which was further adjusted based on the percentage of polypropylene in the feedstock supplied. For the Augusta Facility and future purification facilities, we plan to link the feedstock price, in part, to the price of a #5 plastic bale of polypropylene as reported by recyclingmarkets.net (“Feedstock Market Pricing”). We will procure both feedstock in line with Feedstock Market Pricing as well as low value feedstocks that we can process, below Feedstock Market Pricing for the Augusta Facility.
PreP Facilities
We have installed a feedstock processing system with advanced sorting capabilities that can handle various types of plastics in addition to polypropylene (designated as #5 plastic). Our enhanced sorting should allow us to process
48
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
plastic bales between #1 and #7. Our Feed PreP facilities extract polypropylene used in our purification process, while the non-polypropylene feed will be sorted, baled, and subsequently sold on the open market.
We have built a Feed PreP facility in Denver, Pennsylvania ("Denver Facility"), which began operating in October 2024, to provide the required mix and quality of feedstock necessary to meet our offtake requirements at the Ironton Facility.
In conjunction with the Denver Facility, we also plan to build and operate Feed PreP facilities in locations geographically near the feed sources to optimize our supply chain economics. During the third quarter of 2022, we experienced challenges obtaining the necessary water and sewer permits to construct our first planned Feed PreP facility in Central Florida. We are currently pursuing legal remedies with regard to its obligations for the remaining 8 years of its 11-year lease agreement for the Central Florida facility. We are also evaluating alternative preprocessing sites in other locations.
Letter of No Objection Submission and the Granting of FDA Food Packaging Clearances for Certain Feedstocks
On September 10, 2021, we filed for a FDA LNO for Conditions of Use A – H. Conditions of Use describe the temperature and duration at which a material should be tested to simulate the way the material is intended to be used. Conditions of Use C – H address many consumer product packaging requirements, including applications for hot filled and pasteurized, as well as room temperature, refrigerated and frozen applications. Generally speaking, Conditions of Use A and B relate to extreme temperature applications. Our LNO submission also defines the feedstock sources for our planned commercial recycling process, and this LNO submission pertained to (i) food grade post-industrial recycled feedstocks and (ii) food grade curbside post-consumer recycled feedstocks.
On September 6, 2022, we received two separate notifications from the FDA with respect to the following two feedstock sources:
(i) Food grade post-industrial recycled feedstocks: an FDA LNO for approving Conditions of Use A – H; and,
(ii) Food-grade post-consumer recycled feedstock from stadiums: an FDA LNO for Conditions of Use E – G.
On June 11, 2024, we received an additional LNO from the FDA, which expands upon the previous LNO and allows use of our PureFive™ resin (to the extent made from food grade post-consumer recycled material) in contact with all food types under FDA's Conditions of Use A through H.
Our FDA food contact grades are capable of being used for all food types per the conditions of use listed and per all applicable authorizations in the food contact regulations listed in the 21 CFR (Code of Federal Regulations, Title 21).
We are conducting additional testing and plan to make further LNO submissions for additional post-consumer recycled feedstock sources and expanded Conditions of Use.
Future Expansion
On January 17, 2023, we announced our first European purification facility, which is planned to be in Antwerp, Belgium. We are also planning to expand our production capabilities into Asia. Future expansion is dependent on successful completion of project financing.
49
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
Components of Results of Operations
Revenue
We reported approximately $1.6 million in revenues through the first three months of 2025, and have not yet reached significant continuous operational volumes at the Ironton Facility or significant revenue generation.
Cost of Operations
Operating expenses to date have consisted mainly of personnel costs (including wages, salaries and benefits) and other costs directly related to operations at our operating facilities, including rent, depreciation, repairs and maintenance, utilities and supplies. Costs attributable to the design and development of the Ironton Facility, Augusta Facility, and Feed PreP facilities in Central Florida and Denver, Pennsylvania, are capitalized and, when placed in service, will be depreciated over the expected useful life of the asset. We expect our operating costs to increase as we continue to scale operations and increase headcount.
Research and Development Expense
Research and development expenses consist primarily of costs related to the development of the Technology, the facilities and equipment that will use the Technology to purify recycled polypropylene, and the processes needed to collect, sort, and prepare feedstock for purification. These include mainly personnel costs, depreciation for long-lived assets, third-party consulting costs, and the cost of various recycled waste. We expect our research and development expenses to increase for the foreseeable future as we increase investment in feedstock evaluation, including investment in new front-end feedstock mechanical separators to improve feedstock purity and increase the range of feedstocks PCT can process economically. In addition, we are increasing our in-house feedstock analytical capabilities, which will include additional supporting equipment and personnel.
