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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For transition period from to
Commission File Number 001-40234
PureCycle Technologies, Inc.
(Exact name of registrant as specified in its charter)
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| State | | 86-2293091 |
Delaware | | (I.R.S. Employer Identification Number) |
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:
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| 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.
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| 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 7(a)(2)(B) of the Securities 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 November 9, 2022, there were approximately 163,506,449 shares of the registrant's common stock, par value $0.001 per share, outstanding.
PureCycle Technologies, Inc.
QUARTERLY REPORT on FORM 10-Q
TABLE OF CONTENTS
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PART I - Financial Information | |
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| Item 1. Financial Statements | |
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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 outcome of any legal proceedings to which PCT is, or may become a party, and the financial condition, results of operations, earnings outlook and prospects of 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, 2021 (the “Annual Report on Form 10-K”) entitled “Risk Factors,” those discussed and identified in public filings made with the U.S. Securities and Exchange Commission (the “SEC”) by PCT (including this this Quarterly Report on Form 10-Q) and the following:
• PCT's ability to meet, and to continue to meet, applicable regulatory requirements for the use of PCT’s UPR resin (as defined below) in food grade applications (both in the United States and abroad);
• PCT's ability to comply on an ongoing basis with the numerous regulatory requirements applicable to the UPR resin and PCT’s facilities (both in the United States and abroad);
• expectations and changes regarding PCT’s strategies and future financial performance, including its future business plans, expansion plans or objectives, prospective performance and opportunities and competitors, revenues, products and services, pricing, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and PCT’s ability to invest in growth initiatives;
• PCT’s ability to scale and build its first commercial-scale recycling facility in Lawrence County, Ohio (the “Ironton Facility”) in a timely and cost-effective manner;
• PCT’s ability to complete the necessary funding with respect to, and complete the construction of, its first U.S. multi-site facility, located in Augusta, Georgia (the “Augusta Facility”), in a timely and cost-effective manner;
• PCT’s ability to sort and process polypropylene plastic waste at its plastic waste prep (“Feed PreP”) facilities;
• PCT’s ability to maintain exclusivity under the Procter & Gamble Company (“P&G”) license (as described below);
• the implementation, market acceptance and success of PCT’s business model and growth strategy;
• the success or profitability of PCT’s offtake arrangements;
• the ability to source feedstock with a high polypropylene content;
• PCT’s future capital requirements and sources and uses of cash;
PureCycle Technologies, Inc.
PART I - FINANCIAL INFORMATION — CONTINUED
• PCT’s ability to obtain funding for its operations and future growth;
• developments and projections relating to PCT’s competitors and industry;
• the outcome of any legal or regulatory proceedings to which PCT is, or may become, a party including the securities class action case;
• geopolitical risk and changes in applicable laws or regulations;
• the possibility that PCT may be adversely affected by other economic, business, and/or competitive factors, including rising interest rates;
• turnover or increases in employees and employee-related costs;
• changes in the prices and availability of labor (including labor shortages), transportation and materials, including significant inflation, supply chain conditions and its related impact on energy and raw materials, and PCT’s ability to obtain them in a timely and cost-effective manner;
• any business disruptions due to political or economic instability, pandemics, armed hostilities (including the ongoing conflict between Russia and Ukraine);
• the potential impact of climate change on the company, including physical and transition risks, higher regulatory and compliance costs, reputational risks, and availability of capital on attractive terms;
• operational risk; and
• the risk that the COVID-19 pandemic (“COVID-19”), including any new and emerging variants and the efficacy and distribution of vaccines may have an adverse effect on PCT’s business operations, as well as PCT’s financial condition and results of operations.
We undertake 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.
