PureCycle Technologies(PCT) - 2024 Q2 - Quarterly Report

PART I - Financial Information This section presents the company's financial information, including statements and management's analysis Item 1. Financial Statements This section presents PureCycle Technologies, Inc.'s unaudited condensed consolidated financial statements and related notes for the periods ended June 30, 2024 and 2023 Condensed Consolidated Balance Sheets This statement presents the company's financial position as of June 30, 2024, and December 31, 2023 | ASSETS (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $10,895 | $73,411 | | Debt securities available for sale | — | 48,226 | | Restricted cash – current | 2,880 | 25,692 | | Inventory | 6,114 | 4,791 | | Prepaid expenses and other current assets | 12,039 | 10,525 | | Total current assets | 31,928 | 162,645 | | Restricted cash – non-current | 9,680 | 203,411 | | Property, plant and equipment, net | 646,011 | 638,746 | | TOTAL ASSETS | $719,753 | $1,039,373 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2024 | December 31, 2023 | | :-------------------------------------------------- | :------------ | :---------------- | | Accounts payable | $4,241 | $2,881 | | Accrued expenses | 30,930 | 35,391 | | Accrued interest | 7,495 | 8,190 | | Current portion of long-term debt | 3,932 | 9,148 | | Current portion of related party bonds payable | 1,040 | — | | Total current liabilities | 47,638 | 55,610 | | Long-term debt, less current portion | 246,610 | 467,708 | | Related party bonds payable | 62,719 | — | | Related party note payable | — | 39,696 | | Warrant liability | 38,494 | 22,059 | | TOTAL LIABILITIES | $428,142 | $619,137 | | TOTAL STOCKHOLDERS' EQUITY | 291,611 | 420,236 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $719,753 | $1,039,373 | Condensed Consolidated Statements of Comprehensive Loss This statement details the company's comprehensive loss for the three and six months ended June 30, 2024 and 2023 | (in thousands except per share data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating costs | $22,220 | $11,612 | $43,414 | $18,984 | | Research and development | 1,565 | 1,571 | 3,396 | 3,325 | | Selling, general and administrative | 16,137 | 13,410 | 32,094 | 26,105 | | Total operating costs and expenses | 39,922 | 26,593 | 78,904 | 48,414 | | Interest expense | 12,055 | 4,027 | 27,109 | 4,684 | | Interest income | (514) | (1,578) | (4,116) | (3,511) | | Change in fair value of warrants | (4,311) | 26,313 | 9,633 | 31,148 | | Loss on debt extinguishment | — | — | 21,214 | — | | Other expense | 1,060 | 13 | 1,075 | 475 | | Loss before income taxes | (48,212) | (55,368) | (133,819) | (81,210) | | Net Loss | $(48,212) | $(55,368) | $(133,819) | $(81,210) | | Loss per share (Basic and diluted) | $(0.29) | $(0.34) | $(0.81) | $(0.50) | Condensed Consolidated Statements of Stockholder's Equity This statement outlines changes in stockholder's equity for the three and six months ended June 30, 2024 and 2023 | (in thousands) | Common Shares (Number) | Common Stock ($) | Additional Paid-in Capital ($) | Accumulated Other Comprehensive Income (Loss) ($) | Accumulated Deficit ($) | Total Stockholders' Equity ($) | | :--------------- | :--------------------- | :--------------- | :----------------------------- | :------------------------------------------------ | :---------------------- | :----------------------------- | | Balance, Dec 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, Mar 31, 2024 | 164,612 | 165 | 766,519 | 2 | (429,847) | 336,839 | | Share repurchase | (14) | — | (97) | — | — | (97) | | Equity-based compensation | 148 | — | 3,072 | — | — | 3,072 | | Cumulative translation adjustment | — | — | — | 9 | — | 9 | | Net loss | — | — | — | — | (48,212) | (48,212) | | Balance, Jun 30, 2024 | 164,746 | 165 | 769,494 | 11 | (478,059) | 291,611 | Condensed Consolidated Statements of Cash Flows This statement summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023 | (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(79,608) | $(40,424) | | Net cash provided by (used in) investing activities | $23,857 | $(24,868) | | Net cash (used in) provided by financing activities | $(223,308) | $54,097 | | Net decrease in cash and restricted cash | $(279,059) | $(11,195) | | Cash and restricted cash, beginning of period | 302,514 | 227,523 | | Cash and restricted cash, end of period | $23,455 | $216,328 | Notes to the Interim Condensed Consolidated Financial Statements This section provides detailed explanations for the interim condensed consolidated financial statements NOTE 1 - ORGANIZATION This note describes PureCycle