Selling, General and Administrative Expense
Selling, general and administrative expenses consist primarily of personnel-related expenses for our corporate, executive, finance and other administrative functions and professional services, including legal, audit and accounting services. We expect our selling, general, and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our business.
50
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
Results of Operations
Comparison of three months ended March 31, 2025 and 2024
The following table summarizes our operating results for the three months ended March 31, 2025 and 2024:
|
|
Three Months Ended March 31, |
|
|
$ |
|
||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
Revenues |
|
$ |
1,580 |
|
|
$ |
— |
|
|
$ |
1,580 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Cost of operations |
|
|
23,282 |
|
|
|
21,194 |
|
|
|
2,088 |
|
Research and development |
|
|
1,541 |
|
|
|
1,831 |
|
|
|
(290 |
) |
Selling, general and |
|
|
14,478 |
|
|
|
15,957 |
|
|
|
(1,479 |
) |
Total operating expenses |
|
|
39,301 |
|
|
|
38,982 |
|
|
|
319 |
|
Operating loss |
|
|
(37,721 |
) |
|
|
(38,982 |
) |
|
|
1,261 |
|
Interest expense |
|
|
15,064 |
|
|
|
15,054 |
|
|
|
10 |
|
Interest income |
|
|
(379 |
) |
|
|
(3,602 |
) |
|
|
3,223 |
|
Change in fair value of warrants |
|
|
(56,669 |
) |
|
|
13,944 |
|
|
|
(70,613 |
) |
Loss on debt extinguishment |
|
|
— |
|
|
|
21,214 |
|
|
|
(21,214 |
) |
Other (income)/expense |
|
|
(4,569 |
) |
|
|
15 |
|
|
|
(4,584 |
) |
Net income/(loss) |
|
$ |
8,832 |
|
|
$ |
(85,607 |
) |
|
$ |
94,439 |
|
Revenues
The Company reported approximately $1.6 million in revenues during the first quarter ended March 31, 2025, representing its first period of meaningful operations and sales. The Company is currently in various stages of customer application trials, which is anticipated to generate revenue growth in future periods.
Cost of Operations
Total cost of operations increased approximately $2.1 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Cost of operations for the three months ended March 31, 2025 included approximately $1.7 million higher production-related costs due to the ramp-up in production that occurred during the quarter, $1.2 million higher employee-related expenses, $0.9 million in increased rent expense, and $0.3 million in higher equity-based compensation cost as a result of award issuances, partially offset by $1.8 million lower depreciation expense and $0.3 million in lower operational consulting costs.
Research and development expenses
Research and development expenses decreased approximately $0.3 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This decrease was primarily driven by $0.2 million of lower employee costs and $0.2 million of lower operational site costs, partially offset by $0.1 million of higher research and development activities.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased approximately $1.5 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This decrease was primarily driven by approximately $2.1 million of lower legal costs mostly as a result of settlement of outstanding cases in the prior year, partially offset by $0.5 million of higher equity-based compensation from new awards issued since the prior year.
51
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
Interest expense
Interest expense did not significantly change period over period.
Interest income
The decrease for the three-month period was primarily attributable to the liquidation of our available-for-sale investment portfolio earlier during 2024.
Change in fair value of warrants
During the three months ended March 31, 2025, the fair value of our liability-classified awards decreased approximately $56.7 million, primarily driven by a decrease in the underlying value of our common stock, combined with fewer warrants outstanding as a result of the exercise of the RTI warrants during the first quarter of 2025. During the three months ended March 31, 2024, the fair value of our liability-classified awards increased approximately $13.9 million mainly due to an increase in the underlying price of our common stock during the first quarter of 2024.
Change in Loss on Debt Extinguishment
The Company recorded a loss associated with the repurchase of the Revenue Bonds during the three months ended March 31, 2024. There was no similar transaction during the three months ended March 31, 2025.
Other (Income)/Expense
During the three months ended March 31, 2025, the fair value of the Series A Preferred Stock put option decreased by $3.1 million, resulting in a gain recorded in other income. Additionally, the Company recorded a net gain from insurance proceeds of approximately $1.3 million related to settlement of the shareholder derivative lawsuit, as disclosed in Note 12 - Commitments and Contingencies in the Notes to the Condensed Consolidation Financial Statements. These items were the primary drivers of the change from other expense for the three months ended March 31, 2024 to other income for the three months ended March 31, 2025.