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| ASSETS |
| (Unaudited) | | |
| (in thousands except per share data) | September 30, 2022 | | December 31, 2021 |
| CURRENT ASSETS | | | |
| Cash and cash equivalents | $ | 56,447 | | | $ | 33,417 | |
| Debt securities available for sale | 158,513 | | | 167,365 | |
| Restricted cash – current | 100,048 | | | 141,855 | |
| Prepaid expenses and other current assets | 6,032 | | | 2,712 | |
| Total current assets | 321,040 | | | 345,349 | |
| Restricted cash – non-current | 101,023 | | | 88,586 | |
| Prepaid expenses and other non-current assets | 6,831 | | | 5,535 | |
| Operating lease right-of-use assets | 19,607 | | | — | |
| Property, plant and equipment, net | 438,586 | | | 225,214 | |
| TOTAL ASSETS | $ | 887,087 | | | $ | 664,684 | |
| | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
| | | |
| CURRENT LIABILITIES | | | |
| Accounts payable | $ | 7,100 | | | $ | 1,401 | |
| Accrued expenses | 32,570 | | | 35,526 | |
| Accrued interest | 6,127 | | | 1,532 | |
| Total current liabilities | 45,797 | | | 38,459 | |
| NON-CURRENT LIABILITIES | | | |
| Deferred revenue | 5,000 | | | 5,000 | |
| Bonds payable | 233,254 | | | 232,508 | |
| Warrant liability | 66,265 | | | 6,113 | |
| Operating lease right-of-use liabilities | 17,126 | | | — | |
| Other non-current liabilities | 1,108 | | | 1,069 | |
| TOTAL LIABILITIES | $ | 368,550 | | | $ | 283,149 | |
| | | |
| COMMITMENT AND CONTINGENCIES | | | |
| | | |
| STOCKHOLDERS' EQUITY | | | |
Common shares - $0.001 par value, 250,000 shares authorized; 163,509 and 127,647 shares issued and outstanding as of September 30, 2022 and December 31, 2021 | $ | 164 | | | $ | 128 | |
| Additional paid-in capital | 752,559 | | | 539,423 | |
| Accumulated other comprehensive loss | (1,023) | | | (237) | |
| Accumulated deficit | (233,163) | | | (157,779) | |
| TOTAL STOCKHOLDERS' EQUITY | 518,537 | | | 381,535 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 887,087 | | | $ | 664,684 | |
The accompanying notes are an integral part of these financial statements.
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in thousands except per share data) | | | | | | | |
| Costs and expenses | | | | | | | |
| Operating costs | $ | 6,451 | | | $ | 2,687 | | | $ | 16,948 | | | $ | 7,228 | |
| Research and development | 254 | | | 330 | | | 843 | | | 1,101 | |
| Selling, general and administrative | 14,382 | | | 24,489 | | | 42,083 | | | 39,372 | |
| Total operating costs and expenses | 21,087 | | | 27,506 | | | 59,874 | | | 47,701 | |
| Interest (income) expense | (1,102) | | | 1,843 | | | (834) | | | 5,722 | |
| Change in fair value of warrants | 14,884 | | | (8,369) | | | 16,224 | | | 4,893 | |
| Other expense (income) | 79 | | | (3) | | | 120 | | | (206) | |
| Total other expense (income) | 13,861 | | | (6,529) | | | 15,510 | | | 10,409 | |
| Net loss | $ | (34,948) | | | $ | (20,977) | | | $ | (75,384) | | | $ | (58,110) | |
| Loss per share | | | | | | | |
| Basic and diluted | $ | (0.21) | | | $ | (0.18) | | | $ | (0.49) | | | $ | (0.61) | |
| Weighted average common shares | | | | | | | |
| Basic and diluted | 163,490 | | | 118,255 | | | 153,513 | | | 95,773 | |
| | | | | | | |
| Other comprehensive loss | | | | | | | |
| Unrealized loss on debt securities available for sale | $ | 14 | | | $ | 89 | | | $ | (800) | | | $ | (17) | |
| Total comprehensive loss | $ | (34,934) | | | $ | (20,888) | | | $ | (76,184) | | | $ | (58,127) | |
The accompanying notes are an integral part of these financial statements.