Technologies, Inc.'s business, going concern status, and liquidity position - PureCycle Technologies, Inc. (PCT) is commercializing a patented purification recycling technology from P&G to restore waste polypropylene into ultra-pure recycled (UPR) resin, aiming to create a sustainable segment in the global polypropylene market[20] - The company has sustained recurring losses and negative cash flows from operations since inception and has not yet reached significant revenue, raising substantial doubt about its ability to continue as a going concern[27][28][32] - Management believes the going concern doubt has been alleviated through operational enhancements at the Ironton Facility and the ability to re-market purchased bonds for additional liquidity[33] | Liquidity Components (in thousands) | June 30, 2024 | December 31, 2023 | | :---------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $10,895 | $73,411 | | Debt securities available for sale | — | 48,226 | | Restricted cash (current and non-current) | $12,560 | $229,103 | | Working capital | $(15,710) | $107,035 | | Accumulated deficit | $(478,059) | $(344,240) | | Net loss (Six months ended) | $(133,819) | $(81,210) | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's significant accounting policies and recent accounting pronouncements - The interim financial statements are presented in U.S. Dollars and reflect normal recurring adjustments, condensed or omitted certain footnote disclosures in accordance with SEC rules and U.S. GAAP[37] - The company reclassified certain expenses between Operating costs, Research and development, and Selling, general, and administrative for better accuracy, without changing total operating costs and expenses for prior years[39] - An immaterial correction was made to 2023 depreciation expense related to Ironton Facility assets, increasing property, plant and equipment and EPS for the three and six months ended June 30, 2023[40][41] - Inventory is valued at the lower of cost or net realizable value using the average cost method, with spare parts recorded as current assets and expensed upon use[44][45] - The company is evaluating the impact of new FASB ASUs on Income Taxes (2023-09) and Segment Reporting (2023-07), effective for annual periods beginning after December 15, 2024, and fiscal year 2024/2025 respectively[46][47] NOTE 3 – NOTES PAYABLE AND DEBT INSTRUMENTS This note details the company's various debt instruments, including revenue bonds and related party debt | Debt Balances (in thousands) | June 30, 2024 | December 31, 2023 | | :--------------------------- | :------------ | :---------------- | | Green Convertible Notes | $250,000 | $250,000 | | CSC Equipment Financing Payable | 19,747 | 19,747 | | Revenue Bonds | 2,800 | 249,550 | | Other Debt | 3,932 | 1,762 | | Less: Original issue discount and debt issuance costs | (25,937) | (44,203) | | Less: Current portion | (3,932) | (9,148) | | Long-term debt, less current portion | $246,610 | $467,708 | | Related party bonds payable | 93,835 | — | | Pure Plastic Note Payable | — | 43,125 | | Less: Original issue discount and debt issuance costs | (30,076) | (3,429) | | Less: Current portion | (1,040) | — | | Related party debt | $62,719 | $39,696 | - PCT LLC purchased 99% of the outstanding Revenue Bonds for $259.1 million on March 5, 2024, resulting in a $21.2 million loss on debt extinguishment, and intends to re-market some or all of these bonds for liquidity[59][61] - On May 7, 2024, Pure Plastic purchased approximately $94.3 million of Related Party Bonds from PCT LLC, and on May 10, 2024, the Company's $40 million term loan with Pure Plastic was exchanged for these bonds, with a 12% prepayment premium satisfied by Series B Warrants[63][64][69] - The Revolving Credit Facility with Sylebra Capital was increased from $150.0 million to $200.0 million and extended to September 30, 2025, with a carveout for purchasing Revenue Bonds[71] | Principal Repayments (in thousands) | Long-term debt | Related party debt | | :---------------------------------- | :------------- | :----------------- | | Years ending December 31, 2024 (July through December) | $1,905 | $505 | | 2025 | 240 | 10,355 | | 2026 | 3,001 | 7,570 | | 2027 | 6,338 | 25,105 | | 2028 | 6,813 | 7,710 | | 2029 | 3,595 | 8,220 | | Thereafter | 252,800 | 34,370 | | Total | $274,692 | $93,835 | NOTE 4 - EQUITY-BASED COMPENSATION This note describes the company's equity incentive plan and related compensation expenses - The 2021 Equity Incentive Plan authorizes approximately 21.9 million shares, with 12.5 million remaining available for issuance as of June 30, 2024[79] | Restricted