v3.26.1
FAIR VALUE OF FINANCIAL INSTRUMENTS
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 14 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Measured and Recorded at Fair Value on a Recurring Basis

As of March 31, 2026 and December 31, 2025, the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows:

 

March 31, 2026

 

 

December 31, 2025

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

79,714

 

 

$

—

 

 

$

—

 

 

$

79,714

 

 

$

140,694

 

 

$

—

 

 

$

—

 

 

$

140,694

 

Restricted cash
  equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted cash
  equivalents - current

 

 

508

 

 

 

—

 

 

 

—

 

 

 

508

 

 

 

1,984

 

 

 

—

 

 

 

—

 

 

 

1,984

 

Restricted cash
  equivalents -
  noncurrent

 

 

9,395

 

 

 

—

 

 

 

—

 

 

 

9,395

 

 

 

9,356

 

 

 

—

 

 

 

—

 

 

 

9,356

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt
  securities, available
  for sale

 

 

—

 

 

 

30,882

 

 

 

—

 

 

 

30,882

 

 

 

—

 

 

 

13,631

 

 

 

—

 

 

 

13,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Put Option Liability

 

$

—

 

 

$

—

 

 

$

1,563

 

 

$

1,563

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Warrant liability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private Warrants -
  liability classified

 

 

—

 

 

 

—

 

 

 

10

 

 

 

10

 

 

 

—

 

 

 

—

 

 

 

9

 

 

 

9

 

Series A Warrants

 

 

—

 

 

 

13,318

 

 

 

—

 

 

 

13,318

 

 

 

—

 

 

 

13,673

 

 

 

—

 

 

 

13,673

 

Series B Warrants

 

 

—

 

 

 

—

 

 

 

7,506

 

 

 

7,506

 

 

 

—

 

 

 

—

 

 

 

15,749

 

 

 

15,749

 

Series C Warrants

 

 

—

 

 

 

—

 

 

 

15,000

 

 

 

15,000

 

 

 

—

 

 

 

—

 

 

 

29,400

 

 

 

29,400

 

Total warrant liability

 

$

—

 

 

$

13,318

 

 

$

22,516

 

 

$

35,834

 

 

$

—

 

 

$

13,673

 

 

$

45,158

 

 

$

58,831

 

As of March 31, 2026 and December 31, 2025, the estimated fair value of the Company's financial instruments not remeasured at fair value on a recurring basis within the fair value hierarchy are as follows:

 

March 31, 2026

 

 

December 31, 2025

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Green Convertible
  Notes

 

$

—

 

 

$

—

 

 

$

246,186

 

 

$

246,186

 

 

$

—

 

 

$

—

 

 

$

244,560

 

 

$

244,560

 

Revenue Bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related party bonds

 

 

—

 

 

 

—

 

 

 

107,311

 

 

 

107,311

 

 

 

—

 

 

 

—

 

 

 

117,928

 

 

 

117,928

 

Third-party bonds

 

 

—

 

 

 

—

 

 

 

26,809

 

 

 

26,809

 

 

 

—

 

 

 

—

 

 

 

31,118

 

 

 

31,118

 

Total Revenue Bonds

 

$

—

 

 

$

—

 

 

$

134,120

 

 

$

134,120

 

 

$

—

 

 

$

—

 

 

$

149,046

 

 

$

149,046

 

For the instruments classified as Level 3, significant changes in any of the significant unobservable inputs in isolation would not result in a materially different fair value estimate. The fair value of the liabilities above is derived from the trading price of the Company's publicly traded bonds on the last trading day of the fiscal quarter. The Company's publicly traded bonds are thinly traded and, as such, the Company has deemed the input as an unobservable input. Since each of the instruments classified as Level 3 are being valued using similar inputs, a significant change that would impact expected volatility or the market price of the Company's Common Stock could result in a material change to the total combined value of these instruments. An increase in one or both of these inputs would result in a higher assessed value for each instrument.

Measurement of the Private Warrants

The private warrants are measured at fair value on a recurring basis using a Black-Scholes model. The private warrants are classified as Level 3 and were valued using the following assumptions:

 

March 31, 2026

 

 

December 31, 2025

 

Expected annual dividend yield

 

 

—

 %

 

 

—

 %

Expected volatility

 

 

99.4

 %

 

 

101.5

 %

Risk-free rate of return

 

 

3.7

 %

 

 

3.7

 %

Expected option term (years)

 

 

1.0

 

 

 

0.2

 

The expected term of the private warrants is determined based on the duration of time the warrants are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the valuation date. The expected volatility is based on the implied volatility calculated for the Company’s public warrants, which have similar characteristics to the private warrants. The dividend yield on the Company’s private warrants is assumed to be zero as the Company has not historically paid dividends on its Common Stock.