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three and Nine Months Ended September 30, 2022 |
| Common stock | | Class A | | Class B Preferred | | Class B-1 Preferred | | Class C | | | | | | | | |
| (in thousands) | Shares | | Amount | | Units | | Amount | | Units | | Amount | | Units | | Amount | | Units | | Amount | | Additional paid-in capital | | Accumulated other comprehensive loss | | Accumulated deficit | | Total stockholders' equity |
| Balance, December 31, 2021 | 127,647 | | | $ | 128 | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | 539,423 | | | $ | (237) | | | $ | (157,779) | | | $ | 381,535 | |
| Issuance of common stock | 35,714 | | | 35 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 205,261 | | | — | | | — | | | 205,296 | |
| Share repurchase | (130) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,049) | | | — | | | — | | | (1,049) | |
| Equity based compensation | 3 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,171 | | | — | | | — | | | 3,171 | |
| Unrealized loss on available for sale debt securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (340) | | | — | | | (340) | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (25,432) | | | (25,432) | |
| Balance, March 31, 2022 | 163,234 | | | $ | 163 | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | 746,806 | | | $ | (577) | | | $ | (183,211) | | | $ | 563,181 | |
| Share repurchase | (2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (17) | | | — | | | — | | | (17) | |
| Equity based compensation | 50 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,267 | | | — | | | — | | | 3,267 | |
| Unrealized loss on available for sale debt securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (460) | | | — | | | (460) | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (15,004) | | | (15,004) | |
| Balance, June 30, 2022 | 163,282 | | | $ | 163 | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | 750,056 | | | $ | (1,037) | | | $ | (198,215) | | | $ | 550,967 | |
| Share repurchase | (71) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (506) | | | — | | | — | | | (506) | |
| Equity based compensation | 298 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,009 | | | — | | | — | | | 3,010 | |
| Unrealized loss on available for sale debt securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 14 | | | — | | | 14 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (34,948) | | | (34,948) | |
| Balance, September 30, 2022 | 163,509 | | | $ | 164 | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | 752,559 | | | $ | (1,023) | | | $ | (233,163) | | | $ | 518,537 | |
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three and Nine Months Ended September 30, 2021 |
| Common stock | | Class A | | Class B Preferred | | Class B-1 Preferred | | Class C | | | | | | | | |
| (in thousands) | Shares | | Amount | | Units | | Amount | | Units | | Amount | | Units | | Amount | | Units | | Amount | | Additional paid-in capital | | Accumulated other comprehensive loss | | Accumulated deficit | | Total stockholders' equity |
| Balance, December 31, 2020 | — | | | — | | | 37,998 | | | $ | 38 | | | 20,628 | | | $ | 21 | | | 16,322 | | | $ | 16 | | | 6,711 | | | $ | 7 | | | $ | 192,381 | | | $ | — | | | $ | (80,714) | | | $ | 111,749 | |
| Issuance of units upon vesting of Legacy PCT profits interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 116 | | | — | | | 239 | | | — | | | — | | | 239 | |
| Redemption of vested profit units | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5) | | | — | | | (36) | | | — | | | — | | | (36) | |
| Removal of beneficial conversion feature upon adoption of ASU 2020-06 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (31,075) | | | — | | | 437 | | | (30,638) | |
| Merger Recapitalization | 81,754 | | | 82 | | | (37,998) | | | (38) | | | (20,628) | | | (21) | | | (16,322) | | | (16) | | | (6,822) | | | (7) | | | — | | | — | | | — | | | — | |
ROCH Shares Recapitalized, Net of Redemptions, Warrant Liability and Issuance Costs of $28.0 million | 34,823 | | | 35 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 293,931 | | | — | | | — | | | 293,966 | |
| Issuance of restricted stock awards | 775 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | — | | | — | | | — | |
| Forfeiture of restricted stock | (3) | | | (1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | — | |
| Reclassification of redeemable warrant to liability | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (33) | | | — | | | — | | | (33) | |
| Equity based compensation | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 68 | | | — | | | — | | | 68 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (26,074) | | | (26,074) | |
| Balance, March 31, 2021 | 117,349 | | | $ | 117 | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | 455,475 | | | $ | — | | | $ | (106,351) | | | $ | 349,241 | |
| Forfeiture of restricted stock | (10) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Equity based compensation | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 835 | | | — | | | — | | | 835 | |
| Unrealized loss on available for sale debt securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (106) | | | — | | | (106) | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (11,059) | | | (11,059) | |
| Balance, June 30, 2021 | 117,339 | | | $ | 117 | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | 456,310 | | | $ | (106) | | | $ | (117,410) | | | $ | 338,911 | |
| Exercise of warrants | 17 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 196 | | | — | | | — | | | 196 | |
| Issuance of restricted stock awards | 1,000 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | — | | | — | | | — | |
| Equity based compensation | 26 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,611 | | | — | | | — | | | 13,611 | |
| Share repurchase | (131) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,695) | | | — | | | — | | | (1,695) | |
| Unrealized gain on available for sale debt securities | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 89 | | | — | | | 89 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (20,977) | | | (20,977) | |
| Balance, September 30, 2021 | 118,251 | | | 118 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 468,421 | | | (17) | | | (138,387) | | | 330,135 | |
The accompanying notes are an integral part of these financial statements.
