UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2024
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: 001-40234
PureCycle Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
86-2293091 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
5950 Hazeltine National Drive, Suite 300
Orlando, Florida 32822
(877) 648-3565
(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:
Title of each class |
|
Trading Symbols |
|
Name of each exchange on which registered |
Common Stock, par value $0.001 per share |
|
PCT |
|
The Nasdaq Stock Market LLC |
Warrants, each exercisable for one share of common stock, $0.001 par value per share, at an exercise price of $11.50 per share |
|
PCTTW |
|
The Nasdaq Stock Market LLC |
Units, each consisting of one share of common stock, $0.001 par value per share, and three quarters of one warrant |
|
PCTTU |
|
The Nasdaq Stock Market LLC |
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. Yes ☒ No ☐
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). Yes ☒ No ☐
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.
Large accelerated filer |
☒ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
|
|
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 ☐ No ☒
As of May 3, 2024, there were approximately 164,630,907 shares of the registrant's common stock, par value $0.001 per share, outstanding.
1
PureCycle Technologies, Inc.
QUARTERLY REPORT on FORM 10-Q
TABLE OF CONTENTS
|
Page |
PART I - Financial Information |
|
|
|
Item 1. Financial Statements |
|
|
|
Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023 |
5 |
|
|
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three months ended March 31, 2024 and 2023 |
6 |
|
|
7 |
|
|
|
8 |
|
|
|
Notes to the Interim Condensed Consolidated Financial Statements |
9 |
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
35 |
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
46 |
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|
46 |
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|
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PART II - Other Information |
|
|
|
47 |
|
|
|
47 |
|
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
47 |
|
|
47 |
|
|
|
47 |
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|
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48 |
|
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50 |
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52 |
2
PureCycle Technologies, Inc.
PART I - FINANCIAL INFORMATION
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, 2023 (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:
3
PureCycle Technologies, Inc.
PART I - FINANCIAL INFORMATION — 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.
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.
4
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS |
|
|||||||
|
|
(Unaudited) |
|
|
|
|
||
(in thousands) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
CURRENT ASSETS |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
25,021 |
|
|
$ |
73,411 |
|
Debt securities available for sale |
|
|
2,187 |
|
|
|
48,226 |
|
Restricted cash – current |
|
|
7,566 |
|
|
|
25,692 |
|
Prepaid expenses and other current assets |
|
|
16,397 |
|
|
|
15,316 |
|
Total current assets |
|
|
51,171 |
|
|
|
162,645 |
|
Restricted cash – non-current |
|
|
7,353 |
|
|
|
203,411 |
|
Prepaid expenses and other non-current assets |
|
|
4,689 |
|
|
|
4,772 |
|
Operating lease right-of-use assets |
|
|
28,785 |
|
|
|
29,799 |
|
Property, plant and equipment, net |
|
|
642,017 |
|
|
|
638,746 |
|
TOTAL ASSETS |
|
$ |
734,015 |
|
|
$ |
1,039,373 |
|
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|||||||
|
|
|
|
|
|
|
||
CURRENT LIABILITIES |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
8,363 |
|
|
$ |
2,881 |
|
Accrued expenses |
|
|
29,406 |
|
|
|
35,391 |
|
Accrued interest |
|
|
2,597 |
|
|
|
8,190 |
|
Current portion of long-term debt |
|
|
3,204 |
|
|
|
9,148 |
|
Total current liabilities |
|
|
43,570 |
|
|
|
55,610 |
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
||
Deferred revenue |
|
|
5,000 |
|
|
|
5,000 |
|
Long-term debt, less current portion |
|
|
242,937 |
|
|
|
467,708 |
|
Related party note payable |
|
|
41,452 |
|
|
|
39,696 |
|
Warrant liability |
|
|
36,003 |
|
|
|
22,059 |
|
Operating lease right-of-use liabilities |
|
|
26,270 |
|
|
|
27,253 |
|
Other non-current liabilities |
|
|
1,944 |
|
|
|
1,811 |
|
TOTAL LIABILITIES |
|
$ |
397,176 |
|
|
$ |
619,137 |
|
|
|
|
|
|
|
|
||
COMMITMENT AND CONTINGENCIES |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
||
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Common shares - $0.001 par value, 250,000 shares authorized; 164,612 and 164,279 shares issued and outstanding as of March 31, 2024 and December 31, 2023 |
|
|
165 |
|
|
|
164 |
|
Preferred shares - $0.001 par value, 25,000 shares authorized; 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023 |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
766,519 |
|
|
|
764,344 |
|
Accumulated other comprehensive income (loss) |
|
|
2 |
|
|
|
(32 |
) |
Accumulated deficit |
|
|
(429,847 |
) |
|
|
(344,240 |
) |
TOTAL STOCKHOLDERS' EQUITY |
|
|
336,839 |
|
|
|
420,236 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
734,015 |
|
|
$ |
1,039,373 |
|
The accompanying notes are an integral part of these financial statements.
5
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
|
Three Months Ended March 31, |
|
|||||
|
2024 |
|
|
2023 |
|
||
(in thousands except per share data) |
|
|
|
|
|
||
Costs and expenses |
|
|
|
|
|
||
Operating costs |
$ |
21,194 |
|
|
$ |
7,372 |
|
Research and development |
|
1,831 |
|
|
|
1,754 |
|
Selling, general and administrative |
|
15,957 |
|
|
|
12,695 |
|
Total operating costs and expenses |
|
38,982 |
|
|
|
21,821 |
|
Interest expense |
|
15,054 |
|
|
|
657 |
|
Interest income |
|
(3,602 |
) |
|
|
(1,933 |
) |
Change in fair value of warrants |
|
13,944 |
|
|
|
4,835 |
|
Loss on debt extinguishment |
|
21,214 |
|
|
|
— |
|
Other expense |
|
15 |
|
|
|
462 |
|
Total other expense |
|
46,625 |
|
|
|
4,021 |
|
Net Loss |
$ |
(85,607 |
) |
|
$ |
(25,842 |
) |
Loss per share |
|
|
|
|
|
||
Basic |
$ |
(0.52 |
) |
|
$ |
(0.16 |
) |
Diluted |
$ |
(0.52 |
) |
|
$ |
(0.16 |
) |
Weighted average common shares |
|
|
|
|
|
||
Basic |
|
164,355 |
|
|
|
163,588 |
|
Diluted |
|
164,355 |
|
|
|
163,784 |
|
|
|
|
|
|
|
||
Other comprehensive income |
|
|
|
|
|
||
Unrealized gain on debt securities available for sale |
$ |
18 |
|
|
$ |
641 |
|
Cumulative translation adjustment |
|
16 |
|
|
|
— |
|
Total comprehensive loss |
$ |
(85,573 |
) |
|
$ |
(25,201 |
) |
The accompanying notes are an integral part of these financial statements.
6
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
For The Three Months Ended March 31, 2024 |
|
|||||||||||||||||||||
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(in thousands) |
|
Shares |
|
|
Amount |
|
|
Additional paid-in capital |
|
|
Accumulated other comprehensive (loss) income |
|
|
Accumulated deficit |
|
|
Total stockholders' equity |
|
||||||
Balance, December 31, 2023 |
|
|
164,279 |
|
|
$ |
164 |
|
|
$ |
764,344 |
|
|
$ |
(32 |
) |
|
$ |
(344,240 |
) |
|
$ |
420,236 |
|
Options exercised |
|
|
16 |
|
|
|
— |
|
|
|
92 |
|
|
|
— |
|
|
|
— |
|
|
|
92 |
|
Share repurchase |
|
|
(99 |
) |
|
|
— |
|
|
|
(598 |
) |
|
|
— |
|
|
|
— |
|
|
|
(598 |
) |
Equity based compensation |
|
|
416 |
|
|
|
1 |
|
|
|
2,681 |
|
|
|
— |
|
|
|
— |
|
|
|
2,682 |
|
Unrealized gain on available for sale debt securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
18 |
|
Cumulative translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
|
|
— |
|
|
|
16 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(85,607 |
) |
|
|
(85,607 |
) |
Balance, March 31, 2024 |
|
|
164,612 |
|
|
$ |
165 |
|
|
$ |
766,519 |
|
|
$ |
2 |
|
|
$ |
(429,847 |
) |
|
$ |
336,839 |
|
|
|
For The Three Months Ended March 31, 2023 |
|
|||||||||||||||||||||
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(in thousands) |
|
Shares |
|
|
Amount |
|
|
Additional paid-in capital |
|
|
Accumulated other comprehensive (loss) income |
|
|
Accumulated deficit |
|
|
Total stockholders' equity |
|
||||||
Balance, December 31, 2022 |
|
|
163,550 |
|
|
$ |
164 |
|
|
$ |
753,885 |
|
|
$ |
(641 |
) |
|
$ |
(242,525 |
) |
|
$ |
510,883 |
|
Share repurchase |
|
|
(48 |
) |
|
|
— |
|
|
|
(277 |
) |
|
|
— |
|
|
|
— |
|
|
|
(277 |
) |
Equity-based compensation |
|
|
169 |
|
|
|
— |
|
|
|
2,166 |
|
|
|
— |
|
|
|
— |
|
|
|
2,166 |
|
Unrealized gain on available for sale debt securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
641 |
|
|
|
— |
|
|
|
641 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,842 |
) |
|
|
(25,842 |
) |
Balance, March 31, 2023 |
|
|
163,671 |
|
|
$ |
164 |
|
|
$ |
755,774 |
|
|
$ |
— |
|
|
$ |
(268,367 |
) |
|
$ |
487,571 |
|
The accompanying notes are an integral part of these financial statements.
7
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three months ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
(85,607 |
) |
|
$ |
(25,842 |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
||
Equity-based compensation |
|
|
2,682 |
|
|
|
2,166 |
|
Change in fair value of warrants |
|
|
13,944 |
|
|
|
4,835 |
|
Depreciation expense |
|
|
9,256 |
|
|
|
1,294 |
|
Amortization of debt issuance costs and debt discounts |
|
|
2,538 |
|
|
|
265 |
|
Accretion of discount on debt securities |
|
|
(318 |
) |
|
|
(138 |
) |
Operating lease amortization expense |
|
|
767 |
|
|
|
926 |
|
Loss on extinguishment of debt |
|
|
21,214 |
|
|
|
— |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
(340 |
) |
|
|
(1,148 |
) |
Prepaid expenses and other non-current assets |
|
|
83 |
|
|
|
(174 |
) |
Accounts payable |
|
|
1,196 |
|
|
|
1,218 |
|
Accrued expenses |
|
|
214 |
|
|
|
2,116 |
|
Accrued interest |
|
|
(4,151 |
) |
|
|
324 |
|
Operating right-of-use liabilities |
|
|
(656 |
) |
|
|
(597 |
) |
Net cash used in operating activities |
|
$ |
(39,178 |
) |
|
$ |
(14,755 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchase of property, plant & equipment |
|
|
(14,348 |
) |
|
|
(46,632 |
) |
Purchase of debt securities, available for sale |
|
|
(30,586 |
) |
|
|
— |
|
Sale and maturity of debt securities, available for sale |
|
|
76,961 |
|
|
|
99,371 |
|
Net cash provided by investing activities |
|
$ |
32,027 |
|
|
$ |
52,739 |
|
Cash flows from financing activities |
|
|
|
|
|
|
||
Payment to purchase revenue bonds |
|
|
(253,230 |
) |
|
|
— |
|
Debt issuance costs |
|
|
(1,119 |
) |
|
|
(1,344 |
) |
Payments to repurchase shares |
|
|
(598 |
) |
|
|
(277 |
) |
Other payments for financing activities |
|
|
(476 |
) |
|
|
(11 |
) |
Net cash used in financing activities |
|
$ |
(255,423 |
) |
|
$ |
(1,632 |
) |
Net (decrease) increase in cash and restricted cash |
|
|
(262,574 |
) |
|
|
36,352 |
|
Cash and restricted cash, beginning of period |
|
|
302,514 |
|
|
|
227,523 |
|
Cash and restricted cash, end of period |
|
$ |
39,940 |
|
|
$ |
263,875 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Non-cash operating activities |
|
|
|
|
|
|
||
Interest paid during the period, net of capitalized interest |
|
|
16,383 |
|
|
|
— |
|
Non-cash investing activities |
|
|
|
|
|
|
||
Additions to property, plant, and equipment in accrued expenses |
|
|
15,656 |
|
|
|
30,809 |
|
Additions to property, plant, and equipment in accounts payable |
|
|
5,903 |
|
|
|
20,509 |
|
Additions to property, plant, and equipment in accrued interest |
|
|
— |
|
|
|
4,271 |
|
Non-cash financing activities |
|
|
|
|
|
|
||
PIK interest on related party note payable |
|
|
1,441 |
|
|
|
— |
|
Reconciliation of cash, cash equivalents reported in the consolidated balance sheet |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
25,021 |
|
|
$ |
38,381 |
|
Restricted cash and cash equivalents - current |
|
|
7,566 |
|
|
|
68,028 |
|
Restricted cash and cash equivalents - non-current |
|
|
7,353 |
|
|
|
157,466 |
|
Total cash, cash equivalents and restricted cash |
|
$ |
39,940 |
|
|
$ |
263,875 |
|
The accompanying notes are an integral part of these financial statements.
8
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION
Formation and Organization
PureCycle Technologies, Inc. (“PCT” or “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 ultra-pure recycled (“UPR”) 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 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.
Business Combination
On March 17, 2021, PureCycle 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 Parent Co, 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, units and warrants are now listed on the Nasdaq Capital Market (“NASDAQ”) under the symbols “PCT,” “PCTTU” and “PCTTW,” respectively.
Legacy PCT unitholders were to be issued up to 4.0 million additional shares of the Company’s common stock if certain conditions are met (“the Earnout”). The Legacy PCT unitholders were entitled to 2.0 million shares if, after 1 year after the Closing and prior to or as of the third anniversary of the Closing, the closing price of the common stock is greater than or equal to $18.00 over any 20 trading days within any 30-trading day period. The Company failed to achieve this milestone by March 17, 2024, and those shares have been forfeited and can no longer be earned by the Legacy PCT unitholders.
The Legacy PCT unitholders will be entitled to 2.0 million shares upon the Ironton Facility becoming operational, as certified by Leidos Engineering, LLC (“Leidos”), an independent engineering firm, in accordance with criteria established in agreements in connection with construction of the plant.
Unless the context otherwise requires, “Registrant,” “PureCycle,” “Company,” “PCT,” “we,” “us,” and “our” 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.
9
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Liquidity and Going Concern
The accompanying consolidated financial statements have been prepared assuming that PCT will continue as a going concern; however, the conditions described below raise substantial doubt about PCT’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 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 our current liquidity (in thousands):
|
|
As of |
|
|||||
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Cash and cash equivalents |
|
$ |
25,021 |
|
|
$ |
73,411 |
|
Debt securities available for sale |
|
|
2,187 |
|
|
|
48,226 |
|
|
|
|
|
|
|
|
||
Restricted Cash (current and non-current) |
|
$ |
14,919 |
|
|
$ |
229,103 |
|
|
|
|
|
|
|
|
||
Working capital |
|
$ |
7,601 |
|
|
$ |
107,035 |
|
Accumulated deficit |
|
$ |
(429,847 |
) |
|
$ |
(344,240 |
) |
|
|
|
|
|
|
|
||
|
|
For the three months ended |
|
|||||
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
||
Net loss |
|
$ |
(85,607 |
) |
|
$ |
(25,842 |
) |
As of March 31, 2024, PCT had $25.0 million of Cash and Cash Equivalents, Debt Securities Available for Sale of $2.2 million, and Restricted Cash of $14.9 million. PCT also has a $200.0 million revolving credit facility with Sylebra Capital (the “Revolving Credit Facility”) that is currently unused and expires on September 30, 2025.
PCT sold an immaterial amount of UPR resin in 2023 and through March 31, 2024. Due to intermittent mechanical challenges during the commissioning process, the Ironton Facility has not yet reached the point of producing meaningful volumes and on-spec product. While these mechanical issues are not uncommon for a first-of-its kind manufacturing facility, the downtime needed to correct these issues is a significant contributing factor to the delay of the Ironton Facility reaching the point of producing meaningful volumes and on-spec product. We expect the Ironton Facility to be fully operational later in 2024.