A summary of the private warrants activity from December 31, 2025 to March 31, 2026 is as follows:

(in thousands)

 

Fair Value
(Level 3)

 

Balance, December 31, 2025

 

$

9

 

Change in fair value

 

 

1

 

Balance, March 31, 2026

 

$

10

 

Refer to Note 13 - Warrants for further information.

Measurement of the Series A Warrants

The Series A Warrants meet the definition of derivative instruments and are measured at fair value on a recurring basis using the market price of the Company’s publicly traded warrants, with changes in fair value recorded in current earnings. The Company has determined the publicly traded warrants to be an appropriate proxy to value the Series A Warrants as both warrants have similar redemption features and the same exercise price. The Series A Warrants are classified as Level 2 for both initial measurement at issuance and subsequent measurement each period.

Measurement of the Series B Warrants

The Series B Warrants meet the definition of derivative instruments and are measured at fair value on a recurring basis. The Company has determined the Series B Warrants to be a Level 3 fair value measurement and has performed initial recognition and ongoing remeasurement using a Monte Carlo simulation to calculate its fair value using the following assumptions:

 

March 31, 2026

 

 

December 31, 2025

 

Expected annual dividend yield

 

 

—

 %

 

 

—

 %

Expected volatility

 

 

99.4

 %

 

 

101.5

%

Risk-free rate of return

 

 

3.9

 %

 

 

3.7

%

Expected option term (years)

 

 

4.7

 

 

 

4.9

 

The expected term of the Series B Warrants is determined based on the duration of time the warrants are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the valuation date. The expected volatility is based on the implied volatility calculated for the Company’s public warrants, which have similar characteristics to the Series B Warrants. The dividend yield on the Company’s warrants is assumed to be zero as the Company has not historically paid dividends on its Common Stock.

A summary of the Series B Warrants activity from December 31, 2025 to March 31, 2026 is as follows:

(in thousands)

 

Fair Value
(Level 3)

 

Balance, December 31, 2025

 

$

15,749

 

Change in fair value

 

 

(8,243

)

Balance, March 31, 2026

 

$

7,506

 

Measurement of the Series C Warrants

The Series C Warrants meet the definition of derivative instruments and are measured at fair value on a recurring basis. The Company has determined the Series C Warrants to be a Level 3 fair value measurement and has performed initial recognition and ongoing remeasurement using a Monte Carlo simulation to calculate its fair value using the following assumptions:

 

March 31, 2026

 

 

December 31, 2025

 

Expected annual dividend yield

 

 

—

 %

 

 

—

 %

Expected volatility

 

 

99.4

 %

 

 

101.5

%

Risk-free rate of return

 

 

3.9

 %

 

 

3.7

%

Expected option term (years)

 

 

4.7

 

 

 

4.9

 

The expected term of the Series C Warrants is determined based on the duration of time the warrants are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the valuation date. The expected volatility is based on the implied volatility calculated for the Company’s public warrants, which have similar characteristics to the Series C Warrants. The dividend yield on the Company’s warrants is assumed to be zero as the Company has not historically paid dividends on its Common Stock.

A summary of the Series C Warrants activity from December 31, 2025 to March 31, 2026 is as follows:

(in thousands)

 

Fair Value
(Level 3)

 

Balance, December 31, 2025

 

$

29,400

 

Change in fair value

 

 

(14,400

)

Balance, March 31, 2026

 

$

15,000

 

Measurement of the Put Option Liability

The Put Option liability meets the definition of a derivative instrument and is measured at fair value on a recurring basis. The Company has determined the Put Option liability to be a Level 3 fair value measurement and has performed initial recognition and ongoing remeasurement using a Monte Carlo simulation to calculate its fair value using the following assumptions:

 

March 31, 2026

 

 

December 31, 2025(1)

 

Risk-free rate of return

 

 

3.7

 %

 

 

—

 %

Credit spread

 

 

18.6

 %

 

 

—

 %

__________

(1) During June 2025, the Company announced its plans to construct the Thailand Facility, which adjusted the timeline on construction of the Augusta Facility. Because the Put Option is contingent upon the Company incurring any indebtedness that is senior to the Series A Preferred Stock and/or secured by the assets of PureCycle Augusta, LLC, this adjusted timeline resulted in the likelihood of the Put Option being exercised as remote through the end of 2025. During 2026, the likelihood of the Company incurring indebtedness that would be secured by the assets of PureCycle Augusta, LLC became more than remote; accordingly, a fair value was measured and recorded as of March 31, 2026.

A summary of the Put Option activity from December 31, 2025 to March 31, 2026 is as follows:

(in thousands)

 

Fair Value
(Level 3)

 

Balance, December 31, 2025

 

$

—

 

Change in fair value

 

 

1,563

 

Balance, March 31, 2026

 

$

1,563

 

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to fair value measurements.