PureCycle Technologies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Nine months ended September 30, |
| (in thousands) | 2022 | | 2021 |
| Cash flows from operating activities | | | |
| Net loss | $ | (75,384) | | | $ | (58,110) | |
| Adjustments to reconcile net loss to net cash used in operating activities | | |
|
| Equity-based compensation | 9,448 | | | 14,753 | |
| Fair value change of warrants | 16,224 | | | 4,893 | |
| Depreciation expense | 2,583 | | | 1,507 | |
| Amortization of debt issuance costs and debt discounts | 746 | | | 2,208 | |
| (Accretion) amortization of (discount) premium on debt securities | (235) | | | 395 | |
| Operating lease amortization expense | 964 | | | — | |
| Issuance costs attributable to warrants | — | | | 109 | |
| Gain on extinguishment of secured term loan | — | | | (314) | |
| Changes in operating assets and liabilities | | | |
| Prepaid expenses and other current assets | (3,320) | | | (2,347) | |
| Prepaid expenses and other non-current assets | (1,296) | | | (2,917) | |
| Accounts payable | 827 | | | (399) | |
| Accrued expenses | 491 | | | (9,554) | |
| Accrued interest | 324 | | | 2,819 | |
| Deferred revenue | — | | | 5,000 | |
| Operating right-of-use liabilities | (1,536) | | | — | |
| Net cash used in operating activities | $ | (50,164) | | | $ | (41,957) | |
| Cash flows from investing activities | | | |
| Construction of plant | (212,095) | | | (88,153) | |
| Purchase of debt securities, available for sale | (192,388) | | | (229,183) | |
| Sale and maturity of debt securities, available for sale | 200,689 | | | 44,197 | |
| Net cash used in investing activities | $ | (203,794) | | | $ | (273,139) | |
| Cash flows from financing activities | | | |
| Proceeds from issuance of common stock | 206,072 | | | — | |
| Proceeds from issuance of warrants | 43,929 | | | — | |
| Payments to repurchase shares | (1,572) | | | — | |
| Common stock issuance costs | (775) | | | — | |
| Other (payments) proceeds from financing activities | (36) | | | 160 | |
| Proceeds from ROCH and PIPE financing, net of issuance costs | — | | | 298,461 | |
| Bond issuance costs | — | | | (4,067) | |
| Convertible notes issuance costs | — | | | (480) | |
| Net cash provided by financing activities | $ | 247,618 | | | $ | 294,074 | |
| Net decrease in cash and restricted cash | (6,340) | | | (21,022) | |
| Cash and restricted cash, beginning of period | 263,858 | | | 330,574 | |
| Cash and restricted cash, end of period | $ | 257,518 | | | $ | 309,552 | |
| Supplemental disclosure of cash flow information | | | |
| Non-cash operating activities | | | |
| Interest paid during the period, net of capitalized interest | $ | 650 | | | $ | 845 | |
| Non-cash investing activities | | | |
| Additions to property, plant, and equipment in accrued expenses | $ | 22,059 | | | $ | 25,300 | |
| Additions to property, plant, and equipment in accounts payable | $ | 3,267 | | | $ | 1,425 | |
| Additions to property, plant, and equipment in accrued interest | $ | 4,271 | | | $ | 1,708 | |
| Non-cash financing activities | | | |
| Initial fair value of acquired warrant liability | $ | — | | | $ | 4,604 | |
| Share repurchase — additions to accrued expense | $ | — | | | $ | 1,695 | |
| PIK interest on convertible notes | $ | — | | | $ | 1,680 | |
The accompanying notes are an integral part of these financial statements.