As of March 31, 2024, PCT anticipates that up to $12.5 million will be needed to complete the investment in the Ironton Facility, which relates to a performance guarantee payment due after successful completion of a performance testing milestone. PCT also has other capital commitments of approximately $47.1 million related to long-lead equipment and pre-construction work for the Augusta Facility, and $17.0 million for equipment and leases related to future Feed PreP and purification facilities, both in the U.S. and internationally. Moreover, there are interest payments of at least $18.5 million, as well as other ongoing monthly costs associated with managing the Company and possible draws on the Revolving Credit Facility.
Pursuant to the requirements of the Financial Accounting Standards Board’s 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 one year from the date the consolidated financial statements are issued.
10
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
PCT believes that its current level of unrestricted liquidity is not sufficient to fund operations, fund outstanding commitments, and further its future growth plans. The conditions described above raise substantial doubt regarding PCT’s ability to continue as a going concern for a period of at least one year from the date of issuance of the consolidated financial statements included in this Quarterly Report on Form 10-Q.
In an effort to alleviate these conditions, PCT is currently performing certain operational enhancements that are expected to correct the production issues with the Ironton Facility. Further, on March 5, 2024, the Purchaser (as defined below) purchased 99% of the outstanding Bonds (as defined below), which used $50.8 million, net, of unrestricted cash, and reduced Restricted Cash by $207.1 million. The purchased Bonds are held in an account with PCT LLC. PCT intends to, and has the ability to, re-market some or all of these Bonds 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 and Term Loan Credit Agreement (as defined below). After considering management’s plans to mitigate these conditions, including adjustment of expenditure timing and execution of the amendment to the Revolving Credit Facility, PCT believes this substantial doubt has been alleviated and it has sufficient liquidity to continue as a going concern for the next twelve months.
PCT’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, and other challenges or unforeseen circumstances. As a low-revenue operating company, PCT 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, PCT expects to seek additional debt or equity financing from outside sources, which it may not be able to raise on terms favorable to PCT, or at all. If PCT is unable to raise additional debt or sell additional equity when desired, or if PCT is unable to manage its cash outflows, PCT’s business, financial condition, and results of operations would be adversely affected. In addition, any financing arrangement may have potentially adverse effects on PCT 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 PCT’s operating flexibility. If PCT consummates an equity financing to raise 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 PCT’s common stock.
11
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated interim financial statements include the accounts of the Company. The condensed consolidated interim 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, 2024 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2024. The accompanying condensed consolidated interim 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 Company's 2023 Annual Report on Form 10-K for the year ended December 31, 2023; as filed with the SEC on March 6, 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, 2024 and 2023. Specifically, the Company reclassified certain expenses between Operating costs, Research and development, and Selling, general, and administrative to more accurately reflect the activities of the business. Total operating costs and expenses did not change for prior years.
Restricted Cash
Cash pledged as collateral for future capital purchases and leased properties is deemed restricted and included within restricted cash. Restricted cash that is expected to be spent or released from restriction within twelve months is classified as current on the consolidated balance sheet. Restricted cash that is expected to be spent or released from restriction after twelve months is classified as noncurrent on the consolidated balance sheet.
Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 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 our annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for our annual periods beginning in fiscal year 2025 and interim periods beginning in the first quarter of fiscal year 2026. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
12
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
NOTE 3 – NOTES PAYABLE AND DEBT INSTRUMENTS
The Company’s debt balances, including related party debt, consist of the following at March 31, 2024 and December 31, 2023 (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Green Convertible Notes, interest at 7.25% due semiannually; balance due at maturity in August 2030 |
|
$ |
250,000 |
|
|
$ |
250,000 |
|
CSC Equipment Financing Payable, currently bearing interest at a monthly charge of 3.1% of the outstanding balance financed; 36 month term expected to commence December 1, 2024, bearing interest at 7.25% (based on lease rate factor indexed to WSJ Prime Rate) |
|
|
19,747 |
|
|
|
19,747 |
|
Revenue Bonds, interest at 7% due semiannually; semiannual principal repayments beginning 2031 maturing 2042 |
|
|
2,800 |
|
|
|
249,550 |
|
Other Equipment Financing Payable |
|
|
1,216 |
|
|
|
1,762 |
|
|
|
|
273,763 |
|
|
|
521,059 |
|
Less: Original issue discount and debt issuance costs classified as a reduction to long-term debt |
|
|
(27,622 |
) |
|
|
(44,203 |
) |
Less: Current portion |
|
|
(3,204 |
) |
|
|
(9,148 |
) |
Long-term debt, less current portion |
|
$ |
242,937 |
|
|
$ |
467,708 |
|
|
|
|
|
|
|
|
||
Related Party Debt |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Pure Plastic Note Payable, interest at applicable rate plus margin, as defined (12.9% and 13.0% as of March 31, 2024 and December 31, 2023, respectively); balance due at maturity in December 2025 |
|
|
44,566 |
|
|
|
43,125 |
|
Less: Original issue discount and debt issuance costs classified as a reduction to note payable |
|
|
(3,114 |
) |
|
|
(3,429 |
) |
Related party note payable |
|
$ |
41,452 |
|
|
$ |
39,696 |
|
|
|
|
|
|
|
|
||
Sylebra Line of Credit, $200.0M borrowing capacity remaining, interest at applicable rate plus margin, as defined; maturing September 2025 |
|
$ |
— |
|
|
$ |
— |
|
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 Lawrence County, Ohio, the Ironton Facility. Capitalized terms used but not defined herein have the meanings ascribed thereto in the Indenture.
The Revenue Bonds were offered in three series, including (i) Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020A (“Series 2020A Bonds”); (ii) Subordinate Exempt Facility Revenue 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").
13
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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 $1,050 per $1,000 principal amount of the Bonds purchased, which amount is calculated in part to compensate the Sellers for default interest accruing from January 2, 2023 through December 31, 2023, as well as other accrued and unpaid interest from the last interest payment to, but not including, the Closing Date (as defined below) of the Purchase as consideration for consent to the Third Supplemental Indenture, by and among SOPA, PCO, the Guarantor, PCTO Holdco LLC and the Trustee (the “Third Supplemental Indenture”), which sets forth certain proposed amendments to the Bond Documents (“Proposed Amendments”) that will eliminate a substantial portion of the covenants, Events of Default (as defined below), and other material terms and protections for the benefit of the Holders contained in the Indenture, the Loan Agreement, the Guaranty (as defined below) and other transaction documents that are permitted by the terms of the Indenture and/or the Loan Agreement to be eliminated with the consent of Majority Holders. The Purchase will occur only if Sellers include at least the Majority Holders and if Sellers consent to the Proposed Amendments. The purchase price shall not include any default or penalty interest accruing from January 1, 2024 that may otherwise be owed to Sellers, and each Seller will waive its respective right to such default or penalty interest as additional compensation for the Purchase.
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:
14
PureCycle Technologies, Inc.
NOTES TO THE INTERIM 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. PureCycle Technologies LLC, an affiliate of PCO and the Guarantor under the Guaranty, will be 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.
The Purchaser purchased 99% of the outstanding Bonds with $74.5 million of unrestricted cash and $184.6 million of restricted cash. The Purchase was determined to be an extinguishment of the underlying debt obligation due to PCO being a wholly-owned subsidiary of the Purchaser. PCT intends to, and has the ability to, re-market some or all of these Bonds based on the need for additional liquidity. Of the $259.1 million paid for the purchase, $5.9 million represented payment of accrued and unpaid interest prior to the Closing Date and $253.2 million was allocated to the outstanding carrying value at the Closing Date of $232.0 million. A $21.2 million loss on extinguishment of the Bonds was recognized in the condensed consolidated statement of comprehensive loss for the three months ended March 31, 2024.
15
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
On March 25, 2024, SOPA, as Issuer, PCO, the Guarantor, PCTO Holdco LLC, a Delaware limited liability company and affiliate of PCO (the pledgor under the Equity Pledge and Security Agreement) 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 $22.1 million from the Senior Bonds Debt Service Reserve Fund and $3.3 million from the Repair and Replacement Fund, in each case, to PCO. In addition, the Fourth Supplemental Indenture provides that the Senior Bonds Debt Service Reserve Requirement, the Subordinate Bonds Debt Service Reserve Requirement, and the Repair and Replacement Fund Requirement shall each be reduced to $0, respectively, and that certain provisions of the Indenture and/or the Loan Agreement, as applicable, relating to the funding and maintenance of the Senior Bonds Debt Service Reserve Fund, the Subordinate Bonds Debt Service Reserve Fund, and the Repair and Replacement Fund, will be suspended until the effectiveness of an amendment to the Indenture, the Loan Agreement and/or other applicable Financing Documents provides otherwise in accordance with the terms of the Indenture, the Loan Agreement and such other applicable Financing Documents.
Sylebra Credit Facility
On March 15, 2023, PCT entered into a $150 million Revolving Credit Facility pursuant to a credit agreement (the "Revolving Credit Agreement") dated as of March 15, 2023, with PureCycle Technologies Holdings Corp. and PureCycle Technologies, LLC (the “Guarantors”), Sylebra Capital Partners Master Fund, LTD, Sylebra Capital Parc Master Fund, and Sylebra Capital Menlo Master Fund (collectively, the “Lenders”), and Madison Pacific Trust Limited (the “Administrative Agent” and “Security Agent”). The Lenders and their affiliates are greater than 5% beneficial owners of PCT.
On March 1, 2024, PCT increased the Revolving Credit Facility from $150.0 million to $200.0 million, extended the maturity date to September 30, 2025, and obtained a carveout to permit the Company to purchase the Revenue Bonds, pursuant to an amendment to the Revolving Credit Agreement with PCT, the Guarantors, the Lenders, and the Administrative Agent and Security Agent.
The Pure Plastic Term Loan Facility
On May 8, 2023, the Company entered into a $40 million term loan facility pursuant to the Term Loan Credit Agreement ("Term Loan Credit Agreement") dated as of May 8, 2023, among the Guarantors and Pure Plastic LLC (as Lender, Administrative Agent, and Security Agent), which matures on December 31, 2025 (the “Term Loan Facility”). The Term Loan Credit Agreement was amended on August 21, 2023. Affiliates of the Lender are greater than 5% beneficial owners of the Company.
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 $150.0 million to $200.0 million and obtained a carve out to permit the Company to purchase the Revenue Bonds. Each of PureCycle Technologies Holdings Corp. and PureCycle Technologies, LLC are subsidiaries of the Company.
Green Convertible Notes
On August 21, 2023, the Company priced its private offering of $215.0 million in aggregate principal amount of 7.25% Green Convertible Senior Notes due 2030 (the “Initial Notes”). On August 22, 2023, the initial purchaser in such offering exercised its option to purchase an additional $35.0 million in aggregate principal amount of the 7.25% Green Convertible Senior Notes due 2030 (together with the “Initial Notes”, the “Notes”), bringing the total aggregate principal amount of the Notes to $250.0 million. Entities affiliated with a greater than 5% beneficial owner of the Company purchased $50.0 million aggregate principal amount at maturity of the Notes.
16
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
As of March 31, 2024, the fair value of the Green Convertible Notes was $137.6 million.
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 |
|
||
2024 (April through December) |
|
$ |
1,708 |
|
|
$ |
— |
|
2025 |
|
|
6,150 |
|
|
|
44,566 |
|
2026 |
|
|
6,611 |
|
|
|
— |
|
2027 |
|
|
6,494 |
|
|
|
— |
|
2028 |
|
|
— |
|
|
|
— |
|
2029 |
|
|
— |
|
|
|
— |
|
Thereafter |
|
|
252,800 |
|
|
|
— |
|
|
|
$ |
273,763 |
|
|
$ |
44,566 |
|
Less: Original issue discount and debt issuance costs classified as a reduction to long-term debt |
|
|
(27,622 |
) |
|
|
(3,114 |
) |
Less: Current Portion |
|
|
(3,204 |
) |
|
|
— |
|
Total |
|
$ |
242,937 |
|
|
$ |
41,452 |
|
NOTE 4 - EQUITY-BASED COMPENSATION
2021 Equity Incentive Plan
On March 17, 2021, our 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) 3% of the shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year, and (b) such smaller number of shares as determined by the Board of Directors (the “Board”) of the Company.
As of March 31, 2024, approximately 17.0 million shares of common stock are currently authorized for issuance under the Plan, of which approximately 12.8 million shares remain available for issuance under the Plan (assuming maximum performance with respect to the performance goals applicable to the issued Plan awards).
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.
17
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
A summary of restricted stock activity for the three months ended March 31, 2024 is as follows (in thousands except per share data):
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Non-vested at December 31, 2023 |
|
|
2,847 |
|
|
$ |
9.31 |
|
|
|
2.3 |
|
Granted |
|
|
1,109 |
|
|
|
5.68 |
|
|
|
|
|
Vested |
|
|
(434 |
) |
|
|
6.29 |
|
|
|
|
|
Forfeited |
|
|
(71 |
) |
|
|
6.29 |
|
|
|
|
|
Non-vested at March 31, 2024 |
|
|
3,451 |
|
|
$ |
8.57 |
|
|
|
2.6 |
|
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. The fair value of the stock is estimated on the date of grant using the Black-Scholes option-pricing model using the following assumptions:
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
||
Expected annual dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Expected volatility |
|
|
88.5 |
% |
|
|
77.3 |
% |
Risk-free rate of return |
|
|
4.3 |
% |
|
|
3.5 |
% |
Expected option term (years) |
|
|
6.5 |
|
|
|
6.5 |
|
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 was 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 was determined using the Company’s closing stock price on the grant date.
18
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
A summary of stock option activity for the three months ended March 31, 2024 is as follows (in thousands except per share data):
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|||
Balance, December 31, 2023 |
|
|
983 |
|
|
$ |
20.17 |
|
|
5.4 |
|
|
Granted |
|
|
345 |
|
|
|
5.73 |
|
|
|
10.0 |
|
Exercised |
|
|
(16 |
) |
|
|
5.72 |
|
|
|
— |
|
Forfeited |
|
|
(7 |
) |
|
|
5.72 |
|
|
|
— |
|
Balance, March 31, 2024 |
|
|
1,305 |
|
|
$ |
16.25 |
|
|
|
6.3 |
|
Exercisable |
|
|
613 |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|||
Weighted avg grant date fair values |
|
|
4.45 |
|
|
|
|
|
|
|
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 (the “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”).
The Company issued 0.4 million PSUs for the three months ended March 31, 2024. As of March 31, 2024, the performance-based provision has not been achieved for any of the outstanding performance-based awards.
The Company recognizes compensation expense for the Performance PSUs equal to the fair value of the equity-based compensation awards and 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, 2024 is as follows (in thousands except per share data):
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|||
Balance, December 31, 2023 |
|
|
1,246 |
|
|
$ |
8.85 |
|
|
1.7 |
|
|
Granted |
|
|
353 |
|
|
|
5.73 |
|
|
|
|
|
Vested |
|
|
— |
|
|
|
— |
|
|
|
|
|
Forfeited |
|
|
(208 |
) |
|
|
17.43 |
|
|
|
|
|
Balance, March 31, 2024 |
|
|
1,391 |
|
|
$ |
6.75 |
|
|
|
1.9 |
|
19
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Equity-based compensation cost is recorded within the selling, general and administrative expenses within the condensed consolidated statements of comprehensive loss. Equity-based compensation expense for the three months ended March 31, 2024 and 2023 is presented in the following table (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
||
Total equity-based compensation for RSUs |
|
$ |
2,564 |
|
|
$ |
2,418 |
|
Total equity-based compensation for PSUs |
|
|
(52 |
) |
|
|
(268 |
) |
Total equity-based compensation for stock options |
|
|
170 |
|
|
|
14 |
|
|
|
$ |
2,682 |
|
|
$ |
2,164 |
|
NOTE 5 - WARRANTS
RTI Warrants
RTI Global (“RTI”) holds warrants to purchase 971 thousand shares of PCT common stock. RTI can exercise these warrants as of March 17, 2022. The warrants expire on December 31, 2024. The Company determined the warrants are a liability classified under ASC 480. Accordingly, the warrants were held at their initial fair value and will be remeasured at fair value at each subsequent reporting date with changes in the fair value presented in the condensed consolidated statements of comprehensive loss.