Stock Units (RSUs) Activity (in thousands except per share data) | Number of RSUs | Weighted average grant fair value | | :---------------------------------------------------------- | :------------- | :-------------------------------- | | Non-vested at December 31, 2023 | 2,847 | $9.31 | | Granted | 1,358 | $5.73 | | Vested | (579) | $6.63 | | Forfeited | (96) | $6.44 | | Non-vested at June 30, 2024 | 3,530 | $8.45 | | Stock Option Activity (in thousands except per share data) | Number of Options | Weighted Average Exercise Price | | :------------------------------------------------------- | :---------------- | :------------------------------ | | Balance, December 31, 2023 | 983 | $20.17 | | Granted | 355 | $5.73 | | Exercised | (16) | $5.72 | | Forfeited | (7) | $5.72 | | Balance, June 30, 2024 | 1,315 | $16.53 | | Exercisable | 613 | | | Equity-based Compensation Expense (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total equity-based compensation for RSUs | $2,650 | $3,252 | $5,214 | $5,284 | | Total equity-based compensation for PSUs | 178 | 230 | 127 | (38) | | Total equity-based compensation for stock options | 244 | 156 | 413 | 170 | | Total | $3,072 | $3,638 | $5,754 | $5,416 | NOTE 5 - WARRANTS This note provides details on the company's outstanding warrants and their fair value measurement - RTI holds 971 thousand warrants expiring December 31, 2024, classified as a liability and remeasured at fair value each reporting period[93][94] - Public warrants (5.7 million outstanding) are equity-classified, while private warrants (0.2 million outstanding) are liability-classified due to a cashless exercise provision for the Sponsor[98][99][100] - Series A Warrants (17.9 million outstanding) and Series B Warrants (3.1 million outstanding) are classified as derivative liabilities due to a Black-Scholes value calculation provision with a volatility floor of 100% or greater[106][107][110][111] | Warrant Expense (Benefit) (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | RTI warrants | $(757) | $2,621 | $340 | $2,563 | | Private placement warrants | (80) | 299 | 88 | 371 | | Series A warrants | (4,822) | 23,393 | 7,857 | 28,214 | | Series B warrants | 1,348 | — | 1,348 | — | | Change in fair value of warrants | $(4,311) | $26,313 | $9,633 | $31,148 | NOTE 6 – NET LOSS PER SHARE This note explains the calculation of net loss per share and anti-dilutive awards - The company uses the two-class method for EPS calculation, allocating income to common and participating securities based on dividend rights, but not allocating undistributed net losses to nonvested restricted stock[112] | (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common shareholders | $(48,212) | $(55,368) | $(133,819) | $(81,210) | | Weighted average common shares outstanding, basic and diluted | 164,691 | 163,739 | 164,524 | 163,664 | | Net loss per share attributable to common stockholder, basic and diluted | $(0.29) | $(0.34) | $(0.81) | $(0.50) | - Anti-dilutive awards, including warrants, stock options, RSUs, PSUs, contingently-issuable earnout shares, and Green Convertible Notes, were excluded from diluted net loss per share calculations[114] NOTE 7 – PROPERTY, PLANT AND EQUIPMENT This note details the company's property, plant, and equipment, along with depreciation expense | Property, Plant and Equipment (in thousands) | Cost (June 30, 2024) | Accumulated Depreciation (June 30, 2024) | Net Book Value (June 30, 2024) | | :------------------------------------------- | :------------------- | :--------------------------------------- | :----------------------------- | | Building | $81,703 | $3,745 | $77,958 | | Machinery and equipment | 360,720 | 35,084 | 325,636 | | Construction in process | 239,399 | — | 239,399 | | Total property, plant and equipment | $686,886 | $40,875 | $646,011 | | Depreciation Expense (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating costs | $6,233 | $1,895 | $14,555 | $2,283 | | Research and development expense | 765 | 750 | 1,525 | 1,499 | | Selling, general, and administrative expense | 169 | 159 | 343 | 316 | | Total depreciation expense | $7,167 | $2,804 | $16,423 | $4,098 | NOTE 8 - INCOME TAXES This note discusses the company's income tax position and valuation allowance against deferred tax assets - The company has a full valuation allowance against net deferred tax assets, as their realization is not more likely than not, and reported $0 tax expense for the periods ended June 30, 2024 and 2023[118] NOTE 9 – FAIR VALUE OF FINANCIAL INSTRUMENTS This note categorizes and explains the fair value measurements of financial instruments - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[120][121] | Liabilities (in thousands) | Level 1 (June 30, 2024) | Level 2 (June 30, 2024) | Level 3 (June 30, 2024) | Total (June 30, 2024) | | :------------------------- | :---------------------- | :---------------------- | :---------------------- | :-------------------- | | RTI warrants | — | — | $1,777 | $1,777 | | Private warrants | — | — | 353 | 353 | | Series A warrants | — | $28,214 | — | 28,214 | | Series B warrants | — | — | 8,150 | 8,150 | | Total warrant liability | $— | $28,214 | $10,280 | $38,494 | - Private warrants and RTI warrants are Level 3 measurements, valued using Black-Scholes and Binomial Tree models respectively, with significant unobservable inputs like expected volatility and option term[124][126] - Series A Warrants are Level 2, valued using the market price of publicly traded warrants, while Series B Warrants are Level 3, valued using a Monte Carlo simulation[130][131] NOTE 10 - AVAILABLE-FOR-SALE INVESTMENTS This note details the company's available-for-sale investments, including commercial paper and corporate bonds - The company held no available-for-sale investments as of June 30, 2024, having previously held highly liquid debt securities and commercial paper[136] | Available-for-Sale Investments (in thousands) | Amortized Cost (Dec 31, 2023) | Gross Unrealized Gains (Dec 31, 2023) | Gross Unrealized Losses (Dec 31, 2023) | Total Fair Value (Dec 31, 2023) | | :-------------------------------------------- | :---------------------------- | :------------------------------------ | :------------------------------------- | :------------------------------ | | Commercial Paper | $46,069 | $— | $(20) | $46,049 | | Corporate Bonds | 2,175 | 2 | — | 2,177 | | Total | $48,244 | $2 | $(20) | $48,226 | NOTE 11 - COMMITMENTS AND CONTINGENCIES This note outlines the company's commitments, contingencies, and ongoing legal proceedings - PCT renewed a surety bond for $25.0 million on March 14, 2024, increasing to $45.9 million effective July 1, 2024, for financial assurance related to a vendor contract[139] - A tentative settlement of $12 million was reached on April 2, 2024, for the Consolidated Theodore Lawsuit (shareholder securities litigation), funded by D&O insurance, pending court approval[143] - The Southgate Lawsuit, alleging misleading statements about Ironton Facility operations, is ongoing, with PCT vigorously defending against the amended complaint[145][146][147] - A memorandum of understanding was signed on May 7, 2024, to settle the Consolidated Derivative Litigation (Ayers and Brunson lawsuits) for corporate therapeutics and a $3 million monetary component, pending court approval[156] - PCO is involved in an arbitration with Denham-Blythe Company, Inc. (DB) for approximately $17.0 million related to construction activities at the Ironton Facility, with PCO counterclaiming for damages due to DB's deficiencies[160][163] NOTE 12 - LEASES This note describes the company's lease arrangements and related accounting impacts - On May 14, 2024, the company sublet its former corporate headquarters in Orlando, FL, recognizing an $0.8 million impairment on the related right-of-use asset[168] NOTE 13 - SUBSEQUENT EVENTS This note reports on significant events that occurred after the reporting period - On July 12, 2024, PCT entered an equipment financing arrangement with Varilease Finance, Inc., receiving $6.5 million in progress funding, with an additional $3.8 million anticipated[169] - On August 7, 2024, an agreement was reached for the purchase of approximately $22.5 million of Series A Bonds owned by PCT LLC at $800 per $1,000 principal amount, expected to close around August 9, 2024[170] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition and operational results for the three and six months ended June 30, 2024 Overview This section provides an overview of PureCycle Technologies, Inc.'s business model and purification recycling technology - PureCycle Technologies, Inc. (PCT) is commercializing a patented purification recycling technology from P&G to transform waste polypropylene into ultra-pure recycled (UPR) resin, aiming to meet sustainability goals and reduce plastic waste[173] - PCT's process involves two steps: Feed Pre-Processing (collecting, sorting, and preparing waste polypropylene) and purification (using solvent, temperature, and pressure to restore feedstock to near-virgin condition)[174] The Ironton Facility This section details the operational status, challenges, and expected capacity of the Ironton Facility - The Ironton Facility commenced commissioning in April 2023, achieved mechanical