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.
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.
Private Placement Offering
On March 7, 2022, the Company entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “2022 PIPE Investors”), pursuant to which the Company agreed to sell to the Investors, in a private placement, shares of the Company’s common stock, par value $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. The Company received approximately $250.0 million in gross proceeds from the 2022 PIPE Offering. The Company incurred approximately $0.8 million of expenses primarily related to advisory fees in conjunction with the 2022 PIPE Offering.
Refer to Note 6 – Warrants for further information.
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 Securities and Exchange Commission (the “SEC”)
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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 nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2022. 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.
Reclassifications
Certain amounts in prior periods have been reclassified to conform with the report classifications of the nine months ended September 30, 2022 and 2021.
Potential Impact of COVID-19 on the Company’s Business
The extent to which the COVID-19 pandemic and the restrictions resulting from the pandemic will continue to impact the Company’s business, financial condition or results of operations will depend on future developments, which are highly uncertain and cannot be accurately predicted. The Company has implemented certain policies and procedures to continue its operations in light of the COVID-19 pandemic and the restrictions resulting from the pandemic.
Liquidity
The Company has sustained recurring losses and negative cash flows from operations since its inception. As reflected in the accompanying condensed consolidated interim financial statements, the Company has not yet begun commercial operations and does not have any sources of revenue. The following is a summary of the components of our current liquidity (in thousands):
| | | | | | | | |
| As of |
| September 30, 2022 | December 31, 2021 |
| Cash and cash equivalents | $ | 56,447 | | $ | 33,417 | |
| Debt securities available for sale | $ | 158,513 | | $ | 167,365 | |
| Unrestricted liquidity | $ | 214,960 | | $ | 200,782 | |
| Less: Other Ironton set-aside | $ | 54,560 | | $ | 50,713 | |
| Available unrestricted liquidity | $ | 160,400 | | $ | 150,069 | |
| | |
| Restricted Cash (current and non-current) | $ | 201,071 | | $ | 230,441 | |
| | |
| Working capital | $ | 275,243 | | $ | 306,890 | |
| Accumulated deficit | $ | (233,163) | | $ | (157,779) | |
| | |
| For the nine months ended |
| September 30, 2022 | September 30, 2021 |
| Net loss | $ | (75,384) | | $ | (58,110) | |
As of September 30, 2022, we had $160.4 million of Available Unrestricted Liquidity. The Ironton set-aside amount of $54.6 million, together with the Liquidity Reserve of $50.2 million, relates to the Ironton Guaranty that requires PureCycle to maintain at least $100.0 million of cash on its balance sheet in addition to other required operational reserves of $4.6 million. A portion of this Guaranty requirement will be released when certain conditions have been met (refer to Note 3 – Notes Payable and Debt Instruments for further information).
PureCycle Technologies, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
We believe additional Ironton construction costs will be incurred of approximately $75.0 million. However, the additional costs include a $12.0 million construction performance guarantee that will only be paid once our independent engineering firm has certified the Ironton Facility. We also have other net capital commitments of approximately $8.6 million and have ongoing monthly costs associated with managing the company. We maintain our belief that the Ironton Facility will be cash generating in the first half of 2023. But, with no certainty related to the results of operational start-up, or certainty related to raising additional capital to fund our planned growth or general corporate purposes, we are limiting our hiring practices and restricting cash expenditures consistent with our Available Unrestricted Liquidity. Currently, we believe we have adequate available liquidity to maintain operations for the next twelve months.