Liquidity and Capital Resources
We commenced commercial operations in 2023 and to date have sold an insignificant amount of PureFiveTM resin and have yet to reach significant continuous operational volumes, though we did report our first quarterly revenues for the three months ended March 31, 2025. Our ongoing operations have, to date, been funded by a combination of equity financing through the issuance of units, common stock and preferred stock, and the issuance of various debt instruments. The following is a summary of the components of our current liquidity. As of March 31, 2025,
52
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
restricted cash consisted primarily of certain amounts required to support outstanding letters of credit and other collateral as well as initial construction commitments for the Augusta Facility.
(in thousands) |
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Cash |
|
$ |
22,482 |
|
|
$ |
15,683 |
|
|
|
|
|
|
|
|
||
Ironton Facility bond reserves |
|
|
3,152 |
|
|
|
3,120 |
|
Augusta construction escrow |
|
|
5,490 |
|
|
|
16,398 |
|
Letters of credit and other collateral |
|
|
6,338 |
|
|
|
6,310 |
|
Restricted Cash (current and noncurrent) |
|
|
14,980 |
|
|
|
25,828 |
|
|
|
|
|
|
|
|
||
Green Convertible Notes |
|
|
250,000 |
|
|
|
250,000 |
|
Revenue Bonds |
|
|
137,230 |
|
|
|
118,630 |
|
Equipment financing payable and other debt |
|
|
28,142 |
|
|
|
31,491 |
|
Less: discount and issuance costs |
|
|
(51,983 |
) |
|
|
(53,477 |
) |
Gross long-term debt and Related Party Note Payable |
|
$ |
363,389 |
|
|
$ |
346,644 |
|
As of March 31, 2025, we had approximately $22.5 million of cash and cash equivalents and approximately $15.0 million of restricted cash. We also have a $200.0 million revolving credit facility with Sylebra Capital (the “Revolving Credit Facility”) that is currently unused and expires on September 30, 2026, per a recent amendment described below.
Our Ironton facility is working on improving its commercial operating capabilities, including its operating rates, reliability, and product quality. During the first quarter of 2025, we reported our first quarterly revenues of approximately $1.6 million. Numerous customer trials are on-going and are expected to lead to higher future revenues; however, there is uncertainty as to the success or timing of future orders from any successful trials.
We believe that our current level of unrestricted liquidity is not sufficient to fund operations, outstanding commitments, and further our future growth plans. The conditions described above raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. See Note 2 - Summary of Significant Accounting Policies - Liquidity and Going Concern for further information.
On September 11, 2024, we entered into subscription agreements with certain investors pursuant to which we sold, in a private placement, approximately $90.0 million in the aggregate and before deducting fees and other estimated offering expenses of (i) Series A Preferred Stock, par value $0.001 per share ("Series A Preferred Stock"); (ii) Common Stock and (iii) Series C Warrants.
In an effort to alleviate these conditions, we are working to improve the operation of the Ironton Facility, and we continue to pursue commercialization of our products with potential customers. Meanwhile, on February 5, 2025, we entered into subscription agreements (the "Offering") with certain investors in a private placement for an aggregate of 4,091,293 shares of the Common Stock at a price of $8.0655 per share. The gross proceeds from the Offering were approximately $33.0 million before deducting fees and other estimated offering expenses. Refer to Note 4 - Common and Preferred Stock Transactions in the notes to the condensed consolidated financial statements included in the Quarterly Report on Form 10-Q for further information. Further, on March 31, 2025, we sold $18.6 million in aggregate par amount of Series A bonds owned by PCT LLC at a purchase price of $880 per $1,000 principal amount under a bond purchase agreement for net proceeds of $16.4 million, and during April 2025, we sold $11.8 million in aggregate par amount of Series A Bonds owned by PCT LLC at a purchase price of $880 per $1,000 principal amount under a bond purchase agreement for gross proceeds of $10.4 million. Refer to Note 3 -
53
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
Long-term Debt and Bonds Payable in the notes to the condensed consolidated financial statements included in the Quarterly Report on Form 10-Q for further information. As of March 31, 2025, there were $99.0 million of outstanding bonds that we intend to, and have the ability to, re-market based on the need for additional liquidity. The re-marketing process may require the addition of certain covenants to enhance the marketability of the purchased Bonds. The ability to re-market the purchased Bonds with any such additional new covenants would require a further amendment to, or waiver of, provisions included within the Revolving Credit Facility. In addition, we have a $200.0 million Revolving Credit Facility with Sylebra Capital that is currently unused and expires on September 30, 2026, as extended on April 11, 2025. Any borrowings under the Revolving Credit Facility would accrue interest at SOFR plus 17.5% as of March 31, 2025.