completion, and began pellet production, with an expected UPR resin capacity of approximately 107 million pounds/year when fully operational[175] - The facility has experienced intermittent mechanical challenges, particularly with the recovery and removal of polyethylene and other solids (CP2), delaying consistent sustainable production rates[175][177] - PCT is pursuing solutions for CP2 removal and evaluating processes to blend its resin with post-industrial recycled material or virgin polypropylene to improve product consistency[177] The Augusta Facility This section outlines plans, investments, and financing challenges for the Augusta Facility expansion - PCT plans to build its first U.S. multi-line facility in Augusta, Georgia, with up to eight production lines, aiming for approximately 1 billion pounds of UPR resin capacity per year[178] - The company has invested approximately $91.9 million in pre-construction engineering and long-lead equipment for Phase One, which requires creating 82 full-time jobs and $440 million investment by December 31, 2026[179] - Market conditions have created uncertainty regarding project financing for the Augusta Facility, leading PCT to limit expenses and adjust its timeline while pursuing various financing structures[183] Feedstock Pricing This section explains the company's 'Feedstock+' pricing model for UPR resin - PCT uses a 'Feedstock+' pricing model for its UPR resin, which passes on feedstock costs and de-risks operating margin volatility by dividing market cost by yield-loss and adding a fixed price[184] - For the Augusta Facility and future plants, feedstock prices will be linked to the price of no 5 plastic bale of polypropylene as reported by recyclingmarkets.net[185] PreP Facilities This section describes plans for Feed PreP facilities to optimize feedstock supply chain economics - PCT plans to build Feed PreP facilities near feed sources to optimize supply chain economics, with a future facility in Denver, Pennsylvania, expected to be operational in late 2024[186] - The company's enhanced sorting system can process plastic bales between no 1 and no 7, extracting polypropylene for purification and selling non-polypropylene feed on the open market[186] FDA Food Packaging Clearances This section reports on FDA clearances for UPR resin in food packaging applications - On June 11, 2024, PCT received an additional FDA Letter of No Objection (LNO), allowing its UPR resin from food-grade post-consumer recycled material to be used in contact with all food types under FDA's Conditions of Use A through H, matching virgin polypropylene[190] - The company plans further LNO submissions for additional post-consumer recycled feedstock sources and expanded Conditions of Use[191] Future Expansion This section discusses the company's international expansion plans and their financing contingencies - PCT announced its first European purification facility in Antwerp, Belgium, and is developing a UPR purification facility in Ulsan, South Korea, through a joint venture with SK geo centric Co, Ltd[192] - Future expansion, including plans with Mitsui & Co Ltd in Japan, is contingent on successful project financing[192] Components of Results of Operations This section explains the key components influencing the company's operating results and expenses - PCT generated immaterial revenue through the first six months of 2024, not yet reaching significant continuous operational volumes or revenue generation[193] - Operating costs are expected to increase with scaling operations and headcount, while research and development expenses will rise due to investments in feedstock evaluation and analytical capabilities[194][197] - Selling, general and administrative expenses are projected to increase due to headcount growth, public company compliance, legal, audit, insurance, and investor relations activities[198] Results of Operations This section provides a detailed analysis of the company's financial performance for the reported periods | (in thousands, except %) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | Change (%) | | :----------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Operating costs | $22,220 | $11,612 | $10,608 | 91% | | Research and development | 1,565 | 1,571 | (6) | (0)% | | Selling, general and administrative | 16,137 | 13,410 | 2,727 | 20% | | Total operating costs and expenses | 39,922 | 26,593 | 13,329 | 50% | | Interest expense | 12,055 | 4,027 | 8,028 | 199% | | Interest income | (514) | (1,578) | 1,064 | (67)% | | Change in fair value of warrants | (4,311) | 26,313 | (30,624) | (116)% | | Loss on debt extinguishment | — | — | — | 