A summary of the RTI warrant activity for three months ended March 31, 2024 is as follows (in thousands, except per share data):
|
|
Number of warrants |
|
|
Weighted average exercise price |
|
|
Weighted average grant date fair value |
|
|
Weighted average remaining contractual term (years) |
|
||||
Outstanding at December 31, 2023 |
|
|
971 |
|
|
$ |
5.56 |
|
|
$ |
0.03 |
|
|
|
1.0 |
|
Granted |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Exercised |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Outstanding at March 31, 2024 |
|
|
971 |
|
|
$ |
5.56 |
|
|
$ |
0.03 |
|
|
|
0.8 |
|
Exercisable |
|
|
971 |
|
|
|
|
|
|
|
|
|
|
Refer to Note 9 – Fair Value of Financial Instruments for further information.
Public Warrants and Private Warrants
The Company has outstanding public and private warrants which entitle each holder to exercise its warrants only for a whole number of shares of common stock. Each whole warrant entitles the registered holder to purchase one whole share of the Company’s common stock at a price of $11.50 per share at the later of the closing of the Business Combination or one year after ROCH’s initial public offering, provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. The warrants will expire five years after March 17, 2021, or earlier upon redemption or liquidation.
20
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
The private warrants are identical to the public warrants, except that the private warrants and the common stock issuable upon exercise of the private warrants were not transferable, assignable or salable until after March 17, 2021, subject to certain limited exceptions. Additionally, the private warrants are non-redeemable so long as they are held by the initial holder or any of its permitted transferees. If the private warrants are held by someone other than the initial holder or its permitted transferees, the private warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.
The Company may redeem the outstanding warrants in whole, but not in part, at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. If the Company calls the warrants for redemption, management will have the option to require all holders that wish to exercise the warrants to do so on a cashless basis. In no event will the Company be required to net cash settle the warrant exercise. 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 CR Financial Holdings, Inc. (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 will classify the private warrants as a liability pursuant to ASC 815 until the private warrants are transferred from the initial purchasers or any of their permitted transferees.
There were approximately 5.7 million public warrants and 0.2 million private placement warrants outstanding at March 31, 2024 and 2023. Refer to Note 9 - Fair Value of Financial Instruments for further information.
Series A Warrants
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 $0.001 per share, and Series A warrants to purchase shares of common stock (the “Series A Warrants”) at a price of $7.00 per share of common stock and one-half (1/2) of one Series A Warrant (the “2022 PIPE Offering”).
On March 17, 2022, the Company closed the 2022 PIPE Offering and issued to the 2022 PIPE Investors an aggregate of 35,714,272 shares of common stock and Series A Warrants to purchase an aggregate of 17,857,136 shares of common stock. Each whole warrant entitles the registered holder to purchase one whole share of the Company’s common stock at a price of $11.50 per share any time after September 17, 2022 (the “Initial Exercise Date”), provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of common stock. The warrants will expire on March 17, 2026.
The Company may redeem the outstanding Series A Warrants in whole, but not in part, at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period commencing after the Series A Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders. If the Company calls the Series A Warrants for redemption, management will have the option to require all holders that wish to exercise the warrants to do so on a cashless basis.
21
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
In no event will the Company be required to net cash settle the warrant exercise.
The agreements governing the Series A Warrants (the “Series A Warrant Agreements”) provide for a Black-Scholes value calculation (“Black-Scholes Value”) in the event of certain transactions (“Fundamental Transactions”), which includes a floor on volatility utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders of the Series A Warrants that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, the Company will classify the Series A Warrants as a liability pursuant to ASC 815.
As of March 31, 2024, there were approximately 17.9 million Series A Warrants outstanding. Refer to Note 9 – Fair Value of Financial Instruments for further information.
Warrant expense (benefit) recognized for each period is presented in the following table (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
RTI warrants |
|
$ |
1,097 |
|
|
$ |
(58 |
) |
Private placement warrants |
|
$ |
168 |
|
|
$ |
72 |
|
Series A warrants |
|
$ |
12,679 |
|
|
$ |
4,821 |
|
NOTE 6 – NET LOSS PER SHARE
The Company follows the two-class method when computing net loss per common share when shares are issued that meet the definition of participating securities. The two-class method requires income available to common shareholders 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 earnings per share (“EPS”) calculations for the three months ended March 31, 2024 and 2023 (in thousands):
|
|
Three months ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net loss attributable to common shareholders |
|
$ |
(85,607 |
) |
|
$ |
(25,842 |
) |
Denominator: |
|
|
|
|
|
|
||
Weighted average common shares outstanding, basic |
|
|
164,355 |
|
|
|
163,588 |
|
Net loss per share attributable to common stockholder, basic |
|
$ |
(0.52 |
) |
|
$ |
(0.16 |
) |
22
PureCycle Technologies, Inc.
NOTES TO THE INTERIM 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, 2024 and 2023 (in thousands):
|
|
Three months ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net loss attributable to PureCycle Technologies |
|
$ |
(85,607 |
) |
|
$ |
(25,842 |
) |
Less change in fair value of RTI Warrants |
|
|
— |
|
|
|
(58 |
) |
Net loss attributable to common shareholders |
|
$ |
(85,607 |
) |
|
$ |
(25,900 |
) |
Denominator: |
|
|
|
|
|
|
||
Weighted average common shares outstanding, basic |
|
|
164,355 |
|
|
|
163,588 |
|
Add common equivalent shares from warrants |
|
|
— |
|
|
|
196 |
|
Weighted average common shares outstanding, diluted |
|
|
164,355 |
|
|
|
163,784 |
|
|
|
|
|
|
|
|
||
Net loss per share attributable to common stockholder, diluted |
|
$ |
(0.52 |
) |
|
$ |
(0.16 |
) |
Certain outstanding common share 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. A summary of those outstanding common share equivalents is presented in the following table:
|
|
Three months ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Anti-dilutive awards |
|
|
|
|
|
|
||
Warrants, vested not exercised |
|
|
24,747 |
|
|
|
23,776 |
|
Stock options, vested not exercised |
|
|
1,309 |
|
|
|
613 |
|
RSU, non-vested |
|
|
3,439 |
|
|
|
3,478 |
|
PSU, non-vested |
|
|
1,393 |
|
|
|
1,413 |
|
Contingently - issuable shares related to the earnout |
|
|
2,000 |
|
|
|
4,000 |
|
Shares issuable upon conversion of Green Convertible Notes |
|
|
16,869 |
|
|
|
— |
|
NOTE 7 – 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 (in thousands):
|
|
March 31, |
|
|||||||||
|
|
Cost |
|
|
Accumulated |
|
|
Net Book |
|
|||
Building |
|
$ |
81,703 |
|
|
$ |
3,200 |
|
|
$ |
78,503 |
|
Machinery and equipment |
|
|
353,576 |
|
|
|
28,660 |
|
|
|
324,916 |
|
Leasehold Improvements |
|
|
3,017 |
|
|
|
1,612 |
|
|
|
1,405 |
|
Fixtures and Furnishings |
|
|
736 |
|
|
|
203 |
|
|
|
533 |
|
Land improvements |
|
|
150 |
|
|
|
35 |
|
|
|
115 |
|
Land |
|
|
1,150 |
|
|
|
— |
|
|
|
1,150 |
|
Construction in process |
|
|
235,395 |
|
|
|
— |
|
|
|
235,395 |
|
Total property, plant and equipment |
|
$ |
675,727 |
|
|
$ |
33,710 |
|
|
$ |
642,017 |
|
23
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
|
|
December 31, 2023 |
|
|||||||||
|
|
Cost |
|
|
Accumulated |
|
|
Net Book |
|
|||
Building |
|
$ |
81,593 |
|
|
$ |
2,440 |
|
|
$ |
79,153 |
|
Machinery and equipment |
|
|
349,796 |
|
|
|
20,415 |
|
|
|
329,381 |
|
Leasehold Improvements |
|
|
2,972 |
|
|
|
1,447 |
|
|
|
1,525 |
|
Fixtures and Furnishings |
|
|
711 |
|
|
|
177 |
|
|
|
534 |
|
Land improvements |
|
|
150 |
|
|
|
32 |
|
|
|
118 |
|
Land |
|
|
1,150 |
|
|
|
— |
|
|
|
1,150 |
|
Construction in process |
|
|
226,885 |
|
|
|
— |
|
|
|
226,885 |
|
Total property, plant and equipment |
|
$ |
663,257 |
|
|
$ |
24,511 |
|
|
$ |
638,746 |
|
Depreciation expense is recorded in the condensed consolidated statements of comprehensive loss as follows:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Operating costs |
|
$ |
8,322 |
|
|
$ |
388 |
|
Research and development expense |
|
|
760 |
|
|
|
749 |
|
Selling, general, and administrative expense |
|
|
174 |
|
|
|
157 |
|
Total depreciation expense |
|
$ |
9,256 |
|
|
$ |
1,294 |
|
NOTE 8 - 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 which are also not more likely than not to be realized. As a result, for the periods ended March 31, 2024 and 2023, the Company has reported tax expense of $0 and $0, respectively.
Management has evaluated the Company’s tax positions and has determined that the Company has taken no uncertain tax positions that require adjustment to the condensed consolidated interim financial statements for the respective periods.
NOTE 9 – 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.
24
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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, 2024 and December 31, 2023, 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 (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents |
|
$ |
8 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8 |
|
|
$ |
36,277 |
|
|
$ |
35,215 |
|
|
$ |
— |
|
|
$ |
71,492 |
|
Restricted cash equivalents - current |
|
|
7,566 |
|
|
|
— |
|
|
|
— |
|
|
|
7,566 |
|
|
|
25,692 |
|
|
|
— |
|
|
|
— |
|
|
|
25,692 |
|
Restricted cash equivalents - noncurrent |
|
|
7,353 |
|
|
|
— |
|
|
|
— |
|
|
|
7,353 |
|
|
|
203,411 |
|
|
|
— |
|
|
|
— |
|
|
|
203,411 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial paper, available for sale |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
46,049 |
|
|
|
— |
|
|
|
46,049 |
|
US Treasury Notes |
|
|
2,187 |
|
|
|
— |
|
|
|
— |
|
|
|
2,187 |
|
|
|
2,177 |
|
|
|
— |
|
|
|
— |
|
|
|
2,177 |
|
Total investments |
|
$ |
2,187 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,187 |
|
|
$ |
2,177 |
|
|
$ |
46,049 |
|
|
$ |
— |
|
|
$ |
48,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Warrant liability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RTI warrants |
|
|
— |
|
|
|
— |
|
|
|
2,534 |
|
|
|
2,534 |
|
|
|
— |
|
|
|
— |
|
|
|
1,437 |
|
|
|
1,437 |
|
Private warrants |
|
|
— |
|
|
|
— |
|
|
|
433 |
|
|
|
433 |
|
|
|
— |
|
|
|
— |
|
|
|
265 |
|
|
|
265 |
|
Series A warrants |
|
|
— |
|
|
|
33,036 |
|
|
|
— |
|
|
|
33,036 |
|
|
|
— |
|
|
|
20,357 |
|
|
|
— |
|
|
|
20,357 |
|
Total warrant liability |
|
$ |
— |
|
|
$ |
33,036 |
|
|
$ |
2,967 |
|
|
$ |
36,003 |
|
|
$ |
— |
|
|
$ |
20,357 |
|
|
$ |
1,702 |
|
|
$ |
22,059 |
|
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, 2024 |
|
|
December 31, 2023 |
|
||
Expected annual dividend yield |
|
|
— |
% |
|
|
— |
% |
Expected volatility |
|
|
91.7 |
% |
|
|
100.2 |
% |
Risk-free rate of return |
|
|
4.6 |
% |
|
|
4.1 |
% |
Expected option term (years) |
|
|
2.0 |
|
|
|
2.2 |
|
The expected term of the warrants granted are 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 was 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 zero as the Company has not historically paid dividends. The fair value of the underlying Company shares was determined using the Black-Scholes calculation.
The aggregate values of the private warrants were $0.4 million and $0.3 million on March 31, 2024 and December 31, 2023, respectively.
25
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
A summary of the private warrants activity from December 31, 2023 to March 31, 2024 is as follows (in thousands):
|
|
Fair value |
|
|
Balance, December 31, 2023 |
|
$ |
265 |
|
Change in fair value |
|
|
168 |
|
Balance, March 31, 2024 |
|
$ |
433 |
|
Refer to Note 5 – Warrants for further information.
Measurement of the RTI warrants
Significant changes in any of the significant unobservable inputs in isolation would not result in a materially different fair value estimate. The interrelationship between these inputs is insignificant.
The Company has determined its warrant to be a Level 3 fair value measurement and has remeasured using a Binomial Tree option pricing model to calculate its fair value using the following assumptions:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Expected annual dividend yield |
|
|
— |
% |
|
|
— |
% |
Expected volatility |
|
|
112.9 |
% |
|
|
118.1 |
% |
Risk-free rate of return |
|
|
5.1 |
% |
|
|
4.7 |
% |
Expected option term (years) |
|
|
0.8 |
|
|
|
1.0 |
|
The expected term of the warrants granted are 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 was calculated based on the specific volatility of PCT’s publicly-traded common stock. In determining similar entities, the Company considered industry, stage of life cycle, size and financial leverage. The dividend yield on the Company’s warrants is assumed to be zero as the Company has not historically paid dividends. The fair value of the underlying Company shares was determined using the Binomial Tree model calculation.
The Company has an option to repurchase the warrants at any time. The maximum fair value of the warrants is limited by the fair value of the repurchase option, which cannot exceed $15.0 million.
Changes in Level 3 liabilities measured at fair value from December 31, 2023 to March 31, 2024 are as follows (in thousands):
|
|
Fair value |
|
|
Balance, December 31, 2023 |
|
$ |
1,437 |
|
Change in fair value |
|
|
1,097 |
|
Balance, March 31, 2024 |
|
$ |
2,534 |
|
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.
26
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Assets and liabilities recorded at carrying value
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 accounts payable at cost, which approximates fair value due to their short-term nature or stated rates. The Company records debt at cost.
NOTE 10 - AVAILABLE-FOR-SALE INVESTMENTS
The Company classifies its investments in debt securities as available-for-sale. Debt securities have been historically comprised of highly liquid investments with minimum “A” rated securities. The debt securities have historically been reported at fair value with unrealized gains or losses recorded in accumulated other comprehensive income in the condensed consolidated balance sheets. Refer to Note 9 – Fair Value of Financial Instruments for information related to the fair value measurements and valuation methods utilized.
The following table represents the Company’s available-for-sale investments by major security type as of March 31, 2024 and December 31, 2023 (in thousands):
|
|
March 31, 2024 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Total |
|
||||
US Treasury Notes |
|
$ |
2,188 |
|
|
$ |
— |
|
|
$ |
(0.1 |
) |
|
$ |
2,187 |
|
Corporate Bonds |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Municipal Bonds |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
2,188 |
|
|
$ |
— |
|
|
$ |
(0.1 |
) |
|
$ |
2,187 |
|
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Total |
|
||||
Commercial Paper |
|
$ |
46,069 |
|
|
$ |
— |
|
|
$ |
(20 |
) |
|
$ |
46,049 |
|
Corporate Bonds |
|
|
2,175 |
|
|
|
2 |
|
|
|
— |
|
|
|
2,177 |
|
Municipal Bonds |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
48,244 |
|
|
$ |
2 |
|
|
$ |
(20 |
) |
|
$ |
48,226 |
|
The following table represents the Company’s available-for-sale investments by contractual maturity as of March 31, 2024 and December 31, 2023 (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Amortized |
|
|
Fair Value |
|
|
Amortized |
|
|
Fair Value |
|
||||
Due within one year |
|
$ |
2,188 |
|
|
$ |
2,187 |
|
|
$ |
48,244 |
|
|
$ |
48,226 |
|
Due after one year through five years |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
2,188 |
|
|
$ |
2,187 |
|
|
$ |
48,244 |
|
|
$ |
48,226 |
|
Debt securities as of March 31, 2024 had an average remaining maturity of 0.25 years.