Our future capital requirements will depend on many factors, including the funding mechanism and construction schedule of additional facilities, funding needs to support other business opportunities, funding for general corporate purposes, debt service, and other challenges or unforeseen circumstances. As a low-revenue operating company, we continually review our cash outlays, pace of hiring, professional services and other expenditures, and capital commitments to proactively manage those needs in tandem with our available unrestricted cash balance. For future growth and investment, we expect to seek additional debt or equity financing from outside sources, which we may not be able to raise on terms favorable to us, or at all. If we are unable to raise additional debt or sell additional equity when desired, or if we are unable to manage our cash outflows, business, financial condition, and results of operations would be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we consummate an equity financing to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our common stock.
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. We do not have any off-balance sheet arrangements or interests in variable interest entities that would require consolidation. Note that while certain legally binding offtake arrangements have been entered into with customers, these arrangements are not unconditional and definite agreements subject only to customer closing conditions, and do not qualify as off-balance sheet arrangements required for disclosure.
Cash Flows
A summary of our cash flows for the periods indicated is as follows:
|
|
Three Months Ended March 31, |
|
|
$ |
|
||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
Net cash used in operating activities |
|
$ |
(38,868 |
) |
|
$ |
(39,178 |
) |
|
$ |
310 |
|
Net cash (used in)/provided by investing activities |
|
|
(15,004 |
) |
|
|
32,027 |
|
|
|
(47,031 |
) |
Net cash provided by/(used in) financing activities |
|
|
49,823 |
|
|
|
(255,423 |
) |
|
|
305,246 |
|
Cash and cash equivalents, beginning of period |
|
|
41,511 |
|
|
|
302,514 |
|
|
|
(261,003 |
) |
Cash and cash equivalents, end of period |
|
$ |
37,462 |
|
|
$ |
39,940 |
|
|
$ |
(2,478 |
) |
Cash Flows from Operating Activities
Net cash used in operating activities for the three months ended March 31, 2025 was relatively consistent with the comparable prior year period. The primary driver of the change was due to changes in working capital during each respective period.
54
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
Cash Flows from Investing Activities
During the three months ended March 31, 2025, we reported cash used in investing activities of approximately $15.0 million, which was entirely comprised of cash paid for capital expenditures during that period. During the three months ended March 31, 2024, we reported cash provided by investing activities of approximately $32.0 million, which is comprised of approximately $77.0 million of cash proceeds from the sale of debt securities, partially offset by the purchase of debt securities totaling $30.6 million and capital expenditures of $14.3 million. Capital expenditures remained relatively consistent as compared to the prior year. We sold all of our debt securities during 2024 and had no similar type transactions during 2025.
Cash Flows from Financing Activities
We reported net cash provided by financing activities of approximately $49.8 million during the three months ended March 31, 2025 as compared to net cash used in financing activities of approximately $255.4 million during the three months ended March 31, 2024. This change was primarily attributable to $253.2 million paid to purchase the outstanding Revenue Bonds during 2024, $33.2 million of proceeds from the issuance of common stock during 2025, $16.4 million of proceeds from the sale of Revenue Bonds during 2025, $5.4 million in proceeds from the exercise of the RTI warrants during 2025, and $1.1 million of debt issuance costs paid during 2024, partially offset by $1.1 million of higher payments to repurchase shares during 2025 and $2.9 million of higher other payments for financing activities during 2025.
Indebtedness
There have been no material changes regarding our indebtedness from the information we provided in our most recent Annual Report on Form 10-K, except as outlined in the information below. Refer to Note 3 - Long-Term Debt and Bonds Payable to the Notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for additional information regarding our outstanding indebtedness.
Revenue Bonds
See Note 3 – Long-term Debt and Bonds Payable to our unaudited condensed consolidated financial statements included in Part I, Item 1. "Financial Statements."
Revenue Bonds Issued to Related Party
See Note 3 – Long-term Debt and Bonds Payable to our unaudited condensed consolidated financial statements included in Part I, Item 1. "Financial Statements."
Sylebra Credit Facility
See Note 3 – Long-term Debt and Bonds Payable to our unaudited condensed consolidated financial statements included in Part I, Item 1. "Financial Statements."
Financial Assurance
See Note 3 – Long-term Debt and Bonds Payable to our unaudited condensed consolidated financial statements included in Part I, Item 1. "Financial Statements."