100% | | Other expense | 1,060 | 13 | 1,047 | 8,054% | | Net loss | $(48,212) | $(55,368) | $(7,156) | 13% | | (in thousands, except %) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change ($) | Change (%) | | :----------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Operating costs | $43,414 | $18,984 | $24,430 | 129% | | Research and development | 3,396 | 3,325 | 71 | 2% | | Selling, general and administrative | 32,094 | 26,105 | 5,989 | 23% | | Total operating costs and expenses | 78,904 | 48,414 | 30,490 | 63% | | Interest expense | 27,109 | 4,684 | 22,425 | 479% | | Interest income | (4,116) | (3,511) | (605) | 17% | | Change in fair value of warrants | 9,633 | 31,148 | (21,515) | (69)% | | Loss on debt extinguishment | 21,214 | — | 21,214 | 100% | | Other expense | 1,075 | 475 | 600 | 126% | | Net loss | $(133,819) | $(81,210) | $(52,609) | 65% | - Operating costs increased significantly due to higher depreciation ($4.3M for Q2, $12.3M for H1) from Ironton Facility assets and increased operational site costs ($7.3M for Q2, $11.6M for H1)[200] - Selling, general and administrative expenses rose due to higher legal and professional consulting fees ($4.3M for Q2, $6.4M for H1) related to a legal settlement and bond purchase, and increased insurance costs ($1.6M for H1)[202] - Interest expense surged due to additional financing in 2023 (Green Convertible Senior Notes) and the cessation of interest capitalization on Revenue Bonds[204] - The change in fair value of warrants resulted in decreased expense, primarily driven by changes in PCT's common stock price, volatility, and reduction in warrant terms[206] - A $21.2 million loss on debt extinguishment was recognized in Q1 2024 from the purchase of the majority of outstanding Revenue Bonds[207] Liquidity and Capital Resources This section discusses the company's liquidity position, funding sources, and capital investment plans - PCT's operations are funded by equity and debt financing, but current unrestricted liquidity is insufficient to fund operations and future growth plans, raising substantial doubt about its going concern ability[209][218] - Management believes going concern doubt is alleviated by operational enhancements at the Ironton Facility and the ability to re-market purchased bonds for additional liquidity[219] | Liquidity (in millions) | June 30, 2024 | December 31, 2023 | | :---------------------- | :------------ | :---------------- | | Cash and Cash Equivalents | $10.9 | $73.4 | | Debt Securities Available for Sale | — | 48.2 | | Restricted Cash (current and non-current) | $12.6 | $229.1 | | Green Convertible Notes | $224.0 | $220.7 | | Related Party Revenue Bonds | 63.8 | — | | Pure Plastic Related Party Note Payable | — | 39.7 | | Revenue Bonds | 2.8 | 234.6 | | Gross Long-term Debt and Related Party Note Payable | $370.3 | $564.2 | - PCT has a $200.0 million unused revolving credit facility with Sylebra Capital, expiring September 30, 2025[212] - Anticipated capital investments include $5.0-$8.0 million for the Ironton Facility and $46.5 million for the Augusta Facility and future Feed PreP/purification facilities, plus at least $55.0 million in interest and principal payments[214] Cash Flows This section analyzes the company's cash flow movements from operating, investing, and financing activities | (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change ($) | Change (%) | | :--------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(79,608) | $(40,424) | $(39,184) | 97% | | Net cash provided by investing activities | $23,857 | $(24,868) | $48,725 | (196)% | | Net cash used in financing activities | $(223,308) | $54,097 | $(277,405) | (513)% | | Cash and cash equivalents, end of period | $23,455 | $216,328 | $(192,873) | (89)% | - Net cash used in operating activities increased by $39.2 million, primarily due to higher interest payments ($21.0M) and increased operational site costs and legal fees ($18.6M)[225] - Net cash provided by investing activities increased by $48.7 million, driven by $99.5 million lower capital expenditure payments, partially offset by higher investment purchases and lower maturities/sales of investments[226] - Net cash used in financing activities increased by $277.4 million, mainly due to $253.2 million paid to purchase outstanding Revenue Bonds and a $23.5 million decrease in debt proceeds[227] Indebtedness This section details significant changes in the company's debt instruments and financing arrangements - PCT LLC purchased $246.8 million of outstanding Revenue Bonds on March 5, 2024, which was treated as debt extinguishment, and the company plans to re-market