The Company reviews available-for-sale investments for other-than-temporary impairment loss periodically. The Company considers factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. For debt securities, we also consider whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis and (ii) the amortized cost basis cannot be recovered as a result of credit losses.
27
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
During the three months ended March 31, 2024 and 2023, the Company did not recognize any other-than-temporary impairment losses. All marketable securities with unrealized losses have been in a loss position for less than twelve months, and the Company does not anticipate any material losses upon maturity of these investments. The fair value for fixed-rate debt securities is based on quoted market prices for the same or similar debt instruments and is classified as Level 2. The fair value for the Company's other securities holdings, primarily under commercial paper, equals the carrying value and is classified as Level 2.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Financial Assurance
On March 14, 2024, PCT renewed a surety bond in the amount of $25.0 million to provide financial assurance related to its performance under a certain vendor contract, which expires at the earlier of satisfaction of the obligation, termination of the related vendor contract, or one year from issuance (subject to renewal within one year).
These financial instruments are issued in the normal course of business and are not considered company indebtedness. Because PCT currently has no liability for these financial assurance instruments, they are not reflected in its consolidated balance sheets.
Legal Proceedings
PCT 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 PCT that remains outstanding as of March 31, 2024.
Shareholder Securities Litigation
Beginning on or about May 11, 2021, two putative class action complaints were filed against PCT, certain senior members of management and others, asserting violations of federal securities laws under Section 10(b) and Section 20(a) of the Exchange Act. The complaints generally allege that the applicable defendants made false and/or misleading statements in press releases and public filings regarding the Technology, PCT’s business and PCT’s prospects. The first putative class action complaint was filed in the U.S. District Court for the Middle District of Florida by William C. Theodore against PCT and certain senior members of management (the “Initial Theodore Lawsuit”). The second putative class action complaint was filed in the U.S. District Court for the Middle District of Florida by David Tennenbaum against PCT, certain senior members of management and others (the “Tennenbaum Lawsuit”). On July 14, 2021, the court granted a motion to consolidate the Initial Theodore and Tennenbaum Lawsuits (consolidated as the “Consolidated Theodore Lawsuit”) and on July 27, 2021, Tennenbaum filed a motion to voluntarily dismiss his complaint without prejudice. On August 5, 2021, the Court entered an order appointing Mariusz Ciecko and Robert Ciecko as Co-Lead Plaintiffs (“Lead Plaintiffs”) and Pomerantz LLP as Lead Counsel.
On September 27, 2021, the Lead Plaintiffs filed a consolidated amended complaint. The consolidated amended complaint seeks to represent a class of investors who purchased or otherwise acquired PCT’s securities between November 16, 2020, and May 5, 2021, certification of the alleged class, as well as compensatory and punitive damages.
28
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
The consolidated amended complaint relies on information included in a research report published by Hindenburg Research LLC.
On November 12, 2021, PCT and the individual defendants affiliated with PCT (“PCT Defendants”) and Byron Roth each filed separate motions to dismiss Lead Plaintiffs’ amended complaint. Additional submissions by the parties were filed in December 2021 and January 2022.
On August 4, 2022, the U.S. District Court for the Middle District of Florida dismissed the Consolidated Theodore Lawsuit, without prejudice. Plaintiffs filed their second amended complaint on August 18, 2022, in which they seek to represent a class of investors who purchased or otherwise acquired PCT’s securities between November 16, 2020, and November 10, 2021, and alleged violations of Section 10(b) and Section 14(a) of the Exchange Act.
On September 15, 2022, the PCT Defendants and Byron Roth each filed a motion to dismiss the second amended complaint, and the parties filed additional responsive pleadings in October 2022. On June 15, 2023, the U.S. District Court for the Middle District of Florida granted the PCT Defendants’ motion solely with regard to named defendant Tamsin Ettefagh, but denied the motion as to all other defendants. On June 30, 2023, the PCT Defendants filed a Motion for Reconsideration. Further, on July 14, 2023, each of the PCT and Roth Defendants filed their respective Answers and Counterclaims. The Motion for Reconsideration remains pending.
On November 30, 2023, Lead Plaintiffs filed their motion to certify two classes: a Section 14(a) class and a Section 10(b) class. On January 17, 2024, Lead Plaintiffs amended their motion for class certification to seek certification of only the Section 10(b) class. On January 23, 2024, PCT, the Individual Defendants and Bryon Roth submitted a joint opposition to Lead Plaintiffs’ motion for class certification. Plaintiffs’ reply in support of their motion for class certification was filed on February 21, 2024. The parties have been engaged in discovery, which is currently scheduled to close in July 2024. On March 21, 2024, the Court agreed to stay the litigation for thirty days in order to give the parties an opportunity to try to resolve the action through mediation.
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 (the "Southgate Lawsuit"). The complaints generally allege that the applicable defendants made false and/or misleading statements in press releases and public filings between August 8, 2023 and September 13, 2023, regarding the status of commissioning activities at the Ironton Facility, and specifically the impact of a power outage at the Ironton Facility in August 2023 and subsequent seal system failure in September 2023. Purported shareholders have filed motions to be appointed lead plaintiff in the action, and on February 20, 2024, the Court appointed James Smith as Lead Plaintiff and Glancy Prongay & Murray LLP as Lead Counsel.
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. On May 6, 2024, the Company and the Individual Southgate Defendants filed a motion to dismiss the Southgate complaint.
PCT, the PCT Defendants and the Individual Southgate Defendants intend to vigorously defend against the Consolidated Theodore Lawsuit and the Amended Southgate Lawsuits.
29
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Given the stage of the litigation, 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 arise from the unresolved Theodore and Amended Southgate Lawsuits.
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 19, 2022, the court granted the parties’ joint stipulation to stay the Han Derivative Lawsuit and administratively closed the matter pending the disposition of the motions to dismiss in the Class Action Lawsuits.
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").
On March 17, 2022, the court granted the parties’ joint stipulation to stay the Ayers Derivative Lawsuit and administratively closed the matter pending the disposition of the motions to dismiss in the Class Action Lawsuits.
After the court in the Consolidated Theodore Lawsuit ruled on the second motion to dismiss, the stay in the derivative actions was lifted. Ayers and Han (collectively the “Derivative Plaintiffs”), PCT 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”). In light of the Motion for Reconsideration in the Consolidated Theodore Lawsuit, the Derivative Plaintiffs, PCT, and Individual Derivative Defendants filed a joint stipulation to continue the stay of the Consolidated Derivative Litigation until thirty days after the court in the Class Action rules on the Motion for Reconsideration. Because the Motion for Reconsideration in the Consolidated Theodore Lawsuit remains pending, the stay of the Consolidated Derivative Litigation remains in effect.
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. At this stage of the litigation, neither PCT nor the Individual Ayers Defendants have answered the Consolidated Amended Derivative Complaint, moved to dismiss the complaint, or otherwise responded to the complaint.
30
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
On March 29, 2024, John Brunson, a purported PCT 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. The Brunson Derivative Lawsuit also references two reports by Bleeker Street Research in November 2023 which alleged that the Company had misled investors about the launch of the Ironton Facility, and would not meet its production targets. Plaintiffs also point to and discuss the Theodore Securities Class Action and allege that PCT is exposed to liability in that case. The Brunson Derivative Lawsuit seeks unspecified monetary damages, declaratory relief, unspecified disgorgement and restitution from the Individual Brunson Defendants, and costs and fees associated with bringing the action.
The Individual Derivative Defendants intend to vigorously defend against the Consolidated Derivative Litigation and the Brunson Derivative Lawsuit. Given the stage of the litigation, 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 arise from the unresolved Consolidated Derivative Litigation or Brunson Derivative Lawsuit.
In the future, PCT may become party to additional legal matters and claims arising in the ordinary course of business. While PCT 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 PCT 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 $17.0 million related to certain fee applications, change orders and amounts currently held in retainage by PCO, and, on June 21, 2023, filed a mechanics lien in Lawrence County, Ohio for the same sum. On July 20, 2023, PCO filed its Answer and Counterclaim, in which PCO contends that various deficiencies in DB’s work resulted in damages to PCO in excess of DB’s $17.0 million Arbitration Demand, including, but not limited to, the following: DB’s insufficient and incomplete engineering drawings and packages, insufficient and unorganized material management, insufficient and inefficient contractor management, insufficient and rudimentary schedule management, incomplete and inefficient procurement procedures, and that the Company was required to undertake significant re-work at additional cost resulting from DB’s failure to adequately perform its obligations under the EPC Contract. On September 14, 2023, DB filed a motion with the AAA seeking to join ThermalTech Engineering, Inc., and ThermalTech Turnkey Solutions LLC, a subcontractor engaged by DB to provide engineering services for the Ironton Project. PCO and ThermalTech Engineering, Inc. have objected to the joinder and the matter remains pending.
31
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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 December 12, 2023, defendant UMB Bank, N.A. (“UMB”) filed an Answer and Counterclaim against DB. On January 9, 2024, the Lawrence County Court granted DB’s request for a stay of the lawsuit pending the resolution of the arbitration proceeding.
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. We are currently unable to predict the outcome of this matter.
On October 6, 2023 and October 27, 2023, the Company received two additional books and records demands pursuant to Section 220 of the Delaware General Corporation Law, from two purported stockholders of the Company, in connection with the stockholders’ 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. We are currently unable to predict the outcome of this matter.
NOTE 12 - SUBSEQUENT EVENTS
In connection with the preparation of the condensed consolidated interim financial statements for the period ended March 31, 2024, management has evaluated events through May 8, 2024 to determine whether any events required recognition or disclosure in the condensed consolidated interim financial statements. The following subsequent events were identified through the date of these condensed consolidated interim financial statements:
On April 2, 2024, the Company reached tentative settlement of the Consolidated Theodore Lawsuit (the “Securities Settlement”), which was memorialized in a Stipulation of Settlement dated May 6, 2024. Pursuant to the terms of the Securities Settlement, all known and unknown claims shall be settled for $12 million in exchange for a complete release of the Company and the individually named defendants in each of the referenced matters. The Securities Settlement shall be funded by the remainder of the Company’s self-insured retention under its directors and officers liability insurance policies applicable to the claims (“D&O Insurance”) and contributions by various carriers comprising part of the D&O Insurance tower available to the Company and defendants. The Securities Settlement is subject to court approval.
On May 7, 2024, the Company entered into an MOU agreement to settle the Ayers Derivative Lawsuit, the Brunson Derivative Lawsuit and certain shareholder demands (the “Demand Letters”), including demands under Delaware Code Section 220 and/or investigation demands (the “Derivative Settlement”). Under the proposed terms of the MOU in the Derivative Settlement, all claims shall be settled in exchange for certain corporate therapeutics and a monetary component of $3 million, out of which plaintiffs’ counsel may seek up to $2 million in attorneys’ fees (as approved by the Court), in exchange for a complete release of all claims set forth in the Ayers and Brunson derivative actions and the Demand Letters. Carriers comprising part of the D&O insurance tower will contribute $3 million of applicable policy limits to fund the monetary component of the Derivative Settlement.
32
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
The Derivative Settlement is subject to final documentation and court approval.
Pure Plastic Bond Purchase
On May 7, 2024, PCT LLC entered into an agreement with Pure Plastic LLC (“Pure Plastic”), a Delaware limited liability company, whereby Pure Plastic will purchase approximately $94.3 million in aggregate par amount of Bonds owned by PCT LLC (the “Purchased Bonds”), including (i) a portion of the Series 2020A Bonds, (ii) all of the Series 2020B Bonds, and (iii) all of the Series 2020C Bonds, at a purchase price of $800 per $1,000 principal amount of the Purchased Bonds (the “Pure Plastic Purchase Agreement”). Affiliates of Pure Plastic are greater than 5% beneficial owners of the Company.
As total consideration for the Purchased Bonds, the aggregate amount of principal outstanding, together with accrued but unpaid interest thereon, of approximately $45.5 million under the Term Loan Facility will be deemed to be prepaid in full and PCT LLC will receive $30 million in cash, as further provided for in the Payoff and Release Letter (as defined below).
The closing of the transactions contemplated by the Pure Plastic Purchase Agreement will occur in three tranches, with each tranche subject to the satisfaction of certain conditions.
The Pure Plastic Purchase Agreement requires PCT LLC to make best efforts to:
Pursuant to the Payoff and Release Letter, by and among the Company, the Credit Facility Guarantors (as defined in the Pure Plastic Purchase Agreement) and Pure Plastic (the “Payoff and Release Letter”), which is to be entered into as of the Initial Closing Date (as defined in the Pure Plastic Purchase Agreement), the Company is required to pay a 12% prepayment premium on the outstanding principal and interest paid in order to prepay the Term Loan Facility (the “Prepayment Premium”) plus certain expenses. The Company will issue warrants (“Series B Warrants”) to Pure Plastic pursuant to a Series B Warrant Agreement to satisfy the Prepayment Premium (the “Series B Warrant Agreement”).
33
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
The Series B Warrants entitle Pure Plastic to purchase approximately 3.1 million shares of the Company's Common Stock at a price of $11.50 per share any time on or after November 6, 2024. The Series B Warrants will expire on December 1, 2030. The Company will pay the expenses in cash.
The Payoff and Release Letter also provides that if the Term Loan Facility is not paid off by a certain date, the Payoff Amount (as defined therein) will be increased by a specific amount on a daily basis. The Payoff and Release Letter will terminate and be of no force or effect if the Payoff Date (as defined therein) does not occur by 5:00 p.m. (Eastern Time) on May 17, 2024.
Lastly, the Payoff and Release Letter provides that all of the Obligations (as defined therein) under the Term Loan Facility shall be deemed paid and satisfied in full upon the satisfaction of certain conditions and, furthermore, upon the satisfaction of such conditions, all liens securing the Obligations shall be deemed to be fully released and discharged.
34
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which PCT’s management believes is relevant to an assessment and understanding of PCT’s 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 the Company’s most recent Annual Report on Form 10-K, as well as the unaudited condensed consolidated interim 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 the Company’s 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,” “our,” and “the Company” are intended to mean the business and operations of PCT and its consolidated subsidiaries.
Overview
PureCycle Technologies, Inc. (“PCT” or “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 ultra-pure recycled (“UPR”) 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 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 two steps: Feed Pre-Processing (“Feed PreP”) and the use of PCT’s recycling technology for purification. The Feed PreP step will collect, sort, and prepare polypropylene waste (“feedstock”) for purification. The purification step is a purification recycling process that uses a combination of solvent, temperature, and pressure to return the feedstock to near-virgin condition through a novel configuration of commercially available equipment and unit operations. The purification process puts the plastic through a physical extraction process using super critical fluids that both extract and filter out contaminants and purify the color, opacity, and odor of the plastic without changing the bonds of the polymer. By not altering the chemical makeup of the polymer, the Company is able to use significantly less energy and reduce production costs as compared to virgin resin.
The Ironton Facility
PCT commenced commissioning activities at its first commercial-scale plant in Lawrence County, Ohio (referred to herein as the “Ironton Facility”), in April 2023, achieved mechanical completion of the plant and commenced pellet production from post-industrial and post-consumer materials later in 2023. The Ironton Facility leverages the existing infrastructure of PCT’s pilot facility known as the Feedstock Evaluation Unit (the “FEU”), which became operational in 2019, and the Ironton Facility is expected to have UPR resin capacity of approximately 107 million pounds/year when fully operational. PCT sold an immaterial amount of UPR resin through the first quarter of 2024 but has not yet reached meaningful volumes and on-spec product. PCT has experienced intermittent mechanical challenges during the commissioning process including, but not limited to, limits in the rates at which certain contaminants can currently be removed from the purification process, as well as challenges with continuous operations of the pelletizing system for finished product. While these mechanical issues are not uncommon for first-of-its kind manufacturing facilities, the down-time needed to correct these issues is delaying the Ironton Facility from reaching consistent sustainable production rates.
35
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
We expect the Ironton Facility to be fully operational later in 2024.
As of March 31, 2024, PCT anticipates that up to $12.5 million will be needed to complete the investment in the Ironton Facility, which relates to a performance guarantee payment due after successful completion of a performance testing milestone.