Critical Accounting Policies and Estimates
There have been no significant changes in our critical accounting policies and estimates from the information we provided in our most recent Annual Report on Form 10-K.
55
PureCycle Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — CONTINUED
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
56
PureCycle Technologies, Inc.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks as of March 31, 2025 does not differ materially from that included in our most recent Annual Report on Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including ensuring that such information is accumulated and communicated to management (including the principal executive and financial officers) as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of March 31, 2025 (the end of the period covered by this Quarterly Report on Form 10-Q).
Changes in Internal Control over Financial Reporting
There have been no changes during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
57
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
For a description of the legal proceedings pending against us, see “Legal Proceedings” in Note 12 - Commitments and Contingencies - to the Notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10‑Q.
In the future, we may become party to additional legal matters and claims arising in the ordinary course of business. While we are unable to predict the outcome of the above or future matters, we do not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on our overall financial position, results of operations, or cash flows.
Item 1A. Risk Factors
There have been no material changes from risk factors previously disclosed in our most recent Annual Report on Form 10-K in response to Part 1, Item 1A.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information with respect to the Company’s purchases of its common stock for the first quarter of 2025:
Period |
|
(a) Total number of shares (or units) purchased* |
|
|
(b) Average price paid per share (or unit)* |
|
|
(c) Total number |
|
|
(d) Maximum |
|
||||
January 1 to January 31 |
|
|
1,123 |
|
|
$ |
10.75 |
|
|
|
— |
|
|
$ |
— |
|
February 1 to February 28 |
|
|
85,718 |
|
|
|
9.83 |
|
|
|
— |
|
|
|
— |
|
March 1 to March 31 |
|
|
99,890 |
|
|
|
8.67 |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
186,731 |
|
|
$ |
9.22 |
|
|
|
— |
|
|
$ |
— |
|
* Shares withheld to cover tax withholding obligations under the net settlement provision upon vesting of restricted stock units.
58
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION — CONTINUED
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
None of our directors or officers
59
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION — CONTINUED
ITEM 6. EXHIBITS
Exhibit Number |
|
Description of Exhibit |
2.1 |
|
|
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
3.4 |
|
|
|
|
|
3.5 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
10.4 |
|
|
|
|
|
10.5 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
60
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION — CONTINUED
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.1 |
|
The following financial statements from PureCycle Technologies, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, formatted in Inline XBRL (eXtensible Business Reporting Language): |
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(i) Consolidated Balance Sheets as of March 31, 2025 (Condensed and Unaudited) and December 31, 2024. |
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(ii) Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three Months Ended March 31, 2025 and 2024. |
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(iii) Unaudited Condensed Consolidated Statements of Stockholders Equity for the Three Months Ended March 31, 2025 and 2024. |
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(iv) Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024. |
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(v) Notes to the Condensed Consolidated Financial Statements. |
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104.1 |
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Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
* Submitted electronically herewith.
** Certain identified information has been excluded from this exhibit pursuant to Rule 601(b)(10) of Regulation S-K because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential.
† Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules upon request by the Securities and Exchange Commission.
61
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION — CONTINUED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PURECYCLE TECHNOLOGIES, INC. |
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(Registrant) |
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By: |
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/s/ Dustin Olson |
Dustin Olson |
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Chief Executive Officer |
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(Principal Executive Officer) |
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By: |
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/s/ Jaime Vasquez |
Jaime Vasquez |
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Chief Financial Officer |
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(Principal Financial Officer) |
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Date: May 7, 2025 |
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62
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Dustin Olson, certify that:
Date: |
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May 7, 2025 |
By: |
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/s/ Dustin Olson |
Dustin Olson |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Jaime Vasquez, certify that:
Date: |
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May 7, 2025 |
By: |
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/s/ Jaime Vasquez |
Jaime Vasquez |
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Chief Financial Officer |
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(Principal Financial Officer) |
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Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PureCycle Technologies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2025 (the “Report”), Dustin Olson, Chief Executive Officer of the Company, certifies, to the best of his knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: May 7, 2025
|
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By: |
/s/ Dustin Olson |
Dustin Olson |
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Chief Executive Officer (Principal Executive Officer) |
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Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PureCycle Technologies, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2025 (the “Report”), Jaime Vasquez, Chief Financial Officer of the Company, certifies, to the best of his knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: May 7, 2025
By: |
/s/ Jaime Vasquez |
Jaime Vasquez |
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Chief Financial Officer |
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(Principal Financial Officer) |
|