these bonds[232] - On May 7, 2024, Pure Plastic purchased approximately $94.3 million of Related Party Bonds from PCT LLC, and the Company's $40 million term loan with Pure Plastic was exchanged for these bonds, with a prepayment premium satisfied by Series B Warrants[233][234] - The Sylebra Credit Facility was increased to $200.0 million and extended to September 30, 2025, with an amendment to permit the disposition of bonds[240][241] - A surety bond for financial assurance was renewed and increased from $25.0 million to $45.9 million, effective July 1, 2024[244] Critical Accounting Policies and Estimates This section confirms no significant changes in critical accounting policies and estimates - There have been no significant changes in critical accounting policies and estimates from the information provided in the most recent Annual Report on Form 10-K[246] Recent Accounting Pronouncements This section refers to Note 2 for details on recent accounting pronouncements - Refer to Note 2 for information on recent accounting pronouncements, their adoption timing, and potential impact on financial condition and results of operations[247] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes in market risks compared to the prior annual report - Information about market risks as of June 30, 2024, does not differ materially from that included in the most recent Annual Report on Form 10-K[249] Item 4. Controls and Procedures This section details the evaluation of disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures as of June 30, 2024 - PCT's management, including principal executive and financial officers, concluded that disclosure controls and procedures were effective as of June 30, 2024[250] Changes in Internal Control over Financial Reporting This section reports no material changes in internal control over financial reporting during the quarter - There have been no changes during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, PCT's internal control over financial reporting[251] PART II - Other Information This section covers other required information, including legal proceedings and equity security sales Item 1. Legal Proceedings This section refers to Note 11 for legal proceedings and assesses their financial impact - For a description of pending legal proceedings, refer to "Legal Proceedings" in Note 11 ("Commitments and Contingencies") of the Interim Condensed Consolidated Financial Statements[253] - PCT does not believe that the ultimate resolution of any pending or future legal matters will have a material adverse effect on its overall financial position, results of operations, or cash flows[254] Item 1A. Risk Factors This section states no material changes to previously disclosed risk factors - There have been no material changes from risk factors previously disclosed in the most recent Annual Report on Form 10-K[255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on common stock purchases related to tax withholding for RSUs | Period | (a) Total number of shares (or units) purchased* | (b) Average price paid per share (or unit)* | | :---------------- | :----------------------------------------------- | :------------------------------------------ | | April 1 to April 30 | 1,284 | $5.73 | | May 1 to May 31 | 11,746 | 5.22 | | June 1 to June 30 | 727 | 5.24 | | Total | 13,757 | $5.27 | * Shares withheld to cover tax withholding obligations under the net settlement provision upon vesting of restricted stock units Item 3. Defaults Upon Senior Securities This section confirms no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[255] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[256] Item 5. Other Information This section reports on Rule 10b5-1 trading plans and other significant events occurring after the reporting period Rule 10b5-1 Trading Plans This section confirms no adoption, modification, or termination of Rule 10b5-1 trading plans by officers or directors - None of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2024[256] Other Events This section reports on a subsequent agreement for the purchase of Series A Bonds - On August 7, 2024, an agreement was reached for certain purchasers to acquire approximately $22.5 million of Series A Bonds owned by PCT LLC at $800 per $1,000 principal amount, with funds expected by August 9, 2024[257] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - The exhibits include various legal and financial documents such as the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation, Series B Warrant, Bond Purchase Agreements, Payoff and Release Letter, and certifications by the CEO and CFO[260][261]