Market conditions remain challenging, and the Company now faces uncertainty as to the timing or likelihood of success of the currently anticipated project financing for the Augusta Facility, which will, initially, include two purification lines and three PreP facilities. As a result, we are currently pursuing various structures for project financing of our Augusta Facility, including the PreP facilities, in addition to the previously announced debt financing. While we remain confident in our ability to finance the Augusta Facility, we are limiting our expenses and adjusting our timeline in light of this uncertainty. As noted, this cash has either been spent, has been moved to Restricted Cash or is reflected in the other net capital commitments of approximately $8.6 million noted above.
Our future capital requirements will depend on many factors, including actual construction costs for the Ironton Facility, 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 challenges or unforeseen circumstances. As a pre-revenue operating company, we continually review our cash outlays, pace of hiring, professional services and other spend, and capital commitments to pro-actively manage those needs in tandem with our Available Unrestricted Liquidity balance. For our future growth and investment, we expect to seek additional debt or equity financing from outside sources, which we may not be able to raise on terms favorable to us, or at all. If we are unable to raise additional debt or sell additional equity when desired, or if we are unable to manage our cash outflows, our business, financial condition, and results of operations would be adversely affected.
Emerging Growth Company
At September 30, 2022, we qualified as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we have taken and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have opted to take advantage of such extended transition period available to emerging growth companies which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard.
PCT will become a large accelerated filer for the fiscal year ending December 31, 2022, and as such PCT will lose emerging growth status on December 31, 2022. As of December 31, 2022, PCT will be required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies and will be required to comply with, among other things, the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. For as long as PCT continues to be an emerging growth company, however, PCT intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act.
PureCycle Technologies, Inc.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at date of inception to be cash and cash equivalents. As of September 30, 2022, the Company’s cash and cash equivalents balance represents cash and money market funds deposited with financial institutions, as well as commercial paper with maturities of 90 days or less at acquisition. As of December 31, 2021, the Company’s cash and cash equivalents balance represents cash and money market funds deposited with financial institutions. These balances may exceed federally insured limits; however, the Company believes the risk of loss is low. Actively traded money market funds are measured at their net asset value (“NAV”) and classified as Level 1. The Company’s remaining cash equivalents are classified as Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because of the short time between the purchase of the instrument and its expected realization.
Investments
The Company accounts for its investment in Debt Securities in accordance with ASC 320, Investments – Debt Securities. 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. All investment holdings as of September 30, 2022 and December 31, 2021 have been classified as Available for Sale. The Company classifies its Debt Securities investments as current assets as they are highly liquid and the related funds are available for use in current operations.
Income Taxes
To calculate the interim tax provision, at the end of each interim period the Company estimates the annual effective tax rate and applies that to its ordinary quarterly earnings. The effect of changes in the enacted tax laws or rates is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and judgments including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in other jurisdictions, permanent differences between book and tax amounts, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or the tax environment changes.
Furthermore, in December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The new guidance affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The Company adopted the ASU during the first quarter of 2021 using a prospective approach. The adoption of the ASU did not have a material impact on the Company’s condensed consolidated financial statements.
Warrants
The Company evaluates all of its financial instruments, including issued warrants, to determine if such instruments are liability classified, pursuant to ASC 480 - Distinguishing Liabilities from Equity (“ASC 480”) or derivatives or contain features that qualify as embedded derivatives pursuant to ASC 815 – Derivatives and Hedging (“ASC 815”). The classification of instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Issuance costs incurred with the Business Combination that are attributable to liability classified warrants are expensed as incurred.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, ASU 2018-10, Codification Improvements to Topic 842, Leases, was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Furthermore, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.
PureCycle Technologies, Inc.
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Furthermore, on June 3, 2020, the FASB deferred by one year the effective date of the new leases standard for private companies, private not-for-profits (“NFPs”) and public NFPs that have not yet issued (or made available for issuance) financial statements reflecting the new standard. The Company adopted Topic 842 and applicable technical updates as of January 1, 2022 using the modified retrospective transition method. See Note 14 for further details.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU 2016-13”), which, together with subsequent amendments, amends the requirement on the measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is currently in the process of evaluating the effects of this pronouncement on the Company's financial statements and does not expect it to have a material impact on the consolidated financial statements.