The Augusta Facility
In July 2021, PCT reached an agreement with The Augusta Economic Development Authority (“AEDA”) to build its first U.S. facility with multiple lines for both Feed PreP and purification (“multi-line facility”) in Augusta, Georgia (the “Augusta Facility”). PCT expects the approximately 200-acre location to eventually include up to eight production lines, which are expected to collectively have UPR 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 UPR resin. PureCycle has allocated 40% of the Augusta Facility output, for Lines 1 and 2, to existing customers and expects that additional offtake agreements will continue to be negotiated.
On June 30, 2023, PCT and the AEDA executed an Economic Development Agreement (“EDA”) related to the Company’s plans to construct the Augusta Facility. Pursuant to the EDA, PCT expects 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, PCT will be obligated to create 82 full-time jobs with investments of at least $440 million no later than December 31, 2026. Through March 31, 2024, PCT has invested approximately $88.0 million for pre-construction engineering and long-lead equipment for the benefit of Phase One investments. If PCT elects to activate the second phase of the Augusta Project, PCT will be required to create an additional 25 full-time jobs and investments of $295 million no later than December 31, 2028. To the extent PCT fails to achieve an average of 80% of the jobs and investment commitments in any year over the 20-years of each phase, PCT will be required to make a repayment to the AEDA of a pro rata portion of the total value of the Incentive Benefits received by PCT in such year.
Also on June 30, 2023, PCT entered into a series of agreements with the AEDA to construct phase one (“Phase One”) of the Augusta Facility. PCT is 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. PCT 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 by PCT. As noted above, PCT anticipates that the first portion of Phase One will consist of one purification line and construction commenced prior to the end of 2023. Also 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 PCT as lessee of the Augusta Project. PCT will remain the owner of the Improvements and Equipment for accounting purposes during the term of the lease as PCT 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 PCT makes to the AEDA during the term of the arrangement are not otherwise expected to be material.
At the end of 2023, the Company commenced site preparation activities, including debris removal and site stabilization activities, and continued with payments to vendors for certain long lead-time equipment. Pursuant to the EDA, PCT must also show continuous construction progress, with regard to the first purification line under the first phase of the Augusta Project during 2024 or risk losing certain future Incentive Benefits. 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.
36
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
As a result, PCT is currently pursuing various structures for project financing of the Augusta Facility. While PCT remains confident in its ability to finance the Augusta Facility, it is limiting its expenses and adjusting its timeline in light of this uncertainty. If PCT is unable to raise additional debt or equity, when desired, or on terms favorable to PCT, PCT’s business, financial condition, and results of operations would be adversely affected.
Feedstock Pricing
PCT sees a robust pipeline of demand for its recycled polypropylene and PCT is seeing market acceptance of its “Feedstock+” pricing model for its UPR resin. The “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 de-risks PCT’s operating margin volatility.
For the Ironton Facility, PCT’s feedstock price was linked, in part, to changes in the Chemical Market Analysis, the index for virgin polypropylene, in 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, PCT plans to link the feedstock price, in part, to the price of a no. 5 plastic bale of polypropylene as reported by recyclingmarkets.net (“Feedstock Market Pricing”). PCT will procure both feedstock in line with Feedstock Market Pricing as well as low value feedstocks that can be processed by PCT, below Feedstock Market Pricing for the Augusta Facility.
PreP Facilities
In conjunction with the Augusta Facility, PCT also plans to build and operate Feed PreP facilities in locations geographically near the feed sources to optimize PCT’s supply chain economics. During the third quarter of 2022, PCT experienced challenges obtaining the necessary water and sewer permits to construct its first planned Feed PreP facility in Central Florida. PCT is evaluating its available recourses, including legal requirements and remedies with regard to its obligations for the remaining 8 years of its 11-year lease agreement for the Central Florida facility. PCT is also evaluating alternative preprocessing sites in other locations. Also, on August 24, 2022, PCT signed a lease for a future PreP facility in Denver, Pennsylvania, which is expected to be operationally ready in late 2024. Throughout the second half of 2021, PCT developed a feedstock processing system with advanced sorting capabilities that can handle various types of plastics in addition to polypropylene (designated as no. 5 plastic). PCT’s enhanced sorting should allow PCT to process plastic bales between no. 1 and no. 7. PCT’s new Feed PreP facilities will extract polypropylene and ship it to PCT’s purification lines, while the non-polypropylene feed will be sorted, baled, and subsequently sold on the open market.
Letter of No Objection Submission and the Granting of FDA Food Packaging Clearances for Certain Feedstocks
On September 10, 2021, PCT filed for a U.S. Food and Drug Administration (“FDA”) Letter of No Objection (“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. The LNO submission also defines the feedstock sources for the Company’s 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.
37
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
The FDA confirmed receipt of the submission on September 13, 2021 and followed up with additional questions and requests for clarification in a letter received by PCT on January 7, 2022. PCT responded to the FDA’s questions on February 17, 2022.
On September 6, 2022, PCT received two separate notifications from the FDA with respect to the following two feedstock sources:
(i) Food grade post-industrial recycled feedstocks: an FDA opinion letter 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.
The Company’s 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).
The Company is conducting additional testing and plans to make further LNO submissions for additional post-consumer recycled feedstock sources and expanded Conditions of Use.
Future Expansion
On January 17, 2023, the Company announced that its first European purification facility will be in Antwerp, Belgium. On October 20, 2022, the Company executed a Joint Venture Agreement with SK geo centric Co., Ltd., to develop a UPR purification facility in Ulsan, South Korea. The parties will each hold an equal stake in the joint venture with commencement of construction activities pending necessary financing. The Company is also planning to expand its production capabilities into Asia through negotiation of joint ventures with Mitsui & Co. Ltd. in Japan for in-country production and sales. Future expansion is dependent on successful completion of project financing.
Components of Results of Operations
Revenue
PCT generated an immaterial amount of revenue through the first quarter of 2024 but has not yet reached (i) significant continuous operational volumes at the Ironton Facility or (ii) significant revenue generation. The Ironton Facility is expected to be fully operational later in 2024.
Operating Costs
Operating expenses to date have consisted mainly of personnel costs (including wages, salaries and benefits) and other costs directly related to operations at PCT’s 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.
38
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
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, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.
Results of Operations
Comparison of three ended March 31, 2024 and 2023
The following table summarizes our operating results for the three ended March 31, 2024 and 2023:
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
|
|
|
|
|
|
$ |
|
|
% |
|
||||
(in thousands, except %) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Change |
|
||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating costs |
|
$ |
21,194 |
|
|
$ |
7,372 |
|
|
$ |
13,822 |
|
|
|
187 |
% |
Research and development |
|
|
1,831 |
|
|
|
1,754 |
|
|
|
77 |
|
|
|
4 |
% |
Selling, general and administrative |
|
|
15,957 |
|
|
|
12,695 |
|
|
|
3,262 |
|
|
|
26 |
% |
Total operating costs and expenses |
|
|
38,982 |
|
|
|
21,821 |
|
|
|
17,161 |
|
|
|
79 |
% |
Interest expense |
|
|
15,054 |
|
|
|
657 |
|
|
|
14,397 |
|
|
|
2,192 |
% |
Interest income |
|
|
(3,602 |
) |
|
|
(1,933 |
) |
|
|
(1,669 |
) |
|
|
86 |
% |
Change in fair value of warrants |
|
|
13,944 |
|
|
|
4,835 |
|
|
|
9,109 |
|
|
|
188 |
% |
Loss on debt extinguishment |
|
|
21,214 |
|
|
|
— |
|
|
|
21,214 |
|
|
|
100 |
% |
Other expense |
|
|
15 |
|
|
|
462 |
|
|
|
(447 |
) |
|
|
(97 |
)% |
Net loss |
|
$ |
(85,607 |
) |
|
$ |
(25,842 |
) |
|
$ |
(59,765 |
) |
|
|
231 |
% |
Operating costs
The increase for the three month period was primarily attributable to higher depreciation expense related to assets supporting operations of $7.9 million due primarily to placing the Ironton Facility assets in service in the second quarter of 2023, increased operational site costs of $4.3 million related to operating the Ironton Facility, higher labor costs of $1.0 million due primarily to increased contract labor at the Ironton Facility related to plant optimization activities, and higher rent for operating facilities of $0.7 million.
Research and development expenses
Research and development expenses did not significantly change period over period.
Selling, general and administrative expenses
The increase for the three month period was principally attributable to $2.1 million higher legal and professional consulting fees primarily related to the purchase of the Revenue Bonds in the first quarter of 2024, and higher insurance cost of $0.7 million.
Interest expense
The increase for the three month period was attributable to additional financing incurred in the second and third quarters of 2023, including closing of $250.0 million of green convertible senior notes in August 2023, as well as ceasing capitalization of interest on the Revenue Bonds beginning in June 2023 as the plant is now in service.
39
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
Interest income
The increase for the three month period was attributable to higher interest earned on PCT’s investment portfolio and money market funds due to rising interest rates, as well as a higher average balance of invested funds in the first quarter of 2024 compared to the same period in 2023.
Change in fair value of warrants
The increased expense for the three month period was attributable to the change in fair value of the Company’s liability-classified warrants, of which the primary drivers of the change in valuation related to changes in the underlying price of PCT’s common stock, as well as fluctuations in volatility and reduction in the warrant terms with the passage of time.
Loss on debt extinguishment
The amount reported in the first quarter of 2024 relates to the loss recorded on the purchase of the majority of the outstanding Revenue Bonds.
Other expense
Other expenses were not material for either period presented.
Liquidity and Capital Resources
During 2023 and through March 31, 2024, PCT commenced commercial operations and sold an immaterial amount of UPR resin but has not yet reached significant continuous operational volumes. PCT’s ongoing operations have, to date, been funded by a combination of equity financing through the issuance of units and debt financing through the issuance of various debt instruments. The following is a summary of the components of our current liquidity. The Debt Securities Available for Sale represent investment holdings in highly liquid debt securities and commercial paper with an average maturity of less than one year. As of December 31, 2023, Restricted Cash consisted primarily of certain amounts required for the Series 2020A Bonds and other initial construction commitments for the Augusta Facility. On March 5, 2024, a subsidiary of the Company purchased 99% of the outstanding Bonds which, among other things, released Restricted Cash to be used to purchase the Bonds. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Indebtedness – Revenue Bonds” for more information.
(in millions) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Cash and Cash Equivalents |
|
$ |
25.0 |
|
|
$ |
73.4 |
|
Debt Securities Available for Sale |
|
|
2.2 |
|
|
48.2 |
|
|
|
|
|
|
|
|
|
||
Ironton Facility Bond Reserves |
|
$ |
3.5 |
|
|
$ |
210.6 |
|
Augusta Construction Escrow |
|
|
7.3 |
|
|
|
14.4 |
|
Letters of Credit and Other Collateral |
|
|
4.1 |
|
|
|
4.1 |
|
Restricted Cash (current and non-current) |
|
$ |
14.9 |
|
|
$ |
229.1 |
|
|
|
|
|
|
|
|
||
Green Convertible Notes |
|
$ |
222.3 |
|
|
$ |
220.7 |
|
Equipment Financing Payable |
|
|
21.0 |
|
|
|
21.6 |
|
Pure Plastic Related Party Note Payable |
|
|
41.5 |
|
|
|
39.7 |
|
Revenue Bonds |
|
|
2.8 |
|
|
|
234.6 |
|
Add: Discount and Issuance Costs |
|
|
30.7 |
|
|
|
47.6 |
|
Gross Long-term Debt and Related Party Note Payable |
|
$ |
318.3 |
|
|
$ |
564.2 |
|
40
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
As of March 31, 2024, PCT had $25.0 million of Cash and Cash Equivalents, Debt Securities Available for Sale of $2.2 million, and Restricted Cash of $14.9 million. PCT also has a $200.0 million revolving credit facility with Sylebra Capital (the “Revolving Credit Facility”) that is currently unused and expires on September 30, 2025.
PCT sold an immaterial amount of UPR resin in 2023 and through March 31, 2024. Due to intermittent mechanical challenges during the commissioning process of the Ironton Facility, the Ironton Facility has not yet reached the point of producing meaningful volumes and on-spec product. While these mechanical issues are not uncommon for a first-of-its kind manufacturing facility, the downtime needed to correct these issues is a significant contributing factor to the delay of the Ironton Facility reaching the point of producing meaningful volumes and on-spec product. We expect the Ironton Facility to be fully operational later in 2024.
As of March 31, 2024, PCT anticipates that up to $12.5 million will be needed to complete the investment in the Ironton Facility, which relates to a performance guarantee payment due after successful completion of a performance testing milestone. PCT also has other capital commitments of approximately $47.1 million related to long-lead equipment and pre-construction work for the Augusta Facility and $17.0 million for equipment and leases related to future Feed PreP and purification facilities, both in the U.S. and internationally. Moreover, there are interest payments of at least $18.5 million, as well as other ongoing monthly costs associated with managing the Company and possible draws on the Revolving Credit Facility.
Pursuant to the requirements of the Financial Accounting Standards Board’s 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 one year from the date the consolidated financial statements included in this Quarterly Report on Form 10-Q are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
PCT 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 PCT’s ability to continue as a going concern for a period of at least one year from the date of issuance of the consolidated financial statements included in this Quarterly Report on Form 10-Q.
In an effort to alleviate these conditions, PCT is currently performing certain operational enhancements that are expected to correct the production issues with the Ironton Facility. Further, on March 5, 2024, PureCycle Technologies LLC ("PCT LLC") purchased 99% of the outstanding Bonds, which used $50.8 million, net, of unrestricted cash, and reduced Restricted Cash by $207.1 million. The purchased Bonds are held in an account with PCT LLC. PCT intends to, and has the ability to, re-market some or all of these Bonds 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 and Term Loan Credit Agreement. After considering management’s plans to mitigate these conditions, including adjustment of expenditure timing and execution of the amendment to the Revolving Credit Facility, PCT believes this substantial doubt has been alleviated and it has sufficient liquidity to continue as a going concern for the next twelve months.
41
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
PCT’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, and other challenges or unforeseen circumstances. As a low-revenue operating company, PCT continually reviews its cash outlays, pace of hiring, professional services and other spend, and capital commitments to proactively manage those needs in tandem with our Available Unrestricted Liquidity balance. For future growth and investment, PCT expects to seek additional debt or equity financing from outside sources, which it may not be able to raise on terms favorable to PCT, or at all. If PCT is unable to raise additional debt or sell additional equity when desired, or if PCT is unable to manage its cash outflows, PCT’s business, financial condition, and results of operations would be adversely affected. In addition, any financing arrangement may have potentially adverse effects on PCT 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 PCT’s operating flexibility. If PCT consummates an equity financing to raise 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 PCT’s common stock.
PCT has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. PCT does 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, except %) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Change |
|
||||
Net cash used in operating activities |
|
$ |
(39,178 |
) |
|
$ |
(14,755 |
) |
|
$ |
(24,423 |
) |
|
|
166 |
% |
Net cash provided by investing activities |
|
|
32,027 |
|
|
|
52,739 |
|
|
|
(20,712 |
) |
|
|
(39 |
)% |
Net cash used in financing activities |
|
|
(255,423 |
) |
|
|
(1,632 |
) |
|
|
(253,791 |
) |
|
|
15,551 |
% |
Cash and cash equivalents, beginning of period |
|
|
302,514 |
|
|
|
227,523 |
|
|
|
74,991 |
|
|
|
33 |
% |
Cash and cash equivalents, end of period |
|
$ |
39,940 |
|
|
$ |
263,875 |
|
|
$ |
(223,935 |
) |
|
|
(85 |
)% |
Cash Flows from Operating Activities
The $24.4 million increase in net cash used in operating activities for the three months ending March 31, 2024 compared to the same period in 2023 was primarily attributable to higher interest payments on debt of $16.4 million (including $8.6 million paid for the green convertible notes and $5.9 million in outstanding interest paid in connection with the purchase of the Revenue Bonds), an increase in cash payments related to operating expenses of $5.5 million primarily driven by an increase in operational site costs at the Ironton Facility, higher cash paid related to employee costs of approximately $3.2 million, higher lease payments for operating facilities and equipment rentals of approximately $0.8 million, partially offset by higher interest income of $1.7 million driven primarily by interest earned on the Company’s investment portfolio.
