Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On March 17, 2021 (the "Closing Date"), PureCycle Technologies LLC ("PCT LLC")
consummated the previously announced business combination ("Business
Combination") with Roth CH Acquisition I Co., a Delaware corporation (both prior
to and after the Closing Date, "ROCH"), Roth CH Acquisition I Co. Parent Corp.,
a Delaware corporation and wholly owned direct subsidiary of ROCH ("ParentCo")
and others 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, 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. ("PureCycle,"
"Company," "we" or "our"). PureCycle continues the existing business operations
of PCT LLC as a publicly traded company. 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.
Subsequent to the Business Combination, on April 12, 2021, the staff of the
Securities and Exchange Commission (the "SEC Staff") issued a public statement
entitled "Staff Statement on Accounting and Reporting Considerations for
Warrants Issued by Special Purpose Acquisition Companies ("SPACs")" (the "SEC
Staff Statement"). In the SEC Staff Statement, the SEC Staff expressed its view
that certain terms and conditions common to SPAC warrants may require the
warrants to be classified as liabilities on the SPAC's balance sheet as opposed
to equity. Since issuance, ROCH's 199,125 Private Warrants (as defined in ROCH's
Annual Report on Form 10-K for the period ended December 31, 2020 (the "ROCH
Form 10-K")), that were converted into Company warrants pursuant to the Business
Combination, were accounted for as equity within ROCH's balance sheet. On May
27, 2021, after discussion and evaluation, Company management, in consultation
with the Audit Committee, concluded that the Private Warrants should be
presented as liabilities with subsequent fair value remeasurement.
On June 2, 2021, the Company concluded that ROCH's (i) audited financial
statements for the year ending December 31, 2020; (ii) unaudited interim
financial statements as of and for the periods ended June 30, 2020 and September
30, 2020 and (iii) audited balance sheet as of May 7, 2020 and unaudited pro
forma balance sheet as of May 26, 2020 (collectively, the "Affected Periods")
should be restated because of a misapplication in the guidance regarding
accounting for the Private Warrants and should no longer be relied upon.
Historically, the Private Warrants were reflected as a component of equity on
ROCH's consolidated balance sheets, based on the application of Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
Topic 815-40, Derivatives and Hedging, Contracts in Entity's Own Equity ("ASC
815-40"). The views expressed in the SEC Staff Statement were not consistent
with ROCH's historical interpretation of the specific provisions within its
warrant agreements and ROCH's application of ASC 815-40 and ASC 480 to the
warrant agreements with respect to the Private Warrants. We reassessed ROCH's
accounting for the Private Warrants in light of the SEC Staff's published views.
Based on this reassessment, we determined that the Private Warrants should be
classified as liabilities measured at fair value upon issuance, with subsequent
changes in fair value reported in ROCH's consolidated statements of operations
each reporting period. Additionally, offering costs attributable to the Private
Warrants, based on the Private Warrants' fair value as a percentage of proceeds,
are no longer included as an offset to equity but were expensed as incurred.
The Company has discussed the matters disclosed in this Current Report on Form
8-K with its independent registered public accounting firm, Grant Thornton LLP
("GT"), and with ROCH's and ParentCo's former independent registered public
accounting firm, Marcum, LLP ("Marcum"), and intends to file an amendment to the
ROCH Form 10-K (the "Amended ROCH Form 10-K") reflecting this reclassification
of the Private Warrants for the Affected Periods. The adjustments to the
financial statement items for the Affected Periods will be set forth through
expanded disclosure in the financial statements included in the Amended ROCH
Form 10-K, including further describing the restatement and its impact on
previously reported amounts. The Company is working diligently with its auditors
and others to file the Amended ROCH Form 10-K as soon as practicable.
The change in accounting for the Private Warrants, which were converted into
PureCycle warrants pursuant to the Business Combination, was appropriately
reflected in PureCycle's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2021 filed on May 19, 2021 and does not have any further impact
on PureCycle's consolidated financial statements.
Forward-Looking Statements
This Current Report on Form 8-K includes "forward-looking statements" within the
meaning of the "safe harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, but are
not limited to, statements regarding the Company's plans and expectations,
impacts of accounting guidance and future filings. Forward-looking statements
are typically identified by words such as "plan," "believe," "expect,"
"anticipate," "intend," "outlook," "estimate," "forecast," "project," "budget,"
"continue," "could," "may," "might," "possible," "potential," "predict,"
"should," "would," "continue" 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 and are inherently subject to uncertainties and changes in
circumstances and their potential effects and speak only as of the date of such
statement. 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 "Risk Factors," in the Company's
Quarterly Report on Form 10-Q, originally filed with the SEC on May 19, 2021.
Should one or more of these risks or uncertainties materialize or should any of
the assumptions made by management prove incorrect, actual results may vary in
material respects from those projected in these forward-looking statements.
All subsequent written and oral forward-looking statements or other matters
attributable to PureCycle or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this Current Report on Form 8-K. Except to the extent required by
applicable law or regulation, PureCycle undertakes no obligation to update these
forward-looking statements to reflect events or circumstances after the date of
this Current Report on Form 8-K or to reflect the occurrence of unanticipated
events.
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