NOTE 3 – NOTES PAYABLE AND DEBT INSTRUMENTS
Convertible Notes
On October 6, 2020, Legacy PCT entered into a Senior Notes Purchase Agreement (the “Agreement”) with certain investors. The Agreement provides for the issuance of Senior Convertible Notes (the “Notes” or “Convertible Notes”), which have an interest rate of 5.875% and mature on October 15, 2022 (the “Maturity Date”). The initial closing took place on the date of the Indenture on October 7, 2020 (the “First Closing”), upon which $48.0 million in aggregate principal of Notes were issued to the Investors (“the Magnetar Investors”). The Agreement also includes an obligation for the Company to issue and sell, and for each of the Magnetar Investors to purchase, Notes in the principal amount of $12.0 million within 45 days after the Company enters into the Merger Agreement as defined in Note 1 (“Second Closing Obligation”). On December 29, 2020, the remaining Notes were purchased in accordance with the Agreement. The first and second interest payments of $1.7 million and $1.8 million, respectively, were due on April 15, 2021 and October 15, 2021, respectively, and were paid entirely in kind, which increased the principal amount of the Notes by $3.5 million (“PIK Interest”). The Notes were convertible through the Maturity Date at the option of the holder. During the fourth quarter of 2021, the entire $63.5 million principal balance of the Notes was converted into 9.2 million shares of common stock. The conversion increased common stock and Additional paid-in capital by $61.8 million, which represents the converted principal $63.5 million and forfeited interest of $0.1 million, offset by remaining capitalized issuance costs of $1.8 million.
The following provides a summary of the interest expense of PCT’s convertible debt instruments (in thousands):
| | | | | | | | | | | | | | |
| Three months ended September 30, | Nine months ended September 30, |
| 2022 | 2021 | 2022 | 2021 |
| Contractual interest expense | $ | — | | $ | 906 | | $ | — | | $ | 2,689 | |
| Amortization of deferred financing costs | — | | 466 | | — | | 1,546 | |
| Effective interest rate | — | % | 9.0 | % | — | % | 9.0 | % |
Revenue Bonds
On October 7, 2020, the Southern Ohio Port Authority (“SOPA”) issued certain revenue bonds (“Bonds” or “Revenue Bonds”) pursuant to an Indenture of Trust dated as of October 1, 2020 (“Indenture”), between SOPA and UMB Bank, N.A., as trustee (“Trustee”), and loaned the proceeds from their sale to PureCycle: Ohio LLC, an Ohio limited liability company (“PCO”), pursuant to a loan agreement dated as of October 1, 2020 between SOPA and PCO (“Loan Agreement”), to be used to (i) acquire, construct and equip the Ironton Facility; (ii) fund a debt service reserve fund for the Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020A Bonds (“Series 2020A Bonds”); (iii) finance capitalized interest; and (iv) pay the costs of issuing the Bonds. The Bonds were offered in three series, including (i) Series 2020A Bonds; (ii) Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Tax-Exempt Series 2020B; and (iii) Subordinate Exempt Facility Revenue Bonds (PureCycle Project), Taxable Series 2020C.
PureCycle Technologies, Inc.
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| | | | | | | | | | | | | | |
| (in thousands) | | | | |
| Bond Series | Term | Principal Amount | Interest Rate | Maturity Date |
| 2020A | A1 | $ | 12,370.00 | | 6.25 | % | December 1, 2025 |
| 2020A | A2 | $ | 38,700.00 | | 6.50 | % | December 1, 2030 |
| 2020A | A3 | $ | 168,480.00 | | 7.00 | % | December 1, 2042 |
| 2020B | B1 | $ | 10,000.00 | | 10.00 | % | December 1, 2025 |
| 2020B | B2 | $ | 10,000.00 | | 10.00 | % | December 1, 2027 |
| 2020C | C1 | $ | 10,000.00 | | 13.00 | % | December 1, 2027 |
The proceeds of the Bonds and certain equity contributions have been placed in various trust funds and non-interest-bearing accounts established and administered by the Trustee under the Indenture. Before each disbursement of amounts in the Project Fund held by the Trustee under the Indenture, PCO is required to submit to the Trustee a requisition for funds to be disbursed outlining the specified purpose of the disbursement and substantiating the expenditure. In addition, 100% of revenue attributable to the production of the Ironton Facility must be deposited into an operating revenue escrow fund held by U.S. Bank Trust Company, National Association, as escrow agent. Funds in the trust accounts and operating revenue escrow account will be disbursed by the Trustee when certain conditions are met, and will be used to pay costs and expenditures related to the development of the Ironton Facility, make required interest and principal payments (including sinking fund redemption amounts) and pay any premium, in certain circumstances required under the Indenture, to redeem the Bonds.