42
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
Cash Flows from Investing Activities
The $20.7 million decrease in cash provided by investing activities for the three months ending March 31, 2024 compared to the same period in 2023 was attributable to $30.6 million higher investment purchases and $22.4 million lower maturities and sales of investments, offset by $32.3 million lower capital expenditure payments.
Cash Flows from Financing Activities
The $253.8 million increase in net cash used in financing activities for the three months ending March 31, 2024 compared to the same period in 2023 was primarily attributable to $253.2 million paid to purchase the outstanding Revenue Bonds.
Indebtedness
There have been no material changes regarding the Company's 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 (“Notes Payable and Debt Instruments”) to the Notes to the Interim Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Company's outstanding indebtedness.
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 PureCycle Technologies, Inc. (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 Lawrence County, Ohio (the “Ironton Facility”). Capitalized terms used but not defined herein have the meanings ascribed thereto in the Indenture.
The Revenue Bonds were offered in three series, including (i) Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020A (“Series 2020A Bonds”); (ii) Subordinate Exempt Facility Revenue 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").
All of the Bonds are Outstanding under the Indenture. PureCycle Technologies LLC, a Delaware limited liability company (the “Guarantor”), purchased $246.8 million in aggregate principal amount of Bonds Outstanding under the Indenture on March 5, 2024, of which $216.8 million in aggregate principal amount are Series 2020A Bonds, and continues to hold all of those purchased Bonds such that the Guarantor comprises the Majority Holders. The Purchase was determined to be an extinguishment of the underlying debt obligation due to PCO being a wholly-owned subsidiary of the Purchaser. PCT intends to, and has the ability to, re-market some or all of these Bonds 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.
43
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
On March 25, 2024, SOPA, as Issuer, PCO, the Guarantor, PCTO Holdco LLC, a Delaware limited liability company and affiliate of PCO (the pledgor under the Equity Pledge and Security Agreement) 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 $22.1 million from the Senior Bonds Debt Service Reserve Fund and $3.3 million from the Repair and Replacement Fund, in each case, to PCO. In addition, the Fourth Supplemental Indenture provides that the Senior Bonds Debt Service Reserve Requirement, the Subordinate Bonds Debt Service Reserve Requirement, and the Repair and Replacement Fund Requirement shall each be reduced to $0, respectively, and that certain provisions of the Indenture and/or the Loan Agreement, as applicable, relating to the funding and maintenance of the Senior Bonds Debt Service Reserve Fund, the Subordinate Bonds Debt Service Reserve Fund, and the Repair and Replacement Fund, will be suspended until the effectiveness of an amendment to the Indenture, the Loan Agreement and/or other applicable Financing Documents provides otherwise in accordance with the terms of the Indenture, the Loan Agreement and such other applicable Financing Documents.
See Part II, Item 5 of this Quarterly Report on Form 10-Q for additional information regarding the Bonds from the period covered by this Quarterly Report on Form 10-Q to the filing of this Quarterly Report on Form 10-Q.
Sylebra Credit Facility
On March 15, 2023, PCT entered into a $150 million revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement (as amended, the “Revolving Credit Agreement”) dated as of March 15, 2023, with PureCycle Technologies Holdings Corp. and PureCycle Technologies, LLC (the “Guarantors”), Sylebra Capital Partners Master Fund, LTD, Sylebra Capital Parc Master Fund, and Sylebra Capital Menlo Master Fund (collectively, the “Lenders”), and Madison Pacific Trust Limited (the “Administrative Agent” and “Security Agent”). The Lenders and their affiliates are greater than 5% beneficial owners of PCT.
On March 1, 2024, PCT increased the Revolving Credit Facility from $150.0 million to $200.0 million, extended the maturity date to September 30, 2025, and obtained a carveout to permit the Company to purchase the Revenue Bonds, pursuant to an amendment to the Revolving Credit Agreement.
The Pure Plastic Term Loan Facility
On May 8, 2023, the Company entered into a $40 million term loan facility pursuant to the Term Loan Credit Agreement ("Term Loan Credit Agreement") dated as of May 8, 2023, among the Guarantors and Pure Plastic LLC (as Lender, Administrative Agent, and Security Agent), which matures on December 31, 2025 (the “Term Loan Facility”). The Term Loan Credit Agreement was amended on August 21, 2023. Affiliates of the Lender are greater than 5% beneficial owners of the Company.
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 $150.0 million to $200.0 million and obtained a carve out to permit the Company to purchase the Revenue Bonds. Each of PureCycle Technologies Holdings Corp. and PureCycle Technologies, LLC are subsidiaries of the Company.
Financial Assurance
On March 14, 2024, PCT renewed a surety bond in the amount of $25.0 million to provide financial assurance related to its performance under a certain vendor contract, which expires at the earlier of satisfaction of the obligation, termination of the related vendor contract, or one year from issuance (subject to renewal within one year).
44
PureCycle Technologies, Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
These financial instruments are issued in the normal course of business and are not considered company indebtedness. Because PCT currently has no liability for these financial assurance instruments, they are not reflected in its consolidated balance sheets.
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.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed consolidated interim 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.
45
PureCycle Technologies, Inc.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks as of March 31, 2024 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
PCT’s management, with the participation of its principal executive and financial officers, has evaluated the effectiveness of its disclosure controls and procedures in ensuring that the information required to be disclosed in reports that it files or submits 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, PCT’s principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of March 31, 2024 (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, PCT’s internal control over financial reporting.
46
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 11 (“Commitments and Contingencies”) to the Notes to the Interim Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10‑Q.
In the future, PCT may become party to additional legal matters and claims arising in the ordinary course of business. While PCT 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.
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 2024:
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 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
February 1 to February 29 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
March 1 to March 31 |
|
|
98,651 |
|
|
6.07 |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
|
98,651 |
|
|
$ |
6.07 |
|
|
|
— |
|
|
$ |
— |
|
* Shares withheld to cover tax withholding obligations under the net settlement provision upon vesting of restricted stock units
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
Not applicable.
47
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION — CONTINUED
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
MINE SAFETY DISCLOSURES None of the Company’s directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K, during the Company’s fiscal quarter ended March 31, 2024.
Entry into a Material Definitive Agreement
On May 7, 2024, PCT LLC entered into an agreement with Pure Plastic LLC (“Pure Plastic”), a Delaware limited liability company, whereby Pure Plastic will purchase approximately $94.3 million in aggregate par amount of Bonds owned by PCT LLC (the “Purchased Bonds”), including (i) a portion of the Series 2020A Bonds, (ii) all of the Series 2020B Bonds, and (iii) all of the Series 2020C Bonds, at a purchase price of $800 per $1,000 principal amount of the Purchased Bonds (the “Pure Plastic Purchase Agreement”). Affiliates of Pure Plastic are greater than 5% beneficial owners of the Company.
As total consideration for the Purchased Bonds, the aggregate amount of principal outstanding, together with accrued but unpaid interest thereon, of approximately $45.5 million under the Term Loan Facility will be deemed to be prepaid in full and PCT LLC will receive $30 million in cash, as further provided for in the Payoff and Release Letter (as defined below).
The closing of the transactions contemplated by the Pure Plastic Purchase Agreement will occur in three tranches, with each tranche subject to the satisfaction of certain conditions.
The Pure Plastic Purchase Agreement requires PCT LLC to make best efforts to:
Pursuant to the Payoff and Release Letter, by and among the Company, the Credit Facility Guarantors (as defined in the Pure Plastic Purchase Agreement) and Pure Plastic (the “Payoff and Release Letter”), which is to be entered into as of the Initial Closing Date (as defined in the Pure Plastic Purchase Agreement), the Company is required to pay a 12% prepayment premium on the outstanding principal and interest paid in order to prepay the Term Loan Facility (the “Prepayment Premium”) plus certain expenses.
48
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION — CONTINUED
The Company will issue warrants (“Series B Warrants”) to Pure Plastic pursuant to a Series B Warrant Agreement to satisfy the Prepayment Premium (the “Series B Warrant Agreement”). The Series B Warrants entitle Pure Plastic to purchase approximately 3.1 million shares of the Company's Common Stock at a price of $11.50 per share any time on or after November 6, 2024. The Series B Warrants will expire on December 1, 2030. The Company will pay the expenses in cash.
The Payoff and Release Letter also provides that if the Term Loan Facility is not paid off by a certain date, the Payoff Amount (as defined therein) will be increased by a specific amount on a daily basis. The Payoff and Release Letter will terminate and be of no force or effect if the Payoff Date (as defined therein) does not occur by 5:00 p.m. (Eastern Time) on May 17, 2024.
Lastly, the Payoff and Release Letter provides that all of the Obligations (as defined therein) under the Term Loan Facility shall be deemed paid and satisfied in full upon the satisfaction of certain conditions and, furthermore, upon the satisfaction of such conditions, all liens securing the Obligations shall be deemed to be fully released and discharged.
The foregoing descriptions of the Pure Plastic Purchase Agreement, the Fifth Supplemental Indenture (which is included as Exhibit D to the Pure Plastic Purchase Agreement), the Payoff and Release Letter, and the Series B Warrant Agreement (which is included as Exhibit B to the Payoff and Release Letter) and are not complete and are qualified in their entirety by reference to the full text of the agreements or the “form of” the agreements, which are attached hereto as Exhibits 10.6, 10.7, 10.8, and 10.9 and incorporated herein by reference.
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information contained under the section above entitled “Entry into a Material Definitive Agreement” is incorporated here by reference. Upon the occurrence of an Event of Default (as defined in the Indenture), the amount outstanding under the Bonds may be accelerated. Refer to Note 3 (“Notes Payable and Debt Instruments”) to the Notes to the Interim Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the material terms of the Bonds.
Unregistered Sales of Equity Securities
The information contained under the section above entitled “Entry into a Material Definitive Agreement” is incorporated here by reference. The Company offered and sold the Purchased Bonds and the Series B Warrants to Pure Plastic in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D thereunder. Pure Plastic represented that it is an “accredited investor” within the meaning of Regulation D under the Securities Act and that it acquired the securities for investment purposes, and not with a current view to, or for resale in connection with, any distribution, resale, pledging, fractionalization, subdivision or other disposition thereof. The securities are not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
49
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 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
10.4 |
|
|
|
|
|
10.5 |
|
|
|
|
|
10.6 |
|
|
|
|
|
10.7 |
|
|
|
|
|
50
PureCycle Technologies, Inc.
PART II — OTHER INFORMATION — CONTINUED
10.8 |
|
Form of Payoff and Release Letter, by and among PureCycle Technologies, Inc. as the Borrower, PureCycle Technologies LLC and PureCycle Technologies Holdings Corp., as Guarantors, and Pure Plastic LLC, as the Administrative Agent and Security Agent* † |
|
|
|
10.9 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
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, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language): |
|
|
(i) Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023. |
|
|
(ii) Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023. |
|
|
(iii) Unaudited Condensed Consolidated Statements of Stockholders Equity for the Three Months Ended March 31, 2024 and 2023. |
|
|
(iv) Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023. |
|
|
(v) Notes to the Interim Condensed Consolidated Financial Statements. |
|
|
|
104.1 |
|
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
† 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.
51
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. |
||
(Registrant) |
||
By: |
|
/s/ Dustin Olson |
Dustin Olson |
||
Chief Executive Officer |
||
(Principal Executive Officer) |
By: |
|
/s/ Jaime Vasquez |
Jaime Vasquez |
||
Chief Financial Officer |
||
(Principal Financial Officer) |
||
|
||
Date: May 8, 2024 |
52
Exhibit 10.6
BOND PURCHASE AGREEMENT
This BOND PURCHASE AGREEMENT (this “Agreement”) is entered into as of May 7, 2024, by and between Pure Plastic LLC, a Delaware limited liability company (the “Purchaser”), and PureCycle: Technologies LLC, a Delaware limited liability company, qualified to do business in the State of Ohio (the “Seller” or the “Guarantor” and together with the Purchaser, the “parties”). Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Indenture (as defined herein).
WHEREAS, Southern Ohio Port Authority, a port authority and a body corporate and politic duly organized under the laws of the State of Ohio (the “Issuer”) and UMB Bank, N.A., as trustee (the “Trustee”), are party to that certain Indenture of Trust, dated as of October 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), pursuant to which the Issuer has issued the $219,550,000 Southern Ohio Port Authority Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020A (the “Series 2020A Bonds” or the “Senior Bonds”), the $20,000,000 Southern Ohio Port Authority Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020B (the “Series 2020B Bonds” and together with the Series 2020A Bonds, the “Tax-Exempt Bonds”), and the $10,000,000 Southern Ohio Port Authority Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Taxable Series 2020C (the “Series 2020C Bonds” or the “Taxable Bonds” and together with the Series 2020B Bonds, the “Subordinate Bonds”, and together with the Tax-Exempt Bonds, the “Bonds”);
WHEREAS, all of the Bonds are Outstanding;
WHEREAS, the Issuer and PureCycle: Ohio LLC, an Ohio limited liability company (the “Company”) are party to that certain Loan Agreement, dated as of October 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), pursuant to which the proceeds derived from the issuance and sale of the Bonds have been loaned to the Company in order to assist the Company in, among other things, financing the acquisition, construction, equipping and installation of a portion of a plastics recycling facility located in Lawrence County, Ohio;
WHEREAS, the Seller is party to that certain Amended and Restated Guaranty of Completion, entered into as of May 11, 2021, and effective as of October 7, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), pursuant to which the Seller, in its capacity as Guarantor, has provided a guaranty with respect to Obligations of the Company under the Loan Agreement on the terms set forth therein in favor of the Trustee;
WHEREAS, pursuant to that certain Purchase Agreement and Consent dated as of March 5, 2024, Guarantor purchased (i) all of the Subordinate Bonds, and (ii) all but $2,800,000 in aggregate principal amount of the Senior Bonds; and as of this date, the Guarantor is the Holder of the aforesaid Subordinate Bonds and all but $2,800,000 of the Senior Bonds;
WHEREAS, the Seller is willing to sell to Purchaser those Bonds listed on Exhibit A to this Agreement (the “Purchased Bonds”), at a purchase price of $800 per $1,000 principal amount of Purchased Bonds (the “Purchase Price”) upon the terms and conditions set forth in this Agreement;
WHEREAS, the Purchaser agrees with the Seller that Purchaser will purchase the Purchased Bonds from Seller at the Purchase Price and upon the terms and conditions set forth herein; WHEREAS, on May 8, 2023, PureCycle Technologies, Inc., a Delaware corporation and parent of the Seller and the Company (“PCT Inc.”), entered into $40.0 million Term Loan Facility (the “Loan”) pursuant to a Term Loan Credit Agreement dated as of May 8, 2023, as amended August 21, 2023 and March 1, 2024 (the “Term Loan Credit Agreement”), among PCT Inc., PureCycle Technologies Holdings Corp. and the Seller (collectively, the “Credit Facility Guarantors”), and the Purchaser, which matures on December 31, 2025;
WHEREAS, amounts outstanding under the Term Loan Credit Agreement bear interest at a variable annual rate equal to Term SOFR (as defined in the Term Loan Credit Agreement) in effect for such period plus an applicable margin equal to 7.5%, and the interest rate for the outstanding Loan was 12.91929% as of May 6, 2024; the Loan was issued with a 5% original issue discount; and there is a prepayment premium of 12% of the amount paid (the “Prepayment Premium Amount”);
WHEREAS, as of May 10, 2024, the aggregate amount of principal outstanding, together with accrued but unpaid interest thereon under the Term Loan Credit Agreement is Forty-Five Million Four Hundred Fifty Thousand Five Hundred and Thirty-Eight Dollars ($45,450,538) (the “Outstanding Principal and Interest Payoff Amount”), all as more particularly described in that certain Payoff and Release Letter dated as of Initial Closing Date (the “Payoff and Release Letter”) by and among PCT, Inc., the Credit Facility Guarantors and the Purchaser;
WHEREAS, the Purchaser and the Seller agree that the Purchase Price for the Purchased Bonds shall be paid to the Seller by the Purchaser (i) by the deemed satisfaction of the Outstanding Principal and Interest Payoff Amount in accordance with and subject to the terms and conditions of the Payoff and Release Letter to be delivered on the Initial Closing Date, (ii) together with cash in the amount of Thirty Million Dollars ($30,000,000), to be paid as provided herein, and that any and all other Payoff Amounts (as defined in the Payoff and Release Letter) payable in connection with Payoff and Release Letter, including, with limitation, any Prepayment Premium Amount (all such Payoff Amounts other than the Outstanding Principal and Interest Amount, the “Other Payoff Amounts”), shall be paid by PCT, Inc. from other sources and in the manner provided in the Payoff and Release Letter;
NOW, THEREFORE, in consideration of the premises and the mutual agreements contained in this Agreement, and for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows:
2
(A) Seller shall obtain from Frost Brown Todd LLP (“Bond Counsel”) a reliance letter addressed to Purchaser permitting Purchaser to rely on the opinion of Bond Counsel dated March 26, 2024 stating that execution and delivery of the Fourth Supplemental Indenture will not adversely affect the exclusion from gross income of interest on the Tax-Exempt Bonds for federal income tax purposes; provided, however, that interest on any Tax-Exempt Bond for any period during which such Tax-Exempt Bond is held by a "substantial user" of the facilities financed by the Tax-Exempt Bonds, or a "related person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as Amended (the "Code"), is not excludible from gross income for purposes of federal income taxation pursuant to Section 103 of the Code. Such form of opinion is referred to herein as the “Tax Opinion.”
