PureCycle Technologies, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual report, not a standalone fourth-quarter report. PureCycle was a pre-revenue company developing a licensed process to purify waste polypropylene into near-virgin recycled resin.
Financial results and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | None | None |
| Operating costs and expenses | $81.3 million | $69.6 million |
| Net loss | $84.7 million | $77.5 million |
| Net loss per share | $0.54 | $0.75 |
| Net cash used in operations | $65.5 million | $54.5 million |
| Net cash used in investing | $218.4 million | $305.6 million |
| Net cash provided by financing | $247.5 million | $293.4 million |
Operating costs rose 152%, largely due to higher staffing and consulting costs as the company prepared for commercial operations. SG&A declined 7%, mainly because 2021 included higher equity compensation and business-combination expenses. No operating margin is available because the company had no revenue.
At year-end, cash was $63.9 million and available-for-sale debt securities were $98.6 million. Management reported $107.9 million of available unrestricted liquidity after specified set-asides; restricted cash was $163.6 million. Debt was $233.5 million net carrying value ($249.6 million gross bonds and notes). Property, plant and equipment was $505.7 million, including $473.3 million in construction in progress. Working capital was $197.9 million.
Progress, changes and outlook
- The Ironton, Ohio commercial facility was not completed by its original December 1, 2022 deadline. It is designed for approximately 107 million pounds of annual capacity. The company expected mechanical completion by June 30, 2023, completion by December 31, 2023, and production ramp milestones into January 2024.
- PureCycle estimated another $55–$80 million of 2023 investment to complete Ironton, versus $280.9 million invested through year-end 2022. It said the final amount depended on contract contingencies.
- In March 2023, bondholders waived the construction-related default subject to conditions, including milestones and approximately $87.3 million of additional deposits for reserves, construction and interest. A $150 million revolving credit facility, entered into March 15, 2023 with Sylebra-affiliated lenders, satisfied the waiver’s financing requirement. The facility matures June 30, 2024 and carries escalating margins over Term SOFR.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern based on year-end conditions, but stated that the credit facility and spending adjustments alleviated that doubt for the following twelve months. The company still expected to seek additional financing.
- Augusta, Georgia was planned as a multi-line facility, with operations previously targeted for late 2024 subject to financing. The company had secured offtake for 40% of expected Augusta output and was pursuing project financing. Its agreement with the local development authority required financing and initial project steps by June 30, 2023; failure could put the project at risk.
- Other expansion plans included a Denver-area Feed PreP facility, a South Korean joint venture, and a European facility in Antwerp. These projects remained dependent on permits, financing and execution. Central Florida Feed PreP plans faced water and sewer permitting challenges.
- The FDA had issued an opinion letter for specified food-grade post-industrial feedstocks covering Conditions of Use A–H, and an LNO for stadium post-consumer feedstock covering Conditions E–G. Further feedstock sources and uses required additional testing and submissions.
Risks, contingencies and unusual items
- Commercial-scale performance, commissioning, product quality, feedstock availability, customer approvals and the economics of the Feedstock+ pricing model were unproven. The company had no operating revenue and might not achieve profitability.
- Liquidity remained constrained by construction spending, debt service, reserves and other commitments. The Ironton bond waiver imposed demanding milestones; failure to meet its terms could trigger default. The company reported $21.2 million in Augusta commitments and $41.4 million related to future Feed PreP and purification facilities.
- The company reported securities class-action and shareholder derivative litigation related to alleged statements about its technology and prospects. Outcomes and potential losses could not be reasonably estimated; the class action remained pending after a motion to dismiss was filed.
- Grant Thornton gave an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting. Two material weaknesses remained: inadequate financial-reporting review processes and IT access controls. Management said remediation was underway.
- Net loss included a $5.8 million increase in warrant fair-value expense. The company also recorded $55.9 million of warrant liabilities at year-end, including $51.4 million for Series A warrants.
Key facts investors should verify
- Whether Ironton met the waiver’s completion, production and pellet-output milestones, and its actual remaining cost and ramp-up performance.
- Actual availability and terms of borrowing under the $150 million revolving facility, required deposits and reserves, and remaining cash runway.
- Whether Augusta financing and local-authority deadlines were met, and the project’s revised cost, schedule and contracted offtake.
- Commercial product quality, customer qualification, feedstock supply, realized prices and margins once sales begin.
- Progress in remediating material weaknesses and developments or estimated exposure in the pending litigation.