At closing of the Bonds, Legacy PCT contributed $60.0 million in equity and executed a Guaranty of Completion dated as of October 1, 2020 (“Guaranty”) and PureCycle and certain affiliates contributed an additional $40.0 million in equity upon the Closing of the Business Combination. Under the Guaranty, PureCycle funded a $50.0 million liquidity reserve for the Ironton Facility (“Liquidity Reserve”) and deposited that amount upon the Closing of the Business Combination in an escrow account held by U.S. Bank Trust Company, National Association, as escrow agent. In addition, the Guaranty requires that PureCycle maintain at least $75.0 million of cash on its balance sheet as of July 31, 2021 and $100.0 million of cash on its balance sheet as of January 31, 2022, in each case, inclusive of the Liquidity Reserve. The Company met these requirements and continues to maintain that cash balance at September 30, 2022. The Guaranty was amended and restated in May 2021 (“ARG”) to include a requirement, among others, that PureCycle replenish the Liquidity Reserve at the level of $50.0 million until completion of the Ironton Facility and the payment of all Project costs and until conditions relating to certain supply and offtake agreements have been met. Thereafter, the Liquidity Reserve amount will be reduced as provided in the ARG and PureCycle will not be required to replenish the reduced Liquidity Reserve. When all conditions to reducing the Liquidity Reserve to $25.0 million have been met, the reduced Liquidity Reserve without the obligation of replenishment will remain in place so long as any Series 2020A Bonds remain outstanding under the Indenture.
The Bonds are recorded within Bonds payable in the condensed consolidated balance sheet. The Company incurred $4.8 million and $4.8 million of interest cost during the three months ended September 30, 2022 and 2021, respectively, and $14.5 million and $14.4 million of interest cost during the nine months ended September 30, 2022 and 2021, respectively. As the Bond proceeds will be used to construct the Company’s property, plant and equipment, the interest costs related to the tax-exempt portion of the Revenue Bonds have been capitalized within Property, Plant and Equipment. The Company capitalized $4.2 million and $4.2 million of interest cost during the three months ended September 30, 2022 and 2021, respectively, and $12.8 million and $12.8 million of interest cost during the nine months ended September 30, 2022 and 2021. Management believes the fair value of the Revenue Bonds is not materially different than the carrying amount.
NOTE 4 - STOCKHOLDERS’ EQUITY
Common Stock
Holders of PCT common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. The holders do not have cumulative voting rights in the election of directors. Upon the Company’s liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of the Company’s common stock will be entitled to receive pro rata the Company’s remaining assets available for distribution. Holders
PureCycle Technologies, Inc.
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of the Company’s common stock do not have preemptive, subscription, redemption or conversion rights. All shares of the Company’s common stock are fully paid and non-assessable. The Company is authorized to issue 250.0 million shares of common stock with a par value of $0.001. As of September 30, 2022, and December 31, 2021, 163.51 million and 127.65 million shares are issued and outstanding, respectively.
Preferred Stock
As of September 30, 2022, the Company is authorized to issue 25.0 million shares of preferred stock with a par value of $0.001, of which no shares are issued and outstanding.
NOTE 5 - 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 of the Company.
As of September 30, 2022, approximately 8.3 million shares of common stock are currently authorized for issuance under the Plan, of which approximately 6.5 million shares remain available for issuance under the Plan (assuming maximum performance with respect to the applicable performance goals applicable to the issued Plan awards).