(B) Seller shall obtain a Tax Opinion related to the Tax-Exempt Bonds from Bond Counsel with respect to the execution of this Bond Purchase Agreement together with a reliance letter addressed to Purchaser permitting Purchaser to rely on such Tax Opinion.
(C) Seller shall obtain from Bond Counsel the forms of Tax Opinion and reliance letters addressed to the Purchaser that it will deliver on the date of adoption of the Supplemental Indentures referred to in Sections 5(a) and 5(b) below with respect to the Tax-Exempt Bonds and Bond Counsel’s statement that, with appropriate assumptions, it will deliver those opinions and reliance letters on adoption of the Fifth Supplemental Indenture and the Sixth Supplemental Indenture (each, as defined herein), respectively.
3
4
5
6
[Remainder of Page Intentionally Left Blank]
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
|
|
|
|
|
|
|
SELLER: PureCycle Technologies LLC
By: /s/ Brad S. Kalter Brad S. Kalter Secretary
PURCHASER: Pure Plastic LLC
By: /s/ Dan Gibson
|
||||
|
|
[Signature page to Bond Purchase Agreement]
Exhibit A
Purchased Bonds
Par Amount CUSIP Numbers
$10,000,000 84355A AF9
$10,000,000 84355A AE2
$10,000,000 84355A AD4
$12,370,000 84355A AA0
$26,945,000 84355A AB8
$69,315,000
Par Amount CUSIP Number
$6,250,000 84355A AB8
Par Amount CUSIP Numbers
$ 5,505,000 84355A AB8
$13,245,000 84355A AC6
$18,750,000
Exhibit B
Investor Letter
FORM OF INVESTOR LETTER
May [10], 2024
PureCycle Technologies LLC
5950 Hazeltine National Drive, Suite 300
Orlando, Florida 32822
Locke Lord LLP
7850 Five Mile Road
Cincinnati, OH 45230
Re: $10,000,000 Southern Ohio Port Authority Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Taxable Series 2020C (the “Series 2020C Bonds”);
$20,000,000 Southern Ohio Port Authority Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020B (the “Series 2020B Bonds”); and
$_______________ Southern Ohio Port Authority Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020A (the “Series 2020A Bonds” and collectively with the Series 2020C Bonds and the Series 2020B Bonds, the “Bonds”)
Ladies and Gentlemen:
The undersigned, being the purchaser (the “Purchaser”) of the above-referenced Bonds from PureCycle Technologies LLC (the “Seller”) on this date, hereby represents and acknowledges to you as follows:
PURE PLASTIC LLC
By: _________________________________
Name: _______________________________
Title: ________________________________
Exhibit C
Wire Instructions for Seller’s Account
XXXXXXXXXXX
ABA #XXXXXXXXXXX
Account Name: XXXXXXXXXXXXX
Account No.: XXXXXXXXXXXXXX
Further Credit: XXXXXXXXXXXXXX
Exhibit D
Substantial Form of Fifth Supplemental Indenture
FIFTH SUPPLEMENTAL INDENTURE
This FIFTH SUPPLEMENTAL INDENTURE, dated as of _______. 2024 (this “Fifth Supplemental Indenture”), is entered into by and among SOUTHERN OHIO PORT AUTHORITY, a port authority and a body corporate and politic duly organized under the laws of the State of Ohio (the “Issuer”), PURECYCLE: OHIO LLC, a limited liability company organized and existing under the laws of the State of Ohio (the “Company”), PURECYCLE TECHNOLOGIES LLC, a Delaware limited liability company (the “Guarantor”), PCTO HOLDCO LLC, a Delaware limited liability company (the “Pledgor”; and together with the Company and the Guarantor, the “Company Parties”), and UMB BANK, N.A., a national banking association duly organized, existing and authorized to accept and execute trusts of the character herein set out under the laws of the United States and having a corporate trust office in Minneapolis, Minnesota, as trustee (the “Trustee”). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Indenture (as defined below).
WITNESSETH:
WHEREAS, the Issuer and the Trustee are party to that certain Indenture of Trust, dated as of October 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), pursuant to which the Issuer has issued its $219,550,000 Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020A (the “Series 2020A Bonds” or the “Senior Bonds”), its $20,000,000 Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020B (the “Series 2020B Bonds” and, together with the Series 2020A Bonds, the “Tax-Exempt Bonds”), and its $10,000,000 Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Taxable Series 2020C (the “Series 2020C Bonds” and, together with the Series 2020B Bonds, the “Subordinate Bonds” and, the Series 2020C Bonds collectively with the Series 2020A Bonds and Series 2020B Bonds, the “Bonds”);
WHEREAS, the Issuer and the Company are party to that certain Loan Agreement, dated as of October 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), pursuant to which the proceeds derived from the issuance and sale of the Bonds have been loaned to the Company in order to, among other things, assist the Company in financing the acquisition, construction, equipping and installation of a portion of a plastics recycling facility located in Lawrence County, Ohio;
WHEREAS, the Guarantor is party to that certain Amended and Restated Guaranty of Completion, entered into as of May 11, 2021, and effective as of October 7, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), pursuant to which the Guarantor has provided a guaranty with respect to the Obligations (as defined in the Guaranty) of the Company on the terms set forth therein, in favor of the Trustee;
WHEREAS, the Pledgor is party to that certain Equity Pledge and Security Agreement, dated as of October 7, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Equity Pledge and Security Agreement”), pursuant to which the Pledgor has secured the Company’s obligations under the Financing Documents and Bond Documents by, among other things, pledging the Pledged Interests (as defined in the Equity Pledge and Security Agreement) to the Trustee on the terms set forth therein; WHEREAS, pursuant to the terms of that certain Purchase Agreement and Consent, dated as of March 5, 2024, by and among the Company, the Guarantor, and each of the other signatories thereto, the Guarantor purchased, and as of the date hereof is the Holder of, (i) all of the Outstanding Subordinate Bonds, and (ii) $216,750,000 in aggregate principal amount of the Outstanding Senior Bonds, with the effect that, as of the date hereof the Guarantor is the Holder of a majority in aggregate principal amount of the Senior Bonds Outstanding and, therefore, constitutes the Majority Holders;
WHEREAS, the Company has requested that the Trustee, at the direction of the Majority Holders, amend certain provisions of the Indenture and other Financing Documents as described herein;
WHEREAS, pursuant to such request, the Guarantor, in its capacity as Majority Holders, has agreed to amend certain provisions of the Indenture and other Financing Documents, subject to the terms and conditions set forth herein, and has directed the Trustee to execute this Fifth Supplemental Indenture pursuant to that certain Direction and Indemnity, dated as of _____, 2024 (the “Direction and Indemnity”); and
WHEREAS, at the request of the Company, by passage on ______, 2024 of Resolution No. 2024- ___ by its Board of Directors (the “Amending Resolution”), the Issuer has approved the substantial form of the Fifth Supplemental Indenture and authorized its execution and delivery.
NOW, THEREFORE, in consideration of the foregoing recitals, mutual agreements contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1.Amendments to the Indenture. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 hereof:
(a) Section 1.01 of the Indenture is hereby amended by adding the following defined term in appropriate alphabetical order:
““Fifth Supplemental Indenture” means the Fifth Supplemental Indenture, dated as of _________, 2024, by and among the Issuer, the Company, the Guarantor, the Pledgor, and the Trustee, as amended, restated, supplemented or otherwise modified from time to time.”
(b) The definition of “Majority Holders” set forth in Section 1.01 of the Indenture is hereby deleted and replaced by the following definition:
““Majority Holders” means (i) so long as any Senior Bonds are Outstanding, the Holders of seventy-five percent (75%) in aggregate principal amount of the Senior Bonds then Outstanding, and (ii) if no Senior Bonds are then Outstanding, the Holders of seventy-five percent (75%) in aggregate principal amount of Bonds then Outstanding.”
(c) Notwithstanding anything to the contrary in the Indenture, the Loan Agreement or any other Financing Document or Bond Document, the lead-in paragraph of Section 10.02(a) of the Indenture shall be deleted in its entirety and replaced with the following text:
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“(a) Except as provided in Section 10.01 hereof, the Holders of not less than 75% in aggregate principal amount of the Outstanding Senior Bonds shall have the right, from time to time, to consent to and approve the execution by the Issuer and the Trustee of such Supplemental Indentures as shall be deemed necessary and desirable by the Issuer for the purpose of modifying, altering, amending, adding to or rescinding any of the terms or provisions contained in this Indenture, any Supplemental Indenture or the Bonds; provided, however, that nothing contained in this Section shall permit:”
SECTION 2.Representations And Warranties Of Company Parties. In order to induce the Trustee to enter into this Fifth Supplemental Indenture, each Company Party hereby represents and warrants that:
(a) Each Company Party (i) is a corporation, partnership or limited liability company duly organized, validly existing, and in active status or good standing under the laws of its state of incorporation or formation, (ii) has the corporate or limited liability company power and authority to own or lease and operate its properties and to carry on its business as now being and hereafter proposed to be conducted, and (iii) is duly qualified and is in active status or good standing as a foreign corporation or limited liability company, and authorized to do business, in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization, except with respect to this clause (iii) where the failure to qualify, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
(b) Each Company Party has the power and has taken all necessary action, corporate or otherwise, to authorize it to execute, deliver, and perform its obligations under this Fifth Supplemental Indenture and each of the other Financing Documents and Bond Documents to which it is a party in accordance with the terms thereof and to consummate the transactions contemplated hereby and thereby. Each of this Fifth Supplemental Indenture and each other Financing Document and Bond Document to which a Company Party is a party has been duly executed and delivered by such Company Party, and is a legal, valid and binding obligation of such Company Party, enforceable against it in accordance with its terms except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditor’s rights generally or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).
(c) The execution, delivery, and performance of this Fifth Supplemental Indenture and each of the other Financing Documents and Bond Documents in accordance with their respective terms and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate any applicable law, except where any such violation could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (ii) conflict with, result in a breach of or constitute a default under the certificate of incorporation or formation, by-laws, partnership agreement, operating agreement or other governing documents of any Company Party or under any contract to which any Company Party is a party or by which any Company Party or any of its properties may be bound, or (iii) result in or require the creation or imposition of any Lien upon or with any assets or property of any Company Party except Permitted Liens.
(d) All of the representations and warranties of the Company Parties under this Fifth Supplemental Indenture and the other Financing Documents and Bond Documents (after giving effect to this Fifth Supplemental Indenture) are true and correct in all material respects (without duplication of any materiality qualifier contained herein or therein, as applicable), and there exists no Default or Event of Default, in each case after giving effect to this Fifth Supplemental Indenture.
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SECTION 3.Representations And Warranties Of Issuer. In order to induce the Trustee to enter into this Fifth Supplemental Indenture, the Issuer hereby represents and warrants that:
(a) The Issuer is a port authority and body corporate and politic validly existing under the laws of the State.
(b) The Issuer has the necessary power under the Act and has duly taken all action on its part required to execute and deliver this Fifth Supplemental Indenture, to undertake the transactions contemplated by this Fifth Supplemental Indenture and to carry out its obligations hereunder.
(c) Neither the execution and delivery of this Fifth Supplemental Indenture, the consummation of the transactions contemplated hereby nor the fulfillment of or compliance with the provisions of this Fifth Supplemental Indenture will conflict with or result in a breach by the Issuer of any of the terms, conditions or provisions of the Act or any restriction, agreement, instrument, order or judgment to which the Issuer is a party or by which it is bound, or will constitute a default by the Issuer under any of the foregoing.
(d) Pursuant to the Amending Resolution, the Issuer has duly authorized the execution and delivery of this Fifth Supplemental Indenture.
(e) When duly executed and delivered on behalf of the Issuer, and assuming the due authorization, execution and delivery by the other parties hereto, this Fifth Supplemental Indenture shall constitute a valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms; provided, that the enforceability of this Fifth Supplemental Indenture may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors’ rights generally and the application of general principles of equity.
(f) To the best knowledge of the Issuer, as of this date, there is no action, suit or proceeding at law or in equity, pending or threatened against the Issuer to restrain or enjoin the execution and delivery of this Fifth Supplemental Indenture or in any way contesting the validity or affecting the power of the Issuer with respect to the documents or instruments executed by the Issuer in connection herewith or the existence of the Issuer or the power or the right of the Issuer to enter into this Fifth Supplemental Indenture.
(g) The Amending Resolution was duly passed by the Issuer at a public meeting of the Board of Directors of the Issuer held in accordance with all applicable laws and at which a quorum was present and acting throughout, and the Amending Resolution remains in full force and effect and has not been repealed, amended, modified or superseded.
(h) The Issuer has no knowledge of (i) any existing Event of Default under the Indenture, or (ii) any event, fact or circumstance that, with the passage of time, the giving of notice or both, could constitute an Event of Default under the Indenture.
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SECTION 4.Conditions Precedent To Effectiveness. This Fifth Supplemental Indenture shall be effective upon the satisfaction of each of the following conditions:
(a) The Trustee shall have received (i) this Fifth Supplemental Indenture, duly executed by each of the Issuer, the Company, the Guarantor, the Pledgor, and the Trustee, and (ii) the Direction and Indemnity, duly executed by the Guarantor in its capacity as Majority Holders.
(b) The representations and warranties of the Company Parties contained herein shall be true and correct in all material respects (without duplication of any materiality qualifier), and there shall exist no Default or Event of Default, in each case after giving effect to this Fifth Supplemental Indenture (and the Trustee shall have received a certificate of an Authorized Representative of the Company, the Guarantor and the Pledgor certifying as to the matters set forth in this clause (b)).
(c) The representations and warranties of the Issuer contained herein shall be true and correct in all material respects (and the Trustee shall have received a certificate of the Issuer certifying as to the matters set forth in this clause (c)).
(d) The Trustee shall have received an Officer’s Certificate and opinion of Independent Counsel covering such matters as required pursuant to the Indenture and such other matters as are reasonably requested by the Trustee or the Majority Holders.
(e) The Trustee shall have received a customary legal opinion of Locke Lord LLP, counsel to the Company Parties, in form and substance reasonably satisfactory to the Trustee and the Majority Holders.
(f) The Company shall have reimbursed the Trustee for all reasonable and documented out-of-pocket costs and expenses, including the reasonable fees and disbursements of Arnold & Porter Kaye Scholer LLP in connection with the review and execution of this Fifth Supplemental Indenture.
(g) The Trustee shall have received a certificate of the secretary or assistant secretary of each of the Company, the Guarantor and the Pledgor, certifying (A) that attached thereto is a true and complete copy of each organizational document of such applicable party certified (to the extent applicable) as of a recent date by the Secretary of State of the state of its organization, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors (or equivalent governing body) of such applicable party authorizing the execution, delivery and performance of this Fifth Supplemental Indenture and that such resolutions have not been modified, rescinded or amended and are in full force and effect, and (C) as to the incumbency and specimen signature of each officer executing this Fifth Supplemental Indenture or any other document delivered in connection herewith on behalf of such applicable party (together with a certificate of another officer as to the incumbency and specimen signature of the secretary or assistant secretary executing the certificate required by this clause (g)).
(h) The Trustee shall have received a certificate as to the good standing (to the extent such concept is legally recognized in the applicable jurisdiction) of each of the Company, the Guarantor and the Pledgor (in so-called “long-form” if available) as of a recent date, from the Secretary of State of the state of its organization.
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(i) The Trustee shall have received a certificate of the Issuer covering such matters as are reasonably requested by the Trustee or the Majority Holders.
SECTION 5.Reference To And Effect Upon The Financing Documents.
(a) Except as expressly modified hereby, all terms, conditions, covenants, representations and warranties contained in the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, and the other Financing Documents and Bond Documents, and all rights of the Trustee and the Holders and all of the obligations of the Company Parties, shall remain in full force and effect. Each of the Company Parties hereby confirms that the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, and the other Financing Documents and Bond Documents are in full force and effect and that, as of the date hereof, no Company Party has any right of setoff, recoupment or other offset or any defense, claim or counterclaim with respect to any of the obligations of the Company Parties pursuant to the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, and the other Financing Documents and Bond Documents.
(b) Except as expressly provided herein, the execution, delivery and effectiveness of this Fifth Supplemental Indenture shall not directly or indirectly (i) constitute a consent or waiver of any past, present or future violations of any provisions of the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, this Fifth Supplemental Indenture, and the other Financing Documents and Bond Documents, or (ii) amend, modify, or operate as a waiver of any provision of the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, and the other Financing Documents and Bond Documents or any right, power, or remedy of the Trustee or any Holder.
(c) From and after the date on which this Fifth Supplemental Indenture shall be effective, (i) all references to the Indenture, the Loan Agreement, or the Guaranty in any Financing Document or Bond Document, shall mean such agreement, as modified hereby, and (ii) the term “Financing Documents” or “Bond Documents” in the Indenture, the Loan Agreement, the Guaranty, and the other Financing Documents and Bond Documents shall include, without limitation, this Fifth Supplemental Indenture and any agreements, instruments and other documents executed and/or delivered in connection herewith.
(d) This Fifth Supplemental Indenture shall not be deemed or construed to be a satisfaction, reinstatement, novation or release of the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, or any other Financing Document or Bond Document.
SECTION 6.Costs And Expenses. Notwithstanding anything to the contrary in the Indenture, Loan Agreement, the Guaranty, and the other Financing Documents and Bond Documents, the Company shall pay promptly after written demand therefor from and after the date of this Fifth Supplemental Indenture all reasonable and documented, out-of-pocket legal costs of the Trustee, in connection with the administration of the Indenture, Loan Agreement, the Guaranty, and the other Financing Documents and Bond Documents and any amendments, modifications or waivers thereof and in connection with the enforcement or protection of its rights in connection with the Indenture, Loan Agreement, the Guaranty, and the other Financing Documents and Bond Documents or in connection with the Bonds, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect thereof.
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SECTION 7.Issuer and Company Party Confirmations. Each of the Issuer and the Company Parties hereby confirm that all actions required to be taken by the Issuer, the Company, the Guarantor, the Pledgor, and the Trustee pursuant to the Indenture, the Loan Agreement, and the other Financing Documents and Bond Documents have been taken in accordance with such documents. Each of the Issuer and the Company Parties confirm that entry into this Fifth Supplemental Indenture is permitted under the Indenture, the Loan Agreement, and the other Financing Documents and Bond Documents.
SECTION 8.Reaffirmation. Except as expressly modified by this Fifth Supplemental Indenture, each of the Company Parties hereby (i) acknowledges and agrees that all of its pledges, grants of security interests and Liens and other obligations under the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, or any other Financing Document or Bond Document to which it is a party are reaffirmed and remain in full force and effect on a continuous basis, (ii) reaffirms (x) each Lien granted by it to the Trustee, and (y) in the case of the Guarantor, the guarantees made by it pursuant to the Guaranty, and (iii) acknowledges and agrees that the grants of security interests and Liens and other obligations and guarantees, as applicable, are, and shall remain, in full force and effect on and after the effective date of this Fifth Supplemental Indenture. Except as specifically modified herein, the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, and the other Financing Documents and Bond Documents and the obligations of the Company Parties thereunder are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms.
SECTION 9.Release. The Company, the Guarantor and the Pledgor (collectively, the “Releasing Parties”) hereby release, acquit and forever discharge the Trustee, the Holders, and their respective investment advisors and Affiliates, and any of their and their investment advisors’ and Affiliates’ respective officers, directors, agents, employees, attorneys, consultants, or representatives, or any of the respective predecessors, successors or assigns of any of the foregoing (collectively, the “Released Parties”) from and against any and all manner of actions, causes of action, suits, debts, controversies, damages, judgments, executions, claims (including, without limitation, crossclaims, counterclaims and rights of set-off and recoupment) and demands whatsoever, whether known or unknown, whether asserted or unasserted, in contract, tort, law or equity, which any Releasing Party may have against any of the Released Parties by reason of any action, failure to act, matter or thing whatsoever arising from or based on facts occurring on or prior to the date hereof that relate to the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, this Fifth Supplemental Indenture, the other Financing Documents or Bond Documents or the transactions contemplated thereby or hereby (except to the extent arising from the willful misconduct or gross negligence of any Released Parties), including, but not limited to, any such claim or defense to the extent that it relates to (a) any covenants, agreements, duties or obligations set forth in the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, this Fifth Supplemental Indenture, or the other Financing Documents or Bond Documents, or (b) any actions or omissions of any of the Released Parties in connection with the initiation or continuing exercise of any right or remedy contained in the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, this Fifth Supplemental Indenture, or the other Financing Documents or Bond Documents or at law or in equity with respect to the Indenture, the Loan Agreement, the Guaranty, the Equity Pledge and Security Agreement, this Fifth Supplemental Indenture, or the other Financing Documents or Bond Documents.
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SECTION 10.Trustee. For the avoidance of doubt, with respect to all matters contained in this Fifth Supplemental Indenture, the Trustee shall have all rights, protections, indemnities and exculpations set forth in the Indenture, the Loan Agreement, or any other Financing Document or Bond Document, and such rights, protections, indemnities and exculpations are hereby incorporated by reference herein.
SECTION 11.GOVERNING LAW; Jurisdiction.
(a) Governing Law. This Fifth Supplemental Indenture shall be governed exclusively by the applicable laws of the State of Ohio.
(b) Jurisdiction. To the fullest extent permitted by applicable law, the parties hereto irrevocably submit to the jurisdiction of the United States District Court or the United States Bankruptcy Court for the Southern District of Ohio or any State court located in Scioto County, Ohio or Lawrence County, Ohio, in any suit, action or proceeding based on or arising out of or relating to this Fifth Supplemental Indenture and irrevocably agree that all claims in respect of such suit or proceeding may be determined in any such court. The parties hereto irrevocably waive, to the fullest extent permitted by law, any objection which they may have to the laying of the venue in any such court. Any final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon the parties hereto and may be enforced in any courts to the jurisdiction of which each such party is subject by a suit upon such judgment; provided, that service of process is effected upon such party in the manner specified herein or as otherwise permitted by law.
(c) Waiver of Jury Trial. EACH OF THE COMPANY, THE ISSUER, THE HOLDERS, AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS FIFTH SUPPLEMENTAL INDENTURE, THE BONDS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 12.Headings. Section headings in this Fifth Supplemental Indenture are included herein for convenience of reference only and shall not constitute a part of this Fifth Supplemental Indenture for any other purposes.
SECTION 13.Severability. The illegality or unenforceability of any provision of this Fifth Supplemental Indenture or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Fifth Supplemental Indenture or any instrument or agreement required hereunder.
SECTION 14.Counterparts. This Fifth Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same agreement.
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In proving this Fifth Supplemental Indenture or any other Financing Document in any judicial proceedings, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom such enforcement is sought. Any signatures hereto delivered by Electronic Transmission shall be deemed an original signature hereto.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed and delivered by their duly authorized officers as of the day and year first above written.
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ISSUER: |
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SOUTHERN OHIO PORT AUTHORITY By:
COMPANY: PURECYCLE: OHIO LLC By:
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GUARANTOR: PURECYCLE TECHNOLOGIES LLC By:
PLEDGOR: PCTO HOLDCO LLC By:
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[Signature Page to Fifth Supplemental Indenture]
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TRUSTEE: |
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UMB BANK, N.A., as Trustee By: |
[Signature Page to Fifth Supplemental Indenture]
Exhibit E
Sixth Supplemental Indenture Covenants
Exhibit 10.8
PURE PLASTIC LLC
[______________________]
[______________________]
May [__], 2024
PureCycle Technologies, Inc.
5950 Hazeltine Drive Suite 300
Orlando, FL 32822
Attention: Jaime Vasquez, Chief Financial Officer
Email: jvasquez@purecycle.com
Re: Payoff and Release Letter
Reference is hereby made to the Credit Agreement dated as of May 8, 2023 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”) by and among PURECYCLE TECHNOLOGIES, INC., a Delaware Corporation (the “Borrower”), PURECYCLE TECHNOLOGIES HOLDINGS CORP., a Delaware Corporation (“Holdings”), PURE CYCLE TECHNOLOGIES, LLC, a Delaware limited liability company (“PureCycle LLC” and, together with Holdings, collectively, the “Guarantors”), the Lenders party thereto and PURE PLASTIC LLC, a Delaware limited liability company (“Pure Plastic”), as the Administrative Agent for the Lenders thereunder (in such capacity, the “Administrative Agent”) and Security Agent for the Secured Parties thereunder (in such capacity, the “Security Agent” and, together with the Administrative Agent, collectively, the “Agents”). Capitalized terms used and not otherwise defined herein shall have the same meanings as specified in the Credit Agreement.
Reference is further hereby made to the Bond Purchase Agreement dated as of May 7, 2024 (the “Bond Purchase Agreement”) by and between PureCycle LLC and Pure Plastic, pursuant to which, among other things, PureCycle LLC intends to sell to Pure Plastic certain Ironton Bonds (collectively, the “Purchased Bonds”), subject to the terms and conditions set forth therein.
In connection with the consummation of the transactions contemplated under the Bond Purchase Agreement, the Administrative Agent has been informed that on the Scheduled Payment Date (as defined below) the Borrower intends to pay and satisfy in full all of the Obligations, indebtedness and liabilities owing by the Loan Parties to the Secured Parties under and in respect of, and otherwise in accordance with, the Credit Agreement and the other Loan Documents (collectively, the “Obligations”).
Description |
$ Amount |
|
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Outstanding Principal plus Accrued but Unpaid Interest |
$45,450,538 |
Prepayment Premium |
$[3,200,000] |
Legal Fees and Expenses |
$[________] |
Payoff Amount |
[$ ] |
If the Payoff Date (as defined below) does not occur until after 12:00 noon (Eastern Time) on the Scheduled Payoff Date, the Payoff Amount shall be increased by $[__________] (the “Per Diem Amount”) on a daily basis until the Payoff Date. This Letter shall terminate and be of no force or effect if the Payoff Date does not occur by 5:00 p.m. (Eastern Time) on May 17, 2024. Nothing in this Letter, including the inclusion of the Per Diem Amount, shall be construed as an amendment to Section 2.07 of the Credit Agreement, which provides that all accrued and unpaid Obligations are due and payable on the Termination Date.
Name of Bank: |
[__________] |
ABA No.: |
[__________] |
Account Name: |
[__________] |
Account No.: |
[__________] |
Reference: |
[__________] |
-2-
Name of Bank: |
[__________] |
ABA No.: |
[__________] |
Account Name: |
[__________] |
Account No.: |
[__________] |
-3-
[remainder of the page intentionally left blank; signatures follow]
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Very truly yours,
PURE PLASTIC LLC, as Administrative Agent
By:
Name: Daniel Gibson
Title: Member
PURE PLASTIC LLC, as Security Agent
By:
Name: Daniel Gibson
Title: Member
[Signature Page to Payoff Letter (Pure Plastic Credit Agreement)]
AGREED TO AND ACCEPTED
AS OF THE DATE HEREOF:
BORROWER:
PURECYCLE TECHNOLOGIES, INC.
By:
Name: Dustin Olson
Title: Chief Executive Officer
GUARANTORS:
PURECYCLE TECHNOLOGIES HOLDINGS CORP.
By:
Name: Dustin Olson
Title: Chief Executive Officer
PURECYCLE TECHNOLOGIES, LLC
By:
Name: Dustin Olson
Title: Chief Executive Officer
[Signature Page to Payoff Letter (Pure Plastic Credit Agreement)]
EXHIBIT A
Bond Purchase Agreement
(see attached)
EXHIBIT B
Series B Warrant
(see attached)
EXHIBIT C
UCC-3 Termination Statements
(see attached)
EXHIBIT D
Intellectual Property Release
(see attached)
Exhibit 10.9
EXHIBIT B
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
SERIES B WARRANT PURECYCLE TECHNOLOGIES, INC.
Warrant Shares: |
3,003,000 |
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Initial Exercise Date: November 6, 2024 |
THIS SERIES B WARRANT (this “Series B Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after November 6, 2024 (the “Initial Exercise Date”) and on or prior to the earlier of (i) 5:00 p.m. (New York City time) on December 1, 2030 and (ii) the date fixed for redemption of the Series B Warrants (defined below) as provided in Section 4 (the “Termination Date”) but not thereafter, to subscribe for and purchase from PureCycle Technologies, Inc., a Delaware corporation (the “Company”), up to 3,003,000 shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Series B Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Series B Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Black Scholes Value” means the value of this Series B Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the highest VWAP during the period beginning on the Trading Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 3(d) and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds (or such other consideration) within the later of (i) five business days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Series B Warrant in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Series B Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Series B Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Series B Warrant (without regard to any limitations on the exercise of this Series B Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Series B Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Series B Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Series B Warrant with the same effect as if such Successor Entity had been named as the Company herein.
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“Business Day” and “business day” mean a day other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.
“Common Stock” means the Company’s common stock, par value $0.001 per share.
“Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Series B Warrants” means warrants to purchase Common Stock of the Company designated as a “Series B Warrant” with terms identical to those of this Series B Warrant, except with respect to the number of Warrant Shares and the identity of the Holder.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Series B Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Warrant Agent” shall be any duly appointed agent selected by the Company. The Warrant Agent shall initially be Continental Transfer & Trust Company.
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(A) = |
as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of |
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Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day; |
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(B) = |
the Exercise Price of this Series B Warrant, as adjusted hereunder; and |
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(X) = |
the number of Warrant Shares that would be issuable upon exercise of this Series B Warrant in accordance with the terms of this Series B Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of this Series B Warrant being exercised, and the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Series B Warrant. The Company agrees not to take any position contrary to this Section 2(c).
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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Series B Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Series B Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Series B Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Series B Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Series B Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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PureCycle Technologies Inc.
5950 Hazeltine National Drive, Suite 650
Orlando, Florida 32822
Attention: Brad Kalter
E-mail: bkalter@purecycle.com
with a required copy to (which copy shall not constitute notice):
Jones Day
1221 Peachtree Street, NE, Suite 400
Atlanta, Georgia 30361
Attention: Joel T. May and Thomas L. Short
E-mail: jtmay@jonesday.com; tshort@jonesday.com
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(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Series B Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
PURECYCLE TECHNOLOGIES, INC.
By:
Name:
Title:
NOTICE OF EXERCISE
To: PURECYCLE TECHNOLOGIES, INC.
CC: WARRANT AGENT
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Series B Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
in lawful money of the United States; or
if otherwise permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Series B Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Series B Warrant and all rights evidenced thereby are hereby assigned to:
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Dated: _______________ __, ______ |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Dustin Olson, certify that:
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May 8, 2024 |
By: |
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/s/ Dustin Olson |
Dustin Olson |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Jaime Vasquez, certify that:
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May 8, 2024 |
By: |
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/s/ Jaime Vasquez |
Jaime Vasquez |
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Chief Financial Officer |
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(Principal Financial Officer) |
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, 2024 (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 8, 2024 |
By: |
/s/ Dustin Olson |
Dustin Olson |
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Chief Executive Officer (Principal Executive Officer) |
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, 2024 (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 8, 2024
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/s/ Jaime Vasquez |
Jaime Vasquez |
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Chief Financial Officer |
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(Principal Financial Officer) |